The Sherman Antitrust Act claims in the Indiana case — one of more than 20 nationwide bringing similar claims — can’t be refiled, only appealed. Shops in four states have already appealed less developed versions of the lawsuits to the Eleventh Circuit, even though Middle District of Florida Judge Gregory Presnell hasn’t dismissed with prejudice the majority of the charges.
Like the cases themselves, Presnell’s dismissal Monday of IABA matched his Capitol ruling word for word at times. He ruled that insurers acting similarly wasn’t enough proof on its own of collusion.
“The actions allegedly taken by the Defendants in this case, such as paying the same labor rates, refusing to pay for the same list of procedures, and requiring the use of lower-quality parts, are not enough, on their own, to constitute a violation of Section 1 of the Sherman Act,” Presnell wrote. “Evidence of conscious parallelism alone does not permit an inference of conspiracy unless the Plaintiff either (1) establishes that, assuming there is no conspiracy, each defendant engaging in the parallel action acted contrary to its economic self-interest or (2) offers other “plus factors” tending to establish that the defendants were not engaging merely in oligopolistic price maintenance or price leadership but rather in a collusive agreement to fix prices or otherwise restrain trade.”
Sadly, he also again referred to the insurers, rather than the customers picking the shops, as the “buyer-side.”
Given the amount of details in the shops’ lawsuit, Presnell’s stance feels a bit “baby with the bathwater.” Why not just dismiss the claims for the insurers not mentioned consistently in this timeline?:
In 2008, State Farm had set the “market rate” across the State of Indiana at $48.00 per hour for labor and refinish labor, and $26.00 per hour for paint and materials. Defendants Indiana Farmers, Indiana Insurance, GEICO, Shelter and American Family were also paying $48.00 and $26.00 per hour.
At the end of 2008/beginning of 2009, State Farm lowered its “market rate” without explanation to $44.00 for labor while increasing the paint and materials “market rate” to $28.00 per hour. Simultaneously, Progressive and GEICO dropped their “market rate” to State Farm’s; within sixty days, Allstate, American Family, and Shelter had all changed their rates to match, as well.
At the end of 2009, when State Farm raised its “market rate” to $46.00 per hour for labor and $30.00 per hour for paint and materials, Progressive, Liberty Mutual, Safeco, American States all changed their “market rate,” as well.
In mid-2013, when State Farm raised its “market rate” for labor to $48.00 per hour, Shelter, American States, Indiana Farmers, Allstate, Nationwide, American Family, Progressive, Safeco all changed their “market rate,” either simultaneously or within thirty to sixty days.
In early 2014, when State Farm inexplicably lowered its “market rate” back to $46 per hour for labor, American Family, Allstate, GEICO, Safeco, Progressive, Nationwide, Liberty Mutual, Indiana Farmers also all changed simultaneously, with Shelter following within sixty days.
Tasked with reviewing the state-level claims and offering guidance to Presnell, Smith also recommended Friday that the Indiana shops’ quantum meruit (getting a benefit without paying for it) be killed for good.
However, in the Indiana case, Smith felt that while some of the shops and trade association’s allegations indicated unjustified interference, state law still wasn’t on their side. Plus, the lawsuit accused all 27 insurers but only provided examples of four doing any steering, according to Smith and the complaint:
(The customer) identified Plaintiff Conn’s Collision as his choice of repair shop to insurer Safeco. Safeco told (the customer) he was required to go to one of Safeco’s preferred repair shops to have an estimate performed before going to Conn’s, that Conn’s was not one of Safeco’s preferred shops, that if (the customer) went to a Safeco-preferred shop, the repair would be performed faster. (The customer) felt significantly pressured by Safeco to go another shop rather than the shop of his choice, Plaintiff Con’s.
(A customer) identified Plaintiff Martin’s Body Shop as his choice of repair shop to insurer Liberty Mutual. Liberty Mutual told (the customer) that Martin’s was not on their preferred list of shops, that going to Martin’s would mean the repairs would take longer, that if he took his vehicle to Martin’s, Liberty Mutual would not warranty the repairs performed but going to a Liberty Mutual preferred shop would result in a warranty of the repairs performed. As a result, (the customer) felt significantly pressured by Liberty Mutual to go to another shop rather than the shop of his choice, Plaintiff Martin’s.
