Safelite, LYNX and Insurer Defendants Respond to New York Restraint of Trade Suit, Including Short Payment and Steering Allegations
June 15, 2011

Safelite, LYNX Services and Pittsburgh Glass Works, along with 14 different insurers named in a recent restraint of trade suit filed by a New York Glass shop owner, have responded to the suit by way of endorsed memos to the court requesting a pre-motion to dismiss conference. David Harner, owner of Auto Glass of Westchester Windshield Doctor, filed the suit in April and alleges those involved have committed breach of contract, fraud, unfair claims settlement practices, restraint of trade, anti-trust, and coercion, among other charges, through their alleged actions in dealing with his business and his customers.

While the judge has agreed to the pre-motion conference, which will be held on July 11, the two letters (one of which was sent on behalf of the insurers by Douglas Dunham, corporate counsel for State Farm, and the other of which was sent on behalf of the third-party administrators (TPAs) involved by Safelite counsel Fiona Schaeffer) outline the defendants' initial arguments as to the reasons they believe the case should be dismissed.

In the letter from Safelite, submitted jointly for the non-insurer defendants, including PGW and LYNX, the companies point out that the "crux of [Harner's] complaint-asserted as a breach of contract claim-appears to be that he has not received full payment on invoices submitted to certain insurer defendants for work performed for their insureds." The companies allege that these claims should not be made against non-insurers or TPAs, as they "are not independent actors, but act as 'agent[s]' and 'intermediaries' of certain insurers … under individual contracts with certain insurer defendants."

With regard to Harner's steering allegations, the companies write, "Plaintiff does not deny that insureds can and do use [his] repair shop, which admittedly is not in any insurer defendant's 'network;' nor does plaintiff allege that he has lost a single job because of the defendants' alleged actions."

The non-insurer defendants also suggest that there is an "underlying theme" in Harner's complaint: "that his business should be protected from competition with other glass repair shops and that consumers should not be informed about lower-cost alternatives." They claim in response that "competing through lower prices is the essence of competition."

"Furthermore, plaintiff's 'predatory' pricing objection bears no resemblance to an actionable predatory pricing claim, which requires pricing below costs by a monopolist with a 'dangerous probability' of recouping lost profits by eliminating the competition," writes Schaeffer. " … Plaintiff does not allege that the non-insurer defendants are monopolists in any relevant market, or that plaintiff has been excluded from such a market, or even that plaintiff has lost any identifiable sale."

Safelite, LYNX and PGW further allege that "lower prices are, of course, good for competition and consumers," citing a 1990 case involving USA Petroleum Co.

The insurers make a similar argument against the case in their letter, much of which deals with Harner's steering and short payment allegations. The companies allege that New York law permits insurance companies to recommend glass repair facilities to their insureds, and that insurers in the state "are not obligated to pay for glass repair charges exceeding the amount a recommended facility would have charged."

They also claim that Harner's breech of contract claim is invalid as he has no contract with any of the insurers and has not specified any contract that has been broken.

With regard to his anti-trust claims, the insurers allege that the claims are "deficient because [Harner] fails to allege any antitrust injury or antitrust standing," and that "he has not alleged any harm to competition at all, much less connected any harm to competition with an injury [to himself]."

Harner alleges in his original suit that "all the defendants actions, individually, combined, and in concert, are unreasonable under the circumstances, [and] have denied [him] the right to earn income, his ability to create a sound business reputation, and have denied him his right to continue to operate his business without interference, in a free, unfettered, and profitable manner, within the framework of the law."

He further claims that the TPAs noted "together, through planning and foresight, have created a contract an/or combination and/or conspiracy in the form of trust or otherwise, amongst and between those defendant insurers, by using the defendant PGW and/or the defendant LYNX, or the defendant Belron and/or the defendant Safelite, as intermediaries in an attempt to restrain trade or commerce, and to enforce a mandate to set and/or fix and/or stabilize prices, and/or to restrain trade, and/or whereby a monopoly is or may be established or maintained … "

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