Amicus Curiae Brief — FTC v. Ticor Title Ins. Co.

; } Supreme Court, U.S. |

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No. 91-7 AUG 2 3 199)

In The OFFICE OF THE CLERK

SUPREME COURT OF THE UNITBB-SFA5ES

October Term, 1990

FEDERAL TRADE COMMISSION,

Petitioner,

Vv.

TICOR TITLE INSURANCE CO., et al.,

Respondent.

BRIEF OF AMICUS CURIAE STATES OF WISCONSIN,

ALABAMA, ALASKA, ARIZONA, ARKANSAS, IDAHO,

IOWA, KENTUCKY, LOUISIANA, MAINE, MARYLAND,

MASSACHUSETTS, MICHIGAN, MINNESOTA,

MISSISSIPPI, MISSOURI, MONTANA, NEVADA,

NEW HAMPSHIRE, NEW JERSEY, NEW YORK,

NORTH CAROLINA, NORTH DAKOTA, OHIO, OKLAHOMA,

PENNSYLVANIA, TENNESSEE, TEXAS, UTAH, VERMONT,

VIRGINIA, WASHINGTON, AND WEST VIRGINIA, IN

SUPPORT OF PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

‘FOR THE THIRD CIRCUIT

J. JOSEPH CURRAN, JR. JAMES E. DOYLE

Attorney Generali Attorney General

ROBERT N. MCDONALD KEVIN J. O'CONNOR*

ELLEN 8S. COOPER Assistant Attorney General

Assistant Attorneys General State of Wisconsin

200 St. Paul Place Wisconsin Department of Justice

19th Floor Post Office Box 7857

Baltimore, Maryland 21202 Madison, Wisconsin 53707-7857

(301) 576-6470 (608) 266-8986

*Counsel of Record

(Additional Attorneys General listed inside)

LIST OF COUNSEL

Counsel for the State of Alabama

JAMES H. EVANS

Attorney General

Mare Givhan

Chief, Antitrust Division

Office of Attorney General

11 South Union Street

Montgomery, Alabama 36130

(205) 242-7331

Counsel for the State of Alaska

CHARLES E. COLE

Attorney General

James Forbes

Assistant Attorney General

1031 West 4th Avenue, Suite 200

Anchorage, Alaska 99501

(907) 269-5200

Counsel for the State of Arizona

GRANT WOODS

Attorney General

H. Leslie Hall

Chief Counsel, Consumer Protection

and Antitrust Section

Jeri K. Auther

Assistant Attorney General

1275 West Washington

Phoenix, Arizona 85007

(602) 542-3702

Counsel for the State of Arkansas Counsel for the State of. Louisiana

WINSTON BRYANT WILLIAM J. GUSTE, JR.

Attorney General Attorney General

Royce Griffin | Jesse James Marks

Deputy Attorney General | Assistant Attorney Genera!

200 Tower Building | Chief, New Orleans Office

4th and Center Streets ANNE F. BENOIT

Little Rock, Arkansas 72201 Assistant Attorney General

(501) 682-2007 Chief, Antitrust Division

Louisiana Department of Justice

Counsel for the State of Idaho 234 Loyola Avenue, 7th Floor

LARRY ECHOHAWK New Orleans, Louisiana 70112

Attorney General (504) 568-5575

Brett T. DeLange

Deputy Attorney General Counsel for the State of Maine

Office of the Attorney General MICHAEL E. CARPENTER

State House, Room 113A Attorney General

Boise, Idaho 83720 Stephen L. Wessler

(208) 334-2424 Deputy Attorney General

Chief, Consumer & Antitrust Division

Counsel for the State of Iowa State House Station 6

BONNIE J. CAMPBELL Augusta, Maine 04333

Attorney General (207) 289-3661

John R. Perkins

Deputy Attorney General Counsel for the State of Maryland

Hoover Building, 2nd Floor J. JOSEPH CURRAN, JR.

