If your company must publically file its service rates, you should consider attacks that plaintiffs’ lawyers have launched against other fee schedules. Also, keep in mind ripple effects that market-conduct examinations can have. A recent decision from a California appellate court highlights these dangers.

In that case, Kirk v. First American Title Company, the plaintiffs alleged that the defendant sub-escrow company had overcharged them in violation of its filed rates. Two types of fees were at issue: sub-escrow charges and disbursement costs (like for overnight delivery, messenger services, and wire transfers). The problem with the sub-escrow fee, the consumers alleged, was that it could vary based on actual services provided. That situation created an ambiguous filing that should be construed against the company, the consumers asserted. Also, the disbursement charges were supposedly unfair because the rate schedule did not clearly specify if the fees were per transaction or per usage. Some of these issues came to light in a market-conduct examination that the California Department of Insurance imposed on First American in 2007.

The result in the trial court was a mixed bag: the consumers prevailed on a few of their theories but lost on all the rest. Ultimately, the trial judge awarded the classes $1.4 million in restitution and $265,000 in attorneys fees.

Kirk offers industry members several lessons. First, official approval of filed rates is no guaranty of immunity. Courts are inconsistent with their application of the filed-rate doctrine, which holds generally that rates can be challenged only through the public approval process and not through later court action. Second, class-action lawyers will try to exploit any sort of rate ambiguity they can. The iterative nature of scheduled charges can lead to potentially mind-boggling liability. Third, even if class lawyers fail in their primary effort, they will nonetheless dive into the situation and sniff out any other possible avenue of recovery. So, if a questionable rate opens the doors to the courthouse, a determined class lawyer will try relentlessly to extort money under any potentially viable theory.

In other words, when renewing or revising your public rates, you should think like a greedy consumer lawyer.