Quality Auto Painting Center of Roselle, Inc. v. State Farm Indemnity Co., 030419 FED11, 15-14178

Docket Nº:15-14178, 15-14179, 15-14180
Opinion Judge:ANDERSON, CIRCUIT JUDGE
Party Name: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-...
Judge Panel:Before ED CARNES, Chief Judge, TJOFLAT, WILSON, WILLIAM PRYOR, MARTIN, JORDAN, NEWSOM, BRANCH, and ANDERSON, Circuit Judges. JORDAN, Circuit Judge, joined by MARTIN, Circuit Judge, concurring: WILSON, Circuit Judge, dissenting in part:
Case Date:March 04, 2019
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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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.

Nos. 15-14178, 15-14179, 15-14180

United States Court of Appeals, Eleventh Circuit

March 4, 2019

Appeals from the United States District Court for the Middle District of Florida D.C. Docket Nos. 6:14-md-02557-GAP-TBS, 6:14-cv-06012-GAP-TBS, 6:14-cv-06013-GAP-TBS, 6:14-cv-06018-GAP-TBS, 6:14-cv-06019-GAP-TBS, 6:15-cv-06022-GAP-TBS

Before ED CARNES, Chief Judge, TJOFLAT, WILSON, WILLIAM PRYOR, MARTIN, JORDAN, NEWSOM, BRANCH, and ANDERSON, [*] Circuit Judges. [**]

ANDERSON, CIRCUIT JUDGE

This antitrust case requires us to apply the standards announced in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), to determine whether the allegations of the five complaints before us are sufficient to "nudge[] their claims across the line from conceivable to plausible," id. at 570, 127 S.Ct. at 1974, so as to state a claim under § 1 of the Sherman Act. Plaintiff-Appellant automobile repair shops (the "Body Shops") claim that the Defendant-Appellee Insurance Companies colluded to lower repair prices by improperly pressuring the shops to lower prices and by threatening to boycott those who do not comply. The Body Shops claim a per se price-fixing conspiracy and a per se conspiracy to boycott. They also bring several state law claims.

I. BACKGROUND

The cost of repairing a damaged vehicle is primarily based on labor and material costs. Repair shops can consult estimating guides to assist in calculating their labor rates but there is no standard way of determining a shop's labor rate. Within the category of labor costs, variables such as overhead, shop size and capacity, repair volume, and expertise affect each shop's rate. Market considerations, such as the prevailing labor rates within the geographic area of the shop, can dominate that cost. Material costs are driven by the cost of repairing or replacing damaged parts. Parts can be sourced from the original manufacturer, an aftermarket company, a salvage yard, or a parts refurbisher. Alfred M. Thomas & Michael Jund, Collision Repair and Refinishing: A Foundation Course for Technicians 7 (2014).

The Body Shops are a group of professional automobile repair companies that provide collision repair services to individuals insured by the Insurance Companies. Accepting the factual allegations in the complaint1 as true and construing them in the light most favorable to the plaintiff-as required by the Fed.R.Civ.P. 12(b)(6) posture of this case-the Body Shops derive seventy to ninety- five percent of their revenue from customers who pay via insurance and the Insurance Companies account for sixty-five to eighty-five percent of the insurance market in each of the relevant states. The Body Shops broadly allege that the Insurance Companies-with Defendant-Appellee State Farm as their leader-have combined or conspired to depress the amounts they pay for auto repairs performed on behalf of their insureds. According to the Body Shops, the Insurance Companies accomplish this in a number of ways.

First, the Body Shops allege that each of the Insurance Companies use a formal agreement system called "direct repair programs" or "DRPs."2 In exchange for entering into a DRP, the several Insurance Companies each agrees to list a shop as a "preferred provider" for its insureds which, at least in theory, generates increased business for the shop. In return, the shop agrees to certain concessions regarding, among other things, the "market rate" at which they are entitled to be reimbursed for labor costs. State Farm sets its market rate using an electronic survey of the shops in a particular geographic area and advises the Body Shops that they will pay no more than the market rate. In addition, the other Insurance Companies advise the Body Shops that they will pay no more than State Farm. The Body Shops allege, primarily, that the survey is methodologically unsound, 3that State Farm manipulates the survey to achieve an artificial rate, that State Farm will contact a shop and demand that they lower their rates, that State Farm will threaten-and effectuate-removal from the "preferred providers" list if a shop attempts to raise its rate, and that State Farm attempts to prohibit discussions among repair shops about their rates on the theory that such discussions constitute illegal price-fixing. The Body Shops allege that the market rate is enforced even against those shops which are not signatories to a DRP.4

Additionally, the Body Shops allege that the Insurance Companies have combined or conspired to depress the amounts they pay for replacement parts on damaged vehicles. According to the Body Shops, the Insurance Companies refuse to pay for "original equipment manufacturer" parts, which-because they are designed by the car manufacturer to fit the precise make and model of the damaged car-are more expensive. Rather, the Body Shops are required to use either "aftermarket" parts designed by third-parties or "salvaged" parts from other wrecked vehicles. These parts require extra time to install-which the Insurance Companies do not pay for-and cannot be guaranteed as safe by the Body Shops. The Insurance Companies also allegedly: utilize industry-standard databases5- which identify "target" costs for certain repairs-only when financially advantageous to them; often refuse to pay for necessary repairs; routinely refuse to reimburse the cost of certain materials; mandate participation in their parts procurement process; and force discount programs on the Body Shops. The Body Shops argue that these actions constitute a per se price-fixing violation of the Sherman Act.

Lastly, the Body Shops allege that the Insurance Companies engage in a practice known as "steering," in which they discourage their insureds from patronizing a noncompliant repair shop through "misrepresentation, insinuation, and casting aspersions." These practices allegedly include telling insureds that a particular repair shop: is not on the preferred provider list; has had quality control issues; charges more than other shops in the area (and that they will not pay the excess amount); takes longer than other shops (and that they will not pay for additional car rental days); and does not perform work that can be guaranteed by the Insurance Companies, even though the Insurance Companies never guarantee any repair work. The Body Shops argue that the Insurance Companies conspire with respect to such steering, constituting a per se group boycott.

The Body Shops filed approximately twenty-two similar lawsuits in federal district courts throughout the country.[6] The Judicial Panel on Multidistrict Litigation transferred all of the actions to the Middle District of Florida (Judge Presnell) where the "lead case," A&E Auto Body, Inc. v. 21st Century Centennial Insurance Co., No. 6:14-cv-310, was already pending. Of the twenty-two actions: two-the lead case and one other-were dismissed with prejudice7 and not appealed; four were dismissed and are currently on appeal; and two were dismissed by the district court and then also had their appeals dismissed for lack of prosecution. Of the remaining fourteen, five are the subject of this appeal.

As relevant to this appeal, the Body Shops alleged two violations of federal law under the Sherman Act, 15 U.S.C. § 1, for price-fixing and group boycotting. They also alleged three causes of action under the laws of the state in which the suits were filed for unjust enrichment, quantum meruit, and tortious interference8(collectively, the "State Law Claims").9 The Insurance Companies moved to dismiss all fourteen cases, the Body Shops filed a consolidated response to which the Insurance Companies replied, and the district court referred the matter to a magistrate judge for a report and recommendation.

Pursuant to that referral, the magistrate judge entered a fifty-nine page Report and Recommendation (the "R&R"), which concluded that the relevant claims should be dismissed...

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