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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-14160
________________________
D.C. Docket Nos. 6:14-md-02557-GAP-TBS,
6:14-cv-06012-GAP-TBS
QUALITY AUTO PAINTING CENTER OF ROSELLE, INC.,
Traded as Prestige Auto Body,
Plaintiff-Appellant,
versus
STATE FARM INDEMNITY COMPANY,
STATE FARM GUARANTY INSURANCE COMPANY, et al.,
Defendants-Appellees.
________________________
No. 15-14162
________________________
D.C. Docket Nos. 6:14-md-02557-GAP-TBS,
6:14-cv-06013-GAP-TBS
ULTIMATE COLLISION REPAIR, INC.,
Plaintiff-Appellant,
versus
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STATE FARM INDEMNITY COMPANY,
STATE FARM GUARANTY INSURANCE COMPANY, et al.,
Defendants-Appellees.
________________________
No. 15-14178
________________________
D.C. Docket Nos. 6:14-md-02557-GAP-TBS,
6:14-cv-06018-GAP-TBS
CAMPBELL COUNTY AUTO BODY, INC.,
Plaintiff-Appellant,
versus
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
STATE FARM FIRE & CASUALTY COMPANY, et al.,
Defendants-Appellees.
________________________
No. 15-14179
________________________
D.C. Docket Nos. 6:14-md-02557-GAP-TBS,
6:14-cv-06019-GAP-TBS
LEE PAPPAS BODY SHOP, INC.,
DAVID C. BROSIUS,
2
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d.b.a. Martins Auto Body Works, Inc.,
ART WALKER AUTO SERVICES, INC.,
WHITEFORD COLLISION AND REFINISHING, INC.,
Plaintiffs-Appellants,
versus
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
STATE FARM FIRE & CASUALTY COMPANY, et al,
Defendants-Appellees.
________________________
No. 15-14180
________________________
D.C. Docket Nos. 6:14-md-02557-GAP-TBS,
6:15-cv-06022-GAP-TBS
CONCORD AUTO BODY, INC.,
Plaintiff – Appellant,
versus
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
STATE FARM FIRE & CASUALTY COMPANY, et al,
Defendants-Appellees.
3
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________________________
Appeals from the United States District Court
for the Middle District of Florida
________________________
(September 7, 2017)
Before WILSON and ANDERSON, Circuit Judges, and ROTHSTEIN, * District
Judge.
WILSON, Circuit Judge:
Automobile body shops filed five complaints, each asserting federal antitrust
and state tort claims against insurance companies. The body shops appeal the
dismissal of their complaints for failure to state a claim.
The automobile insurance and repair industries have customs and practices
that the public frequently encounter and endorse. The public’s level of familiarity,
however, has no bearing on whether such customs and practices have been
employed for the benefit of a long-term scheme designed to thwart antitrust and
tort laws. Wary of the prejudicial effect of preconceptions about these industries,
assuming as true only those facts within the four corners of the complaints, and
drawing inferences from those facts only in favor of the body shops, we determine
*
Honorable Barbara Jacobs Rothstein, United States District Judge for the Western District of
Washington, sitting by designation.
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that the shops pleaded enough facts to plausibly support their federal antitrust and
state tort claims. We reverse the dismissal of those claims.
I. Introduction
In their complaints, 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 repair. The first line of tactics was designed to set a “market
rate,” which reflected not the forces of the market but an artificial rate that would
benefit only the insurance companies. The second line of tactics was designed to
pressure the body shops into accepting the market rate by steering insureds away
from the non-compliant shops that charged more than the rate. The body shops
argue that the insurance companies’ concurrent lines of tactics violated both
federal antitrust and state tort laws.
The body shops argue two types of antitrust violations. First, the body shops
argue that the insurance companies engaged in horizontal price fixing, an illegal
agreement among competitors to fix prices. Instead of pleading facts that directly
support the existence of an agreement, the body shops plead facts supporting
circumstances—such as parallel conduct, adoption of a uniform price despite
variables that would ordinarily result in divergent prices, and uniform practices—
from which the shops infer the existence of an agreement. Second, the body shops
argue that the insurance companies boycotted the non-compliant shops that
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charged more than the fixed prices by enlisting unwitting insureds into their
scheme. Specifically, the body shops argue that the insurance companies steered
insureds away from the non-compliant shops with misleading or false statements
about the shops’ business integrity and quality.
Arguing the commission of three state torts, the body shops assert that the
insurance companies were unjustly enriched, deprived the shops of quantum
meruit, and tortiously interfered with potential business of the shops.
Because the body shops plead enough facts to plausibly support their federal
antitrust and state tort claims, we reverse the dismissal of those claims.
II. Factual Allegations 1
A. The insurance companies generate a significant portion of the body
shops’ revenues.
The body shops operate in Kentucky, Missouri, New Jersey, and Virginia.
The insurance companies offer policies in these states and collectively control
approximately 65% of the private passenger automobile insurance market in
Kentucky, 85% in Missouri, 72% in New Jersey, and 100% in Virginia. Of the
insurance companies, the State Farm companies have the largest market share: they
1
Reviewing a dismissal for failure to state a claim, we accept the factual allegations as true and
draw all reasonable inferences in favor of the claimant. Spanish Broad. Sys. of Fla., Inc. v. Clear
Channel Commc’ns, Inc., 376 F.3d 1065, 1070 (11th Cir. 2004). The facts as pleaded in the
complaints, and viewed in the light most favorable to the plaintiffs, are as follows.
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control approximately 22.3% of the private passenger automobile insurance market
in Kentucky, 22.88% in Missouri, and 14.85% in Virginia. 2 The insurance
companies’ insureds generate 60% of the Kentucky body shop’s revenue and
between 70% and 95% of the revenue of each of the remaining body shops. Most
of the insurance companies are subsidiaries or affiliates, or are otherwise related.
2
The New Jersey complaints do not allege State Farm’s control of that state’s private passenger
automobile insurance market.
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B. First line of tactics: The insurance companies select the “market rate”
at which they reimburse the body shops.
The insurance companies refuse to reimburse the body shops at more than
the “market rate,” which is a term that appears in direct repair program (DRP)
agreements between the companies and certain body shops. Under a DRP
agreement, an insurance company lists a body shop as a “preferred provider” in
exchange for the company’s paying the shop no more than the “going rate in the
market area.” However, even if a body shop does not participate in an insurance
company’s DRP, the company refuses to reimburse the shop at more than the
market rate. None of the plaintiff body shops participates in a defendant insurance
company’s DRP. 3
The market rate comprises the market labor rate and the market materials
costs, both of which the insurance companies select. The insurance companies use
the market labor rate that one company, State Farm, determines by using a method
that is unverified and the results of which State Farm manipulates. Also, the
insurance companies depress the market material costs by pressuring body shops
into using inferior parts and into offering discounts and concessions.
3
The Missouri body shop participated in State Farm’s DRP for ten years; State Farm eliminated
the shop from the program in 2013 after the shop refused to implement the company’s parts
procurement program.
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1. The insurance companies use the market labor rate that one company
determines and manipulates.
In determining the market labor rate that all of the insurance companies use,
State Farm uses an unverified “half plus one” method of calculation and
manipulates the result. 4 The half plus one method (1) calculates half plus one—an
amount we designate as “n”—of the total number of employees or work bays
(whichever is fewer in each body shop) in the market area; (2) lists the shops in a
market area from the shop with the fewest employees or work bays to the shop
with the most; and (3) declares the market labor rate as the labor rate of the shop
that employs the n-th employee or work bay. It is unclear how the method
designates a market area. No insurance company other than State Farm has
attempted to independently verify the results of this method.
In addition to using an unverified method of calculating the market labor
rate, State Farm manipulates the results of the method by affecting the inputs.
First, State Farm affects the labor rate that a body shop submits through an online
survey compiling information used in the half plus one method. A body shop that
enters a DRP agreement with State Farm can fill out a survey about the shop’s
labor rate through an electronic forum, State Farm’s Business to Business portal.
4
In addition to using the market labor rate, the other insurance companies have specifically
advised the body shops that the companies “will pay no more than State Farm pays for labor.”
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State Farm can and does manipulate a body shop’s survey submission. Second,
State Farm affects the inputs used in the half plus one method by removing a body
shop that charges a higher labor rate from the DRP. If a DRP body shop tries to
charge more than the market labor rate, State Farm first tells the shop that it is the
only shop that is attempting to raise its labor rate—when in fact several shops have
done the same. If the DRP body shop continues to charge a higher labor rate, State
Farm threatens to and does remove the shop from the DRP. Thus the labor rate of
the body shop no longer contributes, even facially, to the calculation of the market
labor rate.
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.
2. The insurance companies lower the market materials costs by
pressuring the body shops into using inferior parts and into offering
discounts and concessions.
The insurance companies depress the market material costs. They use
tactics such as requiring a body shop to repair a faulty part rather than installing a
replacement part, even when the shop strongly recommends against continued use
of the faulty part; requiring a shop to install a used or recycled part, even when a
new part is available and would be best; and requiring a shop to offer discounts and
concessions, even if doing so will force the shop to operate at a loss.
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3. The resulting market rate is arbitrary and inconsistent with leading
collision repair estimating databases.
The resulting market rate is arbitrary and inconsistent with three leading
collision repair estimating databases, ADP, CCC, and Mitchell, on which the
insurance companies selectively rely. For example, insurance companies strictly
adhere to the labor time estimated by a database, yet they argue that materials costs
are included in a repair estimate (the amount that the companies would have to
pay) although the databases state that the costs are not included in an estimate.
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.” This practice of creating
arbitrary rates forces a body shop either to perform an incomplete or substandard
repair—which prevents the shop from fulfilling an obligation to a customer to
return a vehicle to its pre-accident condition—or to accumulate costs without
compensation—which jeopardizes the shop’s business. 5
5
The body shops attached as an exhibit to each complaint a “non-exhaustive list of procedures
and processes the [d]efendants refuse to pay and/or pay in full.”
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C. Second line of tactics: The insurance companies force compliance with
their artificial market rate.
The insurance companies force the body shops to charge at or less than the
market rate with misleading or false statements to insureds about a non-compliant
shop’s 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. 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.6 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.
6
The New Jersey body shops allege that the GEICO companies in particular delay supplemental
payments and delay re-inspecting vehicles. After finally inspecting a vehicle, a GEICO
inspector would refuse to pay a body shop because the bill is “too old.” If the insured also
refuses to pay the bill, the body shop must absorb the unpaid cost.
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III. Procedural History
Initially, the body shops sued in the states in which they are located.
Because the actions involved similar antitrust and tort claims, the Judicial Panel on
Multidistrict Litigation transferred the actions to the Middle District of Florida for
consolidated pretrial proceedings. This appeal is by body shops in five of fourteen
actions that were dismissed. Although the district court granted the body shops an
opportunity to amend their complaints, the shops in the five actions chose to appeal
instead. 7
IV. Standard of Review
We review de novo a dismissal for failure to state a claim. Spanish Broad.
Sys., 376 F.3d at 1070. We must reverse the dismissal if the complaint “state[s] a
claim to relief that is plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570,
127 S. Ct. 1955, 1974 (2007)), after we accept the factual allegations as true and
draw all reasonable inferences in favor of the claimant, see Spanish Broad. Sys.,
376 F.3d at 1070.
7
“Generally, an order dismissing a complaint is not final and appealable unless the order holds
that it dismisses the entire action or that the complaint cannot be saved by amendment. . . .
However, [in this circuit] the plaintiff need not wait until the time for amendment expires; he can
waive the right to later amend, treat the dismissal as final, and file a notice of appeal before the
expiration of the amendment period.” Van Poyck v. Singletary, 11 F.3d 146, 148 (11th Cir.
1994) (per curiam).
