Ultimate Collision Repair, Inc. v. State Farm Indemnity Company , 917 F.3d 1249 ( 2019 )

[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
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,
2
6:14-cv-06019-GAP-TBS
LEE PAPPAS BODY SHOP, INC.,
DAVID C. BROSIUS,
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,
3
Defendants-Appellees.
________________________
Appeals from the United States District Court
for the Middle District of Florida
________________________
(March 4, 2019)
Before ED CARNES, Chief Judge, TJOFLAT, WILSON, WILLIAM PRYOR,
MARTIN, JORDAN, NEWSOM, BRANCH, and ANDERSON, ∗ Circuit Judges.∗∗
ANDERSON, Circuit Judge:
This antitrust case requires us to apply the standards announced in Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007), to determine
whether the allegations of the five complaints before us are sufficient to “nudge[]
their claims across the line from conceivable to plausible,” id. at 570, 127 S. Ct. at
1974, so as to state a claim under § 1 of the Sherman Act. Plaintiff-Appellant
automobile repair shops (the “Body Shops”) claim that the Defendant-Appellee
Insurance Companies colluded to lower repair prices by improperly pressuring the
shops to lower prices and by threatening to boycott those who do not comply. The
Body Shops claim a per se price-fixing conspiracy and a per se conspiracy to
boycott. They also bring several state law claims.
∗ Senior Judge R. Lanier Anderson elected to participate in this decision pursuant to 28 U.S.C. §
46(c).
∗∗ Judges Marcus, Rosenbaum, and Jill Pryor are recused. Judge Britt Grant joined the
Court on August 7, 2018, and did not participate in these en banc proceedings.
4
I. BACKGROUND
The cost of repairing a damaged vehicle is primarily based on labor and
material costs. Repair shops can consult estimating guides to assist in calculating
their labor rates but there is no standard way of determining a shop’s labor rate.
Within the category of labor costs, variables such as overhead, shop size and
capacity, repair volume, and expertise affect each shop’s rate. Market
considerations, such as the prevailing labor rates within the geographic area of the
shop, can dominate that cost. Material costs are driven by the cost of repairing or
replacing damaged parts. Parts can be sourced from the original manufacturer, an
aftermarket company, a salvage yard, or a parts refurbisher. Alfred M. Thomas &
Michael Jund, Collision Repair and Refinishing: A Foundation Course for
Technicians 7 (2014).
The Body Shops are a group of professional automobile repair companies
that provide collision repair services to individuals insured by the Insurance
Companies. Accepting the factual allegations in the complaint 1 as true and
construing them in the light most favorable to the plaintiff—as required by the Fed.
R. Civ. P. 12(b)(6) posture of this case—the Body Shops derive seventy to ninety-
1
Because this appeal is a consolidation of five separate cases, there are five separate
complaints in the record. The parties agree that the five complaints are “nearly identical,” En
Banc Br. of Body Shops, at 6 n.1, and that the complaint in the lead case, Quality Auto Painting
Center v. State Farm, No. 15-14160, is representative. Accordingly, unless otherwise noted,
citations to a complaint in this opinion are to paragraphs of that complaint.
5
five percent of their revenue from customers who pay via insurance and the
Insurance Companies account for sixty-five to eighty-five percent of the insurance
market in each of the relevant states. The Body Shops broadly allege that the
Insurance Companies—with Defendant-Appellee State Farm as their leader—have
combined or conspired to depress the amounts they pay for auto repairs performed
on behalf of their insureds. According to the Body Shops, the Insurance
Companies accomplish this in a number of ways.
First, the Body Shops allege that each of the Insurance Companies use a
formal agreement system called “direct repair programs” or “DRPs.” 2 In exchange
for entering into a DRP, the several Insurance Companies each agrees to list a shop
as a “preferred provider” for its insureds which, at least in theory, generates
increased business for the shop. In return, the shop agrees to certain concessions
regarding, among other things, the “market rate” at which they are entitled to be
reimbursed for labor costs. State Farm sets its market rate using an electronic
survey of the shops in a particular geographic area and advises the Body Shops that
they will pay no more than the market rate. In addition, the other Insurance
Companies advise the Body Shops that they will pay no more than State Farm.
2
Each of the Insurance Companies who use DRPs has a unique name for their specific
program. However, the term “DRP” appears to be widely used in the industry and, in any event,
the parties here appear to prefer its usage when describing these programs generally.
6
The Body Shops allege, primarily, that the survey is methodologically unsound, 3
that State Farm manipulates the survey to achieve an artificial rate, that State Farm
will contact a shop and demand that they lower their rates, that State Farm will
threaten—and effectuate—removal from the “preferred providers” list if a shop
attempts to raise its rate, and that State Farm attempts to prohibit discussions
among repair shops about their rates on the theory that such discussions constitute
illegal price-fixing. The Body Shops allege that the market rate is enforced even
against those shops which are not signatories to a DRP.4
Additionally, the Body Shops allege that the Insurance Companies have
combined or conspired to depress the amounts they pay for replacement parts on
damaged vehicles. According to the Body Shops, the Insurance Companies refuse
to pay for “original equipment manufacturer” parts, which—because they are
designed by the car manufacturer to fit the precise make and model of the damaged
car—are more expensive. Rather, the Body Shops are required to use either
“aftermarket” parts designed by third-parties or “salvaged” parts from other
wrecked vehicles. These parts require extra time to install—which the Insurance
3
The survey sets the market rate just slightly above the rate offered by the median
“technician or work bay” in the relevant area when those rates are listed from lowest to highest.
The Body Shops assert that this is an invalid means of determining the rate because it does not
take into account the variances in shop size, skill of technicians, and other quality variables, and
that State Farm alters the shops’ labor rates arbitrarily.
4
None of the Body Shops here are currently a party to a DRP, and only one has apparently
ever been. That relationship ended approximately one year before this action was filed.
7
Companies do not pay for—and cannot be guaranteed as safe by the Body Shops.
The Insurance Companies also allegedly: utilize industry-standard databases 5—
which identify “target” costs for certain repairs—only when financially
advantageous to them; often refuse to pay for necessary repairs; routinely refuse to
reimburse the cost of certain materials; mandate participation in their parts
procurement process; and force discount programs on the Body Shops. The Body
Shops argue that these actions constitute a per se price-fixing violation of the
Sherman Act.
Lastly, the Body Shops allege that the Insurance Companies engage in a
practice known as “steering,” in which they discourage their insureds from
patronizing a noncompliant repair shop through “misrepresentation, insinuation,
and casting aspersions.” These practices allegedly include telling insureds that a
particular repair shop: is not on the preferred provider list; has had quality control
issues; charges more than other shops in the area (and that they will not pay the
excess amount); takes longer than other shops (and that they will not pay for
additional car rental days); and does not perform work that can be guaranteed by
the Insurance Companies, even though the Insurance Companies never guarantee
5
According to the complaint, there are three leading collision repair estimating
databases—ADP, CCC, and Mitchell—which “provide software and average costs associated
with particularized types of repairs to create estimates.” Compl. ¶¶ 65-66. The databases
generate estimates that include “the ordinary and customary repairs, repair time (labor) and
materials to return a vehicle to its pre-accident condition,” and are considered reliable starting
points. Id. at ¶ 66.
8
any repair work. The Body Shops argue that the Insurance Companies conspire
with respect to such steering, constituting a per se group boycott.
The Body Shops filed approximately twenty-two similar lawsuits in federal
district courts throughout the country. 6 The Judicial Panel on Multidistrict
Litigation transferred all of the actions to the Middle District of Florida (Judge
Presnell) where the “lead case,” A&E Auto Body, Inc. v. 21st Century Centennial
Insurance Co., No. 6:14-cv-310, was already pending. Of the twenty-two actions:
two—the lead case and one other—were dismissed with prejudice 7 and not
appealed; four were dismissed and are currently on appeal; and two were dismissed
by the district court and then also had their appeals dismissed for lack of
prosecution. Of the remaining fourteen, five are the subject of this appeal.
6
The parties’ filings and the district court’s orders are less than clear about the total
number of cases involved in this multidistrict litigation. It appears that there were, at one point,
twenty-four independent causes of action with regard to this litigation: the twenty-two discussed
above; a RICO class action that was filed in Illinois, was transferred to the Middle District of
Florida, and is still currently pending; and a state consumer protection action filed by the State of
Louisiana in Louisiana state court, removed to federal court in Louisiana by the Insurance
Companies, transferred to the Middle District of Florida, and then remanded to Louisiana state
court by the district court.
7
The initial complaint in the lead case was dismissed without prejudice “on the grounds
that it was a prohibited ‘shotgun’ pleading, that it failed to properly set forth the basis for [the
district c]ourt’s jurisdiction, that it failed to identify which parties had ongoing contracts with
one another, and that all of the allegations of wrongdoing were attributed, collectively, to every
[Insurance Company], even where such collective attribution made no sense.” A&E Auto Body,
2015 WL 5604786, at *1 (M.D. Fla. Sept. 23, 2015). The Body Shops filed an amended
complaint and the district court dismissed one claim with prejudice and the remainder of the
claims without prejudice once again. Id. Finally, the district court dismissed all the claims from
the second amended complaint with prejudice, noting that “[d]espite becoming much wordier,
the Plaintiffs’ pleadings have not come remotely close to satisfying the minimum pleading
requirements as to any of the claims asserted.” Id. at *12.
9
As relevant to this appeal, the Body Shops alleged two violations of federal
law under the Sherman Act, 15 U.S.C. § 1, for price-fixing and group boycotting.
They also alleged three causes of action under the laws of the state in which the
suits were filed for unjust enrichment, quantum meruit, and tortious interference8
(collectively, the “State Law Claims”). 9 The Insurance Companies moved to
dismiss all fourteen cases, the Body Shops filed a consolidated response to which
the Insurance Companies replied, and the district court referred the matter to a
magistrate judge for a report and recommendation.
Pursuant to that referral, the magistrate judge entered a fifty-nine page
Report and Recommendation (the “R&R”), which concluded that the relevant
claims should be dismissed without prejudice. The Body Shops then filed an
Omnibus Objection to the R&R (the “Objection”), wherein they challenged the
magistrate judge’s conclusions with respect to some of their claims. The district
court overruled the Body Shops’ objections to the R&R, adopted the R&R, and
8
In New Jersey the correct label for this cause of action is “tortious interference with
prospective economic advantage;” in Kentucky and Missouri it is “tortious interference with
business relations;” and in Virginia it is “tortious interference with a business relationship.”
9
The Body Shops alleged additional violations of state law founded on theories of quasi-
estoppel, equitable estoppel, conversion, state antitrust statutes, and state consumer protection
statutes—all of which were dismissed. The Body Shops did not challenge the dismissal of those
claims and they are thus abandoned on appeal. See Greenbriar, Ltd. v. City of Alabaster, 881
F.2d 1570, 1573 n.6 (11th Cir. 1989) (holding that issues not raised on appeal are deemed
waived).
10
dismissed all of the relevant claims without prejudice (the “Dismissal Order”). 10
Rather than file amended complaints, the Body Shops appealed the district court’s
decision with respect to five of the initial actions—two that were filed in New
Jersey and one each from Kentucky, Missouri, and Virginia. Those five actions
were consolidated on appeal. A divided panel of this Court reversed the district
court’s decision, holding that the Body Shops had alleged sufficient allegations to
survive a motion to dismiss on all of the claims. That decision was vacated when
this Court voted to hear the case en banc.11
II. ISSUES ON APPEAL
The parties were instructed to brief the en banc court on the following
issues:
1) Can a per se illegal price-fixing agreement or conspiracy between and
among the several defendant-Insurance Companies plausibly be inferred from the
allegations of the complaints in the several cases before this Court.
