Sterman v. Transamerica Title Ins. Co.

• Decision Date: 18 January 1978
• Docket Number: No. 2,CA-CIV,2
• Citation: 580 P.2d 729,119 Ariz. 268
• Parties: , 1978-1 Trade Cases P 61,852 Albert STERMAN and Brenda Sterman, husband and wife, William R. Fasse and Marsha S. Fasse, husband and wife and all others similarly situated, Appellants, v. TRANSAMERICA TITLE INSURANCE COMPANY, a California Corporation, Arizona Title Insurance and Trust Company, an Arizona Corporation, Lawyers Title of Arizona, an Arizona Corporation, Pioneer National Title Insurance Company, a California Corporation, Uslife Title Company of Arizona, an Arizona Corporation, Stewart Title & Trust of Tucson, an Arizona Corporation, Title Insurance Company of Minnesota, an Arizona Corporation, Title Security Agency of Arizona, an Arizona Corporation, and Chicago Title Insurance Company, a Missouri Corporation, its principal, Western Title Insurance Agency, an Arizona Corporation, and Commonwealth Land Title Insurance Company, a Pennsylvania Corporation, its principal, Land Title Association of Arizona, an Arizona Corporation and Title Insurance Rating Bureau of Arizona, an Arizona Corporation, Appellees. 2597.
• Court: Arizona Court of Appeals

Page 729

580 P.2d 729

119 Ariz. 268, 1978-1 Trade Cases P 61,852

Albert STERMAN and Brenda Sterman, husband and wife, William R. Fasse and Marsha S. Fasse, husband and wife and all others similarly situated, Appellants, v.TRANSAMERICA TITLE INSURANCE COMPANY, a California Corporation, Arizona Title Insurance and Trust Company, an Arizona Corporation, Lawyers Title of Arizona, an Arizona Corporation, Pioneer National Title Insurance Company, a California Corporation, Uslife Title Company of Arizona, an Arizona Corporation, Stewart Title & Trust of Tucson, an Arizona Corporation, Title Insurance Company of Minnesota, an Arizona Corporation, Title Security Agency of Arizona, an Arizona Corporation, and Chicago Title Insurance Company, a Missouri Corporation, its principal, Western Title Insurance Agency, an Arizona Corporation, and Commonwealth Land Title Insurance Company, a Pennsylvania Corporation, its principal, Land Title Association of Arizona, an Arizona Corporation and Title Insurance Rating Bureau of Arizona, an Arizona Corporation, Appellees.

No. 2 CA-CIV 2597.

Court of Appeals of Arizona,Division 2.

Jan. 18, 1978.

Rehearing Denied March 8, 1978.

Review Denied April 18, 1978.

O'Dowd & Burke by Erik M. O'Dowd, Tucson, for appellants.

Lewis & Rocaby John P. Frank, Kimball J. Corson and Fish, Briney, Duffield, Miller, Young & Adamson, P. C. by Richard Duffield, Tucson, for appelleeTransamerica Title Ins. Co.

Merchant, Lohse & Bloom by Ashby I. Lohse, Tucson, for appellee Arizona Title Ins. and Trust Co.

Bilby, Shoenhair, Warnock & Dolph, P. C. by Michael A. Lacagnina and David A. Paige, Tucson, for appellee Lawyers Title of Arizona.

Miller, Pitt & Feldman, P. C. by Stanley G. Feldman and Janice A. Wezelman, Tucson, for appelleePioneer Nat. Title Ins. Co.

Jennings, Strouss & Salmon by Riney B. Salmon, II, and David L. White, Phoenix, for appelleeUSLIFE Title Co. of Arizona.

Molloy, Jones, Donahue, Trachta & Childers, P. C. by Michael J. Meehan, Tucson, for appelleeStewart Title & Trust of Tucson.

Edward B. Towey, Denver, Colo., for appelleeTitle Ins. Co. of Minnesota.

Bell, Boyd, Lloyd, Haddad & Burns by John C. Christie, Jr., Chicago, Ill., for appelleesTitle Sec. Agency of Arizona and Chicago Title Ins. Co.

Holesapple, Conner, Jones & Johnson by Edmund D. Kahn, Tucson, for appelleesTitle Ins. Co. of Minnesota; Title Sec. Agency of Arizona and Chicago Title Ins. Co.

Johnson, Hayes & Dowdall, Ltd. by Raymond F. Hayes, Tucson, for appelleesWestern Title Ins. Agency and Commonwealth Land Title Ins. Co.

McLoone, Theobald & Galbut, P. C. by Martin R. Galbut and Kevin T. Ahern, Phoenix, for appellee Land Title Ass'n of Arizona.

Brown & Bain, P. A. by Philip P. Berelson and Neil S. Cumsky, Phoenix, for appellee Title Ins. Rating Bureau of Arizona.

Bruce E. Babbit, Atty. Gen. by John C. Dutton, Jr., Asst. Atty. Gen., Phoenix, for amicus curiaeJohn N. Trimble, Director of Arizona Dept. of Ins.

OPINION

RICHMOND, Chief Judge.

