First American Title Co. of South Dakota v. South Dakota Land Title Ass'n
| Citation | 714 F.2d 1439 |
| Decision Date | 11 August 1983 |
| Docket Number | No. 82-1753,82-1753 |
| Parties | 1983-2 Trade Cases P 65,539 FIRST AMERICAN TITLE COMPANY OF SOUTH DAKOTA and First American Title Insurance Company of South Dakota, Appellants, v. SOUTH DAKOTA LAND TITLE ASSOCIATION, South Dakota Abstracter's Board of Examiners, Black Hills Land and Abstract Company, Dennis O. Murray, Security Land and Abstract Company, Glen M. Rhodes, Fall River County Abstract Company, Charles E. Clay, Custer Title Company, Betty J. Gould, Haakon County Abstract Company, Keith Emerson, Wayne Roe, and Charles Nass, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Lynn, Jackson, Shultz & Lebrun, P.C., Donald R. Shultz, Gene N. Lebrun, Rapid City, S.D., Burns & Figa, P.C., Hugh A. Burns, Phillip S. Figa, Denver, Colo., for appellants.
Mark V. Meierhenry, Atty. Gen., Jeffrey P. Hallem, Asst. Atty. Gen., Pierre, S.D., for state appellees.
Schmidt, Schroyer, Colwill & Zinter, P.C., Gary F. Colwill, Ronald G. Schmidt, Pierre, S.D., for appellees South Dakota Land Title Ass'n, Fall River Abstract Co., Charles E. Clay, Custer Title Co., Betty J. Gould, Haakon County Abstract Co., Keith Emerson, Wayne Roe and Charles Nass.
Before HEANEY and FAGG, Circuit Judges, and HANSON, * Senior District Judge.
This antitrust case concerns alleged anticompetitive private and regulatory restraints on the South Dakota abstracting and title insurance businesses. Plaintiffs/appellants, First American Title Company of South Dakota and First American Title Insurance Company of South Dakota, contend that they were the victims of a price-fixing conspiracy, frivolous and sham litigation, and a conspiracy to devise and enforce statutes and regulations which served to restrain trade in the abstracting and title insurance businesses, all in violation of sections 1 and 2 of the Sherman Act. 1 15 U.S.C. §§ 1 and 2. Defendants/appellees are the South Dakota Land Title Association (the Association), a professional association of South Dakota abstracters; the South Dakota Abstracters' Board of Examiners (the Board of Examiners), the state board which regulates the business of abstracting; and various individual South Dakota abstracters and title companies. The district court also permitted the joinder of the State of South Dakota as a defendant pursuant to a motion by the Board of Examiners.
Following a bifurcated bench trial on the issue of liability, the district court entered judgment for defendants. The court found that there was insufficient evidence to support a conclusion that a private price-fixing conspiracy existed among defendant abstracters and their title companies. The court further concluded that plaintiffs' remaining antitrust claims were barred by the McCarran-Ferguson Act, the Noerr-Pennington doctrine, and the state action doctrine. The First American companies appeal these holdings and we affirm.
South Dakota pervasively regulates the business of abstracting and insuring land titles. See SDCL chs. 36-13 (Abstracters of Title) and 58-25 (Title Insurance Rates and Policies). Until July 1, 1979, South Dakota required that no foreign insurance company could issue a title insurance policy on property in South Dakota unless the policy was countersigned by a licensed abstracter who was doing business in the county where the property was located. SDCL § 58-25-16. 2
In order to do business in a particular county in South Dakota, an abstracter, among other requirements, must have an approved abstract plant showing "in a sufficiently comprehensive form, all instruments affecting the title to real estate which are of record or on file in the office of the register of deeds...." SDCL § 36-13-10. The Board of Examiners, whose duty it is to "carry out the purposes and enforce the provisions of" the statutes governing abstracting and to "make such rules and regulations as may be necessary to carry out the purposes of those statutes," SDCL § 36-13-6, defines by regulation what constitutes "sufficiently comprehensive form" for an abstract plant's records. In part, this long-standing regulation requires that the plant contain
a complete index showing every instrument recorded in the register of deeds' office in the county wherein [the abstracter] proposes to operate, properly listed against the specific property which it affects, and also a separate index showing all recorded instruments which do not affect specific property. This index ... must be made from an actual check of each page of each book of recorded instruments in said office, and in no case will a copy or film of the numerical index in the register's office be accepted.
