Saturday, 30 November 2002 17:00

Five shops sue State Farm for interfering with business

Five body shop owners in Texas have filed suit against State Farm for damaging their businesses. The group, represented by Dallas attorney Christopher Davis, alleges that State Farm interfered with their businesses and acted unlawfully to restrain trade and commerce in the markets where the plaintiffs have (or had) their businesses. 

One of the plaintiffs is former industry activist Roy Smalley, owner of Eurowerks in the Dallas area. Smalley closed down his collision business earlier this year, although he still does business under the Eurowerks name in Commerce, Texas, where he restores vintage vehicles, primarily Porsches. While Smalley would not comment on the suit, referring requests for comment to attorney Davis, he noted that he went into the collision repair business ten years ago, "and in only two years built it into a $500,000 operation, working on referrals. I spent ten years running the collision business - the first five building it, and the last five trying to figure out what the hell was happening to the industry." Smalley noted that he was one of the first State Farm Service First shops in his area, and stayed in that program for about three years. In the late 90's, Smalley played a key role in an unsuccessful attempt to strengthen Texas laws on insurers steering work to their partner shops.

The lawsuit, filed in May, alleges that State Farm work represents 30% - 40% of the Texas market and that the amount of work from State Farm at plaintiffs' shops had dropped precipitously as work was steered to Service First shops. The complaint states causes of action for interference with contractual relationships and prospective relationships; fraud and deceit; business disparagement and violation of the Texas Free Enterprise and Antitrust Act. This last cause of action alleges that State Farm and its Service First partners acted in concert to restrain trade and that State Farm and its partners, through persuasion or coercion, restricted and/or ignored proper repair practices to which consumers are entitled. It also alleges that State Farm used its Repair Facility Survey Form to artificially suppress labor rates in the State, and that State Farm forced the plaintiff shop owners out of the market under the pretense that they were overcharging for services.

Plaintiffs' attorney Davis noted that he has previously represented auto body shops, is familiar with the industry, and would not have taken the case if he did not feel there was a strong probability of prevailing.


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