                 United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 16-1561
                        ___________________________

     Dale R. Ludwick, on behalf of Herself and All Others Similarly Situated

                        lllllllllllllllllllllPlaintiff - Appellant

                                           v.

     Harbinger Group, Inc.; Fidelity & Guaranty Insurance Company; Raven
            Reinsurance Company; Front Street Re (Cayman), Ltd.

                      lllllllllllllllllllllDefendants - Appellees
                                      ____________

                     Appeal from United States District Court
                for the Western District of Missouri - Kansas City
                                 ____________

                          Submitted: November 16, 2016
                              Filed: April 13, 2017
                                 ____________

Before RILEY,1 Chief Judge, WOLLMAN and KELLY, Circuit Judges.
                              ____________

RILEY, Chief Judge.




      1
       The Honorable William Jay Riley stepped down as Chief Judge of the United
States Court of Appeals for the Eighth Circuit at the close of business on March 10,
2017. He has been succeeded by the Honorable Lavenski R. Smith.
       The question in this case is whether letting Dale Ludwick pursue her federal
racketeering claims against an insurance company and its affiliates would impair state
regulation of the insurance business in Iowa, Maryland, or Missouri. We agree with
the district court2 that it would, and the McCarran-Ferguson Act forbids that result.
See 15 U.S.C. § 1012(b). We affirm the dismissal of Ludwick’s claims.

I.      BACKGROUND
        The essence of Ludwick’s case is that Fidelity & Guaranty Insurance Company
(F&G)—directed by the hedge fund that owns it, Harbinger Group, Inc., and abetted
by two related subsidiaries, Raven Reinsurance Company and Front Street Re
(Cayman), Ltd.—misled her into paying too much for an F&G annuity. F&G did so,
Ludwick says, by disseminating reports and marketing materials that did not properly
reflect sham transactions F&G undertook to hide its true financial state. The details
and ultimate propriety of those transactions are largely immaterial to our resolution
of this appeal. As relevant, Ludwick’s theory is that between 2011 and 2013, F&G
took billions of dollars in liabilities off its books by transferring them to its affiliates
Raven and Front Street, even though those companies did not have sufficient assets
to cover them. At the same time, F&G marked up its valuation of the Raven stock it
owned. And after quickly unwinding one of the transactions and taking some
liabilities back from Raven, F&G arranged for an unaffiliated insurance
company—apparently gratuitously—to assume those liabilities, plus others, while
taking assets worth significantly less (and otherwise lacking the resources to cover
them).

     According to Ludwick, if F&G had properly accounted for these transactions
under the principles promulgated by the National Association of Insurance
Commissioners, as F&G claimed to do in its annual statements, F&G would have had


       2
        The Honorable David Gregory Kays, Chief Judge, United States District Court
for the Western District of Missouri.

                                            -2-
to report its “surplus” was in fact negative—in other words, that its liabilities
exceeded its assets. Instead, F&G reported billion-dollar surpluses in each of 2011,
2012, and 2013. Based, in part, on F&G’s apparent financial good health, Ludwick
bought an annuity in 2013.

        Ludwick eventually became convinced F&G was not in as good shape as it
seemed, and thus her annuity was not worth what she paid for it. She sued under the
Racketeer Influenced and Corrupt Organizations Act (RICO), see 18 U.S.C.
§ 1964(c), alleging F&G—under Harbinger’s control and facilitated by the
subsidiaries (collectively, F&G, from here on, except where context dictates
otherwise)—committed numerous acts of mail and wire fraud in the course of a book-
cooking scheme, most straightforwardly by distributing paper and electronic copies
of its deceptive reports and marketing materials.3 See id. § 1962(c), (d) (imposing
liability for conducting an enterprise’s affairs through a pattern of racketeering
activity and for conspiring to do so); see also id. § 1961(1) (defining racketeering
activity). The district court granted F&G’s motion to dismiss for failure to state a
claim on which relief can be granted, see Fed. R. Civ. P. 12(b)(6), relying on the
McCarran-Ferguson Act and not reaching the merits of Ludwick’s RICO claims.
Ludwick appeals. See 28 U.S.C. § 1291 (appellate jurisdiction).

II.   DISCUSSION
      The McCarran-Ferguson Act provides: “No Act of Congress shall be construed
to invalidate, impair, or supersede any law enacted by any State for the purpose of
regulating the business of insurance . . . unless such Act specifically relates to the
business of insurance.” 15 U.S.C. § 1012(b). There is no suggestion RICO
“specifically relates” to insurance, and no dispute Iowa, Maryland, and Missouri

      3
       Ludwick filed her case as a class action, seeking to represent everyone who
has bought annuities from F&G since Harbinger acquired the company in April 2011.
The district court dismissed the suit before ruling on class certification, and class
issues are not relevant to this appeal.

