The Sherman Act makes every contract, combination, or conspiracy in unreasonable restraint of interstate or foreign commerce illegal. 26 Stat. 209, as amended, 15 U. S. C. § 1. These consolidated cases present questions about the application of that Act to the insurance industry, both here and abroad. The plaintiffs (respondents here) allege that both domestic and foreign defendants (petitioners here) violated the Sherman Act by engaging in various conspiracies to affect the American insurance market. A group of domestic defendants argues that the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U. S. C. § 1011 et seq., precludes application of the Sherman Act to the conduct alleged; a group of foreign defendants argues that the principle of international comity requires the District Court to refrain from exercising jurisdiction over certain claims against it. We hold that most of the domestic defendants' alleged conduct is not immunized
The two petitions before us stem from consolidated litigation comprising the complaints of 19 States and many private plaintiffs alleging that the defendants, members of the insurance industry, conspired in violation of § 1 of the Sherman Act to restrict the terms of coverage of commercial general liability (CGL) insurance
According to the complaints, the object of the conspiracies was to force certain primary insurers (insurers who sell insurance directly to consumers) to change the terms of their
First, CGL insurance has traditionally been sold in the United States on an "occurrence" basis, through a policy obligating the insurer "to pay or defend claims, whenever made, resulting from an accident or `injurious exposure to conditions' that occurred during the [specific time] period the policy was in effect." App. 22 (Cal. Complaint ¶ 52). In place of this traditional "occurrence" trigger of coverage, the defendants wanted a "claims-made" trigger, obligating the insurer to pay or defend only those claims made during the policy period. Such a policy has the distinct advantage for the insurer that when the policy period ends without a claim having been made, the insurer can be certain that the policy will not expose it to any further liability. Second, the defendants wanted the "claims-made" policy to have a "retroactive date" provision, which would further restrict coverage to claims based on incidents that occurred after a certain date. Such a provision eliminates the risk that an insurer, by issuing a claims-made policy, would assume liability arising from incidents that occurred before the policy's effective date, but remained undiscovered or caused no immediate harm. Third, CGL insurance has traditionally covered "sudden and accidental" pollution; the defendants wanted to eliminate that coverage. Finally, CGL insurance has traditionally provided that the insurer would bear the legal costs of defending covered claims against the insured without regard to the policy's stated limits of coverage; the defendants
To understand how the defendants are alleged to have pressured the targeted primary insurers to make these changes, one must be aware of two important features of the insurance industry. First, most primary insurers rely on certain outside support services for the type of insurance coverage they wish to sell. Defendant Insurance Services Office, Inc. (ISO), an association of approximately 1,400 domestic property and casualty insurers (including the primary insurer defendants, Hartford Fire Insurance Company, Allstate Insurance Company, CIGNA Corporation, and Aetna Casualty and Surety Company), is the almost exclusive source of support services in this country for CGL insurance. See id., at 19 (Cal. Complaint ¶ 38). ISO develops standard policy forms and files or lodges them with each State's insurance regulators; most CGL insurance written in the United States is written on these forms. Ibid. (Cal. Complaint ¶ 39); id., at 74 (Conn. Complaint ¶ 50). All of the "traditional" features of CGL insurance relevant to this litigation were embodied in the ISO standard CGL insurance form that had been in use since 1973 (1973 ISO CGL form). Id., at 22 (Cal. Complaint ¶¶ 51-54); id., at 75 (Conn. Complaint ¶¶ 56— 58). For each of its standard policy forms, ISO also supplies actuarial and rating information: it collects, aggregates, interprets, and distributes data on the premiums charged, claims filed and paid, and defense costs expended with respect to each form, id., at 19 (Cal. Complaint ¶ 39); id., at 74 (Conn. Complaint ¶¶ 51-52), and on the basis of these data it predicts future loss trends and calculates advisory premium rates, id., at 19 (Cal. Complaint ¶ 39); id., at 74 (Conn. Complaint ¶ 53). Most ISO members cannot afford to continue to use a form if ISO withdraws these support services. See id., at 32-33 (Cal. Complaint ¶¶ 97, 99).
Second, primary insurers themselves usually purchase insurance to cover a portion of the risk they assume from the
The prehistory of events claimed to give rise to liability starts in 1977, when ISO began the process of revising its 1973 CGL form. Id., at 22 (Cal. Complaint ¶ 55). For the first time, it proposed two CGL forms (1984 ISO CGL forms), one the traditional "occurrence" type, the other "with a new `claims-made' trigger." Id., at 22-23 (Cal. Complaint ¶ 56). The "claims-made" form did not have a retroactive date provision, however, and both 1984 forms covered "`sudden and accidental' pollution" damage and provided for unlimited coverage of legal defense costs by the insurer. Id., at 23 (Cal. Complaint ¶¶ 59-60). Within the ISO, defendant Hartford Fire Insurance Company objected to the proposed 1984 forms; it desired elimination of the "occurrence" form, a retroactive date provision on the "claims-made" form, elimination of sudden and accidental pollution coverage, and a legal defense cost cap. Defendant Allstate Insurance Company also expressed its desire for a retroactive date provision on
Dissatisfied with this state of affairs, the defendants began to take other steps to force a change in the terms of coverage of CGL insurance generally available, steps that, the plaintiffs allege, implemented a series of conspiracies in violation of § 1 of the Sherman Act. The plaintiffs recount these steps as a number of separate episodes corresponding to different claims for relief in their complaints;
The first four Claims for Relief in the California Complaint, id., at 36-43 (¶¶ 111-130), and the Second Claim for Relief in the Connecticut Complaint, id., at 90-92 (¶¶ 120— 124), charge the four domestic primary insurer defendants and varying groups of domestic and foreign reinsurers, brokers, and associations with conspiracies to manipulate the ISO CGL forms. In March 1984, primary insurer Hartford persuaded General Reinsurance Corporation (General Re), the largest American reinsurer, to take steps either to procure desired changes in the ISO CGL forms, or "failing that, [to] `derail' the entire ISO CGL forms program." Id., at 24 (Cal. Complaint ¶ 64). General Re took up the matter with its trade association, RAA, which created a special committee that met and agreed to "boycott" the 1984 ISO CGL forms unless a retroactive-date provision was added to the
The four primary insurer defendants (Hartford, Aetna, CIGNA, and Allstate) also encouraged key actors in the London reinsurance market, an important provider of reinsurance for North American risks, to withhold reinsurance for coverages written on the 1984 ISO CGL forms. Id., at 25-26 (Cal. Complaint ¶¶ 69-70). As a consequence, many London-based underwriters, syndicates, brokers, and reinsurance companies informed ISO of their intention to withhold reinsurance on the 1984 forms, id., at 26-27 (Cal. Complaint ¶¶ 71-75), and at least some of them told ISO that they would withhold reinsurance until ISO incorporated all four desired changes, see supra, at 771, and n. 3, into the ISO CGL forms. App. 26 (Cal. Complaint ¶ 74).
