text:
To establish the Examination of Bank Service Providers Act; to authorize the Superintendent of Banks, through examiners appointed by the superintendent, to examine service providers that provide services to certain banks, subject to supervision and inspection by the superintendent.
The existing provisions of Chapter 3A, consisting of Sections 5-3A-1 to 5-3A-17, inclusive, of Title 5, Code of Alabama 1975, are designated as Article 1 of Chapter 3A of Title 5, Code of Alabama 1975.
Article 2, commencing with Section 5-3A-30, of Chapter 3A, Title 5, is added to the Code of Alabama 1975, to read as follows: Article 2. §5-3A-30. This article shall be known and may be cited as the Examination of Bank Service Providers Act. §5-3A-31. The Legislature finds and declares that the connections between banks and service providers create risks to the financial system, as banks are increasingly reliant on third parties to provide or enable key banking functions and other services. Because of the role service providers have in the safety and soundness of banks and the stability of the financial system, the Legislature finds that it is necessary for banking agencies to have authority to examine service providers. The purpose of this article is to authorize the Superintendent of Banks, through examiners appointed by the superintendent, to examine service providers that provide services to banks, other than national banks, subject to supervision and inspection by the superintendent. §5-3A-32. For the purposes of this article, the following terms shall have the following meanings: (1) SERVICE PROVIDER. Any person, company, corporation, or other legal entity that provides a covered service listed in Section 5-3A-33 to a serviced bank. (2) SERVICED BANK. Every bank, bank holding company, bank service company, or any subsidiary or affiliate of a bank that is subject to the supervision of the superintendent pursuant to Section 5-3A-1, and for which covered services are performed by a service provider. §5-3A-33. (a) Whenever a serviced bank causes to be performed for itself, by contract or otherwise, any of the covered services listed in this subsection, the performance, condition, and affairs of the service provider are subject to regulation and examination to the same extent as if the services were being performed by the serviced bank itself when deemed necessary by the superintendent to ensure the safe and sound operation of a serviced bank or serviced banks or to respond to a danger, or potential danger, to the public welfare. For the purposes of this section, covered services include all of the following: (1) Data processing services. (2) Activities that support financial services including, but not limited to, lending, funds transfer, fiduciary activities, trading activities, and deposit taking. (3) Internet related services including, but not limited to, web services and electronic bill payments, mobile applications, system and software development and maintenance, and security monitoring. (b) In order to promote regulatory efficiency, in the event that a service provider has been examined by another state or federal financial services regulatory agency or by a member of the Federal Financial Institution Examinations Council (FFIEC), or any successor entity, in the immediately preceding 24 months, the superintendent may accept the results of the examination in lieu of conducting his or her own examination. Nothing in this article shall be construed as limiting or otherwise restricting the superintendent from participating in any examination by any other state or federal agency or a member of the FFIEC. §5-3A-34. Examination reports of service providers created or obtained by the superintendent or State Banking Department are confidential subject to Sections 5-3A-3 and 5-3A-11. The superintendent may furnish a copy, or portions thereof, of a report of any examination performed by the superintendent of the performance, condition, and affairs of any service provider and any other information obtained through examination of the service provider to entities as provided in Section 5-3A-3, including the board of directors of the serviced bank, under the same terms and with the same limitations as set forth for other examination reports, data, and information under Section 5-3A-3. Additionally, the superintendent may furnish copies of his or her reports of examination, and any other information obtained through examination of the service provider, to the FFIEC, and to the board of directors of the service provider, under the same terms and with the same limitations as provided in Section 5-3A-3. §5-3A-35. (a) The superintendent may enter into agreements, which shall be deemed sole source, one vendor, and one supplier contracts under the procurement laws of this state and shall be exempt from competitive and other bid requirements, with any bank supervisory agency that has concurrent jurisdiction over a service provider to do either of the following: (1) Engage the services of the examiners of any bank supervisory agency at a reasonable rate of compensation. (2) Provide the services of the examiners of the State Banking Department to any bank supervisory agency at a reasonable rate of compensation. (b) The superintendent may enter into corrective agreements with a service provider or may issue corrective orders to a service provider if the superintendent determines the actions are necessary to ensure the safe and sound operation of a serviced bank or serviced banks or to respond to a danger, or potential danger, to the public welfare. (c) The superintendent may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over a service provider.
March 27, 2018 H Assigned Act No. 2018-500.

matches: §5 §5 §5 §5 §5 §5


FTC v. TICOR TITLE INS. CO.
Petitioner Federal Trade Commission filed an administrative complaint charging respondent title insurance companies with horizontal price fixing in setting fees for title searches and examinations in violation of 5(a)(1) of the Federal Trade Commission Act. In each of the four States at issue - Connecticut, Wisconsin, Arizona, and Montana - uniform rates were established by a rating bureau licensed by the State and authorized to establish joint rates for its members. Rate filings were made to the state insurance office and became effective unless the State rejected them within a specified period. The Administrative Law Judge held, inter alia, that the rates had been fixed in all four States, but that, in Wisconsin and Montana, respondents' anticompetitive activities were entitled to state action immunity, as contemplated in Parker v. Brown, 317 U.S. 341 , and its progeny. Under this doctrine, a state law or regulatory scheme can be the basis for antitrust immunity if the State (1) has articulated a clear and affirmative policy to allow the anticompetitive conduct and (2) provides active supervision of anticompetitive conduct undertaken by private actors. California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 105 . The Commission, which conceded that the first part of the test was met, held on review that none of the States had conducted sufficient supervision to warrant immunity. The Court of Appeals reversed, holding that the existence of a state regulatory program, if staffed, funded, and empowered by law, satisfied the active supervision requirement. Thus, it concluded, respondents' conduct in all the States was entitled to state action immunity.
1. State action immunity is not available under the regulatory schemes in Montana and Wisconsin. Pp. 8-16.
(a) Principles of federalism require that federal antitrust laws be subject to supersession by state regulatory programs. Parker, supra, at 350-352; Midcal, supra; Patrick v. Burget, 486 U.S. 94 . Midcal's two-part test confirms that States may not confer antitrust immunity on private persons by fiat. Actual state involvement is the precondition for immunity, which is conferred out of respect for the State's ongoing [504 U.S. 621, 622] regulation, not the economics of price restraint. The purpose of the active supervision inquiry is to determine whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention. Although this immunity doctrine was developed in actions brought under the Sherman Act, the issue whether it applies to Commission action under the Federal Trade Commission Act need not be determined, since the Commission does not assert any superior preemption authority here. Pp. 8-11.
(b) Wisconsin, Montana, and 34 other States correctly contend that a broad interpretation of state action immunity would not serve their best interests. The doctrine would impede, rather than advance, the States' freedom of action if it required them to act in the shadow of such immunity whenever they entered the realm of economic regulation. Insistence on real compliance with both parts of the Midcal test serves to make clear that the States are responsible for only the price-fixing they have sanctioned and undertaken to control. Respondents' contention that such concerns are better addressed by the first part of the Midcal test misapprehends the close relation between Midcal's two elements, which are both directed at ensuring that particular anticompetitive mechanisms operate because of a deliberate and intended state policy. A clear policy statement ensures only that the State did not act through inadvertence, not that the State approved the anticompetitive conduct. Sole reliance on the clear articulation requirement would not allow the States sufficient regulatory flexibility. Pp. 635-637.
(c) Where prices or rates are initially set by private parties, subject to veto only if the State chooses, the party claiming the immunity must show that state officials have undertaken the necessary steps to determine the specifics of the price-fixing or rate-setting scheme. The mere potential for state supervision is not an adequate substitute for the State's decision. Thus, the standard relied on by the Court of Appeals in this case is insufficient to establish the requisite level of active supervision. The Commission's findings of fact demonstrate that the potential for state supervision was not realized in either Wisconsin or Montana. While most rate filings were checked for mathematical accuracy, some were unchecked altogether. Moreover, one rate filing became effective in Montana despite the rating bureau's failure to provide requested information, and additional information was provided in Wisconsin after seven years, during which time another rate filing remained in effect. Absent active supervision, there can be no state action immunity for what were otherwise private price-fixing arrangements. And state judicial review cannot fill the void. See Patrick, supra, at 103-105. This Court's decision in Southern Motor Carriers Rate Conference, [504 U.S. 621, 623] Inc. v. United States, 471 U.S. 48 , which involved a similar negative option regime, is not to the contrary, since it involved the question whether the first part of the Midcal test was met. This case involves horizontal price-fixing under a vague imprimatur in form and agency inaction in fact, and it should be read in light of the gravity of the antitrust offense, the involvement of private actors throughout, and the clear absence of state supervision. Pp. 637-640.
