Quality Auto Painting Ctr. of Roselle, Inc. v. State Farm Indem. Co.
| Decision Date | 07 September 2017 |
| Docket Number | Nos. 15-14160, 15-14162, 15-14178, 15-14179, 15-14180.,s. 15-14160, 15-14162, 15-14178, 15-14179, 15-14180. |
| Citation | 870 F.3d 1262 |
| Parties | QUALITY AUTO PAINTING CENTER OF ROSELLE, INC., Traded as Prestige Auto Body, Plaintiff-Appellant, v. STATE FARM INDEMNITY COMPANY, State Farm Guaranty Insurance Company, et al., Defendants-Appellees. Ultimate Collision Repair, Inc., Plaintiff-Appellant, v. State Farm Indemnity Company, State Farm Guaranty Insurance Company, et al., Defendants-Appellees. Campbell County Auto Body, Inc., Plaintiff-Appellant, v. State Farm Mutual Automobile Insurance Company, State Farm Fire & Casualty Company, et al., Defendants-Appellees. Lee Pappas Body Shop, Inc., David C. Brosius, d.b.a. Martins Auto Body Works, Inc., Art Walker Auto Services, Inc., Whiteford Collision and Refinishing, Inc., Plaintiffs-Appellants, v. State Farm Mutual Automobile Insurance Company, State Farm Fire & Casualty Company, et al., Defendants-Appellees. Concord Auto Body, Inc., Plaintiff-Appellant, v. State Farm Mutual Automobile Insurance Company, State Farm Fire & Casualty Company, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Allison P. Fry, John Arthur Eaves, Jr., Eaves Law Office, Jackson, MS, Mark L. Shurtleff, Shurtleff Law Firm, Salt Lake City, UT, Joshua S. Bauchner, Ansell Grimm & Aaron, Clifton, NJ, Van Bunch, Eric David Zard, Tonna K. Farrar, Bonnett Fairbourn Friedman & Balint, PC, Phoenix, AZ, David A. Futscher, Parry Deering Futscher & Sparks, PSC, Covington, KY, Peter Andrew Miller, Miller Legal, LLC, Charlottesville, VA, for Plaintiffs–Appellants.
Elizabeth Helmer, Michael P. Kenny, Tiffany Lynne Powers, Alston & Bird, LLP, Jeffrey S. Cashdan, Claire Carothers Oates, Christine Alice Hopkinson, King & Spalding, LLP, John P. Hutchins, LeClairRyan, Atlanta, GA, Johanna W. Clark, Carlton Fields Jorden Burt, PA, Hal Kemp Litchford, Kyle Allen Diamantas, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Michael L. McCluggage, Eimer Stahl LLP, Richard L. Fenton, Mark L. Hanover, Dentons US, LLP, Timothy J. Rooney, Winston & Strawn, LLP, Chicago, IL, Kymberly Kochis, Michael R. Nelson, Francis X. Nolan, Eversheds Sutherland (US)LLP, Eric Hochstadt, David L. Yohai, John P. Mastando, III, Weil Gotshal & Manges, LLP, Michael B. de Leeuw, Cozen O'Connor, New York, NY, Michael J. Kurtis, Nelson Levine de Luca & Horst, Blue Bell, PA, Lori J. Caldwell, Rumberger Kirk & Caldwell, PA, Winter Park, FL, Bonnie Lau, Dentons US LLP, San Francisco, CA, Michael Hiram Carpenter, Carpenter Lipps & Leland, LLP, Joseph Edward Ezzie, Michael Scott McIntyre, Baker & Hostetler, LLP, Columbus, OH, Amelia W. Koch, Baker Donelson, PC, Seth A. Schmeeckle, Lugenbuhl Wheaton Peck Rankin & Hubbard, Steven F. Griffith, Jr., Baker Donelson, PC, New Orleans, LA, Marjorie Salazar, Lugenbuhl Wheaton Peck Rankin & Hubbard, Houston, TX, Dan W. Goldfine, Ian M. Fischer, Joshua Grabel, Jamie L. Halavais, Lewis Roca Rothgerber Christie, LLP, Paul Bruce Converse, Steptoe & Johnson, LLP, Phoenix, AZ, Michael Edward Mumford, Ernest Eugene Vargo, Baker & Hostetler, LLP, Jeffery D. Ubersax, Jones Day, Cleveland, OH, Thomas G. Rohback, Axinn Veltrop & Harkrider, LLP, Hartford, CT, David T. Klapheke, Boehl Stopher & Graves—Louisville KY, Robert L. Steinmetz, Gwin Steinmetz & Baird, PLLC, Louisville, KY, Lori M. McAllister, Dykema Gossett, PLLC, Lansing, MI, Robert Bradley Best, Jonathan Stuart Masters, Hal K. Best, Holcomb Dunbar Watts Best Masters & Golmon, PA, Oxford, MS, Matthew C. Blickensderfer, Frost Brown & Todd, LLC, Cincinnati, OH, Robert Francis Reklaitis, LeClairRyan, Washington, DC, Edward Keenan Cottrell, Smith Gambrell & Russell, LLP, Jacksonville, FL, Elizabeth S. Skilling, Harman Claytor Corrigan & Wellman, Glen Allen, VA, Kenneth F. Hardt, Sinnott Nuckols & Logan, PC, Midlothian, VA, Thomas A. French, Rhoads & Sinon, LLP, Harrisburg, PA, Daniel Wilke, Wilke & Wilke, PC, Steven Howard Schwartz, Brown & James, PC, St. Louis, MO, Michael S. McCarthy, Heather Carson Perkins, Faegre Baker Daniels, LLP, Denver, CO, Ryan Hurley, Sarah Jenkins, Kathy L. Osborn, Faegre Baker Daniels, LLP, Indianapolis, IN, for Defendants–Appellees.
