Capitol Body Shop, Inc. v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 09 February 2015
• Docket Number: MDL Case No. 6:14-cv-2557-GAP-TBS,Case No: 6:14-cv-6000-Orl-31TBS
• Parties: CAPITOL BODY SHOP, INC., et al., Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Middle District of Florida

CAPITOL BODY SHOP, INC., et al., Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendants.

Case No: 6:14-cv-6000-Orl-31TBS

MDL Case No. 6:14-cv-2557-GAP-TBS

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION

February 9, 2015

REPORT AND RECOMMENDATION

Pending before me, on referral from the presiding district judge, are Defendants' motions to dismiss (Docs. 26, 31, 41, 44). Upon due consideration, I respectfully recommend that the motions be GRANTED in part and DENIED in part, that Count IV of Plaintiffs' amended complaint titled "Quasi Estoppel" be DISMISSED with prejudice, and that the remaining counts in the amended complaint be DISMISSED without prejudice.

I. Background

Plaintiffs are a group of 25 Mississippi auto body repair shops and Defendants are 15 insurance companies that write automobile insurance in the state of Mississippi. Plaintiffs allege that Defendants conspired to fix prices and boycott Plaintiffs in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. The allegations in this case mirror those made by the plaintiffs in A&E Auto Body, Inc. v. 21st Century Centennial Insurance Co., No. 6:14-cv-00310-Orl-31TBS, which are summarized by the Court in its Order granting the defendants' motions to dismiss in that case:

The Defendants in this case are alleged to "exert control" over the Plaintiffs' businesses (and the hourly rates paid by the Defendants) in a number of ways, beginning with agreementsgenerally referred to as "direct repair programs" or "DRPs". To participate in a particular insurer's DRP, a repair shop typically agrees to certain concessions in regard to such things as the prices it will charge and the priority given to vehicles owned by people who have insurance through that insurer. In exchange, the repair shop is listed as a "preferred provider". However, the Plaintiffs complain that the prices that they were permitted to charge under the DRPs were unfairly manipulated, that even repair shops that were not participating in DRPs were restricted to those price ceilings, and that repair shops that complained about these practices or tried to charge higher prices faced intimidation and boycotts from the insurers.

As a general proposition, each DRP contains language obligating the repair shop to charge the insurance company no more than the "market rate" for repairs in the general area. State Farm Mutual Automobile Insurance Company ("State Farm"), a Defendant in this case, determines this market rate. State Farm surveys the repair shops in a given area, determines the hourly rate charged by each repair technician, and then designates a rate just above the midpoint of all rates charged to be the "market rate." However, the Plaintiffs complain that State Farm alters the survey results to achieve a "wholly artificial 'market rate'" and uses this artificially lowered result to negotiate price decreases from repair shops. If a repair shop attempts to raise its hourly rate, State Farm will, among other things, remove it or threaten to remove it from the DRP.

The other Defendants, who do not perform such surveys, "specifically advised the Plaintiffs that they will pay no more than State Farm pays for labor." The Defendants refuse to pay a higher labor rate even to Plaintiffs who are not participating in a DRP.

The Plaintiffs also allege that the Defendants improperly lowered the amounts that they paid for repairs by, among other things, refusing to pay for replacement parts even where the repair shop thought replacement was a better option than repair and by requiring utilization of used parts even where new parts were available. The Plaintiffs also complain that the Defendants (1) are refusing to abide by the estimates set forth in the industry's leading collision-repair-estimating databases; (2) that they are refusing to pay for certain required materials and practices on the grounds that those items are included in the price of the repair; and (3) that they have imposed arbitrary caps on the amount they are willing to pay for paint as part of a repair.

2015 WL 304048, at *1-2 (M.D. Fla. Jan. 21, 2015).

Plaintiffs filed their original complaint in the United States District Court for the Southern District of Mississippi on January 7, 2014 (Doc. 1). Two months later, before any Defendant was served, they filed their amended complaint (Doc. 3). In addition to the Sherman Act claims, Plaintiffs' amended complaint asserts six state-law claims: Violation of Mississippi Code § 83-11-501 (Count I); Quantum Meruit (Count II); Unjust Enrichment (Count III); Quasi-Estoppel (Count IV); Tortious Interference with Business Relations (Count V); and Conversion (Count VI). Defendants filed motions to dismiss, Plaintiffs responded, and Defendants replied (Docs. 26-27, 31, 33, 41-42, 44-45, 67-70, and 72-75).

