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Eleventh Circuit Reverses Dismissal of Auto Body Companies’ Sherman Act Section 1 Complaint

Posted by : Matthew Wild | On : September 14, 2017

In Quality Auto Painting Ctr. of Roselle, Inc. v. State Farm Indem. Co., No. 15-14160, 2017 U.S. App. LEXIS 17138 (11 Cir. Sept. 7, 2017), the Eleventh Circuit recently reversed the dismissal of the actions brought by auto body shops against auto insurers.  The actions were brought for violations § 1 of the Sherman Act and for state claims of unjust enrichment, quantum meruit and tortious interference.  The Court summarized the auto body shops’ allegations as follows:

The body shops argue that the insurance companies engaged in two lines of tactics in pursuit of a single goal: to depress the shops’ rates for automobile repairs.  The first line of tactics was designed to set a “market rate,” which reflected no forces of the market but an artificial rate that would benefit only insurance companies.  The second line of tactics was designed to pressure the body shops in accepting the market rate by steering insureds away from non-compliant shops that charged more than the rate.

2017 U.S App. LEXIS 17138, at *25.  Based on these allegations (which are set out in more detail in the complaints), the body shops argued that the insurance companies engaged in horizontal price fixing and boycotting.  Horizontal price fixing and boycotting are per se violations of § 1 of the Sherman Act.

The Court held that despite direct allegations of an agreement, the allegations were sufficient to infer the existence of an agreement.  Thus, the complaints were sufficient to satisfy the pleading standard established by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).

To satisfy Twombly, the Court explained:

in the absence of direct evidence of an agreement, an antitrust claimant must show not only “parallel conduct” but also “further factual enhancement.”  Often labeled as “parallel plus” or “plus factors,” these factual enhancements “serve as proxies for direct evidence of an agreement.”  This [C]ircuit has never prescribed factors or a combination of factors that may be sufficient to tip the parallel conduct into the domain of per se violation.

2017 U.S. App. LEXIS 17138, at *35-36 (citations omitted).

The Court held that the body shops established “parallel conduct [because] they allege that the insurance companies adopted the same labor rate and materials costs and employed the same line of tactics to depress the rate and costs.”  Id., at *37.  The Court held that the body shops established further factual enhancements because of the “adoption of a uniform price despite variables that would ordinarily result in divergent prices [] and uniform practices”.  Id., at *41.  The Court thus held that it could “infer the existence of an agreement.”  Id.

The Court also reversed dismissal of the unjust enrichment, quantum meruit and tortious interference claims.  The Court held that “unjust enrichment requires a showing that a plaintiff conferred a benefit on a defendant that the defendant knew about and that allowing defendant to retain the benefit without the payment would be unjust.”  Id., at *49-50.  The Court then held:

The allegations readily and plausibly establish the claims of unjust enrichment [because] [t]he body shops allege that the shops conferred benefits by providing repair services at the low price that the insurance companies collectively selected[, and] the body shops allege that the insurance companies not only knew about the benefits but also forced the shops to confer the benefits. . . .

Id., at *50.

The Court held that the body shop’s “readily and plausibly establish claims for quantum meruit because the body shop’s allege that they rendered repair services, expecting compensation; that the services were in fact for the insurance companies . . . and that the companies paid an artificially low price, below the reasonable value for the services.”  Id., at *53.

The Court held that the tortious interference claims were “readily and plausibly establish[ed]” because of the insurance companies’ “false and misleading statements about the shops’ business integrity and quality and that this . . . resulted in a loss of business.”  Id., at *54

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