AIG 2007 Annual Report Download - page 78

American International Group, Inc. and Subsidiaries
compensation to each broker. Plaintiffs assert that the defendants and In re Employee Benefit Insurance Brokerage Antitrust Litiga-
violated the Sherman Antitrust Act, RICO, the antitrust laws of 48 tion (the Second Employee Benefits Complaint) along with revised
states and the District of Columbia, and are liable under common law particularized statements in both actions on May 22, 2007. The
breach of fiduciary duty and unjust enrichment theories. Plaintiffs allegations in the Second Commercial Complaint and the Second
seek treble damages plus interest and attorneys’ fees as a result of Employee Benefits Complaint are substantially similar to the
the alleged RICO and Sherman Antitrust Act violations. allegations in the First Commercial Complaint and First Employee
The plaintiffs in the First Employee Benefits Complaint are nine Benefits Complaint, respectively. The complaints also attempt to
individual employees and corporate and municipal employers add several new parties and delete others; the Second Commer-
alleging claims on behalf of two separate nationwide purported cial Complaint adds two new plaintiffs and twenty seven new
classes: an employee class and an employer class that acquired defendants (including three new AIG defendants), and the Second
insurance products from the defendants from August 26, 1994 to Employee Benefits Complaint adds eight new plaintiffs and nine
the date of any class certification. The First Employee Benefits new defendants (including two new AIG defendants). The defend-
Complaint names AIG, as well as eleven brokers and five other ants filed motions to dismiss the amended complaints and to
insurers, as defendants. The activities alleged in the First strike the newly added parties. The Court granted (without leave
Employee Benefits Complaint, with certain exceptions, track the to amend) defendants’ motions to dismiss the federal antitrust
allegations of contingent commissions, bid-rigging and tying made and RICO claims on August 31, 2007 and September 28, 2007,
in the First Commercial Complaint. respectively. The Court declined to exercise supplemental jurisdic-
On October 3, 2006, Judge Hochberg of the District of New tion over the state law claims in the Second Commercial
Jersey reserved in part and denied in part motions filed by the Complaint and therefore dismissed it in its entirety. On Janu-
insurer defendants and broker defendants to dismiss the multi- ary 14, 2008, the court granted defendants’ motion for summary
district litigation. The Court also ordered the plaintiffs in both judgment on the ERISA claims in the Second Employee Benefits
actions to file supplemental statements of particularity to elabo- Complaint and subsequently dismissed the remaining state law
rate on the allegations in their complaints. Plaintiffs filed their claims without prejudice, thereby dismissing the Second Employee
supplemental statements on October 25, 2006, and the AIG Benefits Complaint in its entirety. On February 12, 2008, plaintiffs
defendants, along with other insurer and broker defendants in the filed a notice of appeal to the United States Court of Appeals for
two consolidated actions, filed renewed motions to dismiss on the Third Circuit with respect to the dismissal of the Second
November 30, 2006. On February 16, 2007, the case was Employee Benefits Complaint. Plaintiffs previously appealed the
transferred to Judge Garrett E. Brown, Chief Judge of the District dismissal of the Second Commercial Complaint to the United
of New Jersey. On April 5, 2007, Chief Judge Brown granted the States Court of Appeals for the Third Circuit on October 10, 2007.
defendants’ renewed motions to dismiss the First Commercial Several similar actions that were consolidated before Chief Judge
Complaint and First Employee Benefits Complaint with respect to Brown are still pending in the District Court. Those actions are
the antitrust and RICO claims. The claims were dismissed without currently stayed pending a decision by the court on whether they
prejudice and the plaintiffs were given 30 days, later extended to will proceed during the appeal of the dismissal of the Second
45 days, to file amended complaints. On April 11, 2007, the Commercial Complaint and the Second Employee Benefits
Court stayed all proceedings, including all discovery, that are part Complaint.
of the multi-district litigation until any renewed motions to dismiss On August 24, 2007, the Ohio Attorney General filed a
the amended complaints are resolved. complaint in the Ohio Court of Common Pleas against AIG and a
A number of complaints making allegations similar to those in number of its subsidiaries, as well as several other broker and
the First Commercial Complaint have been filed against AIG and insurer defendants, asserting violation of Ohio’s antitrust laws.
other defendants in state and federal courts around the country. The complaint, which is similar to the Second Commercial
The defendants have thus far been successful in having the Complaint, alleges that AIG and the other broker and insurer
federal actions transferred to the District of New Jersey and defendants conspired to allocate customers, divide markets, and
consolidated into the multi-district litigation. The AIG defendants restrain competition in commercial lines of casualty insurance
have also sought to have state court actions making similar sold through the broker defendant. The complaint seeks treble
allegations stayed pending resolution of the multi-district litigation damages on behalf of Ohio public purchasers of commercial
proceeding. In one state court action pending in Florida, the trial casualty insurance, disgorgement on behalf of both public and
court recently decided not to grant an additional stay, but instead private purchasers of commercial casualty insurance, as well as a
to allow the case to proceed. Defendants filed their motions to $500 per day penalty for each day of conspiratorial conduct. AIG,
dismiss, and on September 24, 2007, the court denied the along with other co-defendants, moved to dismiss the complaint
motions with respect to the state antitrust, RICO, and common on November 16, 2007. Discovery is stayed in the case pending
law claims and granted the motions with respect to both the a ruling on the motion to dismiss or until May 15, 2008,
Florida insurance bad faith claim against AIG (with prejudice) and whichever occurs first.
the punitive damages claim (without prejudice). Discovery in this SICO. In July, 2005, SICO filed a complaint against AIG in the
action is ongoing. Southern District of New York, claiming that AIG had refused to
Plaintiffs filed amended complaints in both In re Insurance provide SICO access to certain artwork and asked the court to
Brokerage Antitrust Litigation (the Second Commercial Complaint)order AIG immediately to release the property to SICO. AIG filed
24 AIG 2007 Form 10-K