Antitrust Law Daily Repair shops’ antitrust suit against insurers reinstated on appeal
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Friday, September 8, 2017

Repair shops’ antitrust suit against insurers reinstated on appeal

By Gregory Kane, J.D., M.B.A.

Automobile body shops that filed antitrust suits against multiple insurance companies for price fixing and boycotting had their claims reinstated by a divided U.S. Court of Appeals in Atlanta after being dismissed for failure to state a claim in district court. The shops had presented sufficient facts, including additional factors to support the inference of an agreement amongst the insurance companies, to plausibly support their antitrust claims (Quality Auto Painting Center of Roselle, Inc. v. State Farm Indemnity Company, September 7, 2017, Wilson, C.).

A group of automobile body shops across Kentucky, Missouri, New Jersey, and Virginia brought suit against insurance companies that collectively control some 65% to 100% of the private passenger automobile insurance market in each state. State Farm Indemnity Company has the largest market share. The body shops alleged that the insurance companies engaged in two tactics to depress rates for automobile repairs. First, the insurance companies settled on an arbitrary market rate which was provided by State Farm after the manipulation of so-called market data so as to advantage the insurance companies. This first tactic forms the basis of the body shops’ antitrust claim for horizontal price fixing. Second, the insurance companies pressured the body shops into accepting the market rate by steering customers away from non-compliant shops with false or misleading statements. The body shops had initially sued in the states in which they are located and the actions were consolidated in the Middle District of Florida by the Judicial Panel on Multidistrict Litigation.

The district court dismissed the lawsuit claiming that parallel action did not equate to price fixing without further evidence of an agreement. The present appeal is by body shops from just five of the fourteen actions that were dismissed.

Price fixing. The body shop claim of horizontal price fixing is based on an inferred agreement that shows parallel conduct as well as additional factors that serve as proxies for evidence of an agreement. Allegedly, the insurance companies uniformly adopted State Farm’s arbitrary market price despite variables that would ordinarily result in divergent prices. This includes the opportunity for the insurance companies to differentiate themselves by offering reimbursements using high quality parts and highly skilled labor. The insurance companies also allegedly uniformly required such actions as the repairing of faulty parts rather than installing replacement parts even when replacement was the more appropriate action. The insurance companies allegedly acted uniformly as well in enforcing the market rate by stating to insured individuals that certain body shops take longer to make repairs, impugning the quality of the shops work or stating that prior customers complained about a shop, each of which statement is misleading or false. The uniformity of these tactics contributed to the inference of an illegal agreement. Given the presence of parallel conduct with these additional factors, the dismissal of the price fixing claim was reversed and remanded by the court.

Boycott. As previously noted, the insurance companies allegedly used identical actions designed to steer insured motorists away from non-compliant body. The insurance companies allegedly made false or misleading statements about the body shops’ business integrity and quality, specifically regarding factors that were either beyond the body shops control, such as the time needed to wait for an insurance adjuster’s appraisal, or that were true of both compliant and non-compliant body shops, such as the insurance company not guaranteeing the work. The allegations, when accepted as true in assessing a motion to dismiss, plausibly establish a per se boycotting violation. The boycotting claims were reversed and remanded.

Dissent. A dissent would have affirmed dismissal of the antitrust claims. The dissent rejected the two plus factors that the majority believed were suggestive of an agreement to fix prices. The "allegations suggesting an agreement to boycott are even weaker," the dissent concluded.

The cases are Nos. 15-14160, 15-14162, 15-14178, 15-14179, and 15-14180.

Attorneys: Allison P. Fry (Eaves Law Firm), Mark L. Shurtleff (Shurtleff Law Firm) and Joshua S. Bauchner (Ansell Grimm & Aaron, P.C.) for Quality Auto Painting Center of Roselle, Inc. Elizabeth Helmer (Alston & Bird LLP), Johanna W. Clark (Carlton Fields Jorden Burt, P.A.) and Hal Kemp Litchford (Baker, Donelson, Bearman, Caldwell & Berkowitz P.C.) for State Farm Indemnity Co.

Companies: Quality Auto Painting Center of Roselle, Inc.; State Farm Indemnity Co.; State Farm Guaranty Insurance Co.

MainStory: TopStory Antitrust AlabamaNews FloridaNews GeorgiaNews

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