Opinion ID: 1597995
Heading Depth: 1
Heading Rank: 4

Heading: whether the appellees are barred from seeking judicial review by application of the filed rate doctrine.

Text: ¶ 30. American Bankers submits that any of the complaints made in reference to the reasonableness of American Bankers' CPI premium rates are unfounded, as they were submitted to and expressly approved by the state agency charged by the legislature with jurisdiction over insurance rates. American Bankers contends that any judicial determination on these rates would be fundamentally unfair, would raise serious due process concerns and violate the filed-rate doctrine. Simply stated, the doctrine holds that any `filed rate'that is, one approved by the governing regulatory agencyis per se reasonable and unassailable in judicial proceedings brought by ratepayers. Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 18 (2d Cir.1994). Accord United Gas Pipe Line Co. v. Willmut Gas & Oil Co., 231 Miss. 700, 97 So.2d 530, 531 (1957)(petitioner can claim no rate as a legal right that is other than the filed rate, whether fixed or merely accepted by the Commission, and not even a court can authorize commerce in the commodity on other terms.) (quoting Montana-Dakota Utils. Co. v. Northwestern Pub. Serv. Comm'n, 341 U.S. 246, 251, 71 S.Ct. 692, 95 L.Ed. 912 (1951)). ¶ 31. American Bankers first argues that the filed-rate doctrine applies squarely to protect regulated insurance rates from judicial intervention and redetermination. It cites one of the earliest cases discussing such doctrine which was heard by the U.S. Supreme Court. In Keogh v. Chicago & Northwestern Ry., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922), the plaintiff alleged a conspiracy to fix freight transportation rates at an unnaturally high level. Writing for the Court, Justice Brandeis held that the complaint had to be dismissed because the rates had been filed with the Interstate Commerce Commission and deemed reasonable. Justice Brandeis reasoned that any attempt to reassess the reasonableness of the rates would require the judiciary to reconstitute the whole rate structure of the industry. Id. at 163-64, 43 S.Ct. 47. ¶ 32. Since Keogh, the filed-rate doctrine has been relied upon by many entities regulated by federal or state law, including claims against insurers which directly or indirectly challenge the approved premium rate. [8] American Bankers charges that the filed-rate doctrine prevents more than judicial rate-setting; it precludes any judicial action which undermines agency rate-making authority. Katz v. MCI Tel. Corp., 14 F.Supp.2d. 271, 274 (E.D.N.Y.1998); Kutner v. Sprint Communications Co., 971 F.Supp. 302 (W.D.Tenn.1997)(filed-rate doctrine forbids courts from ordering relief that would contravene the filed rate). ¶ 33. American Bankers' second argument hinges on the premise that the filed-rate doctrine precludes all claims against regulated entities which directly or indirectly challenge the approved rate. The two purposes of the filed-rate doctrine are that first, it protects against price discrimination between ratepayers (the nondiscrimination strand), and second, it preserves the exclusive role of regulatory agencies in approving rates that are reasonable by keeping courts out of the rate making process (the non-justiciability strand). Marcus v. AT & T Corp., 138 F.3d 46, 58 (2d Cir.1998). Application of the filed-rate doctrine in any particular case is not determined by the culpability of the defendant's conduct or the possibility of inequitable results. Nor does the doctrine's application depend on the nature of the cause of action the plaintiff seeks to bring. Rather, the doctrine is applied strictly to prevent a plaintiff from bringing a cause of action even in the fact of apparent inequities whenever either the nondiscrimination strand or the nonjusticiability strand underlying the doctrine is implicated by the cause of action the plaintiff seeks to pursue. Id. at 58-59 (citations omitted) ¶ 34. American Bankers points out that numerous courts have held the filed-rate doctrine to prohibit plaintiffs from claiming a lower rate than the one filed by a regulatory entity with the appropriate regulatory agency. Florida Mun. Power Agency v. Florida Power & Light Co., 64 F.3d 614, 615 (11th Cir.1995). Moreover, it claims that all customers are `conclusively presumed' to have constructive knowledge of the filed tariff under which they receive service. Fax Telecomms., Inc. v. A.T. & T., 138 F.3d 479, 488 (2d Cir.1998) citing Kansas City S. Ry. v. Carl, 227 U.S. 639, 653, 33 S.Ct. 391, 57 L.Ed. 683 (1913). ¶ 35. American Bankers cites Marcus v. AT & T Corp., 938 F.Supp. 1158 (S.D.N.Y.1996), aff'd, 138 F.3d 46 (2d Cir. 1998) to illustrate the broad reach of the filed-rate doctrine. In Marcus, plaintiffs sued AT & T for their alleged failure to disclose their practice of rounding up long-distance calls to the next higher minute. While the plaintiffs did not directly challenge AT & T's filed rate per se, they did claim that but for such fraudulent practices customers would have switched long-distance carriers or would have been more careful when on the phone. Marcus, 138 F.3d at 59. ¶ 36. The action