For the first time ever, ISO invited representatives of the domestic and foreign reinsurance markets to speak at an ISO Executive Committee meeting. Id., at 27-28 (Cal. Complaint ¶ 78). At that meeting, the reinsurers "presented their agreed upon positions that there would be changes in the CGL forms or no reinsurance." Id., at 29 (Cal. Complaint ¶ 82). The ISO Executive Committee then voted to include a retroactive-date provision in the claims-made form, and to exclude all pollution coverage from both new forms. (But it neither eliminated the occurrence form, nor added a legal defense cost cap.) The 1984 ISO CGL forms were then withdrawn from the marketplace, and replaced with forms (1986 ISO CGL forms) containing the new provisions. Ibid.
The Fifth Claim for Relief in the California Complaint, id., at 43-44 (¶¶ 131-135), and the virtually identical Third Claim for Relief in the Connecticut Complaint, id., at 92-94 (¶¶ 125-129), charge a conspiracy among a group of London reinsurers and brokers to coerce primary insurers in the United States to offer CGL coverage only on a claims-made basis. The reinsurers collectively refused to write new reinsurance contracts for, or to renew longstanding contracts with, "primary . . . insurers unless they were prepared to switch from the occurrence to the claims-made form," id., at 30 (Cal. Complaint ¶ 88); they also amended their reinsurance contracts to cover only claims made before a "`sunset date,' " thus eliminating reinsurance for claims made on occurrence policies after that date, id., at 31 (Cal. Complaint ¶¶ 90-92).
The Sixth Claim for Relief in the California Complaint, id., at 45-46 (¶¶ 136-140), and the nearly identical Fourth Claim for Relief in the Connecticut Complaint, id., at 94-95 (¶¶ 130-134), charge another conspiracy among a somewhat different group of London reinsurers to withhold reinsurance for pollution coverage. The London reinsurers met and agreed that all reinsurance contracts covering North American casualty risks, including CGL risks, would be written with a complete exclusion for pollution liability coverage. Id., at 32 (Cal. Complaint ¶¶ 94-95). In accordance with this agreement, the parties have in fact excluded pollution liability coverage from CGL reinsurance contracts since at least late 1985. Ibid. (Cal. Complaint ¶ 94).
Finally, the Eighth Claim for Relief in the California Complaint, id., at 47-49 (¶¶ 146-150), and its counterpart in the Fifth Claim for Relief in the Connecticut Complaint, id., at 95-97 (¶¶ 135-139), charge a group of London and domestic retrocessional reinsurers
Nineteen States and a number of private plaintiffs filed 36 complaints against the insurers involved in this course of events, charging that the conspiracies described above violated § 1 of the Sherman Act, 15 U. S. C. § 1. After the actions had been consolidated for litigation in the Northern District of California, the defendants moved to dismiss for failure to state a cause of action, or, in the alternative, for summary judgment. The District Court granted the motions to dismiss. In re Insurance Antitrust Litigation, 723 F.Supp. 464 (1989). It held that the conduct alleged fell within the grant of antitrust immunity contained in § 2(b) of the McCarran-Ferguson Act, 15 U. S. C. § 1012(b), because it amounted to "the business of insurance" and was "regulated by State Law" within the meaning of that section; none of the conduct, in the District Court's view, amounted to a "boycott" within the meaning of the § 3(b) exception to that grant of immunity. 15 U. S. C. § 1013(b). The District Court also dismissed the three claims that named only certain London-based defendants,
The Court of Appeals reversed. In re Insurance Antitrust Litigation, 938 F.2d 919 (CA9 1991). Although it held the conduct involved to be "the business of insurance" within the meaning of § 2(b), it concluded that the defendants could
We granted certiorari in No. 91-1111 to address two narrow questions about the scope of McCarran-Ferguson Act antitrust immunity,
The petition in No. 91-1111 touches on the interaction of two important pieces of economic legislation. The Sherman Act declares "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations,. . . to be illegal."15 U. S. C. § 1. The McCarran-Ferguson Act provides that regulation of the insurance industry is generally a matter for the States, 15 U. S. C. § 1012(a), and (again, generally) that "[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance," § 1012(b). Section 2(b) of the McCarranFerguson Act makes it clear nonetheless that the Sherman Act applies "to the business of insurance to the extent that such business is not regulated by State Law," § 1012(b), and § 3(b) provides that nothing in the McCarran-Ferguson Act "shall render the . . . Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation," § 1013(b).
