Crawford's Auto Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 17-12583

• Decision Date: 20 December 2019
• Docket Number: No. 17-12583,17-12583
• Citation: 945 F.3d 1150
• Parties: CRAWFORD'S AUTO CENTER, INC., et al., Plaintiffs - Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendants - Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

945 F.3d 1150

CRAWFORD'S AUTO CENTER, INC., et al., Plaintiffs - Appellants,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendants - Appellees.

No. 17-12583

United States Court of Appeals, Eleventh Circuit.

December 20, 2019

Steven Bloch, Silver Golub & Teitell, LLP, STAMFORD, CT, John William Barrett, Steven Bloch, Bailey & Glasser, LLP, CHARLESTON, WV, Allison P. Fry, Allison P. Fry, Attorney at Law, JACKSON, MS, Patricia Mulvoy Kipnis, Bailey & Glasser, LLP, HADDONFIELD, NJ, David Francis Sorensen, Berger & Montague, PC, PHILADELPHIA, PA, for Plaintiffs- Appellants.

Michael P. Kenny, Elizabeth Helmer, Alston & Bird, LLP, ATLANTA, GA, Brent Robert Austin, Daniel D. Birk, Michael L. McCluggage, Eimer Stahl LLP, CHICAGO, IL, Hal Kemp Litchford, Baker Donelson Bearman Caldwell & Berkowitz, PC, ORLANDO, FL, for Defendants - Appellees STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, STATE FARM GENERAL INSURANCE COMPANY, STATE FARM INDEMNITY COMPANY, STATE FARM GUARANTY INSURANCE COMPANY.

Michael Hiram Carpenter, Carpenter Lipps & Leland, LLP, COLUMBUS, OH, for Defendants - Appellees NATIONWIDE MUTUAL INSURANCE COMPANY, ALLIED PROPERTY & CASUALTY INSURANCE COMPANY, AMCO INSURANCE COMPANY, DEPOSITORS INSURANCE COMPANY, NATIONWIDE INSURANCE COMPANY OF AMERICA, COLONIAL COUNTY MUTUAL INSURANCE COMPANY, NATIONWIDE AFFINITY INSURANCE COMPANY OF AMERICA, NATIONWIDE AGRIBUSINESS INSURANCE COMPANY, NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY, NATIONWIDE MUTUAL FIRE INSURANCE.

Dan W. Goldfine, Ian M. Fischer, Jamie L. Halavais, Husch Blackwell, LLP, Joshua Grabel, Lewis Roca Rothgerber Christie, LLP, PHOENIX, AZ, for Defendants - Appellees GEICO ADVANTAGE INSURANCE COMPANY, GEICO CHOICE INSURANCE COMPANY, GEICO CASUALTY COMPANY, GEICO SECURE INSURANCE COMPANY, GEICO GENERAL INSURANCE COMPANY, GEICO COUNTY MUTUAL INSURANCE COMPANY, GEICO INDEMNITY COMPANY, GOVERNMENT EMPLOYEE'S INSURANCE COMPANY.

Jeffrey S. Cashdan, King & Spalding, LLP, ATLANTA, GA, Michael R. Nelson, Eversheds Sutherland (US) LLP, The Grace Bldg, NEW YORK, NY, for Defendant - Appellee PROGRESSIVE UNIVERSAL INSURANCE COMPANY.

Richard L. Fenton, Jacqueline A. Giannini, Mark L. Hanover, Dentons US, LLP, CHICAGO, IL, Bonnie Lau, Morrison & Foerster, LLP, SAN FRANCISCO, CA, for Defendants - Appellees ALLSTATE CORPORATION (THE), ALLSTATE INSURANCE COMPANY, ALLSTATE COUNTY MUTUAL INSURANCE COMPANY, ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE NEW JERSEY PROPERTY AND CASUALTY INSURANCE COMPANY, ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY, ENCOMPASS INDEMNITY COMPANY, ESURANCE INSURANCE COMPANY, ESURANCE PROPERTY & CASUALTY INSURANCE COMPANY.

Michael Edward Mumford, Baker & Hostetler, LLP, CLEVELAND, OH, for Defendants - Appellees LIBERTY MUTUAL HOLDING COMPANY, INC., LIBERTY MUTUAL GROUP, INC., THE FIRST LIBERTY INSURANCE CORPORATION, LIBERTY COUNTY MUTUAL INSURANCE COMPANY, TEXAS, LIBERTY MUTUAL FIRE INSURANCE COMPANY, LIBERTY MUTUAL INSURANCE COMPANY, LM GENERAL INSURANCE COMPANY, PEERLESS INSURANCE COMPANY, SAFECO INSURANCE COMPANY OF AMERICA, SAFECO INSURANCE COMPANY OF ILLINOIS.

Before WILLIAM PRYOR, MARTIN, and KATSAS,^* Circuit Judges.

MARTIN, Circuit Judge:

Plaintiffs Crawford's Auto Center, Inc. and K & M Collision, LLC are two auto body collision repair shops located in Pennsylvania and North Carolina. They brought this class action suit against dozens of insurer defendants, alleging claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and state law fraud and unjust enrichment theories. The defendants consist of seven families of insurance companies—State Farm, Allstate, GEICO, Progressive, Farmers Insurance, Liberty Mutual, and Nationwide—but Progressive and Farmers Insurance were dismissed voluntarily from this appeal. We will refer to the remaining defendants collectively ("Defendants").