2. The Court of Appeals should have the opportunity to reexamine its determinations with respect to Connecticut and Arizona in order to address whether it accorded proper deference to the Commission's factual findings as to the extent of state supervision in those States. P. 640.
922 F.2d 1122 (CA3 1991), reversed and remanded.
KENNEDY, J., delivered the opinion of the Court, in which WHITE, BLACKMUN, STEVENS, SCALIA, and SOUTER, JJ., joined. SCALIA, J., filed a concurring opinion, post, p. 640. REHNQUIST, C.J., filed a dissenting opinion, in which O'CONNOR and THOMAS, JJ., joined, post, 641. O'CONNOR, J., filed a dissenting opinion, in which THOMAS, J., joined, post, 646.
Deputy Solicitor General Wallace argued the cause for petitioner. With him on the briefs were Solicitor General Starr, Assistant Attorney General Rill, Robert A. Long, Jr., James M. Spears, Jay C. Shaffer, Ernest J. Isenstadt, Michael E. Antalics, and Ann Malester.
[ Footnote * ] A brief of amici curiae urging reversal was filed for the State of Wisconsin et al. by James E. Doyle, Attorney General of Wisconsin, and Kevin J. O'Connor, Assistant Attorney General, J. Joseph Curran, Jr., Attorney General of Maryland, and Robert N. McDonald and Ellen S. Cooper, Assistant Attorneys General, James H. Evans, Attorney General of Alabama, Charles E. Cole, Attorney General of Alaska, and James Forbes, Assistant Attorney General, Grant Woods, Attorney General of Arizona, and Jeri K. Auther, Assistant Attorney General, Winston Bryant, Attorney General of Arkansas, and Royce Griffin, Deputy Attorney General, Charles M. Oberly III, Attorney General of Delaware, Robert A. Butterworth, Attorney General of Florida, Larry Echohawk, Attorney General of Idaho, and Brett T. DeLange, Deputy Attorney General, Bonnie J. Campbell, Attorney General of Iowa, and John R. Perkins, Deputy Attorney General, Frederic J. Cowan, Attorney General of Kentucky, and James [504 U.S. 621, 624] M. Ringo, Assistant Attorney General, William J. Guste, Jr., Attorney General of Louisiana, and Jesse James Marks and Anne F. Benoit, Assistant Attorneys General, Michael E. Carpenter, Attorney General of Maine, and Stephen L. Wessler, Deputy Attorney General, Scott Harshbarger, Attorney General of Massachusetts, and George K. Weber and Thomas M. Alpert, Assistant Attorneys General, Frank J. Kelley, Attorney General of Michigan, Hubert H. Humphrey III, Attorney General of Minnesota, Mike Moore, Attorney General of Mississippi, Marc Racicot, Attorney General of Montana, Frankie Sue Del Papa of Nevada, John P. Arnold, Attorney General of New Hampshire, Charles T. Putnam, Senior Assistant Attorney General, and Walter L. Maroney, Assistant Attorney General, Robert J. Del Tufo, Attorney General of New Jersey, and Laurel A. Price, Deputy Attorney General, Robert Abrams, Attorney General of New York, Jerry Boone, Solicitor General, and George W. Sampson and Richard Schwartz, Assistant Attorneys General, Lacy H. Thornburg, Attorney General of North Carolina, James C. Gulick, Special Deputy Attorney General, and K. D. Sturgis, Assistant Attorney General, Nicholas J. Spaeth, Attorney General of North Dakota, and David W. Huey, Assistant Attorney General, Lee Fisher, Attorney General of Ohio, and Marc B. Bandman, Assistant Attorney General, Susan B. Loving, Attorney General of Oklahoma, and Jane F. Wheeler, Assistant Attorney General, Ernest D. Preate, Jr., Attorney General of Pennsylvania, Thomas L. Welch, Chief Deputy Attorney General, and Carl S. Hisiro, Assistant Chief Deputy Attorney General, James E. O'Neil, Attorney General of Rhode Island, and Edmund F. Murray, Jr., Special Assistant Attorney General, Charles W. Burson, Attorney General of Tennessee, John Knox Walkup, Solicitor General, and Perry A. Craft, Deputy Attorney General, Dan Morales, Attorney General of Texas, Will Pryor, First Assistant Attorney General, Mary F. Keller, Deputy Attorney General, and Mark Tobey, Assistant Attorney General, R. Paul Van Dam, Attorney General of Utah, Jeffrey L. Amestoy, Attorney General of Vermont, and Geoffrey A. Yudien, Assistant Attorney General, Mary Sue Terry, Attorney General of Virginia, Kenneth O. Eikenberry, Attorney General of Washington, and Carol A. Smith, Assistant Attorney General, Mario J. Palumbo, Attorney General of West Virginia, and Donald L. Darling, and Joseph B. Meyer, Attorney General of Wyoming.
Briefs of amici curiae urging affirmance were filed for the State of California et al. by Daniel E. Lungren, Attorney General of California, [504 U.S. 621, 625] Roderick E. Walston, Chief Assistant Attorney General, and Thomas F. Gede, Special Assistant Attorney General, Gale A. Norton, Attorney General of Colorado, Don Stenberg, Attorney General of Nebraska, and Mark W. Barnett, Attorney General of South Dakota; for the American Insurance Association et al. by John E. Nolan, Craig A. Berrington, James H. Bradner, Jr., Theresa L. Sorota, and Patrick J. McNally; for Hartford Fire Insurance Co. et al. by Stephen M. Shapiro, Mark I. Levy, Andrew J. Pincus, and Roy T. Englert, Jr.; and for the National Council of Compensation Insurance by Jerome A. Hochberg and Mark E. Solomons.
The Federal Trade Commission filed an administrative complaint against six of the Nation's largest title insurance [504 U.S. 621, 625] companies, alleging horizontal price-fixing in their fees for title searches and title examinations. One company settled by consent decree, while five other firms continue to contest the matter. The Commission charged the title companies with violating 5(a)(1) of the Federal Trade Commission Act, 38 Stat. 719, 15 U.S.C. 45(a)(1), which prohibits "[u]nfair methods of competition in or affecting commerce." One of the principal defenses the companies assert is state action immunity from antitrust prosecution, as contemplated in the line of cases beginning with Parker v. Brown, 317 U.S. 341 (1943). The Commission rejected this defense, In re Ticor Title Ins. Co., 112 F. T. C. 344 (1989), and the firms sought review in the United States Court of Appeals for the Third Circuit. Ruling that state action immunity was available under the state regulatory schemes in question, the Court of Appeals reversed. 922 F.2d 1122 (1991). We granted certiorari. 502 U.S. 806 (1991).
Title insurance is the business of insuring the record title of real property for persons with some interest in the estate, including owners, occupiers, and lenders. A title insurance policy insures against certain losses or damages sustained by reason of a defect in title not shown on the policy or title report to which it refers. Before issuing a title insurance [504 U.S. 621, 626] policy, the insurance company or one of its agents performs a title search and examination. The search produces a chronological list of the public documents in the chain of title to the real property. The examination is a critical analysis or interpretation of the condition of title revealed by the documents disclosed through this search.
The title search and examination are major components of the insurance company's services. There are certain variances from State to State and from policy to policy, but a brief summary of the functions performed by the title companies can be given. The insurance companies exclude from coverage defects uncovered during the search; that is, the insurers conduct searches in order to inform the insured and to reduce their own liability by identifying and excluding known risks. The insured is protected from some losses resulting from title defects not discoverable from a search of the public records, such as forgery, missing heirs, previous marriages, impersonation, or confusion in names. They are protected also against errors or mistakes in the search and examination. Negligence need not be proved in order to recover. Title insurance also includes the obligation to defend in the event that an insured is sued by reason of some defect within the scope of the policy's guarantee.