2) Can a per se illegal agreement or conspiracy between and among the several
defendant-Insurance Companies to boycott the plaintiffs’ Body Shops plausibly be
10
An identical R&R, Objection, and Dismissal Order was filed in each of the cases present
on appeal.
11
We recognize the tremendous effort that the district court expended in handling a
multidistrict litigation of this scale.
11
inferred from the allegations of the complaints in the several cases before this
Court.
The parties also briefed the state law issues involving the three state law
claims—unjust enrichment, quantum meruit, and tortious interference. We address
first the federal antitrust claims, including the alleged price-fixing conspiracy and
the alleged group boycott, and then the state law claims.
III. STANDARD OF REVIEW
We review a district court’s dismissal of a complaint with prejudice for
failure to state a claim de novo. Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283,
1288 (11th Cir. 2010). While we accept the factual allegations in the complaint as
true, construing them in the light most favorable to the plaintiff, the allegations
must state a claim for relief that is plausible, not merely possible. Twombly, 550
U.S. at 570, 127 S. Ct. at 1974; Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 1949 (2009). Under this standard, “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Iqbal,
556 U.S. at 678, 129 S. Ct. at 1949.
12
IV. FEDERAL ANTITRUST CLAIMS
A. The Legal Landscape
Section One 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.
In addition to that bare bones recital of prohibited behavior, the Supreme Court has
long concluded that Congress intended only to prohibit “unreasonable” restraints
on trade. See, e.g., Arizona v. Maricopa Cty. Med. Soc., 457 U.S. 332, 343, 102
S. Ct. 2466, 2472–73 (1982). Thus, § 1 prohibits (1) conspiracies that (2)
unreasonably (3) restrain interstate or foreign trade. Spanish Broad. Sys. of Fla.,
Inc. v. Clear Channel Commc’ns, Inc., 376 F.3d 1065, 1071 (11th Cir. 2004). Only
the first element is at issue on this appeal.12
Therefore, because the Body Shops are required to allege facts plausibly
suggesting a conspiracy, “the crucial question is whether the challenged
12
Regarding the second element, certain behaviors have been held to be so “plainly
anticompetitive,” National Society of Professional Engineers v. United States, 435 U.S. 679,
692, 98 S. Ct. 1355, 1365 (1978), and to so often “lack . . . any redeeming virtue,” North Pacific
Railway Co. v. United States, 356 U.S. 1, 5, 78 S. Ct. 514, 518 (1958), that they are conclusively
presumed to be unreasonable, Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441
U.S. 1, 8, 99 S. Ct. 1551, 1557 (1979). Horizontal price-fixing and group boycotts—the two
alleged violations here—often, if not always, fall into this category of “per se” violations. In
light of our disposition, we need not address Geico’s argument that the per se analysis should not
apply to the context of insurance companies reimbursing their insureds for the companies’
obligation to pay a body shop for vehicle repairs.
13
anticompetitive conduct stems from independent decision or from an agreement,
tacit or express.” Twombly, 550 U.S. at 554, 127 S. Ct. at 1964. As in this case,
the Supreme Court in Twombly was confronted with “the antecedent question of
what a plaintiff must plead in order to state a claim under § 1 of the Sherman Act.”
Id. at 555–56, 127 S. Ct. at 1964. In applying the general standards applicable
under Fed. R. Civ. P. 8 to a § 1 claim, the Supreme Court held that “stating such a
claim requires a complaint with enough factual matter (taken as true) to suggest
that an agreement was made.” Id. at 556, 127 S. Ct. at 1965. The Court recognized
that “[a]sking for plausible grounds to infer an agreement does not impose a
probability requirement at the pleading stage; it simply calls for enough facts to
raise a reasonable expectation that discovery will reveal evidence of illegal
agreement.” Id. at 556, 127 S. Ct. at 1965. The Court held:
While a showing of parallel “business behavior is admissible
circumstantial evidence from which the fact finder may infer
agreement,” it falls short of “conclusively establishing agreement or
. . . itself constituting a Sherman Act offense.” Theatre Enterprises[,
Inc. v. Paramount Film Distributing Corp., 346 U.S. 537] at 540–541,
74 S. Ct. 257 [(1954)]. Even “conscious parallelism,” a common
reaction of “firms in a concentrated market that recognize their shared
economic interests and their interdependence with respect to price and
output decisions” is “not in itself unlawful.” Brooke Group Ltd. v.
Brown & Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S. Ct.
2578, 125 L.Ed.2d 168 (1993); see 6 P. Areeda & H. Hovenkamp,
Antitrust Law ¶ 1433a, p. 236 (2d ed. 2003) (hereinafter Areeda &
Hovenkamp) (“The courts are nearly unanimous in saying that mere
interdependent parallelism does not establish the contract,
combination, or conspiracy required by Sherman Act § 1) . . .
14
The inadequacy of showing parallel conduct or
interdependence, without more, mirrors the ambiguity of the behavior:
consistent with conspiracy, but just as much in line with a wide swath
of rational and competitive business strategy unilaterally prompted by
common perceptions of the market. . . . [P]roof of a § 1 conspiracy
must include evidence tending to exclude the possibility of
independent action . . . . [C]onspiracy evidence must tend to rule out
the possibility that the defendants were acting independently.
Id. at 553-54, 127 S. Ct. at 1964 (alterations in original removed).
Even 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, 571 (11th Cir. 1999) (internal quotations, changes, and
footnotes omitted). As this Court has noted, these plus factors “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. v.
Philip Morris USA, 346 F.3d 1287, 1301 (11th Cir. 2003).
Conclusory allegations of agreement or conspiracy are insufficient. As the
Court held in Twombly:
[A]n allegation of parallel conduct and a bare assertion of conspiracy
will not suffice. Without more, parallel conduct does not suggest
conspiracy, and a conclusory allegation of agreement at some
15
unidentified point does not supply facts adequate to show illegality.
Hence, when allegations of parallel conduct are set out in order to
make a § 1 claim, they must be placed in a context that raises a
suggestion of a preceding agreement, not merely parallel conduct that
could just as well be independent action.
550 U.S. at 556-57, 127 S. Ct. at 1966. The plaintiff has the obligation to provide
“more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Id. at 555, 127 S. Ct. at 1964-65.
We address first the Body Shops’ claim of horizontal price-fixing
conspiracy, and then turn to their claim of horizontal boycotting conspiracy. As
noted above, both claims require that the Plaintiffs allege facts supporting an
agreement or conspiracy among the Insurance Companies.
B. Horizontal Price-Fixing Conspiracy
At the outset, we address an issue 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. The Body Shops’
appellate briefing takes undue liberties in construing the inferences 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—
16
between the allegations of the complaints and the allegations of the appellate
briefing—are discussed, where relevant, below.13
The Body Shops identify several purported plus factors that they contend—
in conjunction with their allegations of parallel conduct—warrant an inference of a
per se horizontal price-fixing conspiracy. We discuss each14 of their purported
plus factors in turn. 15
13
In the briefing instructions for the en banc briefs, the Body Shops were instructed to
“identify the allegations [of the complaints] from which such an agreement or conspiracy can
plausibly be inferred and discuss whether any asserted inference of agreement or conspiracy is
‘just as much in line with a wide swath of rational competitive business strategy prompted by
common perceptions of the market . . . or whether such inference is supported by allegations
tending to rule out the possibility that the defendants were acting independently.’” Reluctantly,
we cannot conclude that the en banc brief of the Body Shops complied with that directive.
Although their brief lists numerous statements that it asserts are “specific allegations of conduct
that probably do not result from . . . independent responses to common stimuli,” many have no
tendency to suggest an advance agreement among the insurance companies, and are thus simply
irrelevant. As indicated in this opinion, others reflect facts that are simply not pled in the
complaints and not reasonably inferred from the actual allegations. We also discuss in this
opinion those allegations with respect to actions just as much in line with a wide swath of
rational competitive business strategy and thus cannot qualify as the plus factors required for a
viable claim.
14
Two can be rejected outright. The Body Shops argue that they asserted “specific
allegations of conduct that indicate the sort of restricted freedom of action and sense of
obligation that one generally associates with agreement.” However, despite arguing in their brief
that representatives from non-State Farm Defendants have stated that they are restricted from
altering the purported market rate unless authorized by State Farm, that allegation is nowhere to
be found in the complaints. Quite the contrary, the only relevant specific allegation of fact is that
the non-State Farm Insurance Companies advise the Plaintiffs that they will pay no more than
State Farm pays—i.e., mere price leadership as discussed below.
The Body Shops also argue that the conspiracy is shown by the presence of a common
motive, namely desire to maximize profits. However, under this logic, most businesses with
similar pricing would be deemed in cahoots with each other because that is the goal of most
corporations. This plus factor is more properly invoked in contexts where the motive is unique
and specific to the alleged conspirators. See, e.g., Instructional Sys. Dev. Corp. v. Aetna Cas. &
Sur. Co., 817 F.2d 639, 647 (10th Cir. 1987) (company exerted influence on municipality in
favor of monopolist as part of agreement to avoid monopolist challenging it in another market);
see also Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1434c, at 276-77 (4th ed.
17
1. Uniformity of Price
The Body Shops argue in their brief that the Insurance Companies’ conduct
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.” This asserted 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 ordinarily result in divergent pricing.” The second
component is an indicator of the agreement that makes collusion more plausible
than conscious parallelism, thus moving the needle off of equipoise.
The sources on which the Body Shops rely make clear the necessity of both
components. In Federal Trade Commission v. Cement Institute, 333 U.S. 683,
2017), ¶ 1434c, at 276-77 (discussing how motivation can, in some cases, merely restate
interdependence).
15
In considering each plus factor, we are 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, 346 F.3d at
1301.
18
713, 68 S. Ct. 793, 809 (1948), the Supreme Court 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.” But the record
evidence in that case 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.” 333 U.S. at 713, 68 S. Ct. at 809. Likewise, the Body
Shops quote a leading antitrust treatise for the idea that an agreement may be
present if rivals establish identical prices, but they fail 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.” Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1434b (3d ed.
2012). 16 Thus, while this so-called convergent pricing certainly is—or at least
could 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 case on which the Body Shops rely are substantial.
First, the focus in Cement Institute on “secret,” “sealed,” and “simultaneous”
bids is crucial precisely because that is what takes the situation beyond that of
mere conscious parallelism: competitors cannot consciously parallel one another if
they only learn of the other’s price after they have established their own. Perhaps
16
Both Twombly and the Appellants quote from earlier editions of Areeda and
Hovenkamp’s Antitrust Law. However, we use the fourth edition of that treatise.
19
sensing this, the Body Shops’ brief argues that all of the Insurance Companies
employ the same, identical “market rate” which State Farm does not make public.
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 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.
There are no factual allegations that the market rate is a secret. Indeed,
nowhere in the complaints do the Body Shops suggest that the labor rate is a secret.
Quite the opposite, the complaints reveal that State Farm must necessarily tell the
rate to every repair shop in a given geographic area.
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
simultaneously approached the Body Shops with an identical market rate (which
might possibly indicate that they had communicated in advance), the complaints
allege that the other Insurance Companies simply conform to State Farm’s rate—
whatever that may be. Compl. ¶ 62 (“Defendants . . . specifically advised the
Plaintiff they will pay no more than State Farm pays for labor.”); Compl. ¶ 115
(“[D]efendants [state] that they will conform to State Farm’s payment structure.”).
20
Following the example set by a competitor, without agreeing to do so in advance,
is textbook “price leadership”—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 (“It is well settled in this circuit that evidence of conscious parallelism
alone does not permit an inference of conspiracy unless the plaintiff either
establishes that . . . 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 not engaging merely in oligopolistic price maintenance or price
leadership but rather in a collusive agreement to fix prices”) (internal punctuation
and citations omitted); City of Tuscaloosa, 158 F.3d at 571 (“[C]onsciously
parallel behavior by oligopolists does not in itself support an inference of
agreement, of ‘a meeting of the minds,’ any more strongly than it supports an
inference of legal price maintenance or leadership.”). Price leadership is
comprehensively described in the leading antitrust treatise:
The first firm in a five-firm oligopoly, Alpha, may be eager to
lower its price somewhat in order to expand its sales. However, it
knows that the other four firms would probably respond to a price cut
by reducing their prices to maintain their previous market shares.
