On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. MER L-4116-00.
Before Judges Coburn, Wells and C.S. Fisher.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiff filed a putative class action complaint alleging that she, and others similarly situated, were defrauded in the purchase of certain credit insurance policies marketed by a credit card issuer. This appeal requires that we consider whether the trial judge erred (1) in dismissing plaintiff's complaint through the application of the filed rate doctrine, and (2) in determining that the primary jurisdiction doctrine required that the claims be considered by state and federal administrative agencies.
Plaintiff Joan Richardson filed a complaint, on her own behalf and on behalf of others similarly situated, in the Law Division against defendant CitiBank (South Dakota), N.A., which issued a credit card to her in 1988, and against defendants Standard Guaranty Insurance Company, Union Security Life Insurance Company, and American Security Insurance Company (the defendant insurers). Plaintiff complained that defendants' sales practices fraudulently induced her into purchasing, between 1988 and 1999, credit interruption of income policies, combined credit life and credit disability insurance policies, and a credit family leave insurance policy.
The complaint sets forth claims based on the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -116, common law fraud, fraudulent concealment, negligence (against CitiBank only), breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty (against CitiBank only); while delineated as separate causes of action, instead of demands for relief, plaintiff also sought reformation and the imposition of a constructive trust. More specifically, the complaint alleged that defendants made false, misleading, or deceptive statements, failed to disclose pertinent information, and failed to adequately explain the terms of the policies. Plaintiff also claimed that defendants sold ambiguously-worded policies, construed the policies in a manner calculated to minimize the benefits paid, paid benefits in a lesser amount than required, enrolled plaintiff in a family leave policy without her consent, improperly collected premiums after plaintiff made a claim for benefits, unfairly or inaccurately calculated premiums, and ignored cancellation notices. Plaintiff also claimed that commissions were paid to CitiBank in violation of N.J.A.C. 11:17B-2.1.
Defendants moved to dismiss, asserting the claims were barred by the filed rate doctrine or, in the alternative, the court was required to defer to state and federal agencies pursuant to the doctrine of primary jurisdiction. The trial judge granted this motion by way of a written decision. We affirm in part and reverse in part, concluding that the filed rate doctrine requires dismissal of most of the claims asserted against the defendant insurers, that the record does not presently permit a similar finding with regard to CitiBank, and that the doctrine of primary jurisdiction should not have been applied except with regard to the claims against American relating to its credit interruption policies.
The filed rate doctrine is a product of the deference which courts give to the ratemaking and regulatory processes of administrative bodies. The doctrine is based on the understanding that a regulated entity is"forbid[den]... [from] charg[ing] rates for its services other than those properly filed with the appropriate federal regulatory authority." Weinberg v. Sprint Corp., 173 N.J. 233, 242 (2002) (quoting Fax Telecommunicaciones, Inc. v. AT&T, 138 F.3d 479, 488 (2nd Cir. 1998)). Stated another way, its purposes are to"preserve the regulating agency's authority to determine the reasonableness of rates" and to insure that the regulated entity"charge[s] only those rates that the agency has approved or been made aware of as the law may require." H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 488 (8th Cir. 1992), cert. denied, 504 U.S. 957, 112 S.Ct. 2306, 119 L.Ed. 2d 228 (1992) (citing Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577-78, 101 S.Ct. 2925, 2930-31, 69 L.Ed. 2d 856, 864-65 (1981)).
As our Supreme Court's recent decisions in Weinberg and Smith v. SBC Comm. Inc., 178 N.J. 265 (2004) demonstrate, the filed rate doctrine impacts upon claims asserted against regulated entities in two ways. First, the doctrine bars claims for monetary relief"where the damage claims are premised on state contract principles, consumer fraud, or other bases on which plaintiffs seek to enforce a rate other than the filed rate." Weinberg, supra, 173 N.J. at 243. And second, claims against regulated entities may be limited or extinguished by the fact that consumers"are conclusively presumed to have constructive knowledge of the filed tariff." Id. at 242 (internal quotations and citations omitted). In Smith, the Court referred to these two aspects of the filed rate doctrine as the"nondiscrimination" and"nonjusticiability" strands. 178 N.J. at 273 (citing Marcus v. AT&T Corp., 138 F.3d 46, 58 (2nd Cir. 1998)). Besides limiting or precluding claims for damages brought by consumers, the nondiscrimination strand has been held to bar judicial consideration of antitrust claims, Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 415-23, 106 S.Ct. 1922, 1926-30, 90 L.Ed. 2d 413, 419-27 (1986), as well as a claim that one regulated entity defrauded another in reaching an agreement as to the rates each would charge, Montana-Dakota Util. Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 248, 71 S.Ct. 692, 693-94, 95 L.Ed. 912, 916 (1951). The nonjusticiability strand tends to bar consumer fraud claims in another way. While the Court in Arkansas Louisiana stated that it had"save[d] for another day the question whether the filed rate doctrine applies in the face of fraudulent conduct," 453 U.S. at 583 n.13, 101 S.Ct. at 2933 n.13, 69 L.Ed. 2d at 254 n.13, our Supreme Court has answered that question in the affirmative in Weinberg, supra, 173 N.J. at 244. Accordingly, the nonjusticiability strand, as employed by the Court in Weinberg, precludes fraud claims because it operates on the presumption that the plaintiff had knowledge of the filed rates and, thus, could not reasonably rely upon the regulated entity's misrepresentations or omissions of material facts.
