Antitrust Law Daily Bail bond industry price fixing claims go forward against one surety
News
Friday, January 8, 2021

Bail bond industry price fixing claims go forward against one surety

By Nicole D. Prysby, J.D.

Other claims that surety companies, bail agencies, and bail agent associations conspired to fix bail bonds prices failed for lack of allegations about a defendant’s role or agreement to join the conspiracy.

California bail bond purchasers plausibly alleged an antitrust conspiracy among surety companies to artificially inflate the price of bail bonds in California but alleged sufficiently specific claims against only one surety defendant. The plaintiffs claimed that surety companies, bail agencies, bail agent associations, and individuals who served as executives for various defendants, conspired to artificially inflate the price of bail bonds. They plausibly alleged an antitrust conspiracy with respect to the surety defendants, through allegations that they engaged in parallel conduct by uniformly filing for and offering standard premium rates of 10 percent. The plaintiffs also sufficiently alleged plus factors such as public statements by defendants that could be construed as invitations to agree. However, the plaintiffs failed to allege how most of the surety defendants joined the conspiracy. The one exception was the surety that was the alleged ringleader of the conspiracy, and a corporate officer. Claims against bail agencies and trade associations failed, for for lack of allegations that they agreed to the conspiracy (In re California Bail Bond Antitrust Litigation, January 5, 2021, Tigar, J.).

The plaintiffs claimed that California bail bond industry players, including surety companies, bail agencies, bail agent associations, and individuals who served as executives for various defendants, conspired to artificially inflate the price of bail bonds in California. The alleged conspiracy had two components: fixing bail bond premium rates at 10 percent of the cost of bail, and preventing rebating. In April 2020, the court held that the plaintiffs made sufficient allegations of parallel conduct and plus factors to raise a suggestion of an agreement between the defendants, including allegations of uniform premium rate filing, misrepresentation regarding the defendants’ ability to offer rebates, and trade association meetings offering the opportunity to exchange information. However, the plaintiffs failed to allege sufficient facts as to how all of the surety and bail agency defendants and two of the industry association defendants had "joined or participated" in the alleged conspiracy. The plaintiff filed a second amended class action complaint (SCAC) and the defendants motioned to dismiss the claims.

Claims against bail agents and trade associations. The SCAC alleged a horizontal agreement among the surety defendants to seek approval for a uniform standard premium rate of 10 percent and to discourage the bail agents they worked with from offering rebates. The plaintiffs also alleged a vertical agreement between the agencies and the sureties, and potentially a horizontal agreement among the agencies. Likewise for the trade associations, whom the plaintiffs alleged helped enforce the conspiracy. But the claims against the bail agents and trade associations failed, because the only agreement described in the SCAC was that among the sureties. Plaintiffs alleged that the bail agency defendants misled consumers, which furthered the conspiracy, but failed to allege that they agreed to the conspiracy in the first place. Similarly, the plaintiffs alleged that the trade associations played a critical role in maintaining the conspiracy, through hosting meetings that provided opportunities for sureties and bail agents to conspire, but never alleged that the trade associations entered into an agreement in the first place.

Claims against surety defendants. The plaintiffs plausibly alleged an antitrust conspiracy with respect to the surety defendants. They sufficiently alleged that the defendants engaged in parallel conduct by uniformly filing for and offering premium rates of 10 percent. The defendants pointed to some surety defendants that offered higher or lower rates, but other than two sureties that began offering a standard rate of 9 percent in 2018, the standard rate for all defendants was 10 percent. The fact that some defendants had different rates for certain customers in low or high risk categories did not undermine the parallel nature of the standard rates because plaintiffs plausibly alleged that the standard rates act as a sort of artificially inflated base price from which negotiations for discounts began. The SCAC also sufficiently alleged parallel conduct in the form of similarly misleading statements about the defendants’ ability to offer rebates. The SCAC sufficiently alleged plus factors, including participation in trade associations that provide opportunities to exchange information or make agreements, public statements by defendants that could be construed as invitations to agree, and factors suggesting a market susceptible to conspiratorial price-fixing, such as high barriers to entry, waning demand, and saturation. The SCAC alleged that the California bail bond industry is ideally suited to price-fixing due to oligopolistic factors.

The defendants argued that the new allegations undercut the plausibility of the alleged conspiracy, by creating a non-collusive explanation for the parallel pricing. The court rejected that argument, pointing out that another explanation for the parallel pricing, in the context of the alleged market factors and other plus factors, was collusion.

However, the plaintiffs failed to adequately allege the role in the conspiracy for every surety defendant. The SCAC alleged the general role played by the sureties, such as the creation of a practice of monitoring rebating of rivals, but did not allege how most of the surety defendants joined the conspiracy. The plaintiffs made no allegations of communications between defendants or specific information about meetings by which the alleged price-fixing conspiracy was effectuated. For example, the SCAC did not allege that any surety defendant learned of or agreed to join the conspiracy at any of the trade association meetings, or any details of who attended them or what was discussed. The one exception was American Surety Company (ASC), the alleged ringleader of the conspiracy. The SCAC alleged that ASC communicated to its surety rivals that it would not lower its rates below 10 percent and encouraged them to follow, and an ASC officer posted a statement on ASC’s website urging everyone in the industry not to grant rebates. The SCAC also adequately alleged the role in the conspiracy for the ASC officer.

The case is No. 4:19-cv-00717-JST.

Attorneys: Polina Brandler (Hammondlaw, PC) for Stephen Breaux. Paul Jeffrey Riehle (Faegre Drinker Biddle & Reath LLP) for Accredited Surety and Casualty Co. Timothy P. Irving (Tyson & Mendes LLP) for Aegis Security Insurance Co. Gary Alan Nye (Roxborough Pomerance Nye & Adreani, LLP) for Allegheny Casualty Co. Gerard G. Pecht (Norton Rose Fulbright US LLP) for American Contractors Indemnity Co. John Arthur Sebastinelli (Greenberg Traurig, LLP) for American Surety Co. Andrew Koning (Koning Zollar LLP) for All-Pro Bail Bonds, Inc.

Companies: Accredited Surety and Casualty Co.; Aegis Security Insurance Co.; Allegheny Casualty Co.; American Contractors Indemnity Co.; American Surety Co.; All-Pro Bail Bonds, Inc.

MainStory: TopStory Antitrust GCNNews CaliforniaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Antitrust Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on antitrust legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.