Unless Alpha believes that it can conceal its price reduction for a time
or otherwise gain a substantial advantage from being the first to move,
the price reduction would merely reduce Alpha’s profits and the
profits of the other firms as well.
Such “oligopolistic rationality” cannot only forestall rivalrous
price reductions, it can also provide for price increases through, for
example, price leadership. If the price had for some reason been less
21
than X [the price a monopolist would charge to maximize profits],
firm Beta might announce its decision to raise its price to X effective
immediately, or in several days, or next season. The other four firms
may each choose to follow Beta’s lead; if they do not increase their
prices to Beta’s level, Beta may be forced to reduce its price to their
level. Because each of the other firms knows this, each will consider
whether it is better off when all are charging the old price or price X.
They will obviously choose X when they believe that it will maximize
industry profits.
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1429b (4th ed. 2017). 17
With respect to interdependent parallelism like price leadership, the treatise notes:
“The courts are nearly unanimous in saying that mere interdependent parallelism
does not establish contract, combination, or conspiracy required by Sherman Act
§1.” Id. ¶ 1433a. This follows from the Supreme Court’s holding in Twombly:
“Even ‘conscious parallelism,’ a common reaction of firms in a concentrated
market that recognize their shared economic interests and their interdependence
with respect to price and output decisions is not in itself unlawful.” 550 U.S. at
553-54, 127 S. Ct. at 1964 (internal quotations and punctuation omitted).
Further distinguishing our case 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. 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
17
Hereinafter cited as Areeda and Hovenkamp.
22
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
that set standardized prices. Indeed, these industry databases not only indicate
standardized pricing for parts, but they also estimate repair time (labor) for
particular types of repairs which are ordinary and customary repairs. 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 have pointed and none that we can perceive—are present here.
The Body Shops have not 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 demonstrates that such prices are standardized, and
that one should expect convergent prices—not divergent prices.
23
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
expect it. Nor are any of the other reasons offered by the Body Shops suggestive
of an environment in which we would expect to see divergent pricing. And
without an expectation of divergent pricing, all that remains is an allegation of
uniform pricing, which is indicative only of parallel conduct. Although the
complaints repeatedly allege that the insurance companies have agreed and
conspired with respect to price, these allegations have no basis in the facts actually
alleged. They are merely conclusions and therefore are an insufficient basis on
which to infer a prior agreement. Twombly, 550 U.S. at 557, 127 S. Ct. at 1966(“[A] conclusory allegation of agreement at some unidentified point does not
supply the facts adequate to show illegality.”).
In this case, the Body Shops’ own allegations put a nail in their coffin. Their
own allegations explain why there is uniformity in price—the other Insurance
Companies simply tell body shops that they will pay no more than State Farm.
This is a rational and legitimate business strategy and one which involves clearly
legal price leadership. Accordingly, we reject this plus factor as an indicator of
the necessary agreement.
24
2. Uniformity of Tactics
As its second plus factor, the Body Shops argue that the Insurance
Companies have engaged in uniform practices suggestive of an agreement.
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., De Jong Packing Co. v. U.S. Dep’t of Agric., 618 F.2d
1329, 1332–34 (9th Cir. 1980). Although the Body Shops’ briefing describes the
Insurance Companies’ tactics as “the same,” “identical,” and part of a “script[],”
the Body Shops’ briefing is 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. ¶ 63. There is nothing in those allegations to suggest that the Insurance
Companies’ tactics are uniform or that they use a script.18 None of the actual
allegations of the complaints suggest that language used by the several Insurance
Companies was the “same” or “identical” or like a “script.” Indeed in none of the
five complaints do the words “same,” “identical” or “script” appear in reference to
18
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. And the
allegation of concerted action is merely conclusory.
25
the tactics used. Nor is there any other actual allegation that suggests some
uniform practice that is somehow idiosyncratic and not to be expected as within the
“wide swath of rational and competitive business strategy unilaterally prompted by
common perceptions of the market.” Twombly, 550 U.S. at 554, 127 S. Ct. at
1964. Not only is there no allegation of identical or similar language, the language
actually used in the complaints suggests just the opposite. As noted, ¶ 63 alleges
“[t]hrough various means” and ¶ 64 alleges “[s]ome of these methods”—i.e.,
phrases that do not suggest that all or a substantial group of the Insurance
Companies engage in all or most of the methods in strikingly similar ways.
The Body Shops argue that the Insurance Companies have engaged in
uniform tactics in that they require the Body Shops: to repair faulty parts rather
than install replacement parts; to install used or recycled parts; and to offer
discounts and concessions. Even if there were considerable uniformity with
respect to the Insurance Companies’ use of such methods, that would be suggestive
of an agreement only if such usage would not plausibly arise from “independent
responses to common stimuli.” See Twombly, 550 U.S. at 556 n.4, 127 S. Ct. at1965 n.4 (quoting Areeda and Hovenkamp ¶ 1425). All of these purported “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, this is
26
plainly not the case here. None of these tactics could even be fairly described as
novel, let alone idiosyncratic, so as 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, and where the parts are standardized and most repairs are
“ordinary and customary” with industry wide databases that provide standardized
estimates. 19 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.”). Thus,
even if we assume considerable uniformity among the Insurance Companies with
respect to requiring where possible the repair of parts (rather than using new),
requiring the use of recycled parts (rather than new), and requiring discounts, there
would be no basis for inferring a prior agreement because each insurance company
would rationally and independently want to do precisely that. That is, independent
action is at least as plausible as concerted action pursuant to prior agreement; thus
19
As noted above, there are no actual allegations that the Insurance Companies use
identical language conveying their instructions to body shops to use recycled parts, etc., nor any
other actual allegation of fact suggesting that some uniform practice is somehow idiosyncratic so
as to give rise to an inference of advance agreement.
27
nothing “tends to exclude the possibility of independent action,” Twombly, 550
U.S. at 553-54, 126 S. Ct. at 1964, or “remove[s] . . . [this case] from the realm of
equipoise and render[s] [this case] more probative of conspiracy than of conscious
parallelism,” Williamson Oil, 346 F.3d at 1301. Indeed, this is especially true in
this case where the complaints repeatedly allege that the several companies say
they will “conform to State Farm’s payment structure.” Compl. ¶ 115.
A complaint merely alleging several common and obvious industry practices
should not 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).
The Body Shops’ briefing suggests that the Insurance Companies’ tactics are
highly uniform when even the complaint does not allege that. Although the Body
Shops do allege uniformity of actions, no facts are actually alleged in support of
this conclusion. Therefore, the allegation is merely conclusory and insufficient.
Id. at 557, 127 S. Ct. at 1966. The Body Shops do not explain which of the
28
challenged activities occurred “in concert” and which occurred “independently.”
And no facts are actually alleged suggesting concerted action pursuant to a prior
agreement. The Body Shops rely upon several alleged tactics which are clearly
common, obvious, and mainstream. An inference of prior agreement does not arise
from the mere fact that several Insurance Companies adopt policies favoring use of
cheaper parts and offering discounts to Insurance Companies. The Body Shops’
position is inconsistent with Supreme Court precedent, especially with Twombly,
as well as Eleventh Circuit precedent.
Long before Twombly clearly established what an antitrust plaintiff had to
plead in order to warrant an inference of prior agreement or conspiracy for
purposes of a viable claim under § 1 of the Sherman Act, both the D.C. Circuit in
Proctor v. State Farm Mutual Automobile Insurance Co., 675 F.2d 308 (D.C. Cir.
1982), and the Seventh Circuit in Quality Auto Body, Inc. v. Allstate Insurance
Co., 660 F.2d 1195 (7th Cir. 1981),20 held in a summary judgment context that
parallel conduct of insurance companies in dealing with automobile repair shops
(parallel conduct the same or very similar to that alleged in the instant case) was in
the self-interest of each insurance company and thus did not give rise to an
inference of prior agreement or concerted action necessary to prove a horizontal
price-fixing conspiracy. The D.C. Circuit held:
20
By coincidence, the Illinois Body Shop in this Seventh Circuit case has a name very
similar to that of the New Jersey Quality Auto Shop in the instant case.
29
There is some evidence of parallel behavior by appellees. Construing
this evidence in the light most favorable to appellants, it suggests that
upon occasion certain appellees used the same labor rate in writing
estimates, that they had similar arrangements with repair shops that
agreed to do volume work at the low rates used in their estimates, that
they conducted surveys of repair shops to determine the average rate
charged by shops in particular areas, and that they tended to resist
price increases by repair shops. However, these alleged parallel
practices, without more, cannot create an inference or a conspiracy
among appellees where, as here, the practices are in the economic
self-interest of each of the individual appellees. The practices are as
consistent with independent as with concerted actions. Unless an
insurance company is willing to pay whatever price is charged at any
given repair shop, it stands to reason that it would conduct surveys to
determine the rates charged by repair shops. It is equally
understandable that a company would, in an effort to control costs,
resist price increases and write estimates using the lowest rates
acceptable to a sufficient number of quality garages. It also makes
economic sense for an insurance company to make arrangements with
certain repair shops that agree to do work at the rates used by the
company in writing estimates in exchange for volume referrals by the
company.
675 F.2d at 1334; see also Workman v. State Farm Mut. Auto. Ins. Co., 520
F.Supp. 610, 621 (N.D. Cal. 1981) (holding, in the same context of insurance
companies dealing with automobile repair shops, that parallel conduct very similar
to that alleged in the instant case alone does not create an inference of
impermissible conspiracy because “[s]uch conduct is in the economic self-interest
of each individual insurance company”). All three of these cases so held on the
basis of such parallel conduct alone, without the additional nail-in-the-coffin of our
plaintiffs’ case—i.e., the follow-the-leader practices in our case which
conclusively explain why the Insurance Companies here engage in such parallel
30
conduct. As discussed above, it is clearly established that such follow-the-leader
practices are legal and do not, by themselves, give rise to an inference of prior
agreement. In other words, our case is not only controlled by Twombly but our
case is a fortiori from the three cited cases in this same context of an insurance
company’s dealings with automobile repair shops.
For the foregoing reasons, both of the Body Shops’ first two purported plus
factors—identity of price and identity of tactics—are mere parallel conduct and do
not support their attempt to allege the necessary agreement or conspiracy.
3. Contrary to Economic Interest
The Body Shops’ brief suggests that the Insurance Companies’ adherence to
State Farm’s artificial “market rate” and other payment structures is in
contradiction to the industry databases, and by implication is against their
economic self-interest. Courts have recognized a company’s actions that were
against its self-interest can constitute a plus factor. See, e.g., In re Flat Glass
Antitrust Litigation, 385 F.3d 350, 360 (3d. Cir. 2004). Courts and commentators
have further observed that this plus factor often restates interdependence in the
context of alleged price-fixing. Id. at 361; see also Areeda & Hovenkamp, supra
¶ 1434c1.
This argument exists only by implication because the Body Shops merely
entitle the section of their brief “contrary to []economic self-interest.” However,
31
they do not explain how the fact that the other Insurance Companies follow the
lead of State Farm rather than adhering to the industry databases is against their
own self-interest. Nothing in the complaints indicates to us that the actions of the
Insurance Companies are against their economic interests. The pages in the
complaint cited in the brief do not illuminate the argument either. Moreover, it is
hard to imagine how choosing the least costly method of repair, thereby reducing
the reimbursement, is contrary to an insurance company’s economic self-interest.
Thus, we reject this suggested plus factor.
