Consolidated Farmers Mut. Ins. v. Anchor Sav. Ass'n

• Decision Date: 07 November 1979
• Docket Number: No. 78-4094.,78-4094.
• Citation: 480 F. Supp. 640
• Parties: CONSOLIDATED FARMERS MUTUAL INSURANCE COMPANY et al., Plaintiffs, v. ANCHOR SAVINGS ASSOCIATION et al., Defendants.
• Court: U.S. District Court — District of Kansas

480 F. Supp. 640

CONSOLIDATED FARMERS MUTUAL INSURANCE COMPANY et al., Plaintiffs, v. ANCHOR SAVINGS ASSOCIATION et al., Defendants.

No. 78-4094.

United States District Court, D. Kansas.

November 7, 1979.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

L. M. Cornish, Jr., Glenn, Cornish, Leuenberger, Chartered, Topeka, Kan., Sheridan Morgan, Donald H. Loudon, Morris, Larson, King, Stamper & Bold, Kansas City, Mo., for plaintiffs Consolidated Farmers Mutual Insurance Co. and Kansas Mutual Insurance Co.

James R. Loftis, III, James W. Olson, Bergson, Borkland, Margolis & Adler, Washington, D. C., Leonard O. Thomas, Weeks, Thomas, Lysaught, Bingham & Mustain, Kansas City, Kan., Robert L. Hamann, Prairie Village, Kan., for defendant Anchor Savings Association.

James D. Waugh, Cosgrove, Webb & Oman, Topeka, Kan., John P. Arness, Jack McKay, David B. Waller, Hogan & Hartson, Washington, D. C., for defendant Federal National Mortgage Association.

Herbert H. Hopper, Wichita, Kan., for defendant Fidelity Investment Co.

MEMORANDUM AND ORDER

ROGERS, District Judge.

INTRODUCTION

This is an antitrust action brought pursuant to Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and under unspecified sections of the Kansas antitrust laws contained in K.S.A. 50-101 et seq.

Plaintiffs Consolidated Farmers Mutual Insurance Company and Kansas Mutual Insurance Company are two Kansas insurance companies which as part of their businesses sell real property hazard insurance.

Defendant Anchor Savings Association is a Kansas savings and loan association. Defendant Fidelity Investment Company is a Kansas mortgage banker. Defendant Federal National Mortgage Association (FNMA) is a federally chartered, privately owned¹ corporation which was created "to provide supplementary assistance to the secondary market for home mortgages by providing a degree of liquidity for mortgage investments." 12 U.S.C. § 1716(a). When the case began, a fourth defendant was the Federal Home Loan Mortgage Corporation (FHLMC), a quasi-public corporation authorized by Congress in 12 U.S.C. § 1451 et seq. to aid the secondary market. By order of September 8, 1978, this Court dismissed FHLMC from the action on grounds of statutory immunity.²

A brief background is necessary to an understanding of the nature of the action. When a home is purchased the prospective homeowner frequently obtains a mortgage loan from a savings and loan institution or a bank. This is the "primary" mortgage market. Defendants Fidelity and Anchor are in the business of originating mortgages in the primary market. In order to gain funds to make additional loans, Fidelity and Anchor sell these mortgages to institutional investors and entities such as FHLMC and FNMA. When the originator of a mortgage attempts to transfer it, the "secondary" mortgage market is involved. In the secondary market, FNMA and FHLMC facilitate the transfer of mortgages from originators to institutional investors, in part by establishing some uniformity in the mortgage transaction so that the institutional investor will have a better idea of what it is purchasing. Congress intended that the federally sponsored secondary mortgage market should provide standardized mortgage instruments. J. Murray and H. Judy, Uniform Multifamily Mortgage Instruments, 33 Bus.Law. 2303, 2359 (1978).

Congress mandated that FHLMC and FNMA should follow certain guidelines to guarantee the quality of the mortgages handled. In 12 U.S.C. § 1719(a), FNMA is instructed:

(1) To carry out the purposes set forth in paragraph (a) of section 1716 of this title, the operations of the corporation under this section shall be confined, so far as practicable, to mortgages which are deemed by the corporation to be of such quality, type, and class as to meet, generally, the purchase standards imposed by private institutional mortgage investors. . . .

See also 12 U.S.C. § 1454(a)(1).

In order to meet the Congressional mandate, FNMA and FHLMC have established several standards relating to various aspects of the mortgages they purchase. One of these standards regards the hazard insurance covering the property which secures the mortgages purchased. Both FNMA and FHLMC require that such hazard insurance be provided by a company with at least a Class VI rating in Best's Insurance Reports.³ FNMA adopted this requirement in July, 1974.⁴ In 1975, FNMA determined to accept mortgages covered by hazard insurance provided by companies which did not meet the appropriate standard but provided reinsurance certificates by companies which did.

Anchor, which for many years has had a similar requirement regarding the insurance policies for mortgages it created, changed its standard in 1978 from the higher Best's X rating to a Best's VI rating. Fidelity changed its standards in 1974 to the Class VI rating in light of the fact that the majority of its home loan production was originated for sale to either FNMA or GNMA.

