Broadening Application Of The Filed Rate Doctrine


Competition Law360
September 13, 2012

[authors: Richard M. Hagstrom and Monica Geyen]

Ninety years ago Justice Brandeis delivered the opinion in Keogh v. Northwestern Railway Co., 260 U.S. 156 (1922), and based on four policy reasons, concluded that a rate filed and approved by the Interstate Commerce Commission (“ICC”) was not subject to collateral attack by way of a Sherman Act treble damages action.  Historically, the filed rate doctrine has been limited to common carriers and utilities regulated by federal agencies under comprehensive statutes and regulations, which provide remedies for harmed consumers and require regulator rate-setting.  See Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981). 

To date, the United States Supreme Court has never addressed whether the doctrine bars Sherman Act treble damages claims for rates collusively set and jointly filed with a state agency.  In a matter of first impression for it, the Third Circuit Court of Appeals entered unchartered territory by expanding the application of the filed rate doctrine to rates filed with state insurance departments in two related cases.  See In re N.J. Title Ins. Litig., 683 F.3d 451, 453 (3d Cir. 2012); McCray v. Fid. Nat’l Title Ins. Co., 682 F.3d 229, 233 (3d Cir. 2012).  In both cases Plaintiffs claimed that multiple title insurance companies collectively fixed title insurance rates in violation of the Sherman Act. 

Factual Background of In re New Jersey Title Insurance Litigation

In New Jersey, the Department of Banking and Insurance (“DOBI”) approves and regulates title insurance rates.  Defendants are members of and filed rates through the New Jersey Land Title Insurance Rating Bureau (“NJLTIRB”), which “operates . . . as a clearing house for its constituent members by collecting their proposed rates and supporting data and submitting them” to the DOBI.  Plaintiffs alleged that Defendants, in concert with the NJLTIRB, collectively fixed supra-competitive title insurance rates and sought treble damages and injunctive relief.  In re N.J. Title Ins. Litig., 683 F.3d at 454.  The district court dismissed Plaintiffs’ complaint, concluding that: (1) Plaintiffs’ Sherman Act claim was barred by the filed rate doctrine and the McCarran-Ferguson Act; (2) Plaintiffs lacked standing to seek injunctive relief; and (3) Plaintiffs’ New Jersey Antitrust Act claim was barred by a state statutory antitrust exemption.  Id.

Factual Background of McCray v. Fidelity National Title Insurance Company

Delaware law requires title insurers to individually determine their respective insurance rates but allows the Delaware Title Insurance Rating Bureau (“DTIRB”)—another Defendant in the case, to file those rates with the Delaware Department of Insurance (“DOI”).  Under Delaware’s “file and use” statutory scheme, Delaware title insurers’ rates are effective on filing and are automatically deemed approved unless specifically disapproved by the Commissioner within a narrow 30-day period.  McCray, 682 F.3d at 233-34.  The Commissioner took no action with regard to Defendants’ jointly filed rates.

Plaintiffs’ class action complaint alleged that Defendants used the DTIRB as a vehicle collusively to set uniform title insurance rates.  Id. at 234-35.  The district court held that Plaintiffs’ claims for damages and injunctive relief were barred by: (1) the filed rate doctrine—concluding that the doctrine precluded suits challenging rates filed with federal or state agencies; and (2) the McCarran-Ferguson Act, exempting conduct from antitrust liability if it constituted the “business of insurance” and was “regulated by state law.”  Id. at 235.

The Third Circuit’s Expansion of the Filed Rate Doctrine

In substantially similar opinions, the Third Circuit Court of Appeals upheld the district court decisions in both cases, concluding: (1) the filed rate doctrine precluded the Plaintiffs’ claims; and (2) the Plaintiffs did not have standing to pursue injunctive relief.  In re N.J. Title Ins. Litig., 683 F.3d at 460; McCray, 682 F.3d at 242.