The question on this appeal is whether the superior court has jurisdiction over a claim that appellees have unlawfully combined and conspired in fixing escrow fees charged by title insurance companies in Arizona.The trial court dismissed appellants' second amended complaint, concluding that the legislature has vested exclusive jurisdiction in the department of insurance to determine matters of regulation of and competition between title insurance companies, including the fees and rates charged for escrow services.In deciding that the general antitrust legislation of this state does not apply to appellants' claim, the court expressly found:

"(T)hat by the enactment of Arizona's Comprehensive Insurance Code,Article 20 of the Arizona Revised Statutes, exclusive jurisdiction has been vested in the Department of Insurance for the determination of matters relating to the regulation of and competition between title insurance companies, that the effective and consistent administration of the Insurance Code by the Insurance Department requires that such exclusive jurisdiction extend to the provision of title insurance and to closely related services as are performed by these companies, which include escrow services, and that the general anti-trust legislation of the State of Arizona is thereby preempted with respect to the subject matter of this action, depriving this Court of jurisdiction over the Amended Complaint."

The title insurance industry in this state is extensively regulated by the department of insurance pursuant to statute.Does such regulation preempt the field, thereby precluding application of the state's antitrust laws, A.R.S. §§ 44-1401 et seq.?

A.R.S. §§ 20-341,20-342, and20-361 to 20-379, inclusive, govern regulation of title insurance rates.Prior to its amendment in 1977, however, A.R.S. § 20-375 made no provision for rates for escrow services, although such services were authorized by A.R.S. § 20-1581(B).Appellants' claim arose prior to the 1977amendment.

Appellees cite a line of federal cases interpreting the exemption of state regulated insurance industry by the McCarran-Ferguson Act from federal antitrust laws.¹See, e. g., McIlhenny v. American Title Insurance Company, 418 F.Supp. 364(E.D.Pa.1976);Schwartz v. Commonwealth Land Title Insurance Company, 374 F.Supp. 564(E.D.Pa.1974), supp. opinion 384 F.Supp. 302.In that context, the standard "is to determine only whether the (state) has regulated the business of title insurance, and not to determine whether this regulation could be better and more effectively done."Schwartz, supra, 374 F.Supp. at 576.It is sufficient, by that standard, that the state regulatory statutes are comprehensive and confer virtually plenary regulatory power on the state insurance department, which can be exercised by "silent approval as well as by disapproval."Id. at 577 n.16.Appellees contend by analogy that statutory provisions intensively regulating every aspect of a title insurer's business require supervision by the insurance department of all services bearing an integral relationship with the title insurance business, indicating clear legislative intent to supersede the state's general antitrust laws as they might otherwise apply to insurance companies.

Although we question whether rates for escrow services were subject to regulation by the insurance department prior to the 1977amendment of § 20-375, we do not regard that issue as dispositive.Appellees concede that no schedule of such rates ever was filed with the director of insurance, as presently required by the 1977amendment to § 20-376.In contrast with the McCarran Act exemption, which is called into play by the existence of a state scheme of regulation whether or not such scheme has been effectively enforced, seeOhio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178(6th Cir.1971), the presence or absence of enforcement is a determinative factor on the broader question of implied repeal of the antitrust laws by regulatory provisions.

In Gordon v. New York Stock Exchange, Inc., 422 U.S. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463(1975), also relied on by appellees, the Court held that fixing of commission rates by members of the securities exchanges was immune from antitrust attack because of the Securities and Exchange Commission's authority to approve or disapprove exchange commission rates and its exercise of that power.The Court reiterated:

"This Court has considered the issue of implied repeal of the antitrust laws in the context of a variety of regulatory schemes and procedures.Certain axioms of construction are now clearly established.Repeal of the antitrust laws by implication is not favored and not casually to be allowed.Only where there is a 'plain repugnancy between the antitrust and regulatory provisions' will repeal be implied."

422 U.S. at 682, 95 S.Ct. at 2611.

Mr. Justice Douglas in his concurring opinion stressed the Court's reliance on "a long history of actual SEC oversight and approval, and continued congressional affirmation of the SEC's role in holding that the system of fixed commission rates employed on the securities exchanges is immune from antitrust attack":

"The mere existence of a statutory power of review by the SEC over fixed commission rates cannot justify immunizing those rates from antitrust challenges.The antitrust laws are designed to safeguard a strong public interest in free and open competition, and immunity from those laws should properly be implied only when some equivalent mechanism is functioning to protect that public interest.Only if the SEC is actively and aggressively exercising its powers of review and approval can we be sure that fixed commission rates are being monitored in the manner which Congress intended.Cf.Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 387-389, 93 S.Ct. 647, 660-662, 34 L.Ed.2d 577(1973)."422 U.S. at 691-2, 95 S.Ct. at 2616.

This strong public interest in fostering competition is recognized and reconciled with insurance rate regulation in A.R.S. § 20-341:

"The purpose of this article is to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate or unfairly discriminatory, and to authorize and regulate cooperative action among insurers in rate making and in other matters within the scope of this article.Nothing in this article is intended to prohibit or discourage reasonable competition, or to prohibit or encourage, except to the extent necessary to accomplish the purpose stated in this section, uniformity in insurance rates, rating systems, rating plans or practices.This article shall be liberally interpreted to carry into effect the provisions of this section."

From the foregoing, in Pacific Fire Rating Bureau v. Insurance Company of North America, 83 Ariz. 369, 321 P.2d 1030(1958), the Court held invalid a rule approved by the director of insurance which denied unlimited right of...