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From Antitrust Law Daily, January 22, 2015

Auto repair shops’ antitrust claims ‘dinged’ in suit against insurers

By Jeffrey May, J.D.

A group of Florida automobile repair shops failed to adequately allege that insurers conspired to depress prices for the repair services or to boycott the shops that refused to go along with price caps, the federal district court in Orlando has decided. The defendants' motion to dismiss the antitrust claims was granted; however, the court will allow the plaintiffs to file an amended complaint (A&E Auto Body, Inc. v. 21st Century Centennial Ins. Co., January 21, 2015, Pressnell, G.).

The repair shops claimed that a group of 40 insurers, who collectively controlled approximately two-thirds of the automobile insurance market in Florida, unlawfully limited the amounts they paid for automobile repairs on behalf of their insureds in Florida. Some repair shops had entered into contracts with insurers, obligating the shops to charge the insurance company no more than the “market rate” for repairs in the general area. These “preferred providers” for the insurers participated in the insurers' “direct repair programs” and agreed to the price concessions. Some of the defending insurers had not entered into such agreements with the repair shops. The repair shops that were not under such contracts contended that the insurers refused to pay a higher labor rate than the market rate to them as well.

The market rate is determined by State Farm Mutual Automobile Insurance Company, based on a survey of repair shops. The plaintiffs complained that State Farm altered the survey results to achieve a “wholly artificial ‘market rate’” and used this artificially lowered result to negotiate price decreases from the repair shops. In addition, the plaintiffs alleged that the defendants improperly lowered the amounts that they paid for repairs by, among other things, refusing to pay for replacement parts even where the repair shop thought replacement was a better option than repair and by requiring utilization of used parts even where new parts were available. Further, the plaintiffs complained that the defendants refused to abide by the estimates set forth in the industry’s leading collision-repair-estimating databases.

Price fixing. The court rejected the plaintiffs' claim that the insurers conspired to impose maximum price limits upon the shops' products and services. To support their claim, the plaintiffs pointed to “explicit statements by Defendants [that] they will conform to State Farm’s unilaterally imposed payment structure” and “uniformity of action by all Defendants.”

A showing of parallel business behavior was admissible circumstantial evidence from which the fact finder may infer agreement. However, the defending insurers' unwillingness to pay more than State Farm for repair services did not, by itself, raise Sherman Act concerns, the court noted. It appeared that the each insurer was acting out of its own economic self-interest rather than because of an agreement to fix prices. Moreover, the insurers' refusal to pay in accord with third-party, repair-estimating databases, standing alone, did not amount to a conspiracy.

Boycott. The plaintiffs offered even less “evidence” of an agreement to boycott than they did of an agreement to fix prices, according to the court. The complaining repair shops asserted that the defendants “steered customers away” from shops that sought to charge higher prices by badmouthing those shops. The defendants allegedly engaged in this so-called boycott activity to coerce the repair shops into accepting the defendants’ price caps. The court pointed out that the there was no allegation that a defendant refused to allow any of its insureds to obtain a repair from, or refused to pay for repairs performed at, a particular shop.

Impact of antitrust consent decree. In a footnote, the court explained that a 1963 antitrust consent decree between the United States and three insurance trade associations had no relevance to the instant case. While some of the practices at issue in the consent decree were alleged to have occurred in the instant case, none of the parties in the current case were parties to the 1963 consent decree, the court explained.

Non-antitrust claims. Non-antitrust claims also were inadequately pleaded, according to the court. Quantum meruit, unjust enrichment, tortious interference with business relations, and conversion claims were dismissed, but without prejudice. The court suggested that the plaintiffs might have difficulty supporting these claims in an amended complaint. A “quasi-estoppel” claim was dismissed with prejudice, as Florida courts do not recognize such a cause of action.

This is Case No: 6:14-cv-310-Orl-31TBS (MDL docket: 6-14-cv-2257-GAP-TBS).

Attorneys: Alan Brent Geohagan (A. Brent Geohagan, PA) and Allison P. Fry (John Arthur Eaves, Attorneys at Law) for A & E Auto Body, Inc. Brian J. D'Amico (Weil, Gotshal & Manges, LLP), Hal K. Litchford (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC), and Lori J. Caldwell (Rumberger, Kirk & Caldwell, PA) for 21st Century Centennial Insurance Co., Allstate Fire and Casualty Insurance Co., Allstate Insurance Co., and Bristol West Insurance Co. Andrew Abramovich (Boyd & Jenerette, PA) for Acceptance Indemnity Insurance Co.

Companies: A & E Auto Body, Inc.; 21st Century Centennial Insurance Co.; Allstate Fire and Casualty Insurance Co.; Allstate Insurance Co.; Bristol West Insurance Co.; Acceptance Indemnity Insurance Co.; State Farm Mutual Automobile Insurance Co.

MainStory: TopStory Antitrust FloridaNews

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