Petitioners in No. 91-1111 are all of the domestic defendants in the consolidated cases: the four domestic primary insurers, the domestic reinsurers, the trade associations ISO and RAA, and the domestic reinsurance broker Thomas A. Greene & Company, Inc. They argue that the Court of Appeals erred in holding, first, that their conduct, otherwise immune from antitrust liability under § 2(b) of the McCarranFerguson Act, lost its immunity when they conspired with the foreign defendants, and, second, that their conduct amounted to "act[s] of boycott" falling within the exception to antitrust immunity set out in § 3(b). We conclude that the Court of Appeals did err about the effect of conspiring with foreign defendants, but correctly decided that all but one of the complaints' relevant Claims for Relief are fairly read to allege conduct falling within the "boycott" exception to McCarran-Ferguson Act antitrust immunity. We therefore
By its terms, the antitrust exemption of § 2(b) of the McCarran-Ferguson Act applies to "the business of insurance" to the extent that such business is regulated by state law. While "business" may mean "[a] commercial or industrial establishment or enterprise," Webster's New International Dictionary 362 (2d ed. 1942), the definite article before "business" in § 2(b) shows that the word is not used in that sense, the phrase "the business of insurance" obviously not being meant to refer to a single entity. Rather, "business" as used in § 2(b) is most naturally read to refer to "[m]ercantile transactions; buying and selling; [and] traffic." Ibid.
The cases confirm that "the business of insurance" should be read to single out one activity from others, not to distinguish one entity from another. In Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979), for example, we held that § 2(b) did not exempt an insurance company from antitrust liability for making an agreement fixing the price of prescription drugs to be sold to Blue Shield policyholders. Such activity, we said, "would be exempt from the antitrust laws if Congress had extended the coverage of the McCarran-Ferguson Act to the `business of insurance companies.' But that is precisely what Congress did not do." Id., at 233 (footnote omitted); see SEC v. National Securities, Inc., 393 U.S. 453, 459 (1969) (the McCarran-Ferguson Act's "language refers not to the persons or companies who are subject to state regulation, but to laws `regulating the business of insurance' ") (emphasis in original). And in Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982), we explicitly framed the question as whether "a particular practice is part of the `business of insurance' exempted from the antitrust
The Court of Appeals did not hold that, under these criteria, the domestic defendants' conduct fell outside "the business of insurance"; to the contrary, it held that that condition was met.
The full sentence from Royal Drug Co. places the quoted fragment in a different light. "In analogous contexts," we stated, "the Court has held that an exempt entity forfeits antitrust exemption by acting in concert with nonexempt parties." 440 U. S., at 231. We then cited two cases dealing with the Capper-Volstead Act, which immunizes from liability under § 1 of the Sherman Act particular activities of certain persons "engaged in the production of agricultural products."
That the domestic defendants did not lose their § 2(b) exemption by acting together with foreign reinsurers, however, is not enough reason to reinstate the District Court's dismissal order, for the Court of Appeals reversed that order on two independent grounds. Even if the participation of foreign reinsurers did not affect the § 2(b) exemption, the Court of Appeals held, the agreements and acts alleged by the plaintiffs constitute "agreement[s] to boycott" and "act[s] of boycott [and] coercion" within the meaning of § 3(b) of the McCarran-Ferguson Act, which makes it clear that the Sherman Act applies to such agreements and acts regardless of the § 2(b) exemption. See 938 F. 2d, at 928. I agree with
In reviewing the motions to dismiss, however, the Court has decided to use what I believe to be an overly narrow definition of the term "boycott" as used in § 3(b), confining it to those refusals to deal that are "unrelated" or "collateral" to the objective sought by those refusing to deal. Post, at 803. I do not believe that the McCarran-Ferguson Act or our precedents warrant such a cramped reading of the term.
The majority and I find common ground in four propositions concerning § 3(b) boycotts, as established in our decisions in St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (1978), and United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944). First, as we noted in St. Paul, our only prior decision construing "boycott" as it appears in § 3(b), only those refusals to deal involving the coordinated action of multiple actors constitute § 3(b) boycotts: "conduct by individual actors falling short of concerted activity is simply not a `boycott' within [the meaning of] § 3(b)." 438 U. S., at 555; see post, at 800 ("`boycott' " used "to describe . . . collective action"); post, at 801 ("To `boycott' means `[t]o combine in refusing to hold relations' " (citation omitted)).
Second, a § 3(b) boycott need not involve an absolute refusal to deal.
Third, contrary to petitioners' contentions, see Brief for Petitioners in No. 91-1111, pp. 32, n. 14, 34, 38-39, a § 3(b) boycott need not entail unequal treatment of the targets of the boycott and its instigators. Some refusals to deal (those, perhaps, which are alleged to violate only § 2 of the Sherman Act
Fourth, although a necessary element, "concerted activity" is not, by itself, sufficient for a finding of "boycott" under § 3(b). Were this the case, we recognized in Barry, § 3(b) might well "`devour the broad antitrust immunity bestowed by § 2(b),' " 438 U. S., at 545, n. 18 (quoting id., at 559 (Stewart, J., dissenting)), since every "contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce," 15 U. S. C. § 1, involves "concerted activity." Thus, we suggested, simple price fixing has been treated neither as a boycott nor as coercion "in the absence of any additional enforcement activity." 438 U. S., at 545, n. 18; see post, at 804 (contending that simple concerted agreements on contract terms are not properly characterized as boycotts).
