By John Yoswick
Once a year, Automotive Report offers a look into some of the legal battles being waged in the industry. As in the past, shops are suing insurers (and vice versa), technicians are suing shops, and even a company slogan was the focus of a lawsuit. Here’s our annual legal round-up.
Shop sues – and gets sued
One Oregon shop has been on both ends of lawsuits in recent months. Last fall, Leif’s Auto Collision Centers filed a $5 million lawsuit against the Council of Better Business Bureaus and the Better Business Bureau Northwest, accusing the bureau of defamation after it publicized the “F” rating it had given Leif’s.
The BBB said it based the rating on the 57 consumer complaints it had received about the company in the past three years, including at least 31 to which Leif’s had failed to respond. But in the lawsuit, Leif’s said those complaints represented less than 1 percent of the company’s customers, and called the rating unfair and a punishment for refusing to pay dues to the BBB.
“BBB’s marketing and business development plan includes attacking companies that do not pay the BBB in order to drive business to companies that do,” the lawsuit stated, an assertion the BBB flatly denied.
But this spring, an Oregon judge threw out the lawsuit, saying the BBB’s “F” grade was a matter of opinion protected by law. The judge found that Leif’s had not shown that the BBB knowingly published false statements nor shared information with a reckless disregard for the truth. Because Leif’s hadn’t shown it had legitimate grounds to sue, it had to pay the BBB’s legal fees for defending itself, the judge ruled.
Meanwhile in a case still pending, Geico is asking a federal court to override an Oregon law in order to allow the insurer to refuse to do business with Leif’s, alleging that continuing to do so puts Geico employees’ safety at risk. Geico’s lawsuit says Leif’s and its owner Leif Hansen “intentionally create an atmosphere of fear and intimidation that leads to adjusters’ inability to adequately perform their work.” It says Hansen and other Leif’s employees routinely yell at adjusters; threaten to have them arrested or to sue them personally; and carry around knives and talk about guns.
“In particular, at least one Leif’s employee has talked about ‘killing people,’ with the intention of frightening the Geico adjuster,” the lawsuit claims.
The insurer also says Leif’s falsely communicates to customers that delays are being caused by Geico when in reality Leif’s employees have “obstructed, delayed or disrupted inspections when Geico’s adjusters have been ready, willing and present” to conduct them. Geico adjusters “have experienced significant stress and emotional harm,” the lawsuit claims, and “at least one Geico adjuster has refused to return to Leif’s premises for fear of physical injury or harm.”
Geico seeks unspecified damages (exceeding $75,000) for lost profits, damage to reputation, and excessive labor costs “due to assignment of additional claims personnel.” Although Oregon law prohibits an insurer from refusing to do business with a particular shop chosen by an insured, Geico is asking the court to declare that the insurer need not continue to do business with Leif’s, given that Oregon law also requires an employer do what is “reasonably necessary to protect the life, safety and health” of its employees.
In its response to the court, Leif’s and Hansen deny the allegations, and say they will assert such defenses as First Amendment free-speech protections about any statements made about Geico. They argue there is not a sufficient controversy to justify “the creation of a novel exception to an Oregon statute.”
This is not the first time Geico and Leif’s have tangled in court. In 2015, Leif’s was the lone Oregon shop to file a lawsuit, similar to about two dozen other suits brought by shops in other states (see below), accusing Geico and other insurers of conspiring to manipulate shop labor rates and compensation. Leif’s dropped that lawsuit after several months, but Geico immediately sought more than $77,000 in legal fees; the U.S. District Court judge in Florida overseeing all those lawsuits has said he will rule on Geico’s motions for legal fees once all the lawsuits have concluded.
Techs sue for lost wages
A number of recent lawsuits highlight the importance of shops following employment regulations, and maintaining good records of doing so.
Last fall, for example, a dispute related to overtime led a Philadelphia shop (and its owner and manager) to agree to a $9,700 settlement with Steven Marrazzo, a paint prepper who claimed he regularly worked between two and 10 hours of overtime each week during his 10 months at the shop. One of Marrazzo’s claims was that meal breaks were deducted from his pay although he said he worked through such breaks.
Just months later, a federal judge gave preliminary approval to a $600,000 settlement between several Northern California shops and about 150 current and former employees who had filed a class action lawsuit over alleged rest-break violations.
Slogans are just “puffery”
This past spring, a federal appeals court affirmed a lower court’s dismissal of a fraud lawsuit against State Farm by a man who claimed he was duped by the insurer’s “Like a good neighbor…” ad slogan. He’d argued in the suit that when he had a claim, he found State Farm didn’t treat him in “a fair, reasonable and good faith basis” as the slogan indicated it would.
A lower court ruled such slogans are merely “opinion or puffery,” and said of the man’s claim, “if arguments had feelings, this one would be embarrassed to be here.” This year, an appeals court agreed.
Safelite wins free speech battle
Collision repairers aren’t the only ones who gripe about insurers “steering” work to particular companies. Lawsuits over such issues are common in the auto glass industry. Even state regulators have sometimes entered the fray, attempting to clamp down on what they view as excessive or unfair steering practices.
