Antitrust Claims in Auto Repair Shop Case Come to Crashing Halt as Court Grants Insurers’ Motion to Dismiss
On January 21, 2015, Judge Gregory Presnell, the presiding Judge in the In re Auto Body Shop Antitrust Litigation (M.D. Fla.), a consolidated proceeding that brought together over a dozen antitrust cases against a large number of auto insurers, issued an order dismissing the plaintiffs’ complaint in the lead case, A&E Auto Body v. 21st Century Centennial Insurance Company. While Judge Presnell’s decision does not terminate the litigation – because he granted plaintiffs leave to replead their claims – it does constitute a significant early victory for the insurance industry defendants in the closely-followed litigation.
As Judge Presnell explained in his ruling, the A&E case centers around claims by approximately 20 Florida auto body shops that approximately 40 auto insurers in the state conspired to depress the price of auto repairs through the use of direct repair programs, and that the defendants also unlawfully “steer” insured to preferred shops and away from the plaintiffs. Similar claims have been asserted by auto shops in other states, and over the last six months all of the cases have been consolidated before Judge Presnell in the Middle District of Florida for further action.
In ruling on defendants’ motion to dismiss the A&E complaint, Judge Presnell began his analysis of plaintiffs’ price fixing claim by noting that plaintiffs pled that all of the defendants agreed to “conform to State Farm’s unilaterally imposed payment structure.” For this reason, the “crucial question,” the Court explained, is whether “the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express,” and noted that plaintiffs are required to plead “enough factual matter (taken as true) to suggest that an agreement was made.”
Otherwise, the claim fails as a matter of law. Examining plaintiffs’ complaint, Judge Presnell held “plaintiffs’ allegations in this case fall far short of meeting this standard.” Specifically, Judge Presnell concluded that “aside from conclusory allegations that it exists, plaintiffs offer no details at all ... about the alleged agreement, such as how the defendants entered into it, or when. While not fatal to their Sherman Act claims, this bears nothing.” Judge Presnell then explained that “The defendants’ statements about paying no more than State Farm pays for labor do nothing to demonstrate that the plaintiffs are entitled to relief. It is not illegal for a party to decide it is unwilling to pay a higher hourly rate than its competitors have to pay, and the fact that a number of defendants made statements to this effect does not tip the scales toward illegality.” Finally, Judge Presnell concluded that “the fact that a number of defendants have indicated an unwillingness to pay more than State Farm has to pay does not, itself, raise Sherman Act concerns [because] in the words of the Supreme Court, lawful parallel conduct fails to bespeak unlawful agreement. Bell Atlantic v. Twombly, 550 U.S. 544, 556 (2007).”
Turning to plaintiffs’ boycott claim, Judge Presnell found that plaintiffs’ allegations here were equally insufficient. Judge Presnell stated that “plaintiffs allege (in conclusory fashion) that the defendants ‘steer customers away’ by badmouthing shops that seek to charge higher prices,” but held that “there is no allegation that any defendant refused to allow any of its insureds to obtain a repair from such a shop, or refused to pay for repairs performed at such a shop.” In addition, Century Centennial Insurance Company.
Judge Presnell added that to state a “boycott” claim under the antitrust laws, plaintiffs are also required to allege agreement, and “plaintiffs offer even less evidence of an agreement to boycott than they did of an agreement to fix prices.” Accordingly, Judge Presnell dismissed this claim as well.
Undeterred by Judge Presnell’s ruling, on February 11, plaintiffs filed a Second Amended Complaint, again asserting antitrust claims for price fixing and “boycott.” Seeking to bolster the claims that had previously been held to be insufficient, plaintiffs’ new complaint now contains numerous allegations concerning defendants’ alleged “opportunity” and “motive” to conspire, including allegations about interactions at various trade association meetings. Whether plaintiffs’ new allegations will suffice remains to be seen. Defendants will undoubtedly file a new motion seeking to dismiss these amended claims as well. A ruling on that motion will likely not be issued until this summer. When it does, depending on the ruling, it will likely either put an end to the litigation, once and for all, or it will lead to the beginning of discovery which, in this matter, would likely be both far-reaching and expensive for the defendants. Stay tuned.