United States District Court, M.D. Florida, Orlando Division
CRAWFORD'S AUTO CENTER, INC. and K & M COLLISION, LLC, on behalf of themselves and all others similarly situated, Plaintiffs,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendants.
GREGORY A. PRESNELL UNITED STATES DISTRICT JUDGE.
matter comes before the Court after a hearing on various
motions to dismiss (Doc. 209-211) filed by the Defendants,
the response in opposition (Doc. 216) filed by the
Plaintiffs, the replies (Doc. 224, 226, 228) filed by the
Defendants, and the sur-reply (Doc. 235).
instant case is one of 24 similar actions, consolidated for
pretrial purposes, in which auto repair shops in a particular
state have accused insurance companies improperly attempting
to suppress the amounts they are obligated to pay for
automobile repairs. The other 23 cases primarily asserted
antitrust claims; the instant case proceeds primarily under
the Racketeer Influenced and Corrupt Organizations Act rather
than the Sherman Act.
lead case among these actions - henceforth, the
“Florida Action” - was filed in this court in
February 2014. The initial complaint in that case was
dismissed sua sponte in June 2014 on the grounds
that it was a prohibited “shotgun” pleading, that
it failed to properly set forth the basis for the Court's
jurisdiction, that it failed to identify which parties had
ongoing contracts with one another, and that all of the
alleged misdeeds were attributed, collectively, to every
Defendant, even where such collective attribution made no
sense. (Doc. 110 at 1-2 in Case No. 6:14-cv-310-Orl-31TBS).
plaintiffs in the Florida Action filed an amended complaint
later that same month. (Doc. 167 in Case No.
6:14-cv-310-Orl-31TBS). Subsequently, various defendants
moved to dismiss. In January 2015, this court granted those
motions in part, dismissing all the claims in the Florida
Action, some with prejudice. (Doc. 291 in Case No.
6:14-cv-310-Orl-31TBS). The Sherman Act claims in that case -
one for price-fixing, and one for an illegal boycott - were
dismissed because the Florida Action Plaintiffs had failed to
adequately plead the existence of an agreement and had failed
to adequately allege a concerted refusal to deal,
respectively. (Doc. 291 at 20-21 in Case No.
6:14-cv-310-Orl-31TBS). After another amended complaint and
another round of motions to dismiss, the Court dismissed the
Florid Action with prejudice in September 2015. (Doc. 341 in
Case No. 6:14-cv-310-Orl-31TBS). In regard to the antitrust
claims, the court again found that the plaintiffs had failed
to adequately allege the existence of an agreement or a
concerted refusal to deal. (Doc. 341 at 20-21 in Case No.
6:14-cv-310-Orl-31TBS). The plaintiffs in the Florida Action
did not appeal that dismissal.
instant case was filed in the United States District Court
for the Northern District of Illinois in April 2014. (Doc.
1). On December 61, 2014, the United States Judicial Panel on
Multidistrict Litigation transferred the case to this Court.
(Doc. 61). In February, 2015, three groups of Defendants
filed motions to dismiss. On November 25, 2015, the Court
granted the motions and dismissed the First Amended Complaint
(Doc. 138). The Plaintiffs then filed their Second Amended
Complaint (Doc. 213); in response, the Defendants filed the
motions that are the subject of this order.
where indicated, the following is taken from the Second
Amended Complaint (Doc. 205) (henceforth, the
“SAC”), which is accepted as true in pertinent
part for purposes of resolving the instant motions. The
Plaintiffs in this putative class action - Crawford's
Auto Center, Inc. (“Crawford's”) and K&M
Collision, LLC (“K&M”) - operate automobile
collision repair facilities in Pennsylvania and North
Carolina, respectively. (SAC at 8-9). The Defendants are
seventy-odd automobile insurance companies,  arranged into
seven groups, with principal places of business scattered
across the United States. Collectively, the seven groups are
referred to as the “Defendant Insurers.”