"Respondents have agreed on the prices to be charged for title search and examination services or settlement services through rating bureaus in various states. Examples of states in which one or more of the respondents have fixed prices with other respondents or other competitors for all or part of their search and examination services or settlement services are Arizona, Connecticut, Idaho, Louisiana, Montana, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Wisconsin and Wyoming." 112 F.T.C., at 346.
The Commission did not challenge the insurers' practice of setting uniform rates for insurance against the risk of loss from defective titles, but only the practice of setting uniform rates for the title search, examination, and settlement, aspects of the business which, the Commission alleges, do not involve insurance.
Before the Administrative Law Judge (ALJ), respondents defended against liability on three related grounds. First, they maintained that the challenged conduct is exempt from antitrust scrutiny under the McCarran-Ferguson Act, 59 Stat. 34, 15 U.S.C. 1012(b), which confers antitrust immunity over the "business of insurance" to the extent regulated by state law. Second, they argued that their collective ratemaking activities are exempt under the Noerr-Pennington doctrine, which places certain "[j]oint efforts to influence public officials" beyond the reach of the antitrust laws. Mine Workers v. Pennington, 381 U.S. 657, 670 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136 (1961). Third, respondents contended their activities are entitled to state action immunity, which permits anticompetitive conduct if authorized and supervised by state officials. See California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., [504 U.S. 621, 628] 445 U.S. 97 (1980); Parker v. Brown, 317 U.S. 341 (1943). App. to Pet. for Cert. 218a. As to one State, Ohio, respondents contended that the rates for title search, examination, and settlement had not been set by a rating bureau.
Title insurance company rates and practices in 13 States were the subject of the initial complaint. Before the matter was decided by the ALJ, the Commission declined to pursue its complaint with regard to fees in five of these States: Louisiana, New Mexico, New York, Oregon, and Wyoming. Upon the recommendation of the ALJ, the Commission did not pursue its complaint with regard to fees in two additional States, Idaho and Ohio. This left six States in which the Commission found antitrust violations, but in two of these States, New Jersey and Pennsylvania, the Commission conceded the issue on which certiorari was sought here, so the regulatory regimes in these two States are not before us. Four States remain in which violations were alleged: Connecticut, Wisconsin, Arizona, and Montana.
The ALJ held that the rates for search and examination services had been fixed in these four States. For reasons we need not pause to examine, the ALT rejected the McCarran-Ferguson and Noerr-Pennington defenses. The ALJ then turned his attention to the question of state action immunity. A summary of the ALJ's extensive findings on this point is necessary for a full understanding of the decisions reached at each level of the proceedings in the case.
Rating bureaus are private entities organized by title insurance companies to establish uniform rates for their members. The ALT found no evidence that the collective setting of title insurance rates through rating bureaus is a way of pooling risk information. Indeed, he found no evidence that any title insurer sets rates according to actuarial loss experience. Instead, the ALJ found that the usual practice is for rating bureaus to set rates according to profitability studies that focus on the costs of conducting searches and examinations. Uniform rates are set notwithstanding differences in [504 U.S. 621, 629] efficiencies and costs among individual members. App. to Pet. for Cert. 183a-184a.
The ALJ described the regulatory regimes for title insurance rates in the four States still at issue. In each one, the title insurance rating bureau was licensed by the State and authorized to establish joint rates for its members. Each of the four States used what has come to be called a "negative option" system to approve rate filings by the bureaus. Under a negative option system, the rating bureau filed rates for title searches and title examinations with the state insurance office. The rates became effective unless the State rejected them within a specified period, such as 30 days. Although the negative option system provided a theoretical mechanism for substantive review, the ALJ determined, after making detailed findings regarding the operation of each regulatory regime, that the rate filings were subject to minimal scrutiny by state regulators.
In Wisconsin, the State Insurance Commissioner is required to examine the rating bureau at regular intervals, and authorized to reject rates through a process of hearings. Neither has been done. The Wisconsin rating bureau made major rate filings in 1971, 1981, and 1982. The 1971 rate filing was approved in 1971, although supporting justification, which had been requested by the State Insurance Commissioner, was not provided until 1978. The 1981 rate filing requested an 11 percent rate increase. The increase was approved after the office of the Insurance Commissioner checked the supporting data for accuracy. No one in the agency inquired into insurer expenses, though an official testified that substantive scrutiny would not be possible without that inquiry. The 1982 rate increase received but a cursory reading at the office of the Insurance Commissioner. The supporting materials were not checked for accuracy, though, in the absence of an objection by the agency, the rate increase went into effect. Id., at 196a-200a.
In Arizona, the Insurance Director was required to examine the rating bureau at least once every five years. It was not done. In 1980, the State Insurance Department announced a comprehensive investigation of the rating bureau. It was not conducted. The rating bureau spent most of its time justifying its escrow rates. Following conclusion in 1981 of a federal civil suit challenging the joint fixing of escrow rates, the rating bureau went out of business without having made any major rate filings, though it had proposed minor rate adjustments. Id., at 200a-205a.
To complete the background, the ALJ observed that none of the rating bureaus are now active. The respondents abandoned them between 1981 and 1985 in response to numerous private treble-damages suits, so by the time the Commission filed its formal complaint in 1985, the rating bureaus had been dismantled. The ALJ held that the case is not moot, though, because nothing would preclude respondents from resuming the conduct challenged by the Commission. See United States v. W.T. Grant Co., 345 U.S. 629, 632 -633 (1953).
These factual determinations established, the ALJ addressed the two-part test that must be satisfied for state action immunity under the antitrust laws, the test we set out in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). A state law or regulatory scheme cannot be the basis for antitrust immunity unless, first, the State has articulated a clear and affirmative policy to allow the anticompetitive conduct, and second, the State provides active supervision of anticompetitive conduct undertaken by private actors. Id., at 105. The Commission having conceded that the first part of the test was satisfied in the four States still at issue, the immunity question, beginning with the hearings before the ALJ and in all later proceedings, has turned upon the proper interpretation and application of Midcal's active supervision requirement. The ALJ found the active supervision test was met in Arizona and Montana, but not in Connecticut or Wisconsin. App. to Pet. for Cert. 248a.
On review of the ALJ's decision, the Commission held that none of the four States had conducted sufficient supervision, so that the title companies were not entitled to immunity in any of those jurisdictions. The Court of Appeals for the Third Circuit disagreed with the Commission, adopting the approach of the First Circuit in New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d 1064 (1990), which [504 U.S. 621, 632] had held that the existence of a state regulatory program, if staffed, funded, and empowered by law, satisfied the requirement of active supervision. Id., at 1071. Under this standard, the Court of Appeals for the Third Circuit ruled that the active state supervision requirement was met in all four States, and held that the respondents' conduct was entitled to state-action immunity in each of them. 922 F.2d, at 1140.
We granted certiorari to consider two questions: first, whether the Third Circuit was correct in its statement of the law and in its application of law to fact, and second, whether the Third Circuit exceeded its authority by departing from the factual findings entered by the ALJ and adopted by the Commission. Before this Court, the parties have confined their briefing on the first of these questions to the regulatory regimes of Wisconsin and Montana, and focused on the regulatory regimes of Connecticut and Arizona in briefing on the second question. We now reverse the Court of Appeals under the first question, and remand for further proceedings under the second.
The preservation of the free market and of a system of free enterprise without price-fixing or cartels is essential to economic freedom. United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972). A national policy of such a pervasive and fundamental character is an essential part of the economic and legal system within which the separate States administer their own laws for the protection and advancement of their people. Continued enforcement of the national antitrust policy grants the States more freedom, not less, in deciding whether to subject discrete parts of the economy to additional regulations and controls. Against this background, in Parker v. Brown, 317 U.S. 341 (1943), we upheld a state-supervised, market sharing scheme against a Sherman Act challenge. We announced the doctrine that federal antitrust laws are subject to supersession by state regulatory [504 U.S. 621, 633] programs. Our decision was grounded in principles of federalism. Id., at 350-352.
