Opinions of the United
2009 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-4-2009

Amer Millennium Ins v. First Keystone Risk
Precedential or Non-Precedential: Non-Precedential

Docket No. 08-2821




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Recommended Citation
"Amer Millennium Ins v. First Keystone Risk" (2009). 2009 Decisions. Paper 1239.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1239


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                                                               NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT


                                     No. 08-2821



                   AMERICAN MILLENNIUM INSURANCE CO.,
                                           Appellant

                                          v.

               FIRST KEYSTONE RISK RETENTION GROUP, INC;
                   OCEAN RISK RETENTION GROUP, INC;
                         PINELANDS INS CO, RRG



                     Appeal from the United States District Court
                              for the District of New Jersey
                             (D.C. Civil No. 2-07-cv-03400)
                    District Judge: Honorable Dennis M. Cavanaugh


                                 Argued May 21, 2009

          Before: RENDELL, STAPLETON and ALARCÓN*, Circuit Judges

                                 (Filed: June 4, 2009)




       *Honorable Arthur L. Alarcón, Senior Judge, United States Court of Appeals for
the Ninth Circuit, sitting by designation.
Frederick E. Gerson, Esq. [ARGUED]
D’Alessandro, Jacovino & Gerson
147 Columbia Turnpike
P.O. Box 340, Suite 103
Florham Park, NJ 07932
  Counsel for Appellant
  American Millennuim Insurance Co

John A. Stone, Esq. [ARGUED]
DeCotiis, Fitzpatrick, Cole & Wisler
500 Frank West Burr Boulevard
Glenpointe Centre West, Suite 31
Teaneck, NJ 07666
  Counsel for Appellees
  Ocean Risk Retention Grp Inc and
  Pinelands Ins Co

Zachary L. Grayson [ARGUED]
Israel American Law Group
Mishol Nurit 3, Suite 796
Kfar Vradim
Israel

David P. Skand, Esq.
Gerstein, Grayson & Cohen
Suite 301
1288 Route 73 South
Mount Laurel, NJ 08054
  Counsel for Appellee
  First Keystone Risk Retention Grp Inc


                              OPINION OF THE COURT


RENDELL, Circuit Judge.

      Appellant American Millennium Insurance Co. (“AMI”) brought an action against

Appellee Risk Retention Groups (“RRGs”), alleging, based on several theories, that the


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RRGs were competing against AMI unfairly in the New Jersey insurance market by

failing to comply with certain state regulatory requirements. The District Court granted

Appellees’ motion to dismiss AMI’s complaint after concluding that a statutory pre-

condition to the filing of pleadings by insurers did not apply to the RRGs, that the other

New Jersey insurance law provisions relied on by AMI did not provide a private right of

action, and that AMI failed to state actionable common law claims. The District Court

also denied AMI leave to amend its complaint. AMI challenges each of the District

Court’s decisions on appeal. For the reasons discussed below, we will affirm.

       We write for the benefit of the parties and only briefly summarize the relevant

facts. AMI is a traditional insurance company that provides insurance for taxi cabs in

New Jersey. Appellees are RRGs organized under the Liability Risk Retention Act of

1986, 15 U.S.C. §§ 3901-3906 (“LRRA”), and provide a collective form of self insurance

to their member businesses by spreading risk across their groups. The LRRA protects the

existence of RRGs by largely preempting state regulation of such entities. It is

undisputed that Appellees are chartered outside of New Jersey, and are offering insurance

products to their members in the state. For the purposes of this appeal, we accept as true

AMI’s allegation that it has suffered a significant loss of taxi cab insurance business since

Appellees began doing business in New Jersey.

       In its complaint, AMI does not dispute that the regulatory preemption provisions

of the LRRA apply to Appellees. However, AMI claims that the LRRA expressly allows



                                             3
states to establish financial responsibility requirements for RRGs, and that Appellees fail

to meet requirements that fit within this exception. AMI asserts that the RRGs are

therefore issuing insurance in violation of the relevant statutes. AMI further alleges that

the RRGs’ sale of insurance in the state is actionable under the torts of intentional

interference with a prospective economic advantage and unfair competition.