Des Moines, Iowa 50319 Attorney General

(515) 281-5164 Robert N. McDonald

Assistant Attorney General

Counsel for the State of Kentucky Chief, Antitrust Division

FREDERIC J. COWAN Ellen S. Cooper

Attorney General Assistant Attorney General

James M. Ringo Deputy Chief, Antitrust Division

Assistant Attorney General 200 St. Paul Place, 19th Floor

State Capitol Building - Baltimore, Maryland 21202

Frankfort, Kentucky 40601 | (301) 576-6470

(502) 564-7600

Counsel for the State of Massachusetts

SCOTT HARSHBARGER

Attorney General

George K. Weber

Assistant Attorney General

Chief, Antitrust Division

Thomas M. Alpert

Assistant Attorney General

Public Protection Bureau

One Ashburton Place, 19th Floor

Boston, Massachusetts 02108

(617) 727-2200

Counsel for the State of Michigan

FRANK J. KELLEY

Attorney General

Post Office Box 30212

Lansing, Michigan 48909

(517) 373-7110

Counsel for the State of Minnesota

HUBERT H. HUMPHREY Iil

Attorney General

102 State Capitol

St. Paul, Minnesota 55155

(612) 296-7575

Counsel for the State of Mississippi

MIKE MOORE

Attorney General

Post Office Box 220

Jackson, Mississippi 39205

(601) 359-3747

Counsel for the State of Missouri

WILLIAM L. WEBSTER

Attorney General

Clayton Friedman

Assistant Deputy Attorney General

Office of the Attorney General

3100 Broadway, Suite 609

Kansas City, Missouri 64111

(816) 531-4207

Counsel for the State of Montana

MARC RACICOT

Attorney General

Justice Building

215 North Sanders

Helena, Montana 59620

(406) 444-2026

Counsel for the State of Nevadc

FRANKIE SUE DEL PAPPA

Heroes Memorial Building

Capitol Complex

Carson City, Nevada 89710

(702) 687-4170

Counsel for the State of New Hampshire

JOHN P. ARNOLD

Attorney General

Charles T. Putnam

Senior Assistant Attorney General

Walter L. Maroney

Assistant Attorney General

25 Capitol Street

Concord, New Hampshire 03301

(603) 271-3641

&

Counsel for the State of New Jersey

ROBERT J. DEL TUFO

Attorney General

Laurel A. Price

Deputy Attorney General

25 Market Street, C.N. 085

Trenton, New Jersey 08625

(609) 633-7804

Counsel for the State of New York

ROBERT ABRAMS

Attorney General

O. Peter Sherwood

Solicitor General

George W. Sampson

Assistant Attorney General

Bureau Chief, Antitrust Bureau

120 Broadway, Suite 2601

New York, New York 10271

(212) 341-2275

Counsel for the State of North Carolina

LACY H. THORNBURG

Attorney General

James C. Gulick

Special Deputy Attorney General

K.D. Sturgis

Assistant Attorney General

Department of Justice

Post Office Box 629

Raleigh, North Carolina 27602

(419) 733-7741

Counsel for the State of North Dakota

NICHOLAS J. SPAETH

Attorney General

David W. Huey

Assistant Attorney General

State Capitol

600 East Boulevard

Bismarck, North Dakota 58505

(701) 224-3404

Counsel for the State of Ohio

LEE FISHER

Attorney General

Marc B. Bandman

Assistant Attorney General

Capitol Square Office Building

65 East State Street, Suite 708

Columbus, Ohio 43266-0590

(614) 466-4328

Counsel for the State of Okiahoma

SUSAN B. LOVING

Attorney General

Jane F. Wheeler

Assistant Attorney General

420 West Main Street

Oklahoma City, Oklahoma 73102

(405) 521-4274

Counsel for the State of Pennsylvania

ERNEST D. PREATE, JR.

Attorney General

Thomas L. Welch

Chief Deputy Attorney General

Carl S. Hisiro

Assistant Chief Deputy Attorney General

Antitrust Section

Office of the Attorney General

14th Floor, Strawberry Square

Harrisburg, Pennsylvania 17120

(717) 787-4530

Counsel for the State of Tennessee

CHARLES W. BURSON

Attorney General and Reporter

John Knox Walkup

Solicitor General

Perry A. Craft

Deputy Attorney General

450 James Robertson Parkway

Nashville, Tennessee 37243-0485

(615) 741-2408

Counsel for the State of Texas

DAN MORALES

Attorney General

Will Pryor

First Assistant Attorney General

Mary F. Keller

Deputy Attorney General

Mark Tobey

Assistant Attorney General

Acting Chief, Antitrust Division

Capitol Station

Post Office Box 12548

Austin, Texas 78711-2548

(512) 463-2100

Counsel for the State of Utah

R. PAUL VAN DAM

Attorney General

236 State Capitol

Salt Lake City, Utah 84114

(801) 538-1331

Counsel for the State of Vermont

JEFFREY L. AMESTOY

Attorney General

Geoffrey A. Yudien

Assistant Attorney General

109 State Street

Montpelier, Vermont 05602

(802) 828-3171

Counsel for the State of Virginia

MARY SUE TERRY

Attorney General

101 North 8th Street

Richmond, Virginia 23219

(804) 786-2071

Counsel for the State of Washington

KENNETH O. EIKENBERRY

Attorney General

Carol A. Smith

Assistant Attorney General

Chief, Antitrust Section

1366 Dexter Horton Building

Seattle, Washington 98104

(206) 464-7663

Counsel for the State of West Virginia

MARIO J. PALUMBO

Attorney General

Robert Wm. Schulenberg III

Senior Assistant Attorney General

812 Quarrier Street

Charleston, West Virginia 25301

((304) 348-0246

Counsel for the State of Wisconsin

JAMES E. DOYLE

Attorney General

Kevin J. O'Connor

Assistant Attorney General

Post Office Box 7857

Madison, Wisconsin 53707-7857

(608) 266-8986

INTEREST OF THE AMICI STATES

SUMMARY OF ARGUMENT

Il.

Ill.

i

TABLE OF CONTENTS

a ae a a ee oe eb Se OEE SOF eee 8

THE TEST APPLIED BY THE COURT OF

APPEALS CONFLICTS WITH LONG-

STANDING PRECEDENT OF THIS

0 ee ee ee

THE CIRCUIT COURT'S DECISION IS

ERRONEOUS BECAUSE MONTANA'S

AND WISCONSIN'S INSURANCE

REGULATORY SCHEMES RELY ON

COMPETITION TO SET RATES AND,

HENCE, DO “OT PROVIDE FOR

ACTIVE STATE REVIEW. .....-.----->:

A. Title insurers in Montana and

Wisconsin are expected to set title

insurance rates competitively and

to submit filings for the limited

purpose of giving insurance

commissioners "notice" of rates

being charged. .....----++++++>

B. The price-fixing would have made

rate review impossible. .......--

EVEN THE FACTS FOUND BY THE

COURT OF APPEALS FAIL TO SATISFY

THE ACTIVE SUPERVISION PRONG.

“s ween eke Oe ee ee Oe ee ee

<a

ee

. 14

IV. THF EXTRAORDINARY WRIT OF

MANDAMUS CANNOT SUBSTITUTE

FOR EFFECTIVE STATE

SUPERVISION. ......--cccccceccevens 15

A. Placing the burden of enforcing

state policy on consumers

circumvents the policy underlying

the state action doctrine. .......... 15

B. Mandamus is inappropriate to

compel the insurance commissioner

to regulate insurance rates as any

arguable authority to investigate

lies within the discretion of the

Peer eee eee ee 16

eee |.) rr ee err eS eee ee ee ee 19

CASES CITED

324 Liquor Corp. v. Duffy,

Se EE sce cn asawesesocceseeuds 7, 16

Bolt v. Halifax Hospital Medical Center,

891 F.2d 810 (11th Cir. 1990) ...............4.. 13

Cal. Retail Liquor Dealers Ass'n. v. Midcal Alum.,

GP GD Scat edcescvese. 4, 5, 6, 7, 9, 16

Carl N. Swenson Co., Inc. v. E.C. Braun Co.,

272 Cal. App.2d 366,

77 Cal. Rep. 378, 379-80 (1969) ...........5006- 2

Gerber v. Comm'r of Ins. of State,

242 Mont. 369, 786 P.2d 1199 (Mont. 1990) . 14, 17, 18

Gerol v. Arena,

127 Wis. 2d 1, 377 N.W.2d 618 (Ct. App. 1985) .... 16

Grillo v. Bd. of Realtors,

91 N.J. Super. 202, 219 A.2d 635 (1966) .......... 2

Hawaii v. Standard Oil Company of California,

405 U.S. 3561 (1972). cece cere vere cccene 2

Heider v. City of Wauwatosa,

37 Wis. 2d 466, 155 N.W.2d 17 (1967) ........--.- 18

In re Insur. Antitrust Litig., 7 Trade Reg.