After these motions were fully briefed, the United States Judicial Panel on Multidistrict Litigation transferred this and three other cases to this district for coordinated or consolidated pretrial proceedings before District Judge Gregory A. Presnell. In re Auto Body Shop Antitrust Litigation, ___ F. Supp. 3d. ___, 2014 WL 3908000 (J.P.M.L. Aug. 8, 2014). On November 14, 2014, the Court held a hearing on the pending motions to dismiss in this and six other related cases (Case No. 6:14-cv-310, Doc. 282). On January 21, 2015, the Court entered its Order dismissing the amended complaint in the Florida case. A&E Auto Body, Inc. v. 21st Century Centennial Ins. Co., No. 6:14-cv-00310-Orl-31TBS, 2015 WL 304048 (M.D. Fla. Jan. 21, 2015). On February 9, Judge Presnell referred the pending motions to dismiss in this case to me for preparation of a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).

II. Legal Standards

Federal Rule of Civil Procedure 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief" so as to give the defendant fair noticeof what the claim is and the grounds upon which it rests, Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). A Rule 12(b)(6) motion to dismiss for failure to state a claim merely tests the sufficiency of the complaint; it does not decide the merits of the case. Milbum v. United States, 734 F.2d 762, 765 (11th Cir.1984). In ruling on a motion to dismiss, the court must accept the factual allegations as true and construe the complaint in the light most favorable to the plaintiff. SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir.1988). The court must also limit its consideration to the pleadings and any exhibits attached to the pleadings. FED.R.CIV.P. 10(c); see also GSW, Inc. v. Long County, Ga., 999 F.2d 1508, 1510 (11th Cir.1993).

A plaintiff must provide enough factual allegations to raise its right to relief above the speculative level, Twombly, 550 U.S. at 555, and to indicate the presence of the required elements, Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1302 (11th Cir.2007). Conclusory allegations, unwarranted factual deductions, or legal conclusions masquerading as facts will not prevent dismissal. Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir.2003).

In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court explained that a complaint need not contain detailed factual allegations "but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Id. 678 (internal citations and quotations omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility ofmisconduct, the complaint has alleged-but it has not 'show[n]'-'that the plaintiff is entitled to relief.'" Id. at 679 (quoting FED.R.CIV.P. 8(a) (2)).

III. Discussion

Count I: Claim under Mississippi Code § 83-11-501

Section 83-11-501 of the Mississippi Code, entitled "Requirement of repairs at particular shop prohibited," provides:

No insurer may require as a condition of payment of a claim that repairs to a damaged vehicle, including glass repairs or replacements, must be made by a particular contractor or motor vehicle repair shop; provided, however, the most an insurer shall be required to pay for the repair of the vehicle or repair or replacement of the glass is the lowest amount that such vehicle or glass could be properly and fairly repaired or replaced by a contractor or repair shop within a reasonable geographical or trade area of the insured.

Plaintiffs argue that this statute creates a cause of action against Defendants for failing to pay an amount sufficient to "properly and fairly repair[]" insureds' vehicles (Doc. 3, ¶ 110; Doc. 68, p. 5). I disagree. The sole duty § 83-11-501 imposes on automobile insurance companies is to refrain from "requir[ing] as a condition of payment of a claim that repairs to a damaged vehicle ... must be made by a particular contractor or motor vehicle repair shop." See Addison v. Allstate Ins. Co., 97 F. Supp. 2d 771, 773 (S.D. Miss. 2000) ("[T]he statute unambiguously forbids only the conditioning of payment upon the selection of certain body shops, not the steering of insureds toward certain shops.")

The second clause of the statute limits the insurer's contractual duty to pay for repairs by providing that "the most an insurer will be required to pay" is "the lowest amount" for which the repair could be properly and fairly completed "by a contractor or repair shop within a reasonable geographical or trade area of the insured."

Plaintiffs argue that Defendants' motions to dismiss are premised upon "reading out" the portion of § 83-11-501 that references "the lowest amount that such vehicle or glass could be properly and fairly repaired" (Doc. 68, pp. 4-5; Doc. 69, p. 21; Doc. 70, p. 28). In fact, it is...