4. Opportunity to Exchange Information
The Body Shops also assert in their brief that they alleged that the Insurance
Companies “have exchanged or have had the opportunity to exchange information
relative to the conspiracy.” Appellants’ En Banc Br. at 27. 21 However, the
argument they make in their brief to support their assertion is: “identical labor
rates, identical refusal to compensate for the same processes and procedures,
identical false excuses for such refusal, uniform adherence to the refusal to alter
labor rates until State Farm does is indicative of shared information and agreement
overall and agreement on the language to be used in refusing payment for repair
services (a ‘script’).” Id. In other words, they argue that because the Insurance
21
Although the Body Shops assert in their brief that the Insurance Companies share with
each other the identity of problem body shops and other information, the actual complaints make
no such allegations.
32
Companies acted in identical ways, they must have been meeting and exchanging
information.
There are two problems with this argument. First, the complaints make no
factual allegations that the Insurance Companies either exchanged information,
employed identical tactics, followed a script, or declined to pay for the same
repairs. Second, even if the actual allegations did indicate considerable uniformity
of price and uniformity of tactics, there would be no inference that this was the
result of exchange of information for the same reasons discussed above. That is,
even if there were considerable uniformity in requiring, for example, repair of parts
(not replacement), use of recycled parts (not new), and requiring discounts, such
actions just as plausibly result from independent resort to common and rational
business practices as from exchange of information. And, as noted above, this is
especially true in light of repeated allegations in the complaints that the several
Insurance Companies say they will “conform to State Farm’s payment structure.”
Compl. ¶ 115.22
22
To the extent that the Body Shops point to their statement in the complaint that “members
of the insurance industry meet regularly to discuss such matters in and amongst themselves,”
Compl. ¶ 115, this statement is so vague as to be useless as support for a conspiracy. The
Supreme Court in Twombly advised that plaintiffs’ pleading of meetings between defendants
needs to provide some degree of detail about the meetings in order to satisfy Rule 8’s notice
requirements. 550 U.S. at 565 n.10, 127 S. Ct. at 1970 n.10. The Court faulted the plaintiff in
Twombly for not providing any details about when, where or with whom in particular the
meetings took place. Id.; see also id. at 567 n.12, 127 S. Ct. at 1971 n.12 (suggesting that
membership in a trade association is not significant). Referring to Twombly and its footnote 10,
Areeda and Hovenkamp opine:“In sum, a conceded ‘opportunity’ to conspire was completely
33
5. Conclusion with respect to Horizontal Price-Fixing Conspiracy
In sum, the Body Shops have alleged only parallel conduct, and have not
alleged any facts supporting plus factors that would tip the scale from equipoise
towards conspiracy sufficiently to prevent dismissal of this count. Accordingly,
we affirm the district court’s dismissal of this claim.
C. Group Boycott
A group boycott is included within the Sherman Act’s prohibition of any
unreasonable contract, combination, or conspiracy in the restraint of interstate
insufficient absent additional allegations about when and where such opportunity occurred, and
about which of the defendants’ employees participated.” Areeda & Hovenkamp, supra, ¶ 1417b.
Indeed, the treatise concludes:
Even if “opportunity” were defined narrowly and limited to proven interfirm
contacts, deeming opportunity to be prima facie proof of conspiracy would lead to
widespread condemnation of procompetitive collaborations. Once competitors
assemble for a lawful activity, they would be presumptive conspirators . . . on
every parallel action subsequently occurring. Because parallel pricing is common
even in competitive markets, juries would be entitled to infer that competitors had
agreed on prices, and price agreements are condemned absolutely. Thus, the
effect of holding opportunity sufficient would be to discourage all trade
associations, industry gatherings, or joint ventures. Thereby to imperil reasonable
and procompetitive collaborations would be inconsistent both with the purposes
of the antitrust laws and with well-established Supreme Court permission for
many kinds of collaboration among competitors. Mere conspiratorial opportunity
is routinely and correctly held insufficient to support a conspiracy finding.
Id. Accord Almanga v. United Airlines, Inc., 851 F.3d 1060, 1071 (11th Cir. 2017) (applying the
Twombly standard, and holding “Defendants’ participation in trade associations . . . do not show
a meeting of the minds”); Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1295 (11th Cir.
2010) (“[I]t was well-settled before Twombly that participation in trade organizations provides
no indication of conspiracy”).
34
trade or commerce. 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). A boycott consists of “pressuring
a party with whom one has a dispute by withholding, or enlisting others to
withhold, patronage or services from the target.” Barry, 438 U.S. at 541, 98 S. Ct.
at 2930. 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 some or
all of the [boycotters].” Id. at 543, 98 S. Ct. at 2931. For boycotting to be per se
illegal, it must involve “horizontal agreements among direct competitors.”
NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135, 119 S. Ct. 493, 498 (1998). In
other words, as with the price-fixing claim of the Body Shops, their conspiracy to
boycott claim requires as a prerequisite sufficient allegations of an agreement or
conspiracy. Again the crucial, antecedent question is whether the alleged actions
of the Insurance Companies stem from independent actions or from prior
agreement.
The boycott allegations in this case are even weaker than the allegations of
price-fixing. Neither the “steering” allegations nor the “boycott” section of the
complaint allege even in conclusory fashion that there was an agreement to do so.
And even if we incorporate the conclusory allegations of an agreement from the
price-fixing sections of the complaint, the instant complaint would still fall short of
35
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.
The Body Shops have asserted in their appellate briefing 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,” both the word “script” and the
word “identical” are conspicuously absent from the complaints. Quite the
contrary, in the only factual allegations with regard to steering insureds away from
their shops, 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
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. ¶ 83. From this, it is argued in the Body Shops’ brief that the Insurance
Companies have engaged in “identical” tactics.
There is nothing in these allegations that would suggest action in concert or
“rule out the possibility that the defendants were acting independently.” Twombly,
550 U.S. at 553-54, 127 S. Ct. at 1964. There is no allegation that all or most of
36
the Insurance Companies used most or all of the foregoing excuses in urging
insureds against patronizing a shop. There is no allegation that the several
companies used the same language. There is no allegation suggesting any other
uniformity that would be unexpected or idiosyncratic.
Moreover, even if there were considerable uniformity with respect to those
reasons that an insured should not use a particular shop, there could hardly be
reasons more expected or more commonly used than those alleged by the Body
Shops. That the shop is not on the preferred provider list, that there are quality
issues, that it charges more, and/or that it takes longer are reasons that any
company would be expected to use in an effort to persuade an insured not to use a
particular shop. The alleged boycotting methods are not so idiosyncratic that they
suggest conspiracy. To the contrary, they are methods that would logically be
employed by any insurer to dissuade its insureds from using a disfavored shop. In
other words, even a considerable uniformity with respect to the use of these
reasons would fall well within the “wide swath of rational and competitive
business strategy unilaterally prompted by common perceptions of the market.” Id.
at 554, 127 S. Ct. at 1964.
For the same reasons that it forecloses the Body Shops’ price-fixing claim,
Twombly forecloses the Body Shops’ group boycott claims; their allegations allege
only parallel conduct which is insufficient to create an inference of prior agreement
37
or conspiracy. The Seventh Circuit in Quality Auto, 660 F.2d at 1206, and the
Northern District of California in Workman, 520 F. Supp. at 623, rejected similar
group boycott claims in this same context involving parallel conduct on the part of
several insurance companies in their dealings with automobile repair shops.
For the foregoing reasons, we affirm the district court’s dismissal of the
Body Shops’ group boycott claims.
V. THE STATE LAW CLAIMS
The Body Shops bring three state law claims for unjust enrichment, quantum
meruit, and tortious interference. We address each in turn.
A. Unjust Enrichment Claims
The Plaintiffs in all four states bring claims of unjust enrichment against
these Defendants. Under the laws of the four states relevant here—Kentucky,
Missouri, New Jersey, and Virginia—the elements of the cause of action include:
(1) the plaintiff conferred a benefit on the defendant; (2) the defendant was aware
thereof; and (3) it would be unjust to permit the defendant to retain the benefit. 23
23
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.
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.
38
The gist of the Plaintiffs’ claims is that the several Body Shops conferred a benefit
on the several Insurance Companies, the latter were aware thereof, and allowing
the Defendants to retain the benefit without full payment would be unjust.
Fatal to these unjust enrichment claims is the fact that each of the five
complaints alleges that each Insurance Company advised the Body Shops that it
would pay no more than State Farm. Because the Plaintiff in each complaint knew
before it undertook the repair that each Defendant-Insurance Company would pay
no more than State Farm would pay, it clearly was not unjust for the Insurance
Company to pay only that amount and no more. Without satisfying the unjust
element, the cause of action fails even if we assume the other elements can be
satisfied.
The Body Shops’ only response to this fatal flaw is that they could not turn
away sixty to ninety-five percent of the available repair business,24 and therefore
their contract to accept the amount State Farm would pay was an invalid contract.
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.”).
24
Aside from this allegation relating to market power, the Body Shops have alleged no
concrete facts that might give rise to an inference of force.
39
However, the Body Shops cite no law—in any of the four states—to the effect that
market power alone is sufficient to invalidate a contract voluntarily entered into.
Our independent research has also uncovered no such case. Moreover, we have
already concluded that the Body Shops have failed to allege facts warranting an
inference that the Insurance Companies agreed to or engaged in a conspiracy.
Thus, the Body Shops’ premise of market power may also collapse in any event.
We conclude that the Body Shops’ unjust enrichment claims are wholly
without merit.
B. Quantum Meruit Claims
The Body Shops in four of the five complaints 25 before us also bring
quantum meruit claims arising under the laws of Kentucky, New Jersey, and
Virginia. To state a cause action for quantum meruit, the Body Shops were
required to allege, among other elements, that the circumstances reasonably
notified the Insurance Companies that the Body Shops expected to get paid
(Virginia and Kentucky) or that they reasonably expected to be compensated (New
Jersey). 26 They cannot do so here.
As discussed above, the Body Shops specifically alleged that each of the
Insurance Companies informed them that they would pay no more than State Farm.
25
The Missouri complaint does not include a cause of action for quantum meruit.
26
See Raymond, Colesar, Glaspy & Huss, P. C. v. Allied Capital Corp., 961 F.2d 489, 491
(4th Cir. 1992) (applying Virginia law); 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).
40
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 amount State Farm would pay. This is fatal to the Virginia and Kentucky
claims. Likewise, having been fully informed that the Insurance Companies would
only pay the amount State Farm would pay, the Body Shops could not have
reasonably expected to receive more than that amount. This is fatal to the New
Jersey claim.
The Body Shops have cited no authority—and our independent research has
uncovered none—to support their position that they can contract to repair the car
for a specified amount, do the repair, and then sue, claiming that they should be
paid more. The only analogous case law our research has uncovered suggests just
the opposite of the Body Shops’ position: 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.27
We conclude that the quantum meruit claims of the Body Shops in the four
complaints are wholly without merit.
27
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”).
41
C. Tortious Inference Claims
Although we have concluded—as did the district court—that the unjust
enrichment and quantum meruit claims of the Body Shops are wholly without
merit, the situation with respect to their tortious interference claims is more
complicated. The district court expressly adopted and approved the magistrate
judge’s dismissal of the tortious interference claims as a violation of the group
pleading doctrine. The district court held:
Consistent with this Court’s prior orders, a general allegation that
some unidentified Defendants—or all Defendants—interfered with
some unidentified customers of some unnamed plaintiff does not
satisfy the pleading standard of Ashcroft v. Iqbal, 556 U.S. 662(2009). Because the Plaintiffs’ allegations are too vague to satisfy
Rule 8(a), Judge Smith recommends dismissal of all the tortious
interference claims. (June 3 Report at 39).
