ATLANTA – A federal appeals court given a new pulse, for now, to a lawsuit brought by Florida auto body repair shops, claiming State Farm improperly pressured shops to lower their prices and threatening to boycott those which did not comply.
On March 4, the U.S. 11th Circuit Court of Appeals in Atlanta - which oversees appeals from federal courts in Florida - in an en banc decision largely let stand a ruling from a Florida U.S. district court judge, who had dismissed the body shops' antitrust claims against State Farm.
However, the three-judge panel revived the body shops' claims against State Farm for tortious interference, and sent the case back to the U.S. District Court for the Middle District of Florida in Fort Myers for further proceedings on that question.
The suit was filed by eight auto body repair shops. As quoted in the court’s ruling, they "argued a per se price-fixing conspiracy and a per se conspiracy to boycott," saying the company essentially set the market on auto insurance repair rates and used that position to force auto body shops to cut costs and, in somce cases, reduce the quality of repairs to save money. They also accused State Farm of several state law claims.
The body shops alleged the State Farm companies refused to pay for original equipment manufacturer parts, which are more expensive, and required the body shops to use either aftermarket parts designed by third parties or salvaged parts from other wrecked vehicles, all of which required more time to install and cannot be guaranteed as being safe.
In addition, the body shops allege that State Farm engages in a practice known as “steering,” in which they discourage their insureds from going to a noncompliant repair shop.
Originally, there were 22 similar lawsuits filed in federal district courts by body shops throughout the country against State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Company. All these lawsuits eventually were transferred to the Middle District of Florida. Of these 22 lawsuits, two were dismissed with prejudice 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 14, five are the subject of the March 5 appellate decision.
While upholding the decision of the lower court judge in the matter, the court's majority said the district judge was wrong to cite the so-called "group pleading doctrine" in dismissing the body shops' tortious interference claims, which are based in Florida state law.
The district judge had found the plaintiffs' complaints had "failed to give fair notice to each defendant" of the tortious interference claims.
However, Judge Anderson noted the ruling says nothing about the actual tortious interference claims themselves. He said, "because the federal antitrust claims have been eliminated from the case," the federal district court could "well decide to exercise its discretion to decline to exercise pendent jurisdiction of these state law tortious interference claims."
Anderson’s ruling was concurred with by judges Ed Carnes, Gerald Bard Tjoflat, William H. Pryor, Jr., Beverly B. Martin, Kevin C. Newsom and Elizabeth L. Branch.
Judge Adalberto Jordan concurred on two parts.
Judge Charles R. Wilson dissented in part, saying the majority was too hasty in upholding the dismissal of the antitrust claims.
“We conclude at this early stage in the litigation that the complaint provides a sufficiently plausible case of price fixing to warrant allowing the plaintiffs to proceed to discovery," Wilson said. "Because the majority incorrectly reaches the opposite conclusion, I respectfully dissent.”