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Friday, 09 January 2015 00:00

Recent Transfer of Auto Body Lawsuits to Florida Causes Concern in Industry

There is a growing concern in the collision repair industry about two key lawsuits recently transferred to the Middle District of Florida. Some reports have indicated that the lawsuits have been consolidated, but that's not the case. Courts have ruled they will be included in the pretrial hearings of the antitrust multidistrict litigation (MDL) filed by auto body shops against insurers in 2014.  

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After several reports published over the past year, Autobody News has found that shops across the country are paying close attention to the court's developments to determine whether the decision will help or hinder the MDL case.

More than 500 auto body shops in 33 states are now part of the MDL against the nation’s top insurers. When Autobody News went to press last month, lead attorney John Eaves Jr. of Eaves Law Firm in Mississippi reported that lawsuits have already been filed by auto body shops in 17 states and 16 more were in the process of being filed.

These shops claim that more than 35 auto insurers have suppressed reimbursement rates to collision repair shops and that the direct repair programs violate antitrust laws. The first five antitrust actions were filed by body shops in Florida, Mississippi, Indiana, Utah and Tennessee the beginning of 2014.

In April of 2014, a RICO class action lawsuit was filed in Illinois by Crawford’s Auto Center on behalf of collision repair facilities nationwide with similar issues. It involves major auto insurance companies and the industry’s three data providers: CCC, Mitchell and Audatex. At the time, Crawford’s did not support the case being consolidated with the MDL. However in December, the Judicial Panel on Multidistrict Litigation decided to transfer the case.

According to court documents, “…transfer is warranted for the reasons set out in our order directing centralization. In that order, we held that the Middle District of Florida was an appropriate… forum for actions stemming from an alleged industry-wide conspiracy to suppress the reimbursement rates applicable to automobile collision repair shops, including complex issues concerning the role of ‘direct repair programs’ in furtherance of the alleged scheme.”

Eaves said when the class action lawsuit was first transferred to Florida there was some concern that it might prolong the multidistrict litigation.

“We’ve been assured that the court will put down a different time track so our concerns are greatly relieved about the class action,” he said.

Although the same court will be handling the case, Eaves predicts it will take longer than the MDL.

“We think this is different. It includes not only insurance companies but also includes the data base providers and the MDL does not,” he said.

The other notable case transferred to the Middle District of Florida in December was State of Louisiana v. State Farm Fire and Casualty Insurance. Filed by Louisiana Attorney General James D. “Buddy” Caldwell against State Farm in August 2014, it alleges monopolization and deceptive trade practices by the insurance company.

Dick Luedke, spokesperson for State Farm, said, “State Farm requested that the lawsuit filed by the attorney-general (AG) in Louisiana be transferred to the multi-district litigation in Florida and so we are pleased the MDL panel has done that in spite of objections from the AG’s office in Louisiana. The Louisiana AG’s allegations do not describe the way State Farm does business as we fulfill our mission to serve the needs of our customers in keeping with our long, proud history of achievements in advancing vehicle safety." 

James Burns, co-leader of the antitrust practice at Dickinson Wright PLLC, said the Louisiana case is somewhat different than the previously transferred cases.

“First, unlike the other previously transferred cases, the Louisiana case was originally filed in state court, and subsequently transferred to federal court,” said Burns, whose practice focuses on the application of the antitrust laws to the insurance industry, but is currently not involved in the MDL proceeding. “In addition, Louisiana contended that its case, which it characterized as an ‘enforcement action,’ was materially different in character than the private party actions currently before the transferee court, and thus the Louisiana case should not be transferred for this reason.”

That contention, however, was rejected by the Panel, Burns noted, which stated that it “often has transferred state enforcement actions to MDLs that involved cases brought by private litigants.”

“The issue of transfer to the MDL is really a secondary issue for our case," said Stacie deBlieux, Louisiana's Assistant Attorney General. "The primary issue is whether federal jurisdiction can be exercised over our case at all, which was filed in state court in Louisiana. We have filed a motion detailing the lack of federal jurisdiction over our claims.  Once that motion is heard by the MDL court, our case should be remanded back to state court in Louisiana.”

Eaves said the attorney general’s action has a good chance of being returned to Louisiana.

“It’s a fundamentally different case,” he said. “That case is representing the people of Louisiana and representing the consumers where our interest is the body shops who serve the consumers. As far as the perspective and the evidence, the attorney general of Louisiana will be focused on the consumer protection laws of Louisiana.”

He explained that the case is focused on antitrust issues and basic contract law in the United States.

“The end result to the consumer is the same but it’s a different set of laws,” he said. “It will be interesting to see if the court actually keeps the case. I think there is a high probability that the court will return it to Louisiana.”

Presiding Judge Gregory Presnell will ultimately decide if the cases should be remanded to state court.

The MDL has a standing court date the first Friday of every month.

“I think the most exciting thing that we’re working on right now is we’re asking the court for an injunction to stop them from the retaliatory practices against body shops, which is all forms of steering,” said Eaves. “We’re articulating about 24 tactics that the insurance companies use on a regular basis to get customers to go to shops that are willing to cut corners.”

This includes representing evidence to the court gathered by the body shops. Their hope is to have a certain amount of penalties occurring even before the litigation gets underway.

“We have hundreds of thousands of documents that will show how consumers are being shorted on their policy reimbursements that are owed to have correct repairs done on their vehicles,” said Ron Perretta, owner of Professional Auto Body in Pennsylvania. “We have documented the steering, improper repairs, substandard parts being used without regard to testing and safety, dialog that’s misleading and how the insurance companies have put their appraisers and other staff at risk of personal lawsuits.”

Perretta, who has been instrumental in spreading the word about the MDL case, said they expect injunction relief to be in effect soon. “This will virtually stop the steering and manipulation by insurers,” he said. “If they don’t follow the judge’s orders there could be serious consequences; we expect they will test the judge.”

“The mission that we have been given is to stop the insurance company’s race to the bottom,” said Eaves. He said the case has focused on “all insurance companies that reward those body shops that are willing to cut corners and punish the shops that are willing to stand up for the consumer.”

He said they have found the practices used by some of the larger insurance carriers are uniform throughout the country.

“They use the same types of policies from Maine to California,” said Eaves. “Ultimately it’s the consumers who are really the victims in all of this.”

When contacted by Autobody News magazine, Allstate Insurance, Liberty Mutual Insurance, Nationwide and Progressive replied that they do not comment on pending litigation. For more information about the multidistrict lawsuit, contact John Eaves Jr., the lead attorney on the case, at johnjr@eaveslaw.com.

Autobody shops in Pennsylvania can contact Ron Perretta at ronperretta@aol.com or 814-931-7669 for more information.

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