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An antitrust complaint must include allegations “plausibly suggesting (not
merely consistent with)” an illegal agreement among the defendants. Jacobs v.
Tempur-Pedic Int’l, Inc., 626 F.3d 1327, 1332 (11th Cir. 2010) (citing Twombly,
550 U.S. at 557, 127 S. Ct. at 1966). This requirement “reflects”—and does not
exceed—“the threshold requirement of Rule 8(a)(2) [of the Federal Rules of Civil
Procedure] that the [complaint’s] plain statement [of a claim] possess enough heft
to show that the pleader is entitled to relief.” Twombly, 550 U.S. at 557, 127 S. Ct.
at 1966 (internal quotation marks omitted); see also id. at 570, 127 S. Ct. at 1974
(clarifying that an antitrust claim is not subject to a “heightened” pleading
standard).
V. Federal Antitrust Claims
A. Horizontal Price Fixing
1. A price fixing agreement can be inferred in the absence of direct
evidence of an agreement.
Under 15 U.S.C. § 1 of the Sherman Antitrust Act, any unreasonable
contract, combination, or conspiracy in the restraint of interstate trade or commerce
is illegal. See Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723,
108 S. Ct. 1515, 1519 (1988) (interpreting § 1 “to prohibit only unreasonable
restraints of trade”). Generally, a plaintiff must demonstrate that such a contract,
combination, or conspiracy is “unreasonable and anticompetitive”; in other words,
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we ordinarily apply the “rule of reason.” See Texaco Inc. v. Dagher, 547 U.S. 1, 5,
126 S. Ct. 1276, 1279 (2006). Certain classes of conduct, however, are deemed
“per se” violations, which are “conclusively presumed to be unreasonable and
therefore illegal without elaborate inquiry as to the precise harm they have caused
or the business excuse for their use.” See Nw. Wholesale Stationers, Inc. v. Pac.
Stationery & Printing Co., 472 U.S. 284, 289, 105 S. Ct. 2613, 2617 (1985).
An example of a per se violation is horizontal price fixing, Jacobs, 626 F.3d
at 1334, which must involve an agreement among competitors, “tacit or express,”
see Twombly, 550 U.S. at 553, 127 S. Ct. at 1964 (internal quotation marks
omitted). If the existence of the agreement is in doubt, the agreement can be
inferred. See id. Necessary for this inference is “parallel conduct or
interdependence,” ideas that are often used interchangeably. See id. at 554,
127 S. Ct. at 1964; Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1411
(3d ed. 2012). An example of parallel conduct is “conscious parallelism,” which is:
the process, not in itself unlawful, by which firms in a
concentrated market might in effect share monopoly
power, setting their prices at a profit-maximizing,
supracompetitive level by recognizing their shared
economic interests and their interdependence with
respect to price and output decisions.
Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227,
113 S. Ct. 2578, 2590 (1993); see also Williamson Oil Co. v. Philip Morris USA,
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346 F.3d 1287, 1291 (11th Cir. 2003). Interdependence, also known as
“interdependent parallelism,” “means that the profitability of [a company’s]
decision depends upon rivals’ reactions.” Areeda ¶¶ 1434a, 1434c.
However, a party claiming horizontal price fixing based on an inferred
agreement must show more than parallel conduct, which on its own “falls short of
conclusively establishing agreement or . . . constituting a Sherman Act offense.”
Twombly, 550 U.S. at 553, 127 S. Ct. at 1964 (internal quotation marks omitted);
see also id. at 554, 127 S. Ct. at 1964 (finding that parallel conduct appears in “a
wide swath of rational and competitive business strategy unilaterally prompted by
common perceptions of the market”). Thus, in the absence of direct evidence of an
agreement, an antitrust claimant must show not only “parallel conduct” but also
“further factual enhancement.” Id. at 557, 127 S. Ct. at 1966; see also Almanza v.
United Airlines, Inc., 851 F.3d 1060, 1069 (11th Cir. 2017).
Often labeled “parallel plus” or “plus factors,” see, e.g., Twombly, 550 U.S.
at 553, 127 S. Ct. at 1963 (discussing the practice in the Second Circuit);
Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 45 (1st Cir. 2013),
these factual enhancements “serve as proxies for direct evidence of an agreement,”
In re Flat Glass Antitrust Litig., 385 F.3d 350, 360 (3d Cir. 2004). This circuit has
never prescribed factors or a combination of factors that may be sufficient to tip
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parallel conduct into the domain of per se violation. Compare Williamson Oil,
346 F.3d at 1301, with In re Travel Agent Comm’n Antitrust Litig., 583 F.3d 896,
907 (6th Cir. 2009) (prescribing which “‘plus factors’ [a]re important when
evaluating circumstantial evidence of concerted action”). Instead, this circuit has
determined that “any showing by [a plaintiff] that tends to exclude the possibility
of independent action can qualify as a plus factor.” Williamson Oil, 346 F.3d
at 1301 (internal quotation marks omitted); see also Almanza, 851 F.3d at 1069
(reproducing and refuting the plaintiffs’ list of “further factual enhancement[s]
needed to support a plausible inference of an agreement”).
Because we do not prescribe plus factors, we do not assign a predetermined
weight to a factor; we decide a factor’s importance only after reviewing it in the
context of the facts of the case and determining its tendency “to exclude the
possibility of independent action.” See Williamson Oil, 346 F.3d at 1301 (internal
quotation marks omitted); In re Musical Instruments & Equip. Antitrust Litig.,
798 F.3d 1186, 1189 (9th Cir. 2015) (“But plaintiffs’ plus factors are no more
consistent with an illegal agreement than with rational and competitive business
strategies, independently adopted by firms acting within an interdependent
market.”). In the same vein, we do not prescribe how many plus factors would be
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necessary to establish an illegal agreement; the number of factors present has no
bearing on whether an antitrust claimant has established an illegal agreement.
2. The body shops’ allegations readily and plausibly establish an inferred
agreement.
The body shops’ allegations, accepted as true, readily and plausibly establish
both parallel conduct and the “further factual enhancement needed to support a
plausible inference of an agreement.” See Almanza, 851 F.3d at 1069. The body
shops plausibly establish parallel conduct; 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. See Williamson Oil, 346 F.3d at 1304 (“As
evidenced by the repeated, synchronous pricing decisions that occurred within the
tobacco industry between 1993 and 2000, appellees plainly priced their products in
parallel.”).
Also, the body shops plausibly establish further factual enhancement. The
body shops identify two plus factors that together support a plausible inference of
an illegal agreement:
[1] Conduct that probably does not result from chance,
coincidence, independent responses to common
stimuli, or mere interdependence unaided by an
advance understanding among the parties[; and] . . .
[2] whether the defendants have been uniform in their
actions[.]
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The first is a well-recognized plus factor—the presence of “[c]ustomary
indications of traditional conspiracy”—and supports an inference of an illegal
agreement here. See Areeda ¶ 1434b; id. ¶ 1434b n.20 (listing “unnatural
parallelism” as an example of a customary indication of traditional conspiracy);
id. ¶ 1425 (defining unnatural parallelism as “parallel behavior that would
probably not result from chance, coincidence, independent responses to common
stimuli, or mere interdependence unaided by an advance understanding among the
parties”); Twombly, 550 U.S. at 556 n.4, 127 S. Ct. at 1965 n.4 (citing the Areeda
treatise for the proposition that unnatural parallelism is an illegal agreement). One
customary indication of traditional conspiracy is a group’s adoption of a uniform
price despite variables that would ordinarily result in divergent prices. See, e.g.,
Fed. Trade Comm’n v. Cement Inst., 333 U.S. 683, 713, 68 S. Ct. 793, 809 (1948)
(“The use of the multiple basing point delivered price system by the cement
producers has been coincident with a situation whereby for many years, with rare
exceptions, cement has been offered for sale in every given locality at identical
prices and terms by all producers.”); Areeda ¶ 1434b (stating that customary
indications of traditional conspiracy are present if rivals place “simultaneous
identical bids on a made-to-order product not readily assembled from standard and
conventionally priced items”).
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According to the body shops, the insurance companies “specifically advised
the [shops] they will pay no more than State Farm pays” despite variables that
would ordinarily contribute to divergent amounts of reimbursement. For example,
the insurance companies utilized State Farm’s market rate although the rate
necessarily depends on how each company defines a market. This definition can
depend on factors such as the geographic area that an insurance company offers
services, the locations that the company has physical offices, and the company’s
relationship with the body shops in certain areas. Also, the insurance companies
utilized State Farm’s market rate although the companies have the ability to
differentiate themselves by offering reimbursement for repairs using high quality
parts (e.g., only “replacement parts” from original manufacturers rather than
repaired faulty parts from insureds’ cars and “used or recycled parts” from other
cars) and highly skilled labor. Finally, the insurance companies utilized State
Farm’s market rate although the companies conduct business with different body
shops, which would charge different labor prices. A customary indication of
traditional conspiracy is present here and contributes to a plausible inference of an
illegal agreement.
The second plus factor—uniform practices—also favors finding an illegal
agreement. The body shops allege that the insurance companies all engaged in the
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first line of tactics, which included requiring a shop to repair a faulty part rather
than install a replacement part; to install a used or recycled part; and to offer
discounts and concessions, even to the detriment of the shops offering such
discounts and concessions. Also, the body shops allege that the insurance
companies all engaged in the second line of tactics. Although this line of tactics
primarily aims to force the body shops into compliance with the market rate, the
tactics aid also in creating an artificial market rate. The tactics include stating to
an insured that a body shop takes longer to repair (and that the insurance 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. Each statement is either misleading or false. Each insurance company’s use
of this same collection of tactics contributes to a plausible inference of an illegal
agreement.
The body shops’ allegations readily and plausibly establish the existence of
parallel conduct, adoption of a uniform price despite variables that would
ordinarily result in divergent prices, and uniform practices, all from which we can
infer the existence of an illegal agreement. See Twombly, 550 U.S. at 572,
127 S. Ct. at 1975. We reverse the dismissal of the price fixing claims.
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3. The arguments against the plausible inference of an illegal agreement
fail.
Dismissing the price fixing claims, the district court states—and the
insurance companies recite on appeal—that, “aside from conclusory allegations
that it exists, the Plaintiffs offer no details at all in the Amended Complaint about
the alleged agreement, such as how the Defendants entered into it, or when.”
However, allegations directly supporting the existence of an agreement, such as
form (written or oral) and date of entry, are unnecessary for a plausible claim of
horizontal price fixing. In the absence of direct evidence of an agreement, the
allegations necessary are those that plausibly establish parallel conduct and further
factual enhancement. “Asking for plausible grounds to infer an agreement . . .
simply calls for enough fact to raise a reasonable expectation that discovery will
reveal evidence of illegal agreement.” Twombly, 550 U.S. at 556, 127 S. Ct.
at 1965 (emphasis added). 8
The insurance companies argue that the body shops fail to allege an
agreement to fix a price because the “market rate” is a mere “ceiling” on what the
companies are willing to pay. However, whether the market rate in fact functions
as a ceiling or as the rate at which the insurance companies reimburse the body
8
Notwithstanding our disagreement with the district court’s analysis, we would like to recognize
the tremendous effort that the district court expended in handling a multidistrict litigation of this
scale.
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shops is inapposite. “[A]greements to fix maximum prices” are likewise per se
violations that “cripple the freedom of traders and thereby restrain their ability to
sell in accordance with their own judgment.” See State Oil Co. v. Khan, 522 U.S.
3, 11, 118 S. Ct. 275, 280 (1997) (internal quotation marks omitted).
Also, the insurance companies argue that the body shops’ plus factors are
not properly before us because the shops argued their existence for the first time on
appeal. Although the body shops have not used the phrase “plus factors,” the
shops have consistently argued that their allegations support the inference of an
illegal agreement. And use of the phrase “plus factors” is not necessary for the use
of these factors on appeal. As we have explained, “any showing by appellants that
tends to exclude the possibility of independent action can qualify as a plus factor.”
