On March 27, the New York Court of Appeals (New York's highest state court), held that the state's antitrust law does not have extraterritorial reach in Global Reinsurance Corp. v. Equitas Ltd. Accordingly, the court held that the plaintiff, the United States subsidiary of Global Reinsurance Corporation, could not assert claims under New York's Donnelly Act against a U.K corporation (Equitas) for alleged anticompetitive conduct that had occurred in the London reinsurance market.
As plaintiff alleged in its complaint, in the early 1990s it purchased reinsurance for certain non-life risks from several Lloyd's of London syndicates. After losses on the plaintiff's business began to mount, the syndicates sought to reduce their subsequent exposure by agreeing to cede plaintiff's business to Equitas, an entity that, according to the plaintiff, took a much more "hard-nosed approach" to the handling of its claims than the syndicates had when individually assessing plaintiff's claims. Plaintiff contended that the syndicate's creation of Equitas constituted unlawful joint action, actionable under the Donnelly Act.
As the Court explained, to state an antitrust claim under the Donnelly Act, Global was required to allege both concerted action by two or more entities and market-wide anticompetitive effects (as opposed to individual harm to the plaintiff, which is insufficient). Plaintiff's claims, however, at most alleged a conspiracy having anticompetitive effects in the London reinsurance market, the Court held, and "plaintiff, although alleging individual injury in New York, has not alleged harm to competition in this country." Accordingly, because New York's relationship to the action was "only by reason of the circumstance that plaintiff's purchasing branch happens to be situated [in New York]," the Court concluded that plaintiff's claims were "not redressable under New York's antitrust statute." Notably, in reaching this conclusion, the Court explained that even the federal antitrust laws fail to reach anticompetitive conduct having effects solely outside the United States, and that this limitation on the Sherman Act, imposed by Congress, "would be undone if states remained free to authorize 'little Sherman Act' claims that went beyond it." For this reason, the Court held that Global Reinsurance's claims had to be dismissed, and reversed the lower court ruling that had permitted plaintiff's action to proceed.
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