was dismissed based on the filed-rate doctrine because, any subscriber who pays the filed rate has suffered no legally cognizable injury. Marcus, 938 F.Supp. at 1170. The court went on to say that any remedy that requires a refund of a portion of the filed ratewhether as an award of damages for fraud on an agency or an award of damages for fraud on consumersis barred. Id. Apparently, because the customers were presumed to have had knowledge of the lawful rate, no customer could demonstrate that he reasonably relied on any of the alleged misrepresentations by AT & T regarding the file rate. Id. at 63. ¶ 37. In American Bankers' last argument on this issue, it stresses that the Mississippi Insurance Department is given full powers of supervision and enforcement of insurance rates, including approval and disapproval of rates [9] and that the presence of such comprehensive regulatory schemes have compelled courts to apply the file-rate doctrine. It argues that a failure to apply the filed-rate doctrine in this case would seriously undermine Mississippi's comprehensive insurance regulatory scheme and would require the judiciary to second-guess the Mississippi Insurance Department's rate-making decisions. ¶ 38. The plaintiffs argue that the filed-rate doctrine does not preclude them from pursuing their claims since American Bankers ignored its own approved rates. Alternatively, they contend that if the filed-rate doctrine did preclude a challenge as to the reasonableness of the rates charged, it is still not a defense to the claims of breach of fiduciary duty and the duty of good faith and fair dealing charged against American Bankers. ¶ 39. While American Bankers cites numerous Mississippi Code sections detailing the authority of the state insurance commissioner to approve rates, it fails to cite Miss.Code Ann. § 83-5-33 which states: No person shall engage in this state in any trade practice which is defined in § 83-5-29 to 93-5-51 as, or determined pursuant to said sections, to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. The trade practices which the legislature has determined are unfair or deceptive acts or practices include misrepresentations and false advertisements, written misrepresentations, and false advertisements, and false information and advertising in general. ¶ 40. The complaints in the case at hand involve claims of breach of fiduciary duty, breach of implied covenants of good faith and fair dealing, fraudulent misrepresentation and negligent misrepresentation among others. All of these causes of action are founded in the common law, and this Court has previously held that such claims are not preempted by state statutes. Protective Serv. Life Ins. Co. v. Carter, 445 So.2d 215, 216 (Miss.1983). ¶ 41. In Carter, the Chancery Court of Clay County heard a case brought by Protective Services against an individual for tortious interference with a contractual right. Id. Carter was hired to look for a local agent to sell burial policies. Id. The problem arose when the agent Carter selected began letting policies which he had sold on behalf of Protective Services in order to be replaced by policies written by Valley Insurance Company. Id. This Court, in reviewing prohibited unfair practices under § 83-5-35, held that if in fact such an unfair competitive practice was found to have taken place, the Commissioner of Insurance had the power to examine and investigate into the affairs of every person engaged in the business of insurance in this state to determine whether such person has been or is engaged in any unfair method or competition or any unfair or deceptive act. Id. This Court went on to state that while there is no provision in the statute for a cause of action for damages based on these actions, one did exist under common law. Id. ¶ 42. These cases are not rate cases, but as set out in the amended complaints they are combination contract, tort and statutory actions brought under the laws of Mississippi. In Gelb v. AT & T Co., 813 F.Supp. 1022, 1023 (S.D.N.Y.1993), a group of plaintiffs alleged that AT & T concealed the cost of using a calling card. Further, the plaintiffs alleged that AT & T fraudulently induced its customers into buying a calling card by leading them to believe that the use of the card was free when, in fact, AT & T levied a substantial charge for using the card. Id. Three claims of liability were asserted in Gelb: (i) fraud as a matter of federal common law; (ii) violation of the RICO statute; and (iii) violation of a consumer protection statute. Id. AT & T argued that the plaintiffs claim was barred by the filed rate doctrine. Id. The federal court held that there was nothing in the policy underpinnings of the filed rate doctrine which would cause it to protect a defendant who unlawfully exacted payment, even at a lawful rate. Id. Furthermore, the court held that AT & T could not insulate itself from all tort claims by simply invoking the filed-rate doctrine. Id. at 1030. The court's rationale hinged on the fact that allowing the filed-rate doctrine to bar the claim, any other company in a regulated industry would thereby be practically immune from common law claims founded in state law as long as they