Williamson Oil, 346 F.3d at 1301 (internal quotation marks omitted). Even this
circuit’s precedent has not always used the phrase to characterize “further factual
enhancement needed to support a plausible inference of an agreement.” See
Almanza, 851 F.3d at 1069; Jacobs, 626 F.3d at 1343. The body shops’ recent use
of the phrase “plus factors” does not change the fact that they have consistently
argued that the allegations support the inference of an illegal agreement.
The Dissent, although agreeing with the existence of parallel conduct, argues
that the proposed plus factors fail to “bear the weight attributed to them.” Dissent
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at 6. Challenging the first plus factor—the insurance companies’ adoption of a
uniform price despite variables that would ordinarily result in divergent prices—
the Dissent disputes that “auto body repairs” are “the type of made-to-order
product not readily assembled from standard and conventionally priced items.”
Dissent at 11. In support, the Dissent substitutes allegations in the complaint with
an external knowledge of auto repair:
Certainly, some parts—such as spark plugs, windshield
wipers, brakes, and tires—may be standard across many
makes and models of cars, while others—such as doors,
windshields, headlights, and fenders—may only fit a few.
But for the overwhelming majority of cars, the necessary
parts are ubiquitous, interchangeable, and standardly
priced.
See Dissent at 11–12. Although Iqbal instructs us to “draw on [our] judicial
experience and common sense,” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950, what
automobile parts are necessary for repairs and whether those parts are “ubiquitous,
interchangeable, and standardly priced” are hardly “judicial experience” or
“common sense.” The Dissent’s substitution based on external knowledge belies
the “the tenet that a court must accept as true all of the allegations contained in a
complaint.” Id. at 678, 129 S. Ct. at 1949. And the substitution is not an inference
in favor of the claimants, the body shops. See Spanish Broad. Sys., 376 F.3d
at 1070. Rather, it is the opposite. Review of the body shops’ allegations does
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indeed reveal variables that would ordinarily result in divergent prices: the shops
allege that they use parts from different sources (e.g., “replacement parts” from
original manufacturers, repaired faulty parts from insureds’ cars, and “used or
recycled parts” from other cars) and charge different prices for the labor required
to install the parts.
Also, challenging the first factor, the Dissent compares the allegations of this
case to the facts in Cement Institute, which involved sealed bids to supply cement
for the same price per barrel. See 333 U.S. at 713, 68 S. Ct. 809. The Dissent
compares first the secrecy of the bids in Cement Institute with the brazenness of
the insurance companies’ declaration that “they will pay no more than State Farm
pays.” See Dissent at 10. However, secrecy is not necessary for the first plus
factor—adoption of a uniform price despite variables that would ordinarily result
in divergent prices—“to raise a reasonable expectation that discovery will reveal
evidence of illegal agreement.” Twombly, 550 U.S. at 556, 127 S. Ct. at 1965.
Also, the Dissent compares the fact that the cement companies in Cement Institute
agreed upon a specific price ($3.286854 per barrel) with the fact that the insurance
companies here declared that “they will pay no more than State Farm pays.” See
Dissent at 10. But the per se violation of horizontal price fixing includes an
agreement “formed for the purpose and with the effect of raising, depressing,
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fixing, pegging, or stabilizing” prices. See United States v. Socony-Vacuum Oil
Co., 310 U.S. 150, 223, 60 S. Ct. 811, 844 (1940) (emphasis added).
Challenging the second plus factor, the Dissent argues that the body shops’
tactics are “among the most common and time-worn methods of increasing
corporate profits in any industry” and that litigants, based on “the mere existence
of an industry-wide practice,” will now cite “the majority opinion and claim a free
pass to proceed directly past a motion to dismiss and into the expensive and
settlement-inducing quagmire of antitrust discovery.” Dissent at 20–21. While
such an apocalyptic development would be concerning, this development is based
on the Dissent’s repeated reliance on external knowledge about practices
commonplace in the automobile industry and consequent derogation of the severity
of the tactics alleged in the complaint. Again, we must look only within the four
corners of the complaint. The complaints contain extensive allegations about the
concerning practices of insurance companies that make the same misleading or
false statements about certain body shops to ensure that the amount that the
companies must reimburse the shops stays low. They contain the practices of
insurance companies that all force body shops to install parts that the shops believe
are unsafe and force shops to offer discounts and concessions at the risk of losing
between 70% and 95% of their revenue (60% for the Kentucky body shop). The
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Dissent’s external knowledge about these practices is inapposite to whether these
practices violate federal antitrust law. The Dissent’s external knowledge has no
place in this review for the complaints’ failure to state a claim. 9
B. Boycotting
The Sherman Act’s prohibition of any unreasonable contract, combination,
or conspiracy in the restraint of interstate trade or commerce extends to a
prohibition of boycotting. See 15 U.S.C. §§ 1, 1013(b); St. Paul Fire & Marine
Ins.v. Barry, 438 U.S. 531, 541, 98 S. Ct. 2923, 2929 (1978). “The generic
concept of boycott refers to a method of pressuring a party with whom one has a
dispute by withholding, or enlisting others to withhold, patronage or services from
the target.” St. Paul Fire & Marine Ins., 438 U.S. at 541, 98 S. Ct. at 2930.
Boycotting that is per se illegal involves “horizontal agreements among direct
competitors.” See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135, 119 S. Ct. 493,
498 (1998). The “ultimate target” of the agreement can be either a competitor or
“a customer of some or all of the [boycotters] who is being denied access to
desired goods or services because of a refusal to accede to particular terms set by
9
Also, the Dissent disputes both plus factors by emphasizing the absence from the complaints of
a statement in the body shops’ brief: that the insurance companies used identical “scripts” to
steer insureds away from noncompliant shops. See Dissent at 24–25. Also, the Dissent
emphasizes that “the body shops’ [brief] takes undue liberties in construing the allegations that
can be fairly read from their pleadings.” Dissent at 1 n.1. The absence from the complaints of
the allegation about “scripts” and other “constructions” of the allegations is inapposite to the
soundness of the allegations that are present in the complaint.
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some or all of the [boycotters].” St. Paul Fire & Marine Ins., 438 U.S. at 543,
98 S. Ct. at 2931.
Accepted as true, the body shops’ allegations readily and plausibly establish
the per se violation of boycotting. The body shops allege that the insurance
companies targeted non-compliant shops by keeping insureds away until those
shops charged at or less than the market rate. And the body shops allege that, in
accordance with the agreement, the insurance companies used identical tactics to
keep insureds away. Specifically, they allege that the insurance companies made
misleading or false statements about the body shops’ business integrity and quality,
including that a 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. We reverse
the dismissal of the boycotting claims.
Challenging this reversal, the Dissent argues that, because the insurance
companies can choose from an ambit of different (and commonplace) tactics, the
tactics are not uniform. In support, the Dissent draws an analogy to people
choosing from different but limited modes of transportation (car, bike, train, etc.)
to reach the same destination. This analogy again belies allegations in the
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complaint that each tactic was misleading or false. As compared to the common
and limited means of transportation, the insurance companies’ misleading or false
tactics together create an idiosyncrasy, the repetition of which is hardly “common.”
The insurance companies’ use of the same ambit of tactics “raise[s] a reasonable
expectation that discovery will reveal evidence of illegal agreement.” Twombly,
550 U.S. at 556, 127 S. Ct. at 1965.
VI. State Tort Claims
In addition to claiming antitrust violations, the body shops claim that the
insurance companies committed state torts, three of which are on appeal: unjust
enrichment, quantum meruit, and tortious interference. Because the body shops’
allegations plausibly support each claim, we reverse the dismissal of the claims.
A. Unjust Enrichment
Generally, unjust enrichment requires a showing that a plaintiff conferred a
benefit on a defendant that the defendant knew about and that allowing the
defendant to retain the benefit without payment would be unjust. See Jones v.
Sparks, 297 S.W.3d 73, 78 (Ky. Ct. App. 2009); JB Contracting, Inc. v. Bierman,
147 S.W.3d 814, 819 (Mo. Ct. App. 2004); Iliadis v. Wal-Mart Stores, Inc.,
191 N.J. 88, 110 (2007); Schmidt v. Household Fin. Corp., II, 276 Va. 108, 116
(2008). The allegations readily and plausibly establish the claims of unjust
enrichment. The body shops allege that the shops conferred benefits by providing
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repair services at the low price that the insurance companies collectively selected.
Also, the body shops allege that the insurance companies not only knew about the
benefits but also forced the shops to confer the benefits with two lines of tactics:
first selecting a low market rate and second pressuring the shops into accepting the
market rate. If we assume the truth of these allegations, the body shops have stated
claims for unjust enrichment. We reverse the dismissal of the unjust enrichment
claims.
Both the district court and the Dissent reject the claims for unjust enrichment
based on the argument that, because the body shops knew how much they were
going to be paid before repairing cars, these claims for unjust enrichment are based
on buyer’s remorse—based on unsatisfactory bargaining by the shops—and that
the claims are for post hoc judicial determination of a reasonable rate for the
repairs. This argument is based on a mistaken assumption (prevalent throughout
the district court’s opinion and the Dissent) that any dealing between the body
shops and the insurance companies was based on a valid contract. See Dissent
at 33 (“They were not threatened or tricked. They were not coerced.”). Assuming
the truth of the allegations and drawing inferences in favor of the body shops, the
insurance companies forced the shops to perform repairs, and any dealing between
the shops and the companies was based on an invalid, unenforceable contract.
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“[A] liability in respect of benefits already received [should not] be imposed (or
measured) by the terms of an invalid contract.” Restatement (Third) of Restitution
and Unjust Enrichment § 33 cmt. d (2011); see also id. (“Liability in contract [is]
distinguished from liability in restitution.” (emphasis omitted)).
The district court dismissed the body shops’ claims for unjust enrichment by
faulting the shops for failing to bargain with the insurance companies. In imposing
this requirement to bargain, the court cited a comment in the Third Restatement of
Restitution and Unjust Enrichment entitled “Benefits voluntarily conferred”:
“Instead of proposing a bargain, the restitution claimant first confers a benefit, then
seeks payment for its value. When this manner of proceeding is unacceptable—as
it usually is, if the claimant neglects an opportunity to contract—a claim based on
unjust enrichment will be denied.” Id. § 2 cmt. d. However, the body shops
consistently allege that the insurance companies forced the shops to confer
benefits; that the shops involuntarily performed repairs at the low market rate.
Disputing the resolution of the unjust enrichment claims, the Dissent offers
yet another apocalyptic development of a world in which parties can renege on the
terms of a contract by suing for unjust enrichment. The Dissent offers an example
of a painter who could contract to paint a home for $10,000 and then recover
$5,000 based on an argument that the actual market rate was $15,000. The Dissent
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offers a second example of a circumstance in which the result is the same despite
less parity in bargaining power. These analogies, designed to demonstrate an
absurd result, derives from the Dissent’s assumption that the body shops’ claims
are based on unsatisfactory bargaining by the shops. However, the allegations,
assumed as true, establish that no bargaining occurred that could support the
existence of an enforceable agreement. Also, our ruling has no bearing on whether
the body shops will later successfully prove the invalidity of the contracts under
which they repaired the vehicles of the defendant companies’ insureds. Even if the
parties did bargain and the issue becomes whether the disparity in bargaining
power was such that would invalidate the contract, determining the extent of
disparity compels, at the very least, discovery. The Dissent’s hypothetical remains
just that—a hypothetical.
B. Quantum Meruit
Generally, quantum meruit requires a showing that a plaintiff with a
reasonable expectation of compensation rendered valuable services to a defendant
who knew about the services but refused to pay reasonable value for the services.
