Katz v. Fid. Nat'l Title Ins. Co.

• Decision Date: 17 July 2012
• Docket Number: No. 10–3545.,10–3545.
• Parties: Jordan KATZ; Gaby Hasrouni; Gina Hasrouni; Craig Mintz; Sean Nightingale; Micah Watts; Carol A. Rhamy; Katherine A. Wirkus; Adam C. Falkner, Plaintiffs–Appellants, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

685 F.3d 588

2012-2 Trade Cases P 77,972

Jordan KATZ; Gaby Hasrouni; Gina Hasrouni; Craig Mintz; Sean Nightingale; Micah Watts; Carol A. Rhamy; Katherine A. Wirkus; Adam C. Falkner, Plaintiffs–Appellants,

v.FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al., Defendants–Appellees.

No. 10–3545.

United States Court of Appeals,Sixth Circuit.

Argued: Oct. 7, 2011.

Decided and Filed: July 17, 2012.

ARGUED:Daniel B. Allanoff, Meredith Cohen Greenfogel & Skirnick, P.C., Philadelphia, PA, for Appellants. David M. Foster, Fulbright & Jaworski L.L.P., Washington, D.C., for Appellees. ON BRIEF:Daniel B. Allanoff, Bruce K. Cohen, Meredith Cohen Greenfogel & Skirnick, P.C., Philadelphia, PA, Eugene A. Spector, Spector Roseman & Kodroff, P.C., for Appellants. David M. Foster, Fulbright & Jaworski L.L.P., Washington, D.C., Deborah A. Coleman, Arthur M. Kaufman, Hahn Loeser & Parks LLP, Cleveland, Ohio, Kerin Lyn Kaminski, Giffen & Kaminski, LLC, Cleveland, Ohio, Russell Kutell, Frost Brown Todd LLC, Columbus, Ohio, David G. Greene, Kevin J. Walsh, Locke Lord Bissell & Liddell LLP, New York, New York, James I. Serota, Greenberg Traurig, LLP, New York, New York, Patricia A. Screen, Brouse McDowell LPA, Cleveland, Ohio, Edward A. Matto, Steptoe & Johnson, PLLC, Columbus, Ohio, for Appellees.

Before: BOGGS and STRANCH, Circuit Judges; and THAPAR,^* District Judge.

OPINION

BOGGS, Circuit Judge.

These consolidated cases are eight of at least forty-five lawsuits nationwide, alleging that title-insurance companies and rating bureaus violated state and federal antitrust laws by conspiring to charge inflated rates. See In re Title Ins. Real Estate Settlement Procedures Act & Antitrust Litig., 560 F.Supp.2d 1374, 1376 (J.P.M.L.2008) (denying consolidation of twenty-five pending title-insurance antitrust cases; mentioning “at least twenty related actions”). The district court dismissed all of Appellants' claims with prejudice. It held, first, that the filed-rate doctrine foreclosed damages and any injunctive relief that would interfere with an already-filed rate; ¹ and, second, that the McCarran–Ferguson Act, along with Title XXXIX of the Ohio Revised Code, barred Appellants' federal and state antitrust actions altogether. We reach the same conclusion through different reasoning. We hold that the McCarran–Ferguson Act and Title XXXIX of the Ohio Revised Code prevent Appellants from maintaining any antitrust action based on Appellees' title-insurance rate filings. As such, the filed-rate doctrine, which limits the antitrust remedies available to private parties, is irrelevant. We therefore affirm the district court's dismissal, with prejudice, of Appellants' complaint.

I

Jordan Katz and eight other named plaintiffs (“Appellants”) brought suit on behalf of themselves and all other purchasers of title insurance in Ohio from March 2004 through the present. They alleged that twenty-two title-insurance companies and the Ohio Title Insurance Rating Bureau (“Appellees”) violated state and federal antitrust laws by conspiring to set unreasonably high title-insurance rates.²

Appellee title-insurance companies filed rates with the Ohio Department of Insurance through a properly licensed rating bureau, the Ohio Title Insurance Rating Bureau (“OTIRB”). Appellants claimed that it was “impossible for the Department of Insurance to review, regulate or supervise the reasonableness of the rates collectively set by defendants because those rates are based principally on undisclosed costs.” The “undisclosed costs,” Appellants alleged, included “kickbacks, referral fees and other expenses designed to solicit business referrals.” ³ They contended that these inducements led to an “increase [in] the prices Ohio title insurance purchasers ... paid compared to what they would have paid absent defendants' joint illegal conduct.” Appellants urge that such an increase in price, resulting from unlawful collaboration, is actionable under § 1 of the Sherman Act, 15 U.S.C. § 1, and under the Valentine Act, Ohio Rev.Code §§ 1331.01– 1353.06, Ohio's antitrust statute.They seek both injunctive relief and damages.

