Before me is a motion to dismiss the complaint and/or stay the action pending a related [*2]arbitration. For the reasons explained below, the action is not stayed, and only the tortious interference cause of action is dismissed. The Donnelly Act and injunctive relief causes of action will go forward.

Plaintiff Global Reinsurance Corporation U.S. Branch ("Global") has sued defendants Equitas Ltd., Equitas Reinsurance Ltd., and Equitas Policyholders Trustee Ltd. (collectively "Equitas") for damages and injunctive relief based on anticompetitive and tortious conduct. The following background summary is based on the allegations of the amended complaint,^[FN1] as supplemented by affidavits, and does not constitute findings of fact.

Global is the United States branch of a German company called Global Reinsurance Corporation. Global has been licensed to do business in New York State by the New York Department of Insurance since 1963. (Smith Aff. ¶ 2.) All three Equitas entities are United Kingdom corporations.

As many reinsurance companies do, Global ceded some of its risk to other reinsurers. This second level of reinsurance is called "retrocessional" reinsurance. Global entered into certain retrocessional treaties with groups of underwriters, called "syndicates," in the Lloyd's of London insurance market. Under these treaties, these syndicates agreed to share part of Global's risk under its various reinsurance obligations. The individual underwriter members of Lloyd's are also called "Names." The syndicates, at least prior to 1996, used to compete against each other for the placement of new business. (Compl. ¶ 24.)

In the 1980s and 1990s, many Names faced financial ruin, because large losses outpaced the collection of premiums. As a result, the Lloyd's marketplace was restructured to "fix and cap" some of their liabilities. (Compl. ¶ 29.) Equitas was created to reinsure and handle claims for some Names' pre-1993 liabilities. The liabilities assumed by Equitas included those created by the syndicates' treaties with Global. (Compl. ¶ 29.)

In 1996, under the Reconstruction and Renewal Plan (the "R & R Plan"), syndicates contracted with Equitas to vest in Equitas the responsibility for claims decisions as to pre-1993 business. (Compl. ¶ 2.) Under the R & R Plan, Equitas controls when and how the underwriters perform their obligations under their treaties with Global. (Compl. ¶ 3.)

On September 3, 1996, Equitas and certain Names entered into the Reinsurance and Run-Off Contract ("RROC"), which defines Equitas's duties and powers. (Compl. ¶ 30.) Under the RROC, the Names pooled their reserves into a fund held by Equitas.(Compl. ¶ 38.) Under United Kingdom law, the Names and Equitas are legally distinct entities Equitas's assets cannot be reached by the Names, and Equitas is subject to different regulatory rules. (Compl. ¶¶ 40-46.) The RROC gave Equitas the authority to manage claims, including the ability to make or withhold payments, for some of the Names' pre-1993 liabilities. (Compl. ¶¶ 32-34.) Before the RROC was executed, syndicates had made individual decisions about whether to pay claims and how much to pay; now these decisions are made by Equitas alone. (Compl. ¶ 35.)

The R & R Plan eliminated various forms of competition between syndicates, at least as to pre-1993 business, by "put[ting] Equitas on both sides of transactions that would otherwise have been between unrelated entities." (Compl. ¶¶ 37, 115.) For example, the syndicates used to compete with each other for clients and for a reputation for fairness, and this competition [*3]informed the positions they took on claims. The R & R Plan eliminated any need for the syndicates to compete for clients or for a good business reputation. (Compl. ¶ 36(a).) Finally, whereas syndicates that participated in the same risks used to have to persuade co-insurers to adopt their positions on claims decisions, they no longer have that check on the reasonableness of their positions. (Compl. ¶ 36(b).)

On March 14, 2007, Global filed this complaint, seeking relief based on three causes of action: (1) tortious interference with contract, (2) the Donnelly Act, and (3) injunctive relief. The gist of the complaint is that Equitas has conspired with various syndicates at Lloyd's to use their combined market power to pay uncompetitive payouts on reinsurance claims, enforce new contract terms on Global, and coerce Global into renegotiating its treaties with them. Plaintiff alleges that Equitas could not get away with these delays and other deficiencies in claims handling, if the competition between these syndicates had not been eliminated through the R & R Plan and the RROC.

Global's complaint is based on four separate sets of allegations: (a) the commutation allegations; (b) the imposition of Reinsurance Documentation Requirements; (c) the suppression of payments due; and (d) the starvation allegations.

(a)The Commutation Allegations

The allegations grouped together under this heading involve three agreements into which Global entered with Home Insurance Companies, American International Group, Inc., and The Hartford Companies in 2003 and 2004. According to these agreements, called "commutation agreements," Global's future reinsurance obligations to these insurance companies were to be satisfied by the payment of certain sums. (Compl. ¶¶ 50-52.) The underwriters assumed liability for some of these obligations under various treaties with Global. (Compl. ¶ 53.) Since then, Global has paid Home, AIG, and Hartford the sums it owes under the commutation agreements in full. Global has now billed the underwriters for their share under the treaties, which is $3.3 million. Equitas has taken the position that it will not let the underwriters pay Global, unless Global signs a release of the underwriters' future liabilities on the claims. (Compl. ¶¶ 58-62.) The complaint alleges that "Equitas is in a position to demand such extra-contractual conditions to payment only because of the economic power it illegally obtained through the combination effected by the R & R Plan." (Compl. ¶ 66.) Global says it has a right to prompt payment, which cannot be conditioned on the execution of new releases that were not part of the original treaties. (Compl. ¶¶ 63-67.)