       Appellees moved to dismiss the complaint under Rule 12(b)(6). AMI argued then,

as it does now, that the RRGs had no standing to file the motion under state law until,

pursuant to N.J.S.A. 17:51-2(a), they either posted bond or presented certificates to issue

insurance in New Jersey. The District Court concluded that N.J.S.A. 17:51-2(a) did not

bar Appellees’ motion because the statute was inapplicable to the RRGs. The Court then

determined that AMI had no private right of action to enforce the insurance statutes, and

that AMI failed to state claims for tortious interference and unfair competition. The

Court denied a cross motion by AMI for judgment on the pleadings on the same

reasoning, and denied leave for AMI to amend the complaint to purportedly cure the

pleading deficiency and add the New Jersey Department of Banking and Insurance

(“DOBI”) as a necessary party. AMI challenges each of these decisions on appeal.1

       AMI first argues that the RRGs lacked standing to file their motion to dismiss



  1
    This action was brought in state court, but removed by Appellees to the District Court
for the District of New Jersey. The District Court had jurisdiction pursuant to 28 U.S.C.
§ 1441. This Court has jurisdiction to review the grant of a motion to dismiss under Fed.
R. Civ. P. 12(b)(6) pursuant to 28 U.S.C. § 1291, and exercises plenary review.
McGovern v. Philadelphia, 

, 115 (3d Cir. 2009).

                                              4
because they failed to comply with special requirements for insurers that are not licenced

in the state. The provision at issue provides:

              Before any insurer not authorized to transact business in this
              State shall file or cause to be filed any pleading or other paper
              in any action or proceeding instituted against it, such insurer
              shall either (1) deposit with the clerk of the court in which
              such action or proceeding is pending cash or securities or file
              with such clerk a bond . . . or (2) procure a certificate of
              authority to transact the business of insurance in this State.

N.J.S.A. 17:51-2(a). The District Court determined that this provision was inapplicable

to RRGs such as Appellees. We agree. Appellees cannot produce the certificates

normally awarded by the DOBI to insurance companies for the sale of insurance in the

state because Appellees are out-of-state RRGs, and are not “insurers” within the meaning

of this statute. The LRRA protects the existence and availability of RRGs through the

preemption of state regulation.

       AMI relies on an exception to preemption within the LRRA:

       [N]othing in this chapter shall be construed to preempt the authority of a
       State to specify acceptable means of demonstrating financial responsibility
       where the State has required a demonstration of financial responsibility as a
       condition for obtaining a license or permit to undertake specified activities.

15 U.S.C. § 3905(d). AMI argues that this exception applies to capitalization

requirements contained in Title 17, Subtitle 3, Part 1, Chapter 17 of the New Jersey

Statutes, which govern the formation of insurance companies in the state. However, New

Jersey also enacted the New Jersey Risk Retention Act, 17:47A-1 to 17:47A-12, which

establishes a separate regulatory scheme for RRGs. N.J.S.A. 17:47A-3 provides that,


                                             5
“Any person wishing to establish a risk retention group chartered and licensed to write

only liability insurance in this State shall” comply with the formation requirements in

Chapter 17. N.J.S.A. 17:47A-3(a) (emphasis added). It is undisputed that none of the

Appellees are formed, chartered, or licensed in New Jersey.

       Moreover, the LRRA § 3905(d) exception relied on by AMI applies where “the

State has required a demonstration of financial responsibility as a condition for obtaining

a license or permit to undertake specified activities.” 15 U.S.C. § 3905(d) (emphasis

added). This exception must be read in conjunction with the general preemption

provisions of the LRRA, which provide in part:

       [A] risk retention group is exempt from any State law, rule, regulation, or
       order to the extent that such law, rule, regulation, or order would . . . make
       unlawful or regulate, directly or indirectly, the operation of a risk retention
       group except that the jurisdiction in which it is chartered may regulate the
       formation and operation of such a group . . . .

