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Ongoing Tension Between Filed-Rate And State-Action Doctrines

Competition Law360
July 10, 2013

By Qianwei Fu
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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.[1] The court found “no apparent requirement” that the state-action and filed-rate doctrine be “reconciled.”[2]

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.[3]

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.[4] 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.”[5]

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.[6]

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.[7]

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.’”[8]

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.[9] Recent years have seen a growing weight of authority supporting application of the doctrine to rates authorized by state agencies.[10]

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.”[11]

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.”[12]

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.[13] 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.[14]

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.[15] In Wileman, the Ninth Circuit held, “The mere fact of failure to disapprove [by the agency] does not legitimize otherwise anticompetitive conduct.”[16]

Mere nondisapproval, the court held, “is equally consistent with lack of knowledge or neglect as it is with assent.”[17]  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.[18]

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.[19] 

Tension between Filed-Rate and State-Action Doctrines

Extending the filed-rate doctrine to state regulatory schemes without requiring any meaningful administrative review creates serious theoretical tension between the filed-rate and state-action doctrines. As commentators, including the amici curiae in McCray, aptly pointed out, this approach would impose very different antitrust treatment for state regulatory regimes that are identical in every way except that one has a pro-forma rate-filing requirement, and the other does not.

Courts that have adopted this approach seem to have overlooked the broader analytical question of whether, given a state’s involvement, the anti-competitive conduct in question ostensibly, blessed, in some way, by state government, nevertheless violates federal antitrust laws.

In antitrust law, the state-action doctrine permits certain state-mandated or state-directed restraints, which would otherwise violate federal antitrust laws. First proclaimed in Parker v. Brown, the state-action antitrust immunity is grounded on principles of federalism.[20]

In upholding the legality of a California regulatory program that limited raisin output and thereby raised raisin prices, the court concluded that Congress did not intend the Sherman Act to restrain state efforts to regulate trade.[21]  Private anti-competitive conduct is entitled to state-action immunity only when satisfying a two-prong analysis: “the State has articulated a clear and affirmative policy to allow the anticompetitive conduct,” and “the State provides active supervision of anticompetitive conduct undertaken by private actors.”[22]

In Ticor, the Supreme Court rejected the state-action immunity for “file and use” title insurance regulatory systems by which private parties set rates subject to veto only if the state chose because “[t]he mere potential for state supervision” was insufficient to displace the unequivocal commands of Congress for free competition.[23]

The court emphasized that the purpose of the active supervision inquiry was to determine “whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties.”[24]

Ticor teaches that state rate-filing regulations do not shield private parties from antitrust liability unless the criteria of state-action immunity are met.[25]  Interestingly, the court never discussed the filed-rate doctrine in Ticor.

Under the current framework, the filed-rate doctrine is undoubtedly a more viable defense to state rate-setting regimes because the standard of administrative supervision required for the application of the state-action doctrine is significantly higher. The lower courts’ varying interpretations of the acceptable level of agency review under the filed-rate doctrine have led to inconsistent judicial results in otherwise similar state rate-setting contexts.

Professor Hovenkamp of the University of Iowa College of Law criticized the lack of authorization requirement in the filed-rate doctrine because it “may serve to confer an effective antitrust immunity in situations where antitrust’s ‘state action’ doctrine would not apply.”[26] 

Perhaps a sensible solution when addressing state rate-setting schemes is to deem the filed-rate doctrine subsumed and thus made inapplicable by the state-action doctrine. A lesser alternative is to limit the filed-rate doctrine’s application to state regulators only when the state regulatory regime in question provides affirmative, meaningful administrative review.

--By Qianwei Fu, Zelle Hofmann Voelbel & Mason LLP

Qianwei Fu is an associate in the firm's San Francisco office.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 682 F.3d 229 (3d Cir. 2012).

[2] Id. at 238 n.6.

[3] McCray v. Fid. Nat. Title Ins. Co., 133 S. Ct. 1242 (2013).

[4] Keogh v. Chi. & N.W.Ry Co., 260 U.S. 156 (1922); Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 577 (1981).           

