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Federal Court Sides with Body Shops in Appeal of State Farm Price-Fixing Decision

Eight collision repairers that are suing State Farm for allegedly fixing prices and steering consumers to DRP shops have won their appeal in the U.S. Court of Appeals for the 11th Circuit, giving new life to their case.

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Josh Cable has 17 years of experience as a writer and editor for newspapers, B2B publications and marketing organizations. His areas of expertise include U.S. manufacturing, lean/Six Sigma and workplace safety and health.

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Eight collision repairers that are suing State Farm for allegedly fixing prices and steering consumers to DRP shops have won their appeal in the U.S. Court of Appeals for the 11th Circuit, giving new life to their case.

After the U.S. Court of Appeals for the Middle District of Florida dismissed a consolidated case, eight shops filed an appeal. In a majority opinion, the 11th Circuit reversed the lower court’s decision, concluding that the shops “pleaded enough facts to plausibly support their federal antitrust and state tort claims.”

The body shops – operating in Kentucky, Missouri, New Jersey and Virginia – allege that State Farm and its competitors have conspired to set an artificial “market rate” that’s inconsistent with the estimating information from Audatex, CCC and Mitchell. State Farm’s price-fixing forces shops to cut corners on repairs or absorb some of the repair costs themselves, while lining the pockets of insurers, the lawsuit contends.

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The shops allege that State Farm engages in dastardly tactics to suppress the market labor and material rates.

The repairers contend that State Farm uses an unverified method of calculating the market labor rate – the “half-plus-one” method – and manipulates the results of its online labor-rate survey by deleting any DRP shops that charge more than the market rate.

When a DRP shop attempts to charge more than the market labor rate, State Farm tells the shop that it’s the only one trying to raise its labor rate, and the insurer threatens to jettison the shop from the DRP, the lawsuit alleges.

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The collision repairers also argue that State Farm steers consumers away from shops that charge more than the insurer’s market rate, by making misleading or false statements about the shops’ business integrity and quality.

“For example, the insurance companies tell an insured that the body shop takes longer to repair (and that the company would not pay for a rental car after a certain number of days); that the company cannot guarantee the shop’s work as it does for other shops; that the shop offers lower-quality services; and that previous customers had complained about the shop,” Judge Charles Wilson explains in the majority decision, summarizing some of the shops’ allegations.

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“The statement that a body shop takes longer is misleading because any delay by a shop is caused by an insurance company’s delay in sending an appraiser to inspect an insured’s vehicle. Also, the statement that an insurance company cannot guarantee the body shop’s work is misleading because the company does not guarantee the work of any shop. Finally, the insurance companies make the remaining statements without ascertaining the truth of the statements and with the intent to disparage a non-compliant body shop’s business integrity and quality.”

The appeal is part of a consolidated, multistate lawsuit filed by body shops making similar allegations against insurers. The 11th Circuit appeal is for five of 14 recently dismissed lawsuits.

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“At no point did the body shops claim to know when, where and how the insurance companies agreed to fix a market rate and to boycott those who charged more – nor did the shops have to,” Wilson asserts in the majority opinion, citing case law.

“ … The body shops have supplied enough allegations to raise such a reasonable expectation [that pretrial discovery will reveal evidence of illegal price-fixing]. The body shops have consistently alleged the existence of parallel conduct and of plus factors allowing a plausible inference of an illegal agreement. And the allegations have sufficiently established the body shops’ state tort claims of unjust enrichment, quantum meruit and tortious interference. We reverse and remand for further proceedings consistent with this opinion.”

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