If you can’t trust anti-trust, what can you trust?

I’d rather be posting my recipe for Cranberry Daiquiris than tackling anti-trust issues – and probably should do both as there is little entertainment value in the subject.

If you read my earlier post and want more background, I suggest this tag-on of Sop’s from late summer when he stepped in to help me find my way back from an unexpected detour by Road Home.

Although today’s ruling was in federal court; the Katrina insurance antitrust case was filed in State court – and for good reason.  Louisiana has a State anti-trust law, one of the defendants insurers is domiciled in Louisiana, and the alleged price fixing took place in the State.  However, the defendants were successful in their effort to move the case to federal court; and, it appears from the Ex Parte consent motions on the docket, that Buck up Buddy had also been successful in resolving his concerns about Foti’s contracts with private attorneys.

The State’s interest was represented by one of the staff attorneys from the AG’s office, Jane Johnson, who filed a reply memorandum in support of motion to sever as suggested in a related Fifth Circuit ruling on the case now known as Louisiana ex rel Caldwell v Allstate.

The Attorney General proposes what the 5th Circuit ordered, that this Honorable Court decide on the best course of action and is suggesting severing the claim for injunctive relief because 1) that allows more options for this Court in deciding how to proceed, and 2) that is what the Fifth Circuit suggested…

Allstate is only one of the Defendants.  Others insurers named as defendants include State Farm, USAA, Lafayette, Farmers, and Standard Fire.  In addition to the six insurers, there are four other defendants – McKinsey & Company; XACTWAREMarshall & Swift /Beockh, owner of Integriclaim; and Insurance Services Office, Inc – familiar names to SLABBED readers who have followed the scheme.

Although the defendants had followed the lead of McKinsey and jointly filed a Motion to Dismiss under Rule 12b(6), it appears the ruling was unexpected and the focus of preparation had been on the Motion to Sever and moving the case in part back to State court as suggested by the Fifth Circuit.

The defendants, however, were obviously well-prepared to press for the dismissal and because of the Motion’s relevance to the scheme, our focus in this post will be on the arguments made in that Motion.  However, let’s first take a look at Rule 12b(6) –  failure to state a claim upon which relief can be granted – and then define antitrust.

any combination of business practices that led to the restriction of trade…[for example] …the expansion of monopolies, the restriction of free trade (competition) and the imposition of price fixing by industry members…

It is important to note that today’s dismissal was specific to the charge the defendants had violated antitrust laws as stated in their motion.

The Complaint is insufficient to state an antitrust claim under the Louisiana Monopolies Act… because the same claim was asserted, in at least two other cases before this Court…and was dismissed on the pleadings in both cases…asserted the very same “price fixing” conspiracy now alleged here…

[T]he Complaint fails to adequately plead an antitrust conspiracy because there are no facts alleged in the Complaint (which is substantively identical to the complaints in Schaefer and Mornay) that plausibly suggest the existence of a collusive agreement to restrain competition by any defendant...

The Complaint is a strained effort to force-fit allegations of improper claims payment practices and breaches of contract into the antitrust (i.e., treble damages) framework. An antitrust claim, however, requires pleading and proof of a conspiracy among competitors to injure competition in a market in which they compete. The Complaint fails to meet this fundamental pleading requirement…

There was no market to adjust Louisiana policyholders’ claims after the 2005 hurricanes. Insurers only adjusted and paid the claims of  those Louisiana citizens with whom they had insurance contracts. If the policyholders were somehow injured by the claim settling practices, their injury was due to an alleged breach of contract, not any lessening of competition. (all emphasis added)

Lyndon Johnson pretty much summed up  my level of trust in insurance defense attorneys when he said I never trust a man unless I’ve got his pecker in my pocket.

So, after reading the convincing motion to dismiss filed by the defendants, I read the compelling Response in opposition to Motion to Dismiss filed by Lousiana.

Louisiana’s petition contains verifiable and therefore, plausible facts of cartelization and price-fixing, together with defendants’ public admissions, which can be tied to cartel behavior. Defendants ask this court to disregard those facts and use the summary judgment standard, in substitution for the notice pleading standard. Defendants also present arguments contradictory to Louisiana antitrust laws. Moreover, Defendants present affirmative defenses, not in an answer as required, but in memoranda, forbidden by both the federal rules of civil procedure and Louisiana jurisprudence. They have failed to meet their burdens of proof. Therefore, the Attorney General asks this Court to allow this important antitrust case to proceed and to deny defendants’ Motions to Dismiss.

Read the motion and the State’s response – and we’ll continue this discussion as we look at Schafer v State Farm over the holidays.

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