Rep. (1991-1 Trade Cas.) (CCH) 1 69,460

(9th Cir. June 18, 1991) .. 1... eee eee eee eee eens 13

Law Enforcement Standards Bd. v.

Village of Lyndon Station,

101 Wis. 2d 472, 305 N.W.2d 89 (1981) ......- 16, 17

Medic Air Corp. v. Air Ambulance Auth.,

843 F.2d 1187 (9th Cir. 1988) .....--- eee ee eeee 13

New England Motor Rate Bureau, Inc. v. F.T.C.,

908 F.2d 1064 (Ist Cir. 1990) .....-. eee eee eees 7

Patrick v. Burget,

486 U.S. 94 (1988) ......-- eee ee eeee 4, 5, 6, 7, 14

St. Paul Fire & Marine Ins. Co. v. Barry,

Pr 4 0 ee ee 4,13

State ex rel. Butte Youth Serv. Center v. Murray,

170 Mont. 171, 551 P.2d 1017 (1976) ........- 16, 17

State of Georgia v. Pennsylvania R.R.,

324 U.S. 439 (1945) 2... cece eee weer rr eeees 2

iv Page

State v. Milwaukee Braves, Inc.,

31 Wis. 2d 699, 144 N.W.2d 1(1966) ..........-. 2

Town of Hallie v. City of Eau Claire,

ht & | ee 6, 15

Vretenar v. Hebron,

144 Wis. 2d 655, 424 N.W.2d 714 (1988) ......... 18

Will v. United States,

hi ne 16

STATUTES AND RULES CITED

TR ef ere: ee eee ee 16

15 U.B.C. 8 1BKe) (IDBD) .. ww ccc cece scree ccesecvens 2

Mont. Code Ann.

Title 37, ef seq. (1968) 0. ccc cece er reveces 5

FG oo ha ccc ctcecasevcdpenceneaseens 5

§$ 90-14-1004 (1989) 0.0... cc cece cece rere reece. 2

§ 90-14-1338 (19GB) 0. ccc ccc cere esvnns 16

§ SB—-1-Bi1(1) (19GB)... cc ccc ccc ce svceves 17

FSS 2 Ieee reer rere ee 17

§ SB-2-BIS CGI) ow ccc cc cc vccvccses 17

§ 33-1-7O1(1) (19089) 0. wc ccc cece eenee 17

} = St aPerrrrrrerrrerrrrr cere 15

Mont. Code Ann.

§ 33-16-101(2) (1989) .....- eee eee eee eee 10

§ 33-16-201 (1989) .....- eee ee ee eer teeee 12

§ 33-16-201(1)(a) (1989)... eee ee eens 14

§ 33-16-201(1)(b) (1989) .. 1... e eee eee teens 3

§ 33-16-202(2)(3) (1989) ....-- eee reer eer ereee 9

§ 33-16-203 (1989) ....--- ee errr erreeee 10, 12

§ 33-16-203(1) (1989) 2... eee eee eee eee erees 8

S 99-16-908 (19088)... cece errr errr secees 9

$8 70-73, 76-78 (1989) ....--- errr r rer rrrrree 5

Wis. Stat. Ch.

50 (1989-90) ...-- eee eee eres eee e eens 5

144 (CIDBD—BO) nw ccc cee c ce evnererecces 5

BAD CIGED—BB) nn ccc ccc ccc cc cescreesseness 5

OO Er re re ke ee 9

Wis. Stat. §

133.18 (1060-90) wc cer sre ccrsreresserreers 16

601.41(5) (1989-90)... eee ee eens 14, 17

01.43 (108O-OO) nw ccc creme ccc rerrcereses 17

Wis. Stat. §

626.01 (19BB-BO) 0. ccc ccc e cc ecccscvssscsss 9

625.01(a) (1989-90) .. 1. wc eee ee eee eee eee eres 9

625.01(b) (1989-90) 2... . eee ee ee ee eee 9

625.11 (108B-OO) 0. ccc cere cc vccsscecesses 12

625.11(1) (1989-90) ... cere rec cece revere 3, 14

625.12 (1988-O0) wc ccc cc ccc cccevevceseses 12

625.15 (1989-90) ..... ccc ceveveces 8, 10, 12, 15

625.15(1) (1969-90)... cece were ec ce eveveces 8

625.21 (1989-90) . 0... cee c ccc c cee ercecens 18

635.38 (1080-G8) ww ccc cecesnscsesevueen eae 9

Wis. Stat. Ann.

he Ss: si—‘(‘“‘C;i‘~™S 10

Tt fO eae CC! 15

Tt 8D). ae: :t—<‘“CSCS™S™S 10

Utah Code Ann.

§ 76-10-O86 (1001) .....ccccccssseesuseeeees 2

OTHER AUTHORITIES

Bup. Cs. BR. 200) .. ec ccccesvcesess ue heen ee 2

No. 91-72

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1990

FEDERAL TRADE COMMISSION,

Petitioner,

v.

TICOR TITLE INSURANCE CO., et al.,

Respondent.