Before WILSON and ANDERSON, Circuit Judges, and ROTHSTEIN,* District Judge.
Automobile body shops filed five complaints, each asserting federal antitrust and state tort claims against insurance companies. The body shops appeal the dismissal of their complaints for failure to state a claim.
The automobile insurance and repair industries have customs and practices that the public frequently encounter and endorse. The public's level of familiarity, however, has no bearing on whether such customs and practices have been employed for the benefit of a long-term scheme designed to thwart antitrust and tort laws. Wary of the prejudicial effect of preconceptions about these industries, assuming as true only those facts within the four corners of the complaints, and drawing inferences from those facts only in favor of the body shops, we determine that the shops pleaded enough facts to plausibly support their federal antitrust and state tort claims. We reverse the dismissal of those claims.
In their complaints, the body shops argue that the insurance companies engaged in two lines of tactics in pursuit of a single goal: to depress the shops' rates for automobile repair. The first line of tactics was designed to set a "market rate," which reflected not the forces of the market but an artificial rate that would benefit only the insurance companies. The second line of tactics was designed to pressure the body shops into accepting the market rate by steering insureds away from the non-compliant shops that charged more than the rate. The body shops argue that the insurance companies' concurrent lines of tactics violated both federal antitrust and state tort laws.
The body shops argue two types of antitrust violations. First, the body shops argue that the insurance companies engaged in horizontal price fixing, an illegal agreement among competitors to fix prices. Instead of pleading facts that directly support the existence of an agreement, the body shops plead facts supporting circumstances—such as parallel conduct, adoption of a uniform price despite variables that would ordinarily result in divergent prices, and uniform practices—from which the shops infer the existence of an agreement. Second, the body shops argue that the insurance companies boycotted the non-compliant shops that charged more than the fixed prices by enlisting unwitting insureds into their scheme. Specifically, the body shops argue that the insurance companies steered insureds away from the non-compliant shops with misleading or false statements about the shops' business integrity and quality.
Arguing the commission of three state torts, the body shops assert that the insurance companies were unjustly enriched, deprived the shops of quantum meruit, and tortiously interfered with potential business of the shops.
Because the body shops plead enough facts to plausibly support their federal antitrust and state tort claims, we reverse the dismissal of those claims.
The body shops operate in Kentucky, Missouri, New Jersey, and Virginia. The insurance companies offer policies in these states and collectively control approximately 65% of the private passenger automobile insurance market in Kentucky, 85% in Missouri, 72% in New Jersey, and 100% in Virginia. Of the insurance companies, the State Farm companies have the largest market share: they control approximately 22.3% of the private passenger automobile insurance market in Kentucky, 22.88% in Missouri, and 14.85% in Virginia.2 The insurance companies' insureds generate 60% of the Kentucky body shop's revenue and between 70% and 95% of the revenue of each of the remaining body shops. Most of the insurance companies are subsidiaries or affiliates, or are otherwise related.
The insurance companies refuse to reimburse the body shops at more than the "market rate," which is a term that appears in direct repair program (DRP) agreements between the companies and certain body shops. Under a DRP agreement, an insurance company lists a body shop as a "preferred provider" in exchange for the company's paying the shop no more than the "going rate in the market area." However, even if a body shop does not participate in an insurance company's DRP, the company refuses to reimburse the shop at more than the market rate. None of the plaintiff body shops participates in a defendant insurance company's DRP.3
The market rate comprises the market labor rate and the market materials costs, both of which the insurance companies select. The insurance companies use the market labor rate that one company, State Farm, determines by using a method that is unverified and the results of which State Farm manipulates. Also, the insurance companies depress the market material costs by pressuring body shops into using inferior parts and into offering discounts and concessions.
In determining the market labor rate that all of the insurance companies use, State Farm uses an unverified "half plus one" method of calculation and manipulates the result.4 The half plus one method (1) calculates half plus one—an amount we designate as "n"—of the total number of employees or work bays (whichever is fewer in each body shop) in the market area; (2) lists the shops in a market area from the shop with the fewest employees or work bays to the shop with the most; and (3) declares the market labor rate as the labor rate of the shop that employs the n-th employee or work bay. It is unclear how the method designates a market area. No...
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