The principle of freedom of action for the States, adopted to foster and preserve the federal system, explains the later evolution and application of the Parker doctrine in our decisions in Midcal, supra, and Patrick v. Burget, 486 U.S. 94 (1988). In Midcal, we invalidated a California statute forbidding licensees in the wine trade sell to below prices set by the producer. There we announced the two-part test applicable to instances where private parties participate in a price-fixing regime. First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself. 445 U.S., at 105 (internal quotation marks omitted). Midcal confirms that, while a State may not confer antitrust immunity on private persons by fiat, it may displace competition with active state supervision if the displacement is both intended by the State and implemented in its specific details. Actual state involvement, not deference to private price-fixing arrangements under the general auspices of state law, is the precondition for immunity from federal law. Immunity is conferred out of respect for ongoing regulation by the State, not out of respect for the economics of price restraint. In Midcal, we found that the intent to restrain prices was expressed with sufficient precision so that the first part of the test was met, but that the absence of state participation in the mechanics of the price posting was so apparent that the requirement of active supervision had not been met. Ibid.
The active supervision requirement stems from the recognition that, where a private party is engaging in the anticompetitive activity, there is a real danger that he is acting to further his own interests, rather than the governmental interests of the State. . . . The requirement is designed to ensure that the state action doctrine will shelter only the particular anticompetitive acts of private parties that, in the judgment of the State, actually further state regulatory policies. To accomplish this purpose, the active supervision requirement mandates that the State exercise ultimate control over the challenged anticompetitive conduct. . . . The mere presence of some state involvement or monitoring does not suffice. . . . The active supervision prong of the Midcal test requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy. Absent such a program of supervision, there is no realistic assurance that a private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests. 486 U.S., at 100 -101 (internal quotation marks and citations omitted).
Because the particular anticompetitive conduct at issue in Patrick had not been supervised by governmental actors, we decided that the actions of the peer review committee were not entitled to state action immunity. Id., at 106.
Our decisions make clear that the purpose of the active supervision inquiry is not to determine whether the State has met some normative standard, such as efficiency, in its regulatory practices. Its purpose is to determine whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not [504 U.S. 621, 635] simply by agreement among private parties. Much as in causation inquiries, the analysis asks whether the State has played a substantial role in determining the specifics of the economic policy. The question is not how well state regulation works, but whether the anticompetitive scheme is the State's own.
Although the point bears but brief mention, we observe that our prior cases considered state action immunity against actions brought under the Sherman Act, and this case arises under the Federal Trade Commission Act. The Commission has argued at other times that state action immunity does not apply to Commission action under 5 of the Federal Trade Commission Act, 15 U.S.C. 45. See U.S. Bureau of Consumer Protection, Staff Report to the Federal Trade Commission on Prescription Drug Price Disclosures, Chs. VI(B) and (C) (1975); see also Note, The State Action Exemption and Antitrust Enforcement under the Federal Trade Commission Act, 89 Harv.L.Rev. 715 (1976). A leading treatise has expressed its skepticism of this view. See 1 P. Areeda & D. Turner, Antitrust Law § 218 (1978). We need not determine whether the antitrust statutes can be distinguished on this basis, because the Commission does not assert any superior preemption authority in the instant matter. We apply our prior cases to the one before us.
Respondents contend that principles of federalism justify a broad interpretation of state action immunity, but there is a powerful refutation of their viewpoint in the briefs that were filed in this case. The State of Wisconsin, joined by Montana and 34 other States, has filed a brief as amici curiae on the precise point. These States deny that respondents' broad immunity rule would serve the States' best interests. We are in agreement with the amici submission.
If the States must act in the shadow of state action immunity whenever they enter the realm of economic regulation, then our doctrine will impede their freedom of action, not advance it. The fact of the matter is that the States regulate [504 U.S. 621, 636] their economies in many ways not inconsistent with the antitrust laws. For example, Oregon may provide for peer review by its physicians without approving anticompetitive conduct by them. See Patrick, at 105. Or Michigan may regulate its public utilities without authorizing monopolization in the market for electric light bulbs. See Cantor v. Detroit Edison Co., 428 U.S. 579, 596 (1976). So we have held that state action immunity is disfavored, much as are repeals by implication. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 398 -399 (1978). By adhering in most cases to fundamental and accepted assumptions about the benefits of competition within the framework of the antitrust laws, we increase the States' regulatory flexibility.
States must accept political responsibility for actions they intend to undertake. It is quite a different matter, however, for federal law to compel a result that the States do not intend, but for which they are held to account. Federalism serves to assign political responsibility, not to obscure it. Neither federalism nor political responsibility is well served by a rule that essential national policies are displaced by state regulations intended to achieve more limited ends. For States which do choose to displace the free market with regulation, our insistence on real compliance with both parts of the Midcal test will serve to make clear that the State is responsible for the price-fixing it has sanctioned and undertaken to control.
Respondents contend that these concerns are better addressed by the requirement that the States articulate a clear policy to displace the antitrust laws with their own forms of economic regulation. This contention misapprehends the close relation between Midcal's two elements. Both are directed at ensuring that particular anticompetitive mechanisms operate because of a deliberate and intended state policy. See Patrick, supra, at 100. In the usual case, Midcal's requirement that the State articulate a clear policy shows little more than that the State has not acted through [504 U.S. 621, 637] inadvertence; it cannot alone ensure, as required by our precedents, that particular anticompetitive conduct has been approved by the State. It seems plain, moreover, in light of the amici curiae brief to which we have referred, that sole reliance on the requirement of clear articulation will not allow the regulatory flexibility that these States deem necessary. For States whose object it is to benefit their citizens through regulation, a broad doctrine of state action immunity may serve as nothing more than an attractive nuisance in the economic sphere. To oppose these pressures, sole reliance on the requirement of clear articulation could become a rather meaningless formal constraint.
"Where . . . the state's program is in place, is staffed and funded, grants to the state officials ample power and the duty to regulate pursuant to declared standards of state policy, is enforceable in the state's courts, and demonstrates some basic level of activity directed towards seeing that the private actors carry out the state's policy and not simply their own policy, more need not be established." 922 F.2d, at 1136, quoting New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d 1071.
Based on this standard, the Third Circuit ruled that the active supervision requirement was met in all four States, and held that the respondents' conduct was entitled to state action immunity from antitrust liability. 922 F.2d, at 1140.
While in theory the standard articulated by the First Circuit might be applied in a manner consistent with our precedents, it seems to us insufficient to establish the requisite level of active supervision. The criteria set forth by the First Circuit may have some relevance as the beginning [504 U.S. 621, 638] point of the active state supervision inquiry, but the analysis cannot end there. Where prices or rates are set as an initial matter by private parties, subject only to a veto if the State chooses to exercise it, the party claiming the immunity must show that state officials have undertaken the necessary steps to determine the specifics of the price-fixing or rate-setting scheme. The mere potential for state supervision is not an adequate substitute for a decision by the State. Under these standards, we must conclude that there was no active supervision in either Wisconsin or Montana.
Respondents point out that, in Wisconsin and Montana, the rating bureaus filed rates with state agencies, and that in both States the so-called negative option rule prevailed. The rates became effective unless they were rejected within a set time. It is said that, as a matter of law in those States, inaction signified substantive approval. This proposition cannot be reconciled, however, with the detailed findings, entered by the ALJ and adopted by the Commission, which demonstrate that the potential for state supervision was not realized in fact. The ALJ found, and the Commission agreed, that, at most, the rate filings were checked for mathematical accuracy. Some were unchecked altogether. In Montana, a rate filing became effective despite the failure of the rating bureau to provide additional requested information. In Wisconsin, additional information was provided after a lapse of seven years, during which time the rate filing remained in effect. These findings are fatal to respondents' attempts to portray the state regulatory regimes as providing the necessary component of active supervision. The findings demonstrate that, whatever the potential for state regulatory review in Wisconsin and Montana, active state supervision did not occur. In the absence of active supervision in fact, there can be no state action immunity for what were otherwise private price-fixing arrangements. And as in Patrick, the availability of state judicial review could not fill the void. Because of the state agencies' limited role and [504 U.S. 621, 639] participation, state judicial review was likewise limited. See Patrick, 486 U.S., at 103 -105.
