Four title insurance companies recently filed a lawsuit
against the registers of deeds in five Michigan counties after they were
informed they could no longer resell the bulk data sets they purchased at
discount prices from the counties. The
five Michigan counties named in the suit were Eaton, Lapeer, Newaygo, Saginaw
and Tuscola. The title companies
alleged that the registers’ actions violated several laws including the
Sherman Antitrust Act, the Due Process and Equal Protection Clauses, and one
Michigan law that prohibits county registers from maintaining systems of
abstracts of title. The title
companies who brought the suit were: First American Title, Chicago Title,
Lawyers Title and Transnation Title.
The county registers in this lawsuit maintained that they had done nothing to
prohibit or limit the companies’ access to the county records.
They had each acted responsibly by recording all instruments conveying
interests in land and maintaining a grantor-grantee index of these documents.
They were merely limiting the resale of information that had been
purchased from the county at a lower cost than the taxpayer traditionally
paid. The counties also stated that they would have no problem with the
companies’ resale of the information if they were willing to pay the
traditional fee that the taxpayers were paying for access to the public
record.
For several years prior to this lawsuit being filed, the title companies had
been able to purchase the bulk data sets from counties at discounted rates and
each had built large indices within their own firms that maintained the
various counties’ records. Due
to the expense of this process, the title companies claimed that they often
had to resell the information they had gathered from the counties to other
parties, including other title insurance companies.
In addition to these claims, “the title insurance companies consider
themselves to be in competition with the registers in a market for public
documents,” according to the language contained in the suit.
Under Michigan state law, anyone requesting a copy of a public record is
charged $1 per page for a paper copy. The
Michigan Legislature set this statute and this is the maximum cost any county
can charge for a copy. Additionally,
anyone who purchases the paper copy at this cost is permitted by law to share
the record with whomever he chooses.
The counties had entered into the agreements with the companies to sell them
the information at discounted rates due to the volume they were purchasing.
Yet, under the rules of their agreements, the companies were required
to enter into a licensing accord that prohibited them from sharing, or
reselling, this bulk data with others. One
county named in the suit – Tuscola County – has never provided bulk data
and has always required that anyone who wanted access to a county record had
to pay the $1 per page copy fee.
In November of 2004, the Michigan Court of Appeals ruled in an unrelated suit
that Lapeer County was not guilty of violating a title company’s rights by
refusing to allow it the right to resell the information it purchased from the
public record. The court also
ruled that the county register had not been guilty of violating the Inspection
of Records Act, the Freedom of Information Act, or the Headlee Amendment.
Although the Lapeer title company who brought the suit has appealed the
court of appeals’ decision, it is still under application at the Michigan
Supreme Court level.
Finally, the title companies were claiming that the counties were keeping
tract indices, also known as a system of abstracts of title.
Under Michigan’s state law, any county with a population of less than
900,000 is prohibited from maintaining tract indices unless a majority of its
voters has elected to establish such a system in a general election.
The four title companies were claiming in this suit that the counties
in question had built these indices and did not fulfill either of the two
aforementioned qualifications. The
suit claimed “the registers are nonetheless currently maintaining tract
indices on their Internet websites, and that these tract indices are systems
of abstracts of title which are prohibited by statute."
Thus, in reviewing the claims made against the registers by
the four title insurance companies, three counts were stipulated that
contested the actions of the registers to limit the resale and distribution of
the bulk data they purchased from the public record.
By forcing them to pay higher prices, they also claimed that the
counties limited their access to the public record.
Therefore, count one of the suit alleged that the registers actions’ created a
monopolization of the county records and, thus, the anti-competitive practices
placed them in direct violation of the Sherman Antitrust Act.
Count II cited violations of the Due Process Clause and the Equal
Protection Clause and the third count alleged that the counties had violated
Michigan statute by maintaining tract indices within their county records.