Doc. 222 at 7. Although the district court invoked Iqbal, we understand its ruling
to be based on a very narrow group pleading rationale, rather than a standard-issue
Twombly-Iqbal determination of the plausibility of the tortious interference claims
in light of the well-pleaded factual allegations. 28 The gist of the problem with
group pleading—as the magistrate judge noted earlier on page 9 of that same June
28
We note that, in a report and recommendation adopted by the district judge in dismissing
another complaint in this multidistrict litigation, the magistrate judge concluded that the
allegations adequately alleged the elements of Tennessee tortious interference and did state a
plausible claim if taken as true, but determined that the complaint “suffer[ed] from a different
problem”—i.e., the group pleading issue. Brewer Body Shop v. State Farm Mut. Ins. Co., 101 F.
Supp. 3d 1256, 1265–66 (M.D. Fla. 2015). We take and mean to imply no position on the
correctness of that plausibility holding. We mention it only to observe that the magistrate judge
seems to have considered the group pleading “problem” as a separate matter from a run-of-the-
mill Twombly-Iqbal analysis.
42
3 report—is the failure to give fair notice to each named defendant of the claims
against it. For example, a complaint may fail to provide fair notice of the claims
by failing to specify which defendants interfered with which plaintiffs. Weiland v.
Palm Beach Cty. Sheriff’s Office, 792 F.3d 1313, 1323 (11th Cir. 2015). Because
the district court rested its dismissal of the tortious interference claims on this
narrow group pleading rationale, and because we think the district court will be
well situated to determine the status of these claims on remand, we need not
address the merits of the tortious interference claims or even the general contours
of the doctrine of group pleading. We also do not address the relationship between
that doctrine and the Twombly-Iqbal plausibility pleading standard or, for that
matter, whether the allegations of tortious interference meet the plausibility
standard. We address only the above-quoted narrow basis on which the district
court relied.
We cannot agree with the district court that the instant five complaints’
failure to name a plaintiff, to identify specific defendants, or to identify specific
customers in the allegations relating to tortious interference deprived the
Defendants of fair notice. Contrary to the suggestion of the district court, there is
no problem with respect to “some unnamed plaintiff.” In four of these five cases,
there is only one plaintiff and thus it is absolutely clear that the person or entity
interfered with is the single named plaintiff in each complaint. Although the fifth
43
case29 involves four named plaintiffs, they are four body shops located in close
proximity to each other in Virginia Beach and Suffolk, Virginia. It is amply clear
in this fifth complaint that each Defendant-Insurance Company is alleged to have
tortiously interfered with each of these four Virginia body shops. The allegations
provide fair notice that each of the Plaintiffs is claiming that each of the named
Defendants is tortiously interfering in the manner alleged with the named Plaintiff
in each of the four single-plaintiff complaints and with the four named Plaintiffs in
the fifth case.30
We are also unpersuaded by the district court’s concern that the allegations
in the complaints concern “some unidentified Defendants—or all Defendants.”
The substance of the alleged tortious interference is as follows. As alleged in ¶¶
107-08 of the representative Quality Auto complaint, each complaint alleges that
the named Insurance Companies—by means of a campaign of misrepresentation of
facts about poor quality, etc.—have repeatedly steered their insureds away from
each named Plaintiff to punish that Plaintiff for complaints about or refusal to
submit to the price ceilings and other practices imposed by the named Defendants.
Although these allegations are aimed generally at “the Defendants,” each
29
The fifth case, Pappas Body Shop, Inc., v. State Farm Mutual Automobile Insurance Co.,
No. 15-14179, has four listed plaintiffs.
30
Counting the named Insurance Companies in the same corporate family as a single
defendant, as the district court did earlier in its opinion, Doc. 222 at 4, there are between twelve
and twenty named defendants in the five complaints.
44
complaint stipulates that, “[w]here the term ‘Defendants’ is used within this
Complaint, ‘Defendants’ is intended to and does mean each and every Defendant
named in the caption above.” In other words, the named Defendants 31 in each
complaint had fair notice that “each and every” one of them is alleged to have
improperly steered its own insureds away from the named Body Shops in each
complaint because that Body Shop was not compliant with that Insurance
Company’s preferred reimbursement rate and other cost-saving practices.
Thus, of the potential deficits identified by the district court—i.e., general
allegations about “unidentified Defendants,” “unidentified customers,” and
“unnamed plaintiff[s]”—the only possible defect remaining is the failure to
identify specific insureds/potential customers who were thus steered. We cannot
conclude that the Body Shops’ failure to identify particular potential customers
who were steered away constitutes a failure to give each defendant fair notice of
the claim against it. It is not the potential customer who is the target of the alleged
tortious interference; it is the targeted Body Shop. A potential customer may—but
very well may not—tell the Body Shop that he or she was steered away. On the
other hand, each Insurance Company, or its claims adjusters, will know whether
the company engages in such a practice, and will know whether each named
Plaintiff in the five complaints was noncompliant with that company’s preferred
31
The named Insurance Companies in each of the five complaints are not identical.
45
practices and, most important, whether its insureds were steered away from that
Plaintiff Body Shop.
In sum, we are not persuaded by the district court’s grounds for concluding
that the allegations of tortious interference in each of these five cases violated the
group pleading doctrine, i.e., failed to give fair notice to each defendant of the
claim being made against it. Accordingly, we vacate the judgment of the district
court only with respect to the tortious interference claims in each of these five
cases, and we remand for further proceedings. We note that in vacating the
judgment of the district court with respect to the tortious interference claim, we
have ruled only on the district court’s stated group pleading rationale. We note
also, because the federal antitrust claims have been eliminated from the case, the
district court may well decide to exercise its discretion to decline to exercise
pendent jurisdiction of these state law tortious interference claims, pursuant to 28
U.S.C. § 1367.32VI. CONCLUSION
32
We note that declining to exercise pendent jurisdiction is only one of the various options
available to the district court on remand. We emphasize that we vacate the judgment of the
district court with respect to the tortious interference claims only on the above described basis—
i.e., our rejection of the narrow theory of group pleading upon which the district court relied.
We decline to address other possible theories on the basis of which that judgment might have
been affirmed (whether on the basis of the merits or other pleading deficiencies, including even
other possible group pleading theories).
46
We affirm the judgment of the district court dismissing all of the claims
except the tortious interference claims, which we vacate and remand for further
proceedings not inconsistent with this opinion.
AFFIRMED in PART, VACATED in PART, and REMANDED.
47
JORDAN, Circuit Judge, joined by MARTIN, Circuit Judge, concurring:
I concur in Parts II, III, and V of the court’s opinion. And given the
pleading standards that the Supreme Court has put in place for antitrust cases, see
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 553–70 (2007), and the complaint’s
failure to include important factual allegations on which the plaintiffs now rely, I
concur in the judgment as to Parts I and IV.
I have some concerns about a court relying on its own independent research
with respect to facts on the ground, particularly in a motion to dismiss context. I
am not convinced that we should be citing to a book on collision repairs, see Maj.
Op. at 5, to understand how the auto repair industry actually operates. This is not
the sort of adjudicative fact—a fact which is “relevant to a determination of the
claims presented in a case,” Dippin’ Dots, Inc. v. Frosty Bites Dist., 369 F.3d 1197,
1204 (11th Cir. 2004)—which can be judicially noticed under Rule 201 of the
Federal Rules of Evidence.
The taking of judicial notice is “a highly limited process” because it
“bypasses the safeguards which are involved with the usual process of proving
facts by competent evidence in district court.” Shahar v. Bowers, 120 F.3d 211,
214 (11th Cir. 1997) (en banc). In my view, how the auto repair industry works is
not a matter that “can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.” Rule 201(b)(2). Cf. A & H
48
Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 166 F.3d 191, 196 (3d Cir. 1999)
(denying motion to take judicial notice that swimwear and lingerie are separate
industries because “it requires a factual determination [which is] inappropriate for
judicial notice”).
49
WILSON, Circuit Judge, dissenting in part:
Anticompetitive exercises of buyer market power often go unpunished.1 Not
because the antitrust laws and existing antitrust jurisprudence cannot address them,
but because it is often counterintuitive. To the average non-efficiency minded
observer, condemning a practice that results in low prices seems like bad policy.
But low prices do not tell the whole story. Antitrust law—with its goal to enable
optimal market output through competition—demands a closer look. It is in that
context that this case asks us to determine when an antitrust complaint alleging an
anticompetitive exercise of collective buyer market power can survive a motion to
dismiss.
At this early stage, the law requires us to view the complaint as a whole,
accept all the allegations as true,2 draw all reasonable inferences in favor of the
body shops, and only then decide whether the allegations, taken together, plausibly
suggest an agreement. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558 (2007).
1
See generally Herbert Hovenkamp, Whatever Did Happen to the Antitrust Movement?, 94
Notre Dame L. Rev. 583, 628–36 (2018).
2
Relatedly, Twombly instructs us to resist reasoning backwards from our own version of the facts
or knowledge of the industry at issue. See Maj. Op. at 5 (citing Alfred M. Thomas & Michael
Jund, Collision Repair and Refinishing: A Foundation Course for Technicians 7 (2014)); Maj.
Op. at 22 (“[T]he ‘products’ here—cars—are so readily assembled from standard parts that their
assembly line manufacturing set the standard for other industries.”); Maj. Op. at 27 (noting that
for the auto insurance industry, “parts and labor reimbursements are the primary business
expenditures”). Imagine the already difficult job of a district court analyzing an antitrust
complaint if that was Twombly’s directive: not just to analyze the facts alleged in the complaint
in front of it, but to embark on its own independent fact-finding mission to determine whether
other facts might exist that discredit those we must accept as true.
50
Following that directive, and viewed in the proper economic context, the body
shops’ allegations state a price-fixing claim under the Sherman Act. 3
The majority portrays this as an easy case for condemning an antitrust action
under Twombly, finding a lack of so-called “plus factors” required to allege a
plausible agreement under Sherman Act § 1. And if the law and facts were as
simple as described by the majority, I would be inclined to agree. But the
majority’s narrow view of Twombly does not represent the balance the Supreme
Court struck between the cost of antitrust discovery and the burden on antitrust
plaintiffs—the “group of private attorneys general,” Ill. Brick Co. v. Illinois, 431
U.S. 720, 746 (1977)—tasked with enforcing the antitrust laws.
I. The Basic Economics of Buyer Cartels
The body shops plausibly allege an agreement when viewed in the context of
buyer, rather than seller, cartels. The difference has confused many courts. See
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 350b (4th ed. 2017)
(“Clearly mistaken is the occasional court that thinks low buying prices
procompetitive regardless of the restraints on competition that lead to such
prices . . . . The suppliers’ loss also constitutes antitrust injury, for it reflects the
rationale for condemning buying cartels—namely, suppression of competition
among buyers, reduced upstream and downstream output, and distortion of
3
The majority correctly concludes that the group boycott allegations are too conclusory to state a
claim. I dissent only on the price-fixing claim. See Maj. Op. at Part IV (B).
51
prices.”); W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 103–04 (3d
Cir. 2010) (reversing district court and rejecting its reliance on the argument that
“low reimbursement rates translate into low premiums for subscribers” because
“[s]uch shortchanging poses competitive threats similar to those posed by
conspiracies among buyers to fix prices”).
Buyer cartels cause “suboptimal output, reduced quality, allocative
inefficiencies, and (given the reductions in output) higher prices for consumers in
the long run.” W. Penn, 627 F.3d at 104. An oligopsony market is one in which a
cartel of relatively few buyers has significant market power in the buying market.
Compared to a competitive market, oligopsony generates infracompetitive4 input
prices and a smaller quantity of the input demanded. See generally Areeda &
Hovenkamp, supra, ¶¶ 2002, 2011. Using body shop labor as an example, a
simplified causal chain goes like this: A group of auto insurers form a cartel and
collectively agree on the maximum price they will pay for body shop labor. The
cartel collectively dominates the market for the purchase of body shop labor. The
cartel also collectively dominates the market for the sale of auto insurance. There
are no substitute “inputs” for auto body shop labor—the ability to sell auto
insurance depends on the ability of each insurer to purchase auto body labor. The
colluding insurers pay a lower price for body shop labor, which, given the simple
4
Infracompetitive means below the competitive level—that is, a price below marginal cost.