                                         -3-
(respectively, where F&G is based now, where it was based until 2013,4 and where
Ludwick lives) regulate the insurance business. Nor would imposing RICO liability
for F&G’s alleged misconduct “invalidate” or “supersede” Iowa, Maryland, or
Missouri law. See Humana Inc. v. Forsyth, 525 U.S. 299, 307 (1999) (giving the
terms their ordinary meanings). The only question is whether Ludwick’s RICO
charges would “impair” state insurance regulation.

       This question, like the sufficiency of Ludwick’s allegations more generally, is
a legal issue we review de novo. See, e.g., Saunders v. Farmers Ins. Exch., 537 F.3d
961, 963 (8th Cir. 2008). The Supreme Court articulated the governing standard in
Humana Inc. v. Forsyth: “When federal law does not directly conflict with state
regulation, and when application of the federal law would not frustrate any declared
state policy or interfere with a State’s administrative regime, the McCarran-Ferguson
Act does not preclude its application.” Humana, 525 U.S. at 310.

      Ludwick insists her suit threatens no conflict, frustration, or interference
because it is just about F&G’s bookkeeping, not the underlying propriety of the
transactions or state regulators’ approval of them. The distinction cannot bear the
weight of Ludwick’s argument. “In applying Humana’s fact-intensive interpretation
of the word ‘impair,’ our focus must be on the precise federal claims asserted,”
because “a statute might ‘impair’ state insurance laws when applied in some ways,
but not in others.” Saunders, 537 F.3d at 967. The precise claims asserted in this
case arise out of F&G, in Ludwick’s words, “misrepresent[ing] the true financial
condition of [the company] in its public reports and marketing materials, artificially


      4
       Ludwick makes little mention of Maryland law in her briefs, explaining she
“does not contend” it applies. We see no reason why that should matter. Maryland
had primary regulatory authority over F&G for most of the time covered by
Ludwick’s complaint, and the existence of a third state whose regulation of the
insurance business might be affected by federal litigation is a potential flaw in
Ludwick’s case, not a supplemental theory she can choose to forgo or ignore.

                                         -4-
inflating its purported assets and surplus.” Ruling on those claims would necessarily
involve deciding whether the supposed sham transactions left F&G in the healthy
financial position it reported, or whether Ludwick is correct that a proper accounting
would have shown liabilities substantially exceeding F&G’s assets (as Ludwick says,
“a negative statutory surplus”).

       Questions about insurance companies’ solvency are, no surprise, squarely
within the regulatory oversight by state insurance departments. In Maryland (as
elsewhere) deals like those underlying Ludwick’s case—namely, reinsurance
transactions with affiliates—must be submitted to the insurance commissioner for
review before they can be consummated. See Md. Code Ann., Ins. § 7-703(a)(1), (c),
(d)(4); see also Iowa Code § 521A.5(1)(c)(1). See generally Saunders, 537 F.3d at
965 (“Like most States, Missouri thoroughly regulates the business of insurance.”).
And the commissioner is directed to consider both whether the transaction
“potentially adversely affects the interests of policyholders” and whether “after the
transaction, . . . the insurer has assets and surplus as regards policyholders that:
(i) bear a reasonable relation to the insurer’s outstanding liabilities; and (ii) are
adequate to meet the insurer’s financial needs.” Md. Code Ann., Ins. §§ 7-702(3),
-703(e); see also Iowa Code § 521A.5(1)(a)(6), (f). For all practical purposes, that
is the same inquiry Ludwick’s claims seek. A federal court could not rule in
Ludwick’s favor without holding, more or less explicitly, that state insurance
regulators were wrong to let the transactions proceed, because the negative surplus
Ludwick alleges would be patently unreasonable and inadequate. Cf. Saunders, 537
F.3d at 968 (“‘[A] more complete overlap with the state [agency’s] . . . decisions is
impossible to conceive.’” (second alteration in original) (quoting Dehoyos v. Allstate
Corp., 345 F.3d 290, 302 (5th Cir. 2003) (Jones, J., concurring in part and dissenting
in part))); Doe v. Mut. of Omaha Ins. Co., 179 F.3d 557, 564 (7th Cir. 1999) (“Even
if the formal criteria are the same under federal and state law, displacing their
administration into federal court—requiring a federal court to decide whether an
insurance policy is consistent with state law—obviously would interfere with the

                                         -5-
administration of the state law. The states are not indifferent to who enforces their
laws.”).