to the Plaintiffs, the Defendant Insurers have engaged in
fraud and extortion to reduce the amounts they would
otherwise have to pay for repairs to vehicles owned (or
damaged) by their insureds. (SAC at 116-17). The Plaintiffs
allege that the Defendant Insurers have made
misrepresentations and omitted material facts as to the
“prevailing rate” for automobile repairs “for
the purpose of deceiving Plaintiffs … to accept
artificially suppressed compensation for insured
repairs.” (SAC at 119). In addition and/or in the
alternative, the Plaintiffs allege that they were, among
other things, “coerced or forced to accept suppressed
compensation for insured repairs predicated on fear of
economic harm, i.e., if the repair facilities wanted
to do business with Defendant Insurers.” (SAC at 121).
carrying out their schemes, the Plaintiffs allege, the
Defendant Insurers have been assisted by three
“Information Providers” - CCC Information
Services, Inc. (“CCC”), Mitchell International,
Inc. (“Mitchell”), and AudaExplore North America,
Inc. (“Audaexplore”). The Information Providers
gather data regarding such things as labor rates and material
costs and provide software for estimating the cost of
automobile repairs. (SAC at 13-14). The Information Providers
have not been named as defendants in this suit.
first seven counts of the Second Amended Complaint, the
Plaintiffs assert seven claims under the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1961-1968 - one against each Defendant Insurer.
(In addition to the direct allegations of fraud and
extortion, each of the RICO counts also includes allegations
that the Defendant Insurer conspired to defraud and extort
the Plaintiffs, in violation of 18 U.S.C. § 1962(c).) In
Count VIII and Count IX, the Plaintiffs assert state law
claims for unjust enrichment and fraud. The state law claims
are asserted against all of the Defendants collectively.
Motions to Dismiss
Rule of Civil Procedure 8(a)(2) requires “a short and
plain statement of the claim showing that the pleader is
entitled to relief” so as to give the defendant fair
notice of what the claim is and the grounds upon which it
rests, Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct.
99, 103, 2 L.Ed.2d 80 (1957), overruled on other
grounds, Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A Rule
12(b)(6) motion to dismiss for failure to state a claim
merely tests the sufficiency of the complaint; it does not
decide the merits of the case. Milbum v. United
States, 734 F.2d 762, 765 (11th Cir.1984). In ruling on
a motion to dismiss, the Court must accept the factual
allegations as true and construe the complaint in the light
most favorable to the plaintiff. SEC v. ESM Group,
Inc., 835 F.2d 270, 272 (11th Cir.1988). The Court must
also limit its consideration to the pleadings and any
exhibits attached thereto. Fed.R.Civ.P. 10(c); see also
GSW, Inc. v. Long County, Ga., 999 F.2d 1508, 1510 (11th
plaintiff must provide enough factual allegations to raise a
right to relief above the speculative level,
Twombly, 550 U.S. at 555, 127 S.Ct. at 1966, and to
indicate the presence of the required elements, Watts v.
Fla. Int'l Univ., 495 F.3d 1289, 1302 (11th
Cir.2007). Conclusory allegations, unwarranted factual
deductions or legal conclusions masquerading as facts will
not prevent dismissal. Davila v. Delta Air Lines,
Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173
L.Ed.2d 868 (2009), the Supreme Court explained that a
complaint need not contain detailed factual allegations,
“but it demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation. A pleading
that offers labels and conclusions or a formulaic recitation
of the elements of a cause of action will not do. Nor does a
complaint suffice if it tenders naked assertions devoid of
further factual enhancement.” Id. at 1949
(internal citations and quotations omitted). “[W]here
the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has
alleged - but it has not ‘show[n]' - ‘that
the plaintiff is entitled to relief.'” Id.
at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).
Racketeer Influenced and Corrupt Organizations Act provides a
civil action to recover treble damages for injury “by
reason of a violation of” its substantive provisions.
18 U.S.C. § 1964(c). It prohibits, inter alia,
the conducting of an enterprise's affairs “through
a pattern of racketeering activity.” 18 U.S.C.
