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Eleventh Circuit grants insurers’ request for rehearing in multistate antitrust case

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Business Practices | Insurance | Legal

The Eleventh Circuit Court of Appeals has for now set aside a decision in favor of collision repairers in multiple states, agreeing with insurers that a full panel of judges should consider the shops’ appeal.

A three-judge panel of the appeals court heard the case in April 2017 and split 2-1 on Sept. 7, 2017, in favor of reversing a lower Middle District of Florida court decision to dismiss antitrust, steering and unjust enrichment allegations brought by eight body shops in New Jersey, Kentucky, Virginia and Missouri against the nation’s largest insurers. It was a major win for repairers in those cases and similar litigation also consolidated before the skeptical Florida court.

The decision April 6 puts that 2017 victory on hold and drags out the 2014 and 2015 lawsuits even further. The ultimate Eleventh Circuit en banc decision won’t occur until more than a year from the 2017 ruling, for the hearing before the full court isn’t scheduled until Oct. 22.

“Petitions for rehearing having been filed and a member of this Court in active service having requested a poll on whether this case should be reheard en banc, and a majority of the judges of this Court in active service who are not disqualified having voted in favor of granting rehearing en banc, IT IS ORDERED that this case will be reheard en banc,” the decision reached by eight judges stated. “The panel’s opinion is VACATED.”

The court did not state the results of the vote involving Chief Judge Ed Carnes and circuit Judges Elizabeth Branch, Adalberto Jordan, Beverly Martin, Kevin Newsom, William Pryor Jr., Gerald Tjoflat and Charles Wilson. Wilson wrote the Sept. 7 majority opinion for himself and sitting District Judge Barbara Rothstein.

Circuit Judges Julie Carnes, Stanley Marcus, Jill Pryor and Robin Rosenbaum all recused themselves. Senior Judge R. Lanier Anderson, who dissented in September, did not participate on the panel.

Like the original appeal, the case seems to hinge on whether insurers behaving similarly is enough to prove price-fixing.

Middle District of Florida Judge Gregory Presnell, often in conjunction with Magistrate Judge Thomas Smith, had consistently declared insufficient evidence existed to support the shops’ federal allegations that large carriers were conspiring to fix prices and boycott shops and state allegations of tortious interference (“steering”) and receiving services without paying for them (unjust enrichment/quantum meruit).

Wilson and Rothstein in September 2017 felt that when they set aside external considerations and accepted the shops’ conclusions as truth, the collision repairers had made enough of a case to support their claims. At the motion-to-dismiss stage, the court is supposed to give the edge to the plaintiff in this fashion within reason; this is different from the actual trial when the assertions must actually be proven.

Anderson and insurers seeking a new outcome from the Eleventh Circuit (here’s State Farm’s petition, for example) argued that with respect to the antitrust claims, the shops hadn’t demonstrated why insurers wouldn’t naturally all seek to pay the same amounts as a rival. Parallel competitive behavior isn’t illegal, only collusion is.

“State Farm had a clear independent economic interest in setting the rates it would pay through a market survey,” State Farm wrote in its petition for an en banc hearing. “The other defendants also had clear independent economic interests that would have led them each to decide not to pay more than what the shop was already accepting from State Farm. The shops offer repair services to defendants’ policyholders. The insurers pay for these services pursuant to a contract with the policyholder. The complaints are not about the prices of premiums that insurers charge their policyholders (which are affected by repair costs). It is plainly in the interest of insurers to lower repair costs by resisting price increases, especially because, as the complaints concede, competitive body shops are willing to perform repairs for lower rates.”

Wilson and Rothstein felt the shops had done enough if the brief itself was taken in a vacuum — which is how they said the case must be held. While Anderson could use his common sense, he couldn’t at this point override the facts put forth in the case with his own external knowledge, they said.

The allegation that insurers adopted similar boycott tactics and refused to pay more than certain amounts in a diverse market was enough evidence that the court couldn’t dismiss antitrust behavior out of hand, the judges ruled.

Even if insurers succeed in having the full Eleventh Circuit overriding Wilson and Rothstein and killing the federal antitrust claims and state-level quantum meruit and unjust enrichment allegations, they might be unable to keep the state-level tortious interference claims dismissed.

Though he disagreed with the majority’s legal interpretation, even Anderson agreed with the end result of overturning Presnell and preserving the shops’ steering claims.

“I would also have found that the body shops adequately stated a claim under the laws of each of the four states,” Anderson wrote. “Although the elements of the claim are not identical, there are three requirements of tortious interference that are both common to all four of the relevant states and which could reasonably be contested by the parties: (1) the body shops must have had a valid business expectancy; (2) the insurance companies must have had knowledge of that valid business expectancy; and (3) any interference must have been improper. All are satisfied by the steering allegations. The first requirement is met because the body shops allege that the insureds had chosen a particular body shop, … thereby raising the shop’s prospective economic interest above a purely speculative level. Secondly, the steering allegations also make clear that the insurance companies had knowledge of the prospective economic advantage—if they did not know that an insured had chosen a shop they would not have been able to steer them away from it. Lastly, the allegations of the complaint suggest, among other things, that steering is done to ‘punish’ noncompliant shops, that it is accomplished through ‘misrepresentation of facts,’ and that it is ‘malicious.’  Taken as true, such behavior is sufficiently improper to survive a motion to dismiss. Accordingly, in addition to reversing the district court’s group pleading analysis, I would also have remanded with a determination that the complaints state a valid claim for tortious interference.”

All three appellate judges also shot down the Florida court’s rejection of the shops on the grounds of group pleading. The court has throughout the multidistrict litigation taken issue with shops’ lack of specifics over which insurer had allegedly committed which act — ignoring the logical and obvious possibility that the shops were alleging every insurer sued had indeed committed every count in the lawsuit.

Anderson’s interpretation clearly supports the latter analysis, which could if upheld by the full Eleventh Circuit make life easier for shops attempting to sue multiple insurers, at least in the Eleventh Circuit’s jurisdiction and certainly in the Middle District of Florida.

“The problem with the district court’s group pleading analysis in this case is not—as the majority believes—that it unnecessarily required the body shops to tie the insurance companies to the alleged wrongdoing,” Anderson wrote. “The problem with the district court’s analysis—and the reason that I join the majority in reversing with respect to this claim—is that the body shops have in fact done so. Each corporate defendant could read the complaint and fairly discern what it is they are alleged to have done. This—at least in this context—is all that Rule 8 requires and, accordingly, it was error to dismiss the complaints for group pleading. But to suggest that such pleadings are not ‘necessary’ is plainly not true.”

Featured image: The Eleventh Circuit Court of Appeals is pictured. (Provided by Eleventh Circuit)