See Quadrille Bus. Sys. v. Ky. Cattlemen’s Ass’n, Inc., 242 S.W.3d 359, 366
(Ky. Ct. App. 2007); Starkey, Kelly, Blaney & White v. Estate of Nicolaysen,
172 N.J. 60, 68 (2002); Raymond, Colesar, Glaspy & Huss, P.C. v. Allied Capital
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Corp., 961 F.2d 489, 491 (4th Cir. 1992) (applying Virginia law). 10 The
allegations readily and plausibly establish the claims for quantum meruit. The
body shops allege that they rendered repair services, expecting compensation; that
the services were in fact for the insurance companies, which were obligated to pay
the shops in accordance with the companies’ relationship with their insureds; and
that the companies paid an artificial price, below the reasonable value for the
services. Also, the body shops allege that the insurance companies demanded
discounts and concessions for the companies’ insureds; such additional services
were provided to the companies, who refused to pay any compensation for those
services. If we assume the truth of these allegations, the body shops have stated
claims for quantum meruit. We reverse the dismissal of the claims.
C. Tortious Interference
Generally, tortious interference requires a showing of a valid business
relationship or expectancy that would have occurred but for the defendant’s
improper or malicious interference, which resulted in damages. See Snow Pallet,
Inc. v. Monticello Banking Co., 367 S.W.3d 1, 6 (Ky. Ct. App. 2012); Clinch v.
Heartland Health, 187 S.W.3d 10, 14 (Mo. Ct. App. 2006); Lamorte Burns & Co.
v. Walters, 167 N.J. 285, 305–06 (2001); Dunlap v. Cottman Transmission Sys.,
10
The Missouri complaint contains no claim for quantum meruit.
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LLC, 287 Va. 207, 216 (2014). The allegations readily and plausibly establish the
claims of tortious interference. The body shops allege (1) that the insurance
companies prevented insureds willing to use the shops from doing so with
misleading or false statements about the shops’ business integrity and quality and
(2) that this prevention resulted in the loss of business. Also, the body shops allege
that the insurance companies forced the shops to perform incomplete or
substandard repairs, which prevented the shops from fulfilling obligations to
customers to return vehicles to their pre-accident conditions and which negatively
affected business. If we assume the truth of these allegations, the body shops have
stated claims for tortious interference.
In dismissing the body shops’ claims for tortious interference, the district
court faulted the shops for filing a so-called “group pleading,” which prevented the
shops from tailoring their allegations to the claim of tortious interference in each
state. Although the complaints are largely similar, the complaints as they stand
include sufficiently tailored allegations for us to conclude the plausibility of the
claim of tortious interference in each state. For example, the complaints specify
for each state the insurance companies that used State Farm’s market rate, the
market dominance of the defendant companies, and the percentage of revenue that
the defendant companies generated for a body shop—all of which establish the
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companies’ command over a shop in each state. These individualized allegations
lend credence to the claims that the insurance companies exercised enough control
over insureds’ choice of body shops to affect the profitability of the shops.
Also, in dismissing the tortious interference claims, the district court stated
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 is unclear why such allegations are necessary; in a
complaint alleging uniformity of the insurance companies’ price and practices,
requiring the body shops to include allegations about each company can only result
in needless repetition. Further, the complaints specified two insurance companies
as engaging in tortious interference: State Farm, for its role in determining the
market labor rate, and GEICO, for its delay in payment and re-inspection. 11 We
reverse the dismissal of the tortious interference claims.
11
As stated above, the allegations about GEICO appear only in the New Jersey complaints.
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VII. Conclusion
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. “Asking for plausible grounds to infer an
agreement . . . simply calls for enough fact to raise a reasonable expectation that
discovery will reveal evidence of illegal agreement.” Twombly, 550 U.S. at 556,
127 S. Ct. at 1965. The body shops have supplied enough allegations to raise such
a reasonable expectation. 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.
REVERSED AND REMANDED.
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ANDERSON, Circuit Judge, concurring in part in the judgment and dissenting in
part:
I concur with the majority in that I too would reverse the district court’s
dismissal of the tortious interference claim. 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. Additionally, because I am of the opinion that the body shops have
failed to plausibly allege the existence of the agreement required to state a federal
antitrust claim and have failed to adequately plead their other state law claims, I
would affirm the district court’s dismissal of those causes. Accordingly, I concur in
the judgment of the majority opinion with respect to Part VI.C. With regard to the
remainder, I respectfully dissent.
VIII. Introduction
I do not differ substantially from the majority in its framing of the relevant
facts of this case. Based on the allegations in the complaints,1 I accept that the
1
At the outset, I pause to address two issues regarding the complaints. The first is merely
an observation of the time-worn principle that it is only the factual allegations contained therein
which we must accept as true. In my opinion, the body shops’ appellate briefing takes undue
liberties in construing the allegations that can be fairly read from their pleadings. The district
court dismissed these claims without prejudice and, therefore, the body shops had an opportunity
to amend their complaints to include any additional allegations that may have been omitted from
their initial pleadings. Having chosen not to do so, they are not permitted to simply “insert” new
allegations through their appellate briefing. These gaps—between the allegations of the
complaints and the allegations of the appellate briefing—are discussed, where relevant, below.
Secondly, I note that this appeal is a consolidation of five cases and, therefore, there are
five complaints in the record. References in this opinion to the “complaints” can be considered a
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insurance companies have engaged in a series of actions that are designed to
depress the amounts they pay to body shops—including to those body shops that
are not signatories to a DRP agreement. I accept, for instance, that State Farm sets
a market labor rate, that other insurance companies advise the body shops that they
will pay no more than State Farm, and that, in setting this rate, State Farm: uses a
methodologically unsound “half-plus-one” technique; manipulates survey data;
threatens and effectuates removal of noncompliant shops from its “preferred
providers” list; and explicitly demands that shops lower their rates if they want to
be preferred providers. I also accept that the insurance companies refuse to pay for
new parts, that they require the use of aftermarket or salvaged parts, and that they:
utilize industry-standard databases only when financially advantageous to them;
refuse to reimburse the cost of certain procedures and materials; require the shops’
participation in their parts procurement processes; and insist on discount programs.
Lastly, I accept that the insurance companies engage in “steering,” that they
discourage insureds from patronizing noncompliant repair shops through
“misrepresentation, insinuation, and casting aspersions,” and that they erroneously
collective reference to all of them. References to a “complaint” and citations to “Compl. at ¶ X”
are to the complaint in the New Jersey case filed by Quality Auto Painting Center of Roselle,
Inc., which is, in relevant part, representative of the other four complaints.
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inform insureds that particular shops: are not on their preferred provider lists; have
had quality control issues; charge more than other shops; take longer than other
shops; and do not perform work that can be guaranteed.
My concern with the body shops’ complaints in this case—and with the
majority’s treatment of those complaints—is not that they have failed to adequately
describe a pattern of behavior that, taken as true, might be considered
objectionable. Indeed, as to one of the asserted causes of action—the tortious
interference claim—I am persuaded that these actions, if proven, are unlawful.
Rather, my concern is that conduct does not become unlawful by virtue of having
been deemed objectionable. Nor does it become unlawful in one context by virtue
of having been found so in another. Accordingly, when considering a motion to
dismiss, courts must carefully apply the well-pled allegations to the requirements
of each asserted claim. With regard to the antitrust claims, binding case law
indicates to me that the allegations of these complaints do not give rise to the
necessary reasonable inference of agreement or conspiracy and, therefore, fail to
state a claim. I also conclude that the allegations fall short of stating claims with
regard to quantum meruit and unjust enrichment. I discuss each in turn.
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IX. Federal Antitrust Claims
The body shops have repeatedly2 argued that the above-recited facts, if
proven, violate federal antitrust law. Thus we are tasked with answering, as the
Supreme Court has phrased it, “the antecedent question of what a plaintiff must
plead in order to state a claim under § 1 of the Sherman Act.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 554–55, 127 S. Ct. 1955, 1964 (2007). Section 1 of the
Sherman Act, under which both the price fixing and boycotting claims are brought,
provides that “[e]very contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several States, or with
foreign nations, is declared to be illegal.” 15 U.S.C. § 1. As that statutory language
suggests, the Act “does not prohibit [all] unreasonable restraints of trade . . . but
only [those] restraints effected by a contract, combination, or conspiracy.”
Twombly, 550 U.S. at 553, 127 S. Ct. at 1964 (first two alterations in original)
(quoting Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 775, 104 S. Ct.
2731, 2743 (1984)). The crucial consideration then “is whether the challenged
anticompetitive conduct ‘stem[s] from independent decision or from an agreement,
2
The instant appeal represents only a portion of more than twenty such cases filed on
behalf of body shops around the country and consolidated in the Middle District of Florida.
Notwithstanding this Court’s disagreement with its resolution of the present issues, I agree with
the majority in expressing my gratitude to the district court for its efficient and thorough
handling of this extraordinarily complex litigation.
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tacit or express.’ ” Id. at 553, 127 S. Ct. at 1964 (alteration in original) (quoting
Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540, 74 S. Ct.
257, 259 (1954)). Accordingly, the answer to our antecedent question turns on
whether there is “a complaint with enough factual matter (taken as true) to suggest
that an agreement was made.” Id. at 556, 127 S. Ct. at 1965.
In plausibly establishing the existence of such an agreement, “an allegation
of parallel conduct and a bare assertion of conspiracy will not suffice.” Id. at 556,
127 S. Ct. at 1966. Indeed, long before Twombly:
It [was] well settled in this circuit that evidence of conscious
parallelism alone does not permit an inference of conspiracy unless
the plaintiff either establishes that, assuming there is no conspiracy,
each defendant engaging in the parallel action acted contrary to its
economic self-interest, or offers other “plus factors” tending to
establish that the defendants were . . . in a collusive agreement to fix
prices or otherwise restrain trade.
City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 570–71 (11th Cir. 1998)
(footnotes, citations, alterations, and quotations omitted). A showing of plus
factors is necessary because they “remove [a plaintiff’s] evidence from the realm
of equipoise and render that evidence more probative of conspiracy than of
conscious parallelism.” Williamson Oil Co., Inc. v. Philip Morris USA, 346 F.3d
1287, 1301 (11th Cir. 2003). Thus the body shops were required to plausibly allege
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the existence of both (1) parallel conduct and (2) sufficient “plus factors” from
which we could infer an agreement. 3
The majority, in a conclusion to which I do not object, finds that the body
shops have established the existence of the necessary parallel conduct. Based on
this conduct, I—like the majority—searched the complaints for plus factors
suggesting the existence of the proscribed collusive agreement. As it detailed
above, the majority’s search revealed two plus factors 4 that in its opinion support a
plausible inference of an agreement to fix prices. Additionally, and although it
declines to label them as such, the majority also apparently found sufficient plus
factors to support an inference of an agreement to boycott. I am convinced that
none of the identified factors—whether considered individually or together—will
bear the weight attributed to them.
3
Of course, an antitrust plaintiff can also offer direct evidence of an agreement or evidence
of parallel conduct that is contrary to the defendants’ self-interest. The body shops have not done
so here and are, accordingly, left with an attempt at adducing evidence of relevant plus factors.
4
The body shops argued on appeal that their complaints established at least five plus
factors. The majority has relied only on those it identified in its opinion and, therefore, I do not
address the body shops’ additional plus factors in any depth. It bears mentioning, however, that I
consider them to be wholly without merit.
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A. Price Fixing
Turning to the individual plus factors allegedly supporting horizontal price
fixing,5 the majority identifies two that it believes are suggestive of an agreement.
Broadly speaking, the first concerns uniformity of price and the second concerns
uniformity of action. I discuss each in turn.