Contrary to the majority's view, however, our decisions have suggested that "enforcement activity" is a multifarious concept. The South-Eastern Underwriters Court, which coined the phrase "boycotts[,] . . . coercion and intimidation," 322 U. S., at 535; see n. 14, supra, provides us with a list of actions that, it finds, are encompassed by these terms. "Companies not members of [the association]," it states, "were cut off from the opportunity to reinsure their risks, and their services and facilities were disparaged; independent sales agencies who defiantly represented non[association] companies were punished by a withdrawal of the right to represent the members of [the association]; and persons needing insurance who purchased from non[association]
The question in this litigation is whether the alleged activities of the domestic defendants, acting together with the foreign defendants who are not petitioners here, include "enforcement activities" that would raise the claimed attempts to fix terms to the level of § 3(b) boycotts. I believe they do. The core of the plaintiffs' allegations against the domestic defendants concern those activities that form the basis of the First, Second, Third, and Fourth Claims for Relief in the California Complaint, and the Second Claim for Relief in the Connecticut Complaint: the conspiracies involving both the primary insurers and domestic and foreign brokers and reinsurers to force changes in the ISO CGL forms. According to the complaints, primary insurer defendants Hartford and Allstate first tried to convince other members of the ISO that the ISO CGL forms should be changed to limit coverage in the manner we have detailed above, see supra, at 773-774; but they failed to persuade a majority of members of the relevant ISO committees, and the changes were not made. Unable to persuade other primary insurers to agree voluntarily to their terms, Hartford and Allstate, joined by Aetna and CIGNA, sought the aid of other individuals and entities who were not members of ISO, and who would not ordinarily be parties to an agreement setting the terms of primary insurance, not being in the business of selling it. The four primary insurers convinced these individuals and entities, the reinsurers, to put pressure on ISO and its members by refusing to reinsure coverages written on the ISO CGL forms until the desired changes were made. Both domestic and foreign reinsurers, acting at the behest of the four primary
This pattern of activity bears a striking resemblance to the first act of boycott listed by the South-Eastern Underwriters Court; although neither the South-Eastern Underwriters opinion, nor the underlying indictment, see Transcript of Record, O. T. 1943, No. 354, p. 11 (¶ 22(e)), details exactly how the defendants managed to "cut off [nonmembers] from the opportunity to reinsure their risks," 322 U. S., at 535, the defendants could have done so by prompting reinsurance companies to refuse to deal with nonmembers, just as is alleged here.
First, the allegation that the reinsurers acted at the behest of the four primary insurers excludes the possibility that the reinsurers acted entirely in their own independent selfinterest, and would have taken exactly the same course of action without the intense efforts of the four primary insurers. Although the majority never explicitly posits such autonomy on the part of the reinsurers, this would seem to be the only point of its repeated emphasis on the fact that "the scope and predictability of the risks assumed in a reinsurance contract depend entirely upon the terms of the primary policies that are reinsured." Ibid. If the encouragement of the four primary insurers played no role in the reinsurers' decision to act as they did, then it is difficult to see how one could describe the reinsurers as acting at the behest of the primary insurers, an element I find crucial to the § 3(b) boycott alleged here. From the vantage point of a ruling on motions to dismiss, however, I discern sufficient allegations in the complaints that this is not the case. In addition, according to the complaints, the four primary insurers were not acting out of concern for the reinsurers' financial health when they prompted the reinsurers to refuse reinsurance for certain risks; rather, they simply wanted to ensure that no other primary insurer would be able to sell insurance policies that they did not want to sell. Finally, as the complaints portray the business of insurance, reinsurance is a separate, specialized product, "[t]he availability [of which] affects the ability and willingness of primary insurers to provide insurance to their customers." App. 18 (Cal. Complaint ¶ 34). Thus, contrary to the majority's assertion, the boundary between the primary insurance industry and the reinsurance industry is not merely "technica[l]." Post, at 808.
Believing that there is no other principled way to narrow the § 3(b) exception, the majority decides that "boycott" encompasses just those refusals to deal that are "unrelated" or "collateral" to the objective sought by those refusing to deal. Post, at 803. This designation of a single "`unitary phenomenon,'"
Finally, we take up the question presented by No. 91-1128, whether certain claims against the London reinsurers should have been dismissed as improper applications of the Sherman
At the outset, we note that the District Court undoubtedly had jurisdiction of these Sherman Act claims, as the London reinsurers apparently concede. See Tr. of Oral Arg. 37 ("Our position is not that the Sherman Act does not apply in the sense that a minimal basis for the exercise of jurisdiction doesn't exist here. Our position is that there are certain circumstances, and that this is one of them, in which the interests of another State are sufficient that the exercise of that jurisdiction should be restrained").
When it enacted the FTAIA, Congress expressed no view on the question whether a court with Sherman Act jurisdiction should ever decline to exercise such jurisdiction on grounds of international comity. See H. R. Rep. No. 97-686, p. 13 (1982) ("If a court determines that the requirements for subject matter jurisdiction are met, [the FTAIA] would have no effect on the court[`s] ability to employ notions of comity. . . or otherwise to take account of the international character of the transaction") (citing Timberlane ). We need not decide that question here, however, for even assuming that in a proper case a court may decline to exercise Sherman Act jurisdiction over foreign conduct (or, as Justice Scalia would put it, may conclude by the employment of comity analysis in the first instance that there is no jurisdiction), international comity would not counsel against exercising jurisdiction in the circumstances alleged here.
The only substantial question in this litigation is whether "there is in fact a true conflict between domestic and foreign law." Société Nationale Industrielle Aérospatiale v. United States Dist. Court for Southern Dist. of Iowa, 482 U.S. 522, 555 (1987) (Blackmun, J., concurring in part and dissenting in part). The London reinsurers contend that applying the Act to their conduct would conflict significantly with British law, and the British Government, appearing before us as amicus curiae, concurs. See Brief for Petitioners Merrett Underwriting Agency Management Ltd. et al. in No. 91-1128, pp. 22-27; Brief for Government of United Kingdom of Great Britain and Northern Ireland as Amicus Curiae 10-14. They assert that Parliament has established a comprehensive
The judgment of the Court of Appeals is affirmed in part and reversed in part, and the cases are remanded for further proceedings consistent with this opinion.
