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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 504 U.S. 621

## Text

; } Supreme Court, U.S. |
“% FILED
e |
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0168%3A05. Public record. Not legal advice.