1. Uniformity of Price
The majority first suggests that the insurance companies’ conduct “probably
does not result from chance, coincidence, independent responses to common
stimuli, or mere interdependence unaided by an advance understanding among the
parties” because they have “adopt[ed] a uniform price despite variables that would
ordinarily result in divergent prices.” Maj. Op. at 15–16. As the majority’s
recitation suggests, this plus factor consists of two components. First, the
defendants must have adopted a uniform price. This component, however, is
suggestive only of parallel conduct and, without more, will not justify invoking the
plus factor. Accordingly, the uniform price must exist “despite variables that would
5
In considering each plus factor, I am cognizant of the Supreme Court’s admonition that
antitrust plaintiffs receive “the full benefit of their proof without tightly compartmentalizing the
various factual components and wiping the slate clean after scrutiny of each.” Cont’l Ore Co. v.
Union Carbide & Carbon Corp., 370 U.S. 690, 699, 82 S. Ct. 1404, 1410 (1962). At the same
time, it is undoubtedly our responsibility “to evaluate the evidence proffered by the plaintiffs not
to ascertain its credibility, but instead to determine whether that evidence, if credited, ‘tends to’
establish a conspiracy more than it indicates conscious parallelism.” Williamson Oil Co., Inc. v.
Philip Morris USA, 346 F.3d 1287, 1301 (11th Cir. 2003).
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ordinarily result in divergent pricing.” The second component is the indicator of
the agreement that makes collusion more likely than conscious parallelism.
The sources on which the majority relies in introducing this plus factor make
clear the necessity of both components. Indeed, the majority observes that the
Supreme Court has inferred an agreement where “for many years, with rare
exceptions, cement has been offered for sale in every given locality at identical
prices and terms by all producers.” Maj. Op. at 16 (quoting FTC v. Cement Inst.,
333 U.S. 683, 713, 68 S. Ct. 793, 809 (1948)). But this is just the first component;
the majority fails to point out that the record evidence in that case—discussed in
the sentence immediately following the one that it quotes—established that
“[t]housands of secret sealed bids ha[d] been received by public agencies which
corresponded in prices of cement down to a fractional part of a penny.” Cement
Inst., 333 U.S. at 713, 68 S. Ct. at 809. Likewise, the majority quotes a leading
antitrust treatise for the idea that an agreement may be present if rivals establish
identical prices, but fails to grapple with the caveat that this is only true where
there are “simultaneous identical bids on a made-to-order product not readily
assembled from standard and conventionally priced items.” Maj. Op. at 16
(quoting Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1434b (3d ed.
2012)). Thus, while this so-called convergent pricing certainly is—or at least could
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be—a plus factor, it should only be invoked where we should otherwise expect
divergent pricing. Considered in the appropriate light, the differences between the
instant case and the sources on which the majority relies are substantial.
First, the focus on “secret,” “sealed,” and “simultaneous” bids is crucial
precisely because it excludes the possibility of conscious parallelism: competitors
cannot consciously parallel one another if they only learn of the other’s price after
they have established their own. Perhaps sensing this, the body shops’ brief on
appeal argues that “[a]ll of the [insurance companies] reach[] the same, identical
‘market rate’ . . . which State Farm refuses to [make] public.” Brief of Appellants
at 21. As an initial matter, alleging that State Farm does not publicly disclose the
market rate and arguing that it is a secret are two very different things. The sources
on which the majority relies do not focus on whether a certain party made the
information public but, rather, simply on whether or not it was public. Stated
differently, the fact that State Farm does not issue a press release with the market
rate does not foreclose the possibility that it is publicly known. This is a crucial
distinction.
However, giving the body shops the benefit of every inference in their favor
as required in this posture, their argument in brief—that State Farm does not
publish its market rate—could charitably be read to suggest that the market rate is
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a secret. This would be a fairly damning allegation, and one that strikes right to
heart of Cement Institute’s focus, if it were at all supported by the complaints.
Unfortunately, there are no factual allegations—to speak nothing of evidence—that
the market rate is a secret. Indeed, nowhere in the complaint do the body shops
suggest that the labor rate is a secret. Quite the opposite, the complaint reveals that
State Farm must necessarily tell the number to every repair shop in a given
geographic area.
Moreover—even if it were possible to share the market rate with the body
shops while, at the same time, keeping it a secret from the other insurance
companies—there are no allegations at all that the other insurance companies knew
what it was in advance. Indeed, rather than allege that all of the insurance
companies approached the body shops with an identical market rate (which might
possibly indicate that they had communicated in advance), the complaint alleges
twice that the other insurance companies simply conform to State Farm’s rate—
whatever that may be. Compl. at ¶ 62 (“Defendants . . . specifically advised the
Plaintiff they will pay no more than State Farm pays for labor.”); Compl. at ¶ 115
(“[D]efendants [state] that they will conform to State Farm’s payment structure.”).
Following the example set by a competitor, without agreeing to do so in advance,
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is textbook “price leadership” 6—a practice we have repeatedly stated is insufficient
to establish the existence of an agreement. See, e.g., Williamson Oil, 346 F.3d at
1301–03; City of Tuscaloosa, 158 F.3d at 571. Accordingly, even if State Farm’s
market rate were a secret—which, again, the body shops do not allege—such a fact
would be of no use when the other insurance companies are not also alleged to
have known the number in advance.
Further distinguishing our case from the examples on which the majority
relies is the fact that auto body repairs are not the type of “made-to-order product
not readily assembled from standard and conventionally priced items” where we
expect to see divergent pricing. Maj. Op. at 16 (quoting Areeda ¶ 1434b). On the
contrary, the “products” here—cars—are so readily assembled from standard parts
that their assembly-line manufacturing set the standard for other industries. That
the body shops are repairing those cars, rather than assembling them for the first
time, does not make the parts used to do so any less standard. And they are so
conventionally priced that, as discussed below, the body shops believe that the
insurance companies should not be allowed to deviate from third-party databases
6
The majority (Maj. Op. at 22-23) fails to recognize that the allegation—that the insurance
companies told the body shops that they would pay no more than State Farm—gives rise to no
inference of prior agreement; to the contrary, it is a straightforward assertion of following the
price leader.
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that set standardized prices. Certainly, some parts—such as spark plugs,
windshield wipers, brakes, and tires—may be standard across many makes and
models of cars, while others—such as doors, windshields, headlights, and
fenders—may only fit a few. But for the overwhelming majority of cars, the
necessary parts are ubiquitous, interchangeable, and standardly priced. Thus, while
convergent pricing where it should otherwise not be expected can undoubtedly
serve as a plus factor, none of the indicators to which courts and commentators
have traditionally looked to support such a factor—or at least none to which the
body shops or the majority have pointed—are present here.
Neither the body shops nor the majority have pointed to any plausible reason
that one should expect that prices in this market—involving standardized
automobile parts and repairs—would be divergent. Quite the contrary, the body
shops argue that the insurance companies should comply with several databases
that exist for the sole purpose of establishing standardized pricing. That is, the fact
that the body shops insist that the insurance companies should comply with the
prices published in these three separate databases assumes that such prices are
standardized, and that one should expect convergent prices—not divergent prices.
In short, the instant case bears none of the traditional hallmarks of a situation
in which uniform pricing is present in an industry where we would otherwise not
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expect it. Nor are any of the other reasons offered by the body shops (or the
majority) suggestive of an environment in which we would expect to see divergent
pricing. The majority’s reliance on this plus factor is premised on an assumption
that there has been an “adoption of a uniform price despite variables that would
ordinarily lead to divergent prices;” yet I see no indication that I should expect to
see divergent pricing in this industry. And without an expectation of divergent
pricing all that remains is an allegation of uniform pricing, which is indicative only
of parallel conduct. Accordingly, I would reject this plus factor as an indicator of
the necessary agreement.
2. Uniformity of Tactics
As to its second plus factor, the majority concludes that the insurance
companies have engaged inuniform practices suggestive of an agreement. Maj. Op.
at 17-18. True enough, several courts have found a plus factor where there is a
similarity of language, terms, or conditions used by the alleged co-conspirators that
would be improbable absent collusion. See, e.g., Apex Oil Co. v. DiMauro, 822
F.2d 246, 256–58 (2d Cir. 1987); De Jong Packing Co. v. U.S. Dep’t of Agric., 618
F.2d 1329, 1332–34 (9th Cir. 1980). And, true enough, the body shops’ appellate
briefing describes the insurance companies’ tactics as “the same,” “identical,” and
part of a “script[].” Brief of Appellants at 22. Thus, if I were required to accept the
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well-pled allegations of a brief as true I might be inclined to agree with the
majority.
Unfortunately, the body shops’ appellate briefing is once again betrayed by
their complaints, which introduce the relevant tactics as follows:
Through various methods, the [insurance companies] have,
independently and in concert, instituted numerous methods of
coercing the [body shops] into accepting less than actual and/or
market costs for materials and supplies expended in completing
repairs.
Compl. at ¶ 63. Whatever else can be said about that allegation, I see no reason to
conclude—as the majority obviously does—that the body shops even believe the
tactics were highly uniform. 7 Indeed, the complaint reflects nothing approaching
the level of conviction about the body shops’ allegations that the majority reads
into it.
Nonetheless, the majority concludes that the insurance companies have
engaged in uniform tactics because they have all required the body shops “to repair
a faulty part rather than install a replacement part; to install a used or recycled part;
and to offer discounts and concessions.” Maj. Op. at 18. Even if these tactics were
7
As for what else can be said about that allegation, the fact that the body shops concede
that some of the alleged actions occurred “independently” is certainly noteworthy. How the
majority was able to discern which of the allegedly nefarious activities were conducted “in
concert”—a Sherman Act concern—and which were conducted “individually”—a decidedly
non-Sherman Act concern—is left unspoken.
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highly uniform, they are suggestive of an agreement only when those tactics would
not plausibly arise from “independent responses to common stimuli.” See
Twombly, 550 U.S. at 556 n.4, 127 S. Ct. at 1965 n.4 (quoting Areeda ¶ 1425). Yet,
the majority fails to address the fact that all three of these “highly uniform” tactics
are easily explained by the most common of corporate stimuli: a desire to increase
profits. And while some methods of increasing profits could be so idiosyncratic as
to be unlikely to arise in the absence of an agreement, such is plainly not the case
here. None of these tactics could even be fairly described as novel, let alone as
sufficiently idiosyncratic to support an inference of an agreement. It can hardly be
denied that repairing (rather than replacing) damaged parts, installing recycled
(rather than new) parts, and requiring discounts are among the most common and
time-worn methods of increasing corporate profits in any industry, let alone in an
industry where parts and labor reimbursements are the primary business
expenditures. Cf. Maj. Op. at 14 (setting forth an established legal principle, which
I respectfully submit the majority then fails to apply: “But plaintiffs’ plus factors
are no more consistent with an illegal agreement than with rational and competitive
business strategies, independently adopted by firms acting within an
interdependent market.” (quoting In re Musical Instruments & Equip. Antitrust
Litig., 798 F.3d 1186, 1189 (9th Cir. 2015)). And yet, under the standard
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announced today, the mere existence of an industry-wide practice permits an
antitrust plaintiff to establish a plus factor.
I do not believe that a complaint merely alleging several common (and
obvious) industry practices should proceed directly past a motion to dismiss and
into the expensive and settlement-inducing quagmire of antitrust discovery. The
Supreme Court has described precisely this problem:
[E]ven if [defendants committed all the acts] in all the ways the
plaintiffs allege, there is no reason to infer that the companies had
agreed among themselves to do what was only natural anyway; so
natural, in fact, that if alleging parallel decisions to resist competition
were enough to imply an antitrust conspiracy, pleading a § 1 violation
against almost any group of competing businesses would be a sure
thing.
Twombly, 550 U.S. at 566, 127 S. Ct. at 1971 (citation omitted).
