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Judge requests more details in policyholders' suit


NEWARK, N.J.--Plaintiffs in a massive class action suit against dozens of brokers and insurers have failed to provide enough specific information to support claims of an industrywide conspiracy to rig bids and steer business to selected insurers, a federal judge has ruled.

Rather than dismiss a pair of consolidated antitrust and racketeering complaints, though, U.S. District Judge Faith Hochberg on Tuesday ordered the plaintiffs to file supplemental statements spelling out the particulars of their charges against individual defendants. Following the supplemental filings, brokers and insurers may then renew motions to dismiss the litigation or seek summary judgment, Judge Hochberg ruled.

The litigation in U.S. District Court in Newark, N.J., consolidates 38 lawsuits filed by policyholders in the wake of New York Attorney General Eliot Spitzer's 2004 allegations of bid rigging by Marsh Inc. and subsequent charges of anticompetitive practices by numerous other brokers and insurers.

The policyholder litigation--divided into separate commercial property/casualty and employee benefits-related complaints--alleges a vast, industrywide conspiracy to stifle competition for the benefit of brokers and insurers. As an alternative to that theory, the plaintiffs also allege at least six "broker-centered" conspiracies in which each broker--Marsh Inc., Aon Corp., Willis Group Holdings P.L.C., Arthur J. Gallagher & Co., Wells Fargo & Co. and USI Holdings Corp.--separately pursued a similar course of anticompetitive conduct with insurers.

Broker and insurer defendants filed motions to dismiss the suits, arguing that the McCarran-Ferguson Act bars antitrust charges against insurers and that the plaintiffs failed to state facts supporting claims under the Sherman Act and the federal Racketeer Influenced and Corrupt Organizations law.

In her ruling Tuesday, Judge Hochberg rejected the defendants' McCarran argument. The antitrust exemption, she wrote, applies only to "the business of insurance" and does not cover the bid-rigging and client-steering practices alleged in the complaints.

The judge agreed, however, that the plaintiffs failed to provide enough detail to support their charges of either "global" or "broker-centered" conspiracies.

"Plaintiffs' broad allegations sweep together more than a hundred defendants, other unnamed brokers and insurers as well as 'other entities' without alleging any facts to show that an implied or express agreement existed between the alleged conspirators," she said of the global antitrust charges.

The plaintiffs likewise failed to meet the RICO law's requirement that they clearly describe the defendants' alleged racketeering enterprise, the judge found.

"Pleading a RICO enterprise is not a mix-and-match game," she wrote. "Here, the complaint does not even identify the members of the (property/casualty insurance) enterprise, but only refers in vague terms to 'the defendants,' 'other insurers that pay contingent commissions,' (and) 'other entities.'"

In the supplemental filings ordered by Judge Hochberg, plaintiffs will have to back up their charges with--for example--specifics of the existence and function of the alleged racketeering enterprise.

The case has already generated a massive volume of discovery material: Marsh has so far produced 14 million pages of documents, while Aon has produced 2 million and the other broker and insurer defendants millions more, court records say.