Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: Auto repair shops’ price fixing claims against insurance companies bumped off, (Feb 23, 2016)

By Linda O’Brien, J.D., LL.M.

A group of vehicle repair shops failed to plead with specificity allegations that automobile insurance companies engaged in a conspiracy to fix the prices they paid for automobile repairs for their insureds, the federal district court in Orlando, Florida has held. Thus, the insurance companies’ motion to dismiss was granted (Capitol Body Shop, Inc. v. State Farm Mutual Automobile Insurance Company, February 22, 2016, Presnell, G.).

In January, 2014, Capitol Body Shop, along with 25 Mississippi vehicle repair businesses, filed suit in Mississippi federal district court against State Farm and 17 other insurance companies, alleging that the insurers conspired to suppress the amounts that they were obligated to pay for automobile repairs, in violation of Section 1 of the Sherman Act and various state laws. The case was consolidated with 24 similar actions for pretrial purposes. The insurance companies moved for dismissal.

Parallel conduct. The court found that the plaintiff repair businesses presented no direct evidence that the defendant insurers entered into a price fixing agreement. The plaintiffs alleged that the defendants’ parallel behavior of paying the same labor rates, refusing to pay for the same list of procedures, and requiring the use of lower-quality parts was sufficient to infer an agreement to suppress automobile repair costs.

According to the court, evidence of conscious parallelism alone did not permit an inference of conspiracy unless the plaintiff established that each defendant engaged in the parallel action contrary to its economic self-interest and offered “plus factors” to show the defendants engaged in a collusive agreement to fix prices. In this case, the plaintiffs’ argument that “underpaying” by a single defendant would result in a loss of customers to insurers that paid in full—and therefore was against the defendants’ economic self-interest—was mere speculation. Moreover, allegations of the possession of market power standing alone or the mere desire to make a profit did not constitute a “plus factor.” The plaintiffs’ allegations of allegedly uniform behavior lacked specifics for the court to conclude that such behavior was collusive and not merely parallel.

Boycott. The plaintiffs also failed to allege that the defendant insurers ever refused to do business with any of the plaintiffs. According to the court, the plaintiffs alleged that some of the defendants attempted to steer their insureds away from one of the plaintiffs to another shop that had a relationship with the insurer. Such allegations did not state a boycott claim, since none of those efforts involved more than a single defendant and there were no allegations that the attempted steering occurred due to the repair shop seeking to obtain a higher reimbursement rate, the court concluded.

The case is No. 6:14-cv-06000-GAP-TBS.

Attorneys: Ellie F. Turnage (Dockins, Turnage & Banks, PLLC) and John Arthur Eaves, Jr. for Capitol Body Shop, Inc., Automotive Alignment & Body Service, Inc., Alexander Body Shop, LLC, and Bill Fowler's Bodyworks, LLC. Elizabeth Helmer (Alston & Bird, LLP), Hal Kemp Litchford (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) and Johanna W. Clark (Carlton Fields Jorden Burt, PA) for State Farm Mutual Automobile Insurance Co. and State Farm Fire and Casualty Co. Claire Carothers Oates (King & Spalding, LLP) and Francis X. Nolan (Sutherland, Asbill & Brennan, LLP) for Progressive Gulf Insurance Co.

Companies: Capitol Body Shop, Inc.; Automotive Alignment & Body Service, Inc.; Alexander Body Shop, LLC; Bill Fowler's Bodyworks, LLC; State Farm Mutual Automobile Insurance Co.; State Farm Fire and Casualty Co.; Progressive Gulf Insurance Co.

Cases: Antitrust FloridaNews