The District Court granted Defendants' motion to dismiss each of Plaintiffs' claims. Plaintiffs appeal this dismissal, as well as the District Court's decision to strike certain exhibits and its decision not to allow Plaintiffs to amend their complaint on the ground that it would be futile. After careful review, and with the benefit of oral argument, we affirm.

I. BACKGROUND

A. FACTUAL BACKGROUND

Defendants are obligated to indemnify collision losses under their insurance claimants' policies. In the event the claimants' vehicles can be repaired, the vehicles must be restored to pre-loss or pre-damaged condition. Plaintiffs allege Defendants have the option to repair the vehicles or pay for the repairs, but they choose to pay for the repairs—performed by collision repair shops—because this protects them from liability for such repairs. Each defendant insurer group has a direct repair program ("DRP"). These programs are composed of collision repair shops around the country that agree to "certain uniform standards and procedures in the repairs covered by" Defendants. In return for entering into these agreements, Defendants refer a consistent volume of repair work to the collision repair shops that participate in each Defendant's respective DRP. Plaintiffs have not entered into such agreements with Defendants and are not part of any of Defendants' DRPs.

Plaintiffs' complaint describes a scheme that enables Defendants to pay as little for repairs as possible. They allege that this scheme harmed non-DRP collision repair shops, like Plaintiffs, because non-DRP shops "expect to be compensated at a rate that is commensurate with the standard of repairs that they are performing." Plaintiffs say Defendants "have created a unilateral solution to achieve their goal of cost savings" by instituting policy language "qualifying their obligation" to pay only the prevailing rate. Plaintiffs allege these "prevailing rates" are artificial, and Defendants use the rates to misrepresent to both insurance claimants and collision repair shops what is necessary to properly repair and restore the damaged vehicles to pre-loss condition. Under Plaintiffs' theory, Defendants' scheme allows them to pay less for the repairs than what Plaintiffs believe they are owed.

Plaintiffs recount that in order to establish the prevailing rate, Defendants work with three auto data companies referred to as the "Information Providers".¹ The Information Providers gather data about things like labor rates and material costs, and put that data into estimating software programs that are then sold to Defendants, DRP collision repair shops, and non-DRP collision repair shops. Defendants and "the vast majority" of collision repair shops then use this software to estimate the cost of automobile repairs. Plaintiffs claim the Information Providers' software is supposed to be neutral, but in practice is not. This is because, as Plaintiffs describe, most of the data uploaded into the software programs comes from Defendants' DRP collision repair shops, and those DRP shops are contractually bound to accept lower rates in exchange for a steady stream of work. This results in estimates that are based on a "feedback loop" that does not accurately reflect rates across the industry. Defendants and the Information Providers are thus able to "cement[ ] the prevailing rate" and apply it to collision repair shops who are not involved in Defendants' DRP programs.

Plaintiffs also allege that Defendants and the Information Providers skew the raw data that gets loaded into the estimating software by "scrub[bing] the estimates presented by Plaintiffs." For example, when Plaintiffs present a repair order—which reflects the repairs required according to manufacturer guidelines and specifications—and outline the compensation for their work, they are uniformly told by Defendants that certain procedures or labor times exceed the prevailing rate. Plaintiffs say it is by this method that Defendants are able to systematically misrepresent the prevailing rates in each repair estimate, including rates for labor, parts and materials.

Plaintiffs claim that as a result of these processes, Defendants consistently refuse to pay anything over the prevailing rate and thus have "artificially suppressed" the compensation Plaintiffs are owed. Plaintiffs are suing Defendants for their "attempts to enforce these artificial prevailing rates" upon them because they have not agreed to Defendants' "limited, pre-defined compensation."

Plaintiffs claim Defendants' practices amount to RICO extortion and fraud, as well as common law fraud and unjust enrichment.

Plaintiffs allege that Defendants misrepresented and omitted material facts to arrive at their prevailing rate for automobile repairs "for the purpose of deceiving Plaintiffs ... to accept artificially suppressed compensation for insured repairs." Plaintiffs say they were "coerced or forced to accept suppressed compensation for insured repairs predicated on fear of economic harm, i.e., if the repair facilities wanted to do business with [Defendants]."

B. PROCEDURAL HISTORY

Plaintiffs first filed their complaint in April 2014 in the U.S. District Court for the Northern District of Illinois. After Defendants moved to dismiss, the parties stipulated that Plaintiffs would amend their complaint. Plaintiffs filed their first amended complaint in August 2014. In December 2014, the Judicial Panel on Multidistrict Litigation transferred the action to the Honorable Gregory Presnell in the Middle District of Florida for consolidated pretrial proceedings. Defendants again moved to dismiss. The District Court, now overseeing the multidistrict litigation, granted the motion, dismissed the complaint, and granted Plaintiffs leave to amend. Plaintiffs filed their Second Amended Complaint (the "Complaint") in January 2016.

Defendants moved to dismiss for a third time. Plaintiffs filed a response to Defendants' motions with a number of exhibits attached. These exhibits included Defendants' repair estimates and Plaintiffs' repair orders. D...