Our decision in Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985), though it too involved a negative option regime, is not to the contrary. The question there was whether the first part of the Midcal test was met, the Government's contention being that a pricing policy is not an articulated one unless the practice is compelled. We rejected that assertion and undertook no real examination of the active supervision aspect of the case, for the Government conceded that the second part of the test had been met. Id., at 62, 66. The concession was against the background of a District Court determination that, although submitted rates could go into effect without further state activity, the State had ordered and held ratemaking hearings on a consistent basis, using the industry submissions as the beginning point. See United State v. Southern Motor Carrier Rate Conference, Inc., 467 F. Supp. 471, 476-477 (ND Ga. 1979). In the case before us, of course, the Commission concedes the first part of the Midcal requirement and litigates the second, and there is no finding of substantial state participation in the rate-setting scheme.
This case involves horizontal price-fixing under a vague imprimatur in form and agency inaction in fact. No antitrust offense is more pernicious than price-fixing. FTC v. Superior Court Trial Lawyers Assn., 493 U.S. 411, 434 , n. 16 (1990). In this context, we decline to formulate a rule that would lead to a finding of active state supervision where, in fact, there was none. Our decision should be read in light of the gravity of the antitrust offense, the involvement of private actors throughout, and the clear absence of state supervision. We do not imply that some particular form of state or local regulation is required to achieve ends other than the establishment of uniform prices. Cf. Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991) (city billboard zoning ordinance entitled to state action immunity). We do [504 U.S. 621, 640] not have before us a case in which governmental actors made unilateral decisions without participation by private actors. Cf. Fisher v. Berkeley, 475 U.S. 260 (1986) (private actors not liable without private action). And we do not here call into question a regulatory regime in which sampling techniques or a specified rate of return allow state regulators to provide comprehensive supervision without complete control, or in which there was an infrequent lapse of state supervision. Cf. 24 Liquor Corp. v. Duffy, 479 U.S. 335, 344 , n. 6 (1987) (a statute specifying the margin between wholesale and retail prices may satisfy the active supervision requirement). In the circumstances of this case, however, we conclude that the acts of respondents in the States of Montana and Wisconsin are not immune from antitrust liability.
In granting certiorari, we undertook to review the further contention by the Commission that the Court of Appeals was incorrect in disregarding the Commission's findings as to the extent of state supervision. The parties have focused their briefing on this question on the regulatory schemes of Connecticut and Arizona. We think the Court of Appeals should have the opportunity to reexamine its determinations with respect to these latter two States in light of the views we have expressed.
The Court's standard is, in my view, faithful to what our cases have said about "active supervision." On the other hand, I think THE CHIEF JUSTICE and JUSTICE O'CONNOR are correct that this standard will be a fertile source of uncertainty and (hence) litigation, and will produce total [504 U.S. 621, 641] abandonment of some state programs because private individuals will not take the chance of participating in them. That is true, moreover, not just in the "negative option" context, but even in a context such as that involved in Patrick v. Burget, 486 U.S. 94 (1988): private physicians invited to participate in a state-supervised hospital peer review system may not know until after their participation has occurred (and indeed until after their trial has been completed) whether the State's supervision will be "active" enough.
I am willing to accept these consequences because I see no alternative within the constraints of our "active supervision" doctrine, which has not been challenged here; and because I am skeptical about the Parker v. Brown, 317 U.S. 341 (1943), exemption for state-programmed private collusion in the first place.
Chief JUSTICE REHNQUIST, with whom Justice O'CONNOR and Justice THOMAS join, dissenting.
The Court holds today that, to satisfy the "active supervision" requirement of state-action immunity from antitrust liability, private parties acting pursuant to a regulatory scheme enacted by a state legislature must prove that "the State has played a substantial role in determining the specifics of the economic policy." Ante, at 11. Because this standard is neither supported by our prior precedent nor sound as a matter of policy, I dissent.
Immunity from antitrust liability under the state-action doctrine was first established in Parker v. Brown, 317 U.S. 341 (1943). As noted by the majority, in Parker, we relied on principles of federalism in concluding that the Sherman Act did not apply to state officials administering a regulatory program enacted by the state legislature. We concluded that state action is exempt from antitrust liability, because, in the Sherman Act, Congress evidences no intent to "restrain state action or official action directed by a state." Id., [504 U.S. 621, 642] at 351. 1 The Parker decision was premised on the assumption that Congress, in enacting the Sherman Act, did not intend to compromise the States' ability to regulate their domestic commerce. Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 56 (1985) (footnote omitted).
We developed our present analysis for state-action immunity for private actors in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). We held in Midcal that our prior precedent had granted state action immunity from antitrust liability to conduct by private actors where a program was "clearly articulated and affirmatively expressed as state policy [and] the policy [was] actively supervised by the State itself." Id., at 105 (internal quotation marks and citation omitted). In Midcal, we found the active supervision requirement was not met because, under the California statute at issue, which required liquor retailers to charge a certain percentage above a price "posted" by area wholesalers, "[t]he State has no direct control over wine prices, and it does not review the reasonableness of the prices set by wine dealers." Id., at 100. We noted that the state-action defense does not allow the States to authorize what is nothing more than private price-fixing. Id., at 105.
In each instance since Midcal in which we have concluded that the active supervision requirement for state-action immunity was not met, the state regulators lacked authority, under state law, to review or reject the rates or action taken [504 U.S. 621, 643] by the private actors facing antitrust liability. 2 Our most recent formulation of the "active supervision" requirement was announced in Patrick v. Burget, 486 U.S. 94 (1988), where we concluded that, to satisfy the "active supervision" requirement, state officials [must] have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy. Id., at 101. Until today, therefore, we have never had occasion to determine whether a state regulatory program which gave state officials authority - "power" - to review and regulate prices or conduct, might still fail to meet the requirement for active state supervision because the State's regulation was not sufficiently detailed or rigorous.
"Where, as here, the state's program is in place, is staffed and funded, grants to the state officials ample power and the duty to regulate pursuant to declared standards of state policy, is enforceable in the state's courts, and demonstrates some basic level of activity directed towards seeing that the private actors carry out the state's policy and not simply their own policy, more need not be established." 922 F.2d 1122, 1136 (CA3 1991), quoting New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d 1064, 1071 (CA1 1990).
The Court likens this test to doing away all together with the active supervision requirement for immunity based on state action. But the test used by the Court of Appeals is [504 U.S. 621, 644] much more closely attuned to our "have and exercise power" formulation in Patrick v. Burget than is the rule adopted by the Court today. The Court simply does not say just how active a State's regulators must be before the "active supervision" requirement will be satisfied. The only guidance it gives is that the inquiry should be one akin to causation in a negligence case; does the State play "a substantial role in determining the specifics of the economic policy." Ante, at 11. Any other formulation, we are told, will remove the active supervision requirement altogether, as a practical matter.
I do not believe this to be the case. 3 In the States at issue here, the particular conduct was approved by a state agency. The agency manifested this approval by raising no objection to a required rate filing by the entity subject to regulation. This is quite consistent with our statement that the active supervision requirement serves mainly an "evidentiary function" as "one way of ensuring that the actor is engaging in the challenged conduct pursuant to state policy." Hallie v. Eau Claire, 471 U.S. 34, 46 (1985).
The Court of Appeals found - properly, in my view - that while the States at issue here did not regulate respondents' rates with the vigor petitioner would have liked, the States' supervision of respondents' conduct was active enough so as to provide for immunity from antitrust liability. The Court of Appeals, having concluded that the Federal Trade Commission applied an incorrect legal standard, reviewed the facts found by the Commission in light of the correct standard and reached a different conclusion. This does not constitute a rejection of the Commission's factual findings.
I would therefore affirm the judgment below.
[c]ontinued enforcement of the national antitrust policy grants the States more freedom, not less, in deciding whether to subject discrete parts of the economy to additional regulations and controls, ante, at 8. However, in Parker, we held that the Sherman Act simply does not apply to conduct regulated by the State. The enforcement of the national antitrust policy, as embodied in the antitrust laws, may grant individuals more freedom to compete in our free market system, but it does not implicate the freedom of the States in deciding whether to regulate.