       This conclusion holds even though Ludwick sometimes describes the relevant
misconduct as not the accounting itself, let alone the underlying transactions, but
F&G’s representation that it arrived at the numbers in its reports without departing
from the standard accounting principles it purported to follow. To start, we agree
with F&G that this theory is a “Post-Hoc Reformulation” of Ludwick’s claims. Yes,
Ludwick’s case has always been about F&G “fraudulently dup[ing]” her into buying
the annuity, but until now her story was that she was duped by lies about the
company’s financial strength, not lies about its accounting practices. The new theory
does not solve the problem. To decide whether F&G’s reported financials reflected
a significant departure from the accounting principles it claimed to have followed, a
federal court would need to ask what the result of the transactions should have been
under those principles. That would drag the court right back into second-guessing
state regulators’ oversight of F&G’s solvency and stability.

       Ludwick also warns against “resurrect[ing] field-preemption arguments that the
Supreme Court expressly rejected in Humana.” See Humana, 525 U.S. at 308 (“We
reject any suggestion that Congress intended to cede the field of insurance regulation
to the States.”). Her concerns are unfounded. The reason Ludwick cannot pursue her
RICO claims is not the mere fact that they relate to the insurance business in the
abstract, as it would be under a field-preemption analysis, but that, as a practical
matter, a federal court ruling on the specific things Ludwick alleges against this
particular insurance company would mean asking the same questions as state
insurance regulators ask and effectively double-checking their work. In other words,
such review is just the sort of case-specific intrusion and interference we have held
the McCarran-Ferguson Act forbids. See Saunders, 537 F.3d at 967-68.




                                         -6-
       The Supreme Court’s decision in SEC v. National Securities, Inc., 393 U.S. 453
(1969), does not help Ludwick either, despite some superficial similarities to this
case. In National Securities, the Court held the Securities and Exchange Commission
(SEC) could unwind an insurance-company merger based on allegations that the
letters soliciting approval from the target company’s shareholders failed to disclose
that they would be paying for the takeover of their own company (among other
misrepresentations), even though state regulators had already signed off on the deal.
Id. at 455, 462-63. Ludwick latches onto the Court’s explanation that “[t]he
gravamen of the [SEC’s] complaint was the misrepresentation, not the merger,” id.
at 462, which she takes to mean she is safe from the McCarran-Ferguson Act as long
as the federal and state inquiries are technically about different things. The Court did
not limit itself to such formalities however—key to its conclusion was that the SEC’s
arguments for undoing the merger (in short, that it was accomplished by deceiving
shareholders) really were entirely separate from the state regulators’ review and
approval, which centered on the effect of the combination on policyholders. See id.
at 463 (“Different questions would, of course, arise if the Federal Government were
attempting to regulate in the sphere reserved primarily to the States by the McCarran-
Ferguson Act.”). In Ludwick’s case, by contrast, the federal claims and the state
determinations boil down to the same issue, namely, how the alleged sham
transactions, properly accounted for, affected F&G’s balance sheet. Cf. Doe v.
Norwest Bank Minn., N.A., 107 F.3d 1297, 1307-08 (8th Cir. 1997) (concluding state
insurance regulation would be impaired by RICO claims against an insurer where, “in
contrast to National Securities, the federal and state statutes at issue . . . are directed
toward the same end”).

       Ludwick’s final attempt to save at least a subset of her claims is also meritless.
Her argument is that because only F&G itself is actually subject to state insurance
laws, “surely [the McCarran-Ferguson Act] does not preclude the assertion of a
federal RICO claim” as to the other defendants. But the Act is concerned with the
practical effect of federal law on state insurance regulation, see 15 U.S.C. § 1012(b);

                                           -7-
Saunders, 537 F.3d at 967, regardless of whom it targets as a technical legal matter.
Litigating claims premised on F&G’s conduct and financial condition against
Harbinger, Raven, and Front Street would be no less disruptive of state insurance
regulation than if F&G were a party as well.

       Though we agree with the district court’s disposition of the case, we do not
adopt the reasoning the district court thought controlling—that “the lack of a private
right of action under the states’ insurance codes is dispositive” and “the availability
of common law remedies [could] not save [Ludwick’s] RICO claim from reverse
preemption.” According to F&G, the district court’s rule “makes sense because the
lack of a private right of action reflects a state determination that ancillary actions
will impair the functioning of the regulatory framework.” But why assume, as that
explanation implicitly does, that an ancillary common-law action would be any less
disruptive? To the contrary, if it were clearly established that a state let aggrieved
parties bring common-law claims against insurance companies in a given situation,
we would seem to be justified in drawing much the same inference as if the cause of
action were written into the insurance code, namely that the state had not found its
regulatory efforts frustrated by the availability of private litigation. See Humana, 525
U.S. at 312 (citing the availability of analogues under “other state laws, statutory or
decisional,” as tending to show that allowing RICO claims would not impair
Nevada’s regulation of the insurance business (emphasis added)); Saunders, 537 F.3d
at 968 (reaching the opposite conclusion because, among other reasons, “neither the
Missouri insurance laws nor Missouri common law provide a private right of action
for [the alleged misconduct]” (emphasis added)); LaBarre v. Credit Acceptance
Corp., 175 F.3d 640, 643 (8th Cir. 1999) (“Minnesota law permits only administrative
recourse for violations of [the relevant provision] and, unlike RICO, does not provide
a private cause of action.”).5