Plaintiff contends that the trial judge erred in applying the filed rate doctrine for numerous reasons. We disagree with plaintiff's preliminary contentions that the filed rate doctrine is a bankrupt theory which should not be expanded beyond those specific industries to which it has been applied, that it is a purely federal doctrine which has no application when the rates in question have been filed with a state regulating body, and that it is inapplicable to the insurance industry.
First, we acknowledge that the continued existence of the filed rate doctrine is controversial, as the majority and dissenting opinions in Weinberg demonstrate. If we were writing on a blank slate, perhaps we could be persuaded to plaintiff's view that this"century-old" doctrine, Am. Tel. and Tel. Co. v. Central Office Tel., Inc., 524 U.S. 214, 222, 118 S.Ct. 1956, 1962, 141 L.Ed. 2d 222, 223 (1998), should not be permitted to override the CFA,"one of the strongest consumer protection laws in the nation," Weinberg, supra, 173 N.J. at 257 (Verniero, J., dissenting), by applying a legal construct that consumers are presumed to know the content of filed rates. The troublesome effect of this doctrine has been recognized by the Supreme Court of the United States, which has said the doctrine's application"may seem harsh in some circumstances." Central Office, supra, 524 U.S. at 223, 118 S.Ct. at 1963, 141 L.Ed. 2d at 233; see also Maislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 130-31, 110 S.Ct. 2759, 2768, 111 L.Ed. 2d 94, 112 (1990). More recently, three members of our own Supreme Court referred to the filed rate doctrine as"a legal fiction whose days, according to some courts, are numbered." Weinberg, supra, 173 N.J. at 255 (Verniero, J., dissenting). See also FaX Telecommunicaciones, supra, 138 F.3d at 491 (The filed rate doctrine"is plainly a creature of a different time."). Despite this difference of opinion about the legitimacy of the doctrine, particularly when pitted against a consumer claim, our consideration of the scope of the filed rate doctrine comes in the wake of the Supreme Court's recent recognition of its continued existence in both its nondiscrimination and nonjusticiability strands. We thus proceed on the understanding that the doctrine maintains a substantial role in administrative ratemaking, as instructed by both Weinberg and the Court's decision in Smith earlier this year.
Second, while the filed rate doctrine has had its greatest application in barring collateral attacks on rates set by federal agencies, it has also been held to apply to rates established by state agencies. See Wegoland, Ltd. v. NYNEX Corp., 27 F.3d 17, 20 (2nd Cir. 1994) ("[C]courts have uniformly held, and we agree, that the rationales underlying the filed rate doctrine apply equally strongly to regulation by state agencies."); Taffet v. Southern Co., 967 F.2d 1483, 1494 (11th Cir.) (The doctrine"applies with equal force to preclude recovery... [when] the rate at issue has been set by a state rate-making authority."), cert. denied, 506 U.S. 1021, 113 S.Ct. 657, 121 L.Ed. 2d 583 (1992); H.J. Inc., supra, 954 F.2d at 494 ("[T]he filed rate doctrine applies whether the rate in question is approved by a federal or state agency."). Indeed, it is noteworthy that the first application of the filed rate doctrine in this State, in 1921, involved a rate set by a state agency. Hackensack Water Co. v. Mayor, etc., of Bor. of Ridgefield, 96 N.J.L. 526 (E. & A. 1921). Thus, we reject plaintiff's argument that the doctrine does not apply to state ratemaking.
Third, we also reject plaintiff's mistaken contention that the filed rate doctrine does not apply to the insurance industry not only because courts are not institutionally suited to regulate insurance premium and benefit rates, but also because of the extensive regulation of this industry. We, thus, align our decision with the considerable weight of authority from other jurisdictions that have applied the filed rate doctrine to ratemaking in the insurance industry. See Kirksey v. Am. Bankers Ins. Co. of Fla., 114 F. Supp. 2d 526 (S.D. Miss. 2000); Allen v. State Farm Fire & Cas. Co., 59 F. Supp. 2d 1217 (S.D. Ala. 1999); Morales v. Attorneys' Title Ins. Fund, Inc., 983 F. Supp. 1418 (S.D. Fla. 1997); Uniforce Temp. Pers., Inc. v. Nat'l Council on Comp. Ins., Inc., 892 F. Supp. 1503 (S.D. Fla. 1995), aff'd, 87 F.3d 1296 (11th Cir. 1996); International Patrol & Detective Agency Co., Inc. v. Aetna Cas. & Surety Co., 419 So.2d 323 (Fla. 1982); Horwitz v. Bankers Life & Cas. Co., 745 N.E.2d 591 (Ill. App. 2001); Amundson & Assoc. Art Studio, Ltd. v. Nat'l Council on Comp. Ins., Inc., 988 P.2d 1208 (Kan. App. 1999); Am. Bankers' Ins. Co. of Fla. v. Wells, 819 So.2d 1196 (Miss. 2001); Byan v. Prudential Ins. Co. of Am., 662 N.Y.S.2d 44 (App. Div. 1997); N.C. Steel, Inc. v. Nat'l Council on Comp. Ins., 496 S.E.2d 369 (N.C. 1998); Prentice v. Title Ins. Co. of Minn., 500 N.W.2d 658 (Wis. 1993).