But earlier this year, one such state effort got a thumbs-down in court. Minnesota regulators in 2015 reached a settlement agreement with Safelite over the company’s scripts in which they told auto glass customers (on behalf of AAA) that they may face additional billing if they choose an out-of-network glass shop. But a U.S. District Court earlier this year struck down that consent order, ruling that the agreement violated Safelite’s free-speech rights.
One shop class action gets shot down
Many of the lawsuits related to the industry involve collision repairers suing insurers. A group of Ohio shops suing Progressive Insurance, for example, were denied class-action status last December.
In their lawsuit, Blue Ash Auto Body (in Cincinnati) and other shops claimed Progressive tortuously interferes with their businesses by dictating what labor rates, services and parts it is willing to pay for, limiting the shops’ ability to return vehicles to pre-loss condition.
Progressive has argued that its direct-repair shops are able to repair vehicles to that standard under the same terms offered to shops not on the program.
The Ohio shops were seeking class-action status to represent all Ohio shops not on Progressive’s direct-repair program.
But a state court ruled last year that the shops met only three of the seven requirements for class action status, and last December, a state appeals court upheld that denial of class action status. The appeals court agreed that there was too much of a “case-by-case” nature to the complaints to be combined into a class action.
Another shop class action dismissed under appeal
Another potential class-action lawsuit brought by shops against insurers has also had a bumpy road this year.
Attorneys for Crawford’s Auto Center in Pennsylvania and K&M Collision in North Carolina succeeded in January in getting a U.S. District Court judge to re-open their case. Judge Gregory Presnell is overseeing the Crawford’s lawsuit after it was transferred to his Florida court along with about two dozen other lawsuits, all involving shops suing insurers. He has dismissed many of those other suits (see below), and put the Crawford’s case on-hold while the appeal of some of those dismissals is pending.
But Crawford’s attorneys Steven Block and David Sorensen noted that unlike all the other cases, which were filed by the Mississippi-based Eaves law firm, their suit alleges violation of federal racketeering (rather than antitrust) laws. It also doesn’t allege “one industry-wide conspiracy” amongst the insurers, but rather separate enterprises in which an insurer and its estimating system partner “collaborate to systematically defraud collision repair professionals” that are using the same estimating systems as a “purported industry-neutral guidepost.” The lawsuit is also the only one of the two dozen that is seeking class-action status on behalf of “tens of thousands of shops” around the country.
Presnell agreed not to hold up the case during the appeals of the Eaves’ lawsuits, but in May, he dismissed the Crawford’s lawsuit for a second time, saying the amended lawsuit still failed to support the shops’ claims that the insurers engaged in fraud or extortion to reduce what they pay for repairs. He wrote that even the 15 pages that the shops’ attorneys added to the new “bloated” version of the lawsuit “failed to remedy the vast majority of the shortcomings” of the original.
“The reader who slogs through all 172 pages of the [amended version] will be left almost entirely in the dark as to what role any of the [individual insurers] played or what actions any of them took in furtherance of the [racketeering] enterprise,” Presnell wrote. “Without more, such allegations are insufficient to support the existence of [a racketeering] enterprise.”
The suit was dismissed with prejudice — meaning it cannot be amended and re-filed again – but the shops’ attorneys in June filed an appeal of Presnell’s dismissal.
Shops’ suits hitting roadblocks
Among the other two dozen lawsuits brought by shops in 18 states (including Alabama, Kentucky, Louisiana, Mississippi and Tennessee) alleging that multiple insurance companies have conspired to manipulate labor rates and other shop charges in order to reduce costs, fewer than 10 remain on appeal after Presnell’s dismissals.
Some previous appeals went nowhere, in part because of missed deadlines or other oversights by the shops’ attorneys. Both lawsuits brought by shops in Louisiana, for example ran into judicial roadblocks last year. In a one-sentence decision, the three-judge Eleventh Circuit appeals court denied the western Louisiana shops’ plea to have their appeal reinstated, shooting down the argument that misinformation from a court clerk was at fault for the shops’ attorneys not submitting all necessary appeals documents on time. A tardy appeal of the dismissal of the lawsuit brought by shops in eastern Louisiana had been similarly denied three months earlier.
In January, the Arizona shops involved in a similar suit asked Presnell to reconsider his dismissal of the suit. Their attorneys from the Eaves law firm acknowledged that in a brief arguing against the dismissal, they pointed Presnell to the wrong pages in their lawsuit for specific examples of price-fixing activity by the insurers. But those examples were elsewhere in the lawsuit, they argued, something the court should have taken into account before dismissing it.
Presnell pulled no punches in denying that request.
“The [shops] now argue that the Court was obligated to…scour the 88-page [lawsuit] for allegations to support the [shops’] arguments,” Presnell wrote. But the court, he said, is not required “to act, in essence, as an advocate for a represented party.”
What’s more, Presnell said, even if the shops’ attorneys had cited the correct section of their own lawsuit, “it would have made no difference.” The examples of what the shops claim as evidence of collusion by insurers were “not participation in an agreement to fix prices” but rather nothing more than “State Farm setting its rates and the other insurers following along (as opposed to entering an agreement to do so).”
Decisions in the appeals of the other similar lawsuits dismissed by Presnell are expected soon. •
John Yoswick, a freelance writer based in Portland, Ore., who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@SpiritOne.com