52
mechanics of supply (production) and demand (price), drives down the quantity of
auto body shop labor produced. In other words, in response to the artificially low
market price of labor, auto body shops produce fewer units (hours) of body shop
labor. The first anticompetitive effect, then, is below-market body shop labor
output.
With fewer units of body shop labor now on the market, insurers have fewer
units available to purchase. Because the insurers purchase fewer units of body
shop labor, they have fewer units to incorporate into their final “product”—auto
insurance. Assuming the colluding insurers have collective market power in the
selling market—the market for auto insurance—the necessary result is that insurers
must either: (1) decrease the number of “units” of labor included in each insurance
policy (say by decreasing the quality or number of repairs so that each repair
requires fewer labor hours); or (2) include the same number of units of labor in
insurance policies and sell fewer insurance policies, which would require a price
increase. The second anticompetitive effect, then, is on consumers of auto
insurance: lower quality auto insurance (insurance that covers lower quality or
fewer repairs) and increased prices for the same quality insurance.
The upshot is that the colluding auto insurers can increase profits by
purchasing their inputs (body shop labor and repair parts) at a price below the
53
competitive level and selling their output product (auto insurance) at a price above
the competitive level. 5
With this framework in mind, it is easy to see why insurers have a motive to
form an agreement. Every colluding insurer is better off, at least in the short run, if
they all comply with the agreement: the insurers can only continue to purchase
inputs at infracompetitive levels if the other insurers do not cheat on the agreement
and purchase more units, driving up the market rate. But every insurer also has an
incentive to cheat. If one insurer purchases more hours of body shop labor, it can
sell either higher quality insurance (insurance that covers more or higher quality
repairs) or it can sell more units of insurance. “The individual cartel member
experiences the full benefit of [purchasing more inputs] but only a portion of the
burden of the [increase] in the market price, which is shared by all cartel
5
Because the auto body shops allege a per se illegal agreement among the auto body insurers to
fix prices, they are not required adequately to allege anticompetitive harm. Even so, the
anticompetitive effects of monopsony power are well-documented, both in the context of
horizontal cartel agreements and horizontal mergers. See, e.g., Todd v. Exxon Corp., 275 F.3d
191 (2d Cir. 2001) (Sotomayor, J.) (holding employees’ allegations of information exchanges
and oligopsonistic market sufficient to state claim of wage suppression conspiracy); Law v. Nat’l
Collegiate Athletic Ass’n, 134 F.3d 1010 (10th Cir. 1998) (condemning agreement among
colleges to limit salaries of basketball coaches); United States v. Anthem, Inc., 855 F.3d 345, 378
(D.C. Cir. 2017) (Kavanaugh, J., dissenting) (disagreeing on the availability of efficiency
defense to merger of two health insurers but recognizing that if the merged insurer “would obtain
provider rates that are below competitive levels because of its exercise of unlawful monopsony
power against providers, that could be a problem, and perhaps a fatal one for this merger”); W.
Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010) (sustaining complaint
that hospital system and health insurer conspired to suppress reimbursement rates paid to
healthcare providers).
54
members . . . . [I]f everyone cheats without limit, the market moves back to the
competitive price.” Areeda & Hovenkamp, supra, ¶ 2002d.
II. The Twombly Standard
We review motions to dismiss de novo. Jacobs v. Tempur-Pedic Intern.,
Inc., 626 F.3d 1327, 1332 (11th Cir. 2010). To state a claim under Sherman Act
§ 1, a complaint must contain “allegations plausibly suggesting (not merely
consistent with) agreement.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558
(2007).6 “Plausibility is the key,” and the well-pleaded allegations “must nudge
the claim across the line from conceivable to plausible.” Jacobs, 626 F.3d at 1333(internal quotation marks and citations omitted). “But no part of the Twombly-
Iqbal pleading standard requires a plaintiff to provide evidence for the factual
allegations in a complaint before they are entitled to the assumption of truth at the
motion-to-dismiss stage.” Hi-Tech Pharm., Inc. v. HBS Int’l, Corp., 910 F.3d
1186, 1197 (11th Cir. 2018) (internal quotation marks omitted). “And, of course, a
6
Given the majority’s extensive reliance on Twombly’s antitrust holding, it is worth noting how
the antitrust allegations here are unlike those in Twombly. The complaint in Twombly alleged
that four dominant telephone companies agreed not to compete by dividing the market into
exclusive selling territories. Twombly, 550 U.S. at 551. The totality of the allegations to support
an agreement were that: the four phone companies did not expand into one another’s territories,
each defendant excluded other companies from their respective territories, and the CEO of one of
the telephone companies had once stated that expanding to its rivals’ territories “might be a good
way to turn a quick dollar but that doesn’t make it right.” Id. at 550. “[P]rice fixing is a very
different practice, producing different kinds of signals, from the market division scheme alleged
in Twombly. Most importantly, parallel lockstep pricing requires interdependence, while
simultaneous failure to enter one another’s markets creates no such inference . . . . By contrast,
the Twombly complaint, which alleged little more than a parallel failure to enter one another’s
markets, did no more than describe behavior that was equally consistent with collusion and
competition.” Areeda & Hovenkamp, supra, ¶ 1434c2.
55
well-pleaded complaint may proceed even if it strikes a savvy judge that actual
proof of those facts is improbable, and that a recovery is very remote and
unlikely.” Twombly, 550 U.S. at 556 (internal quotation marks omitted).
III. Allegations Plausibly Suggesting an Agreement
Because price fixers typically conceal their conspiracies, courts may infer an
agreement from circumstantial evidence. See id. at 553. To survive a motion to
dismiss, the plaintiff must allege “parallel conduct” plus “further factual
enhancement.” Id. at 557. These so-called “plus factors” serve as proxies for
direct evidence of an agreement. We have never prescribed a rigid set of factors or
the weight of any particular factor. Instead, “any showing that tends to exclude the
possibility of independent action can qualify as a plus factor.” Williamson Oil Co.
v. Phillip Morris U.S.A., 346 F.3d 1287, 1301 (11th Cir. 2003) (emphasis added)
(internal quotation marks omitted). The importance of any factor rests on its
tendency to show that the defendants’ behavior is plausibly consistent with a price-
fixing conspiracy, as opposed to a rational and competitive business strategy,
independently adopted by competing firms. See id.A. Consciously Parallel Conduct
The complaints are replete with factual allegations showing consciously
parallel conduct, including perhaps the quintessential example of it: all the
defendants routinely and uniformly refused to pay more than State Farm. The
56
insurers also uniformly: used the same formula for reimbursing paint jobs, refused
to reimburse body shops for a specific set of repairs, and refused to reimburse
shops for new or higher quality parts.7
B. Plus Factors
“An allegation of parallel conduct . . . gets the complaint close to stating a
claim, but without some further factual enhancement it stops short of the line
between possibility and plausibility of entitlement to relief.” Twombly, 550 U.S. at
557 (internal quotation marks omitted). With the allegations already “close to
stating a claim,” id., we must decide whether the body shops allege plus factors
sufficient to nudge their allegations of conspiracy into a plausible entitlement to
7
In discussing uniformity of tactics, the majority notes: “Not only is there no allegation of
identical or similar language, the language actually used in the complaints suggests just the
opposite. As noted, ¶ 63 alleges ‘[t]hrough various means’ and ¶ 64 alleges ‘[s]ome of these
methods’—i.e. phrases that do not suggest that all or a substantial group of the Insurance
Companies engage in all or most of the methods in strikingly similar ways.” Maj. Op. at 26.
That portion of the complaint says: “Through various methods, the Defendants have,
independently and in concert, instituted numerous methods of coercing the Plaintiff into
accepting less than actual and/or market costs for materials and supplies,” and then the next
paragraph lists “[s]ome of these methods.” Compl. ¶¶ 63, 64. These two sections could
reasonably be read to mean the Defendants have all instituted various methods of coercing the
body shops—rather than the majority’s reading that each of the Defendants instituted varying
methods. While far from an object of clarity, if we view this section as a whole, the majority’s
reading is implausible. This paragraph begins the section titled “Suppression of Repair and
Material Costs.” The rest of the section describes the “various methods,” and clarifies that “the
Defendants” engage in those methods. See, e.g., Compl. ¶ 65 (“In addition to the above, the
Defendants have repeatedly and intentionally failed to abide by industry standards for auto
repairs.”); Compl. ¶ 67 (noting that “the Defendants will refuse to allow the body shop to
perform required procedures and processes”); Compl. ¶ 68 (“A non-exhaustive list of procedures
and processes the Defendants refuse to pay and/or pay in full is attached hereto as Exhibit ‘3.’”).
“As we have explained, a court reviewing a motion to dismiss must draw all reasonable
inferences from the factual allegations in a plaintiff’s complaint in the plaintiff’s favor.” Bailey
v. Wheeler, 843 F.3d 473, 482 (11th Cir. 2016).
57
relief. The majority thinks they did not. But viewed as a whole, the body shops
have done enough to proceed to discovery.
1. Plus Factor: Customary Indications of Traditional Conspiracy
A widely accepted plus factor is allegations showing customary indications
of a traditional conspiracy. See Areeda & Hovenkamp, supra, ¶ 1434b. Conduct
that “does not result from chance, coincidence, independent responses to common
stimuli, or mere interdependence” falls into this category. Id. at ¶ 1425. This
conduct includes allegations suggesting the defendants adopted uniform prices and
practices despite variables that would ordinarily, absent an agreement, cause those
prices and practices to diverge. See id. In other words, conduct that conflicts with
“what that defendant’s legitimate economic self-interest would be under the
assumption that it acted alone.” City of Tuscaloosa v. Harcros Chems., Inc., 158
F.3d 548, 570 n.33 (11th Cir. 1998).
i. Uniform Pricing Behavior
“[T]he fact that competitors have knowingly charged identical prices is a
neutral fact in the absence of evidence which would lead one to expect that the
prices would have been different if truly independent decisions had been made.”
Id. at 571 (emphasis added) (internal quotation marks omitted) (reversing the
district court’s grant of summary judgment for defendants on price-fixing claim).
58
There are allegations in the complaints at issue plausibly suggesting prices would
be different absent an agreement.8
First, all the insurers charge the same rate as State Farm without independent
market information or verification of State Farm’s calculation of labor rates.
Second, the insurers all use State Farm’s geographic market definitions for
determining the labor rate, without determining whether the insurer may different
relationships with the shops surveyed in that area. Third, State Farm’s rate is not
in fact the market rate: State Farm arbitrarily calculates and unilaterally modifies it
to reach an infracompetitive figure. The body shops allege that each insurer
uniformly conformed to this identical arbitrary and infracompetitive market rate
without conducting their own surveys of the body shops they use or drawing their
own market boundaries using the location of their insureds or their DRP shops.
8
The majority finds it significant that this case does not contain the precise market factors that
made convergent pricing suspect in prior cases—the “secret,” “sealed,” and “simultaneous” bids
that suggested the identical prices in FTC v. Cement Inst., 333 U.S. 683, 713 (1948), were the
product of collusion. See Maj. Op. at 18–23. While the Supreme Court used these factors to
show the dubious provenance of the prices in Cement Institute, they certainly are not the only
way—or, in the seventy years since the Supreme Court’s decision in that case, the typical way—
to do so. But see Maj. Op. at 19 (“[T]he Body Shops quote a leading antitrust treatise for the
idea that an agreement may be present if rivals establish identical prices, but they fail 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.’” (emphasis
added) (quoting Areeda & Hovenkamp, supra, ¶ 1434b)). Just after the portion quoted by the
majority, the same treatise gives a host of other examples that may amount to “parallelism that is
too close for coincidence and beyond explanation by mere recognized interdependence”
including “conspiratorial opportunity, unexplained meetings, furtive behavior, discussions and
information exchanges, ambiguous participant admissions, solicitations of agreement, sham bids,
threats of common action directed against a potential victim, identical bids, refusals to bid,
proved conspiracy or competition in other markets or times.” Areeda & Hovenkamp, supra,
¶ 1434b. The allegations here make other cases better analogues. See, e.g., In re Text Messaging
Antitrust Litig., 630 F.3d 622 (7th Cir. 2010).