Application to State Agencies

After re-examining the origins of the filed rate doctrine in the Keogh decision, the Third Circuit, relying on footnote 19 in Square D. Co. v. Niagara Frontier Tariff Bureau Inc., 476 U.S. 409, 417, n.19 (1986), concluded that the mere filing of rates by Defendants triggered a treble damages exemption.  See In re N.J. Title Ins. Litig., 683 F.3d at 454-55; McCray, 682 F.3d at 236 (discussing Square D, 476 U.S. at 419-20, 423).  Although the U.S. Supreme Court had never applied the filed rate doctrine to rates filed with state agencies, the Third Circuit in brief referenced two other courts that had elected to extend the doctrine to state agency action.[1]  In re N.J. Title Ins. Litig., 683 F.3d at 455; McCray, 682 F.3d at 236.  Yet, the central issue in Square D was not expansion of the filed rate doctrine, but rather the continued viability of its application to the Interstate Commerce Act (“ICA”) given that its original purpose, as stated in Keogh, was largely eroded and perhaps “unwise as a matter of policy.”  Square D, 476 U.S. at 420.  Square D ultimately relied on a “clear congressional awareness of Keogh” in the “context” of the ICA to continue its application under stare decisisId. at 419, 423.  See also In re N.J. Title Ins. Litig., 683 F.3d at 454-55; McCray, 682 F.3d at 236 (discussing same).  Given the limited issue in Square D, footnote 19 is arguably dictum as to any application outside the “context” of the ICA.  See N.J. Media Group, Inc. v. Ashcroft, 308 F.3d 198, 201 (3d Cir. 2002).

No Meaningful Review

Plaintiffs in both cases argued that if the filed rate doctrine is to be expanded to filings with state agencies, there must be active and meaningful review as required under the two prong state action exemption analysis of California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).  Otherwise a state agency’s inaction subverts the paramount purposes of the Sherman Act.  FTC v. Ticor Title Ins. Co. (Ticor), 504 U.S. 621 (1992).  The Third Circuit rejected Plaintiffs’ argument and expanded the filed rate doctrine to state agencies even where the Delaware and New Jersey insurance laws do not provide for meaningful review of the title insurance rates.  The Third Circuit’s decisions rejected the analysis of the Ninth Circuit in Brown v. Ticor Title Insurance Co., 982 F.2d 386 (9th Cir. 1992), which denied application of the filed rate doctrine absent meaningful review by the state agency.  The Third Circuit concluded that the filed rate doctrine “applies as long as the agency has in fact authorized the challenged rate.”  McCray, 682 F.3d at 238; see also In re N.J. Title Ins. Litig., 683 F.3d at 458.  It reasoned that because the Supreme Court had not yet previously suggested a distinction between agency authorization through “approval” or “non-disapproval,” this distinction was meaningless and not a prerequisite to the filed rate doctrine’s application.  Additionally, in McCray, the Third Circuit concluded that the meaningful review distinction was insignificant because “the DOI was required to review the challenged rates”—even though it was a “file and use” system.  682 F.3d at 239; see also In re N.J. Title Ins. Litig., 683 F.3d at 457.  Yet, Ticor, in addressing virtually identical “file and use” statutes in its state action exemption analysis, concluded there must be actual evidence of active decision-making by the agency even though the applicable statutes purportedly “required” agency oversight.  504 U.S. at 634-35.

The Third Circuit’s broad reliance on Square D’s footnote 19, when applied to state agencies, appears to conflict with the analyses of prior Supreme Court decisions.  In several state action exemption cases, rates were filed, yet the joint conduct was not exempt because there was no meaningful review by the state agency.  See Ticor, 504 U.S. at 627; 324 Liquor Corp. v. Duffy, 479 U.S. 335, 337 (1987); Midcal, 445 U.S. at 99.  If the mere filing of a rate with a state agency was sufficient to create an antitrust exemption, there would have been no need for those courts to analyze the facts under Midcal’s two-pronged test.

Filed Rate Doctrine Policies

The Third Circuit reviewed two of the Keogh, policy reasons—non-discrimination and non-justiciability, and summarily dismissed a third—the availability of a remedy.  The “nonjusticiability” principle necessitates preservation of the exclusive role of agencies in approving rates, and the “nondiscrimination” principle is invoked to prevent carriers from engaging in price discrimination between ratepayers.  In re N.J. Title Ins. Litig., 683 F.3d at 455-56; McCray, 682 F.3d at 241-42. 

