A title fight.

In this David vs. Goliath bout, a Chapel Hill scrapper takes on two heavyweights. But who's the underdog?

Before Allen Fine came along, lawyers and title insurers had a good thing going. Lawyers steered clients to insurance companies, which in turn gave title-search business back to the lawyers.

Fine figured out how to get a piece of the action by circumventing the system, using savings and loans to nudge business his way. His marketing strategy worked so well that by 1984 - a dozen years after he formed Investors Title - the Chapel Hill company was the state's dominant title insurer.

Its piece of the pie was so big that its competitors challenged the way it did business, filing a $15 million restraint-of-trade lawsuit in U.S. District Court in Greensboro. It accuses Investors Title of paying illegal kickbacks.

The suit might strike the uninitiated as a dry courtroom squabble. But it is part of the national debate on who should be allowed to sell or underwrite stocks, bonds and insurance. And it has cost Investors Title dearly. In fact, the publicly traded company's survival depends on winning.

"What this is really all about," says a lawyer who has practiced in North Carolina more than 20 years, "is that for years and years, the title-insurance business was a tight, cozy relationship between lawyers and a few title companies. At [N.C.] Bar Association functions, the finest eats and booze were in the hospitality room run by Lawyers Title.

"I never saw any direct kickbacks to lawyers who used a particular title company, but you would get on their approved list. Then they would send you business, telling clients, `He's our approved lawyer.' It was an indirect and subtle kickback in terms of flow of business."

That, of course, is what Lawyers Title of North Carolina and Jefferson-Pilot Title Insurance Co. claim Investors Title has been doing. If they prevail, Investors Title would have to jettison the system responsible for its remarkable growth.

Last year, Investors Title had 24 percent of the state market, compared with 18 percent for No. 2 Lawyers Title of North Carolina, based in Raleigh. It's a David-andGoliath battle with an unusual twist: Investors Title is Goliath in market share, but it's David in terms of size and resources.

The company, which posted $8.9 million in revenues in 1989, has hitched its fortunes to one concept. Its challengers are owned by organizations that are more powerful and possess deeper pockets.

Lawyers Title, which has done business in North Carolina since 1928, is the state's exclusive agent for Lawyers Title Insurance Co., a $420 million wholly owned subsidiary of Richmond-based Universal Corp. Most of Universal's $2.8 billion in revenues last year came from its tobacco trading operation. Jefferson-Pilot Title Insurance, founded in 1962, is an arm of Jefferson-Pilot Corp. of Greensboro, which posted 1989 revenues of $1.1 billion.

The state attorney general was first to sue Investors Title, in 1985. But when the competitors' legal action came up for a hearing this year, the state dropped out. "They have raised the same sort of issues in the federal case as the attorney general is raising," says Charles M. Hensey, a deputy attorney general.

Jefferson-Pilot Title and Lawyers Title say they have suffered at the hands of Investors Title. The two companies are seeking damages of $15 million, payment of attorneys' fees and, most significant, an end to how Investors Title does business.

Lawyers Title has seen its piece of the market shrink from 32 percent in 1978 - No. 1 among 21 companies that year - to 18 percent in 1989. Jefferson-Pilot's slice is now a sliver, declining from 9 percent to 3 percent over the same period.

But they've made sure Investors Title feels the heat. Mounting legal fees have "hung somewhat of a cloud over the company," says Jeff Levin, a securities analyst with Scott & Stringfellow in Richmond. According to Investors Title's 1989 annual report, it spent $1.1 million in "professional fees" over the past three years, most for legal help.

Last year, the company paid $608,000 in professional fees roughly one-third of its $1.8 million pretax income. "It's the magnitude of this lawsuit [that's significant] challenging the way this company does business," Levin says. "It's a small company."

The suit and a sluggish housing market are dampening Investors Title's operations. Revenues have declined from a record 10 million in 1987, to $9.1 million in 1988, to $8.9 million in 1989. North Carolina accounts for more than two-thirds of the company's business, although Investors Title also operates in 10 other states, including Florida, New York and Connecticut.

Fine is fighting back. In April 1988, two months after Lawyers Title and Jefferson-Pilot Title sued, Investors Title responded with an $11.9 million suit of its own.

Investors Title accuses the companies of conspiring to drive it out of business. It says they began attacking its system a year after it started - through a barrage of complaints to trade organizations and state and federal regulators and, according to Investors Title's countersuit, "innumerable covert meetings with the North Carolina attorney general's office. ... The campaign against Investors has had a long life, involving many corporate and individual participants."