In short, the majority’s analysis of its second plus factor suggests that the
insurance companies’ tactics are highly uniform when even the complaint does not
seem to believe that; declines to explain how it divined which of the challenged
activities occurred “in concert” and which occurred “independently;” and relies
upon several alleged tactics which are clearly common, obvious, and mainstream.
In contrast to the majority, I do not believe an inference of prior agreement arises
from the mere fact that several insurance companies adopt policies favoring use of
cheaper parts and offering discounts to insurance companies. I respectfully submit
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that the majority’s analysis is inconsistent with Supreme Court and Eleventh
Circuit precedent. Accordingly, as with the first, I would reject the second plus
factor and affirm the dismissal of the price fixing claim.
B. Boycotting
Despite my substantial doubts about the existence of a price fixing
agreement, the allegations suggesting an agreement to boycott are even weaker. At
least in their price fixing allegations the body shops made passing reference to an
agreement. Not so with respect to a boycott agreement. While I do not consider it
dispositive, it is certainly noteworthy that the body shops never allege—even in a
conclusory fashion—an agreement to steer customers away from, or to boycott, the
body shops. 8 Neither the “steering” allegations nor the “boycott” section of the
complaint allege the existence of an agreement to do so. And even if we
incorporate the allegations of an agreement from the price fixing sections of the
complaint, I respectfully submit that the instant complaint would still fall short of
even the “few stray statements [that] speak directly of agreement” which the
Supreme Court has held are insufficient. Twombly, 550 U.S. at 564, 127 S. Ct. at
1970.
8
Although I do not consider this failure to be dispositive, treating it as such would not be
outlandish. At a bare minimum, we should expect antitrust plaintiffs to state their belief that an
agreement was reached before we go off in search of plus factors to support an inference of its
existence.
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Undisturbed by the fact that the body shops do not even profess a belief in
the existence of an agreement to boycott, the majority concludes a brief reversal of
the boycotting claim with the following analysis:
Accepted as true, the body shops’ allegations readily and plausibly
establish the per se violation of boycotting. The body shops allege that
the insurance companies targeted non-compliant shops by keeping
insureds away until those shops charged at or less than the market
rate. And the body shops allege that, in accordance with the
agreement, the insurance companies used identical tactics to keep
insureds away.
Maj. Op. at 25 (alteration in original). Thus the majority offers two allegations—it
declines to call them plus factors—which it apparently believes support the
existence of an agreement to boycott: steering and the use of identical tactics in
that steering.
As an initial matter, an allegation of steering—standing alone—cannot be
indicative of an agreement. Steering is a decidedly unilateral activity; it involves
one insurance company steering one of its customers away from one of the body
shops. Accordingly, even if all of the insurance companies engage in it, steering
itself suggests only parallel conduct. Of course, as the tortious interference claims
suggest, it is potentially illegal parallel conduct. But it is only parallel conduct all
the same.
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That said, if there were allegations that “the insurance companies used
identical tactics to steer insureds away,” as the majority claims, the needle would
move toward an inference of the existence of an agreement if, but only if, such
similar or identical tactics would not plausibly arise from “independent responses
to common stimuli.” Twombly, 550 U.S. at 556 n.4, 127 S. Ct. at 1965 n.4. But
once more, the body shops have asserted in their appellate briefing—and the
majority has sanctioned—facts that are simply unsupportable on this record.
Indeed, although the body shops have argued on appeal that “[a]ll of the
Defendants utilize the same script containing identical false and misleading
steering statements,” Brief of Appellants at 30, neither they nor the majority
opinion suggest where I can find such an allegation. Both the word “script”—as
used by the body shops—and the word “identical”—as used by the majority—are
conspicuously absent from the complaints.
Almost as troubling as what the body shops have not pled and yet are given
credit for is what they have pled and yet are not held to account for. With regard to
steering, the body shops allege that:
Examples of this practice include telling insureds and/or claimants
that a particular chosen shop is not on the preferred provider list, that
quality issues have arisen with that particular shop, that complaints
have been received about that particular shop from other consumers,
that the shop charges more than any other shop in the area and these
additional costs will have to be paid by the consumer, that repairs at
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the disfavored shop will take much longer than at other, preferred
shops and the consumer will be responsible for rental car fees beyond
a certain date, and that the Defendant cannot guarantee the work of
that shop as it can at other shops.
Compl. at ¶ 83. From this, it is argued—and I am asked to conclude—that the body
shops have engaged in “identical” tactics. But even a basic illustration of the
pleading trick at work here reveals a fatal flaw. Assume that State Farms steers a
consumer using excuse X; 21st Century steers a consumer using excuse Y; and
GEICO steers a consumer using excuse Z. The body shops can (truthfully) make
the following allegation: “The insurance companies engage in steering. Examples
of these tactics include X, Y, and Z.” 9 In reality, tactics X, Y, and Z are in no way
identical. And yet—using this exact pleading formula—the majority here would
infer that the companies use identical tactics and allow a claim to lie for antitrust
boycotting. Put another way, the body shops’ allegations—and the conclusion the
majority draws from them—is akin to saying: (1) that a group of people “travel” to
get to work; (2) that “examples of this ‘travel’ include driving cars, riding bikes,
9
It is worth noting in my example—as in the instant case—the body shops have not
alleged that the complained-of tactics are “identical.”
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boarding trains, and walking on sidewalks;” and (3) that these people, therefore,
use “identical tactics” to get to work. This simply cannot be the case.10
Put simply, the majority relies upon two asserted plus factors: one (steering)
is at best indicative of parallel conduct and the other (identical tactics) has no basis
in the complaint. Moreover, even if the insurance companies were alleged to have
used the same or similar reasons why their insureds should not use a particular
body shop, established case law would still require a court to then address whether
such similarity would be improbable absent collusion or, rather, whether it was
equally plausible as independent responses to common stimuli.11 For the forgoing
reasons, I conclude that the complaints fall short of alleging facts giving rise to an
inference of an agreement or conspiracy to boycott the body shops.
C. Conclusion
As the Supreme Court has observed, “it is only by taking care to require
allegations that reach the level suggesting conspiracy that we can hope to avoid the
potentially enormous expense of discovery in cases with no ‘reasonably founded
10
The body shops use, and the majority endorses, a similar pleading trick with respect to
the “non-exhaustive list of procedures and processes the [d]efendants refuse to pay and/or pay in
full.” Maj. Op. at 8 n.5 (alteration in original).
11
Even if the insurance companies were alleged to have used similar or identical reasons as
to why their insureds should not use a particular body shop, the reasons suggested—that the body
shop charges more or takes longer or does poor quality work—would seem to be obvious reasons
an insurance company would not want its insureds to use that body shop. That is, such similarity
would seem to be independent responses to common stimuli.
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hope that the [discovery] process will reveal relevant evidence’ to support a § 1
claim.” Twombly, 550 U.S. at 559, 127 S. Ct. at 1967 (alteration in original)
(quoting Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347, 125 S. Ct. 1627, 1634
(2005)). The care required is, at a minimum, enough to ensure that the facts which
are used to justify invoking a plus factor are actually alleged, and that the plus
factors demonstrate parallel behavior plus something else sufficient to give rise to
a plausible inference of the existence of an agreement or conspiracy. Because the
body shops’ complaints reveal significant shortcomings on both of these basic
requirements, I would affirm the district court’s dismissal of both federal antitrust
claims. 12 Accordingly, I respectfully dissent from the majority’s decision with
regard to the antitrust claims.
X. State Tort Claims
The district court also dismissed, as relevant here, three state law claims
brought by the body shops. As does the majority, I would reverse the dismissal of
the body shops’ tortious interference claims. Unlike the majority, however, I would
affirm the dismissal of both the unjust enrichment and quantum meruit claims
because neither is justified by the allegations of the complaint.
12
See infra note 28 (suggesting my concern that the majority may have implicitly relied on
the insurance companies’ market power, leading it to dilute the requirement that there must be—
in addition to consciously parallel conduct—a plus factor giving rise to a plausible inference of
an agreement or conspiracy).
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A. Unjust Enrichment
I respectfully dissent from the majority’s decision to reverse the district
court’s decision dismissing the body shops’ unjust enrichment claims. In all of the
complaints there is an allegation to the effect that each insurance company
specifically advised each body shop that they would pay no more than State Farm
pays. Compl. at ¶ 62 (“Defendants . . . specifically advised the Plaintiff they will
pay no more than State Farm pays for labor.”). Thus it is clear that the body shops
knew before undertaking the repair that they were to be paid certain amounts or in
certain ways. The body shops then undertook the repair anyway. Accordingly, it is
simply not unjust for the insurance companies to retain whatever “benefit” (if any)
that they might be deemed to have received.
Under the laws of the four states relevant here—Kentucky, Missouri, New
Jersey, and Virginia—one of the elements of an unjust enrichment claim is that it
would be unjust or inequitable for the defendant to retain the benefit allegedly
conferred upon it. 13 Because each complaint at issue here specifically alleges that
13
See Jones v. Sparks, 297 S.W.3d 73, 78 (Ky. Ct. App. 2009) (“For a party to prevail
under the theory of unjust enrichment, they must prove three elements: (1) benefit conferred
upon defendant at plaintiff’s expense; (2) a resulting appreciation of benefit by defendant; and
(3) inequitable retention of benefit without payment for its value.”); Binkley v. Am. Equity
Mortg., Inc., 447 S.W.3d 194, 199 (Mo. 2014) (“An unjust enrichment claim requires a showing
that: (1) the plaintiff conferred a benefit on the defendant; (2) the defendant appreciated the
benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust
circumstances.” (quotation omitted)); VRG Corp. v. GKN Realty Corp., 641 A.2d 519, 526 (N.J.
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each insurance company advised the body shops that it would pay no more than
State Farm pays, it clearly was not unjust for each insurance company to pay only
that amount and no more.
Moreover, there is an indisputable principle of law set forth in the
Restatement (Third) that where the parties have an opportunity to arrive at a
contract and do not do so, the courts will generally not go behind them and
establish a valuation for their transaction. See Restatement (Third) of Restitution
and Unjust Enrichment § 2 cmt. d (2011) (“Instead of proposing a bargain, the
restitution claimant first confers a benefit, then seeks payment for its value. When
this manner of proceeding is unacceptable—as it usually is, if the claimant neglects
an opportunity to contract—a claim based on unjust enrichment will be denied.”
(emphasis added)). As the district court correctly held, the body shops’ unjust
enrichment claims fail because they had an opportunity to bargain for a deal they
1994) (“To establish unjust enrichment, a plaintiff must show both that defendant received a
benefit and that retention of that benefit without payment would be unjust.”); Schmidt v.
Household Fin. Corp., II, 661 S.E.2d 834, 838 (Va. 2008) (“To state a cause of action for unjust
enrichment, [a plaintiff has] to allege that: (1) he conferred a benefit on [the defendant]; (2)
[defendant] knew of the benefit and should reasonably have expected to repay [plaintiff]; and (3)
[defendant] accepted or retained the benefit without paying for its value.”). Although the
Virginia rule statement does not expressly require that retention of the benefit be unjust, such a
requirement is routinely read into the elements by Virginia courts. See, e.g., R.M. Harrison
Mech. Corp. v. Decker Indus., Inc., 75 Va. Cir. 404, 2008 WL 10669311, at *3 (2008) (“The
circumstances of the acceptance or retention of the benefit must render it inequitable for the
defendant not to compensate the plaintiff.”).
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considered to be fair and failed to do so.14 Forgoing their opportunity to bargain,
and notwithstanding the fact that the insurance companies had specifically advised
that they would pay no more than State Farm pays, the body shops nevertheless
undertook the repairs and are now seeking to require the insurance companies to
pay more than State Farm had said it would pay. In my judgment, the unjust
enrichment claims of the body shops are not only without merit, they border on
being frivolous claims. I would affirm the judgment of the district court with
regard to the unjust enrichment claims, and I respectfully dissent from the
majority’s decision to reverse.