It is so ordered.
With respect to the petition in No. 91-1111, I join the Court's judgment and Parts I and II—A of its opinion. I write separately because I do not agree with Justice Souter's analysis, set forth in Part II—B of his opinion, of what constitutes a "boycott" for purposes of § 3(b) of the McCarran-Ferguson Act, 15 U. S. C. § 1013(b). With respect to the petition in No. 91-1128, I dissent from the Court's ruling concerning the extraterritorial application of the Sherman Act. Part I below discusses the boycott issue; Part II extraterritoriality.
Determining proper application of § 3(b) of the McCarranFerguson Act to the present cases requires precise definition of the word "boycott."
Petitioners have suggested that a boycott ordinarily requires "an absolute refusal to deal on any terms," which was concededly not the case here. Brief for Petitioners in No. 91-1111, p. 31; see also Reply Brief for Petitioners in No. 91-1111, pp. 12-13. We think not. As the definition just recited provides, the refusal may be imposed "to punish [the target] for the position he has taken up, or coerce him into abandoning it. " The refusal to deal may, in other words, be conditional, offering its target the incentive of renewed dealing if and when he mends his ways. This is often the case—and indeed seems to have been the case with the original Boycott boycott. Cf. McCarthy, supra, at 109 (noting that the Captain later lived "at peace" with his neighbors). Furthermore, other dictionary definitions extend the term to include a partial boycott—a refusal to engage in some, but not all, transactions with the target. See Webster's New International Dictionary 321 (2d ed. 1950) (defining "boycott" as "to withhold, wholly or in part, social or business intercourse from, as an expression of disapproval or means of coercion" (emphasis added)).
It is, however, important—and crucial in the present cases—to distinguish between a conditional boycott and a concerted agreement to seek particular terms in particular
Thus, if Captain Boycott's tenants had agreed among themselves that they would refuse to renew their leases unless he reduced his rents, that would have been a concerted agreement on the terms of the leases, but not a boycott.
The proper definition of "boycott" is evident from the Court's opinion in Eastern States Retail Lumber Dealers' Assn. v. United States, 234 U.S. 600 (1914), which is recognized in the antitrust field as one of the "leading case[s] involving commercial boycotts." Barber, Refusals to Deal under the Federal Antitrust Laws, 103 U. Pa. L. Rev. 847, 873 (1955). The associations of retail lumber dealers in that case refused to buy lumber from wholesale lumber dealers who sold directly to consumers. The boycott attempted "to impose as a condition . . . on [the wholesale dealers'] trade that they shall not sell in such manner that a local retailer may regard such sale as an infringement of his exclusive right to trade." 234 U. S., at 611. We held that to be an "`artificial conditio[n],' " since "the trade of the wholesaler with strangers was directly affected, not because of any supposed wrong which he had done to them, but because of the grievance of a member of one of the associations." Id., at 611-612. In other words, the associations' activities were a boycott because they sought an objective—the wholesale dealers' forbearance from retail trade—that was collateral to their transactions with the wholesalers.
Of course as far as the Sherman Act (outside the exempted insurance field) is concerned, concerted agreements on contract terms are as unlawful as boycotts. For example, in Paramount Famous Lasky Corp. v. United States, 282 U.S. 30 (1930), and United States v. First Nat. Pictures, Inc., 282 U.S. 44 (1930), we held unreasonable an agreement among competing motion picture distributors under which they refused to license films to exhibitors except on standardized terms. We also found unreasonable the restraint of trade in Anderson v. Shipowners Assn. of Pacific Coast, 272 U.S. 359 (1926), which involved an attempt by an association of
In addition to its use in the antitrust field, the concept of "boycott" frequently appears in labor law, and in this context as well there is a clear distinction between boycotts and concerted agreements seeking terms. The ordinary strike
Under the standard described, it is obviously not a "boycott" for the reinsurers to "refus[e] to reinsure coverages written on the ISO CGL forms until the desired changes were made," ante, at 788, because the terms of the primary coverages are central elements of the reinsurance contract— they are what is reinsured. See App. 16-17 (Cal. Complaint ¶¶ 26-27). The "primary policies are . . . the basis of the losses that are shared in the reinsurance agreements." 1 B. Webb, H. Anderson, J. Cookman, & P. Kensicki, Principles of Reinsurance 87 (1990); see also id., at 55; Gurley, Regulation of Reinsurance in the United States, 19 Forum 72, 73 (1983). Indeed, reinsurance is so closely tied to the terms of the primary insurance contract that one of the two categories of reinsurance (assumption reinsurance) substitutes the reinsurer for the primary or "ceding" insurer and places the reinsurer into contractual privity with the primary insurer's policyholders. See id., at 73-74; Colonial American Life Ins. Co. v. Commissioner, 491 U.S. 244, 247 (1989); B. Ostrager & T. Newman, Handbook on Insurance Coverage
Justice Souter simply disregards this integral relationship between the terms of the primary insurance form and the contract of reinsurance. He describes the reinsurers as "individuals and entities who were not members of ISO, and who would not ordinarily be parties to an agreement setting the terms of primary insurance, not being in the business of selling it." Ante, at 788. While this factual assumption is crucial to Justice Souter's reasoning (because otherwise he would not be able to distinguish permissible agreements among primary insurers), he offers no support for the statement. But even if it happens to be true, he does not explain why it must be true—that is, why the law must exclude reinsurers from full membership and participation. The realities of the industry may make explanation difficult:
Justice Souter seems to believe that a nonboycott is converted into a boycott by the fact that it occurs "at the behest of," ante, at 789, or is "solicited" by, ibid., competitors of the target. He purports to find support for this implausible proposition in United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944), which involved a classic boycott, by primary insurers, of competitors who refused to join their price-fixing conspiracy, the South-Eastern Underwriters Association (S. E. U. A.). The conspirators would not deal with independent agents who wrote for such companies, and would not write policies for customers who insured with them. See id., at 535-536. Moreover, Justice Black's opinion for the Court noted cryptically, "[c]ompanies not members of S. E. U. A. were cut off from the opportunity to reinsure their risks." Id., at 535. Justice Souter speculates
Justice Souter suggests that we have somehow mistakenly "posit[ed] . . . autonomy on the part of the reinsurers." Ante, at 792. We do not understand this. Nothing in the complaints alleges that the reinsurers were deprived of their "autonomy," which we take to mean that they were coerced by the primary insurers. (Given the sheer size of the Lloyd's market, such an allegation would be laughable.) That is not to say that we disagree with Justice Souter's contention that, according to the allegations, the reinsurers would not "have taken exactly the same course of action without the intense efforts of the four primary insurers." Ibid. But the same could be said of the participants in virtually all conspiracies: If they had not been enlisted by the "intense efforts" of the leaders, their actions would not have been the same. If this factor renders otherwise lawful conspiracies (under McCarran-Ferguson) illegal, then the Act would have a narrow scope indeed.