[ Footnote 2 ] In 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987), we held that a New York statute failed to shelter private actors from antitrust liability because the state legislation required retailers to charge 112% of the price "posted" by wholesalers. The New York statute, like the California statute at issue in Midcal, gave no power to the state agency to review or establish the reasonableness of the price schedules "posted" by the wholesalers. 324 Liquor, at 345.
[ Footnote 3 ] The state regulatory programs in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), Patrick v. Burget, 486 U.S. 94 (1988), and 324 Liquor, supra, would all fail to provide immunity for lack of active supervision under the test adopted by the Court of Appeals.
[ Footnote 4 ] In neither of the examples cited by the majority as instances of state regulation not intended to authorize anticompetitive conduct would application of a less detailed active supervision test change the result. In Patrick v. Burget, supra, we concluded there was no immunity because the State did not have the authority to review the anticompetitive action undertaken by the peer review committee; in Cantor v. Detroit Edison Co., 428 U.S. 579 (1976), it is unlikely that the clear articulation requirement under our current jurisprudence would be met with respect to the market for light bulbs.
[ Footnote 5 ] It is not clear, from the Court's formulation, whether this is a separate test applicable only to negative option regulatory schemes, or whether it applies more generally to issues of immunity under the state-action doctrine.
JUSTICE O'CONNOR, with whom JUSTICE THOMAS joins, dissenting.
Notwithstanding its assertions to the contrary, the Court has diminished the States' regulatory flexibility by creating an impossible situation for those subject to state regulation. Even when a State has a "clearly articulated policy" authorizing anticompetitive behavior - which the Federal Trade Commission concedes was the case here - and even when the State establishes a system to supervise the implementation of that policy, the majority holds that a federal court may later find that the State's supervision was not sufficiently "substantial" in its "specifics" to insulate the anticompetitive behavior from antitrust liability. Ante, at 11. Given the threat of treble damages, regulated entities that have the option of heeding the State's anticompetitive policy would be foolhardy to do so; those that are compelled to comply are less fortunate. The practical effect of today's decision will likely be to eliminate so-called "negative option" regulation from the universe of schemes available to a State that seeks to regulate without exposing certain conduct to federal antitrust liability.
Moreover, even if a regulated entity could assure itself that the State will undertake to actively supervise its rate filings, the majority does not offer any guidance as to what level of supervision will suffice. It declares only that the State must "pla[y] a substantial role in determining the specifics of the economic policy." Ante, at 11. That standard is not only ambiguous, but also runs the risk of being counterproductive. The more reasonable a filed rate, the less likely that a State will have to play any role other than simply reviewing the rate for compliance with statutory criteria. Such a vague and retrospective standard, combined with the threat of treble damages if that standard is not satisfied, makes "negative option" regulation an unattractive option for both States and the parties they regulate.
Finally, it is important to remember that antitrust actions can be brought by private parties as well as by government prosecutors. The resources of state regulators are strained enough without adding the extra burden of asking them to serve as witnesses in civil litigation and respond to allegations that they did not do their job.


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Appeal from the Superior Court of the State of Alaska, Fourth Judicial District, Fairbanks,Richard D. Savell, Judge.
Appearances: Alan J. Hooper, Law Office of Alan J. Hooper, Fairbanks, for Appellant. Rita T. Allee, Fairbanks, for Appellee.
This case requires us to chart the boundaries of the paternity by estoppel doctrine. B.E.B. was not the biological father of his wife R.L.B.'s newborn son, K., but for several years treated K. as his own son. When B.E.B. and R.L.B. eventually divorced, the superior court ordered B.E.B. to make ongoing child support payments, finding that, in order to prevent K. from suffering emotional harm, B.E.B. should be estopped from denying paternity. We reverse, adopting the majority view of paternity by estoppel. Under this view, we apply the doctrine to prevent financial, not emotional, harm.
B.E.B. and R.L.B. were married in 1979. They had one child in 1977 and one in 1979. In 1981 B.E.B. had a vasectomy. Eight years later, in 1989, R.L.B. gave birth to a third child, K. Over the next three years, B.E.B. treated K. as his own son, intended K. to think of him as his father, and represented to the world that K. was his child. B.E.B. was the only adult male role model in K.'s life. K. even called B.E.B. "daddy."
B.E.B. and R.L.B. separated in November 1993. While B.E.B. maintained regular contact with his two older children, he distanced himself from K., denying that K. was his son. K. nevertheless continued to think of B.E.B. as his father.
Fourteen months after separating from B.E.B., R.L.B. filed for divorce, requesting child support for her three children. In response, B.E.B. denied paternity of K. Trial was scheduled for the first week of October 1995. Prior to trial, B.E.B. moved for an order requiring DNA testing to determine whether he was K.'s father; this motion was unopposed. The court granted B.E.B.'s motion in August 1995. Problems arose in obtaining the blood tests, however, and the results of the tests were not available as the date for the divorce trial approached. B.E.B. moved for a continuance, but the court denied the motion. The court stated that it would bifurcate the trial, trying all issues unrelated to paternity first and reserving paternity-related issues until the DNA test results were completed.
Trial began on October 10, 1995, with B.E.B. appearing pro se. At the outset, the court confirmed that the trial would be bifurcated. Despite the bifurcation order, the court allowed R.L.B. to testify during the first day of trial about some aspects of her paternity by estoppel claim, including the nature of K. and B.E.B.'s relationship. B.E.B. did not object to this testimony. Nevertheless, on several occasions after this testimony, the court reminded the parties of its bifurcation order. For example, when B.E.B. attempted to cross-examine R.L.B. about adultery, the court interrupted, emphasizing that "we are not litigating paternity in this case." Soon after, the court repeated that "[w]e are not going to decide paternity of K. in . . . this hearing because you've asked it to be delayed, and if the evidence is as you say, the Court will consider their defense and decide what happens. But that's not this case." At the end of the first day of trial, the court mused: "So this one-day case has become a two-day case. And without consideration of paternity."
I don't want any of the parties to be misled by a statement I made yesterday about what issues are being tried here. I have permitted, and there has been no objection to the testimony introduced that is intended to support the estoppel defense to disestablishment of paternity.
The court went on to say that, "pending the results of testing," it would not consider the issue of K. being "the biological child" and would leave the record open for admission of the DNA test results. The court concluded this announcement by saying, "you people can talk about relationships, bonds and things like that." Both parties agreed to this arrangement without further question or comment.
The trial ended on the second day, and the court directed B.E.B. to pay interim support for all of the children in R.L.B.'s custody, including K. Shortly thereafter, the DNA tests were completed. The tests conclusively established that B.E.B. was not K.'s biological father. On October 20 B.E.B. submitted the test results to the court and asked it to reconsider the interim child support order as to K. He later filed a post-trial motion in which he noted that his vasectomy predated K.'s birth. B.E.B. alleged that R.L.B. had fraudulently led him to believe that K. was his child. He offered to produce evidence of R.L.B.'s fraudulent conduct in response to R.L.B.'s claim of paternity by estoppel.
Despite B.E.B.'s allegations, the court denied further hearing. Relying on this court's decision in Wright v. Black,(1) the court observed that paternity by estoppel is "intended to avoid unfairness and emotional harm to the child from frustrating the child's expectation of care and support to adulthood . . . ." The court found that B.E.B. and K.'s relationship was established during K.'s first five years. Noting that these years were arguably K.'s most formative, the court held that B.E.B. was estopped from denying paternity. The court also rejected B.E.B.'s request for a hearing on his claim of fraud, ruling that he should have submitted his evidence earlier: "Trial was the time to assert that he had had a vasectomy. Trial was the time to assert that [R.L.B.] had lied and used fraudulent means to cause him to believe [K.] was his child. Trial was the time to assert that the factors of equitable estoppel should not apply to him."
B.E.B. appeals, arguing that the court wrongfully deprived him of an opportunity to present his evidence of fraud, and that the court misapplied the doctrine of paternity by estoppel.
A.The Trial Court Found Paternity by Estoppel Based on Evidence of Potential Emotional Harm to K.
B. Alaska's Prior Cases on Paternity by Estoppel Support a Broad "Emotional Harm" Standard of Prejudice.
C. The Alternative View of Paternity by Estoppel Favors a Narrower Test of Prejudice Focusing on Financial, Rather Than Emotional, Harm.