On June 13, 2005, Judge John Corbett
O’Meara of the United State District Court, Easter District of Michigan,
Southern Division, ruled on the case. According
to two county registers that were directly involved with the case, Mildred
Dodak of Saginaw County and Ginny
McLaren of Tuscola, his decision may spell relief for county registers
facing similar problems throughout Michigan and, perhaps, throughout the
United States.
Concerning the first count that accused the counties of violating the Sherman
Antitrust Act, O’Meara dismissed the claim by upholding the decision
previously determined in the Lapeer County decision in 2004. He referenced the court’s decision that stated: simply
as an exercise of the general power to contract, defendant has the authority
to propose and enter into contracts in which it provides concessions, such as
a reduced bulk rate fee, or copies in microfilm form, in return for a
purchaser agreeing to special conditions, such as a restriction on the use of
the copies provided… further, the negotiation of such contracts is within
the broad statutory grant of authority provided for the care and management of
the property and business concerns of the county.
O’Meara refused to rebuke the judgment of the Michigan
Court of Appeals in the previous case and utilized its stance on helping him
make his decision in this matter. He
also stated that Tuscola County had not acted inappropriately in not providing
the title insurance companies with discounted rates for copies from its
record. The plaintiffs had
alleged that “not providing discounted bulk rates is a violation of
antitrust principles.” Yet,
according to O’Meara’s ruling, the register was only acting pursuant to
statutory directives by providing paper copies at $1 per page.
No law requires a county register to offer title insurance companies
copies at a discounted bulk rate.
When asked by Source of Title why she believed the title companies had pursued
this at the federal level, Mildred Dodak was quick to say that she believes
they were assuming they would lose at the state level.
Dodak, who has acted as the Saginaw County Register of Deeds for the past 18
years, stated that it was her belief that the companies used the antitrust
claims to get the case reviewed at a federal level. “I do believe it was their goal to win in Michigan at the
federal level and that it would hold precedence throughout the United
States.”
She also stated that she was unaware that the title companies were building
large title plants utilizing the information they were buying from the
counties. She did admit that she
knew the smaller “mom and pop title companies” were dwindling, but did not
realize it was due to the title plants being built by the larger title
companies. She expressed concern
that the bulk data sets of records were expediting the closure of the smaller
companies for the economic gain of the larger entities.
Another concern over the resale is the fact that the counties are so reliant
on state revenue sharing, but that its reduction has had significant impacts
on the counties’ budgets throughout Michigan.
Dodak had an independent inquiry conducted prior to the filing of the
lawsuit to determine what the county had lost due to the discounted rate it
offered to title companies. The
inquiry uncovered that the discounted rate was costing them more than 16 cents
per copy than what they would have been recouping from selling the images at
full price.
Following the ruling in the Lapeer County case, she said that she moved her
county to a “no-resale policy” in order to recoup the losses it had
suffered from the reduced cost rates it was offering those who bought the
records in bulk. If the title
companies still wanted the CDs at the reduced rate, they were required to sign
contracts that prohibited them from reselling the images under the terms of
Saginaw County’s new policies.
“The CDs were (billed) at 20 cents an image; I didn’t have an issue with
that because they (title companies) buy a lot that they don’t use and it
justifies this,” added Dodak. “The
idea of the register working with title companies has always been hand-in-hand
because you need them and they need you.
They provide a significant service to constituents to guarantee free
and clear title so the two should work well together.”
Following the court’s decision, Saginaw County will not be offering CDs at
20 cents per image to the title companies.
If they wish to purchase the CDs, Dodak said they will be paying more
than 20 cents per image, but her county has not yet defined what the cost will
be. Additionally, Dodak will
require the companies that purchase them to sign a contract that contains a
“no-resale” clause. If they
purchase the paper copies at $1 per page, however, she has no problem with the
resale of the documents by the title companies.
Ginny McLaren, the Register of Deeds for Tuscola County, agreed with Dodak
that the decision passed down in the federal court in Michigan may lead to
similar decisions throughout the country.
