Villanueva v. Fidelity National Title Co.

In Villanueva v. Fid. Nat'l Title Co., 2018 Cal. App. LEXIS 802 (Ct. App. Sep. 7, 2018), the Sixth District Court of Appeal reversed a judgment against underwritten title company Fidelity National Title Company (“Fidelity”) in a class action lawsuit alleging violation of Unfair Competition Law (“UCL”) predicated on Fidelity’s alleged failure to comply with Insurance Code section 12414.27, which prohibits underwritten title companies from charging rates for services that are not in accordance with the rates on file with the Department of Insurance (“DOI”). The appellate court held the lawsuit was barred by the statutory immunity provision found in Insurance Code section 12414.26, which provides, in relevant part, that “[n]o act done, action taken, or agreement made pursuant to the authority conferred by Article 5.5. . . of this chapter shall constitute a violation of or grounds for prosecution or civil proceedings under any other law of this state heretofore or hereafter enacted which does not specifically refer to insurance.”

In 2006, plaintiff Manny Villanueva (“Villanueva”) and his wife utilized Fidelity to provide escrow services when they were refinancing their home. In addition to its base rate, Fidelity charged additional fees for document preparation, a “Draw Deed” fee, and overnight delivery and courier fees for services provided by outside vendors. Fidelity’s schedule of rates on file with the DOI governing the Villanuevas’ transaction included a “document preparation” fee but did not include rates for delivery or courier services performed by outside vendors or a “Draw Deed” fee. Villanueva filed a class action lawsuit against Fidelity, alleging it had engaged in unlawful conduct by charging him and others fees for delivery services and “Draw Deed” services that were not listed on Fidelity’s rate filings. 

At trial, plaintiffs argued four distinct theories of liability. Under “Delivery Theory No. 1,” plaintiffs argued Fidelity’s charges for delivery services provided by third party vendors were unlawful because the rates for third party delivery services were not included in Fidelity’s rate filings with the DOI. Under “Delivery Theory No. 2,” plaintiffs argued the charges were unlawful because they were for services included in Fidelity’s base rate and, therefore, Fidelity had billed its customers twice for the same services. Under the “General Draw Deed Theory,” a subset of plaintiffs argued that Fidelity could not charge its filed rate for “document preparation” for preparing a deed if the customer’s closing statement described the service as “draw deed” services rather than “document preparation.” Finally, under the “Gap Period Theory,” a subset of plaintiffs involved in real estate transactions during a 21-month period in which Fidelity’s rate filings did not include a rate for “document preparation” for real estate transactions (“Gap Period”) argued that Fidelity’s charges for drawing a deed were unlawful, even if Fidelity’s filed rate for “document preparation” authorized draw deed services in other instances.

On Fidelity’s motions for nonsuit during trial, under Delivery Theory No. 1, the trial court found that Fidelity had violated Insurance Code section 12414.27 (“Section 12414.27”) by charging for delivery services not included in its rate filings, and concluded Delivery Theory No. 2 was moot. The trial court found in favor of Fidelity on the General Draw Deed Theory, but held that charging for drawing a deed during the Gap Period was unlawful. The trial court also rejected Fidelity’s statutory immunity claim pursuant to Insurance Code section 12414.26 (“Section 12414.26”). 

On appeal, Fidelity argued, in relevant part, that it was immune from suit under Section 12414.26 because the Insurance Commissioner has exclusive original jurisdiction over all matters related to the making, filing, and use of its rates. Specifically, the question presented was “whether the statutory immunity in Chapter 1 (§ 12414.26) bars this action challenging the use rates for which there have been no rate filings; rates that have neither been approved nor accepted by the Insurance Commissioner.”

In addressing this question, the appellate court examined the California Supreme Court’s decision in Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 4th 26 (1998), the only published California decision discussing statutory immunity pursuant to Section 12414.26. The Quelimane Court held that the Insurance Code does not displace the UCL “except as to title insurance company activities related to rate setting,” and found that the action at issue was not barred by Section 12414.26 immunity because it involved an alleged conspiracy to refuse to sell title insurance on certain types of property, rather than rate setting activities. The appellate court examined several other California and federal decisions discussing Section 12414.26 and analogous immunity provisions, summarizing their findings as follows:

In summary, the cases hold that the immunity provisions in the Insurance Code (§§ 1860.1, 11758, 12414.26) barred civil actions that challenged as excessive auto insurance rates that had been approved by the Insurance Commissioner (Walker, supra, 77 Cal.App.4th at pp. 756–757), the use of rating factors that had been approved by the Insurance Commissioner to set auto insurance rates (MacKay, supra, 188 Cal.App.4th at p. 1449–1451), and a race discrimination case that was actually a challenge to title insurance rates that had been accepted by the Insurance Commissioner (Lyons, supra, 2009 U.S. Dist. Lexis 119859, *15). On the other hand, statutory immunity did not bar civil actions that were unrelated to ratemaking, including actions based on an alleged conspiracy to refuse to provide title insurance (Quelimane, supra, 19 Cal.4th at pp, 44–46, 51); false advertising (Krumme, supra, 123 Cal.App.4th at pp. 936–937); misallocating medical-legal expenses in reports submitted to the Workers' Compensation Insurance Rating Bureau (SCIF, supra, 24 Cal.4th at pp. at pp. 932, 942, 944); violating statutes that regulate insurance brokers (Krumme, at pp. 936–937); and charging illegal rebates, kickbacks, and commissions (In re California Title Ins. Antitrust Litigation, supra, 2009 U.S.Dist. Lexis 103407).

The appellate court found the circumstances presented in Villanueva to be “more like the cases that involved activities related to ratemaking than those that did not.” The appellate court reasoned that Delivery Theory No. 2 and the General Draw Deed Theory challenged the language of Fidelity’s filed rates.

