J. F. Crawford v. American Title Insurance Company

518 F.2d 217, 1975 U.S. App. LEXIS 12964

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 27, 1975
• Docket: 74-2242
• Status: Published

Opinions

PER CURIAM:

Faced with deciding how closely the federal courts should scrutinize state schemes for regulating insurance practices ¹ before determining that the McCarrofb-Férguson Act exemption, Title 15, U.S.C., § 1012(b), from federal antitrust laws applies, the district court adopted a middle of the road approach and held ² that the statutory scheme, embodied in Code of Alabama, Title 28A, § 227 et seq., for regulation of the specific industry, was sufficient to bring the title insurance industry within the exemption. He rejected the argument of plaintiffs-appellants, representing a class of Alabama title insurance purchasers, that a companion Alabama Statute, Code of Alabama, Title 28A, § 253, — claimed by appellants to control, as the specific takes precedence over the general — operates to prevent the Alabama Insurance Commissioner from taking any action respecting rates or rate fixing within the title insurance industry.

The district court opinion precisely stated the issues, analyzed them in the light of existing precedent, and reached what we think was the correct decision. For the reason stated by the district court, its judgment dismissing the action is affirmed.³

Affirmed.

APPENDIX

MEMORANDUM OPINION

(Number and Title Omitted)

(Filed Apr 17, 1974)

The plaintiffs on behalf of themselves and others, bring this action under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2, against nine title insurance companies and agents. It is alleged that defendants engaged in an “unlawful combination and conspiracy in unreasonable restraint of trade and commerce ... to raise, fix and maintain the prices for premiums or fees charged for the issuance of title insurance policies in the ‘Greater Birmingham Area.’ ” It is also alleged that defendants have conspired to monopolize, attempted to monopolize, and have monopolized such trade and commerce under this same federal antitrust law.

Each of the defendants has separately moved to dismiss the complaint for failure to state a claim upon which relief can be granted and for lack of jurisdiction over the subject matter, grounded upon the McCarron-Ferguson Act, 15 U.S.C. § 1011 et^seq.

The McCarráíi-Ferguson Act provides in relevant part that “the Sherman Act . shall be applicable to the business of insurance to the extent that such business is not regulated by State law.” 15 U.S.C. § 1012(b). To the extent a, state regulates such business by state law, the Sherman Act and other federal' antitrust laws are not applicable. This Court concludes that the State of Alabama has regulated the business of title insurance within the meaning of the McCarron Act so as to render the Sherman Act inapplicable and, that therefore, the motions of the defendants should be granted.

The McCarron Act renders the federal antitrust laws inapplicable when state legislation generally proscribes, permits or otherwise regulates the conduct in question and authorizes enforcement through a scheme of administrative supervision. FTC v. National Casualty Co., 357 U.S. 560, 78 S.Ct. 1260, 2 L.Ed.2d 1540 (1958); California League of Ind. Ins. Pro. v. Aetna Cas. and S. Co., 175 F.Supp. 857 (N.D.Cal.1959); Commander Leasing Co. v. Transamerica Title Ins. Co., 477 F.2d 77 (10th Cir. 1973).

Without question Alabama has generally regulated title insurance throughout any relevant period. The Insurance Code of Alabama (Code of Alabama, Recompiled, 1971 Cumulative Supplement) contains numerous provisions applicable generally to all insurance companies as well as other provisions specifically applicable to title insurance companies.¹ Indeed plaintiffs concede that Alabama has generally regulated title insurance (also conceding, as they must, that title insurance is “insurance” within the meaning of the McCarron Act). They rest their case on the contention that the' specific conduct alleged in this case has not been regulated by Alabama. This is the crucial question.

In 1957, Alabama enacted the Insurance Trade Practices Law, now Title 28A § 227 et seq. That statute was enacted expressly in response to the McCarron Act (as stated in its preamble. Title 28A § 227). It specifically prohibits “all unfair methods of competition” (emphasis supplied) in the business of insurance, and grants specific administrative and supervisory powers to the Insurance Commissioner pursuant to the prohibition.

It can hardly be argued that the phrase “all unfair methods of competition” may not encompass unauthorized agreements to fix premium rates or monopolistic practices as charged in this case. It must be remembered that the draftmen of the model Insurance Trade Practices Act, upon which the Alabama Act is patterned, specifically intended to respond to the invitation of the McCarron Act to withdraw from federal control (and concomitantly place under state control) the very kind of conduct which is charged here.²

