McCray v. Fidelity National Title Insurance Company

• Decision Date: 15 July 2009
• Docket Number: Civil Action No. 08-775.
• Citation: 636 F.Supp.2d 322
• Parties: Dawn A. McCRAY, et al., v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al.
• Court: U.S. District Court — District of Delaware

636 F.Supp.2d 322

Dawn A. McCRAY, et al., v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al.

Civil Action No. 08-775.

United States District Court, D. Delaware.

July 15, 2009.

COPYRIGHT MATERIAL OMITTED

John S. Spadaro, John Sheehan Spadaro, LLC, Hockessin, DE, for Dawn A. McCray, et al.

David A. Felice, Ballard, Spahr, Andrews & Ingersoll, LLP, Titania Mack Parker, Greenberg Traurig, LLP, Basil C. Kollias, Cooch & Taylor, John D. Balaguer, White & Williams, James Darlington Taylor, Jr., Saul Ewing LLP, Peter J. Duhig, Buchanan Ingersoll & Rooney P.C., Wilmington, DE, for Fidelity National Title Insurance Company, et al.

MEMORANDUM

DALZELL, District Judge.¹

In this putative class action, plaintiffs allege that the twenty defendants conspired with one another to fix the price of title insurance in Delaware. Those defendants include (1) the defendant rating bureau, Delaware Title Insurance Rating Bureau, (2) the corporate parent defendants, Fidelity National Financial, Inc., First American Corporation, Stewart Information Services Corporation, Old Republic International Corporation, and the Land-America Financial Group, and (3) the remaining fourteen defendants—the title insurer defendants—most of whom being subsidiaries of the corporate parent defendants.

The defendants filed a joint motion to dismiss pursuant Fed.R.Civ.P. 12(b)(6).² We shall grant this motion for the reasons explained below.

I. Factual Background

In Delaware, the Department of Insurance ("DOI") regulates title insurance³. 18 Del. C. § 2502 (West 2009). Title insurers are required to file their rates with the DOI. Id. § 2504(a). Delaware is a "file and use" state, i.e., the insurers file their rates with the DOI and begin to charge them after the effective date stated in their filings, unless the Commissioner disapproves the rates. Compl. ¶ 4; 18 Del. C. § 2506(a) ("[Rate] filings shall be deemed to meet the requirements of this chapter unless disapproved by the Commissioner"); Elliott v. Blue Cross & Blue Shield of Delaware, Inc., 463 A.2d 273, 274 (Del. 1983).

Delaware law permits insurers to comply with the rate filing requirements through membership in a licensed rating bureau. 18 Del. C. §§ 2510-12. The title insurer defendants here are all members of defendant Delaware Title Insurance Rating Bureau ("DTIRB"). Compl. ¶¶ 3, 31. DTIRB is a licensed rating bureau that "obtains, compiles, and analyzes statistical data from its members relating to their title insurance premiums, losses and expenses." Id. ¶ 19. The Delaware legislature placed title insurance under the authority of the DOI in 2002. 73 Del. Laws, c. 402 (2002). Since then, DTIRB has made only one rate filing, which had an effective date of February 1, 2004. Compl. ¶ 55, Ex. A.

The DOI obliges all rating bureaus to file "advisory prospective loss costs and supporting actuarial and statistical data" rather than simply filing advisory, final rates. Delaware Department of Insurance, Forms and Rates Bulletin No. 5, Lost Cost Filing Requirements (Nov. 27, 1995) ("Bulletin No. 5")⁴. The DOI mandated that "[e]ach insurer must individually determine and file the rates it will use as a result of its own independent company decision-making process. Advisory/rating organizations will continue to develop and file rules, relativity, and supplementary rating information on behalf of their participating insurers." Id. This regulation requires that each member of a rating bureau file its own rates, but allows the members' rate filings, as a predicate to their individual rates, to reference rating information that the rating bureau has filed with the DOI.

On November 13, 2003, before the first DTIRB filing went into effect, the DOI Commissioner, at DTIRB's request, exempted DTIRB members from filing rates in accordance with Bulletin No. 5, specifically the requirement to file loss cost data, because "there [was] no credible historic data, particularly with regard to expenses that the rating bureau could use in preparing the initial rates."⁵ Delaware Department of Insurance, Forms and Rates Bulletin No. 27, Title Insurance Filing Requirements (Nov. 13, 2003) ("Bulletin No. 27"). Although the Commissioner exempted DTIRB members from certain Bulletin No. 5 filing requirements, she ordered that by February 1, 2004, DTIRB "must have an approved statistical plan in place, [which would] allow for collection and aggregation of sufficient premium, loss and expense data to enable the [DOI] to monitor rate adequacy." Id.