BRIEF OF AMICUS CURIAE IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

The States of Wisconsin, Alabama, Alaska, Arizona,

Arkansas, Idaho, Iowa, Kentucky, Louisiana, Maine, Maryland,

Massachusetts, Michigan, Minnesota, Mississippi, Missouri,

Montana, Nevada, New Hampshire, New Jersey, New York,

North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania,

Tennessee, Texas, Utah, Vermont, Virginia, Washington, and

West Virginia (hereinafter "Amici States") submit this brief in

support of the Federal Trade Commission's petition for a writ of

certiorari to review the judgment of the United States Court of

Appeals for the Third Circuit in Ticor Title Insur. Co. v. F.T.C.

(hereinafter Ticor), 922 F.2d 1122 (3rd Cir. 1991), reh’g denied,

922 F.2d 1141 (3d Cir. 1991). Review is warranted because the

decision of the Third Circuit panel adopts a standard for the

active supervision prong of the state action doctrine which

2

undermines state antitrust enforcement and which "conflicts

with applicable decisions of this Court." Sup. Ct. R. 10(c).

INTEREST OF THE AMICI STATES

The Amici States have a vital interest in preventing an

unwarranted expansion of immunity from the antitrust laws.

First, the attorneys general are the chief law officers of their

states and are charged with the duty of enforcing the antitrust

laws. As such, they are the primary public enforcers of the state

antitrust laws, which are often interpreted in conformity with

federal law.’

The attorneys general also represent their states and

political subdivisions in federal antitrust actions for damages

and injunctive relief. In their capacity as parens patriae, they

are authorized to bring federal antitrust actions on behalf of the

citizens of their states.” As the principal public enforcers of the

state antitrust laws and as representatives of the primary

victims of the anticompetitive conduct encouraged by the lower

court's opinion, the Amici States have a substantial interest in

ensuring that federal courts apply the antitrust laws in a

manner consistent with underlying congressional policy, this

Court's past decisions, and sound public policy.

Respondent insurers conceded that the price-fixing

agreements at issue here actually occurred and that they were

unfair and anti-competitive within the meaning of section 5 of

the FTC Act. Ticor, 922 F.2d at 1124. Immunizing such price-

1 E.g., Carl N. Swenson Co., Inc. v. E.C. Braun Co., 272 Cal.

App.2d 366, 77 Cal. Rep. 378, 379-80 (1969); Grillo v. Board of

Realtors, 91 N.J. Super. 202, 219 A.2d 635 (1966); State v. Milwaukee

Braves, Inc., 31 Wis. 2d 699, 144 N.W.2d 1 (1966). See also Mont.

Code Ann. § 30-14-104 (1989); Utah Code Ann. § 76- 10-926 (1991).

2 15 U.S.C. § 15(c) (1989); State of Georgia v. Pennsylvania

R.R., 324 U.S. 439 (1945) (common law parens patriae); Hawaii v.

Standard Oil Company of California, 405 U.S. 251 (1972).

3

fixing agreements strikes at the heart of state antitrust

enforcement.

The state regulatory regimes at issue here explicitly

direct that the insurance commissioners rely on the competitive

marketplace rather than regulate rates directly.” Unwarranted

expansion of the state action doctrine in such cases leaves the

attorneys general and aggrieved consumers powerless to remedy

anticompetitive conduct under federal antitrust law, state

insurance law or other state regulatory schemes. The attorneys

general have a vital interest in maintaining the integrity of the

process by which insurance transactions are accomplished. The

novel exemption fashioned by the court of appeals invites price

fixing by insurers in all lines of insurance despite clear state

statutory language indicating a reliance on competition in such

markets.

Moreover, the attorneys general are continually forced to

weigh the need for antitrust enforcement in industries which

often may be subject to some degree of state oversight.

Expanding antitrust immunity would, thus, seriously impair

antitrust enforcement in general.

The Amici States support the Federal Trade

Commission's contention that the state action doctrine does not

immunize the price-fixing agreements at issue here.

SUMMARY OF ARGUMENT

The attorneys general ask the Court to grant the petition

for certiorari for the following reasons:

1. In Patrick v. Burget, 486 U.S. 94 (1988), this —_

explicitly conditioned the active supervision prong of the state

action test upon a showing that the States "have and exercise

power to review particular anti-competitive acts of private

3 See, e.g., Wis. Stat. § 625.11(1) (1989-90); Mont. Code Ann. §

33-16-201(1)(b) (1989).

4

parties and disapprove those that fail to accord with state

policy." Id. at 101 (emphasis added). The state's involvement

must be sufficient to convert private anticompetitive action into

that of the state itself. Id. Cal. Retail Liquor Dealers Ass'n. v.

Midcal Alum., 445 U.S. 97, 106 (1980). The court of appeals

departed from both this Court's standard and rationale, instead

adopting a rule that "some basic level of [regulatory] activity”

would be sufficient to meet the active supervision prong of the

state action defense (Pet. App. at 28a).‘

2. The court of appeal's decision is erroneous because

the relevant state statutes expressly rely on competition to

determine title insurance rates and search and examination fees.

The filings of rating bureaus provide notice to regulators of rates

that may be charged but do not establish joint rates. Indeed,

agreements to charge specific fees are explicitly prohibited by

state law. Far from being reviewed by state regulators, the

agreements by title insurers to fix search and examination fees

and to file rates jointly based in part on those fees, subverted

the state regulatory scheme by making rate review impossible.

In acquiescing to the filings, the states did not authorize

the price fixing which preceded the filing. See St. Paul Fire &

Marine Ins. Co. v. Barry, 438 U.S. 531, 554 n.26 (1978). State

approval of one activity (i.e., the filing of pooled rating

information) is not state approval of a related but distinct

activity (i.e., classic horizontal price-fixing).

3. The court of appeals based its decision upon a

stylized and selective choice of facts regarding state supervision

in Wisconsin and Montana. However, even the facts relied

upon by the court of appeals would not support a holding that

the "active supervision" prong of this Court's state action test

had been met under Patrick and Midcal.

* "Pet. App.” refers to Appendix A attached to the Petition for

Writ of Certiorari to the United States Court of Appeals for the Third

Circuit submitted by petitioner Federal Trade Commission.