McLaren stated that she believes O’Meara’s decision further defines
that the county registers were only doing what they were supposed to do to
protect the records and the constituents.
“One of the issues (in this case) was monopoly of the records and someone
has to be the official record-keeper,” said McLaren. “I think that the court established that legislature had
every intention that the registry of deeds is the official record and,
therefore, we are not a monopoly of records.”
When asked if she was surprised by the decision of the court on the first
count, McLaren admitted that she was not and would have been surprised had
they not interpreted the laws the way they had.
Both of the registers of deeds stated that they believed the larger title
companies were grasping at straws in the lawsuit they brought.
Because the small companies and the counties have less funding for
maintaining their records and purchasing greater access to them, McLaren added
that she believes the larger title companies have built more of a monopoly of
the records than anyone. The
wealth and the power the companies often wield are much greater than small
businesses or counties have.
The second count of the lawsuit, which alleged that the five counties had
violated procedural due process of law, was also dismissed by O’Meara.
His decision noted the “plaintiffs have failed to establish a liberty
or property interest in the ability to purchase Public Records at a bulk rate
with the ability to resell them. Indeed,
while there may be an interest in the ability to access Public Records,
plaintiffs have not been deprived of this interest.
They are able to purchase Public Records at the $1 statutory price.”
In regard to the violation of substantive due process and equal protection,
the judge again ruled in favor of the county registers stating that “the
registers are not arbitrarily choosing to help one private interest group at
he expense of another… they are instead acting in the interests of the
county governments and the public more broadly.” The decision continued to further state “the register’s
actions are rationally related to the legitimate public interest of ensuring
that counties receive adequate revenue to cover the costs of operating a
recording scheme. A county has a
legitimate interest in trying to maintain, or even increase, revenue streams
from public record sales. Plaintiffs
have failed to state a claim upon which relief can be granted under the Equal
Protection Clause.”
Both Dodak and McLaren were surprised that the title companies had accused
them of helping one private interest group at the expense of the other.
Both believe that the title companies have forgotten that they have
built the record for the county’s constituents and not for private interest
entities.
“My concern has always been that when we provide a special service to a
title company that we are not offering to the general public as a whole… we
are not following our constitutional duties,” said McLaren. “It’s not our money and the statute indicates that we
collect a specific fee. If we
reduce that fee, that’s the public’s money.
We’re giving special treatment and, unfortunately not to the public,
and it is their record.”
Dodak also expressed contentment with the court’s ruling and the judge’s
view of what he established on behalf of county recorders.
”I am happy with the ruling,” Dodak added.
“As I see it, we’ve allowed them (the title companies) to use
taxpayers’ dollars to benefit large industries.
That’s not what it (the public record) is there for.
There is something wrong with that.”
On the third count, which focused on the counties’ establishing tract
indices, the judge did not rule. O’Meara
did state, however, that the third count would be further examined at a later
date. He referenced in his
decision that “plaintiffs point to the websites of the counties, which
provide databases searchable by legal description or address, and claim these
are tract indices.” Because
neither party had engaged in discovery over the third count, he stated that a
ruling could not be made at that time.
Additionally, O’Meara stated that “the court notes that there may not be a
private right of action for the title companies to enforce this statute.”
Both Dodak and McLaren said they would be surprised if the July 6, 2005
hearing on the final count establishes any action that the companies may be
able to take against them.
Both admitted that they were pleased with the decision that the federal court
made on count I and II and did not anticipate further action would be taken on
the third count.
Source of Title contacted the senior counsel for the title companies, David
Ettinger of Honigman, Miller, Schwartz and Cohn Attorneys.
However, he was unavailable for comment as of the date of publication.
“I think this is a significant victory not only for
Michigan, but for the other states that are experiencing similar lawsuits that
we’ve had here in Michigan,” added Dodak. “This calms the waters and
predicates on state statutes… going through the federal courts, it defines
it even more. I think it’s just
a great win, not only for Michigan, but for other states.”
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