R.L.B. urges us to follow the lead of our prior cases by applying the Clevenger test here. She argues that the record supports the trial court's finding that K.'s strong, voluntarily fostered ties to B.E.B. cannot be severed without considerable emotional trauma. In contrast, B.E.B. cites a substantial body of cases in which courts have expressly declined to apply Clevenger's broad test of emotional harm. These courts assert that the doctrine of paternity by estoppel should ordinarily be invoked only upon a showing of economic, rather than emotional, prejudice.
D.	Despite Our Prior Decisions, We Conclude that the Narrower "Financial Harm" Test of Prejudice Must Apply in Paternity by Estoppel Cases.
Moreover, Clevenger's broad rule, centering as it does on a child's emotional well-being after the break-up of a marriage, tacitly assumes that requiring a non-biological parent to pay post-divorce support will encourage a lasting emotional bond. This assumption is highly questionable.
In contrast, the narrower rule, described in cases like Knill and Miller, strives to attain a more realistic goal. It recognizes "the desirability of encouraging [non-biological parents] to assume voluntarily support of children without the fear that doing so may obligate them permanently."(46) This goal is no less significant or desirable than Clevenger's policy of protecting children's emotional well-being. At the same time, the financial prejudice requirement substantially furthers the stated goal of encouraging voluntary relationships. Thus, unlike Clevenger's interpretation of paternity by estoppel, this alternative interpretation of the doctrine seems well suited to accomplish its goal.
Because we conclude that the trial court relied on an incorrect legal standard, we REVERSE the order and REMAND this case for a further hearing on this issue. On remand, the superior court may find estoppel only upon a showing that K.'s reliance on B.E.B.'s parental conduct resulted in financial prejudice.
1. 856 P.2d 477 (Alaska 1993).
2. Whether circumstances justifying estoppel exist is generally a question of fact that we review for clear error. See Wright, 856 P.2d at 479. But "[w]hether the superior court has the power to apply the doctrine of equitable estoppel to cases where a father denies paternity is . . . a question of law[,]" which we review independently. Id.
3. 704 P.2d 205 (Alaska 1985).
6. See id. (quoting Jamison v. Consolidated Utils., 576 P.2d 97, 102 (Alaska 1972)).
7. 11 Cal. Rptr. 707 (1961).
8. See H.P.A., 704 P.2d at 208 (citing Clevenger, 11 Cal. Rptr. at 714); see also K.E. v. J.W., 899 P.2d 133, 134-35 (Alaska 1995) (interpreting these four criteria as covering the representation and reliance elements of equitable estoppel in the paternity context).
9. H.P.A., 704 P.2d at 208-09.
10. 856 P.2d 477 (Alaska 1993).
12. Id. at 481 (citing Clevenger, 11 Cal. Rptr. at 714-15); see also K.E., 899 P.2d at 135.
13. See Wright, 856 P.2d at 481.
15. 899 P.2d 133 (Alaska 1995).
17. See id. at 134.
18. See id. at 135.
19. See id. at 134-35.
20. See id. at 135.
21. 639 N.E.2d 725 (Mass. App. 1994).
22. Id. at 728-30; see also Quintela v. Quintela, 544 N.W.2d 111, 117-20 (Neb. App. 1996) (discussing paternity by estoppel cases).
23. See K.B., 639 N.E.2d at 728.
24. 11 Cal. Rptr. at 714-15.
25. See, e.g., Pietros v. Pietros, 638 A.2d 545, 547 (R.I. 1994). See generally K.B., 639 N.E.2d at 728-30, and Quintela, 544 N.W.2d at 118-19 (both citing numerous cases). Cf. Natalie A. Minton, Equitable Estoppel Precludes Husband in Divorce Proceeding From Refuting Paternity to Avoid Child-Support Payments -- Pietros v. Pietros, 638 A.2d 545 (R.I. 1994), 29 Suffolk U. L. Rev. 625, 630 (1995).
26. 510 A.2d 546 (Md. 1986).
27. See K.B., 639 N.E.2d at 728.
29. See Knill, 510 A.2d at 551-52.
33. Id. at 550 (quoting Miller v. Miller, 478 A.2d 351, 359 (N.J. 1984)).
34. 478 A.2d 351 (N.J. 1984).
37. See, e.g., K.A.T. v. C.A.B., 645 A.2d 570, 573 (D.C. 1994); Wiese v. Wiese, 699 P.2d 700, 702 (Utah 1985). See generally Quintela v. Quintela, 544 N.W.2d 111, 117-19 (Neb. App. 1996); K.B. v. D.B., 639 N.E.2d 725, 728-29 (Mass. App. 1994); Knill, 510 A.2d at 548-50 (citing cases in which courts adopt increasingly popular, narrow requirement of financial detriment).
38. See H.P.A. v. S.C.A., 704 P.2d 205, 208-09 (Alaska 1985).
39. See K.E. v. J.W., 899 P.2d 133, 135 (Alaska 1995).
40. See Wright v. Black, 856 P.2d 477, 481 (Alaska 1993).
41. See id. at 480-81.
43. See H.P.A., 704 P.2d at 207 ("Under normal circumstances it is the biological parents who shoulder the legal responsibility for the welfare of their off-spring.").
44. K.B. v. D.B., 639 N.E.2d 725, 731 (Mass. App. 1994). Indeed, it appears that California law effectively precludes non-biological fathers from challenging paternity more than two years after a child is born. See, e.g., In re Marriage of Freeman, 53 Cal. Rptr. 2d 439, 444-45 (1996) (citing Cal. Fam. Code � 7541).
45. Clevenger additionally focused on the social injury that results when a child previously thought to be legitimate is recognized as having been born out of wedlock. Our reasons for rejecting the policy of preventing emotional harm as a basis for following Clevenger also lead us to reject Clevenger's "social injury" rationale.
46. K.B., 639 N.E.2d at 729.
47. To the extent that Wright, 856 P.2d 477, may be read as adopting the emotional harm standard of prejudice, we overrule that decision.

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Yemen's 2010 mining code contains modern concepts of reconnaissance, exploration and mining, as well as quarrying, rights; it is careful to preclude multiple use of land for competing purposes and is quite straightforward in its drafting; weaknesses in the legislation concern several potential "traps" where performance obligations may lead to the loss of a licence (e.g., the obligation to commence mining within two years of certain conditions and to maintain commercial operations) and language needlessly discretion on the part of the Board that overseas the granting of licences.
The Republic of Yemen is an Arab country in Southwest Asia, occupying the south-western to southern end of the Arabian Peninsula. Yemen has a coastline of about 2,000 km (1,200 mi) and is bordered by Saudi Arabia to the north, the Red Sea to the west, the Gulf of Aden and the Arabian Sea to the south, and Oman to the east. The country has experienced a history of political turbulence since its formation which occurred as a result of the unification of North Yemen and South Yemen in 1990. In recent years, former president Saleh caused substantial unrest after making a proposal to alter the country’s constitution in order to perpetuate his family’s political control. He ultimately agreed not to extend his presidency in return for immunity from prosecution for the various crimes committed during his term in office.
Yemen is a large country with a size roughly equivalent to that of Spain. It has substantial potential for economic deposits of gold, zinc, lead, silver, copper, nickel, platinum and iron ore. Yemen maintains policies aimed at encouraging FDI in the minerals sector and its investment laws similarly promote the fair and equitable treatment of foreign investors. The country is not rated by the Fraser Institute, nor are many of the foreign companies active in its mineral sector. One base metal (nickel, copper and cobalt) project was the subject of a major company (Vale International) investment, but the project was apparently dropped in 2013.
The principal minerals legislation in Yemen is the Law Concerning Mines and Quarries of 2010 (No. 22 of 2010) (“2010 Law”), which provides that all mineral resources are State property (2010 Law, Art. 58.2). The 2010 Law is administered by the Ministry of Oil and Minerals and, with respect to licencing, the Geological Survey and Minerals Resources Board (Board). Foreign companies may participate equally in the acquisition of mineral titles. There are regulations that also apply to the sector. Yemen’s mining law was reformed in 2010 following the assistance of the International Finance Corporation, a member of the World Bank Group.
