Steve Ahn v. Stewart Title Guar. Co.
| Docket Number | D080391 |
| Decision Date | 05 July 2023 |
| Parties | STEVE AHN, Plaintiff and Appellant, v. STEWART TITLE GUARANTY COMPANY, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
APPEAL from a judgment of the Superior Court of San Diego County Super. Ct. No. 37-2019-00014641-CU-WT-CTL, Richard S Whitney, Judge.
Wingert Grebing Brubaker &Juskie, Stephen C. Grebing, and Camille E. Kollar for Plaintiff and Appellant.
Best Best &Krieger and Matthew L. Green for Defendant and Respondent.
DATO Acting P. J Amidst a corporate merger, a sales executive is told there are limitations on how he can compete for the merging partner's clients. He loses sales commissions and is terminated for poor sales performance. Does he have standing to assert a cause of action under the Cartwright Act, California's antitrust statute? (Bus. &Prof. Code,[1] § 16700 et seq.) On the particular facts alleged in this case, the answer is clearly no.
Ahn was a sales executive for a title insurer who claims his sales figures were adversely affected when his employer barred him from using a particular sales pitch to solicit customers from a competitor who was also a proposed corporate merger partner. Ahn's pitch told prospective clients that after the proposed merger was finalized, they would have no choice but to comply with his company's higher-cost, less flexible underwriting standards. He attempted to use this pitch to convince these clients to abandon the competitor before the merger.
But a plaintiff suing under the Cartwright Act must suffer" 'antitrust injury,'" which in turn requires harm that "stem[s] from the anticompetitive aspect of [defendants'] alleged conduct." (Cellular Plus, Inc. v. Superior Court (1993) 14 Cal.App.4th 1224, 1235 (Cellular Plus).) Accepting Ahn's claim that the two merging entities agreed not to fully compete for each other's customers while their merger was pending, Ahn does not claim injury from the alleged anticompetitive aspects of this agreement, but rather from conduct that emphasized their competitive differences. A complaint that he could not lure customers with a pitch about their restricted postmerger options does not constitute an antitrust injury, meaning Ahn lacks standing to sue under the Cartwright Act. We find an alternative ground to affirm based on Ahn's concession at oral argument that Fidelity and Stewart attempted to merge in good faith, and had the merger gone through, his Cartwright Act claim would be barred under Asahi Kasei Pharma Corp. v. CoTherix, Inc. (2012) 204 Cal.App.4th 1 (Asahi). The mere circumstance that the merger was not consummated is not enough to distinguish this case from Asahi.
Our conclusion that Ahn cannot demonstrate an antitrust violation affects his derivative economic relations tort claims, both of which require independently wrongful conduct. Concluding the trial court did not err in granting summary judgment, we therefore affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND A. Background and Claims Against Stewart
Developers of wind, solar, and renewable energy projects must obtain title insurance securing the land and improvements used in a project in order to obtain financing for necessary infrastructure (wind turbines, solar panels, etc.).[2] Title insurance protects lenders and purchasers from defects in the property's title. Because these infrastructure projects are usually built on undeveloped rural land, a major aspect of obtaining title insurance involves getting waivers from owners of subsurface mineral rights. For many rural parcels, subsurface mineral rights were sold a long time ago to mining companies or oil and gas developers. Current landowners may be unsure if mineral rights were ever sold, who bought them, and who currently holds these interests. Once the current interest holders are identified and located, developers must obtain waivers, which is a difficult and time-consuming process. Thus, "title issues for these parcels can be highly complex and a title issue with even one parcel may impact the entire renewable energy project."
Four underwriters, known as the "Big 4," dominate the title insurance industry across the United States. Fidelity National Financial, Inc. (Fidelity) and Stewart Title Guaranty Company (Stewart) are two members of the Big 4 and horizontal competitors. In the renewable energy title insurance market, Stewart competed for business with Fidelity's wholly owned subsidiary, Chicago Title.