The plaintiffs allege that the title insurer defendants used DTIRB as a mechanism to set uniform rates, and, at the behest of the title insurer defendants, DTIRB improperly included in its rate calculation the cost of "kickbacks in the form of finder's fees, gifts, and other financial enticements." Compl. ¶¶ 31, 43. The plaintiffs aver that the title insurance industry is highly concentrated and noncompetitive (defendants account for 98% of the premiums paid in Delaware), and despite growing efficiencies and profit margins, the rates have not changed since 2004. Id. ¶¶ 54-57. In contrast with property and casualty insurance, these defendants do not market insurance to ultimate purchasers, and plaintiffs claim that this is further evidence of an agreement not to compete. Id. ¶ 58.

II. Analysis⁶

As noted, plaintiffs allege that, through DTIRB, the defendants entered into an agreement to fix title insurance prices in Delaware, which is per se illegal price-fixing. Plaintiffs assert an antitrust claim under the Sherman Act, 15 U.S.C. § 1, and a state law unjust enrichment claim. Compl. ¶¶ 70-78. The defendants contend that we should dismiss the plaintiffs' complaint because the filed rate doctrine, also known as the filed tariff doctrine, bars these claims. Defendants also argue that the plaintiffs have failed to allege sufficient facts to establish that the corporate parents of the Delaware title insurer defendants entered into a conspiracy with their subsidiaries to fix title insurance prices.

We first consider the issues related to the filed rate doctrine before turning to the sufficiency of the allegations against the corporate parent defendants.

A. The Filed Rate Doctrine

The filed rate doctrine goes back at least as far as Texas & Pacific Ry. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907), but it was Justice Brandeis in Keogh v. Chicago & Nw. Ry Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922), who gave the doctrine explicit foundation in his opinion for the Court. In Keogh, the doctrine precluded recovery of treble damages under the Sherman Act based on the unreasonableness or excessiveness of the rate that defendants submitted to the Interstate Commerce Commission ("ICC"), which had determined the rate submitted to be reasonable and lawful. Id. at 164, 43 S.Ct. 47. Since Keogh, the Supreme Court has expanded the doctrine beyond the ICC context and applied it to bar state law claims as well. E.g., Ark. La. Gas Co. v. Hall, 453 U.S. 571, 580, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981) (dismissing state contract claim involving rates filed with FERC).

Over the years, the doctrine's acceptance had diminished to the point where Judge Henry J. Friendly suggested that the Supreme Court overrule Keogh because modern legal practice had obviated the need for such a doctrine. Square D Company v. Niagara Frontier Tariff Bureau, Inc., 760 F.2d 1347, 1352-56 (2d Cir.1985). But the Supreme Court did not take Judge Friendly's suggestion, and instead reaffirmed—if tepidly—the vitality of the filed rate doctrine. Square D Company v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 424, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986).⁷ Since this reaffirmation, courts have continued to apply the filed rate doctrine and have developed a host of exceptions and specific considerations that courts ought to address when applying it. See, e.g., Utilimax.com, Inc. v. PPL Energy Plus, LLC, 378 F.3d 303, 306-07 (3d Cir.2004) (discussing two exceptions to the filed rate doctrine, neither of which being relevant here).

The pertinent considerations about the filed rate doctrine lead us to conclude that it applies to the plaintiffs' federal and state claims for money damages. But the filed rate doctrine does not necessarily foreclose all avenues of injunctive relief the plaintiffs may be seeking. Therefore, for the reasons stated below, we will grant the defendants' motion to dismiss, but afford plaintiffs leave to amend their complaint to request injunctive relief that is consistent with the filed rate doctrine and to allege facts sufficient to state a conspiracy claim against the corporate parent defendants.

1. Applicability of the Filed Rate Doctrine to Delaware's Title Insurance Regulation Regime

As a preliminary matter, our Court of Appeals has applied the filed rate doctrine to bar claims when the rates involved have been filed with a federal agency, but has yet to specifically rule on whether the doctrine applies to rates that state administrative agencies authorize. Cf. Utilimax.com, Inc. v. PPL Energy Plus, LLC, 378 F.3d 303, 306 (3d Cir.2004). Other courts have applied the doctrine to preclude recovery of money damages based on allegations that the rates filed with either state or federal agencies were inflated or improper. See, e.g., Wegoland, Ltd. v. NYNEX Corp., 806 F.Supp. 1112, 1115-16 (S.D.N.Y.), aff'd 27 F.3d 17 (2d Cir. 1994) (dismissing civil RICO claim involving rate information filed with different state and federal agencies); Taffet v. Southern Co., 967 F.2d 1483, 1494 (11th Cir.1992) (en banc) (dismissing civil RICO action involving rates filed with state utility regulators); H.J., Inc. v. Nw. Bell Telephone Co., 954 F.2d 485, 494 (8th Cir.1992) (dismissing claims by telephone users involving rates filed with state public utility commission).

We have found no instance of a court holding that the filed rate doctrine does not apply because a state...