Reconnaissance Licence: The licence should not exceed 10,000 sq. kilometres, is issued for a period of one year and may be renewed once (2010 Law, Arts. 7 and 12); it does not entitle the holder to carry out trenches, drilling or similar works, but is needed for airborne surveys (2010 Law, Arts. 9.2 and 10).
Exploration Licence: The licence is an exclusive licence for all minerals and provides the right to obtain a mining licence (2010 Law, Arts. 25 and 28). It is granted for a three-year period and may be renewed twice (2010 Law, Arts. 22 and 23). The licence may not be granted over areas that are already the subject of an exploration, mining or quarry licence (2010 Law, Art. 18).
Mining Licence: A mining licence is issued for a period of up to 25 years and renewable for periods of 10 years on approval (2010 Law, Art. 33). The holder has the right to use surface rights and must make compensation therefor. The holder must enter into a community agreement, complete an EIA and a closure plan, within one year of the grant and must also commence mining within a further two years. The language is potentially problematic as the failure to adhere to certain conditions can give rise to termination (2010 Law, Art. 97).
Transfers are only permitted on consent of the Board (2010 Law, Art. 65).
prepare a plan for an environmental impact assessment as prescribed in the regulation and obtain the approval of the same from the Environment Protection Authority (2010 Law, Art. 30.4).
The holder of the licence is entitled to use surface rights in respect of its operations provided compensation is made.
Yemen, officially known as The Republic of Yemen, is an Arab country in Southwest Asia, which occupies the south-western to southern end of the Arabian Peninsula. Yemen has a coastline of about 2,000 km (1,200 mi) and is bordered by Saudi Arabia to the north, the Red Sea to the west, the Gulf of Aden and the Arabian Sea to the south, and Oman to the east. Vegetation is sparse along the coast, but in the highlands and wadis (valleys) it is plentiful. Acacia, date palm and many types of fruit trees are common. Wild mammals in the region include the baboon, gazelle, leopard and mountain hare. Yemen is also home to more than 27,000 varieties of insects and over 600 specimens of flowering plants. Overgrazing, erosion of poorly maintained agricultural terraces, deforestation and hunting are the major environmental threats.
The principal law is the Environment Protection Law of 1995 (EPL), which provides the framework for the conduct of environmental impact assessments; the prevention of pollution of air, land and water; the handling of toxic and dangerous chemicals; waste management; and liability and sanctions for environmental damage. The law affirms the right of every individual to live in a healthy and balanced environment (EPL, Art. 4). EPL, Article 8 indicates that there is a prohibition on issuing an environmental licence for a new project that damages or pollutes the environment or causes its deterioration. Many of the provisions of the EPL are set out in general terms only and require further elaboration by secondary legislation in order to have full effect. In recent years, the Yemeni authorities have been working on a set of environmental regulations to support the EPL, although at the present time progress with these appears to be stalled.
The main responsibility for wildlife conservation and environmental protection lies with the Environment Protection Authority (Council). With regard to mining projects, the Ministry of Oil and Minerals coordinates with the Council in respect of the permitting of a given project. Other authorities with environmental responsibilities include: the Ministry of Agriculture and Water Resources which is responsible for wildlife conservation and fisheries, and the General Directorate for Forests and Range within the ministry, who is responsible for forestry.
Article 35 of the EPL indicates that it is not permissible for any competent body to give permission or a license to establish, operate or modify projects or establishments that affect and damage the environment, contribute to its deterioration or that cause pollution or any adverse effect or harm to human health or other living organisms, except in accordance with the standards, criteria, specifications or conditions that are determined and specified by the Council. Article 36 requires the preparation of an environmental impact assessment (EIA) for any project or establishment that will “potentially” cause an adverse environmental impact or damage.
The EPL suggests that mining operations are projects requiring an EIA (EPL, Art. 37(1)(a)), although it is unclear as to whether an environmental licence is required in respect of exploration operations. Given that the Law Concerning Mines and Quarries of 2010 (No. 22 of 2010) requires an EIA only in respect of mining operations, it may be fair to assume that exploration activities do not fall within the purview of the law (unlike many of Yemen’s neighbouring countries). The EPL requires a project owner to pay compensation for any damages from operations (EPL, Art. 41). Environmental bonds may be required under EPL, Article 81.

matches:
Art. 58
Art. 18
Art. 33
Art. 97
Art. 65
Art. 30
Art. 4
Art. 37
Art. 41


text:
PENDLEY et al. v. PENDLEY.
Probate of will. Fulton Superior Court. Before Judge Williams.
This is a will contest case. Norman Pendley, the testator, died in 1979. He was survived by his fourth wife, Lavinia Pendley, and two children of previous marriages. Lavinia Pendley petitioned to probate in solemn form a 1972 will wherein she is named as the sole beneficiary and executrix of Norman Pendley's estate. The children filed caveats contending that Norman Pendley was prevented by the undue influence and coercion of Lavinia Pendley from executing his will. The probate court admitted the will to probate and the children appealed to the superior court. A jury returned a verdict in favor of the caveators. Thereafter the court entered a judgment notwithstanding the verdict, from which the caveators appeal. They also appeal the failure of the court to direct a verdict against the propounder of the will for failure to make out a prima facie case establishing the execution of the will. We affirm.
1. Appellants make two enumerations. First they cite as error the granting of a judgment notwithstanding the verdict. The sole issue presented to the jury for its determination was whether Lavinia Pendley had exercised undue influence over Norman Pendley at the time he made his will. The jury found that she had.
The standard for granting a directed verdict or a judgment notwithstanding the verdict are the same. Where there is no conflict in the evidence as to any material issue, and the evidence introduced, with all reasonable deductions therefrom, shall demand a particular verdict, such verdict shall be directed. OCGA 9-11-50 (Code Ann. 81A-150). In reviewing grant of a directed verdict or a judgment notwithstanding the verdict, we must decide whether all the evidence demanded it, or whether there was some evidence supporting the verdict of the jury. Bryant v. Colvin, 160 Ga. App. 442 (287 SE2d 238) (1981). A judgment notwithstanding the verdict is improperly granted in the face of conflicting evidence, and an appellate court must view the evidence in the light most favorable to the party who secured the jury verdict. Id. The appellants argue that Lavinia Pendley was shown by evidence sufficient to support the jury's verdict to have exercised undue influence over her husband in the making of his will. Their principal contention is that Mrs. Pendley's often expressed dislike for them prevented the testator from exercising his own free will in arranging for the disposition of his estate. They cite several disparate episodes scattered over a period of about fifteen years in support of their argument. However, none of these episodes were related to the execution of the testator's will and most occurred at times not within a reasonable period before or after its making. See Akin v. Patton, 235 Ga. 51 (218 SE2d 802) (1975). For undue influence to be a proper ground of caveat, it must exist at the time of the will's execution. King v. Young, 222 Ga. 464 (150 SE2d 631) (1966). The record does not support the contention that Mrs. Pendley substituted her own will for the wishes of the testator. There is no conflict in the evidence, and we find no merit in this enumeration.
2. In their second enumeration appellants contend that the propounder failed to introduce the original will in the superior court.
OCGA 5-3-29 (Code Ann. 6-501) provides that on appeal from a probate court, all competent evidence shall be admissible in the trial de novo in the superior court, and that the whole record is brought up from below. The record of the superior court proceedings shows that the record of the probate court, where the will was shown to be executed with requisite formalities, was brought up and introduced into evidence. This probate record included a photostatic copy of the original will, which original was retained by the clerk of the probate court as required by OCGA 53-3-5 (Code Ann. 113-612). According to the two attesting witnesses to the will, the testator apparently had sufficient mental capacity to make his will and in making it acted freely and voluntarily in 1972. Therefore, we find that the propounder made out a prima facie case, showing the factum of the will and that it was freely and voluntarily executed. Cornelius v. Crosby, 243 Ga. 26 (5) (252 SE2d 455) (1979); Bianchini v. Wilson, 220 Ga. 816 (141 SE2d 889) (1965). There is no merit in this enumeration.
Fairleigh & Furlow, Margaret H. Fairleigh, Alston, Miller & Gaines, G. Conley Ingram, Ronald L. Reid, R. Wayne Thorpe, for appellee.
Howard H. Johnston, for appellants.

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