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Ticor Title Insurance Co. v. Federal Trade Commission

argued on remand from the supreme court: February 24, 1993.


On Petition for Review of an Order of the Federal Trade Commission (FTC Docket No. 9190). Certiorari Granted October 7, 1991. On Remand From The Supreme Court of the United States June 12, 1992

Before: Hutchinson, Nygaard and Alito, Circuit Judges.

Author: Hutchinson


HUTCHINSON, Circuit Judge.

This case concerning petitioners' assertions of immunity from the antitrust laws is again before this Court on cross-petitions for review and enforcement of a Federal Trade Commission ("FTC") order after remand by the United States Supreme Court. See FTC v. Ticor Title Ins. Co., 119 L. Ed. 2d 410, 112 S. Ct. 2169 (1992). The FTC exercised subject matter jurisdiction under 15 U.S.C.A. § 45 (West Supp. 1992). This Court exercises appellate jurisdiction under 15 U.S.C.A. § 45(c) (West 1973). On the merits, we will affirm the final order of the FTC holding that the petitioners are subject to antitrust regulation.

I. Procedural History

A detailed statement of the case appears in the Supreme Court's opinion on certiorari, see Ticor, 112 S. Ct. at 2173-76, and in this Court's earlier opinion, see Ticor Title Ins. Co. v. FTC, 922 F.2d 1122, 1125-27 (3d Cir. 1991) ("Ticor I "). Therefore, we will give only a brief summary of the case's procedural history.

Petitioners are five of the nation's largest title insurance companies (collectively "Ticor").*fn1 On January 7, 1985, the FTC issued an administrative complaint alleging that Ticor*fn2 had engaged in "unfair methods of competition" in violation of section 5 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.A. § 45(a)(1) (West Supp. 1992), by agreeing collectively to set uniform rates for title search and examination services. Ticor accomplished this rate setting through state-licensed "rating bureaus" in thirteen states.

The administrative law Judge ("ALJ") before whom the case was brought issued an initial decision and proposed order on December 25, 1986. The ALJ found Ticor's claim that the collective formulation of rates for title search and examination services is part of the "business of insurance" exempt from the FTC Act under sections 2(b) and 3(a) of the McCarran-Ferguson Act, 15 U.S.C.A. §§ 1012(b), 1013(a) (West 1976), was without merit. The ALJ also rejected Ticor's claim that the Noerr-Pennington doctrine*fn3 protected the challenged conduct from antitrust liability as joint efforts by petitioners to influence state regulators in matters of state policy. The ALJ also rejected Ticor's claim that the state action doctrine exempted them from antitrust liability in Connecticut and Wisconsin, but held that Ticor's rate setting actions in Arizona, Idaho, Montana, New Jersey, and Pennsylvania satisfied both prongs of the state action doctrine and were thus immune from antitrust regulation. Finally, the ALJ ruled that the FTC had failed to prove that Ticor used its rating bureau to establish uniform rates for title search and examination services in Ohio.

Ticor appealed the ALJ's initial decision. The FTC cross-appealed. On September 19, 1989, the FTC affirmed in part and reversed in part the ALJ's decision. The FTC affirmed the ALJ's holding on the McCarran-Ferguson Act and Noerr-Pennington issues, as well as its holding that the state action doctrine did not apply to Ticor's rate setting actions in Connecticut and Wisconsin. It rejected Ticor's state action defense with respect to its rate setting actions in New Jersey, Pennsylvania, Montana, and Arizona, and reversed the ALJ to that extent. The FTC dismissed the complaint insofar as it concerned Ticor's rate setting actions in Idaho and Ohio.

The FTC's final order prohibited Ticor from fixing prices for title search and examination services in the six states where it had held Ticor violated the antitrust laws. The order nevertheless contained a proviso that permits collective establishment of rates for title services in any of these states if undertaken "pursuant to clearly articulated and affirmatively expressed state policy and where such collective activity is actively supervised by a state regulatory body."*fn4 Joint Appendix (Jt. App.) at 125.

In this Court, Ticor filed a timely petition to review the FTC's final order. The FTC filed a cross-petition for enforcement. See 15 U.S.C.A. § 45(c) ("To the extent that the order of the Commission is affirmed, the court shall thereupon issue its own order commanding obedience to the terms of such order of the Commission.")

This Court reversed the FTC's final order on the ground that Ticor was entitled to immunity because the active supervision requirement of the state action doctrine was met in each state. Ticor I, 922 F.2d at 1140. In reaching this Conclusion, we followed the United States Court of Appeals for the First Circuit's reasoning that the active supervision prong of the state action doctrine would be satisfied if the state regulatory program was staffed, funded and empowered by law. Id. at 1137 (citing New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d 1064, 1071 (1st Cir. 1990)).

