Aspen Title & Escrow, Inc. v. Jeld-Wen, Inc.

Decision Date21 September 1987
Docket NumberCiv. No. 86-615-RE.
Citation677 F. Supp. 1477
CourtU.S. District Court — District of Oregon
PartiesASPEN TITLE & ESCROW, INC., an Oregon corporation, Plaintiff, v. JELD-WEN, INC., an Oregon corporation; Trendwest Properties, Inc., an Oregon corporation; Trendwest Development Co., an Oregon corporation; Trendwest Capital Corp., an Oregon corporation; South Valley State Bank, a banking institution chartered under the laws of Oregon; Certified Mortgage Company, an Oregon corporation; MTC, Inc., dba Mountain Title Co., an Oregon corporation; and Richard L. Wendt, Roderick C. Wendt, Alan Craigmiles, and Robert A. Kent, individuals, Defendants.

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Justine Fischer, Suzanne Bonamici, Stoll & Stoll, P.C., Portland, Or., for plaintiff.

Peter R. Jarvis, Stoel, Rives, Boley, Jones & Grey, Portland, Or., Blair M. Henderson, Henderson, Molatore & Klein, Klamath Falls, Or., for defendants.

OPINION

REDDEN, District Judge:

All defendants in this action move for summary judgment of all counts of the complaint. I grant the motion for summary judgment on Counts I through IV, and dismiss Count V for lack of jurisdiction.

LEGAL STANDARD

A motion for summary judgment shall be granted only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). A material fact is one that is relevant to an element of a claim or defense and whose existence might affect the outcome of the suit. T.W. Elec. Service v. Pacific Elec. Contractors, 809 F.2d 626, 630 (9th Cir.1987). Materiality is thus determined by reference to the substantive law governing the claim or defense. Id.

Movants have the initial burden to demonstrate the absence of any material fact and entitlement to judgment as a matter of law. Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir.1980). They may meet their initial burden by identifying for the court the portions of the materials on file which demonstrate the absence of any genuine issue of material fact. T.W. Elec., 809 F.2d at 630. The non-movant must then set forth specific facts showing that there is a genuine issue. Id.

Where conflicting evidence is presented, the truth of the non-movant's evidence must be assumed. Id. at 631. All inferences must be drawn in the light most favorable to the non-movant. Id. Summary judgment is disfavored in complex antitrust actions involving issues of motive and intent. Poller v. Columbia Broadcasting Sys., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962).

BACKGROUND

Three companies in Klamath County, Oregon are licensed to provide title insurance services: plaintiff Aspen Title & Escrow (Aspen), defendant MTC, Inc., doing business as Mountain Title Co. (Mountain), and non-party Klamath County Title Company (Klamath). Klamath County is a relatively discrete and isolated geographical market. Aspen asserts that it is the relevant geographical market for this action, and I agree.

Title insurance indemnifies persons having an insurable interest in real property against loss or damage from defects or failure of title to a particular parcel of realty, or from enforcement of liens existing and not revealed at the time of the issuance of the policy. It is also used in two-party loan transactions, where a loan is secured by real estate already owned by the borrower. In such transactions, the lender takes the security interest in the real property, and is the sole insured. The custom in Klamath County, however, is that the borrower pays for the insurance.

Title insurance is sometimes used in purchase transactions. Typically two title insurance policies are issued: one in favor of the purchaser and one in favor of the lender.

The barriers to entry in the title insurance market in Klamath County are high. This is due to O.R.S. 731.438, which requires a title plant with records covering at least the 20 preceding years in order to be licensed as a title insurance company. A title plant, which includes old maps, plats, records, and indexes, is costly.

Demand for title insurance is derived. It depends on a transaction in which real estate is bought, sold, transferred, or used as security. Historically, price competition in the market has not been great. Formerly, prices were set by a rating bureau and were identical for all companies. Presently, prices are set by underwriters. The rates charged by Aspen, Mountain and Klamath are all set by their respective underwriters on a statewide basis.

The title insurance market is characterized by "reverse competition." That is, most competitive efforts are not aimed at persons who purchase title insurance, but rather at persons likely to refer the business of purchasers. This is because most purchasers do little repeat business, involving themselves only sporadically in the title insurance market. Referrers such as real estate brokers, bankers and attorneys, however, tend to do repeat business and thus are important targets for competitive efforts.