§1962(c). When a plaintiff's Section 1962(c) claim
is based on an alleged pattern of racketeering consisting
entirely of the predicate acts of mail and wire fraud, the
substantive RICO allegations must comply not only with the
plausibility criteria articulated in Twombly and
Iqbal but also with Fed.R.Civ.P. 9(b)'s
heightened pleading standard, which requires that “[i]n
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake.” Am. Dental Ass'n v. Cigna Corp.,
605 F.3d 1283, 1291 (11th Cir. 2010). See also Ambrosia
Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309,
1316 (11th Cir. 2007) (holding that civil RICO claims, which
are “essentially a certain breed of fraud claims, must
be pled with an increased level of specificity” under
Rule 9(b)). The RICO Act also prohibits any conspiracy to
violate its substantive provisions. 18 U.S.C. §1962(d).
Conflict of Laws
case where federal law is at issue, a transferee court is
obligated to apply the law of its own circuit rather than
that of the circuit where the case was originally filed.
Murphy v. F.D.I.C., 208 F.3d 959, 965-66 (11th Cir.
2000) (citing, inter alia, In re Korean Air Lines
Disaster of September 1, 1983, 829 F.2d 1171 (D.C. Cir.
1987)). However, in cases transferred pursuant to 28
U.S.C. § 1407, the transferee court must apply the state
law, including the choice of law rules, that would have been
applied had there been no change of venue. See, e.g. In
re Managed Care Litigation, 298 F.Supp.2d 1259, 1296-97
(S.D.Fla. 2003) (citing Van Dusen v. Barrack, 376
U.S. 612 (1964)).
Plaintiffs allege that the Defendant Insurers, who hold
“almost two-thirds of the national market share”
of the private passenger automobile insurance market,
“have been able to establish the industry standards for
collision repairs, including the compensation for collision
repair services.” (SAC at 18-19). In the policies
between the Defendant Insurers and their insureds, the
Plaintiffs say, the Defendant Insurers are obligated to pay
the “prevailing competitive price” (or equivalent
language) for the repairs required to return the vehicles to
“pre-loss condition”. (SAC at 19). However, the
Defendant Insurers (and other insurers) have tortured the
meaning of the policy provision, and instituted a false
prevailing rate that is not accurate, and does not represent
the prevailing rate for repairs to properly restore vehicles
to pre-loss condition. Rather, Defendant Insurers'
fabricated prevailing rates are merely the rates imposed upon
their respective direct repair program facilities
(SAC at 19-20).
to the Plaintiffs, all of the Defendant Insurers have direct
repair programs (henceforth, “DRPs”) involving
auto repair facilities that agree to abide by uniform
standards and procedures. (SAC at 22). Though the DRP
agreements differ in the particulars, generally speaking they
require the insurer to recommend the DRP shop to
policyholders; in exchange for the increased volume of
business, the repair shop agrees to such things as caps on
their labor rates and maximum prices for parts and paint.
(SAC at 23). The DRP agreements generally also require the
repair shop to use a particular piece of software - produced
by one of the three Information Providers - to estimate the
cost and scope of a repair to an insured's vehicle, as
well as the amount of hours each aspect of a repair should
take. (SAC at 22-23). According to the Plaintiffs, around a
third of insured repairs are performed at DRP shops. (SAC at
insured takes a vehicle to a non-DRP facility for a covered
repair, the Defendant Insurer will offer to pay the same
amount as it would have paid to have the repair performed at
a DRP facility, even though the non-DRP shop has not agreed
to abide by the standards and procedures of that Defendant
Insurer's DRP program. (SAC at 23-24). The Plaintiffs
complain that the Defendant Insureds use the DRP rates to
establish what they call “the artificial prevailing
rate, ” and this rate is then “imposed upon the
entire collision repair industry, ” (SAC at 205),
because the insurers refuse to pay more even at non-DRP
Plaintiffs' First Amended Complaint (Doc. 138) told
essentially the same story as the instant pleading. In it,
the Plaintiffs asserted extortion- and fraud-based RICO
claims against the same seven Defendant Insurers and state
law unjust enrichment and fraud claims against all the
Defendants collectively. In granting the Defendants'
motions to dismiss that earlier pleading, the Court noted,
among other things, that
• The Plaintiffs' assertions that they accepted
“suppressed compensation” to perform repairs for
fear that otherwise some other repair shop would otherwise
get the work could not, as a matter of ...