(A customer) identified Plaintiff Martin’s Body Shop as his choice of repair shop to Defendant Allstate. Allstate told (the customer) that if he used the shop of his choice, he would have to pay more for the repair, that Allstate would not warrant the repairs performed at Martin’s but going to a preferred shop would result in a warranty of the work performed, that Martin’s was difficult and “we can’t work with that shop,” and if (the customer) went to a preferred shop, Allstate could pay that shop directly and (the customer) could get his vehicle back faster. As a result, (the customer) felt significantly pressured by Allstate to go to another shop rather than the shop of his choice, Plaintiff Martin’s.
(The customer) tried on three separate occasions to have his vehicle towed to Plaintiff Brothers Body & Paint. Without his permission and against his wishes, State Farm towed his vehicle to a preferred shop and refused to allow it to be taken to Brothers.
The case’s wording is confusing, and Smith seized on it. The steering allegations indicate none of the specified customers went to the shop they wanted to patron. But shortly after these examples, the lawsuit states, “The punitive and malicious nature of Defendants’ interference is exemplified by the failed steering instances described above.”
In Indiana, you have to be successfully steered, Smith argued. Perhaps the response can clear this up if the “failed” reference was a typo. (Perhaps erroneously copy-and-pasted from a similar lawsuit?)
Still, there wasn’t enough proof to meet the Indiana law that business interference involve what Smith described as a “valid business relationship.”
We’re a little confused by this one and Smith’s assertion that the lawsuit contains no facts “to show that any Plaintiff would have entered into a contract with an identified customer but for the alleged interference.” The four instances cited above seem to indicate the customers wanted to use the plaintiffs’ shops.
In one hope for future lawsuits, Smith did reject insurers’ argument that the lawsuit failed to accuse them of unjustified interference.
“The SAC contains allegations that steering is pointless since Defendants pay the same for the repairs regardless of who performs them,” he wrote. “So Plaintiffs complain, the only reason Defendants steer consumers is to punish Plaintiffs. The SAC also alleges that Defendants make false statements to consumers concerning difficulties they claim to have had when dealing with Plaintiffs, and that if a consumer takes her vehicle to a Plaintiff the work will not be guaranteed. The SAC alleges that Defendants intentionally delay the repair process if a consumer selects a Plaintiffs’ shop. And, that Defendants steer consumers to body shops they know do bad work. If proven at trial, these allegations are sufficient to prove Defendants’ alleged interference was not justified.”
Unfortunately, the case still should fail because it attempted to extrapolate from a few examples to all the insurers, according to Smith.
“Plaintiffs must know whose business they lost,” Smith wrote. “They may not always know why they lost the business, but each Plaintiff should be able to identify at least one specific relationship with which each Defendant successfully interfered.”
If the claims are dismissed with prejudice, the shops won’t be able to revise the lawsuit to cut to the specifics. The response here will be crucial.
Quantum meruit: Troubling Fla. precedent stands
Smith agrees that Indiana businesses could bring cases regarding quantum meruit. But since the shops here allegedly knew insurers weren’t going to pay what they wanted, they couldn’t take a job, give the unreimbursed benefit for free and then plead quantum meruit to obtain the reimbursement they really wanted.
“Plaintiffs cannot credibly allege that they expected additional payment after averring that Defendants fixed prices and told Plaintiffs to ‘take it or leave it,'” Smith wrote. “Under Indiana law, someone who provides work without a reasonable expectation of payment simply cannot recover in quantum meruit.”
The insurer can’t satisfy their contractual obligation to the customer without a repair to pre-loss condition or whatever the policy states. In fact, according to Smith’s citation of Indiana precedent:
“A person confers a benefit upon another if he gives to the other possession of or some other interest in money, land, chattels, or choses in action, performs services beneficial to or at the request of the other, satisfies a debt or a duty of the other, or in any way adds to the other’s security or advantage. He confers a benefit not only where he adds to the property of another, but also where he saves the other from expense or loss. The word ‘benefit,’ therefore, denotes any form of advantage.” (Emphasis added.)
The repair means the insurer also keeps the customer happy, which adds to their advantage in a competitive auto insurance space. As for expense and loss, without shops doing the repairs, insurers would have to total every vehicle.
Perhaps shops need to attach an insurance policy as precedent to convince the judges, but this apparent sentiment at the federal level that insurers don’t benefit from shops’ work is worrisome.