I also briefly set forth two additional concerns with regard to the majority’s
analysis of the unjust enrichment claims. First, in service of a conclusion that the
insurance companies’ actions were somehow unjust, the majority stretches the
words “forced” and “involuntarily” until they cover basic participation in a free
market economy. Second, the majority implicitly resolves an open question of state
law without any analysis at all. Both are problematic.
14
The body shops have consistently argued that they did not have an opportunity to bargain
because the insurance companies offered the market rate on a “take it or leave it” basis and that
the insurance companies refused to negotiate. If this is all that is necessary to circumvent the rule
that parties who are able to negotiate should be held to do so, the rule will quickly become
extinct.
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My first concern with the majority’s analysis is its determination that it
would be unjust for the insurance companies to retain any benefit based on the
explanation that “the body shops consistently allege that the insurance companies
forced the shops to confer benefits; that the shops involuntarily performed repairs
at the low market rate.” Maj. Op. at 28 (first emphasis added). While it is not
possible here to raise all of the secondary consequences of the majority’s
conclusion that the body shops were “forced” into “involuntarily” performing
repairs, I find it worthwhile to highlight just a few of my more serious concerns.
As an initial matter, the majority’s analysis calls into question the principle,
discussed above, that parties who have an opportunity to contract in advance
should do so and, if they do not, the courts should generally refrain from
establishing a value in quasi-contract after the fact. Accord Restatement (Third) of
Restitution and Unjust Enrichment § 2 cmt. d (2011) (quoted above). As the
Seventh Circuit has recognized, “[b]etter that the [plaintiff] should negotiate with
the defendant rather than thrusting on the court the difficult task of constructing a
hypothetical bargain.” Nadalin v. Auto. Recovery Bureau, Inc., 169 F.3d 1084,
1086 (7th Cir. 1999). The majority turns this traditional conception on its head and
places those who forgo a contract in a better legal position than those who contract
in advance. This is evident from that fact that the body shops in the instant
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appeal—who did not negotiate a DRP agreement—are permitted to bring
otherwise unavailable state law claims while those shops who (as the law
encourages) contracted in advance through a DRP are limited to suing on their
contracts. As the majority notes, none of the body shops in the instant appeal are a
part of a DRP. This is not an accident. The body shops are well aware that if they
are signatories to a DRP agreement, their remedy lies in contract rather than in the
unjust enrichment actions they bring here.
Nonetheless, the majority apparently concludes that the body shops’ failure
to strike an acceptable bargain for their services prior to performing the repairs is
excusable because the insurance companies allegedly “forced” them to
“involuntarily” perform the repairs at State Farm’s market rate. I respectfully
submit that the majority has—in its attempt bring the body shops’ allegations
within the scope of unjust enrichment—expanded the definition of those two words
beyond their accepted meaning. The majority’s use of the term “forced” in the
instant context is inconsistent with the facts actually pled by the body shops. The
body shops were under no obligation, legal or otherwise. They were not threatened
or tricked. They were not coerced. 15 They simply made themselves available to
15
I submit that the body shops’ allegation of force should be disregarded as a conclusory
allegation. No concrete facts have been alleged from which might arise a reasonable inference of
force.
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perform a service for compensation, the amount of which they were advised before
undertaking the repair. They are now dissatisfied with that amount of
compensation and are suing for more. Like any other service provider, they have—
or at least had—three options: (1) perform their service for the price that someone
else was willing to pay; (2) negotiate for a higher fee; or (3) decline to perform the
service. Every company in America recognizes that finding the proper mix of those
three basic choices is a crucial part of achieving—or maximizing—profitability.
What the body shops now seek is a fourth option: run to the federal courts and
complain of being “forced” into performing their service.16
It is no exaggeration to say that the majority’s apparent holding threatens
some basic tenets of our economic system. As just one example, consider a
homeowner who makes known that she will pay $10,000 to have her house painted,
claiming (truthfully or not) that this is the going rate. A painter, believing that the
actual market rate (again, truthfully or not) is $15,000, paints the house and the
owner writes him a check for $10,000. If the failure to contract is no longer a
16
For that matter, I see no reason why the majority’s logic cannot just as readily be
employed as a weapon by consumers against the body shops. Suppose a consumer’s car is badly
damaged and cannot be driven. Not wanting his insurance rates to increase, he decides to pay for
the repairs out of pocket. If one of the body shops charges him an amount in excess of what he
thinks he should pay, has he been “forced” to pay that amount? Is it “involuntary”? Is he
permitted to sue the body shop and have a court determine the reasonable price of the repair? Is
this really what federal courts should be doing? These questions, and many more, are left
unanswered in the majority’s opinion.
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barrier in this Circuit—as would seem to be the case under the majority
opinion17—the painter then sues for unjust enrichment of $5,000 on the theory that
the market rate established by the owner was too low. Has she “forced [him] to
confer benefits?” Has he “involuntarily performed [the painting] at the low market
rate?” Has she been unjustly enriched? Surely these questions must be
resoundingly answered in the negative. And if that must be so, there is no
principled reason why the answer to our present question should be any different.
Nor does this example become any more unjust by virtue of a shift in the
parties’ relative bargaining power.18 Suppose that, rather than a singular
homeowner, a real estate developer desires to have an entire subdivision of homes
painted at a rate of $9,000 each. This amount consists of the $10,000 “market rate”
and a 10% “volume discount.” The painter is faced with the same options as our
body shops: conform to the rate and accept the discount, negotiate with the
17
Notably, both parties in this example agree that the painter is entitled to some amount
($10,000) just as both parties in our instant case agree that body shops are entitled to some
amount (the State Farm “market rate”). The failure to contract then in both cases is for an amount
beyond what was agreed to.
18
The majority suggests that a mere disparity in bargaining power can invalidate a contract.
Maj. Op. at 29. However, the majority cites no case law or other authority to support the novel
proposition that mere bargaining power or mere market power is sufficient to invalidate a
contract. Moreover, the body shops have not even argued on appeal that a disparity in
bargaining power could invalidate a contract, or that it could render unjust the insurance
companies’ retention of the benefits conferred. Thus, any such argument, not being fairly raised
on appeal, is abandoned. See, e.g., Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681-83
(11th Cir. 2014).
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developer, or forgo the business. The fact that this is a large chunk of the painter’s
business notwithstanding, it cannot be seriously argued that he is being forced to
paint the houses. Nonetheless the painter—if the majority’s opinion and its logical
consequences are to be taken at face value—can now undertake the job, collect the
discounted rate ($9,000 per house), and then sue the company for the remaining
amount it feels it is owed. 19 I am troubled by this possibility.
My second concern is the majority’s implicit decision on an open question
of state law. Both on appeal and in the district court, the insurance companies
argued that, because the body shops repaired cars belonging to the insureds, any
benefits were rendered to them and not to the insurance companies. This argument
was sufficiently persuasive that the district court had previously dismissed another
action in this litigation because, under Florida law, the benefits were conferred not
on the defendant insurance companies but rather on their insureds.20 However, in
the instant case, the district court recognized that outside of Florida the courts are
divided on the issue of whether, in the insurance context, the benefit is bestowed
19
This is, of course, on top of the fact that if a couple of other developers all independently
decide to pay no more than our hypothetical price leader, the entire group can now be hit with
antitrust violations if the majority opinion and its logical consequences are to be the law of this
Circuit.
20
See A&E Auto Body, Inc. v. 21st Century Centennial Ins. Co., 2015 WL 12867010, at *5
(M.D. Fla. Jan. 22, 2015) (“[I]n unjust enrichment case, . . . ‘a third party providing services to
an insured confers nothing on the insurer except a ripe claim for reimbursement.’” (quoting
Adventist Health Sys./Sunbelt Inc. v. Med. Sav. Ins. Co., 2004 WL 6225293, at *6 (M.D. Fla.
Mar. 8, 2004))).
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on the insured or the insurance company. For that reason, the district court
dismissed the instant unjust enrichment claims on alternative grounds. 21 Although
it was not a basis for the decision below, this question—on whom the benefit was
conferred—was discussed in the magistrate’s report and recommendation, in the
district court’s order, and in the appellate briefing.
Implicitly deciding this open issue of state law, the majority simply holds,
twice, that the body shops stated a valid claim for unjust enrichment. Maj. Op. at
27 (“The allegations readily and plausibly establish the claims of unjust
enrichment.”); Maj. Op. at 33 (“[T]he allegations have sufficiently established the
body shops’ state tort claims of unjust enrichment . . . .”). In doing so, the majority
has necessarily decided that all of the elements have been satisfied. Thus the
majority has implicitly decided that, under the laws of all four states, the benefit is
to be deemed conferred on the insurance company, not the insured.
The majority’s implicit decision might be understood if the case law so
clearly supported one side or the other as to not be worthy of lengthy discussion.
Unfortunately, the opposite is true. In many states—including, as far as I can tell,
each of the four that are relevant here—the proper resolution of this issue remains
21
These alternative grounds largely mirror the basis on which I would affirm the district
court’s decision to dismiss the unjust enrichment claims—namely that the retention of a benefit
(if any) would not be unjust where the body shops knew how much the insurance companies
would pay before undertaking the repair and where they also forwent an opportunity to bargain.
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an open question. 22 And, in addition to its being an open question in the relevant
states, the states that have decided the question differ widely in their approach.23
In implicitly deciding this issue, the majority opinion has the effect of
foreclosing the insurance companies from raising the argument on remand. Even
if the majority must reverse the district court and hold that the body shops have
adequately pled that the insurance companies’ retention of benefits was unjust, I
respectfully submit that the majority should have remanded this issue of first
impression to the district court to resolve in the first instance on remand.
For the reasons discussed above, I would affirm the judgment of the district
court with respect to the unjust enrichment claims, and I respectfully dissent from
the majority’s decision in this regard.
B. Quantum Meruit
I must also register my dissent from the majority’s decision to reverse the
district court’s dismissal of the quantum meruit claims arising under the state laws
22
New Jersey has found a benefit to a prison where a private hospital treated an inmate on
its behalf. Saint Barnabas Med. Ctr. v. Essex County, 543 A.2d 34 (N.J. 1988). While certainly
analogous, that case is factually distinguishable based, among other things, on the legal duty a
jailer owes to inmates. A federal district court in Kentucky has addressed a similar question in
the health insurance context. See Appalachian Reg’l Healthcare v. Coventry Health & Life Ins.
Co., 2013 WL 1314154 (E.D. Ky. Mar. 28, 2013). Any conclusions that are drawn therein are
obviously not binding on us or the Kentucky state courts. I have not seen any indication that the
Virginia or Missouri courts have addressed this question.
23
Compare Myrtle Beach Hosp., Inc. v. City of Myrtle Beach, 532 S.E.2d 868 (S.C. 2000),
with Emergency Physicians Integrated Care v. Salt Lake County, 167 P.3d 1080 (Utah 2007).
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of Kentucky, New Jersey, and Virginia. 24 I would have affirmed the judgment of
the district court because, under the laws of the three states relevant here, the body
shops were required to allege, among other elements, that the circumstances
reasonably notified the insurance companies that they expected to get paid
(Virginia and Kentucky) or that they reasonably expected to be compensated (New
Jersey). 25 They cannot do so here.
As I have discussed above, the body shops specifically alleged that each of
the insurance companies informed them that they would pay no more than State
Farm. The body shops then undertook the repairs. Having fully informed the body
shops of what they were willing to pay, the circumstances could have only
reasonably informed the insurance companies that the body shops expected to be
paid the market rate. This is fatal to the Virginia and Kentucky claims. Likewise,
having been fully informed that the insurance companies would only pay the
market rate, the body shops could not have reasonably expected to receive more
than that amount. This is fatal to the New Jersey claim.
