The New York Court of Appeals ruled Tuesday that a German company called Global Reinsurance cannot bring antitrust claims under New York state’s “little Sherman Act” against Equitas, the reinsurer created in 1996 to cap the liability of Lloyd’s of London syndicates. Happily, to understand the high court’s 22-page opinion, we don’t have to get into its analysis of the global market for retrocessionary reinsurance. We don’t even have to consider Chief Judge Jonathan Lippman‘s discussion of whether Equitas had the power to effect worldwide anticompetitive injury. We need only consider what the opinion called “an immovable obstacle” to Global’s case: New York’s antitrust law, the Donnelly Act, “cannot be understood to extend to the foreign conspiracy (Global) purports to describe.”
To reach that conclusion, the Court of Appeals looked to the Sherman Act, the federal statute on which the state’s Donnelly Act is based. In particular, the court considered the Foreign Trade Antitrust Improvements Act, which says that U.S. antitrust laws do not apply to conduct that took place outside of the United States. (I’ve previously written about the FTAIA’s fascinating implications for trade in the global marketplace.) The only exception to the FTAIA’s bar, Lippman’s opinion said, is when an antitrust plaintiff can show that the alleged conduct had a direct and intended effect on U.S. commerce. Global couldn’t do that, the Chief Judge said:
The London conspiracy here alleged was, according to the complaint, worldwide in its orientation; there is nothing in the pleadings to justify an inference that it targeted United States commerce specially… It is not necessary to know precisely the extent of the Donnelly Act’s extra-territorial reach to understand that it cannot reach foreign conduct deliberately placed by Congress beyond the Sherman Act’s jurisdiction.
That’s great news for Equitas, its lawyers at Simpson, Thacher & Bartlett, and any other defendant facing New York state claims that it engaged in an international antitrust conspiracy. I suspect, however, that the state high court’s ruling will have implications beyond this rather small group. The reason? Morrison v. National Australia Bank.
The U.S. Supreme Court’s 2010 ruling in Morrison, as you surely recall unless you only started reading my blog today, held that federal laws should not be presumed to have extraterritorial application unless Congress so specified. One of the ways plaintiffs have responded to Morrison rebuffs in federal court is by filing suit in state court, asserting state-law causes of action as alternatives to parallel federal-court claims. (See here and here for examples.)