One of the First American companies' contentions is that the requirement that an abstracter's index be "made from an actual check of each page of each book of recorded instruments" imposes a financially-prohibitive burden upon anyone who wishes to open a competing abstract plant in a given county. See Part IV infra. The regulation's anticompetitive effect, according to appellants, is reflected by the current situation in South Dakota in which most counties have only one licensed abstracter, except for the more populated counties, which have two.
Walter J. Linderman became a licensed abstracter in Pennington County, South Dakota in 1973 and formed First American Title Company of South Dakota in 1974. Linderman's title company served as a local agent for a foreign title insurance company, First American Title Insurance Company of California. In his dual capacity as abstracter and title insurance agent, Linderman was qualified to countersign title insurance policies on property located in Pennington County; but in insuring title on property outside Pennington County, Linderman was required to obtain the countersignature of that county's licensed abstracter and pay the resulting fee.
The anomoly in SDCL § 58-25-16 which required only foreign insurance companies to obtain countersignatures from abstracters on title insurance policies led Linderman to form a domestic title insurance company in December 1978--First American Title Insurance Company of South Dakota. This would have enabled Linderman to issue title insurance policies on property in any South Dakota county without obtaining a countersignature from that county's licensed abstracter.
This was not to be, however, because in the ensuing legislative session, the South Dakota legislature amended SDCL § 58-25-16 by deleting the word "foreign," thus extending the countersignature requirement to all title insurance policies, whether they be issued by a foreign or domestic insurance company. 3
Defendants' opposition to Linderman's formation of a domestic title insurance company and their support for the amendments to § 58-25-16 form bases for two of the First American companies' antitrust claims. It is claimed that defendants engaged in frivolous and sham litigation in violation of the Sherman Act by appealing to state court the administrative decision by the Division of Insurance to grant a certificate of authority to First American Title Insurance Company of South Dakota. It is further claimed that defendants engaged in unlawful anticompetitive conduct by lobbying in support of the amendments to § 58-25-16, which included the deletion of the word "foreign" from the statute.
Following the amendment to the countersignature statute, the alleged anticompetitive conspiracy continued in 1979 in the context of a controversy over whether the Division of Insurance or the Board of Examiners had the authority to set countersignature fees. The Board of Examiners already had at that time clear authority to "establish a schedule of fees for doing business" under chapter 36-13 relating to abstracters' services. SDCL § 36-13-25. The countersignature requirement, however, is in chapter 58-25, which regulates title insurance, a business overseen by the Division of Insurance and its director. SDCL § 58-2-21. The First American companies claim that defendants wanted the Board of Examiners to control countersignature fees to insure that they would be sufficiently high to stem the proliferation of title insurance in South Dakota. Presumably, the Board of Examiners' interest in setting high fees would be greater because three of its four members are required to be abstracters. SDCL § 36-13-1.
Following an opinion by the South Dakota Attorney General that the Division of Insurance had authority to set counter-signature fees, the Association brought an ultimately unsuccessful state court action attacking the jurisdictional basis for this authority. Fall River County Abstract Company v. Knutson, (6th Judicial Circuit Court, Hughes County, S.D., November 6, 1979, Judge Robert A. Miller). A basis for the state court ruling was the conclusion that the countersigning of a title insurance policy was purely a ministerial act because South Dakota law did not require any affirmative act by the abstracter before signing. During the 1979 South Dakota legislative session, defendants successfully lobbied the state legislature to pass laws which ensured that the countersigning of a title insurance policy was to be more than a ministerial act and which specifically gave the Board of Examiners the authority to set countersignature fees. 4 The litigation and lobbying by defendants on the countersignature fee issue are alleged to be further unlawful anticompetitive acts.
Although the Board of Examiners did in 1980 obtain authority to establish countersignature fees, no fee schedule ever regulated countersignature fees during the life of the First American Title Insurance Company of South Dakota. It is claimed that Linderman, as the agent for this company, was the victim of a private price-fixing conspiracy by the individually-named defendant abstracters and title companies in 1979 and 1980. Allegedly, these defendants conspired to fix...
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