Perhaps Justice Souter feels that it is undesirable, as a policy matter, to allow insurers to "prompt" reinsurers not to deal with the insurers' competitors—whether or not that refusal to deal is a boycott. That feeling is certainly understandable, since under the normal application of the Sherman Act the reinsurers' concerted refusal to deal would be an unlawful conspiracy, and the insurers' "prompting" could make them part of that conspiracy. The McCarran-
Under the test set forth above, there are sufficient allegations of a "boycott" to sustain the relevant counts of complaint against a motion to dismiss. For example, the complaints allege that some of the defendant reinsurers threatened to "withdra[w] entirely from the business of reinsuring primary U. S. insurers who wrote on the occurrence form." App. 31 (Cal. Complaint ¶ 89), id., at 83 (Conn. Complaint ¶ 93). Construed most favorably to respondents, that allegation claims that primary insurers who wrote insurance on disfavored forms would be refused all reinsurance, even as to risks written on other forms. If that were the case, the reinsurers might have been engaging in a boycott—they would, that is, unless the primary insurers' other business were relevant to the proposed reinsurance contract (for example, if the reinsurer bears greater risk where the primary insurer engages in riskier businesses). Cf. Gonye, Underwriting the Reinsured, in Reinsurance 439, 463-466 (R. Strain ed. 1980); 2 R. Reinarz, J. Schloss, G. Patrik, & P. Kensicki, Reinsurance Practices 21-23 (1990) (same). Other allegations in the complaints could be similarly construed. For example, the complaints also allege that the reinsurers "threatened a boycott of North American CGL risks," not just CGL risks containing dissatisfactory terms, App. 26 (Cal. Complaint ¶ 74), id., at 79 (Conn. Complaint ¶ 78); that "the foreign and domestic reinsurer representatives presented their agreed upon positions that there would be changes in the CGL forms or no reinsurance," id., at 29 (Cal. Complaint ¶ 82), id., at 81-82 (Conn. Complaint ¶ 86); that some of the defendant insurers and reinsurers told "groups of insurance brokers and agents . . . that a reinsurance boycott, and thus loss of income to the agents and brokers who would be unable to find available markets for their customers, would ensue if the [revised] ISO forms were not approved,"
Many other allegations in the complaints describe conduct that may amount to a boycott if the plaintiffs can prove certain additional facts. For example, General Re, the largest American reinsurer, is alleged to have "agreed to either coerce ISO to adopt [the defendants'] demands or, failing that, `derail' the entire CGL forms program." Id., at 24 (Cal. Complaint ¶ 64), id., at 77 (Conn. Complaint ¶ 68). If this means that General Re intended to withhold all reinsurance on all CGL forms—even forms having no objectionable terms—that might amount to a "boycott." Also, General Re and several other domestic reinsurers are alleged to have "agreed to boycott the 1984 ISO forms unless a retroactive date was added to the claims-made form, and a pollution exclusion and a defense cost cap were added to both [the occurrence and claims made] forms." Id., at 25 (Cal. Complaint ¶ 66), id., at 78 (Conn. Complaint ¶ 70). Liberally construed, this allegation may mean that the defendants had linked their demands so that they would continue to refuse to do business on either form until both were changed to their liking. Again, that might amount to a boycott. "[A] complaint should not be dismissed unless `it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 246 (1980) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Under that standard, these allegations are sufficient to sustain the First, Second, Third, and Fourth Claims for Relief in the California Complaint and the First and Second Claims for Relief in the Connecticut Complaint.
Petitioners in No. 91-1128, various British corporations and other British subjects, argue that certain of the claims against them constitute an inappropriate extraterritorial application of the Sherman Act.
The second question—the extraterritorial reach of the Sherman Act—has nothing to do with the jurisdiction of the courts. It is a question of substantive law turning on whether, in enacting the Sherman Act, Congress asserted regulatory power over the challenged conduct. See EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991) (Aramco) ("It is our task to determine whether Congress intended the protections of Title VII to apply to United States citizens employed by American employers outside of the United States"). If a plaintiff fails to prevail on this issue, the court does not dismiss the claim for want of subject-matter jurisdiction—want of power to adjudicate; rather, it decides the claim, ruling on the merits that the plaintiff has failed to state a cause of action under the relevant statute. See Romero, supra, at 384 (holding no claim available under the Jones Act); American Banana Co. v. United Fruit Co., 213 U.S. 347, 359 (1909) (holding that complaint based upon foreign conduct "alleges no case under the [Sherman Act]").
