Quality Auto Painting Ctr. of Roselle, Inc. v. State Farm Indem. Co.

• Decision Date: 04 March 2019
• Docket Number: No. 15-14179,No. 15-14160, No. 15-14180, No. 15-14162, No. 15-14178,15-14160
• Citation: 917 F.3d 1249
• 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

917 F.3d 1249

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.

No. 15-14160

No. 15-14162

No. 15-14178

No. 15-14179

No. 15-14180

United States Court of Appeals, Eleventh Circuit.

March 4, 2019

Mark L. Shurtleff, Shurtleff Law Firm, Salt Lake City, UT, Joshua S. Bauchner, Ansell Grimm & Aaron, Clifton, NJ, John Arthur Eaves, Jr., Eaves Law Firm, LLC, Jackson, MS, for Plaintiff-Appellant.

Elizabeth Helmer, Michael P. Kenny, Alston & Bird, LLP, Atlanta, GA, Johanna W. Clark, Carlton Fields Jorden Burt, PA, Hal Kemp Litchford, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Michael L. McCluggage, Eimer Stahl LLP, Chicago, IL, for Defendants-Appellees State Farm Indemnity Company, State Farm Guaranty Insurance Company.

Jeffrey S. Cashdan, Claire Carothers Oates, King & Spalding, LLP, Atlanta, GA, Kymberly Kochis, Michael R. Nelson, Francis X. Nolan, IV, Eversheds Sutherland (US) LLP, New York, NY, Hal Kemp Litchford, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, for Defendants-Appellees Progressive Freedom Insurance Company, Progressive Garden State Insurance Company.

Lori J. Caldwell, Rumberger Kirk & Caldwell, PA, Orlando, FL, Richard L. Fenton, Mark L. Hanover, Dentons US, LLP, Chicago, IL, Bonnie Lau, Dentons US LLP, San Francisco, CA, Hal Kemp Litchford, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, for Defendants-Appellees Allstate New Jersey Insurance Company.

Michael Hiram Carpenter, Carpenter Lipps & Leland, LLP, Columbus, OH, for Defendant-Appellee Nationwide Mutual Insurance Company.

Hal Kemp Litchford, Kyle Allen Diamantas, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Amelia W. Koch, Baker Donelson, PC, New Orleans, LA, for Defendant-Appellee United Services Automobile Association.

Seth A. Schmeeckle, Lugenbuhl Wheaton Peck Rankin & Hubbard, New Orleans, LA, Marjorie Salazar, Lugenbuhl Wheaton Peck Rankin & Hubbard, Houston, TX, for Defendant-Appellee Hanover Insurance Company.

Eric Hochstadt, David L. Yohai, Weil Gotshal & Manges, LLP, New York, NY, for Defendants-Appellees 21st Century Centennial Insurance Company, 21st Century Assurance Company, 21st Century Pinnacle Insurance.

Dan W. Goldfine, Ian M. Fischer, Joshua Grabel, Jamie L. Halavais, Lewis Roca Rothgerber Christie, LLP, Phoenix, AZ, Leah Ward Sears, Smith Gambrell & Russell, LLP, Atlanta, GA, for Defendants-Appellees GEICO Casualty Company, GEICO Indemnity Company.

Dan W. Goldfine, Ian M. Fischer, Joshua Grabel, Jamie L. Halavais, Lewis Roca Rothgerber Christie, LLP, Phoenix, AZ, for Defendant-Appellee Government Employees Insurance Company.

Michael Edward Mumford, Baker & Hostetler, LLP, Cleveland, OH, for Defendants-Appellees Liberty Mutual Fire Insurance Company, Liberty Mutual Mid-Atlantic Insurance Company, Liberty Insurance Company, LM Insurance Corporation.

Kyle Allen Diamantas, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Amelia W. Koch, Baker Donelson, PC, New Orleans, LA, for Defendants-Appellees USAA Casualty Insurance Company, USAA General Indemnity Company.

Richard L. Fenton, Dentons US, LLP, Chicago, IL, for Defendant-Appellee Allstate New Jersey Insurance Company.

Richard L. Fenton, Dentons US, LLP, Chicago, IL, Lori J. Caldwell, Rumberger Kirk & Caldwell, PA, Orlando, FL, for Defendant-Appellee Allstate New Jersey Property and Casualty Insurance Company.

Thomas G. Rohback, Axinn Veltrop & Harkrider, LLP, Hartford, CT, for Defendants-Appellees Hartford Insurance Company of the Midwest, Hartford Underwriters Insurance Company, Hartford Fire Insurance Company.

Cory L. Andrews, Washington Legal Foundation, Mark J. Botti, Squire Patton Boggs (US) LLP, Washington, DC, Eric Hochstadt, John P. Mastando, III, Weil Gotshal & Manges, LLP, New York, NY, David John Barthel, Michael Beekhuizen, Michael Hiram Carpenter, Carpenter Lipps & Leland, LLP, Columbus, OH, Kyle Allen Diamantas, Baker Donelson Bearman Caldwell & Berkowitz, PC, Orlando, FL, Ian M. Fischer, Dan W. Goldfine, Joshua Grabel, Lewis Roca Rothgerber Christie, LLP, Phoenix, AZ, Dan W. Goldfine, Steven F. Griffith, Jr., Amelia W. Koch, Baker Donelson, PC, New Orleans, LA, Michael Edward Mumford, Ernest Eugene Vargo, Baker & Hostetler, LLP, Cleveland, OH, Thomas G. Rohback, Axinn Veltrop & Harkrider, LLP, Hartford, CT, for Amicus Curiae Washington Legal Foundation Service.

Adam Granich Unikowsky, Jenner & Block, LLP, WASHINGTON, DC, for Amicus Curiae Chamber of Commerce of the United States of America.

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, 167 L.Ed.2d 929 (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,³ that 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...