In July, both sides went before Judge Richard Erwin in U.S. Middle District Court in Greensboro and asked that the suits against them be thrown out. But in late October, Erwin ruled that the dispute merits a jury trial. "What we'd hoped for happened," says Joe Parker, president and general counsel of Lawyers Title.

For most borrowers, title insurance is a cut-and-dried proposition: A mortgage lender either requires - or strongly suggests that customers buy it to protect the lender against liens or claims on commercial or residential property. Borrowers often buy a similar policy to protect themselves.

It's not what Investors is selling that has Lawyers Title and Jefferson-Pilot Title so upset. It's how Investors is selling it. Investors Title contends it's a matter of rivals trying to reduce competition.

Raised in the Davidson County town of Denton, Fine worked as a CPA at the former Haskins & Sells office in Charlotte before returning to his alma mater, UNC-Chapel Hill, for an MBA. While working as vice president of administration at an educational foundation in Durham, Fine decided title insurance looked lucrative.

He raised $735,000 from more than 300 friends to form Investors Title in 1972. He broke with industry tradition in 1975, establishing a system of "lender-agents" to sell title insurance. Previously, title companies had worked primarily through lawyers handling property closings.

"I was looking for a real sleepy industry, and title insurance was an old business where things were being done the way they've always been done," Fine says. "I wanted to use my background to bring a fresh perspective."

In 1974, the Federal Home Loan Bank Board allowed S&Ls to set up service corporations to write title insurance, opening the way for Fine's idea of lender-agents. At that time, many thrifts began selling their mortgage loans on the secondary market. Purchasers required that the loans have title insurance, spurring rapid growth in the market. (Nationally, title-insurance sales nearly quadrupled to $25.4 billion in 1989, from $6.5 billion in 1978.)

Fine went to work to develop a title-insurance plan for North Carolina's S&Ls as they helped finance the state's booming real-estate market of the '70s and '80s. According to court documents, he tried to minimize overhead for thrifts, which "unlike large commercial banks and high-volume mortgage companies ... do not generate a sufficient volume of title-insurance business to be able to sustain a title-agency office."

What he came up with was Investors Title Agencies, a joint venture owned by thrifts, banks and a few developers. About 75 lenders - 80 percent of them S&Ls - are part of Investors Title Agencies, Fine says. The joint venture has 12 North Carolina offices, run by Investors Title through a management agreement. To become a part of the venture, a lender must have a service corporation to sell title insurance.

The service corporation gets commissions (50 percent of the premium) based on the amount of business it sends Investors. Lawyers Title and Jefferson-Pilot Title charge that the lender-agents perform no function other than to refer business to Investors. They brand as kickbacks the commissions the lender-agents receive.

These payments, they say, violate federal and state antitrust laws and the state unfair-trade-practice law. "The idea of the lender getting part of a premium is wrong," says Parker of Lawyers Title. "We think there's an anti-kickback statute that covers that."

Jefferson-Pilot Title executives declined comment.

In the lawsuit, however, Lawyers Title and Jefferson-Pilot Title claim that borrowers feel pressured to use the company recommended by their lender or lawyer.

"Nobody has a lock on any business that I'm aware of," Fine says. "It's a competitive situation, [and the agent or attorney] can go with the company that provides the most service, number of offices and innovations."

Says Levin: "Investors Title is a very entrepreneurial company. ... They came in to what is historically a fairly staid industry and shook things up a bit."

While Investors Title doesn't have an exclusive arrangement with its lender-agents, Fine says there's "not much incentive" for them to refer business elsewhere. "The coverage and policy is the same. The standard rates are about the same." Service, he says, is the only way to compete.

Competition doesn't appear to have slackened. In 1989, 24 companies were selling title insurance in North Carolina, three more than in 1978, according to the N.C. Department of Insurance. Prices have come down, from $3.50 for every $1,000 insured in the early '70s, to $2 per $1,000 today, according to industry officials.

Fine says the crux of the lawsuit against Investors Title is not "how to do business but who should come into the marketplace whether financial institutions should come in. "

Regardless of who picks the title insurer, most consumers know little about the process and usually defer to their lawyer or lender. "The players control the situation because it's not a truly competitive market," says a lawyer who asked not to be named.

"It's not like [consumers] are buying pencils. There's a half-dozen on the shelf, and based on your past experience, you buy the pencil you like. It doesn't work that way."

Susan Shackelford is a Charlotte free-lance writer.