Appellees “filed a joint motion to dismiss on the grounds that Plaintiffs' claims were barred by the filed-rate doctrine and by the McCarran–Ferguson Act.” The district court referred these motions to a magistrate judge, who issued a Report and Recommendation, suggesting that all claims be dismissed. The magistrate judge did, however, state that Appellants should have “an opportunity to ... modify the Complaint in order to present a prayer for non-rate-related injunctive relief that might survive the Filed Rate Doctrine.”

After considering objections from both parties, the district court issued a Memorandum Opinion. It held, first, that the filed-rate doctrine applied to title insurance, and so foreclosed Appellants' claims for monetary damages, but left open the possibility of injunctive relief that would not interfere with rates already filed. Next, it held that the McCarran–Ferguson Act barred Appellants' federal antitrust claims, and that Appellees' conduct did not violate the Valentine Act because it was permissible under Title XXXIX of the Ohio Revised Code. The district court further concluded that dismissal with prejudice was appropriate because the McCarran–Ferguson Act and Title XXXIX completely foreclosed Appellants' federal and state antitrust claims. Appellants timely appealed.

II

We review the grant of a motion to dismiss de novo. Federal–Mogul U.S. Asbestos Pers. Injury Trust v. Cont'l Cas. Co., 666 F.3d 384, 387 (6th Cir.2011). We may “affirm the district court's dismissal of a plaintiff's claims on any grounds, including grounds not relied upon by the district court.” Ibid. (quoting Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir.2009)). In this analysis, “[a]ll well-pleaded facts in the complaint are accepted as true,” Ind. State Dist. Council of Laborers v. Omnicare, Inc., 583 F.3d 935, 942 (6th Cir.2009), and “we construe the complaint in the light most favorable to the non-moving party.” Federal–Mogul, 666 F.3d at 387. A complaint will survive a motion to dismiss only if it “contain[s] ... enough facts to state a claim to relief that is plausible on its face.” Ibid. (internal citations and quotations omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949–50, 173 L.Ed.2d 868 (2009).

III

A

The McCarran–Ferguson Act provides: “[t]he business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.” 15 U.S.C. § 1012(a). Generally, “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance.” Id. at § 1012(b). However, “the Sherman Act ... shall be applicable to the business of insurance to the extent that such business is not regulated by State law.” Ibid. Title XXXIX of the Ohio Revised Code regulates insurance. SeeOhio Rev.Code § 3901.01 (creating department of insurance); id. at §§ 3901.01–3999.99. Accordingly, the McCarran–Ferguson Act bars Appellants' federal antitrust action if title insurance is “the business of insurance” within the meaning of the Act. 15 U.S.C. § 1012(a)-(b).

There are

three criteria relevant in determining whether a particular business or practice is part of the “business of insurance” exempted from the antitrust laws ... first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.

Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982). No single factor in this analysis is dispositive. Ibid. Rather, we must analyze allegedly anti-competitive behavior holistically, keeping in mind that the McCarran–Ferguson antitrust “exemption is for the ‘business of insurance,’ not the ‘business of insurers.’ ” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979).

Here, the district court correctly held that title-insurance rate-making was “the business of insurance,” within the meaning of the McCarran–Ferguson Act. Appellants below did not dispute the magistrate judge's finding that title insurance met the second and third elements of the Royal Drug–Pireno test. Thus, only the first factor, “whether the practice has the effect of transferring or spreading a policyholder's risk,” Pireno, 458 U.S. at 129, 102 S.Ct. 3002, was at issue.

As the court below noted, the first Pireno factor requires only that a product spread some risk; it does not specify any particular quantity. See id. at 129–30, 102 S.Ct. 3002;SEC v. Variable Annuity Life Ins. Co. of Am., 359 U.S. 65, 71, 79 S.Ct. 618, 3 L.Ed.2d 640 (1959) (holding that variable annuity was not the business of insurance because it placed no risk of loss on the issuer). The amount of risk spread, however, is still relevant: it bears on the first factor's weight in the multifaceted Pireno analysis. The instant case illustrates this point. There is no dispute that title-insurance policies are priced well above most estimates of the risk involved. See Appellants' Br. at 28; Appellees' Br. at 38–39. Likewise, however, there is no dispute that title-insurance rate-setting “is an integral part of the policy relationship between the insurer and the insured; and ... is limited to entities within the insurance industry.” Pireno, 458 U.S. at 129, 102 S.Ct. 3002. Hence, title-insurance rate-setting satisfies each Pireno criterion. That one factor is weak while others are strong need not change the ultimate conclusion. Rigid insistence on substantial risk-spreading is not...