John Eaves, Jr., the lawyer representing Mississippi collision repairers who filed an injunction to stop State Farm from mandating the use of PartsTrader in that state, updated Ohio repairers on his latest legal efforts on Nov. 13 in Cleveland.
Eaves, whose law firm has handled high-profile cases such as the Costa Concordia cruise ship disaster and the BP oil spill, stated that his strategy is to replicate the injunction state by state, starting in Mississippi because, according to Eaves, they have a supportive attorney general and insurance commissioner. But he also admitted it might not be suitable for every state, including Alabama which he said has been “begging” him to bring the injunction there but he has so far resisted because he’s “afraid of the result.”
So far, Eaves has talked to more than 150 shops in 22 different states, urging them to join in the effort to take back their business.
“I learned that you aren’t concerned about [State Farm] sending you business, you’re concerned about them taking business from you,” Eaves said. “You call that steering. I call that tortious interference with a business relationship, and that’s against the law.”
After a conference call that afternoon, Eaves said Florida has decided to join the fight, and there are three or four other states waiting to follow.
Eaves said his objective is simple: “To stop the damage about to occur with PartsTrader, and reverse the damage that has been done to [collision repairers] over the last 20 years.”
“I liken PartsTrader to a virus,” said Eaves. “The way it’s designed, it forces shops to get on it, then the shops force the vendors to get on it, then the vendors have to force other shops to get on it. And that’s why we felt the injunction to stop it before it ever contaminated Mississippi was crucial.”
Eaves explained the injunction was filed on the basis of two things: the entire industry is opposed to PartsTrader, which he demonstrated to the judge by assembling shops, dealerships and vendors, and that the mandatory parts procurement program represented tortious interference between the business relationship body shops have with their vendors.
“But there’s also something that’s probably more important: this is an attempt to force you to breach your fiduciary duty to the customer,” said Eaves.
Another goal of the legal action, Eaves explained, is to “reverse the damage” and get shops paid for procedures they performed but were not compensated for a list of 62 items including feather, prime and block, denib and finesse, and masking door jambs. For each state, he’s recalculating such work for the period of the statute of limitations in that state three years in Mississippi, for example. Initial estimates in that state are $675 per each $3,500 repair.
“You do the work, and the insurer gets the profit. That sounded like something I learned in law school,” said Eaves. “We went back to Old English common law that is universal throughout the U.S. except for Louisiana and applied that. It’s a concept called unjust enrichment or quantum meruit, and it’s simple: Did you do the work? Yes. Did the insurer get the profit from it? Yes. Did they do anything for it? No. Then that money belongs to you. And that allows us not to have to prove there is a contract between you and the insurer.”
Yet another part of the suit involves the “market research” insurers have been using, Eaves claims, to artificially suppress labor rates in certain areas.
“I don’t know about your market research, but in Mississippi, State Farm likes to call shops and say, ‘Hey, your labor rate is too high! You need to go back to the survey and cut it down.’ We call that a ‘push poll’ in politics, which means it isn’t an accurate survey,” Eaves said. “So you take that $675 per vehicle and double it and you’ve got some real money on your hands.”
Another way to defeat PartsTrader, said Eaves, is through the 1963 Consent Decree, which was written and signed in 1963 to eliminate insurance company manipulations of the collision repair marketplace.
“The problem is you can have a law, but if the police don’t enforce it, it’s of no value,” said Eaves. “That’s basically what’s happened with the Consent Decree. So when this bill starts rolling out in January in the U.S. Congress, when the fire gets hot enough, I’m hopeful and prayerful that this administration will see the value in enforcing that agreement.”
In sum, Eaves said, “This is bigger than just a legal effort; this is a campaign. I sum it up three ways: you have the legal, political and media, which are the tools of war. You have the air support and artillery, but you have to have the ground troops. We have a political strategy. Many states are already filing bills in their state legislatures to stop PartsTrader. Five weeks ago, I was at a Washington meeting with members of the House and Senate, and we have a bipartisan commitment from Republicans and Democrats in both the House and Senate to reproduce the bill that has been introduced in New York, so we’ll be rolling that out in January the anti-PartsTrader rollout in Washington.”
Part of the battle, Eaves said, is to adequately inform consumers about the fight, because so far they don’t know about it.
“But they will,” Eaves promised. “NBC and CNN have both been to our office and are going to be doing a documentary on this, not from repairers’ perspective unfortunately but how this is going to injure the general public. My concern at the end of the day is we have a duty to the general public, and that’s what the media will talk about, and senators and congressmen as well.
“I just want you to know that what you do is important, you have more power than you realize, and this is a fight that we can and will win. Your business survives because people trust you, and that’s why I’m assured a victory in this case.”
Contact John Eaves, Jr., at [email protected].