Antitrust Law Daily Wrap Up, ANTITRUST—D. Colo.: Homeowners’ conspiracy, RICO claims demolished in insurance dispute, (Jan 19, 2016)

By Greg Hammond, J.D.

A group of 17 homeowners failed to adequately allege Sherman Act, Racketeer Influenced and Corrupt Organizations Act (RICO), consumer protection, and unfair and deceptive practices claims against 113 defendants, arising out of claims the homeowners were deliberately underinsured and misled concerning the amounts they would be paid under their policies, according to the federal district court in Denver. The defendants’ collective motion to dismiss was therefore granted (Snyder v. ACORD Corp., January 15, 2016, Kane, J.).

The plaintiff insured homeowners claimed that after their Colorado homes were destroyed by fires and flood damage, their claims were mishandled in a number of ways and they were misled regarding the terms of their insurance policies and how those terms would be applied. Generally, the homeowners claimed they were systematically and purposefully underinsured and unaware that they would have to repair or replace their homes within a short time frame in order to receive the “Actual Cash Value” of their property. The defendants moved to dismiss the Sherman Act, Colorado Antitrust Act, RICO, Colorado Consumer Protection Act, and Colorado Unfair Claims Deceptive Practices Act claims.

Conspiracy to fix underinsurance. The court first determined that the plaintiffs failed to plead a Sherman Act violation. Despite the homeowners’ argument that they established an antitrust agreement because they alleged that the defendants participated in ACORD—a standard setting organization for the insurance industry—by agreement and the agreement the homeowners were required to allege was one “designed unreasonably to restrain trade.” The court noted that the fact that certain unspecified defendants became ACORD members by way of express agreements did not carry this burden.

In addition, the court found that the allegations failed to raise a suggestion of a preceding agreement. Specifically, the homeowners alleged parallel conduct in that the defendants adopted certain definitions of “Actual Cash Value,” methods for depreciating property, underinsurance, and the interaction between replacement value and actual cash value in the homeowners’ insurance policies. The homeowners, however, did not directly allege that ACORD itself did anything to create, develop, or implement those particular definitions or standards, the court found. In addition, the homeowners did not allege that all of the defendants were members of ACORD or that they in any way participated in ACORD’s activities. Instead, the complaint only alleged that the defendants were “members, strategic partners, associates, or non-member associates” of ACORD, and were stakeholders in the enterprise. Mere opportunity to conspire, however, was not enough to plead antitrust liability, the court concluded. Both the Sherman Act and Colorado Antitrust Act claims were consequently dismissed.

RICO claims. The court next determined that the homeowners failed to allege the predicate acts of mail and wire fraud under the heightened particularity requirements of Federal Rule of Civil Procedure 9(b) because they failed to specify the who, what, when, where, and how of the alleged fraud. In addition, the court concluded that the homeowners: (1) did not adequately plead an association-in-fact enterprise because they failed to sufficiently allege the elements of “purpose” and “relationships among those associated with the enterprise”; (2) did not allege a violation of 1962(a) and 1962(b) because the homeowners did not allege with any specificity what it means to use profits acquired by way of the defendants’ allegedly deceptive practices to acquire a “stake” in the alleged enterprise and failed to allege any connection between the defendants’ acquisition of a “stake” in the alleged enterprise and their injuries; and (3) failed to state a 1962(c) claim because the homeowners have not alleged that the defendants participated in the operation or management of the alleged enterprise.

The court additionally dismissed the Colorado Consumer Protection Act and Colorado Unfair Claims Deceptive Practices Act allegations because the assertions concerning fraudulent statements were not pleaded with particularity.

The case is No. 1:14-cv-01736-JLK.

Attorneys: Eddie Gene Dougherty (Dougherty & Holloway, LLC) for Dale Snyder. Charles Edmond Fuller (Senn Visciano Canges, PC) and Jeffrey Michael Theodore (Steptoe & Johnson LLP) for ACORD Corp. Alan Peter Gregory (Harris, Karstaedt, Jamison & Powers, PC) for Acuity, A Mutual Insurance Co. Lelia Kathleen Chaney (Lambdin & Chaney, LLP) for Addison Insurance Co.

Companies: ACORD Corp.; Acuity, A Mutual Insurance Co.; Addison Insurance Co.; All American Insurance Co.

Cases: Antitrust ConsumerProtection RICO StateUnfairTradePractices ColoradoNews