It is well understood that the insurance industry is"heavily regulated." Pierzga v. Ohio Cas. Group of Ins. Co., 208 N.J. Super. 40, 47 (App. Div.), certif. denied, 104 N.J. 399 (1986); see also In re Prudential Ins. Co. of Am. Sales Practices Litigation, 975 F. Supp. 584, 618 (D.N.J. 1996), aff'd, 148 F.3d 283 (3rd Cir. 1998). The Legislature created the Department of Banking and Insurance (DOBI) in order to"regulate and oversee the operations of the insurance industry," and placed with DOBI the general"statutory obligation to protect the interests of New Jersey's insurance consumers." N.J.S.A. 17:1C-19(a)(1). To carry out that mandate, as it pertains to credit insurance, the Commissioner of DOBI was authorized to adopt, N.J.S.A. 17B:29-1, and has adopted regulations which authorize the issuance of credit involuntary unemployment insurance in combination with credit life and disability, N.J.A.C. 11:2-3.3, require the filing of credit life and credit disability policy forms, N.J.A.C. 11:2-3.14, set standards for premium rates, N.J.A.C. 11:2-3.17, and provide for credit insurance to be issued in connection with"open end debts such as credit card transactions." N.J.A.C. 11:2-3.9.
This legislation also governs the wording as well as the cost of insurance policies by requiring that credit insurance policy forms and premium rates be filed with the Commissioner prior to use. N.J.S.A. 17B:29-7(a). The Commissioner is given sixty days to review such filings and, unless the Commissioner writes of her disapproval within that time frame, the filed rate or policy form"shall be deemed approved." N.J.S.A. 17B:29- 7(g)(2). The Commissioner may approve, however, only those proposed rates that are not"excessive in relation to benefits." N.J.S.A. 17B:29-7(e)(1). The Commissioner was also given a mandate to disapprove proposed policy forms"which are unjust, unfair, inequitable, misleading, deceptive, or encourage misrep- presentation of the coverage, or are contrary to any provision of this code or of any rule or regulation promulgated thereunder." N.J.S.A. 17B:29-7(e)(2). The filed rates are binding upon insurers since N.J.S.A. 17B:29-8(a) declares that"[n]o insurer shall issue any credit life insurance policy or credit health insurance policy for which the premium rate exceeds that determined by the schedules of such insurer as then on file with the [C]commissioner." We are satisfied that the extent of the authority given to the Commissioner by this legislation demonstrates that the particular aspects of the insurance industry involved here represent a fertile ground for the application of the filed rate doctrine. To rule otherwise would invite disharmony by potentially allowing the legislatively authorized rates fixed by DOBI to be adjusted through judicial determinations.
We additionally observe that one criticism of the filed rate doctrine has centered on the assumption that, in some industries, filed rates are not rigorously examined or challenged. See Allan Kanner, The Filed Rate Doctrine and Insurance Fraud Litigation, 76 N.D.L.Rev. 1, 16-19 (2000). In those circumstances, the regulated entity obtains a potent defense to CFA lawsuits even though its rates have arguably not been regulated. See, e.g., Brown v. Ticor Title Ins. Co., 982 F.2d 386, 394 (9th Cir. 1992) ("The absence of meaningful state review allows the insurers to file any rates they want."). While, as a general matter, under-enforcement of ratemaking regulations may constitute a basis for a less rigorous application of the filed rate doctrine, we again emphasize that the statutory framework within which DOBI is expected to operate demonstrates that the area of credit insurance is highly regulated. DOBI is directed to examine such filings for their fairness and their ability to disclose terms relevant to consumers in determining whether to purchase such products. And DOBI's determinations are subject to judicial review. See N.J.S.A. 17B:29-13. Accordingly, we see no cause for the concerns expressed by plaintiff that the regulations in this industry may be under-enforced and conclude that the filed rate doctrine should be applied, in the present circumstances, in the manner prescribed by Weinberg and Smith.
In so holding, we also reject plaintiff's argument that the regulations in question are different from those which bind other industries in which the filed rate doctrine is applied. Specifically, plaintiff contends that, pursuant to N.J.S.A. 17B:29-8(a), the filed rate constitutes only a maximum rate, thereby allowing insurers to vary their rates beneath that fixed ceiling. We disagree with plaintiff as to the significance of this. That the regulated entity is permitted to provide more beneficial rates to consumers in this fashion does not suggest that the Commissioner does not, in approving a maximum rate, engage in ratemaking. ...