59
Each insurer, then, is not merely responding to “common stimuli” in the market.
See Twombly, 550 U.S. at 556 n.4 (quoting Areeda & Hovenkamp, supra, ¶ 1425).
Why would an insurer blindly accept a rate determined arbitrarily by one of
its competitors and divorced from the true competitive rate? Collusion—and with
it the assurance that other competitors will do the same—might not be the only
possible answer, but it is a plausible one. See, e.g., Lifewatch Servs. Inc. v.
Highmark Inc., 902 F.3d 323, 333–35 (3d Cir. 2018) (finding plus factor where
insurers adopted a model policy’s approach to reimbursement of certain medical
device with “near total uniformity” and reasoning that it was improbable “that the
same coverage decision would be reached by nearly all the [insurers]
independently” because some other insurers, independent medical review boards,
and some medical studies concluded the device was medically necessary or met the
standard of care); In re Text Messaging Antitrust Litig., 630 F.3d 622, 628 (7th Cir.
2010) (finding a plus factor where all defendants adopted a “uniform pricing
structure” that raised prices in the face of falling costs, suggesting it was the “sort
of restricted freedom of action and sense of obligation that one generally associates
with agreement” (internal quotation marks omitted)); cf. Proctor v. State Farm
Mut. Auto. Ins. Co., 675 F.2d 308, 334 (D.C. Cir. 1982) (noting that “[u]nless an
insurance company is willing to pay whatever price is charged at any given repair
shop, it stands to reason that it would conduct surveys to determine the rates
60
charged by repair shops,” after discussing evidence that the defendant insurers
conducted their own independent surveys of body shop rates, which sometimes led
to the same rate).
Another element of the insurers’ pricing behavior makes it competitively
suspect. While the majority correctly states that requiring discounts is “among the
most common and time-worn methods of increasing corporate profits,” Maj. Op. at
27, uniformly adhering to a rate that drives the input price below cost is neither
common nor consistent with rational independent business activity.
The uniform “market rate” is below cost—including “artificially created
less-than-market labor rates” and “less than actual and/or market costs for
materials and supplies.” 9 The insurers have uniformly and persistently kept the
labor rate at this infracompetitive level, even in the face of rising input costs and an
awareness that the price was below the body shops’ costs. The body shops allege
that “multiple body shops have attempted to raise their labor rates and advised
State Farm of such.” Compl. ¶59. But State Farm tells each body shop, falsely,
that “they are the only one to demand a higher labor rate.” Compl. ¶ 59.
9
See Compl. ¶ 61 (“net effect of this tactic is to allow State Farm to manipulate the ‘market rate’
and artificially suppress the labor rate”; Compl. ¶ 62 (“These Defendants have agreed to join
forces with State Farm, the dominant market holder, and each other to coerce the Plaintiff into
accepting the artificially created less-than-market labor rates”; Compl. ¶ 63 (“Defendants have,
independently and in concert, instituted numerous methods of coercing the plaintiff into
accepting less than actual and/or market costs for materials and supplies”); Compl. ¶ 64
(“requiring discounts and/or concessions, even when doing so requires the shop to operate at a
loss”); Compl. ¶ 71 (Defendants universally used formula for reimbursing paint repairs “which
compensates the shops for only half the actual cost on average”).
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In a buyers’ cartel, uniform infracompetitive input prices in the face of rising
input costs plausibly suggests an agreement among buyers. Cf. City of Tuscaloosa
v. Harcros Chems., Inc., 158 F.3d 548, 572–73 (11th Cir. 1998) (holding in the
context of a sellers’ cartel that parallel increased prices despite falling costs, high
incumbency rates, and awareness of other sellers’ prices plausibly suggest
conspiracy not to compete on price); Areeda & Hovenkamp, supra, ¶ 1434d3
(citing City of Tuscaloosa favorably for this plus factor); In re Flat Glass Antitrust
Litig., 385 F.3d 350, 360–61 (3d Cir. 2004) (finding, in the context of a sellers
cartel, “[e]vidence that the defendant acted contrary to its interests means evidence
of conduct that would be irrational assuming that the defendant operated in a
competitive market. In a competitive industry, for example, a firm would cut its
price with the hope of increasing its market share if its competitors were setting
prices above marginal costs.”); Starr v. Sony BMG Music Entm’t, 592 F.3d 314,
324 (2d Cir. 2010) (finding a plus factor where defendants raised price above
competitive market price despite falling costs, and uniformly included contract
term that industry commentator said was unprofitable, reasoning that “some form
of agreement among defendants would have been needed to render the enterprises
profitable”); In re Text Messaging Antitrust Litig., 630 F.3d 622, 628 (7th Cir.
2010) (Posner, J.) (finding a plus factor where allegations included that “in the face
of steeply falling costs, the defendants increased their prices . . . because falling
62
costs increase a seller’s profit margin at the existing price, motivating him, in the
absence of agreement, to reduce his price slightly in order to take business from his
competitors, and certainly not to increase his price”).
The economic basis for this conclusion is well established. Recall the
incentives created in a cartel. Every insurer is better off if they all comply with the
agreement: the insurers can only continue to purchase inputs at infracompetitive
levels if the other insurers do not cheat on the agreement by purchasing more hours
of body shop labor and driving up the market rate. But every insurer also has an
incentive to cheat. If one insurer purchases more hours of body shop labor, it can
steal business from its rivals by selling either higher quality insurance (insurance
that covers more or higher quality repairs) or more units of insurance. “The
individual cartel member experiences the full benefit of [purchasing more inputs]
but only a portion of the burden of the [increase] in the market price, which is
shared by all cartel members . . . . [I]f everyone cheats without limit, the market
moves back to the competitive price.” Areeda & Hovenkamp, supra, ¶ 2002d; see
also id. at ¶ 1434c2 (noting that In re Text Messaging relied on “sound economic
theory about collusion and the behaviors that are very difficult to explain in its
absence”). Sustained infracompetitive input prices requires agreement among
purchasers, and, as a result, allegations of infracompetitive input rates in an
63
oligopsonistic purchasing market at least constitute a plus factor that, along with
the other allegations plausibly suggests collusion.10
ii. Uniform Refusal to Follow Industry Standards and Uniform Quality
First, the insurers uniformly require repair shops to use used or imitation
parts, even where new or OEM parts are necessary to put the vehicle in pre-
accident condition. Second, the insurers refuse to reimburse for repairs that, in the
“shop’s professional opinion” are required for a safe and quality repair. Third, the
insurers unvaryingly refuse to reimburse the body shops for the same list of repairs
and services, even where a listed repair or service is necessary to return a given
10
To argue that the identical prices here are not cause for concern, the majority cites the Seventh
Circuit’s decision in Quality Auto Body, Inc. v. Allstate Insurance Co., 660 F.2d 1195 (7th Cir.
1981). Quality Auto Body was an appeal from the grant of summary judgment for the insurers.
The plaintiff body shop conducted significant discovery, including each insurer’s rates,
depositions of their executives, and the results of State Farm’s surveys. See Quality Auto Body,
660 F.2d at 1200 (“The uncontroverted affidavits and deposition testimony submitted by
defendants establish that each company has unilaterally developed its own claim-handling
procedures.”). The Seventh Circuit found that, contrary to the plaintiff’s complaint, the evidence
after discovery revealed that the labor rates used by the insurers were variable and that each
insurer “uses a different method for determining the lowest prevailing competitive rate.” Id.The complaint that apparently warranted discovery merely alleged that the insurers followed a
“common formula” for calculating rates. Id. Similarly, in the other case the majority cites for
this proposition, Proctor v. State Farm Mutual Automobile Insurance Co., 675 F.2d 308, 316
(D.C. Cir. 1982), the D.C. Circuit similarly reviewed an order granting summary judgment.
Noting this important distinction, the court reasoned that “[i]n considering whether to grant
summary judgment in this case the District Court relied . . . on the length of time . . . and the
ample opportunities for discovery that the appellants had to ‘unearth evidence to support their
allegations.” Proctor, 675 F.2d at 316 (internal quotation marks and citations omitted). The
results of discovery—all the body shops here seek—from a pair of cases in the 1980s can hardly
undercut the allegations we must accept as true at the motion to dismiss stage. And if the body
shops here are similarly unsuccessful at uncovering evidence of a conspiracy during discovery,
they too would lose at summary judgment.
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vehicle to pre-accident condition.11 Fourth, the insurers refuse to comply with
industry standards, including three separate independent auto collision repair
databases. The databases include the “ordinary and customary repairs, repair time
(labor) and materials necessary to return a vehicle to its pre-accident condition.”
Both the insurers and body shops agree that the databases are the industry standard.
State Farm even assured at least one state insurance regulator that it would begin to
abide by the databases, but still does not.
This behavior is at least plausibly inconsistent with rational business
behavior—that is, inconsistent with the normal incentive to compete with rivals on
a profitable aspect of quality to gain market share. See Starr v. Sony BMG Music
Entm’t, 592 F.3d 314, 327 (2d Cir. 2010) (“[I]t would not be in each individual
defendant’s self-interest to sell [a product] at prices, and with [certain contract
terms], that were so unpopular as to ensure that ‘nobody in their right mind’ would
want to purchase [it], unless the defendant’s rivals were doing the same.”). For
example, the “Defendants’ conduct runs counter to the millions of dollars insurers
spend to gain or maintain market share by advertising ‘new car replacement’ and
‘accident forgiveness’ policy terms.” Compl. ¶ 118; see also Compl. ¶ 117 (noting
11
The majority’s assertion that “the complaints make no factual allegations that the Insurance
Companies . . . declined to pay for the same repairs” is simply not true. See Compl. ¶ 68 (“A
non-exhaustive list of procedures and processes the Defendants refuse to pay and/or pay in full is
attached hereto as Exhibit ‘3.’”); Exhibit 3 (listing repairs); Compl. ¶ 67 (“In many instances, the
Defendants will refuse to allow the body shop to perform required procedures and processes,
thereby requiring body shops to perform less-than-quality work or suffer a financial loss on a
given repair.”).
65
“the incentives insurers have to gain market share by advertising themselves as the
insurer that does not cut corners on safety and quality of repair work”).
These allegations plausibly suggest an agreement. See Lifewatch Servs., 902
F.3d at 334–35 (holding defendant insurers’ identical refusal to reimburse a
product that “many sophisticated third parties,” including physicians and state
medical review boards, agreed was medically necessary was a plus factor);
Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 49–51 (1st Cir.
2013) (finding a plus factor where defendants acted against their independent
interests by uniformly refusing to adopt a policy “standard in the industry” and
would have “resulted in a higher volume of customer sales due to the attractiveness
of potential savings and environmental benefits”).
2. Plus Factor: Meeting Often to Discuss Prices
Merely belonging to an industry trade association does not in itself constitute
a plus factor. Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1295–96 (11th Cir.
2010). “But we expect competitors to meet together only minimally and to
assemble publicly for relatively open meetings conducted with a particular and
justifiable purpose in mind. To the extent that rivals move away from this model,
their activity becomes less consistent with normal competition and more consistent
with a conspiracy to suppress it.” Areeda & Hovenkamp, supra, ¶ 1417b
(emphasis added). The body shops allege that insurance industry meetings happen
66
“approximately once a month,” are closed to non-members, and that a State Farm
representative admitted it would discuss with other insurers whether to begin using
third-party reimbursement metrics to set rates.12 Compl. ¶ 74 (emphasis added).
