Legal Economic Evaluations, Inc., a California Corporation v. Metropolitan Life Insurance Company, Ibar Settlement Co. v. Metropolitan Life Insurance Company Transamerica Occidental Life Manufacturers Life Ml Settlement Services, Inc. National Structured Settlements Trade, Weil Insurance Agency, Inc., a California Corporation Dba Jerry C. Weil & Associates v. Manufacturers Life

Citations: 39 F.3d 951; 94 Daily Journal DAR 15527; 94 Cal. Daily Op. Serv. 8376; 1994 U.S. App. LEXIS 30476Docket: 93-16007

Court: Court of Appeals for the Ninth Circuit; November 1, 1994; Federal Appellate Court

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In the case of Legal Economic Evaluations, Inc. v. Metropolitan Life Insurance Company, the Ninth Circuit Court of Appeals addresses whether structured settlement consultants, representing tort plaintiffs, have experienced antitrust injury due to alleged boycotts by life insurance carriers and brokers. The plaintiffs—including Legal Economic Evaluations, IBAR Settlement Co., and Weil Insurance Agency—claim that these carriers conspired to exclude them from the annuity brokering market, ensuring that only brokers for tort defendants could negotiate structured settlements. The district court previously granted summary judgment in favor of the defendants, concluding that any harm was primarily to tort plaintiffs rather than to competition itself, as the consultants merely lost negotiating leverage.

The appeals court affirmed the district court's ruling, emphasizing that the injury claimed by the consultants does not reflect harm to competition, which is the focus of antitrust laws. The court ruled that the inability to access information or act as brokers does not constitute antitrust injury, as it does not demonstrate a negative impact on market competition. Additionally, the court validated the refusal to stay proceedings in light of a concurrent state court action under California's Cartwright Act, asserting federal jurisdiction over the Clayton Act claims as exclusive. Consequently, the appeal was denied, and the summary judgment was upheld.

During the late 1970s and early 1980s, structured settlements became a popular resolution method in tort actions, wherein defendants or their insurers purchase annuities for plaintiffs instead of providing lump-sum cash payments. This arrangement benefits defendants by potentially lowering costs and provides plaintiffs with predictable, tax-free future payments. The premium for an annuity is based on the issuer's rate and the annuitant's age, which may be adjusted if the issuer believes the chronological age does not accurately reflect longevity. 

Weil Insurance, Legal Economics, and IBAR claim to have suffered business losses due to a conspiracy among Life Carriers and Brokers aimed at reducing structured settlement costs below the cash value of claims. This conspiracy allegedly involved restricting access to annuity pricing information for tort plaintiffs and their attorneys and boycotting companies like Weil that consulted with plaintiffs. 

The complaint identifies two relevant product markets: annuities for structured settlements and consulting services related to these settlements. It alleges that competition was harmed by the conspiracy, which lowered settlement amounts below actual claim values, limited annuity sales by withholding information, and led to a boycott of consultants. Weil asserts that this behavior constitutes antitrust injury by obstructing competition in the structured settlement market, denying access to necessary relationships with insurers, and distorting pricing dynamics, ultimately reducing the volume of structured settlements.

Antitrust injury refers to harm that antitrust laws aim to prevent, stemming from unlawful defendant actions. Weil claims its injury—elimination as a market competitor—fits this definition, asserting that it is the type of harm targeted by antitrust scrutiny of group boycotts. However, exclusion alone is insufficient to establish antitrust injury; it must link the plaintiff's injury to the defendants' anticompetitive behavior. The antitrust laws are designed to protect competition rather than individual competitors. Weil argues that its injuries align with those identified in case law regarding group boycotts, which can disadvantage competitors by denying essential relationships or access to necessary resources. Nonetheless, such characteristics do not inherently constitute antitrust injury. Weil faces a challenge in demonstrating that its injury corresponds to the anticompetitive misconduct it alleges, as it does not compete in the markets affected by the defendants' actions. Specifically, Weil is not a liability carrier or tort plaintiff, meaning that even if anticompetitive practices harm those entities, Weil's injury does not derive from these competitive harms.

Tort plaintiffs represented by Weil are considered competitors of liability carriers, who purchase annuities. The concern regarding liability carriers not receiving value for their purchases does not constitute an antitrust injury, as there is no evidence they are limited in their choice of brokers or unable to comparison-shop. If they opt for higher-priced products, that is a decision they must bear, not one requiring antitrust protection. Additionally, while tort plaintiffs may suffer due to brokers finding better deals for structured settlements, their disadvantage stems from the inherent economic structure of settlements rather than from any anticompetitive behavior. Tort plaintiffs do not buy annuities directly due to tax advantages linked to purchases made by defendants.

Weil's assertion that the defense-only policy has eliminated a class of competitors—those writing annuities for tort plaintiffs—is unfounded, as annuities are still being placed and brokers are active in the market. The focus should be on overall market competition rather than individual firms' injuries. There is no reduction in competition among those representing tort plaintiffs due to the defense-only policy, as all brokers have equal access to information about Life Carriers' rating practices. The differentiated market dynamics have led to new types of competitors, rendering the decision to consult for tort plaintiffs or broker for defendants devoid of anticompetitive implications.

The excerpt addresses the case of Weil and its reliance on Blue Shield of Virginia v. McCready to argue for antitrust injury. In McCready, the plaintiff, a health plan member, successfully claimed an antitrust injury due to the health plan’s reimbursement policies, which disadvantaged clinical psychologists. The Court ruled that her injury was closely linked to the harm intended by the conspiracy against psychologists, affecting her directly in the psychotherapy market. Weil attempts to draw a parallel, asserting that it faces a similar "Hobson's choice" regarding its clients due to alleged conspiracy limitations. However, the distinction is made that Weil's harm arises in the brokerage or consulting services market, not directly in the market for settling lawsuits or selling annuities, leading to the conclusion that Weil's claimed losses do not stem from competition harm in the relevant market.

Additionally, Weil argues that the district court incorrectly denied its request to stay federal proceedings while awaiting state court outcomes, citing Colorado River Water Conservation District v. United States. The district court's adherence to Ninth Circuit precedent, which prohibits Colorado River abstention when federal jurisdiction is exclusive, is upheld. Weil contends its situation differs from previous cases because it seeks to preserve rights in a secondary forum. The excerpt underscores the judiciary's commitment to allow plaintiffs to pursue federal claims in federal court and challenges the applicability of precedent in this context.

The argument presented was rejected, as there is no basis in the referenced case law, specifically Colorado River, to allow a plaintiff to simultaneously pursue a federal claim while also seeking a similar state claim. The court affirmed this position. Additionally, the excerpt identifies multiple life insurance carriers involved in the case, including The Manufacturers Life Insurance Company and Metropolitan Life Insurance Company, among others. It also lists the brokers involved, such as Ringler Insurance Agency and Kenneth H. Wells & Associates, Inc. Notably, ML Settlement Services and Kenneth H. Wells & Associates have settled and are no longer part of the appeal. The term "the complaint" is used to refer to the allegations that are consistent across all three legal pleadings.