      5
       The district court read our ruling against the plaintiff in LaBarre differently,
reasoning that because (in the district court’s view) Minnesota law did in fact allow

                                          -8-
       Such an inference is not warranted in this case, because Ludwick has failed to
establish that the specific sort of misconduct she alleges—an insurer lying about its
financial condition and accounting—would be actionable under the common law of
each implicated jurisdiction. With respect to Maryland and Missouri, all Ludwick
even purports to show is that each state “recognizes a common-law claim for
fraudulent inducement” against insurance companies. Yet the fact that the state might
allow some claims within such a broad category sheds little light on the disruptive
effects of Ludwick’s particular theory of liability. Cf. Saunders, 537 F.3d at 967
(calling for a “fact-intensive” and context-specific analysis).

       Two last points. First, because we conclude Ludwick’s federal claims are
barred by the McCarran-Ferguson Act, we do not reach F&G’s alternative arguments
that Ludwick lacked standing to sue under RICO and failed plausibly to allege a
scheme or intent to defraud. We do take issue with F&G’s contention that Ludwick’s
allegations are implausible—indeed, “preposterous” and “outlandish”—and we
should affirm their dismissal not because of any legal infirmity, but because it is hard
to believe someone like Ludwick could have uncovered a fraud that eluded “multiple
insurance regulators, a major auditing firm, industry ratings agencies, and the
market.”6 It should (but apparently does not) go without saying that speculation

some common-law claims for fraud and breach of contract against insurance
companies, the existence of such causes of action must be irrelevant, otherwise it
would have factored into our analysis. But LaBarre made no mention of the common
law and, by all indications, rested on an understanding that “Minnesota law
permit[ted] only administrative recourse.” LaBarre, 175 F.3d at 643 (emphasis
added). Regardless of whether that remains an accurate description of Minnesota
law, nothing in LaBarre suggests we meant to address a situation where a plaintiff
specifically could not sue under the insurance code, but could under some other part
of state law. See also Norwest Bank Minn., 107 F.3d at 1306 (“Minnesota law does
not provide a private cause of action for violations of these prohibitions.”).
      6
       “Far more plausible,” F&G assures us, “is that [Ludwick] does not fully
understand these transactions, or simply holds a view of affiliate reinsurance

                                          -9-
about the likelihood a particular plaintiff would be the one to catch the misconduct
she alleges is no reason to throw out her complaint, all the more so when the
speculation is based on thinly veiled assumptions about the party’s relative status and
sophistication. Cf. Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009) (“To be clear, we do
not reject these bald assertions on the ground that they are unrealistic or nonsensical.
We do not so characterize them . . . . It is the conclusory nature of [the plaintiff’s]
allegations, rather than their extravagantly fanciful nature, that disentitles them to the
presumption of truth.”); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (“[O]f
course, a well-pleaded complaint may proceed even if it strikes a savvy judge that
actual proof of the facts alleged is improbable.”). We therefore emphasize that
Ludwick’s loss in this case reflects Congress’s deference to the states as the
traditional regulators of insurance business, see 15 U.S.C. § 1012, not a ruling on the
truth of Ludwick’s claims or a validation of the financial machinations underlying
them.

      Second, at oral argument Ludwick asked to be given a chance to cure the
defects in her complaint if we affirmed the dismissal of her claims, acknowledging
she had not sought to do so in the district court. The time for amending the
complaint, either as of right or with the court’s leave, see Fed. R. Civ. P. 15(a)(1), (2),
has passed—there is a final judgment, now affirmed on appeal, dismissing the case.
Cf. Geier v. Mo. Ethics Comm’n, 715 F.3d 674, 677 (8th Cir. 2013).

III.   CONCLUSION
       Litigating Ludwick’s RICO claims would interfere with state regulation of the
insurance business, and the claims are barred by the McCarran-Ferguson Act. The
district court was right to dismiss. We affirm.
                        ______________________________



transactions that is not shared by the relevant state regulators.”

                                           -10-
