Mark Shurtleff (left) and John Eaves (Photo: John Disney/ALM)

The U.S. Court of Appeals for the Eleventh Circuit heard arguments Tuesday leveled by a group of auto-body repair shops claiming State Farm Insurance and a host of other national carriers are conspiring to fix prices.

The plaintiffs say the insurers have conspired to drive down the prices they're charged for repair services by agreeing among themselves to pay a preset “market rate” and to enforce compliance by “steering” their insureds to businesses that play ball, effectively boycotting other shops.

In addition to State Farm, the defendants include Allstate, Progressive, Geico, Nationwide, USAA, Liberty Mutual and Hartford, among others.

Sitting en banc, the judges were considering whether to keep alive multidistrict litigation that was tossed out by a district judge for failure to state a claim, then revived by a split panel last year.

The cases have been combined in Florida's Middle District, and the instant appeals represent five of 14 similar complaints combined in the action. The body shops in the MDL are in Kentucky, Missouri, New Jersey and Virginia.

Although there are certain variations in the individual complaints, in general they allege the insurers have all agreed to follow a market rate established by State Farm, which is accused of using a method of ranking body shops by criteria, including number of employees, number of work bays and area density, which it then “manipulates” as it solicits businesses to be part of its direct repair program.

If a body shop in the program tries to charge rates higher than those demanded by State Farm, they are met with an “ongoing pattern of coercion and implied threats” to enforce compliance, according to court filings.

Shops not complying are dropped from the program, and customers are “steered” away by the insurer.

In 2016, the five complaints at issue were dismissed for failure to state a claim, but a split panel reversed that ruling last year. The majority opinion was written by Judge Charles Wilson with the concurrence of Washington Western District Judge Barbara Rothstein, sitting by designation. Judge R. Lanier Anderson dissented.

According to Wilson's opinion, the complaints claimed that State Farm and the other defendants used unverified and manipulated market rates to depress 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,” Wilson wrote.

The opinion noted that claims of horizontal price fixing based on inferred agreements rather than evidence of such deals must be bolstered by other evidence, or “plus factors.” Among those cited by the plaintiffs were routine notices from the other insurers that they would not pay any more for repair work than State Farm paid.

Anderson said in a dissent that he agreed the described behavior might be “objectionable,” but that didn't make it illegal.

“With regard to the antitrust claims,” he wrote, “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.”

On Tuesday, attorney Mark Shurtleff represented the lead plaintiff, Quality Auto Painting Center of Roselle Inc., along with colleague John Eaves of John Arthur Eaves Law Offices in Jackson, Mississippi.

Shurtleff began by arguing that the complaining body shops were acting in the best interest of their customers, while “the others” loyalties lie with the insurance companies.”

Several judges were skeptical, with Chief Judge Ed Carnes asking how the insurance companies' behavior in matching each others' rates was any different from other businesses.

“It happens in about every case,” said Carnes. “One raises it, they all raise it.”

Shurtleff pointed to the “uniformity of prices” demanded by the insurers, noting that uncooperative body shops were targeted for criticism and boycotted.

Judge Stanley Marcus wondered whether commonplace business activity, such as an insurer recommending one shop and disclaiming another, was enough to “nudge your case across the line” into illegal price fixing.

Under questioning, Shurtleff agreed that the insurers did not necessarily prohibit their policyholders from utilizing a particular shop and that simply showing that the prices demanded by State Farm and then demanded by other carriers did not necessarily prove collusion in itself.

The insurers were represented by three lawyers: Alston & Bird partner Michael Kenney for State Farm, Dentons partner Rick Fenton for Allstate, and Daniel Goldfine of Lewis Roca Rothgerber Christie for Geico.

The defense lawyers argued there was no direct evidence showing the insurers' alleged action constituted price-fixing, and urged the judges to hew closely to the U.S. Supreme Court's 2007 decision in Bell Atl. Corp. v. Twombly.

That decision toughened the standards for bringing price-fixing claims and established that a simple showing of “parallel conduct” was, without evidence of an an actual agreement, insufficient to support such claims.

“There is no way here to show that what is alleged is anti-competitive activity,” Kenney said.