Ahn previously worked as a senior account executive at Stewart for fifteen years. In 2014, Chicago Title recruited him as their Vice President for Energy Services "for the specific purpose of competing with Stewart's title business in renewable energy." Ahn found it difficult to compete with Stewart given Fidelity's "more stringent underwriting policies concerning surface waivers from the holders of mineral rights." Fidelity generally required a developer to obtain waivers from 100 percent of the holders of subsurface mineral rights as a condition to providing title insurance, and rarely granted exceptions. Stewart, on the other hand, had looser underwriting standards and would provide insurance coverage so long as developers secured waivers from 51 percent or more of the mineral rights holders. These differences in underwriting standards offered "a significant competitive advantage to Stewart and made convincing clients to switch from Stewart to Fidelity very difficult." Few of Ahn's new clients at Chicago Title had moved over from Stewart.
In March 2018, Fidelity announced a tentative merger with Stewart, subject to shareholder and regulatory approval. Ahn would later allege that Fidelity and Stewart agreed during the premerger period not to compete for each other's clients and to allocate their customers. He believed he was fired for attempting to actively compete with Stewart for clients during this premerger period. The specific sales pitch he sought to make, which compels our conclusion that he lacks antitrust standing, is discussed further below.
The merger ultimately did not go through. In September 2019, the FTC challenged it because the proposed merger would concentrate the Big 4 into three main players.[3] The FTC alleged this consolidation was "likely to result in anticompetitive harm." Beyond losing one of four competitors in the market, the FTC was concerned that Stewart, in particular, had "earned a reputation among market participants for being more creative and flexible in providing title insurance-to the benefit of its customers-and for selling title insurance at lower prices than the other Big 4 underwriters." More specifically,
In the FTC's view, neither Stewart nor Fidelity had demonstrated that the merger would yield efficiencies that would counteract anticipated competitive harm to consumers. Following the FTC's complaint, Fidelity and Stewart abandoned their merger attempt.
Ahn sued his employer Chicago Title, its parent Fidelity, Fidelity's Executive Vice President Dan DuBois, and Stewart. He filed his operative First Amended Complaint after the FTC complaint. Only the claims against Stewart are relevant to this appeal. Ahn alleged that Stewart violated the Cartwright Act by conspiring with Fidelity and Chicago Title "to curtail and restrict competition between Fidelity/Chicago and Stewart in wind, solar and renewable energy projects." He asserted that the companies "agreed to allocate customers such that Fidelity would not compete for Stewart's customers" pending the merger. The purpose behind this arrangement, in Ahn's view, was to maintain Stewart's market share, earnings, and customer base while the merger was pending. He further accused Stewart of tortiously interfering with his contractual relations and interfering with his prospective economic advantage, with these tort causes of action resting on an alleged antitrust violation to show independently wrongful conduct.
In other words, Ahn's three causes of action against Stewart rose or fell on his antitrust claim. That claim, in turn, was predicated on efforts by Fidelity and Stewart to restrain Ahn's sales tactics as follows.
Soon after the merger was announced in 2018, Ahn was told by Joe Goodman, his supervisor at Chicago Title, that Stewart would likely have to conform postmerger to Fidelity's tighter underwriting guidelines-i.e., waivers would be required from all rather than half of subsurface mineral rights holders. Ahn saw this as an opportunity to compete for Stewart's customers. As he put it in the complaint: "If Stewart had to meet Chicago/Fidelity's more stringent underwriting standards, this would end Stewart's competitive advantage and open the door for Ahn to convince his old book of business (and other renewable developers) to choose Ahn, and therefore Chicago, over Stewart." Thus, in an attempt to lure Stewart clients to Chicago, Ahn began telling them about the anticipated merger "and looming underwriting parity between Stewart and Chicago/Fidelity."
To Ahn's surprise, his active efforts to compete for...
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