July 10, 2013
In a Sept. 13, 2012 Competition Law 360 article, we discussed the Third Circuit’s opinion in McCray v. Fid. Nat’l Title Ins. Co., in which the Third Circuit applied the filed-rate doctrine to title insurers’ rate filings with state agencies without a requirement for meaningful state review. The court found “no apparent requirement” that the state-action and filed-rate doctrine be “reconciled.”
The Third Circuit’s holding can lead to the inexplicable result that collusively fixed rates filed with a state agency enjoy a treble damages exemption even though the challenged rates could not meet the higher standard of administrative supervision required for application of the state-action immunity. The U.S. Supreme Court recently declined to weigh in on the issue, and the tension between the filed-rate and state-action doctrines remains unresolved.
Increasing Application of Filed-Rate Doctrine to State Agencies
The filed-rate doctrine was developed in the context of federal regulation. It was created at a time when participants in a regulated industry were typically required to file their proposed rates with federal regulators who reviewed the rates to ensure they were fair and reasonable.
Elucidating the doctrine in Keogh and Square D, the Supreme Court explained that only the relevant regulatory authority could change these rates, even if the rates were initially set in a fraudulent or improper manner. Thus, the doctrine prohibits antitrust challenge through a private treble damage action to rates set or approved by federal agencies.
Since Keogh, the filed-rate doctrine has been extended across the spectrum of regulated industries and market sectors. When it applies, “it is rigid and unforgiving” and “bars both state and federal claims.”
Although the Supreme Court has never extended the doctrine to rates set by state regulators, judicial application of the doctrine among lower courts in this regard has been muddled. Acknowledging the context of the doctrine’s origination, some minority courts have found the filed-rate doctrine inapplicable to rates set by a state agency rather than a federal agency.
But a majority of courts that have ruled on the applicability of the filed-rate doctrine to state-regulated rates have applied some version of a filed-rate doctrine to bar antitrust challenges to state-regulated rates.
For example, the court in Taffet v. Southern Co. stated that “where the legislature has conferred power upon an administrative agency to determine the reasonableness of a rate, the rate-payer ‘can claim no rate as a legal right that is other than the filed rate.’”
In the court’s view, the doctrine applies with equal force regardless of whether the rate setting is approved by a federal or state agency. Recent years have seen a growing weight of authority supporting application of the doctrine to rates authorized by state agencies.
In McCray, the Delaware district court followed this view and concluded that it “will preclude the recovery of treble damages for a Sherman Act claim predicated on the alleged excessiveness or otherwise unreasonableness of a rate filed with a state administrative agency.”
Growing Disparity in Interpreting the Acceptable Degree of Agency Review
McCray illustrates the key disagreements among circuits concerning the extent of administrative review required in order to trigger the filed-rate doctrine. Indisputably, the doctrine does not apply in a situation “when a rate is filed with an agency with no authority to approve or reject it.”
When the state agency does have rate-setting authority, courts disagree on the type of agency approval or acceptable level of regulatory review. Some courts require only that the rates to be filed, regardless of any actual review of the filed rates. Other courts require meaningful administrative review before the filed-rate doctrine can apply. The leading case for the latter proposition is Brown v. Ticor Title Ins. Co.
In finding that prior administrative approval of rates is necessary to justify the filed-rate doctrine application, the court in Brown relied on Wileman Brothers & Elliot Inc. v. Giannini, a case addressing alleged state law antitrust violations against fruit producers. In Wileman, the Ninth Circuit held, “The mere fact of failure to disapprove [by the agency] does not legitimize otherwise anticompetitive conduct.”
Mere nondisapproval, the court held, “is equally consistent with lack of knowledge or neglect as it is with assent.” Brown applied these same principles and refused to extend the filed-rate doctrine to title insurance regulatory regimes which were insufficiently comprehensive and did not provide for meaningful review of rates.
Addressing almost identical facts, the district court and the Third Circuit in McCray expressly rejected Brown’s distinction of agency authorization through “approval” or “non-disapproval” of filed rates. Those courts cited contrary authority, which suggests that affirmative agency review may be unnecessary, and found that the regulatory review process at issue was nonetheless adequate.
Tension between Filed-Rate and State-Action Doctrines
Extending the filed-rate...