followed the filed rate. This would appear to also shield potential defendants from liability for civil conspiracy in non-regulated illegal activities. ¶ 43. Courts in a number of other jurisdictions have held that in certain circumstances the filed-rate doctrine is inapplicable. The Fifth Circuit held in Gulf States Utils. Co. v. Alabama Power Co., 824 F.2d 1465, 1472 (5th Cir.1987) that contracts to purchase electricity could be set aside if the plaintiff could demonstrate fraudulent inducement, as such a remedy would not interfere with the federal agency's rate making powers. See also H. J., Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 490 (8th Cir.1991) (filed rate doctrine arguably inapplicable where claim [does] not attack the rate itself and [does] not require court to `second guess' the rate making agency.), Litton Sys., Inc. v. American Tel. Co., 700 F.2d 785, 820 (2rnd Cir.1983)(holding that the filed-rate doctrine was inapplicable when the plaintiffs did not call upon the court to even indirectly determine what a reasonable rate would have been); City of Kirkwood v. Union Elec. Co., 671 F.2d 1173, 1179 (8th Cir.1982) (holding an award of antitrust damages for alleged creation and maintenance of an anti-competitive price squeeze did not conflict with regulatory agency's authority to oversee rates because the plaintiffs did not challenge those agency's reasonableness determination); Wegoland, Ltd. v. NYNEX Corp., 806 F.Supp. 1112, 1116 (S.D.N.Y.1992) (the filed rate doctrine was arguably inapplicable in cases where courts are not asked to determine what a reasonable rate should be.). ¶ 44. Article 3, Section 24 of the Constitution of the State of Mississippi states: All courts shall be open; and every person for an injury done him in his lands, goods, person, or reputation, shall have remedy by due course of law and right and justice shall be administered without sale, denial, or delay. ¶ 45. Article 3, Section 31 states that the right to trial by jury shall remain inviolate. The filed rate doctrine has never been held to be an absolute bar to litigation. To apply the filed rate doctrine in this manner would be an encroachment by regulatory agencies into the court system and would deprive the plaintiffs of their right to trial by jury. ¶ 46. This Court considers the filed-rate doctrine but also recognizes its exceptions listed herein. While the filed-rate doctrine generally creates a presumption that charged rates are reasonable, the concern is when judicial action might affect those rates. Gulf States Utils. Co. v. Alabama Power Co., 824 F.2d 1465, 1472 (5th Cir. 1987). [10] The United States Supreme Court has entertained issues regarding the filed-rate doctrine but has yet to determine whether a fraud exception exists. Arkansas La. Gas Co. v. Hall, 453 U.S. 571, 583 n. 13, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981). As pointed out by both parties in this case, jurisdictions are split on applying such a fraud exception. At the very least it appears that American Bankers may have breached its duty of good faith and fair dealings on all parties to a contract. This Court has recognized such a duty in UHS-Qualicare, Inc. v. Gulf Coast Community Hosp., Inc., 525 So.2d 746, 757 (Miss.1987). [11] ¶ 47. This Court has ruled on the issue of fiduciary duties in the past. In Lowery v. Guaranty Bank & Trust Co., 592 So.2d 79, 83 (Miss.1991), the Court stated: Fiduciary relationship is a very broad term embracing both technical fiduciary relations and those informal relations which exist whenever one person trusts in or relies upon another ... A fiduciary relationship may arise in legal, moral, domestic, or personal context where there appears on the one side an overmastering influence or, on the other side, weakness, dependence or trust justifiably reposed. More importantly, the Court in Lowery held that the existence of a fiduciary duty is a question of fact. Id. at 85. ¶ 48. By virtue of having entered into the loan agreement with Fidelity and the subsequent force placement of insurance with American Bankers, plaintiffs may be expected both defendants would deal with them in good faith as such an obligation is imposed on parties who contract for performance of obligation with each other. Cenac v. Murry, 609 So.2d 1257 (Miss. 1992). Plaintiffs, because of their weaker financial position and lack of sophistication and knowledge with regard to this area, fill the requirements in Lowery of weakness, dependence or trust, justifiably reposed. Conversely, American Bankers appears to be in a strong financial position, especially in comparison with plaintiffs. Under these circumstances, plaintiffs submit that the fiduciary relationship as defined by Lowery can be found to exist. ¶ 49. American Bankers may be found to have owed a fiduciary duty to them by failing to inform the plaintiffs of the nature of the profit sharing scheme between American Bankers and Fidelity. In addition, since American Bankers and Fidelity were agents of each other, both may be found to have owed a fiduciary duty to the plaintiffs which it negligently failed to perform. ¶ 50. As a result, the filed-rate doctrine is not a roadblock to the plaintiffs' day in court.