(b)The Imposition of Reinsurance Documentation Requirements

The complaint also alleges that, in the face of increasing numbers of asbestos claims, in February 2002, Equitas unilaterally modified the treaties between Global and the underwriters to add new Reinsurance Documentation Requirements ("RDRs"). The RDRs require Global to submit burdensome and extra-contractual documentation as a condition of making payments on asbestos-related reinsurance claims. (Compl. ¶¶ 74-83, 88.) According to the complaint, the RDRs contradict the treaties between the underwriters and Global, which provide that the underwriters must "follow the settlements" that is, they cannot challenge Global's reasonable, good faith decision to settle or pay claims. (Compl. ¶¶ 86-87.) Since 2001, Equitas has caused the underwriters to delay making or to refuse to make payments for asbestos-related claims. (Compl. ¶ 94.) The complaint alleges that "[t]he RDRs are effective only because they are imposed by the single, combined entity that... replaced the previously independent economic actors (the Syndicates)." (Compl. ¶ 96.) [*4]

(c)Suppression of Payments Due

These allegations arose in the context of the negotiations for a commutation contract between an affiliate of Global, called Constitution Reinsurance Corporation ("CRC"), and the Bullen Syndicate, one of the syndicates at Lloyd's. These negotiations arose out of the fact that, by 2002, the underwriters owed $4.8 million to Global under the treaties. In early 2003, Equitas began to "suppress" payments that the underwriters owed to Global, in order to pressure CRC into offering the underwriters more favorable terms in the Bullen negotiation, even though the treaties between Global and the underwriters were unrelated to the Bullen negotiation. (Compl. ¶¶ 98-108.) Once the Bullen negotiation resulted in an agreement in principle in May 2003, Equitas agreed to pay Global the $4.8 million it owed under the treaty. But Equitas did not actually make that payment until July 9, 2003. (Compl. ¶¶ 109-10.) The complaint alleges that Equitas improperly used its market power to cause the underwriters to suppress that payment. The alleged "suppression of unrelated balances" was possible only because the R & R Plan "put Equitas on both sides of transactions that would otherwise have been between unrelated entities." (Compl. ¶ 115.)

(d)The Starvation Allegations

Finally, the complaint alleges that Equitas has made a practice of delaying or withholding payment on outstanding balances due under the treaties, in order to leverage discounts from Global in paying off the balances. (Compl. ¶¶ 116-22, 124-27.) The treaties require the underwriters to pay "immediately upon receipt of reasonable evidence of the amount due." (Compl. ¶ 131.) According to the complaint, Equitas has asserted frivolous defenses to payment and refuses to indemnify Global for its expenses in litigating and settling claims (in breach of the treaties and industry custom). (Compl. ¶ 123.) The complaint alleges that the outstanding past due balances owed by Equitas to Global under the treaties is $9.5 million, plus $5 million in interest penalties for late payments. (Compl. ¶ 141.) This alleged "starvation" of Global by Equitas was enabled by the R & R Plan, "by which the previously independent Syndicates [were] replaced by a single, combined entity that has no economic or business incentive to cause the Underwriters to honor their obligations under the Treaties." (Compl. ¶ 133.)

On December 27, 2006 a few months before it brought this action, Global initiated an arbitration proceeding against the underwriters to enforce its treaties. (DiGiovanni Aff. ¶ 3.)

Both in this action and in the arbitration at least as of the briefing of this motion and as of oral argument plaintiff has sought $9.5 million in unpaid balances from Equitas. After oral argument on this motion, plaintiff withdrew its demand for $5 million in interest for delayed payments from the arbitration; it continues to demand that $5 million in interest in this action. (Defs. Supp'l Br. at 1-2.)

In this motion, in addition to moving for a stay pending the related arbitration, defendants attack the complaint on at least eight grounds: (1) Global has no legal capacity to sue; (2) defendants are not subject to personal jurisdiction; (3) the complaint fails to state a claim for tortious interference with contract; (4) the Donnelly Act is preempted; (5) Global has signed a release of all claims based on Equitas's suppression of payments on uncontested balances; (6) the Donnelly Act is untimely; (7) the complaint fails to state a claim under the Donnelly Act; and (8) the complaint does not state a claim for injunctive relief.

Whether This Action Should Be Stayed in Favor of Arbitration

Defendants maintain that this action should be stayed in favor of the arbitration proceeding now pending between Global and the underwriters with regard to the breach of contract claims by [*5]Global that were open as of December 31, 2006. C.P.L.R. § 2201 grants me the discretion to "grant a stay of proceedings in a proper case, upon such terms as may be just." "[A] motion for the stay of an action pending the determination of another action is primarily addressed to the discretion of the court." Pierre Assocs. Inc. v. Citizens Cas. Co. of NY, 32 AD2d 495, 496 (1st Dep't 1969) (stay of action for breach of lease was improperly granted pending determination of insolvency proceeding, where "it appears as a matter of law that the stay may interfere with the rights of the landlord to secure a prompt determination of its claim that the lease has been terminated and canceled").

The general rule is that "[i]t is only where the decision in one action will determine all the questions in the other action, and the judgment on one trial will dispose of the controversy in both actions, that a cause for a stay is presented . . . what is required is complete identity of parties, cause of action and judgment sought." Medical Malpractice Ins. Ass'n v. Methodist Hosp. of Brooklyn, 64 AD2d 558, 559 (1st Dep't 1978) (quoting Pierre Assocs., 32 AD2d at 497).

The heart of the inquiry is whether the determination of the related action would "render academic" the issues raised in the instant action. See Corbetta Constr. Co. v. George F. Driscoll Co., 17 AD2d 176, 179 (1st Dep't 1962) (holding that action-in-chief should not be stayed, because related arbitration proceeding between defendant and third-party defendant "cannot render [the issues raised in this action] academic"); accord American Transit Ins. Co. v. Assoc'd Int'l Ins. Co., 210 AD2d 133, 133 (1st Dep't 1994) (affirming stay pending arbitration, where "it is clear that plaintiff will not be able to recover punitive damages unless it succeeds on its claim for breach of contract, and the latter is indisputably subject to arbitration").

More recently, the First Department has permitted a stay of an action pending the resolution of another pending action involving common issues of law and fact, even though the parties were not identical. E.g., Belopolsky v. Renew Data Corp., 41 AD3d 322 (1st Dep't 2007). The court explained that, although "there was not a complete identity of parties, there were overlapping issues and common questions of law and fact, and the determination of the prior action may dispose of or limit issues which are involved in the subsequent action." Belopolsky, 41 AD3d at 322 (internal citations and quotations omitted) (emphasis added).

I do not share defendants' conviction that the "render academic" standard no longer governs, in light of Belopolsky, for two reasons.

First, Belopolsky's rationale, as quoted above, that a determination in the related action could "dispose of or limit issues" involved in the instant action, is consistent with the "render academic" standard set forth in Corbetta and affirmed in American Transit, which asks whether a determination in the related action would render academic the issues in the instant action.

