Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: Auto repair shops’ price fixing claims against insurance companies fail, (Mar 1, 2016)

By Linda O’Brien, J.D., LL.M.

A group of automobile repair shops and a trade association failed to plead sufficient facts 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 ruled. Thus, the insurance companies’ motion to dismiss was granted (Indiana Autobody Association, Inc. v. State Farm Mutual Automobile Insurance Company, February 29, 2016, Presnell, G.).

In April 2014, automotive collision repair industry trade association Indiana Autobody Association, along with 25 Indiana vehicle repair businesses, filed suit in Indiana federal district court against State Farm and 26 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 to suppress automobile damage repair costs. 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 constituted a violation of Section 1 of the Sherman Act.

According to the court, evidence of conscious parallelism alone did not permit an inference of conspiracy unless the plaintiffs (1) established that each defendant engaged in the parallel action contrary to its economic self-interest and (2) offered “plus factors” to show that 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 rejected as not plausible. 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 that the defendant insurers had numerous opportunities to conspire or there was a uniformity of action were conclusory and did not suggest collusion on the part of the defendants, the court noted.

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 the defendants attempted to coerce auto repair shops into going along with the price fixing scheme by steering their insureds away from the plaintiffs to another shop that had a relationship with the insurer or by disseminating false and misleading information. 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-06001-GAP-TBS.

Attorneys: Allison P. Fry (John Arthur Eaves, Attorneys at Law) for Indiana Auto Body Association, Inc., Gary Conns Collision Center, Inc., Cross Paint & Body Shop, Inc., Dan T. Gratz Body Shop, Inc. and Enneking's Auto Body, Inc. Elizabeth Helmer (Alston & Bird, LLP) and Hal Kemp Litchford (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) for State Farm Mutual Automobile Insurance Co., State Farm Fire and Casualty Co. and State Farm General Insurance Co. Claire Carothers Oates (King & Spalding, LLP) and Francis X. Nolan (Sutherland, Asbill & Brennan, LLP) for Progressive Casualty Insurance Co. and Progressive American Insurance Co.

Companies: Indiana Auto Body Association, Inc.; Gary Conns Collision Center, Inc.; Cross Paint & Body Shop, Inc.; Dan T. Gratz Body Shop, Inc.; Enneking's Auto Body, Inc.; State Farm Mutual Automobile Insurance Co.; State Farm Fire and Casualty Co.; State Farm General Insurance Co.; Progressive Casualty Insurance Co.; Progressive American Insurance Co.

Cases: Antitrust FloridaNews