Moreover the same terminology (“unfair methods of competition”) had been used in Section 5 of the Federal Trade Commission Act (of which the Alabama Insurance Trade Practices Law is a counterpart) and has been interpreted to cover a broad spectrum of unauthorized trade practices, including establishment of rates and charges. F.T.C. v. Brown Shoe, 384 U.S. 316, 86 S.Ct. 1501, 16 L.Ed.2d 587; F.T.C. v. Cement Institute, 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed. 1010, reh. den. 334 U.S. 839, 68 S.Ct. 1492, 92 L.Ed. 1764. More importantly here, it has been uniformly held that “a violation of the Sherman Act is an ‘unfair method of competition’ under the Federal Trade Commission Act.” Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307; Union Circulation Co. v. Federal Trade Commission, 241 F.2d 652 (CA 2 1957). It is necessary to conclude that the same conduct would be subject to regulation by the Alabama Insurance Commissioner under the Alabama Trade Practices Law since the Supreme Court of Alabama has held that federal court interpretation of similar terms used in federal statutes is to be followed. Jackson Securities & Investment Co. v. State, 241 Ala. 288, 2 So.2d 760, 763 (1941) (“Our statute using a term defined by the federal courts should ordinarily be considered as having the meaning thus given by those courts, if consistent with our conception of its true meaning”); Avery Freight Lines, Inc. v. Alabama Public Service Commission, 267 Ala. 646, 104 So.2d 704, 709 (1958). (“In construing the terms and provisions of Alabama statutes derived from federal statutes, such terms and provisions will usually be considered as having the meaning given by the federal courts”).

This Court concludes, therefore, that the Alabama Insurance Trade Practice Act, reaching as it does all unfair methods of competition, places the very conduct charged in the complaint within the ambit of activities over which the Insurance Commissioner has broad regulatory powers.

Notwithstanding the foregoing, plaintiff contends that Alabama has specifically excepted title insurance (as well as life insurance and health and accident insurance) from all general insurance regulations, including the Trade Practices Act. Their argument is based upon Section 13 of Title 28A (provisions relating to a particular kind of insurance shall prevail over provisions relating to insurance generally) and Section 253 of Title 28A (charging the Alabama Commissioner of Insurance with the duty of administering rating bureau provisions applicable to other insurance companies but excepting life, accident and health and title insurance). Since the Commissioner of Insurance (so plaintiffs reason) is not charged with the duty of administering laws pertaining to rating systems for title insurance (or for life or health and accident insurance) he has no authority to enforce the unfair methods of competition provisions of the Trade Practices Law against such companies. This Court finds it impossible to accept this view. Section 250 et seq., providing for rating organizations for certain types of insurance, must be construed in pari materia with Section 227 et seq., the Trade Practices Law. When the rate bureau system was first established by the predecessor to Section 250 et seq., of Title 28A (Title 28, Section 355 et seq.) the administration of “all laws now relating, or hereafter relating, to insurance rates and rating systems” was a responsibility of the Bureau of Rates and not of the Superintendent of Insurance. There is nothing to suggest that when the Trade Practices Law was enacted in 1957 it was intended that the Superintendent of Insurance was not charged with enforcing its provisions against all insurance companies subject to his control without regard to whether supervised rate making procedures had been established for the particular kind of insurance. Rating bureaus represent an exception, as it were, to the prohibition, whether state or federal, against joint rate activity. That no rate bureau provisions have been made for title insurance (or for life or health and accident insurance) does not, in the opinion of this Court, mean that the provisions of the Trade Practices Act are not applicable or that the Commissioner cannot enforce those provisions against such companies. Indeed, the necessary conclusion is to the contrary. Since title insurance, as well as life and health and accident insurance, are not treated specifically with respect to the establishment of premium rates the general provisions fully apply.

Accordingly, the Court concludes that the Alabama Insurance Trade Practices Law (Title 28A, Section 227 et seq.) is fully applicable and the McCarron Act exemption from the federal antitrust laws is therefore activated. Defendants’ motions are therefore granted and this action dismissed.

Done this 17th day of April, 1974.

s/Seybourn H. Lynne Senior Judge

* * *

ORDER DISMISSING THIS ACTION

In conformity with the memorandum opinion of the Court contemporaneously filed herewith,

It is ordered, adjudged and decreed by the Court that this action be and the same is hereby dismissed.

1 . Here, the asserted monopolistic practices were those of private price-fixing agreements between title insurance companies. The parties stipulated that the business of writing title insurance was within the scope of insurance business as defined by the McCarron-Ferguson Act and for purposes of this litigation.

2 . The district court’s opinion is reproduced as an Appendix hereto.

3 . For recent cases adopting the same basic approach in analogous situations as that adopted by the Alabama district court see the following: Harrison v. Chicago Title and Trust Company, 1974-2 Trade Cases, ¶ 75,321 (D.Kans. July 31, 1974); Mitgang v. Western Title Insurance Company, 1974-2 Trade Cases, ¶ 75,322 (N.D.Cal. October 16, 1974). See also Meicler v. Aetna Casualty and Surety Co., et al., 5 Cir. 1975, 506 F.2d 732; Addrisi v. Equitable Life Assurance Society of the United States, 9 Cir. 1974, 503 F.2d 725, cert. denied 1975, 421 U.S. 922, 95 S.Ct. 1590, 43 L.Ed.2d 790.

1 . Title 28A became effective January 1, 1972. However, prior to that date its predecessor, Title 28, as well as Article 10 of Article 7 of Title 10 of the Alabama Code, contained similar provisions pertaining to insurance generally and to title insurance specifically which are now codified in Title 28A. Regulation prior to 1972 was not materially different from that provided in the current Insurance Code.

2 . The McCarron Act itself was prompted by the Supreme Court’s decision in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, which itself involved charges of violations of Sections 1 and 2 of the Sherman Act.