These theories required the court to interpret Fidelity's rate filings to determine whether they encompassed the charges at issue. This was a challenge to the rates as filed by Fidelity. Since these theories challenged the “basic classifications of … services [Fidelity established] to be used as the basis for determining rates” (§ 12401.2) and the rate schedules Fidelity filed with the Insurance Commissioner (§ 12401.1), they involved acts done “pursuant to the authority conferred by Article 5.5” (§ 12414.26) and are subject to the immunity. Thus, we disagree with the trial court's conclusion that the section 12414.26 immunity did not apply to Delivery Theory No. 2 and the General Draw Deed Theory.

The more challenging question in the court’s view was whether Section 12414.26 immunity applied to Delivery Theory No. 1 and the Draw Deed Theory of the Gap Period plaintiffs, as these claims alleged Fidelity charged for services not included in its rate filings and were, therefore, not accepted by the Insurance Commissioner. The appellate court concluded the claims made pursuant to these theories of liability likewise fell within the authority conferred by Article 5.5 and were thus subject to Section 12414.26 immunity:

The statutes in article 5.5 directed Fidelity to establish basic classifications of services to use as the basis for determining its rates (§ 12401.2), to file its schedules of rates with the Insurance Commissioner (§ 12401.1), to indicate the character and extent of the services contemplated in its rate filings (§ 12401.1), and prohibited Fidelity from using any rate “prior to its effective date nor prior to the filing with respect to such rate having been publicly displayed and made readily available to the public for a period of no less than 30 days …” (§ 12401.7). Fidelity failed to establish rates for third party delivery services and document preparation for sales escrows during the Gap Period (§ 12401.2). And although Fidelity filed rate schedules with the Insurance Commissioner throughout the class period, its rate filings failed to indicate the character and extent of all the services contemplated (§ 12401.1). Fidelity also used rates or charges prior to any effective date established by a rate filing in violation of section 12401.7. Thus, Fidelity failed to comply with sections 12401.1, 12401.2, and 12401.7, all of which are in article 5.5 of Chapter 1. In our view, this conduct constitutes “act[s] done … pursuant to the authority conferred by Article 5.5” (§ 12414.26). Thus, the claims under Delivery Theory No. 1 and the General Draw Deed Theory claims of the Gap Period Plaintiffs are also barred by the section 12414.26 immunity.

The appellate court found that a review of the statutory scheme governing the Insurance Commissioner’s exclusive original jurisdiction strengthened its construction of Section 12414.26:

[T]he statutes governing administrative review of rates support the conclusion that the Insurance Commissioner's plenary authority over ratemaking extends to “any rate charged” and “every rate” not just the rates set forth in a rate filing that has been accepted by the Insurance Commissioner. Plaintiffs allege Fidelity failed to comply with article 5.5 by charging rates for services that were not listed in its rate filings and failing to include rates for third party delivery services and some document preparation in its rate filings. The statutes in articles 6.7 and 6.9 of Chapter 1, particularly sections 12414.13, 12414.14, and 12414.21, expressly provide that Plaintiffs' claims fall within the exclusive original jurisdiction of the Insurance Commissioner. Thus, articles 6.7 and 6.9 of Chapter 1 support our conclusion that this case is barred by the immunity in section 12414.26.

Finally, the appellate court rejected Plaintiffs’ argument that Fidelity’s conduct was expressly excluded from Section 12414.26 immunity by the language of Section 12414.27, which provides:

Commencing 120 days following January 1, 1974, no [regulated title entity] shall charge for any title policy or service in connection with the business of title insurance, except in accordance with rate filings which have become effective pursuant to Article 5.5 … or as otherwise authorized by such article; provided, however, where a rate is on file with the commissioner and in effect immediately prior to such date, such rate shall continue in effect until a new rate filing is thereafter made and becomes effective in the manner provided in Article 5.5 … of this chapter.

Plaintiffs argued Section 12414.27 prohibited Fidelity from charging for services for which it had not filed a rate with the DOI and because Section 12414.27 is contained in Article 6.9, not Article 5.5, Section 12414.26 immunity did not apply. The appellate court framed the issue as whether: (a) Section 12414.27 carves out an exception to Section 12414.26 immunity; or (b) Section 12414.27 merely establishes an operative date for the rate filing and regulatory scheme of Article 5.5. In reviewing the language of the statute – which made no reference to Section 12414.26 – and its legislative history, the appellate court determined that Section 12414.27 was merely an implementing statute establishing a delayed operative date for regulated entities to comply with the new statutory scheme and rate filing requirements. The court further determined that in addition to Section 12414.27, other statutes contained in Article 5.5 impliedly prohibited Fidelity from charging customers for services for which no rate was filed, thereby bringing the alleged conduct within the purview of the statutory immunity provision:

As we have observed, sections 12401.1 and 12401.2 required Fidelity to establish classifications of services to be used as the basis for its rates, file its schedules of rates with the Insurance Commissioner, and indicate in its rate filings the character and extent of the services contemplated. (§§ 12401.1, 12401.2.) Section 12401.7 prohibited Fidelity from using any rate prior to its effective date or prior to the rate filing with respect to that rate having been publicly displayed and made readily available for 30 days prior to its effective date. (§ 12401.7.) Here, Fidelity failed to establish classifications of services for draw deed services for sales transactions during the Gap Period and for third party delivery services. It also failed to indicate in its rate filings that it intended to charge for those services and used rates before they were included in a rate filing. By charging for such services, Fidelity has violated sections 12401.1, 12401.2, and 12401.7, which are in article 5.5. Thus, its conduct was subject to the section 12414.26 immunity.

Consequently, the appellate court concluded that Section 12414.26 immunity applied to bar Plaintiffs’ claims for violation of the UCL.