As Judge Friendly wrote in analyzing Keogh the “first, and most important” Keogh policy reason “turns on the existence of a [consumer] remedy in the ICA.” Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 760 F.2d 1347, 1351 (2d Cir. 1985).  Unlike Keogh, where plaintiffs participated in extensive hearings, were afforded full due process rights, and had remedies under the ICA, 260 U.S. at 160, 162, no similar rights were available to the class members.  See, e.g., 18 Del. C. § 2507 (an order disapproving a previously filed and used rate “shall not affect any contract or policy made or issued” prior to the order).  Further, while the non-discrimination policy is “paramount,” Keogh, 260 U.S. at 163, AT&T v. Central Office Telephone, Inc., 524 U.S. 214, 222-23 (1998), the Third Circuit noted that it was not implicated.  In re N.J. Title Ins. Litig., 683 F.3d at 459; McCray, 682 F.3d at 242.

That leaves the non-justiciability strand.  The Third Circuit concluded that the non-justiciability strand supported the filed rate doctrine’s application because a damages award would require the district court to calculate the “legal rate but for” the antitrust violations and thereby vitiate the primary concern to prevent courts from engaging in the ratemaking process.  The court concluded that the DOI’s authority—despite its failure to exercise any meaningful review of the rates—would be subverted through such an award.  See In re N.J. Title Ins. Litig., 683 F.3d at 457-58; McCray, 682 F.3d at 242.

Under the facts alleged in the New Jersey and Delaware complaints, at trial, the district court and jury would not be substituting their judgment for the action of the insurance commissioners, but rather, for their inaction.  The jury would be asked to determine damages just as in any other price-fixing case.  Courts deal with damage issues regularly in antitrust cases by comparing the supra-competitive prices charged by defendants with the “but for” competitive price.  Absent collusion, filed rates and competitive prices are the same.  IA Phillip E. Areeda & Herbert Hovencamp, Antitrust Laws 411 ¶ 247 (3d ed. 2006). 


Finally, the Third Circuit dismissed the Plaintiffs’ claims for injunctive relief, suggesting that Plaintiffs did not have standing under Article III of the U.S. Constitution to pursue their claims because they failed to: (1) allege an injury-in-fact by failing to indicate “actual or imminent” plans to purchase title insurance; and (2) establish that the DTIRB and NJLTIRB intended to file new rates in the future.  In re N.J. Title Ins. Litig., 683 F.3d at 242-43; McCray, 682 F.3d at 460.  In reaching this conclusion, the Third Circuit perhaps: (1) ignored that thousands of class members purchase title insurance daily in Delaware and New Jersey; and (2) overlooked that Article III standing exists for injunctive relief under section 16 of the Clayton Act in instances, even when a treble damages action may be precluded by the filed rate doctrine, where an action is brought to “dissolve an illegal combination or to confine it to the legitimate area of collaboration,” Georgia v. Penn. R. Co., 324 U.S. 439, 460 (1945).

Going Forward

By applying the filed rate doctrine to rate filings with state agencies without a requirement for meaningful state review, the Third Circuit may have set the stage for the Supreme Court to address the intersection of the filed rate doctrine and the state action exemption.  The Third Circuit seemed to invite such review.  See In re N.J. Title Ins. Litig., 683 F.3d at 453.  Further, given the paramount purpose behind Justice Brandeis’ analysis in Keogh was to shield consumers, the fact that the filed rate doctrine has now been wielded as a sword by defendants suggests the Supreme Court should once again analyze the doctrine’s viability.

[1]  See Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 20 (2d Cir. 1994); H.J. Inc. v. Northwestern Bell Telephone Co., 954 F.2d 485, 494 (8th Cir. 1992), where the state agencies “promulgated” the rates. 

Zelle Hofmann served as co-lead counsel for the plaintiffs in the McCray matter.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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