Respectfully, I think that the majority’s analysis contains two flaws that
have resulted in our differing views on the resolution of this issue. The first is the
24
The Missouri complaint does not include a cause of action for quantum meruit.
25
See Raymond, Colesar, Glaspy & Huss, P. C. v. Allied Capital Corp., 961 F.2d 489, 491
(4th Cir. 1992); JP White, LLC v. Poe Cos., LLC, 2011 WL 1706751, at *5 (Ky. Ct. App. May
6, 2011); Weichert Co. Realtors v. Ryan, 608 A.2d 280, 285 (N.J. 1992).
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majority’s conclusion that, because the body shops had a reasonable expectation of
some compensation, they need not demonstrate a reasonable expectation as to the
amount they are now requesting. Maj. Op. at 30 (“The body shops allege that they
rendered repair services, expecting compensation . . . and that the companies paid
an artificial price, below the reasonable value for the services.”). Undoubtedly, the
body shops could reasonably have expected some compensation. Equally
undoubtedly, they could not—at least not reasonably—have expected to receive
more than the market rate when, by their own pleadings, every insurance company
informed them that they intended to pay no more than that rate. Unconcerned with
this distinction, the majority apparently concludes that because they expected some
compensation, they are entitled to have a court determine not just what they could
reasonably have expected, but—regardless of their expectations—the reasonable
value of the services they provided.
The body shops have not cited, and independent research has not uncovered,
any controlling authority in the three relevant states to such an effect. Thus,
without any explanation as to why, the majority appears to have decided an open
question of state law on a state cause of action. As I have mentioned previously,
deciding open state law questions with no explanation might be understandable if
other authority overwhelmingly pointed in a single direction. Such is not the case.
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The only analogous case law suggests the exact opposite result of that reached by
the majority: when a plaintiff has a reasonable expectation of some amount, they
cannot reasonably expect to receive additional compensation and therefore cannot
bring suit to recover it. 26
It is not at all surprising to me that the courts to consider this issue have
resolved it differently than the majority given that it is indistinguishable from the
house painting example in the previous section. True enough, the painter could
have expected some compensation ($10,000) for performing a service (painting the
house). But—having already received what he could have reasonably expected in
compensation—surely he is not now entitled to file a lawsuit for quantum meruit,
allege that the reasonable value of his services is $15,000, and have a court
determine what should be paid him. And yet as surely as such a conclusion is
implausible, it would logically follow from today’s decision. It simply cannot be
the law that a plaintiff, knowing full and well that it has no reasonable expectation
of receiving what it considers the fair market value of its services, can nonetheless
perform a service and then survive a motion to dismiss in its subsequent suit to
26
See, e.g., Hindsight Sols., LLC v. Citigroup Inc., 53 F. Supp. 3d 747, 776 (S.D.N.Y.
2014) (unjust enrichment claim failed because plaintiff could not have reasonably expected to
receive additional compensation); Rodriguez v. Ready Pac Produce, 2014 WL 1875261, at *3
(D.N.J. May 9, 2014) (dismissing unjust enrichment claim where plaintiff “would have no
reasonable expectation to receive additional compensation for hours worked in excess of a
particular amount per week”).
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recover that “full” value. This is unworkable for the business community and
unsustainable for the judicial community.
My second concern is that the majority, again in the quantum meruit context,
has implicitly decided the same open question of state law referred to above in my
discussion of unjust enrichment. Again, the majority has implicitly decided that,
under the laws of the three relevant states, the quantum meruit law contemplates in
the insurance context that the car repairs constitute a service to the insurance
company rather than (or in addition to) the insured. However, as in the unjust
enrichment context, this is an open question of state law that was not addressed by
the district court and has decisively split the jurisdictions to confront it. In so
doing, the majority tackles a substantial and unresolved question of state law,
without any analysis. I respectfully submit that the more appropriate resolution for
the majority would have been to remand the issue to the district court for resolution
in the first instance.
For the reasons stated in the first two paragraphs of this section, it is clear to
me that the allegations of these complaints fall far short of stating any claim for
quantum meruit. Accordingly, I would affirm the judgment of the district court in
this regard. I respectfully dissent from the majority’s decision with respect to the
quantum meruit claims.
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C. Tortious Interference
Lastly, although I agree with the majority that the dismissal of the tortious
interference claims was in error and is due to be reversed, I disagree with the
reasoning employed by the majority in reaching that decision. As an initial matter,
I would have reversed the district court’s decision to dismiss the tortious
interference claims for allegedly impermissible group pleading. The concerns
raised by the district court stem not from the fact that the insurance companies are
unable to ascertain which aspects of the alleged conduct apply to them but, rather,
from the fact that it was not clear to the district court how that conduct amounts to
a viable claim. This is a pleading problem to be sure, but it is not a group pleading
problem. Accordingly, the dismissal was due to be reversed on that basis alone.
I would also have found that the body shops adequately stated a claim under
the laws of each of the four states. Although the elements of the claim are not
identical, there are three requirements of tortious interference that are both
common to all four of the relevant states and which could reasonably be contested
by the parties: (1) the body shops must have had a valid business expectancy; (2)
the insurance companies must have had knowledge of that valid business
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expectancy; and (3) any interference must have been improper.27 All are satisfied
by the steering allegations. The first requirement is met because the body shops
allege that the insureds had chosen a particular body shop, Compl. at ¶ 83
(“Examples of this practice include telling insureds and/or claimants that a
particular chosen shop is not on the preferred provider list . . . .” (emphasis
added)), thereby raising the shop’s prospective economic interest above a purely
speculative level. Secondly, the steering allegations also make clear that the
insurance companies had knowledge of the prospective economic advantage—if
they did not know that an insured had chosen a shop they would not have been able
to steer them away from it. Lastly, the allegations of the complaint suggest, among
27
See Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1, 6 (Ky. Ct. App. 2012)
(“[Plaintiff] must prove: (1) the existence of a valid business relationship or expectancy; (2) that
[defendant] was aware of this relationship or expectancy; (3) that [defendant] intentionally
interfered; (4) that the motive behind the interference was improper; (5) causation; and (6)
special damages.”); Clinch v. Heartland Health, 187 S.W.3d 10, 14 (Mo. Ct. App. 2006) (“The
elements of tortious interference with a business relationship are: (1) The plaintiff was involved
in a valid business relationship; (2) the defendant was aware of the relationship; (3) the
defendant intentionally interfered with the relationship, inducing its termination; (4) the
defendant acted without justification; and (5) the plaintiff suffered damages as a direct result of
defendant’s conduct.”); Lamorte Burns & Co., Inc. v. Walters, 770 A.2d 1158, 1170 (N.J. 2001)
(“To prove its claim, plaintiff must show that it had a reasonable expectation of economic
advantage that was lost as a direct result of defendants’ malicious interference, and that it
suffered losses thereby.”); Dunlap v. Cottman Transmission Sys., LLC, 754 S.E.2d 313, 318 (Va.
2014) (“The necessary elements to establish a prima facie case are: (1) the existence of a valid
contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy
on the part of the interferor; (3) intentional interference inducing or causing a breach or
termination of the relationship or expectancy; and (4) resultant damage to the party whose
relationship or expectancy has been disrupted. . . . [A] plaintiff, in order to present a prima facie
case of tortious interference, must allege and prove not only an intentional interference, but also
that the defendant employed improper methods.” (alterations and quotations omitted)).
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other things, that steering is done to “punish” noncompliant shops, that it is
accomplished through “misrepresentation of facts,” and that it is “malicious.”
Compl. at ¶¶ 36, 82, & 107. Taken as true, such behavior is sufficiently improper
to survive a motion to dismiss. Accordingly, in addition to reversing the district
court’s group pleading analysis, I would also have remanded with a determination
that the complaints state a valid claim for tortious interference.
Although I agree with its outcome, I have two significant concerns with the
majority’s analysis of the claims that prevent me 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.” Maj. Op. at 31-32. However, whether or not the insurance
companies, collectively, have a large market share is plainly not relevant to an
inquiry into whether an insurance company tortiously interfered with a customer of
a particular body shop. I have previously outlined the three elements of a tortious
interference claim that both are common to all four relevant states and are also
contested here. Market power is plainly irrelevant to both the first—the existence
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of a valid business expectancy—and the second—the insurance companies’
knowledge of that business expectancy. And as to the third element—
improper intentional interference—neither the body shops nor the majority cite any
authority suggesting that mere market power can transform otherwise appropriate
conduct into improper interference for purposes of a tortious interference claim.
Accordingly, I respectfully submit that the majority’s reliance on the market power
of the insurance companies is inappropriate. 28
Lastly, I write to express my concern with the majority’s brief analysis of
group pleading, a doctrine that has plagued this case from the beginning.
28
The majority’s explicit reliance on market power in the contexts of both tortious
interference and unjust enrichment (see supra, note 18), and the prominence of the majority’s
recitation in its Part II.A of the facts relating to market dominance, lead me to fear that the
majority may have implicitly relied on market power in its resolution of other claims. In the
price-fixing context for example, I fear that this concern may have lured the majority into
holding that market power, coupled only with consciously parallel conduct, is sufficient to
warrant an inference of agreement or conspiracy to fix prices notwithstanding the absence of any
plausible factual allegations giving rise to such inference, and notwithstanding that the actual
facts indicate that convergent pricing (especially in light of the price leadership) would be the
expected course of events. If the majority is implicitly holding that market power—coupled only
with consciously parallel conduct in the form of price leadership—is a sufficient plus factor to
warrant an inference of agreement or conspiracy for antitrust purposes, I respectfully submit that
such a complex and novel holding should be explored only after thorough briefing and full
analysis. In any event, I would disagree with any such holding for at least two reasons: first, that
argument has not been fairly raised in the body shops’ appellate briefing, and therefore has been
abandoned, see, e.g., Sapuppo v. Allstate Floridian Ins. Co, 739 F.3d 678, 681–83 (11th Cir.
2014) (“A party fails to adequately ‘brief’ a claim when he does not ‘plainly and prominently’
raise it . . . .”); and second, even if market power could in an appropriate case be considered to
have any relevance in the “plus factor” analysis—an issue which I need not address—it would
not warrant an inference of agreement or conspiracy in the instant case where convergent pricing
is so clearly to be expected.
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Specifically, 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.” Maj. Op. at 32. It then rejects this premise because “[i]t is unclear why
such allegations are necessary.” Maj. Op. at32. 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.”
Twombly, 550 U.S. at 55, 127 S. Ct. at 1964 (quoting Conley v. Gibson, 355 U.S.
41, 47, 78 S. Ct. 99, 103 (1957)). And whatever else such “fair notice” requires, I
think, as the district court clearly did, that “at a minimum, [it requires that]
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 is, to put it plainly, necessary because a defendant cannot be fairly asked to
defend a claim if the alleged facts do not tie that defendant to the wrongdoing.
The problem with the district court’s group pleading analysis in this case is
not—as the majority believes—that it unnecessarily required the body shops to tie
the insurance companies to the alleged wrongdoing. The problem with the district
court’s analysis—and the reason that I join the majority in reversing with respect to
this claim—is that the body shops have in fact done so. Each corporate defendant
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could read the complaint and fairly discern what it is they are alleged to have done.
This—at least in this context—is all that Rule 8 requires and, accordingly, it was
error to dismiss the complaints for group pleading. But to suggest that such
pleadings are not “necessary” is plainly not true.
Accordingly, although I agree with the majority’s decision to ultimately
reverse the dismissal of the tortious interference claims for the reasons I detailed in
the opening paragraphs of this section, because of the concerns that I raise about
the majority’s reasoning for doing so, I concur only in the judgment.
XI. Conclusion
With regard to the majority’s reversal of the district court order dismissing the
tortious interference claims, I concur in the result only. With regard to the
remainder of the majority’s opinion, I respectfully dissent.
78