Wednesday, 23 November 2011 16:49

California Court Grants Joint Motion to Dismiss Perez et al. Aftermarket Antitrust Case, Allows Plaintiffs to Refile Case

A California federal judge granted a joint plaintiff and defendant motion to dismiss an antitrust class action against State Farm Mutual Automobile Insurance Co. and other insurers Nov. 15, saying the plaintiffs do not have standing to sue several wholly owned subsidiaries of the insurance companies. The plaintiffs had filed a fourth amended complaint in July against State Farm, Allstate Indemnity Co., Geico General Insurance Co., Liberty Mutual Fire Insurance Co. and the Certified Automotive Parts Association (CAPA), a purportedly independent regulatory body created by the auto insurers, say the plaintiffs.

The complaint added the subsidiaries as named defendants and alleged that the auto insurers set up a sham organization to prevent competition over auto repair parts. U.S. District Judge James Ware said in the ruling that because the plaintiffs never paid insurance premiums directly to the wholly owned subsidiaries, they did not suffer any financial injury at the hands of the subsidiaries, and therefore have no standing to bring a class action against them under Article III of the U.S. Constitution.

The plaintiffs filed suit against the insurance companies and CAPA in 2006. Named plaintiffs Sarah Perez, Michelle Lackney, Rachel Stewart and Rachel Hardyck alleged that the auto insurers violated California competition and antitrust laws because they exclusively offered policies that provided inferior repair parts, as well as boxing out other insurers. They further alleged that CAPA was created by the defendants to advance the scam and that it promoted inferior crash parts as acceptable substitutes for those from the original manufacturers.

 

Judge Ware dismissed the suit on two separate occasions, but the ruling was overturned on appeal by the Ninth Circuit both times. The appeals court ruled in April 2009 that the plaintiffs had Article III standing to proceed with their claims and said in August 2010 that the antitrust claims did not fall under the California insurance commissioner’s exclusive rate-making authority. Judge Ware based his decision on the Ninth Circuit’s 2001 ruling in Lee v. American National Insurance Co., which says class action plaintiffs lack Article III standing in insurance suits if they did not buy a policy from a named defendant.

The plaintiffs had claimed in earlier filings that Lee is not pertinent to the case because it focused on whether a plaintiff had standing to bring an insurance class action, not whether a subsidiary of a defendant could be sued.

In rejecting the plaintiffs’ argument, Judge Ware said that under Lee, plaintiffs can be barred from litigating a class action in federal court if they cannot establish injury.

The judge dismissed the complaint without prejudice and granted leave for the plaintiffs to refile their complaint against only the insurance companies by Nov. 22.

The subsidiaries named in the amended complaint were State Farm Fire and Casualty Co., State Farm General Insurance Co., Allstate Insurance Co., Allstate Property and Casualty Insurance Co., Geico Casualty Co., Geico Indemnity Co., and Government Employees Insurance Co., according to court documents.

The defendants include State Farm Mutual Automobile Insurance Company, Geico General Insurance Company, Liberty Mutual Fire Insurance Company, and Allstate Insurance.

Background on the case, including a legal analysis, can be read in June 2011’s Autobody News, or online at: www.autobodynews.com, search “Perez.”

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