15 U.S.C. § 3902(a) (emphasis added).

       Reading the LRRA and the New Jersey statutes together, an RRG falls under New

Jersey’s capital and licensing requirements only when the RRG seeks to be chartered or

licensed in New Jersey. A contrary interpretation of the New Jersey statutes would most

likely violate the LRRA’s preemption provisions. As it is undisputed that Appellees are

chartered outside of New Jersey, Appellees cannot be considered insurers subject to

licensing or authorization within the meaning of N.J.S.A. 17:51-2(a), and the statute did

not bar Appellees from filing their motion to dismiss.

       Next, AMI argues that the District Court erred by concluding that AMI had no

                                              6
private right of action under Chapter 17. We agree with the District Court’s

determination that the regulatory provisions for insurance companies relied on by

Appellants do not provide a competing insurer any cause of action. Nothing in the

statutes expressly provides a right of action, and the District Court correctly applied the

implied right of action factors of Cort v. Ash, 

(1975), which have been

adopted by the Supreme Court of New Jersey. See R.J. Gaydos Ins. Agency, Inc. v. Nat’l

Consumer Ins. Co., 

, 1143 (N.J. 2001). In addition to the reasons

discussed by the District Court, we note that the regulation of insurance companies in

New Jersey involves a comprehensive statutory scheme, and the Commissioner of

Insurance is expressly charged with enforcement. N.J.S.A. 17:17-10. Furthermore, the

minimum capitalization requirements governing the financial health of insurance

companies may be for the benefit of insureds, or perhaps the public generally, but are

certainly not for the benefit of a competing insurer. Since the insurance statutes do not

provide AMI a private right of action, its claims relying on those statutes were correctly

dismissed.2

       Next, AMI contends that the District Court erred in dismissing its common law

claims for intentional interference with prospective economic advantage and for unfair


  2
    Appellant recasts its Chapter 17 arguments by also alleging that, in issuing insurance
to taxi operators illegally, Appellees violated provisions of Title 48 of the New Jersey
Statutes that require cab operators to carry bona fide insurance. While it is highly
doubtful that any insurer could possibly have a right of action under Title 48, our
resolution of Appellant’s Chapter 17 argument is dispositive of Appellant’s other
statutory claims.

                                              7
competition. As for tortious interference, we agree with the reasoning of the District

Court and its conclusion that AMI failed to plead the claim with the requisite specificity.

See Printing Mart-Morristown v. Sharp Electronics Corp., 

, 37 (N.J. 1989).

In particular, we note that AMI’s complaint fails to identify a single, specific customer

that AMI either lost or could have acquired but for Appellees’ conduct. Furthermore,

AMI makes only a bald assertion that the RRG’s conduct was intentional, and does not

allege facts that could substantiate the necessary existence of malice. As for unfair

competition, we find no case in which a New Jersey court recognized such a claim for the

alleged failure of a competitor to meet an obligation to the state, and we decline to expand

the doctrine as AMI requests. See Lexington Nat’l Ins. Corp. v. Ranger Ins. Co., 

, 420 (3d Cir. 2003).

       Finally, AMI argues that the District Court abused its discretion by denying it

leave to amend its complaint in order to plead tortious interference with greater

specificity, and to add the DOBI as a necessary party. However, the proposed amended

complaint still failed to identify any specific lost or potential customers, and failed to

allege facts that could support a finding of malice. Furthermore, we fail to see how the

addition of any party here could salvage AMI’s uncognizable claims. A district court

does not abuse its discretion in denying leave to amend an inadequate complaint when the

proposed amendments would have been futile. Kanter v. Barella, 

, 181 (3d

Cir. 2007).

       For the reasons stated above, we will AFFIRM the order of the District Court.

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