A Class VI rating means that an insurance company has net resources of $1,500,000 to $2,500,000. Neither plaintiff is large enough to obtain a Best's Class VI rating. For that reason, unless they make suitable arrangements for reinsurance the plaintiffs are unable to provide hazard insurance coverage for property securing mortgages which defendants Anchor and Fidelity originate with the intent of selling to FNMA, GNMA, or FHLMC.

The plaintiffs claim that the Class VI requirement is "arbitrary and without foundation", and that its promulgation by FNMA and FHLMC and the other defendants' acts of honoring that requirement constitute a "combination and boycott" in violation of federal and state antitrust laws.

This action now comes before the Court upon the motions for summary judgment filed by remaining defendants FNMA, Anchor, and Fidelity.

DISCUSSION

The major issue presented by the pending summary judgment motions is whether plaintiffs have a viable claim under Section 1 of the Sherman Act. Boiled down to basics, defendants' briefs argue that plaintiffs' § 1 cause of action is defective in three particulars: (1) plaintiffs cannot show concerted action; (2) plaintiffs cannot show an unreasonable restraint of trade; and (3) plaintiffs cannot show an impact upon interstate commerce.

Summary Judgment

Before discussing the legal issues presented by plaintiffs' antitrust claims, we take cognizance of the applicable procedural standards. It is familiar law that no summary judgment motion is lightly granted. Summary judgment is to be denied unless the moving party demonstrates entitlement to it beyond a reasonable doubt. Madison v. Deseret Livestock Co., 574 F.2d 1027, 1037 (10th Cir. 1978); Mustang Fuel Corp. v. Youngstown Sheet & Tube Co., 516 F.2d 33, 36 (10th Cir. 1975). The court must examine all the evidence in the light most favorable to the party opposing the motion. Mogle v. Sevier County School Dist., 540 F.2d 478, 482 (10th Cir. 1976) cert. denied, 429 U.S. 1121, 97 S.Ct. 1157, 51 L.Ed.2d 572 (1977); Frey v. Frankel, 361 F.2d 437, 442 (10th Cir. 1966). Affidavits are not a substitute for trial. Madison v. Deseret Livestock Co., supra, 574 F.2d at 1036; Eagle v. Louisiana Southern Life Ins. Co., 464 F.2d 607, 608 (10th Cir. 1972). Where different inferences can be drawn from conflicting affidavits and depositions, summary judgment should be denied. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

The Court is aware that precautions against hasty termination of a potentially meritorious action are especially crucial in the area of antitrust. Poller v. C. B. S., Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). Nevertheless, summary judgment can be appropriate even in an antitrust action should the party opposing such a motion fail to respond to a legally sufficient motion supported by affidavits with a showing of specific facts demonstrating the existence of genuine issues of material fact for trial. Stevens v. Barnard, 512 F.2d 866, 878 (10th Cir. 1975); Whitfield v. Gangas, 507 F.2d 880, 882 (10th Cir. 1974). Before granting motions for summary judgment in Natrona Service, Inc. v. Continental Oil Co., 435 F.Supp. 99, 106-107 (D.Wyo.1977), aff'd 598 F.2d 1294 (10th Cir. 1979), Judge Brimmer of Wyoming wrote that admonitions against the granting of such motions in an antitrust case

are not warrants "for every plaintiff who can draft an antitrust complaint, no matter how groundless or improbable its allegations, to force his claim to trial despite its deficient factual underpinnings. Murdock v. City of Jacksonville, 361 F.Supp. 1083, 1086-87 (M.D.Fla.1973). Where the Court has permitted extensive discovery, and where the requirements of Rule 56, Federal Rules of Civil Procedure, are satisfied, the Court may properly grant a motion for summary judgment. Umdenstock v. American Mortgage and Inv. Co., 495 F.2d 589 (10th Cir. 1974). Moreover, when that discovery has failed to reveal any evidence to support the plaintiffs' claims, and the record contains an overwhelming amount of evidence which contradicts the plaintiffs' conspiracy allegation and poses a variety of non-conspiratorial motives, for the defendants' acts, rooted in business judgment, the defendants are entitled to summary judgment. First Nat'l Bank of Ariz. v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Semke v. Enid Auto Dealers' Ass'n, 456 F.2d 1361 (10th Cir. 1972). When it becomes plain that the allegedly unlawful acts do not exist, and the plaintiffs' claims are without merit, the Court has a duty to grant summary judgment. Capital Temporaries, Inc. v. Olsten Corp., 365 F.Supp. 888 (D.Conn. 1973), aff'd, 506 F.2d 658 (2d Cir. 1974).

Allegations which are "glib and conclusory" are insufficient to raise genuine issues of material fact once they have been specifically denied in sworn affidavits and depositions. Kemp Pontiac-Cadillac, Inc. v. Hartford Automobile Dealers' Ass'n, 380 F.Supp.

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