Eleventh Circuit Reinstates Auto Body Shops’ Antitrust Claims Against Insurers
In a 2-1 decision issued on September 7, 2017, the Eleventh Circuit reversed a district court decision dismissing antirust claims brought by auto body shops against a group of car insurance companies in the In re Auto Body Shop Antitrust Litigation.
In this MDL, the auto body shop plaintiffs alleged that the defendant car insurance companies engaged in two lines of tactics in pursuit of a single goal: “to depress the shops’ rates for automobile repair.” The first alleged tactic was designed to set a market rate at an artificially low level to benefit the insurance companies. In this alleged scheme, the insurance companies refused to reimburse body shops at more than the “market rate” that was listed in direct repair program (“DRP”) agreements between the insurance companies and certain body shops. Under a DRP, an insurance company agrees to list a body shop as a “preferred provider” in exchange for the body shop accepting the “market rate” as payment in full. However, even if a body shop does not participate in the DRP, the insurance companies allegedly refused to reimburse the shop at more than the set “market rate.” The second alleged tactic was to pressure the body shops into accepting the artificially low reimbursement rate by steering insureds away from body shops that charged more than that rate, including by making false and misleading statements to insureds about non-compliant shops’ quality and integrity.
Based on these facts, the plaintiffs argued two types of antitrust violations. First, they argued that the insurance companies engaged in an illegal conspiracy to fix prices. Second, they argued that the insurance companies improperly boycotted the non-compliant shops that charged more than the fixed prices.
The district court dismissed the plaintiffs’ claims. As for their allegations of conspiracy to fix prices, the court found that the allegations supported only a finding of conscious parallelism. It explained:
The alleged behavior of the Defendants – i.e., paying the same rates, refusing to pay for the same list of procedures, requiring lower-quality parts – is not enough, on its own, to violate Section 1 of the Sherman Act. Evidence of conscious parallelism alone does not permit an inference of conspiracy unless the Plaintiff either (1) establishes that, assuming there is no conspiracy, each defendant engaging in the parallel action acted contrary to its economic self interest or (2) offers other “plus factors” tending to establish that the defendants were not engaging merely in oligopolistic price maintenance or price leadership but rather in a collusive agreement to fix prices or otherwise restrain trade.
(District Court Opinion at 6-7.) The district court also found that the allegations were not sufficient to support the group boycott claim because the allegations “in no way suggest that the Defendants have engaged in a concerted refusal to deal” because “[e]ach of the incidents involves a single Defendant discouraging one of its insureds from dealing with a single Plaintiff.” (District Court Opinion at 12-13.)
The Eleventh Circuit reversed on both claims. With respect to the alleged price fixing conspiracy, the Eleventh Circuit agreed with the district court that “a party claiming horizontal price fixing based on an inferred agreement must show more than parallel conduct.” (Opinion at 15.) But it found that the plaintiffs satisfied that standard because they alleged “plus factors”—that is, “factual enhancements that serve as proxies for direct evidence of an agreement.” (Id. (internal quotation marks omitted).) Here, the Eleventh Circuit found that the body shop plaintiffs alleged two plus factors: first, that the conduct at issue “probably does not result from chance, coincidence, independent responses to common stimuli, or mere interdependence unaided by an advance understanding among the parties,” and, second, that the “defendants have been uniform in their actions.” (Id. at 17-18.) The insurance companies argued that there was no agreement to fix prices because the “market rate” was merely a “ceiling” on what the insurance companies were willing to pay. The Eleventh Circuit rejected that argument, finding that “[a]greements to fix maximum prices are likewise per se violations” of the antitrust laws. (Id. at 22 (internal quotation marks omitted).)
The majority also found that the allegations established the per se violation of boycotting, and reversed the district court’s dismissal of the boycotting claims. (Id. at 27.)
In a dissenting opinion, Judge Anderson wrote that he would have dismissed the complaint’s price fixing and boycotting claims. As for price fixing, the dissent found that the plaintiffs had alleged nothing more than parallel conduct. Judge Anderson explained that while “convergent pricing certainly is—or at least could be—a plus factor, it should only be invoked where we would otherwise expect divergent pricing.” (Dissent at 43-44.) He explained that “[f]ollowing the example set by a competitor, without agreeing to do so in advance, is textbook price leadership.” (Id. at 46 (internal quotation marks omitted).)
As to the group boycott claim, the dissent found that “the body shops never allege—even in a conclusory fashion—an agreement to steer customers away from, or to boycott, the body shops.” (Id. at 52.) It explained that “an allegation of steering—standing alone—cannot be indicative of an agreement” because steering is a “decidedly unilateral activity.” (Id. at 53.) The dissent further found that even if there were allegations that the insurance companies used identical tactics to steer insureds away from noncompliant body shops, “the needle would move toward an inference of the existence of an agreement if, but only if, such similar or identical tactics would not plausibly arise from independent responses to common stimuli.” (Id. at 54 (internal quotation marks omitted).)
Although ten years have passed since Twombly was decided, the divided opinion in this court illustrates the continued challenge courts face in applying its pleading standards to different industries and factual scenarios. We will continue to monitor further developments in the In re Auto Body Shop Antitrust Litigation.