State Farm’s promise to raise the reimbursement issue at the industry
meeting suggests that State Farm sought the acceptance of the trade association
before adopting database estimates as the method of calculating reimbursement,
and that decisions about the system of calculating rates are made collectively, not
unilaterally by each insurer. These allegations plausibly suggest a conspiracy to
suppress competition rather than independent and rational “follow the leader”
12
Compl. ¶ 74 (State Farm “assured those present, and the Department of Insurance
representative that it would begin abiding by those database estimates and stated it would raise
the matter at its insurance industry meetings, held locally approximately once a month”); Compl.
¶ 75 (“The [auto body shop] association representative present for the meeting, John Mosley,
invited State Farm to attend those [auto body shop] Association meetings if State Farm would
permit members of the Association to attend the insurance meetings. Mr. Simpkins [the State
Farm representative] refused.”). The majority opinion ignores these allegations, instead pointing
to the summary paragraph that notes “members of the insurance industry meet regularly to
discuss such matters in and amongst themselves.” Compl. ¶ 115. The majority, disregarding the
other related allegations—and thus failing to follow Twombly’s directive to view the complaint
as a whole—argues that “this statement is so vague as to be useless as support for a conspiracy.”
Maj. Op. at 33 n.22.
The complaint does not specifically allege whether other defendants attend the “insurance
industry meetings” in question. We do know that “the Insurance Companies account for sixty-
five to eighty-five percent of the insurance market in each of the relevant states.” Maj. Op. at 6.
It is a reasonable inference that at least some participate in “insurance industry meetings.” But
regardless, State Farm’s admission is important because it suggests State Farm seeks approval
from other insurance industry members on its rate setting mechanism. That admission—made in
front of several witnesses—alone suggests the rate that the insurers uniformly follow is not
derived independently by State Farm with the other insurers simply following its lead. See
Compl. ¶ 114 (referring to the “concert of action among the Defendants and co-conspirators to
control and suppress automobile damage repair costs”); Compl. ¶ 115 (“Evidence of this
conspiracy or combination includes, but is not limited to, admission before witnesses that
members of the insurance industry meet regularly to discuss such matters in and amongst
themselves”).
67
activity. See Osborn v. Visa Inc., 797 F.3d 1057, 1067 (D.C. Cir. 2015) (“But the
Plaintiffs here have done much more than allege ‘mere membership.’ They have
alleged that the member banks used the bankcard associations to adopt and enforce
a supracompetitive pricing regime for ATM access fees.”); In re Text Messaging
Antitrust Litig., 630 F.3d 622, 628 (7th Cir. 2010) (holding plaintiffs plausibly
stated a claim for conspiracy when complaint alleged that “defendants belonged to
trade association and exchanged price information directly at association
meetings”); Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 47–48
(1st Cir. 2013) (finding plus factor where complaint alleged that defendants
attended an industry meeting where two dominant defendants “put forward their
position that [adopting a certain policy] was not an option,” and the court “could
infer that their prominent place in the organization would place some pressure on
the other producer defendants to conform with their position”); Lifewatch Servs.
Inc. v. Highmark Inc., 902 F.3d 323, 334 (3d Cir. 2018) (finding plus factor where
insurers met several times a year to set model policy terms on the reimbursement
of a particular medical device, and the insurers uniformly followed the model
policy even though it was not binding them).
The body shops raise more suspicion about these industry meetings by
giving an example of how the insurance industry has used similar meetings to
suppress competition in this precise way in the past. Allegations of “opportunities
68
for abuse” are “not to be ignored when the opportunity is proved to have been
utilized in the past.” See Am. Tobacco Co. v. United States, 328 U.S. 781, 796
(1946) (emphasis added); cf. Williamson Oil Co. v. Phillip Morris U.S.A., 346 F.3d
1287 (11th Cir. 2003) (refusing to allow evidence of the defendants’ industry’s
history of antitrust violations at the summary judgment stage because the class had
failed to direct it to any precedent holding a history of violations suggests a present
violation); Areeda & Hovenkamp, supra, ¶1432b (criticizing Williamson Oil
because “whether a history of past collusion is relevant to likelihood of current
collusion is a question of fact, not of law”). The body shops allege—and attach a
1963 consent decree to the complaints to show—that in the past, the auto insurance
industry has used trade associations to fix auto body repair costs, including auto
body labor, using the same methods alleged here. Compl. ¶¶ 87–89; Exhibit 4
(listing various auto insurer trade associations as defendants).
3. Facilitating Factor: Market Structure
Several of our sister circuits have held that allegations showing a market
susceptible to collusion, while not alone sufficient, can nudge other factual
allegations tending to show an agreement across the line to plausibility. See, e.g.,
In re Text Messaging Antitrust Litig., 630 F.3d 622, 627–28 (7th Cir. 2010)
(“Parallel behavior of a sort anomalous in a competitive market is thus a symptom
of price fixing, though standing alone it is not proof of it; and an industry structure
69
that facilitates collusion constitutes supporting evidence of collusion.”); SD3, LLC
v. Black & Decker (U.S.) Inc., 801 F.3d 412 (4th Cir. 2015); Evergreen Partnering
Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 48 (1st Cir. 2013); Starr v. Sony BMG
Music Entm’t, 592 F.3d 314, 323 (2d Cir. 2010); In re Flat Glass Antitrust Litig.,
384 F.3d 350, 360–61 (3d Cir. 2004) (considering market structure a plus factor for
summary judgment analysis pre-Twombly). Market structure susceptible to
collusion is not independently a plus factor, but it can place other allegations “in a
context that raises a suggestion of preceding agreement.” Twombly, 550 U.S. at557 n.4; see generally Areeda & Hovenkamp, supra, ¶¶ 2002f(1)–(8) (listing
factors that make a market susceptible to collusion including: a small number of
firms with large aggregate market share; a fungible service, considered in the
context of standardization efforts; few avenues for non-price competition; and high
elasticity of supply).
The complaint suggests that at least some of these market factors are present.
First, accounting for those entities with common headquarters, 13 roughly a dozen
insurers control between 70 and 95 percent of the body shops’ revenue. See Todd
v. Exxon, 275 F.3d 191, 210 (2d Cir. 2001) (Sotomayor, J.) (finding fourteen
defendants that employed 80–90% of industry’s workforce sufficient). Second,
13
For example, the lead complaint lists the headquarters of “GEICO Casualty Company,”
“Government Employees Insurance Company,” and “GEICO Indemnity Company” as the same
address in Chevy Chase, Maryland. Compl. ¶¶ 9–11.
70
the as the majority seems to recognize, Maj. Op. at 23, the insurers have
implemented standardization mechanisms that make comparing their inputs
easier—including establishing a quality standard by uniformly refusing to
reimburse for the same repairs. See Areeda & Hovenkamp, supra, ¶ 1435b
(“[A]greed steps might be taken to reduce the product or transactional variety that
impedes rivals’ ability to . . . compare transactions, or to detect ‘cheating’ from
parallel uniformity” such as “agreements standardizing the product . . . or creating
formulas for the computation of freight rates or other elements of price”); Todd,
275 F.3d at 210 (finding jobs at various firms fungible because “the sophisticated
techniques employed by defendants to account for the differences among jobs”
made coordinating price possible). Finally, labor is the quintessential example of
inelastic supply because “an hour not worked today can never be recovered.”
Todd, 275 F.3d at 211. A plaintiff alleging a per se antitrust violation need not
allege anticompetitive harm in a precisely defined market like a plaintiff
proceeding under the rule of reason. See Arizona v. Maricopa Cty. Med. Soc., 457
U.S. 332, 347 (1982) (“We have not wavered in our enforcement of the per se rule
against price-fixing.”); Areeda & Hovenkamp, supra, ¶ 307d2 (“If the claim is
made under the per se rule, proof of a relevant market and power are not required
by the substantive law and thus need not be pled.”). But what we do know from
the complaint suggests this market could be susceptible to collusion. While
71
certainly not a plus factor on its own, the market structure facilitates the
plausibility of an agreement.
4. Facilitating Factor: Exchange of Price Information
Because it allows firms to detect cheating and easily set rates, the apparent
exchange of price information between the insurers also facilitates collusion and
can also nudge other allegations into plausible claims of an agreement. See Areeda
& Hovenkamp, supra, ¶ 1435a. First, all the insurers charged the same “market
rate” as State Farm. Second, only State Farm collects market information from the
body shops used to determine that rate. Third, State Farm’s rate is artificial,
arbitrarily adjusted, and not otherwise derived from actual market information that
would be available to all insurers, seemingly ruling out the possibility that each
insurer is simply responding to common market stimuli to set its rate. Fourth, the
other insurers do not verify the accuracy or validity of State Farm’s rate with the
body shops. Fifth, the body shops are prohibited from discussing their individual
labor rates with each other. And finally, State Farm admitted to discussing a
method for setting reimbursement rates at industry meetings.
These allegations lead to two possible explanations. Either the other
insurers blindly accept the body shops’ recitation of State Farm’s rate without
confirming or otherwise discussing that rate with State Farm, or State Farm shares
its rate with the other insurers. The latter is at least a reasonable inference from the
72
allegations in the complaint. This apparent exchange and use of rate information
nudges the allegations of an agreement closer to plausibility. See In re Flat Glass
Antitrust Litig., 385 F.3d 350, 369 (3d Cir. 2004).
Like standardization, the exchange of rate information is also a facilitating
practice because it makes it easier to detect cheating. If an insurer decided to cheat
on the agreement by offering a higher price to body shops and purchasing more
units of body shop labor, it might drive the actual market rate above State Farm’s
artificial “market rate.” The body shops allege that State Farm collects shop-wide
and market-wide rate data and speaks with body shops that report rates it
unilaterally considers too high. State Farm’s survey could reveal the rate increase
occasioned by the cheating insurer, and its conversations with body shops could
reveal the offender. See In re Text Messaging Antitrust Litig., 630 F.3d 622 (7th
Cir. 2010) (market structure that enables cartel members “to be able to detect
‘cheating’” facilitates collusion). Again, the exchange of rate information alone
does not constitute a plus factor, but it is a well-accepted facilitating practice that
can tip other plus factors into suggesting a plausible agreement.
IV. Conclusion
None of this is to suggest that any of these plus factors or facilitating factors,
standing alone, would allow the plaintiff in another case to survive a motion to
dismiss. The plus factor inquiry is wholistic. We cannot analyze each possible
73
plus factor in isolation, accept or reject it, and move on to the next. Instead, we
view all the possible plus factors and the allegations that support them in their
proper economic context. And only then we decide, whether, viewed as a whole,
there is enough to “nudge the claim across the line from conceivable to plausible.”
Jacobs, 626 F.3d at 1333 (internal quotation marks and citations omitted).
Antitrust laws are often underenforced against anticompetitive exercises of
buyer market power. And yet, under the majority’s interpretation of the Twombly
standard, never has it been harder for an antitrust plaintiff to proceed to discovery.
“The plaintiffs have conducted no discovery. Discovery may reveal the smoking
gun or bring to light additional circumstantial evidence that further tilts the balance
in favor of liability.” In re Text Messaging Antitrust Litig., 630 F.3d 622, 629 (7th
Cir. 2010). Discovery might uncover, for example, that the insurers agreed at
industry meetings to use the same market rate, same reimbursement formulas, and
same standards of quality. It might reveal exchanges of rate information, attempts
to punish cheating insurers, or communications between insurers about
successfully maintaining infracompetitive labor rates. And it might not. But “[a]ll
that we conclude at this early stage in the litigation is that the . . . complaint
provides a sufficiently plausible case of price fixing to warrant allowing the
plaintiffs to proceed to discovery.” Id. Because the majority incorrectly reaches
the opposite conclusion, I respectfully dissent.
74