Second, Belopolsky is a summary memorandum decision that does not cite or distinguish long-established caselaw applying the "render academic" standard. I will not infer that Belopolsky overruled decades of precedent without a murmur of its intent to do so.

The question before me, then, is whether the Donnelly Act claim would be rendered academic based on a determination in the arbitration about whether the underwriters breached their treaties with Global.^[FN2] [*6]

The answer, which will become even clearer in the discussion of the Donnelly Act below, is no. Breach of contract is not an element of a cause of action under the Donnelly Act; the Donnelly Act requires the application of entirely different legal standards. None of the elements of plaintiff's prima facie case under the Donnelly Act is dependent on a determination that the underwriters breached their treaties with Global. And since defendants have not yet answered the complaint, it is too soon to tell whether their compliance with contractual rights and duties is a defense to the Donnelly Act claim.

While it is true that all of the "bad things" alleged against Equitas in the complaint involve breaches of contract, as defendants have observed, (Trans. at 12-13), this does not mean that the same bad things could not also form the basis of a Donnelly Act claim. While these two claims involve many of the same facts, they do not involve common questions of law. The Donnelly Act claim raises a much broader challenge to Equitas's business practices than the breach of a contract, and it requires very different proof.

Therefore, I will not stay this action pending the arbitration.^[FN3]

I now turn to the motion to dismiss.

Global's Legal Capacity to Sue

As a preliminary matter, I have no reason to conclude that Global lacks legal capacity to bring this lawsuit, under C.P.L.R. § 3211(a)(3). Global is the U.S. branch of a German reinsurance company, which is authorized to do business in New York. Consequently, Global is "a complete and separate organization" from the German company. See Moscow Fire Ins. Co. v. Bank of NY & Trust Co., 280 NY 286, 314 (1939) (holding that the United States branch of a Russian insurance company was "under the law of this State a complete and separate organization") (internal citations omitted). As such, I cannot conclude that Global lacks legal capacity to sue.

Personal Jurisdiction Over the Equitas Defendants

Defendants also move to dismiss for lack of personal jurisdiction under C.P.L.R. § 3211(a)(8).

There does not seem to be much question that Equitas Ltd., at least, is subject to personal jurisdiction under New York's long-arm statute.

A court "may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent... transacts any business within the state or contracts anywhere to supply goods or services in the state." C.P.L.R. § 302(a)(1).

In addition, a court may exercise long-arm jurisdiction over a non-domiciliary that "commits a tortious act without the state causing injury to person or property within the state," if the defendant:

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. [*7]

C.P.L.R. § 302(a)(3).

The complaint, as supplemented by the Davidson Affidavit, alleges that Equitas arranged for payment to Global in New York, and sent letters and made telephone calls to Global at its offices in New York regarding some of the matters alleged in the complaint. (Compl. ¶ 12; Davidson Aff. ¶ 3.) The complaint alleges that Equitas personnel met with Global executives in New York to discuss some of the matters alleged, and that Equitas personnel audited Global's claim files in New York. (Compl. ¶ 12; e.g., Davidson Aff. ¶¶ 9-17.) The complaint further alleges that Global has been injured in New York by unreasonable cessation, denial, or delay of the underwriters' payments, because of Equitas's bad faith claims-handling practices. (Compl. ¶ 13.)

Plaintiff acknowledges that Equitas Ltd. is the Equitas entity responsible for the claims activity recited here. (Opp'n Br. at 40.) Therefore, under either C.P.L.R. § 302(a)(1) or § 302(a)(3), Equitas Ltd. is subject to personal jurisdiction.

But defendants insist that, even if the Court has personal jurisdiction over Equitas Ltd., the claims against the two other Equitas defendants should be dismissed. Defendants say that Equitas Policyholders Trustee Limited is dormant, and Equitas Reinsurance Limited has never handled the claims at issue; defendants have submitted an affidavit in support of that assertion. Plaintiff says dismissal is premature, because it has not had a chance to conduct discovery.

I agree with plaintiff; it is entitled to develop a factual record about the interrelationships between the Equitas defendants. I will not dismiss the claims against the other Equitas defendants at this stage.

I now turn to the stickier issues.

Tortious Interference with Contract

With regard to Count I: Defendants contend that Equitas, as the underwriters' agent, cannot have interfered with the contracts of its principals, because plaintiff has not alleged that Equitas has acted outside the scope of its agency or for personal profit or gain.

The standard of review on a motion to dismiss for failure to state a claim is well known.^[FN4]

"The elements of a tortious interference with contract claim are well established the existence of a valid contract, the tortfeasor's knowledge of the contract and intentional interference with it, the resulting breach and damages." Hoag v. Chancellor, Inc., 246 AD2d 224, 228 (1st Dep't 1998) (refusing to dismiss tortious interference with contract claim, where complaint alleged that officer acted for personal profit against corporate interests).

"[A]n agent cannot be held liable for inducing his principal to breach a contract with a third person, at least where he or she is acting on behalf of his principal and within the scope of his authority." Nu-Life Constr. Corp. v. Board of Educ., 204 AD2d 106, 107 (1st Dep't 1994) (internal citations and quotations omitted) (granting summary judgment dismissing tortious interference claim, absent evidence that agent "was at any time acting other than as an agent of the Board, or to show that [he] committed any independent tort"). See also Herald Hotel Assocs. v. Ramada Franchise Sys., Inc., 191 AD2d 288, 595 NYS2d 28, 29 (1st Dep't 1993) (upholding claims of tortious interference with contract against corporate officer who acted both in the corporation's interests and "in his own best interests"); cf. Kartiganer Assocs., P.C. v. New Windsor, 108 AD2d [*8]898, 899 (2d Dep't 1985) (defendant was entitled to summary judgment dismissing tortious interference claim, where plaintiff had "no proof" that his "acts were motivated by self-interest").

Plaintiff insists that the tortious interference claim cannot be dismissed on the ground that Equitas is the Names' agent, since the complaint alleges that Equitas acted for its own self-interest, (see Compl. ¶¶ 39-42, 70-73). But these paragraphs do not support that proposition at all. On the contrary, the complaint alleges that Equitas was created, with the Names' consent, to reinsure them against financial ruin, to handle and pay claims on their behalf, and to save them money. It alleges that the Names delegated certain claims-handling responsibilities to Equitas, that they pooled their reserves into a separate fund, and that this fund was managed by Equitas. (Compl. ¶¶ 28-40.) The fact that the Names, having pooled their funds, cannot now reach Equitas's assets, does not suggest that Equitas acted outside the scope of its authority or against the Names' interests.

Plaintiff then makes the peculiar argument that it is unnecessary to allege personal profit to state a tortious interference claim against an agent, citing Heineman v. S & S Machinery Corp., 750 F. Supp. 1179 (E.D.NY 1990). But Heineman is inapposite, as it did not involve a tortious interference claim.

Plaintiff also says the tortious interference claim survives because it has alleged that Equitas violated the Donnelly Act, "independently of whether it has also caused a breach of contract." (Opp'n Br. at 30.) Plaintiff's account of the law of tortious interference with contract is wholly unpersuasive. One of the elements of the claim is that there must be an "independent tort" by the defendant. See, e.g., Nu-Life, 204 AD2d at 107. The Donnelly Act is not a tort, and plaintiff has not alleged that defendants have committed any tort.

Accordingly, plaintiff has not stated a cause of action for tortious interference.^[FN5]

The Donnelly Act Claim

Defendants move to dismiss Count II under the Donnelly Act as: (1) preempted, (2) released in part, (3) untimely, and (4) having failed to state the elements of a Donnelly Act violation.

The Donnelly Act was modeled on the Sherman Act of 1890, 15 U.S.C. §§ 1-39. Creative Trading Co., Inc. v. Larkin-Pluznick-Larkin, Inc., 136 AD2d 461, 462 (1st Dep't 1988). Accordingly, I will generally follow the federal courts' analysis of the Sherman and Clayton Acts, as well as New York caselaw under the Donnelly Act. See People v. Rattenni, 81 NY2d 166, 171 (1993) ("State antitrust law should generally be construed in light of Federal precedent and given a different interpretation only where State policy, differences in the statutory language or the legislative history justify such a result.") (internal citations omitted).

Preemption by Federal Antitrust Law

Defendants argue this claim is preempted, because it is based in part on acts undertaken in London that affect interstate and international commerce. I disagree.

While this appears to be a question of first impression, I begin with the presumption that state antitrust laws are not preempted by federal law, since monopolies and unfair business practices are "traditionally regulated by the States." California v. ARC Am. Corp., 490 U.S. 93, 101 (1989) (holding that federal law did not preempt several state antitrust laws permitting recoveries by indirect purchasers of cement, who were allegedly injured by nationwide conspiracy to fix cement [*9]prices). Consequently, those state laws "consistent with the broad purposes of the federal antitrust laws: deterring anticompetitive conduct and ensuring the compensation of victims of that conduct" are not preempted. Id. at 102.

"[F]ederal law was not intended to, nor does it, displace state court jurisdiction over causes of action concerning conduct that is alleged to have a significant intrastate or local anticompetitive impact in violation of state antitrust law with minimal interstate consequences." Two Queens, Inc. v. Scoza, 296 AD2d 302, 304 (1st Dep't 2002) (internal quotations omitted) (concluding that Donnelly Act claim was not preempted, although the advertisers over which defendant allegedly had a monopoly were "substantially" national, not local, companies); see also Leader Theatre Corp. v. Randforce Amusement Corp., 186 Misc. 280, 284 (Sup. Ct. NY County 1945) (citations omitted) (federal law did not foreclose Donnelly Act claim concerning film exhibition rights in Brooklyn, where exhibition and display of motion pictures was of "substantial local significance, regardless of the interstate commerce activities involved in making films"); Leider v. Ralfe, 2003 WL 22339305, *8 (S.D.NY Oct. 10, 2003) (permitting Donnelly Act claim to go forward in action by diamond purchasers in New York to recover overcharges against DeBeers international diamond sellers).

"The question is whether the burden on interstate commerce outweighs the States' interests." Two Queens, 296 AD2d at 304. Cf. H-Quotient, Inc. v. Knight Trading Group, Inc., 2005 WL 323750, *5 (S.D.NY Feb. 9, 2005) (purported Donnelly Act claim actually arose under Sherman Act, where the alleged conspiracy was between entities from three states, directed at a foreign-operated securities exchange, and involved stock of a Virginia corporation, and the complaint did not specifically allege impact on intrastate commerce).

Here, plaintiff has alleged that Global was injured in New York by Equitas's cessation, denial, or delay in making payments due under the treaties in violation of the Donnelly Act; that Equitas personnel engaged in some of this conduct in New York, including meeting with Global executives and auditing Global's claim files; and that Equitas directed some of this conduct toward New York, such as by writing letters, making telephone calls, and arranging for payment to Global. (Compl. ¶ 12-13; e.g., Davidson Aff. ¶¶ 9-17.)

Since plaintiff has adequately alleged that Equitas's purported conduct in violation of the Donnelly Act includes a significant intrastate component, the Donnelly Act claim is not preempted by federal law.

Release of Claims About Suppression of Payments

Defendants contend that plaintiff's claims related to the alleged suppression of payments to Global during the Bullen negotiation must be dismissed under C.P.L.R. § 3211(a)(5), based on a Release and Payment Agreement (the "Release") executed in July 2003 by plaintiff's German parent company and the underwriters.

The Release provides that "all obligations of Lloyd's Underwriters in respect of the Reinsurance Claims shall be fully and finally released and discharged by the said payment," and that it is in "complete accord, satisfaction and settlement of all Lloyd's Underwriters' obligations in respect of the Reinsurance Claims." (Britt Aff., Ex. B, § 2.) The Release provides that it "extends to Equitas Limited and Equitas Reinsurance Limited as third party beneficiaries." (Britt Aff., Ex. B, § 4.)

Defendants maintain that the Release bars any Donnelly Act claim based on the suppression of payments allegations. (See Compl. ¶¶ 98-115.) Plaintiff has not challenged the assertion that the [*10]"Reinsurance Claims" to which the Release refers include the $4.8 million at issue in the "suppression of payments" section of the complaint, or that this amount has been paid in full. Plaintiff has also not challenged the authenticity of the Release or defendants' contention that Global is bound by the Release, even though it was signed by its parent corporation.

Plaintiff disagrees, however, that the Release covers the suppression of payments allegations. Plaintiff insists that its claim for interest and damages resulting from the Equitas's delay in making these payments is not barred as "Reinsurance Claims" under the Release, because it arises from the independently wrongful conduct of Equitas in suppressing these funds to coerce a settlement of another contract. Plaintiff insists that it is not barred from seeking interest and damages as a result of the wrongful delay, even though it is barred from bringing suit to recover the $4.8 million itself.

I disagree with plaintiff. I fail to see how the broad language of the Release does not cover plaintiff's claim for damages resulting from the delay in making the $4.8 million in suppressed payments, when everyone agrees that it covers claims for the $4.8 million itself.

As the allegations regarding the suppression of payments during the Bullen negotiation have been released, they are no longer part of this case.^[FN6]

Statute of Limitations

Defendants also argue that any Donnelly Act claims that arose prior to March 14, 2003 are barred by the four-year statute of limitations, under Gen. Bus. Law § 340(5) and C.P.L.R. § 3211(a)(5).

"[E]ach time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act." Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 328 (1971). "[I]f a plaintiff feels the adverse impact of an antitrust conspiracy on a particular date, a cause of action immediately accrues to him to recover all damages incurred by that date and all provable damages that will flow in the future from the acts of the conspirators on that date." Id. at 339 (plaintiff's Sherman Act claim filed six years after it settled another antitrust action for continuation of the same conduct was timely, where the earlier settlement was not based on future damages covering the later time period).

One caveat is that, "where a defendant commits an act injurious to plaintiff outside the limitations period, and damages continue to result from that act within the limitation period, no new cause of action accrues for the damages occurring within the limitations period [if] no act committed by the defendant within that period caused them." Imperial Point Colonnades Condo., Inc. v. Mangurian, 549 F.2d 1029, 1035 (5th Cir. 1977).

In the case of a continuing antitrust violation, "each overt act that is part of the violation... starts the statutory period running again." Klehr v. A.O. Smith Corp., 521 U.S. 179, 189-90 (1997). Nevertheless, "the commission of a separate new overt act generally does not permit the plaintiff to recover for the injury caused by old overt acts outside the limitations period." Id. (analogizing RICO and Clayton Act in dictum) (internal quotations omitted).

So a few things are clear. Any injury that occurred to Global before March 14, 2003 is barred, as it must have occurred because of an old act. Contrariwise, any injury that resulted from [*11]a new act that is, an act that took place since March 14, 2003 would be actionable. I do not need to decide whether an injury that occurred after March 14, 2003 as a result of an old act would be actionable, since plaintiff conceded that it is not entitled to damages for such an injury. (Trans. at 57.)

I reject defendants' argument that plaintiff is barred wholesale from claiming any injury related to the restructuring of Lloyd's, the formation of Equitas, or the execution of the RROC, all of which took place before 2003. Plaintiff may still be entitled to recover for injuries that result from an old agreement, if the defendants have continued to enforce and receive benefits from it. See Imperial Point, 549 F.2d at 1040, 1043-44 (plaintiffs' antitrust claim was not barred by four-year-statute of limitations, although all injuries resulted from pre-limitations act of executing contract, because defendant continued to enforce and receive benefits from the contract). Plaintiff may seek damages for an injury resulting from a Donnelly Act violation that is connected to the restructuring of Lloyd's and the creation of Equitas, if defendants have enforced and received benefits from that arrangement by acts committed since March 14, 2003.

Defendants have withdrawn their argument that the statute of limitations bars plaintiff's pre-commutation claims. (Reply Br. at 27 n.22.) And the suppression allegations are no longer part of this case. I will address the remaining two sets of allegations under the Donnelly Act rubric: the imposition of RDR's and the starving allegations.

First, the complaint alleges that the Names have refused to make or delayed in making payments for asbestos claims ever since Equitas's imposition of the RDRs in 2002. (Compl. ¶ 94.) Plaintiff is certainly barred from recovering damages based on Equitas's denial of payments or delay in payments before March 14, 2003, but a claim based on acts of Equitas since March 14, 2003 is timely.

Second, the complaint alleges that Equitas has "starved" Global by delays in paying claims, and that interest on the outstanding claims exceeded $5 million by the end of 2006. (Compl. ¶ 129.) Plaintiff's starving allegations are time-barred to the extent that they are based on acts of Equitas before March 14, 2003 to refuse or delay payments, but timely to the extent that they are based on acts took place after March 14, 2003.

I now turn to the adequacy of the complaint's substantive allegations.

Failure to State the Elements of a Donnelly Act Violation

Defendants maintain that, even if it were true that Equitas improperly changed the underwriters' claims-handling practices, this conduct does not violate the Donnelly Act.

For purposes of defendants' motion to dismiss for failure to state a claim, I must accept the complaint's factual allegations as true. C.P.L.R. § 3211(a)(7).

The Donnelly Act provides:

Every contract, agreement, arrangement or combination whereby

[1] A monopoly in the conduct of any business, trade or commerce or in the furnishing of any service in this state, is or may be established or maintained, or whereby

[2] Competition or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained or whereby

[3] For the purpose of establishing or maintaining any such monopoly or unlawfully interfering with the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state any business, trade or commerce or the furnishing of any service is or may be restrained,

is hereby declared to be against public policy, illegal and void.

Gen. Bus. Law § 340(1).

To state a claim under the Donnelly Act, alleging a monopoly is not enough. A plaintiff must: (1) identify the relevant product market; (2) describe the nature and effects of the purported conspiracy; (3) allege how the economic impact of that conspiracy is to restrain trade in the market in question; and (4) show that there is a conspiracy or reciprocal relationship between two or more entities. Creative Trading, 136 AD2d at 461-62; accord Benjamin of Forest Hills Realty, Inc. v. Austin Sheppard Realty, Inc., 34 AD3d 91, 94 (2d Dep't 2006). Also, in order to establish standing to bring an antitrust suit, a plaintiff must demonstrate that it has sustained "an antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Daniel v. American Bd. of Emergency Med., 428 F.3d 408, 438 (2d Cir. 2005) (internal quotations omitted) (Sherman Act claim).

Defendants say that plaintiff has failed to establish any of these elements. The analysis may be broken down into four parts.

(a)Whether the complaint alleges a relevant geographic and product market

"For antitrust purposes, a relevant market consists of both a product market those commodities or services that are reasonably interchangeable, and a geographic market the area in which such reasonable interchangeability occurs. The plaintiff must explain why the market it alleges is in fact the relevant, economically significant product market." Benjamin, 34 AD3d at 95 (quoting Shepard Indus., Inc. v. 135 E. 57th St., LLC, 1999 WL 728641, *3 (S.D.NY Sept. 17, 1999)).

"Because market definition is a deeply fact-intensive inquiry, courts hesitate to grant motions to dismiss for failure to plead a relevant product market." Todd v. Exxon Corp., 275 F.3d 191, 199-200 (2d Cir. 2001) (employees of Exxon, alleging in a class action that oil companies exchanged compensation information in order to reduce competition in employee salaries, stated a claim under Sherman Act § 1, under the rule of reason test).

In order to survive a motion to dismiss, a plaintiff "must allege a relevant geographic and product market in which trade was unreasonably restrained or monopolized." Kramer v. Pollock-Krasner Found., 890 F. Supp. 250, 254 (S.D.NY 1995) (Sherman Act claim). A plaintiff must "allege how the net effect of the alleged violation is to restrain trade in the relevant market, and that no reasonable alternative source is available to consumers in that market." Id. (quotations omitted).

"A submarket may also be the subject of a monopoly if its confines are well-defined through the rule of interchangeability." Id. "The relevant market' has been defined as the narrowest market which is wide enough so that products from adjacent areas or from other producers in the same area cannot compete on substantial parity with those included in the market.'" Id. (citations omitted). A single employer or building is not a product market. E.g. Lopresti v. Mass. Mut. Life Ins. Co., 5 Misc 3d 1006(A), 798 NYS2d 710, *4 (Sup. Ct. Oct. 19, 2004), aff'd, 30 AD3d 474 (2d Dep't 2006) (dismissing Donnelly Act claim under C.P.L.R. § 3211(a)(7), where annuity products salesperson [*13]failed to allege that hospital's unilateral decision to limit the retirement plan providers for its employees was a conspiracy, was in a product market, or had an anticompetitive effect).

The complaint alleges that Equitas has restrained the free exercise of "decisionmaking activity with respect to retrocessional claims," "claims activity with respect to retrocessional claims," (Compl. ¶ 2), and "business activity in the handling of retrocessional claims" arising "within this State," (Compl. ¶ 145). While the complaint states it in three different ways, the alleged product market is the market of retrocessional claims activity.

Furthermore, according to the complaint, all of the conduct allegedly in violation of the Donnelly Act was committed by actors in Lloyd's retrocessional reinsurance market. (E.g., Compl. ¶ 37.) Nothing in the complaint alleges a geographic market larger than Lloyd's.

Defendants object that: (1) the product market alleged in the complaint is inadequate and different from that alleged in the opposition brief; (2) plaintiff's opposition brief impermissibly changes the geographic scope of the market from Lloyd's to worldwide; and (3) plaintiff has failed to allege anywhere that the alleged conspiracy has had an economic impact on the worldwide retrocessional reinsurance market.

I disagree with defendants that the product market alleged in the complaint is inadequate or differs significantly from that alleged in the opposition brief. Plaintiff describes the product market in its opposition brief as the "writing of retrocessional reinsurance coverage, or a subset thereof." (Opp'n Br. at 7.) Plaintiff explains that the market participants (i.e., the Names), with and through Equitas, agreed to restrict one dimension of competition in that market: claims handling. (Opp'n Br. at 8-9.) I do not see a relevant difference in the nature of the markets as alleged in the complaint and in the opposition brief; in both, the product market is retrocessional reinsurance. There is no reason why plaintiff should not be able to allege that defendants conspired to restrict just one dimension of competition in that market: claims handling. Plaintiff has adequately alleged a product market; the question is whether plaintiff has adequately alleged a geographic market.

The geographic scope of the market alleged in the complaint is Lloyd's. But in its opposition brief, plaintiff asserts that the geographic market is "potentially worldwide," and that it needs fact discovery in order to determine the geographic contours precisely. (Opp'n Br. at 7.) At oral argument, plaintiff's counsel argued for the first time that Lloyd's has market power in the worldwide market. (Trans. at 53-54.)

I agree with defendants that plaintiff expanded the geographic scope of the market in its opposition brief and at oral argument from that alleged in its complaint. Furthermore, it has done so in a vague manner.I will disregard plaintiff's arguments inasmuch as it has attempted to amend the complaint by argument without permission; I will consider the adequacy of only the geographic market alleged in the complaint, which is Lloyd's.

Defendants maintain that the retrocessional reinsurance market at Lloyd's cannot be a geographic market under the Donnelly Act, for three main reasons: (a) Lloyd's is a small subset of the worldwide reinsurance market; (b) the market for reinsurance is pure capital and therefore must be considered to be worldwide in scope; and (c) plaintiff has not alleged that Lloyd's otherwise dominates the global reinsurance market.

Defendants may be correct about all of these things, but I cannot decide whether they are as a matter of law; Lloyd's percentage of the worldwide reinsurance market, its dominance in that market, and the global nature of the retrocessional reinsurance market are all factual questions, which cannot be resolved on a motion to dismiss. Plaintiff has adequately alleged a geographic [*14]market for purposes of stating a Donnelly Act claim.

At oral argument, plaintiff's counsel indicated that Global desires to amend its complaint again to allege a broader geographic market. Both sides submitted supplemental affirmations on this question. I have considered both submissions for the sole purpose of considering whether to grant plaintiff's request for leave to amend the complaint; for all other purposes, they were unauthorized and are not part of the record.

Plaintiff's affirmation (the Krugman affirmation) was signed by its attorney, who, as far as I can tell, has no personal knowledge of the matters discussed in the affirmation.

I am authorized to permit a party to amend its complaint at any time "upon such terms as may be just." C.P.L.R. § 3025(b). Courts ordinarily require a party seeking to amend a pleading to submit an affidavit of merit from someone with knowledge. See Walter & Rosen, Inc. v. Pollack, 101 AD2d 734, 734 (1st Dep't 1984) (CPLR 3211(e) requires that the proposed new pleading be supported by evidence as on a motion for summary judgment); see also Jebran v. LaSalle Bus. Credit, LLC, 33 AD3d 424, 424 (1st Dep't 2006) (motion to amend was rightly denied, where it was not supported by an affidavit of merit from a person with knowledge).

Because plaintiff has not met the requirement of submitting an affidavit of merit from someone with personal knowledge, I disregard the supplemental Krugman affirmation. Plaintiff may file a motion for leave to amend its complaint to allege a broader geographic market within 20 days of the issuance of this Order and Memorandum Decision.

(b)Whether the complaint alleges a conspiracy or reciprocal relationship between two or more entities

Defendants contend that the complaint fails to state a claim, because it alleges purely unilateral behavior by Equitas in handling claims under the RROC, rather than a "reciprocal relationship of commitment between two or more legal or economic entities," as the Donnelly Act requires. Creative Trading, 136 AD2d at 462 (dismissing Donnelly Act claim, where plaintiffs failed to identify co-conspirator that conspired with the defendant corporation corporation); see Saxe, Bacon & Bolan, P.C. v. Martindale-Hubbell, Inc., 710 F.2d 87, 89 (2d Cir. 1983) (defendant's unilateral decision did not satisfy reciprocal relationship element of Donnelly Act); Commonwealth Elec. Inspection Servs. v. Town of Clarence, 6 AD3d 1185, 1186 (4th Dep't 2004) (dismissing Donnelly Act claim, where municipalities' enactment of an ordinance was "purely unilateral").

Plaintiff maintains that the complaint alleges a hub-and-spoke conspiracy with Equitas as the hub, and the Names as spokes. Each Name allegedly entered into an agreement with Equitas (through the R & R Plan and RROC) to protect him- or herself from claims services competition, by enabling Equitas to drive down claims payments below the levels that would prevail in a competitive market.

"The fixing of prices by one member of a group, pursuant to express delegation, acquiescence, or understanding, is just as illegal as the fixing of prices by direct, joint action." U.S. v. Masonite Corp., 316 U.S. 265, 276 (1942) (price-fixing combination was illegal per se under the Sherman Act, even though the parties desired the agreement independently, where they were all "aware[] of the general scope and purpose of the undertaking"); see also Toys "R" Us, Inc. v. F.T.C., 221 F.3d 928, 936 (7th Cir. 2000) (substantial evidence supported FTC's conclusion that Toys R Us had coordinated an illegal horizontal agreement between toy manufacturers in per se violation of § 1 of the Sherman Act).

The U.S. Courts of Appeals appear to disagree about whether an antitrust claim may be [*15]maintained against a "rimless wheel" conspiracy. See Dickson v. Microsoft Corp., 309 F.3d 193, 203-04 (4th Cir. 2002), cert. denied, 539 U.S. 953 (2003). A rimless wheel conspiracy would be "one in which various defendants enter into separate agreements with a common defendant, but where the defendants have no connection with one another, other than the common defendant's involvement in each transaction." Id. (criticizing other Circuits for permitting rimless wheel conspiracy theories, in misinterpretation of Kotteakos v. United States, 328 U.S. 750 (1946)); cf. Kotteakos, 328 U.S. at 773-74 (eight separate and distinct conspiracies could not be strung together just because one person participated in them all).

Courts generally recognize antitrust claims based on a hub-and-spoke conspiracy, when the plaintiff alleges that each spoke knew the other spokes existed. See North Jackson Pharmacy, Inc. v. Express Scripts Inc., 345 F. Supp.2d 1279, 1294-95 (N.D. Ala. 2004) (concluding that vertical price-fixing conspiracy violated the rule of reason, where plan sponsors were aware they shared a common strategy to use a common agent to drive down pharmacy costs).

To allege a hub-and-spoke conspiracy, it is enough that the complaint alleges that the Names and Equitas were all aware of the general scope and purpose of the undertaking. The complaint here does that. It alleges that the restructuring of Lloyd's established Equitas as the hub of a conspiracy, in which the participating Names or syndicates were the spokes. The complaint alleges that the purpose of restructuring Lloyd's in the R & R Plan was to "fix and cap" certain liabilities of the Names. (Compl. ¶ 29.) The Names allegedly intended to grant Equitas the power and duty to make claims decisions. (Compl. ¶ 30.)

It is not a rimless wheel, either; the Names knew that the other Names were entering into the same agreement with Equitas and intended for them to do so. (Compl. ¶ 30.) The Names pooled their reserves together to create a fund for Equitas. (Compl. ¶ 38.) The effectiveness of the R & R Plan hinged on market-wide participation by syndicates at Lloyd's. (Compl. ¶ 37(a).)

Based on these allegations, the complaint adequately alleges that Equitas is the ringmaster of a wheel-and-spoke conspiracy in violation of the Donnelly Act.

(c)Whether the alleged conspiracy restrains trade in the product market

Every commercial agreement restrains trade; the test is whether the restraint is judged to be unreasonable. Northwest Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 289 (1985) (applying Sherman Act).Even if an agreement eliminating competition between the parties is not an antitrust violation per se, it may still be illegal under the "rule of reason" test if it is an unreasonable restraint on trade.^[FN7] Kick v. Regan, 110 AD2d 934, 936 (3d Dep't 1985) [*16](purchase by competitor of all of respondent's stock, establishing parent-subsidiary relationship, did not violate Donnelly Act under rule of reason, although parent then allowed its subsidiary to submit an uncontested successful bid for a license issuance system) (citing Atkin v. Union Processing Corp., 90 AD2d 332, 335-36 (4th Dep't 1982), aff'd, 59 NY2d 919 (1983)). The rule of reason test "requires proof that the defendant's conduct had an anticompetitive effect in the relevant market; and... that no procompetitive rationale would justify the conduct.'" North Jackson, 345 F. Supp.2d at 1283 (quoting Retina Assocs. v. S. Baptist Hosp. of Fla., 105 F.3d 1376, 1383 (11th Cir. 1997)) (applying Sherman Act).

For example, the U.S. Supreme Court, in FTC v. Indiana Federation of Dentists, held that an agreement among dentists not to forward x-rays to insurers with claim forms was an unreasonable restraint on trade, in part because it limited the choices of dentists' consumers (that is, patients and their insurers). 476 U.S. 447 (1986). The Court rejected the argument that the dentists' practice actually improved the patients' quality of care by preventing their insurers from making bad decisions. The Court held that the dentists were not entitled to decide, on behalf of their patients' insurers, that x-rays were not needed to evaluate claims. Id. at 462-63.

To satisfy the rule of reason, a plaintiff will bear "the initial burden of showing that the challenged action has had an actual adverse effect on competition as a whole in the relevant market; to prove it has been harmed as an individual competitor will not suffice." Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., 996 F.2d 537, 543 (2d Cir. 1993) (HMO and its physicians were entitled to summary judgment dismissing Sherman Act claim by group of radiologists, who failed to show that their exclusion from serving HMO's patients by HMO's participating physicians' group adversely impacted medical services offered to patients).

If a plaintiff is unable to demonstrate such actual effects, it may instead "establish that defendants possess the requisite market power so that their arrangement has the potential for genuine adverse effects on competition." Id. at 546. The burden then "shifts to the defendant to offer evidence of the pro-competitive redeeming virtues' of [its] combination." Id. at 543. If the defendant can offer such evidence, the burden then "shifts back to plaintiff for it to demonstrate that any legitimate collaborative objectives proffered by defendant could have been achieved by less restrictive alternatives, that is, those that would be less prejudicial to competition as a whole." Id. The rule of reason is geared to determine "whether the challenged action purports to promote or to destroy competition." Id.

Defendants insist that plaintiff has not met its initial burden of alleging that the alleged conspiracy between Equitas and the Names to toughen claims-handling practices restricts competition for the sale of new retrocessional coverage in the relevant market. On the contrary, the complaint admits that the purpose of the RROC and R & R Plan was to save the Names from financial ruin. (Compl. ¶¶ 28-29.) Consequently, defendants argue, this arrangement cannot be an agreement to restrain trade.

I disagree. The complaint sufficiently alleges that the syndicates at Lloyd's used to compete with each other in claims servicing, before they aggregated their negotiating power together in Equitas, and that this aggregation enabled Equitas to have an impact on claims-handling practices at Lloyd's that no syndicate acting alone could achieve. (Compl. ¶¶ 35-37, 48, 66, 96, 115, 133.) The implication is that the consolidation of their claims-handling functions and bargaining power into Equitas was intended to and in fact did drive down payments to reinsurers below the payments that would prevail in a competitive market. [*17]

One means of driving down payments was the imposition of burdensome new documentation requirements. (Compl. ¶¶ 69-97.)Courts have found that the imposition of certain burdensome requirements, even apart from price, could be an antitrust violation. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 650 (1980) (an agreement among beer wholesalers not to sell unless the retailer made payment in cash was "anticompetitive" per se, as a form of price-fixing) (internal quotations omitted).

I conclude that plaintiff has alleged facts which, if proven, could satisfy its initial burden under the rule of reason test of showing either that the alleged conspiracy between Equitas and the participating syndicates had an actual adverse effect on competition as a whole at Lloyd's, or that this conspiracy had market power that was strong enough to stifle competition between syndicates.

(d)Whether Global has alleged a compensable antitrust injury

Defendants' final challenge to plaintiff's Donnelly Act claim is that plaintiff lacks standing to bring it, since Global is undisputedly in "run-off" that is, it no longer writes reinsurance or seeks retrocessional coverage.

In order to recover antitrust damages, a plaintiff must prove that its injury is "of the type the antitrust laws were intended to prevent and that flows from... the violation or [] anticompetitive acts made possible by the violation [of the antitrust laws]." Blue Shield of Va. v. McCready, 457 U.S. 465, 482 (1982). The plaintiff need not be one of the defendants' competitors, so long as its injury is "inextricably intertwined" with the injury inflicted on the competitors. Id. at 484 (employee stated a claim that she suffered antitrust injury from health plan's refusal to reimburse fees for psychotherapy services performed by psychologists, though it would reimburse for services performed by competitor psychiatrists, under Clayton Act); Nelson v. Monroe Reg'l Med. Ctr., 925 F.2d 1555, 1561-65 (7th Cir. 1991), cert. denied, 502 U.S. 903 (1991) (plaintiffs stated a Clayton Act claim against a medical clinic, which dominated the local market for medical services, for refusing to treat them, based on the theory that plaintiffs were the first victims of a market-wide injury).^[FN8] A plaintiff must show an injury to "competition as a whole in the relevant market" not just that it has been harmed as an individual competitor. Rubin v. Nine West Group, Inc., 1999 WL 1425364, *6 (Sup. Ct. Nov. 3, 1999) (consumers who paid more for Nine West shoes as a result of manufacturer's efforts to fix retail prices had not suffered antitrust injury under Donnelly Act, because they failed to allege an adverse effect on the market); accord Capital Imaging, 996 F.2d at 547 (dismissing Sherman Act claim by plaintiff radiologists excluded from serving HMO's patients, where plaintiffs failed to show that their exclusion adversely impacted medical services offered to patients, on summary judgment).

Defendants' only real basis for arguing that plaintiff has not suffered an antitrust injury is that Global is in run-off. But Global was not in run-off when it entered into the treaties with the syndicates. The fact that it no longer buys new retrocessional reinsurance does not undermine its claim that it was harmed by Equitas's claims handling practices any more than the plaintiff in McCready would lose her standing to challenge her health plan's refusal to reimburse her for last month's psychotherapy services, just because her health has improved and she no longer requires mental health services. [*18]

And although plaintiff is not one of defendants' competitors, its particular injury can be viewed as a casualty of a market-wide injury caused by defendants' conduct, as in McCready and Nelson.

In conclusion, plaintiff has alleged an antitrust injury and has stated a claim under the Donnelly Act.

Injunctive Relief

Finally, defendants argue that I should dismiss count III for injunctive relief, because plaintiff has failed to establish a likelihood of success on the merits, irreparable harm, and a balance of the equities in its favor. As there has been no discovery, it is too early to decide whether plaintiff demonstrated any of these elements based on the Donnelly Act violation, which is the only remaining substantive claim. I will not dismiss count III on that ground at this time. I do not need to decide now whether plaintiff is otherwise entitled to injunctive relief.

The parties' other contentions have been considered and rejected.

Dated: July __, 2008

ENTERED:

__________________________________

J.S.C.