September 24, 2015
On September 23, 2015, Weil secured for Farmers Insurance, including several affiliates, the dismissal with prejudice of all claims in the lead case of the consolidated multi-district litigation (MDL), In re Auto Body Shop Antitrust Litigation, pending in Florida federal court. The Court’s decision marks the third consecutive time that Farmers and the other defendants have prevailed on a motion to dismiss for failure to state a claim in the lead case, and suggests that the remaining cases in the MDL may suffer a similar fate.
Plaintiffs – 20 Florida auto repair shops – alleged in their second amended complaint (SAC) that Farmers and dozens of other insurance companies engaged in anticompetitive behavior and other unlawful conduct in Florida to control and reduce what they pay plaintiffs for automobile damage repair, labor, and material costs in violation of the federal antitrust laws and other state laws. This was plaintiffs’ third bite at the apple, after the same Court twice dismissed prior complaints, without prejudice, for failure to sufficiently state a claim, most recently in January 2015.
In their SAC, plaintiffs asserted two state law claims, including quantum meruit and tortious interference with a business relationship, as well as violations of the price-fixing and boycott provisions of the Sherman Act. Among other things, the plaintiffs claimed that defendants engaged in “parallel business behavior” such as paying the same rates for repairs, refusing to pay for the same types of repairs and procedures, and requiring lower-quality parts, and steered customers away from plaintiffs’ businesses.
After briefing, the Court granted defendants’ motion to dismiss the SAC with prejudice. As to plaintiffs’ price-fixing claim, the Court held that plaintiffs’ evidence of “parallel business behavior” is not sufficient on its own to assert a violation of Section 1 of the Sherman Act, which would also require a showing by plaintiffs that defendants either acted adversely to their economic self-interest or in such a way that tended to suggest collusion. The Court found that plaintiffs could not make such a showing. As to plaintiffs’ boycotting claim, the Court held that plaintiffs’ examples of alleged steering of customers did not evince a concerted effort by all defendants to refuse to deal with all plaintiffs, but rather that of a single defendant to discourage a single insured from dealing with a single plaintiff. Turning to the plaintiffs’ two state law claims, the Court held that plaintiffs’ claims were again deficient: for failing to identify “an actual and identifiable understanding or agreement” between the plaintiff and its customer, in the case of plaintiffs’ tortious interference claims; and for failing to properly allege that plaintiffs “conferred a benefit on any of the Defendants”, in the case of plaintiffs quantum meruit claims.
Importantly, given that the Court found that nearly all of the remaining cases in the MDL “share the same shortcomings” as the lead case, the Court’s decision presents a major obstacle to their survival past a motion to dismiss.
The Weil team representing Farmers’ affiliates 21st Century Centennial Insurance Company, 21st Century Indemnity Insurance Company, Foremost Insurance Company Grand Rapids, Michigan, Bristol West Insurance Company, and Security National Insurance Company includes partners David L. Yohai, John P. Mastando III, and Eric Hochstadt, and associates Luna Ngan, Robert Swenson, Tracy Ederer, and Ryan Goodland in the New York office.