There is, however, a type of "jurisdiction" relevant to determining the extraterritorial reach of a statute; it is known as "legislative jurisdiction," Aramco, supra, at 253; Restatement (First) Conflict of Laws § 60 (1934), or "jurisdiction to prescribe," 1 Restatement (Third) of Foreign Relations Law of the United States 235 (1987) (hereinafter Restatement (Third)). This refers to "the authority of a state to make its law applicable to persons or activities," and is quite a separate matter from "jurisdiction to adjudicate," see id., at 231. There is no doubt, of course, that Congress possesses legislative jurisdiction over the acts alleged in this complaint: Congress has broad power under Article I, § 8, cl. 3, "[t]o regulate Commerce with foreign Nations," and this Court has repeatedly upheld its power to make laws applicable to persons or activities beyond our territorial boundaries where United
Two canons of statutory construction are relevant in this inquiry. The first is the "longstanding principle of American law `that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.' " Aramco, supra, at 248 (quoting Foley Bros., Inc. v.Filardo, 336 U.S. 281, 285 (1949)). Applying that canon in Aramco, we held that the version of Title VII of the Civil Rights Act of 1964 then in force, 42 U. S. C. §§ 2000e to 2000e—17 (1988 ed.), did not extend outside the territory of the United States even though the statute contained broad provisions extending its prohibitions to, for example, "`any activity, business, or industry in commerce.' " Id., at 249 (quoting 42 U. S. C. § 2000e(h)). We held such "boilerplate language" to be an insufficient indication to override the presumption against extraterritoriality. Id., at 251; see also id., at 251-253. The Sherman Act contains similar "boilerplate language," and if the question were not governed by precedent, it would be worth considering whether that presumption controls the outcome here. We have, however, found the presumption to be overcome with respect to our antitrust laws; it is now well established that the Sherman Act applies extraterritorially. See Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 582, n. 6 (1986); Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 704 (1962); see also United States v. Aluminum Co. of America, 148 F.2d 416 (CA2 1945).
But if the presumption against extraterritoriality has been overcome or is otherwise inapplicable, a second canon of statutory construction becomes relevant: "[A]n act of congress
Consistent with that presumption, this and other courts have frequently recognized that, even where the presumption against extraterritoriality does not apply, statutes should not be interpreted to regulate foreign persons or conduct if that regulation would conflict with principles of international law. For example, in Romero v. International Terminal Operating Co., 358 U.S. 354 (1959), the plaintiff, a Spanish sailor who had been injured while working aboard a Spanish-flag and Spanish-owned vessel, filed a Jones Act claim against his Spanish employer. The presumption against extraterritorial application of federal statutes was inapplicable to the case, as the actionable tort had occurred in American waters. See id., at 383. The Court nonetheless stated that, "in the absence of a contrary congressional direction," it would apply "principles of choice of law that are consonant with the needs of a general federal maritime law and with due recognition of our self-regarding respect for the relevant interests of foreign nations in the regulation of maritime commerce as part of the legitimate concern of the international community." Id., at 382-383. "The controlling considerations" in this choice-of-law analysis were "the interacting interests of the United States and of foreign countries." Id., at 383.
Lauritzen, Romero, and McCulloch were maritime cases, but we have recognized the principle that the scope of generally worded statutes must be construed in light of international law in other areas as well. See, e. g., Sale v. Haitian Centers Council, Inc., ante, at 178, n. 35; Weinberger v. Rossi, 456 U.S. 25, 32 (1982). More specifically, the principle was expressed in United States v. Aluminum Co. of America, 148 F.2d 416 (CA2 1945), the decision that established the extraterritorial reach of the Sherman Act. In his opinion for the court, Judge Learned Hand cautioned "we are not to read general words, such as those in [the Sherman]
More recent lower court precedent has also tempered the extraterritorial application of the Sherman Act with considerations of "international comity." See Timberlane Lumber Co. v. Bank of America, N. T. & S. A., 549 F.2d 597, 608-615 (CA9 1976); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1294-1298 (CA3 1979); Montreal Trading Ltd. v. Amax Inc., 661 F.2d 864, 869-871 (CA10 1981); Laker Airways Limited v. Sabena, Belgian World Airlines, 235 U. S. App. D. C. 207, 236, and n. 109, 731 F.2d 909, 938, and n. 109 (1984); see also Pacific Seafarers, Inc. v. Pacific Far East Line, Inc., 131 U. S. App. D. C. 226, 236, and n. 31, 404 F.2d 804, 814, and n. 31 (1968). The "comity" they refer to is not the comity of courts, whereby judges decline to exercise jurisdiction over matters more appropriately adjudged elsewhere, but rather what might be termed "prescriptive comity": the respect sovereign nations afford each other by limiting the reach of their laws. That comity is exercised by legislatures when they enact laws, and courts assume it has been exercised when they come to interpreting the scope of laws their legislatures have enacted. It is a traditional component of choice-of-law theory. See J. Story, Commentaries on the Conflict of Laws § 38 (1834) (distinguishing between the "comity of the courts" and the "comity of nations," and defining the latter as "the true foundation and extent of the obligation of the laws of one nation within the territories of another"). Comity in this sense includes the choice-oflaw principles that, "in the absence of contrary congressional direction," are assumed to be incorporated into our substantive laws having extraterritorial reach. Romero, supra, at 382-383; see also Lauritzen, supra, at 578-579; Hilton v. Guyot, 159 U.S. 113, 162-166 (1895). Considering comity in
In sum, the practice of using international law to limit the extraterritorial reach of statutes is firmly established in our jurisprudence. In proceeding to apply that practice to the present cases, I shall rely on the Restatement (Third) for the relevant principles of international law. Its standards appear fairly supported in the decisions of this Court construing international choice-of-law principles (Lauritzen, Romero, and McCulloch ) and in the decisions of other federal courts, especially Timberlane. Whether the Restatement precisely reflects international law in every detail matters little here, as I believe this litigation would be resolved the same way under virtually any conceivable test that takes account of foreign regulatory interests.