The escrow service market differs from the title insurance market. Barriers to entry are low. Many parties other than title insurance companies provide these services, notably banks and attorneys. Furthermore, many financial institutions close their transactions in-house, even though a title insurance company may be involved in issuing title insurance. Nonetheless, it is not uncommon for the title insurance issuer to close the transaction. Aspen estimates that 40% of title insurance transactions generate an escrow closing fee for the title insurance company.

Mountain's financial health is unquestioned. Klamath's financial health is also strong. Klamath's president, Bob Veatch, reports that its financial position has improved from year to year. The total gross premiums for title insurance have grown in recent years, from $506,000 in 1983, to $565,000 in 1984, to $573,000 in 1985 and to $709,000 in 1986.

Aspen contends that its own health is uncertain. Aspen is owned and operated by Andy Patterson and Marlene Addington. Aspen came into existence in March 1984, when it took over the Klamath Falls operations of Transamerica Title, which was managed by Patterson and Addington. Patterson and Addington purchased Aspen for $110,000 on a 100 percent leveraged basis. If Aspen's profit and loss statements are adjusted to add back the bonuses received by Patterson and Addington, and the legal expenses associated with this action, they show an adjusted income of $27,192 in the year ending February 1985, minus $8,153 the next year, and $64,743 for the following year. Defendants also point out that Patterson admits that he needs 5.5 employees and 59 to 65 orders per month to remain in operation, and that Aspen has regularly maintained those levels. Aspen acknowledges these facts, but asserts that it is the bringing of this suit which has deterred defendants from taking action to damage Aspen's financial health more seriously.

Market share in the title insurance market can be calculated in two ways: by the number of recordings method or by the gross premiums method. Using either method, Aspen's market share has dropped since 1984. Using the gross premiums method, Aspen's 42% of the Klamath Falls title insurance market in the second quarter of 1984, compared to Mountain's and Klamath's 38% and 20% respectively. By the first quarter of 1986, the respective shares were 33%, 45% and 21%, and by the fourth quarter of 1986 they were 30%, 48% and 22%.

Aspen's market share has dropped since 1984, even as to transactions in which defendants were not involved. Using the number of recordings method, 94% of the title insurance transactions in Klamath County do not involve any of the defendants as a buyer, seller, borrower or lender. Of these transactions, Aspen had a 50% share of the market during the second half of 1984, which dropped to 38% in 1985, and to 32% in 1986. Similarly, if one isolates the transactions involving Klamath First Federal Savings and Loan (Klamath First), the largest consumer of title insurance for real property secured loans in Klamath County, Aspen's share has dropped. Using the number of recordings method, Aspen had a 41% share in the second half of 1984, a 30% share in 1985, and a 28% share in 1986.

Another measure of Aspen's declining market share is its business with the Oregon Department of Veterans' Affairs (DVA). DVA is an active mortgage lender in Klamath County. It never expresses a preference regarding a title insurer, but instead requires the borrower to make the selection. There is no question of defendants improperly influencing these transactions. Using the number of recordings method, Aspen's share of DVA transactions was 70% in the second half of 1984, 36% in 1985, and 25% in 1986. Using the gross premiums method, Aspen's share was 41% in the second half of 1984, 59% in 1985, and 35% for the first five months of 1987.

Several defendants are joined. Jeld-Wen, Inc. (Jeld-Wen) is an Oregon corporation with its headquarters and approximately 550 employees in Klamath County. It manufactures wood mouldings, windows and doors in various states throughout the United States. It has regularly purchased real property in Klamath County over the past decade, for development and for timber. Jeld-Wen has used Mountain's title insurance and closing services almost exclusively since 1979. Defendant Richard Wendt is its president and founder, and owns approximately 40% of its stock. Defendant Roderick Wendt, Richard Wendt's son, is its secretary.

Defendant Trendwest, Inc. (Trendwest) was spun off from Jeld-Wen in 1982. Jeld-Wen had entered the real estate development and home building businesses, and incorporated these, originally as Trendwest Development Co. and later as Trendwest. Its original...

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