Title Firms Are Sued After FTC Price-Fixing Charges

At least six class-action lawsuits have been filed against First American Title Insurance Co. of Santa Ana and five other title insurance companies that earlier this month were accused of price fixing by the Federal Trade Commission, according to First American’s attorney.

The suits, which seek an unspecified amount of damages, have been filed by various individuals and businesses that claim to have been customers of the title insurance companies named by the FTC, according to Paul J. Laveroni, attorney for First American. Laveroni said six to eight separate class-action cases have been filed in at least three federal district courts, including Los Angeles, New York and Lancaster, Pa.

First American Title, a subsidiary of First American Financial Corp., was one of the six major title insurance companies named by the FTC on Jan. 7. The FTC accused the six major title insurance companies of using private ratings bureaus in 13 states to fix prices for title searches they provide for real estate purchasers, thus restraining competition in violation of anti-trust laws. Together, the six firms accounted for more than half of the title insurance business nationwide in 1983.

The FTC complaint alleged that the price-fixing violations occurred in Arizona, Connecticut, Idaho, Louisiana, Montana, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Wisconsin and Wyoming.

The civil suits, Laveroni said, echo the federal agency’s allegations. “In effect, they are riding the coattails of the FTC,” he said.

Among the plaintiffs are Public Storage Inc., a national warehouse developer based in Pasadena. The firm’s attorney, Elwood Kendrick, refused to comment on his client’s lawsuit.

First American said it believes the suits are without merit, adding that it will mount a “vigorous” defense against them.

The title insurance companies will have an opportunity to refute the FTC charges at a hearing before an administrative law judge, which is expected to occur within the next two months.

Title insurance protects property owners from any prior claims that may exist against real estate they buy. Before the insurance is issued, the title insurance firm conducts a search to ascertain that the seller has clear title to the property.

Laveroni acknowledged that First American Title previously participated in ratings bureau operations in which title companies conferred on rates. The rates then had to be approved by the state insurance commissioner. Laveroni said the private ratings bureaus in the 13 states named by the FTC have been dissolved in recent years. But in the past, he said, they had operated openly and “under the blessing of state law.”

First American Title’s position, Laveroni said, is that title searches are part of the insurance business, which is exempt from federal antitrust laws. The FTC is prohibited from investigating or regulating the insurance industry.

However, the FTC concluded that certain jobs done by title insurance companies, specifically title searches and examinations and settlement assistance, are not part of the insurance business and therefore fall under the FTC’s jurisdiction.