Florida Record

Thursday, October 17, 2019

U.S. Court of Appeals for the 11th Circuit sides with body shops in battle against insurance companies

By Sara McCleary | Sep 20, 2017

ATLANTA — A panel of judges for the U.S. Court of Appeals for the 11th Circuit has overturned a decision from a lower court that had dismissed complaints filed by five auto body shops against State Farm, alleging federal antitrust and state tort claims.

The case, appealed from the U.S. District Court for the Middle District of Florida, was heard by circuit judges Charles Wilson and R. Lanier Anderson with District Judge Barbara Jacobs Rothstein of the Western District of Washington, sitting by designation.

The companies include Quality Auto Painting Center of Roselle, Ultimate Collision Repair Inc., Campbell County Auto Body Inc., Lee Pappas Body Shop Inc. and Concord Auto Body Inc.

State Farm Mutual Automobile Insurance Co. and State Farm Fire & Casualty Co. were among the defendants.

Wilson penned the opinion for the majority, noting that the panel believed the shops demonstrated enough evidence to support their federal antitrust and state tort claims. The body shops had appealed the dismissal of their complaints by the lower court, which held that they failed to state a claim.

The body shops operate in Kentucky, Missouri, New Jersey and Virginia. The insurance companies offer policies in these states and collectively control approximately 65 percent of the private passenger automobile insurance market in Kentucky, 85 percent in Missouri, 72 percent in New Jersey and 100 percent in Virginia. 

“By using an unverified method of calculating the market labor rate and by manipulating the results, State Farm achieves a wholly artificial market labor rate,” Wilson wrote.

Insurance companies often use collision repair estimating databases to estimate the costs of repairs, according to the decision. Wilson wrote that the insurance companies' rates were "inconsistent" with three databases that the companies typically use.

The Kentucky and Missouri complaints include allegations about an employee of Safeco Insurance Company who stated that “the corporate direction given was” for the employee to pay a body shop in accordance with the databases only “when it was financially advantageous to the insurer to do so.” 

Anderson concurred in part with the judgment and dissented in part.

“I concur with the majority in that I too would reverse the district court’s dismissal of the tortious interference claim,” he wrote. “However, because I have significant concerns with the analysis of that claim, I join in that portion of the opinion only as to the result.”

Anderson also noted that he would have affirmed the district court’s dismissal of these causes because he believed the body shops had failed to plausibly allege the existence of the agreement required to state a federal antitrust claim and adequately plead their other state law claims.

While Anderson agreed with most of the outcome, he said he had two key concerns with the majority’s analysis of the claims that prevented him from concurring in the opinion.

“My first concern with the majority’s analysis of the tortious interference claims is that it makes explicit a sentiment that I fear may have implicitly influenced the majority’s disposition of other claims, namely that ‘the market dominance of the defendant companies and the percentage of revenue that the defendant companies generated for a body shop… establish the companies’ command over a body shop in each state.’”

Anderson also wrote that the majority notes that the district court concluded that “'at a minimum, plaintiffs should allege sufficient facts specific to each defendant, or at least each corporate family of defendants, to tie that defendant to the wrongdoing alleged.'"

“It then rejects this premise because ‘it is unclear why such allegations are necessary,’” he wrote. I do not find it at all unclear. They are necessary because the purpose of Rule 8 pleading is to provide a defendant fair notice of what the [plaintiff’s] claim is and the grounds upon which it rests.”

The majority’s decision remanded the case for further proceedings.

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Organizations in this Story

State Farm Fire & Casualty Insurance Company State Farm Mutual Automobile Insurance Company U.S. Court of Appeals for the Eleventh Circuit