The Supreme Court granted certiorari to consider (1) whether this Court was correct in its statement of the law concerning the "active supervision" prong of the state action doctrine, and in its application of that law to the facts of the case, and (2) whether this Court exceeded its authority by departing from the factual findings entered by the ALJ and adopted by the FTC. Ticor, 112 S. Ct. at 2176.*fn5 On the first issue, the Supreme Court reversed. It held that although the criteria set forth in the First Circuit test of active supervision were relevant to the active supervision prong of the state action doctrine, they were not the exclusive measure of whether that prong was met. Id. at 2179. The Court reasoned:

Where prices or rates are set as an initial matter by private parties, subject only to a veto if the State chooses to exercise it, the party claiming the immunity must show that state officials have undertaken the necessary steps to determine the specifics of the price-fixing or ratesetting scheme. The mere potential for state supervision is not an adequate substitute for a decision by the State. Under these standards, we must conclude that there was no active supervision in either Wisconsin or Montana.

Id. Having concluded that Ticor's acts in Montana and Wisconsin were not immune from antitrust liability because there was no active supervision, the Supreme Court remanded the case to this Court to determine whether the regulatory schemes of Connecticut and Arizona met the active supervision prong under the above standard. Id. at 2180.

II. Statement of Facts

We again refer the reader to the opinion of the Supreme Court and our earlier opinion for a detailed statement of facts. See id. at 2173-76; Ticor I, 922 F.2d at 1127-29. A relatively concise factual history is presented here.

The purpose of title insurance is to indemnify buyers and lenders for loss resulting from non-record defects in the title of a parcel of real estate. Such defects include those not discoverable from a search of the public records on the parcel, as well as losses caused by errors or mistakes in the search and examination. Negligence need not be proved in order to recover. Title insurance policies generally except matters that a search and examination of public records have identified, as well as any discrepancies that a survey has actually revealed or would have revealed if performed.

Originally, title insurance companies relied upon independent examiners to perform title search and examination services. As the business evolved, title insurance companies expanded and began to provide these services themselves. Today, a title insurance company may still issue a policy of title insurance after an abstractor or attorney unaffiliated with the insurance company performs the search and examination, but in many cases either an attorney-agent of the insurance company or a trained title insurance company employee performs the service. Some insurance companies, however, still use a list of approved attorneys whom a buyer or lender may then hire to perform the search and examination on which the title insurer bases its list of record exceptions to the insuring covenant.

An attorney may act as an attorney-agent for hypothetical insurance company A and at the same time act as an approved attorney for insurance company B. If company A hires the attorney to perform a search and examination as an attorney-agent, he will receive as compensation from the insurance company the price fixed by the insurance companies through the rating bureau in the state in which the property is located. In contrast, if a buyer or lender hires the attorney either directly or by reference to company B's list of approved attorneys, the attorney bills the buyer or lender at whatever rate they negotiate.

In many states, title insurance companies file only their rates for indemnification services (the "risk rate"). In some states a rate is also filed for search and examination services. In the latter case, the search and examination rate is identified separately from the rate charged for underwriting the risk insured against liability.

III. Issues on Appeal

On remand, Ticor presents three issues. First, it argues that under the McCarran-Ferguson Act, 15 U.S.C.A. §§ 1011-15 (West 1976), its collective establishment of rates for title search and examination services falls within that Act's "business of insurance" exemption from federal antitrust laws. Second, Ticor asserts that the collective establishment of rates for title search and examination services was an agreement to influence legislative, judicial, or administrative action, and is therefore immune from the antitrust laws under the Noerr-Pennington doctrine. Finally, Ticor asserts that its filing of title insurance rates through state-chartered rating bureaus in Connecticut and Arizona was actively supervised by those states and thus not subject to the antitrust laws under the standards governing state action that the Supreme Court set out in the opinion that ordered this remand.

The FTC's legal Conclusions are subject to plenary review. Its factual findings are conclusive if supported by substantial evidence. 15 U.S.C.A. § 45(c). Under the "substantial evidence" standard, a reviewing court "must accept the [FTC's] findings of fact if they are supported by such relevant evidence as a reasonable mind might accept as adequate to support a Conclusion." FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 454, 90 L. Ed. 2d 445 , 106 S. Ct. 2009 (1986) (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 95 L. Ed. 456 , 71 S. Ct. 456 (1951)).

IV. Discussion

A. The ...

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