5

4. The court of appeals’ decision to grant state action

immunity is based, in part, upon the court's perception that the

extraordinary writ of mandamus is available to consumers and

that its availability obviates the need for active state

supervision. Ticor, 922 F.2d at 1139-40. The extraordinary

writ of mandamus cannot substitute for active state supervision.

In Wisconsin and Montana, mandamus cannot remedy the

price-fixing conduct or compel state officials to exercise their

discretion. In any event, mandamus does not constitute active

state supervision. Putting the burden on consumers rather than

state officials to initiate review of the anticompetitive conduct

directly contravenes the standard and rationale for state action

immunity.

ARGUMENT

I. THE TEST APPLIED BY THE COURT

OF APPEALS CONFLICTS WITH

LONG-STANDING PRECEDENT OF

THIS COURT.

Virtually every industry is subject to state oversight at

some basic level, by at least one state agency. The scope of state

oversight extends from licensing and regulation of the

professions and quasi-professions, see generally, Mont. Code

Ann. Title 37, et seg. (1989); Wis. Stat. ch. 440, et seq. (1989-90),

and environmental regulation; Mont. Code Ann. Title 75 (1989);

Wis. Stat. ch. 144 (1989-90), to worker safety regulation; Wis.

Stat. ch. 50 (1989-90), Mont. Code Ann. §§ 70-73, 76-78 (1989);

Wis. Stat. ch. 101 (1989-90), and intensive regulation of

utilities; Mont. Code Ann. Title 69 (1989); Wis. Stat. ch. 196

(1989-90).

This Court has repeatedly stated that before private

parties regulated by the states can enjoy immunity from federal

antitrust liability, such parties must satisfy a two-pronged test

determined by this Court. Patrick v. Burget, 486 U.S. 94, 100

(1988). First, the conduct must be undertaken pursuant to a

6

"clearly articulated and affirmatively expressed" state policy to

displace competition with regulation. Second, the anti-

competitive conduct must be “actively supervised by the state.”

Cal. Retail Liquor Dealers Ass'n. v. Midcal Alum., 445 U.S. 97,

105 (1980).

This Court explicitly conditioned the active supervision

prong upon a showing that the states "have and exercise power

to review particular anticompetitive acts of private parties and

disapprove those that fail to accord with state policy." Patrick,

486 U.S. at 101 (emphasis added). The rationale for this

standard is that "[w]here a private party is engaging in the

anti-competitive activity, there is a real danger that he is acting

to further his own interests, rather than the governmental

interests of the State." Town of Hallie v. City of Eau Claire, 471

U.S. 34, 47 (1985). The state's involvement must be sufficient

to convert private anticompetitive action into that of the state

itself. Patrick, 486 U.S. at 105; Midcal, 445 U.S. at 106.

The court of appeals ignored this controlling precedent

and substituted the following standard:

Where .. . the state's program is in place, is

staffed and funded, grants to state officials ample

power and the duty to regulate pursuant to

declared standards of state policy, is enforceable

in the state's courts, and demonstrates some basic

level of activity directed towards seeing that the

private actors carry out the state's policy and not

5 The Federal Trade Commission rejected, on the basis of

extensive findings of fact, the state action defense of the title insurers

as to six states. Pet. App. at 42a. The court of appeals reversed and

vacated the decision of the Federal Trade Commission. This brief

focuses on Wisconsin and Montana because the FTC's petition for

certiorari treats them as leading examples of the erroneous analysis of

the state action defense by the court of appeals. The case, however,

has implications for state regulation and antitrust enforcement far

beyond these two states.

7

simply their own policy, more need not be

established.

Ticor at Pet. App. 28a (quoting New England Motor Rate

Bureau, Inc. v. F.T.C., 908 F.2d 1064, 1071 (1st Cir. 1990)

("NEMRB")).

In sharp contrast to this Court's decision, Midcal and

Patrick, which conditioned state action immunity for private

parties on a review of "the particular anticompetitive acts of

private parties," the court of appeals adopted what amounts to

little more than a "bodies, buildings and budget" standard. Even

where the state has not reviewed the anticompetitive conduct,

and even where the state statutes themselves rely on

competition, rather than regulation, to set rates, the mere

presence of a state regulatory regime could provide antitrust

immunity for unreviewed activities that would otherwise be

per se unlawful under the antitrust laws.

Indeed, the lower court's standard, may, if not reversed

by this Court, enable private parties in many industries

subjected to "some basic level of [regulatory] activity” to claim

state action immunity from federal antitrust liability. Thus, the

decision below, if unreviewed, may have an impact on virtually

all private conduct that is remotely affected by state regulation.

For this reason alone, the Court should grant the Commission's

petition for certiorari and reverse and remand this case with

directions that the court of appeals apply the active supervision

prong enunciated by this Court in Patrick, Midcal and 324

Liquor Corp. v. Duffy, 479 U.S. 335 (1987).

8

Il. THE CIRCUIT COURT'S DECISION IS

ERRONEOUS BECAUSE MONTANA'S

AND WISCONSIN'S INSURANCE

REGULATORY SCHEMES RELY ON

COMPETITION TO SET RATES AND,

HENCE, DO NOT PROVIDE FOR

ACTIVE STATE REVIEW.

The court of appeals misapprehended the purpose of the

joint filing by rating bureaus when it stated: "Once the title

insurance rating bureau establishes the uniform rate for search

and examinations services in a certain state, the insurance

companies that are members of the bureau charge this rate for

these services." Ticor at Pet. App. 12a. However, nothing in the

Montana and Wisconsin statutes suggest that the information

filings of the rating bureau "establishes" rates. To the contrary,

as indicated below, the statutes prohibit agreements among

insurers to charge any rates or fees.

A. Title insurers in Montana and

Wisconsin are expected to set

title insurance rates

competitively and to submit

filings for the limited purpose

of giving insurance

commissioners "notice" of rates

being charged.