Under the Restatement, a nation having some "basis" for jurisdiction to prescribe law should nonetheless refrain from exercising that jurisdiction "with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable." Restatement (Third) § 403(1). The "reasonableness" inquiry turns on a number of factors including, but not limited to: "the extent to which the activity takes place within the territory [of the regulating state]," id., § 403(2)(a); "the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the
In the sense in which the term "conflic[t]" was used in Lauritzen, 345 U. S., at 582, 592, and is generally understood in the field of conflicts of laws, there is clearly a conflict in this litigation. The petitioners here, like the defendant in Lauritzen, were not compelled by any foreign law to take their allegedly wrongful actions, but that no more precludes a conflict-of-laws analysis here than it did there. See id., at 575-576 (detailing the differences between foreign and
Literally the only support that the Court adduces for its position is § 403 of the Restatement (Third)—or more precisely Comment e to that provision, which states:
The Court has completely misinterpreted this provision. Subsection (3) of § 403 (requiring one State to defer to another in the limited circumstances just described) comes into play only after subsection (1) of § 403 has been complied with—i. e., after it has been determined that the exercise of jurisdiction by both of the two States is not "unreasonable." That prior question is answered by applying the factors (inter alia) set forth in subsection (2) of § 403, that is,precisely the factors that I have discussed in text and that the Court rejects.
* * *
I would reverse the judgment of the Court of Appeals on this issue, and remand to the District Court with instructions to dismiss for failure to state a claim on the three counts at issue in No. 91-1128.
Briefs of amici curiae urging affirmance were filed for the State of Texas et al. by Dan Morales, Attorney General of Texas, Will Pryor, First Assistant Attorney General, Mary F. Keller, Deputy Attorney General, and Thomas P. Perkins, Jr., Mark Tobey, Katherine D. Farroba, and Floyd Russell Ham, Assistant Attorneys General, Charles M. Oberly III, Attorney General of Delaware, John J. Polk, Deputy Attorney General, Robert A. Butterworth, Attorney General of Florida, Scott E. Clodfelter, Assistant Attorney General, Robert A. Marks, Attorney General of Hawaii, Larry EchoHawk, Attorney General of Idaho, Brett T. DeLange, Deputy Attorney General, Bonnie J. Campbell, Attorney General of Iowa, John R. Perkins, Deputy Attorney General, Chris Gorman, Attorney General of Kentucky, Robert V. Bullock, Assistant Attorney General, Mike Moore, Attorney General of Mississippi, Jim Steele, Special Assistant Attorney General, William L. Webster, Attorney General of Missouri, Henry T. Herschel, Tom Udall, Attorney General of New Mexico, Frankie Sue Del Papa, Attorney General of Nevada, Lacy H. Thornburg, Attorney General of North Carolina, James C. Gulick, Special Deputy Attorney General, and K. D. Sturgis, Assistant Attorney General, Nicholas J. Spaeth, Attorney General of North Dakota, David W. Huey, Assistant Attorney General, James E. O'Neil, Attorney General of Rhode Island, Maureen G. Glynn, Special Assistant Attorney General, T. Travis Medlock, Attorney General of South Carolina, Mark Barnett, Attorney General of South Dakota, Jeffrey P. Hallem, Assistant Attorney General, R. Paul Van Dam, Attorney General of Utah, Patrice Arent and Cy H. Castle, Assistant Attorneys General, Jeffrey L. Amestoy, Attorney General of Vermont, Julie Brill, Assistant Attorney General, and Mary Sue Terry, Attorney General of Virginia; for the National League of Cities et al. by Lawrence Kill and Anthony P. Coles; and for the Service Station Dealers of America by Dimitri G. Daskalopoulos.
Richard I. Fine filed a brief for the Service Industry Council et al. as amicus curiae.
"1. Whether domestic insurance companies whose conduct otherwise would be exempt from the federal antitrust laws under the McCarranFerguson Act lose that exemption because they participate with foreign reinsurers in the business of insurance," and "2. Whether agreements among primary insurers and reinsurers on such matters as standardized advisory insurance policy forms and terms of insurance coverage constitute a `boycott' outside the exemption of the McCarran-Ferguson Act." Pet. for Cert. in No. 91-1111, p. i; see 506 U.S. 814 (1992).
The Seventh Claim for Relief in the California Complaint, and the virtually identical Sixth Claim for Relief in the Connecticut Complaint, allege a conspiracy among a group of domestic primary insurers, foreign reinsurers, and the ISO to draft restrictive model forms and policy language for "umbrella" and "excess" insurance. On these claims, the Court of Appeals reversed the District Court's order of dismissal as to the domestic defendants solely because those defendants "act[ed] in concert" with nonexempt foreign defendants, 938 F. 2d, at 931, relying on reasoning that the Court has found to be in error, see supra, at 781-784. The Court of Appeals found that "[n]o boycotts [were] alleged as the defendants' modus operandi in respect to [excess and umbrella] insurance." 938 F. 2d, at 930. I agree; even under a liberal construction of the complaints infavor of plaintiffs, I can find no allegation of any refusal to deal in connection with the drafting of the excess and umbrella insurance language. Therefore I conclude that neither the participation of unregulated parties nor the application of § 3(b) furnished a basis to reverse the District Court's dismissal of these claims as against the domestic insurers, and I would reverse the judgment of the Court of Appeals in this respect. The Fifth, Sixth, and Eighth Claims for Relief in the California Complaint and the Third, Fourth, and Fifth Claims for Relief in the Connecticut Complaint also allege concerted refusals to deal; but because they do not name any of the petitioners in No. 91-1111, the Court has no occasion to consider whether they allege § 3(b) boycotts.
"Nothing contained in this Act shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation."