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First Circuit Enforces Broad Reading of the “Arising Out Of” Clause in Massachusetts

Coverage for Entire Claim Excluded by Antitrust Exclusion

Directors and Officers Alert | December 13, 2012
by: Karen Mariscal

In The Saint Consulting Group, Inc. v. Endurance Am. Specialty Ins. Co., 699 F.3d 544 (Nov. 2, 2012), the United States Court of Appeals for the First Circuit held that Endurance American Specialty Insurance Company was not required to cover a claim against its insured for conspiring to block the opening of Wal-Mart stores because of the policy’s antitrust exclusion.  Applying Massachusetts law, the First Circuit upheld a broad reading of the “arising out of” clause, and also found that the antitrust exclusion applied even though there was no actual antitrust violation.

The insured, The Saint Consulting Group (Saint), was a real estate consulting firm that assisted grocery stores in their efforts to stop Wal-Mart from coming into their territories.  The underlying plaintiff, Rubloff Development, had purchased land that it intended to sell to Wal-Mart so that Wal-Mart could open two stores.  Saint, acting on behalf of a competing grocery store, undertook efforts to rally local businesses against Wal-Mart.  A Saint employee allegedly made up false stories about the bad effects of Wal-Mart stores, and concealed the fact that he was a Saint employee working on behalf of a Wal-Mart competitor.  Rubloff Development sued Saint for RICO violations, conspiracy to restrain trade under the Sherman Act and Illinois Antitrust Act, tortious interference with prospective economic advantage, common law fraud, and conspiracy.

Endurance denied coverage to Saint on the basis of an antitrust Exclusion N, which stated that coverage did not apply:

“… to any Claim based upon or arising out of any actual or alleged price fixing, restraint of trade, monopolization or unfair trade practices including actual or alleged violations of the Sherman Anti-Trust Act, the Clayton Act, or any similar provision [of] any state, federal or local statutory law or common law anywhere in the world.”

The Court held that the causes of action for antitrust violations under federal and state statute were excluded by the policy -- that was the easy part.  “The far more interesting question,” the Court said, “is whether Exclusion N also reaches counts of the Second Amended Complaint that rely upon the same facts but charge violations of statutes (e.g. Rico) or common law theories (e.g. fraud, interference with prospective economic advantage), that are not limited to and do not expressly identify their target as restraints of trade.”  (emphasis in original)  The Court stated that the phrase “arising out of” is typically afforded a broad construction under Massachusetts law.  The Court found that the complaint alleged a conspiracy to forestall competition, “and every count in the Rubloff Action that is not itself described as an antitrust claim depends centrally on the alleged existence of such a scheme.”  Because the Court determined that all of the causes of action in the complaint were based on Saint’s efforts to restrain trade, the Court held that under Massachusetts law, the exclusion applied to the entire case.

Possibly because Saint predicted this result, Saint argued that the antitrust exclusion did not apply to any part of the case, because the court in the underlying action found that the conduct was protected by the Noerr-Pennington doctrine from being an antitrust violation.  The First Circuit said this argument was “bewildering,” and a “non-sequitur,” since what matters is not whether the conduct occurred, or whether it was unlawful, but what is alleged.  “The exclusion does not depend on whether a successful defense can be advanced: it excludes meritless claims quite as much as ones that may prove successful.” 

For more information regarding this alert, please contact Karen Mariscal in our Boston office (617.748.5225;

This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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