Insurers are required to give "notice" to the insurance

commissioner of the rates they charge. Mont. Code Ann. §

33-16-203(1) (1989); Wis. Stat. § 625.15 (1989-90). An insurer

may discharge this obligation by developing its own cost data or

by relying upon a filing by a licensed rate service organization

("rating bureau"), with "such modification for its own expense

and loss experience as the credibility of that experience allows."

Mont. Code Ann. § 33-16-203(1) (1989); Wis. Stat. § 625.15(1)

(1989-90). Rating bureaus are permitted to exist so as to make

more efficient the collection and pooling of claims and expense

data against which individual insurers can price their product

9

on a competitive basis. Mont. Code Ann. § 33-16-202(2)(3)

(1989); Wis. Stat. § 625.01 (1989-90).°

Nothing in the insurance statutes of Wisconsin and

Montana compels or authorizes price fixing by title insurers of

search and examination fees.’ To the contrary, these states rely

upon competition to set title insurance rates and, consistent with

that reliance, do not provide for active review of the filed

"notices" of rates. Far from condoning price fixing, the insurance

statutes of Wisconsin and Montana explicitly prohibit

agreements among insurers to use or adhere to rates. E.g., Wis.

Stat. § 625.33 (1989-90); Mont. Code Ann. § 33-16-303 (1989).*

Moreover, insurers are expected to decide, unilaterally, what

rates they will charge based upon "average expense factors

determined by the rate service organization or with such

modification for its own expense and loss experience as the

credibility of that experience allows." E.g., Wis. Stat. § 625.15

(1989-90); Mont. Code Ann. § 33-16-203 (1989). The reliance

© For example, the purposes of the rating bureau statute

include:

(a) To protect policyholders and the public

against the adverse effects of excessive, inadequate or

unfairly discriminatory rates;

(b) To encourage, as the most effective way to

produce rates that conform to the standards of par. (a),

independent action by and reasonable price competition

among insurers.

Wis. Stat. § 625.01(a) and (b) (1989-90).

? The clear articulation prong of the Midcal analysis is not at

issue in this case. However, an understanding of state regulatory

policies is relevant to active supervision.

® The 1969 Committee Comment dealt with this issue

explaining: "Rates may be made individually or collectively by bureaus,

but agreements to adhere to bureau rates are prohibited. Wis. Stat.

Ann. ch. 625 (1960) (Committee Comment at 5) (emphasis added).

10

on competition to set rates and related expenses is underscored

by the Committee Comment to the 1969 revisions to the

Wisconsin insurance statutes: "Of course, a competitively

oriented rating law such as this one will not provide for active

regulatory intervention to ensure what this section directs, but

it sets the standard and relies mainly on competition to achieve

the goal.” Wis. Stat. Ann. § 625.15 (1969) (Committee

Comment). See also, Mont. Code Ann. § 33-16-101(2) (1989).°

Although the Wisconsin Legislature recognized that there

might be situations in which "price competition is replaced by

price fixing in concert," Wis. Stat. Ann. § 625.15 (1969)

(Committee Comment), the Legislature's move to the new

system was premised on the assumption that insurance markets

operate competitively. Consistent with this premise, the

statutes provide that: "Insurers can use the rates they choose.

No approval is required, and a filing is required only for

information and after the fact." Id.

Given the laissez faire structure of insurance rate

regulation described above, it is understandable why, for

example, Wisconsin and Montana regulators never reviewed title

insurance rates and certainly did not review the fixing of search

and examination fees: they relied on competition to determine

% Indeed, the underlying premise of the 1969 revisions in

Wisconsin's rating bureau statute underscores the emphasis the state

placed on insurer competition to set rates, not direct regulation: "The

existing [much more rigid and comprehensive] system of rate

regulation has been rendered unnecessary through the development of

a strikingly greater degree of meaningful price competition in many of

the most important lines of insurance.” Wis. Stat. Ann. ch. 625 (1969)

(Committee Comment). The Wisconsin legislators concluded that this

change in industry attitudes and practices together with enumerated

defects in "[rjate regulation in the traditional manner,” "call for a

system of rate control which eliminates the requirement that rates be

reviewed by the commissioner before use.” Id.

11

rates because their state insurance statutes expressly state that

competition shall determine rates.’

B. The price-fixing would have

made rate review impossible.

Even if the state regulatory structures had not relied on

competition to set rates, and even if the state regulators had

actively reviewed the rates, such review would have been

ineffective because the figures reported for search and

examination fees on the filings reflected price-fixed search and

examination fees, not a compilation or average of fees each

1° The record of this case could not be clearer that such rates

were not reviewed. For example, the FTC noted that Wisconsin had

never examined the title insurance rating bureau, never had a hearing

on any insurance rate filing in any line of insurance, never issued a

rate suspension order, did not have the resources to review rates and,

in general, "Wisconsin followed a hands-off policy m dealing with title

insurers.” Ticor Title Insur. Co., 5 Trade Reg. Rep. (CCH) 9 22,744 at

22,446 (F.T.C. 1989) (quoting testimony of Wisconsin regulators).

The FTC reported that a key Wisconsin official had testified

that:

Q. Now, the department didn't have any idea

what an efficient company's expenses would be for

search and examination services?

A. No.

Q. But it is your opinion that you would really

have to study the search and examination expenses of

the individual companies in order to effectively

regulate the charges for search and examination

expenses?

A Yes.

Ticor Title Insur. Co., 5 Trade Reg. Rep. (CCH) 9% 22,744 at 22,446

(F.T.C. 1989).

12

company expected to incur. Such price fixing undermined the

ability of state regulators to review the reasonableness

of the related rates on a state specific basis by distorting

the market price for the fixed search and examination

services.

The statements that insurers in Wisconsin and Montana

are required to file with their respective insurance

commissioners, see Wis. Stat. § 625.15 (1989-90); Mont. Code

Ann. § 33-16-203 (1989), must include information regarding

risks, expenses and profits. See Wis. Stat. § 625.12 (1989-90);

Mont. Code Ann. § 33-16-201 (1989). State law presumes that

insurers incur costs and expenses in a competitive marketplace.