[5] Simon v. KeySpan Corp., 694 F.3d 196, 205 (2d Cir. 2012), cert. denied, 133 S. Ct. 1998 (U.S. 2013); see also AT&T Co. v. Central Office Tel. Co., 524 U.S. 214 (1988) (holding that filed-rate doctrine barred state law contract and tort claims challenging the federally filed-rate).

[6] E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027, 1033–34 (9th Cir.2007) (“The filed rate doctrine ... bar[s] challenges under state law and federal antitrust laws to rates set by federalagencies”); see also Miletak v. Allstate Ins. Co., 2010 WL 809579, at *4 (N.D.Cal. Mar. 5, 2010) (“The doctrine does not directly apply to a situation, as here, involving potential interference with rates set by a state agency rather than a federal agency.”); Williams v. Union Fid. Life Ins. Co., 123 P.3d 213, 219 (Mont. 2005) (refusing to apply the doctrine to an insurance dispute because the rates were not “set, reviewed or filed by a federal regulatory authority”).

[7] In re Title Ins. Antitrust Cases, 702 F. Supp. 2d 840, 889 (N.D. Ohio 2010).

[8] Taffet v. Southern Co., 967 F.2d 1483, 1494 (11th Cir. 1992).

[9] Id.

[10] See, e.g., In re Title Ins. Antitrust Cases, 702 F.Supp.2d 840(N.D. Ohio 2010); McCray v. Fid. Nat’l Title Ins. Co., 636 F.Supp.2d 322 (D. Del. 2009); In re Pa. Title Ins. Antitrust Litig., 648 F.Supp.2d 663 (E.D. Pa. 2009); Texas Commercial Energy v. TXU Energy, Inc., 2004 WL 1777597 (S.D. Tex. June 24, 2004); Green v. Peoples Energy Corp., 2003 WL 1712566 (N.D. Ill. Mar. 28, 2003).

[11] McCray, 636 F.Supp.2d at 328.

[12] Clark v. Prudential Ins. Co. of Am., 2011 WL 940729, at*14 (D.N.J. Mar. 15, 2011).

[13] See Town of Norwood v. New Eng. Power Co., 202 F.3d 408, 419 (1st Cir.2000) (“It is the filing of the tariffs, and not any affirmative approval or scrutiny by the agency, that triggers the filed rate doctrine.”); McCray v. Fidelity Nat’l Title Ins. Co., 682 F.3d 229, 238-39 (3d Cir. 2012); In re Title Ins. Antitrust Cases, 702 F.Supp.2d 840, 855 (N.D. Ohio 2010) (“[d]efining the contours of an agency’s review of a filed rate is a task best left to the legislative branch”); In re Pennsylvania Title Ins. Antitrust Litig., 648 F.Supp.2d 663, 674-75 (E.D. Pa. 2009) (“as long as the regulatory scheme requires the filing of rate with a government agency that has legal authority to review those rates, the filed rate doctrine applies regardless of the actual degree of agency review of those filed rates”).

[14] 982 F.2d 386 (9th Cir. 1992).

[15] 909 F.2d 332, 337 (9th Cir. 1990).

[16] Id. at 337-38.

[17] Id. at 338.

[18] Brown, 982 F.2d at 394.

[19] McCray, 682 F.3d at 239.

[20] 317 U.S. 341 (1943).

[21] Id. at 351-352.

[22] California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980).  The Supreme Court recently narrowed the scope of activities that may fall within the state-action doctrine, requiring a showing of a “clearly articulated and affirmatively expressed state policy to displace competition.”  F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1007, 1011 (2013).

[23] F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621-622 (1992).

[24] Id. at 635.

[25] See also Cantor v. Detroit Edison Co., 428 U.S. 579, 592-98 (1976) (holding (without discussing the filed-rate doctrine) that state-action immunity did not apply even though the state agency approved the tariff which included the anticompetitive light bulb distribution program).

[26] Herbert J. Hovenkamp, Antitrust and the “Filed Rate” Doctrine: Deregulation and the State Action, University of Iowa Legal Studies Research Paper (Mar. 2013), available at =2191566.

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