See, e.g., Wis. Stat. § 625.11 (1989-90); Mont. Code Ann. § 33-

16-201 (1989).

Any attempt to determine whether or not rates or fees

are excessive must include a comparison of the filed rates with

rates and fees charged by insurers in the competitive market.

If fees have been artificially inflated, excessive profits can be

made to appear "acceptable." Distorting the market for costs

thereby impairs any attempt to review the performance of

insurers. Indeed, the passive, non-reactive regulatory structure

and performance in these two states, as outlined by both the

court of appeals and the FTC, Ticor Title Insur. Co. v. F.T.C., 5

Trade Reg. Rep. (CCH) 4 22,744 at 22,446, 22,450-51 (F.T.C.

1989), is logical given the reliance of the states generally on

competitive markets for determining the level of title insurance

rates.

13

As in St. Paul," there is no indication here that in

acquiescing to the "notice" filings, Wisconsin and Montana

authorized the fixing of search and examination fees. Id. at 554

n.26. State acquiescence in one activity (i.e., the filing of pooled

rating information) is not state review, much less approval, of

the separate and distinct activity (i.e., classic horizontal price

fixing of underlying expenses in that filing). See generally In re

Insur. Antitrust Litig., 7 Trade Reg. Rep. (1991-1 Trade Cas.)

(CCH) 4 69,460 (9th Cir. June 18, 1991); Bolt v. Halifax Hospital

Medical Center, 891 F.2d 810 (11th Cir. 1990); Medic Air Corp.

v. Air Ambulance Auth., 843 F.2d 1187 (9th Cir. 1988).

The respondent insurers have failed to provide any

evidence that the relevant states supervised or approved the

agreement to fix title search and examination fees. Further,

that agreement was neither a reasonable nor a necessary

consequence of filing collective rate schedules and, in fact, would

have subverted effective rate review had it been attempted.

Private parties who subvert the regulatory process ought not to

enjoy immunity emanating from that process. Accordingly, the

respondent insurers’ agreement to fix search and examination

fees is neither state action nor immune from federal antitrust

regulation.

11 In St. Paul, 438 U.S. 531, 554 n.26 (1978), the Court

assumed that policy form changes desired by insurers had been filed

with the state insurance director. However, even though Rhode Island

acquiesced to the filing of these policy forms, there was no indication

that Rhode Island had “authorized the concerted refusal to deal on any

terms with St. Paul's policyholders.” Id. Hence, even though the state

had received and approved the policy forms at issue in St. Paul, state

action immunity was not available to the defendant insurers there.

14

Ill. EVEN THE FACTS FOUND BY THE

COURT OF APPEALS FAIL TO

SATISFY THE ACTIVE SUPERVISION

PRONG.

In order to apply this Court's standard for active

supervision, the Court need not embark upon an extensive

review of the states' regulation of title insurance. Even the facts

presented by the court of appeals provide no basis for a holding

that either Wisconsin or Montana has exercised the power to

review the private price fixing of respondent title insurers.

Patrick, 486 U.S. at 101.

First, the court of appeals noted that both Montana and

Wisconsin allowed unreviewed, collectively-formulated rates to

be used prior to filing. Ticor, 922 F.2d at 1139-40. Moreover,

the insurance regulators in Montana and Wisconsin are not

required to hold a hearing or to examine the filings. See, e.g.,

Wis. Stat. §§ 601.41(5) and 601.43(1) (1989-90); Gerber v.

Comm'r of Ins. of State, 242 Mont. 369, 786 P.2d 1199 (1990).

Finally, the regulators in Montana and Wisconsin, according to

the court of appeals, did no more than (1) receive submissions

for filing; (2) check some of them for mathematical accuracy; and

(3) make certain inquiries regarding geographic scope and

supporting data. Many inquiries went unanswered at all, or

unanswered for several years. Ticor, 922 F.2d at 1139-40 n.16.

Nothing in the decision of the court of appeals or in the

record before the FTC suggests that either state reviewed the

collectively set and enforced title search and examination fees to

determine if they were "excessive, inadequate or unfairly

discriminatory." See, e.g., Wis. Stat. § 625.11(1) (1989-90);

Mont. Code Ann. § 33-16-201(1)(a) (1989). Indeed, such a

review would likely be unavailing where the insurance

regulators would have no reason to believe that the search and

examination prices they were reviewing had been price fixed.

Such acquiescence is understandable because states such as

Wisconsin and Montana rely primarily on competition, not

15

regulation, to determine the appropriate level of rates charged

by insurers participating in rating bureaus.”

IV. THE EXTRAORDINARY WRIT

OF MANDAMUS CANNOT

SUBSTITUTE FOR EFFECTIVE

STATE SUPERVISION.

The court of appeals’ decision to grant state action

immunity is based, in part, upon the court's perception that the

extraordinary writ of mandamus is available to consumers and

that its availability obviates the need for active state

supervision. Ticor, 922 F.2d at 1139-40. The court of appeals’

reliance on mandamus both misapprehends state law and

contradicts the sound prior policy of this Court.

A. Placing the burden of enforcing

state policy on consumers

circumvents the policy

underlying the state action

doctrine.

The availability of mandamus does not constitute active

state supervision. Active state supervision ensures that the

state action doctrine shelters only the particular anti-

competitive acts of private parties that actually further state

regulatory policies. Town of Hallie, 471 U.S. at 46-47 (1985).

The court of appeals' decision to substitute mandamus for "active

12 "On the whole, the insurance market is fairly competitive,

and attention directed to making it more so will be more rewarding

than effort directed to the regulation of particular rates." Wis.

Stat. Ann. § 625.01 (1969) (Committee Comment). “It is the express

intent of this chapter to permit and encourage competition between

insurers on a sound financial basis, and nothing in this chapter is

intended to give the commissioner power to fix and determine a rate

level by classification or otherwise.” Mont. Code Ann. § 33-16-101

(1989).

16

state supervision” takes the burden of initiating review from the

state. As there is no guarantee that consumers or others will

act to protect the policies and interests of the state, reliance on

mandamus vitiates the policies underlying the state action

doctrine.

Additionally, federal and state antitrust laws provide for

treble damages to parties injured by antitrust violations. See

15 U.S.C, § 15 (1989); Wis. Stat. § 133.18 (1989-90); Mont. Code

Ann. § 30-14-133 (1989). Treble damages provide private

litigants with an incentive to supplement governmental

enforcement of the antitrust laws. See Gerol v. Arena, 127 Wis.

2d 1, 377 N.W.2d 618 (Ct. App. 1985). Relief through

mandamus provides no such incentive. See, eg., Law

Enforcement Standards Bd. v. Village of Lyndon Station, 101

Wis. 2d 472, 494, 305 N.W.2d 89, 100 (1981); State ex rel. Butte

Youth Serv. Center v. Murray, 170 Mont. 171, 173-74, 551 P.2d

1017, 1019 (1976). By placing the duty to enforce state policy in

the hands of consumers while removing the incentives provided

by antitrust statutes, the court of appeals nullifies the policies

and protections underlying the "active state supervision"

requirement. To jeopardize the national policy in favor of

competition in the face of such a gauzy cloak of state

involvement runs counter to sound policy. 324 Liquor Corp., 479

U.S. at 343 (1987); Midcal, 445 U.S. at 105.

B. Mandamus is inappropriate to

compel the insurance

commissioner to regulate

insurance rates as any arguable

authority to investigate lies

within the discretion of the

Commissioner.

The remedy of mandamus is drastic, to be invoked only

in extraordinary situations. Will v. United States, 389 U.S. 90

(1967). It is an abuse of discretion to compel action through

mandamus when the duty is not clear and unequivocal and

requires the exercise of discretion. See, e.g., Law Enforcement

17

Standards Bd., 101 Wis. 2d at 494, 305 N.W.2d at 100; Butte

Youth Serv., 170 Mont. at 173-74, 551 P.2d at 1019 (mandamus

is inappropriate to compel the performance of a discretionary

function).

In Montana, the insurance commissioner has the

discretion to investigate insurance rates and determine whether

further action is warranted. Gerber, 242 Mont. at 372, 786 P.2d

at 1201. Following an extensive review of the Montana code,”

that the Gerber court determined that the insurance

commissioner's investigative and prosecutorial discretion rivaled

that of a prosecutor and warranted quasi-judicial immunity. Id.

Accordingly, a writ of mandamus would not issue to compel the

performance of a discretionary act.

Wisconsin has similarly placed certain powers within the

discretion of the insurance commissioner.’* Where authority is

13 E.g., Mont. Code Ann. § 33-1-311(1) (1989): ‘"[TJhe

commissioner MAY conduct such examinations and investigations .. .

as [she] may deem proper"; Mont. Code Ann. § 33-1-701(1) (1989):

"(T]he commissioner MAY hold hearings for any purpose within the

scope of this code deemed by [her] to be necessary"; Mont. Code Ann.

§ 33-1-317 (1989): "[TJhe commissioner MAY after having conducted

a hearing pursuant to § 33-1-701, impose a fine"; Mont. Code Ann. §

33-1-318 (1989): "(Wjhenever IT APPEARS TO THE

COMMISSIONER that a person has engaged in or is about to engage

in an act or practice constituting a violation of [this act, she] MAY .. .

issue an order directing the person to cease and desist." Mont. Code

Ann. (1989) as cited in Gerber, 242 Mont. at 369, 786 P.2d at 1199 (all

emphasis from opinion).

* See, eg., Wis. Stat. § 601.41(5) (1989-90): “The

commissioner MAY at any time hold . . . hearings . . . for the purposes

of investigation ...." Wis. Stat. § 601.43 (1989-90): "WHENEVER

THE COMMISSIONER DEEMS IT NECESSARY in order to inform

himself or herself about any matter related to the enforcement of chs.

600 to 647, the commissioner MAY examine the affairs and condition

of . . . any person or organization of persons doing. . . insurance

business in this state... ." Wis. Stat. § 625.21 (1989-90): "IF THE

(continued...)

18

combined with specific grants of discretion, a regulator's

discretion to investigate is very broad. See, e.g., Vretenar v.

Hebron, 144 Wis. 2d 655, 424 N.W.2d 714 (1988) (municipal

officers have no legal obligation to prosecute all cases in which

an individual commits a violation of municipal ordinances .. .

even when open and flagrant). See also Gerber, 242 Mont. at

372, 786 P.2d at 1201. ("Like the prosecutor, the [insurance]

commissioner has the discretion to investigate and determine

whether further action is warranted.")

Accordingly, mandamus is unavailable to aggrieved

persons because the insurance commissioner's duty to

investigate and prosecute is wholly discretionary. Vretenar.

Mandamus is also improper because "it would be unavailing,

nugatory, or useless [and] its issuance would constitute an idle

act." Heider v. City of Wauwatosa, 37 Wis. 2d 466, 482, 155

N.W.2d 17, 25-26 (1967).

Failing to recognize the discretionary nature of the

insurance commissioner's power, and the impropriety of a writ

of mandamus to compel these discretionary duties, the court of

appeals erroneously concluded that mandamus was a proper

mechanism to force "active state supervision.” Ticor, 922 F.2d

at 1139-40. As mandamus is highly inappropriate, the Third

Circuit Court of Appeals’ decision to grant state action immunity

to the respondent title insurers must be reversed.

(continued)

COMMISSIONER FINDS that competition is not an effective regulator

of rates ... he or she MAY promulgate a rule.” (Emphasis added.)

19

CONCLUSION

For the foregoing reasons, this Court should grant the

petition of the Federal Trade Commission for a Writ of

Certiorari.

Respectfully submitted by,

Counsel for the State of Wisconsin

JAMES E. DOYLE

Attorney General

Kevin J. O'Connor*

Assistant Attorney General

in Charge of Antitrust

Enforcement

Wisconsin Departmenit of Justice

Post Office Box 7857

Madison, Wisconsin 53707-7857

(608) 266-8986

*Counsel of Record