Bail Bond Insurer Must Face Price-Fixing Antitrust Claims by California Customers

OAKLAND, Calif. (CN) — A bail bonds surety company and its chief executive must face a class action claiming they conspired to fix the prices California defendants and their families must pay to get released from jail as they await trial, a federal judge ruled Tuesday.

U.S. District Judge Jon Tigar dismissed virtually all antitrust claims against 28 bail industry players with leave to amend, but he refused to toss claims against American Surety Company and its president, CEO and co-owner William Carmichael. Both are accused of being “ring leaders” of a conspiracy to discourage rivals from offering rebates and to fix premiums, or the percentage of bonds forfeited to make the companies profitable.

The antitrust class action filed in 2019 says 28 bail industry players, including trade associations, two bail agencies, and surety companies who underwrite bail bonds, plotted to submit uniform premium rates of 10% to the California Department of Insurance and concealed bail agents’ ability to offer rebates by suggesting on their websites that rebating is “wrong, unavailable or illegal.”

For example, a 10% premium on a bond set at $40,000 means the bail would cost the purchaser $4,000.

The fact that every surety set premium rates at 10% in California from 2014 to 2018 and only two dropped their rates to 9% in 2018 adequately supports allegations of “uniform rates” and “parallel conduct” — two essential elements of an antitrust claim — in the California bail industry, Tigar concluded.

Despite that finding, the judge dismissed claims against most defendants, finding a second amended complaint did not sufficiently allege bail agencies struck an anticompetitive agreement.

According to the lawsuit, the conspiracy started in 2004 after the California Supreme Court ruled in Pacific Bonding Corporation vs. Garamendi that bail agents could legally offer rebates on standard premium rates approved by the state’s Department of Insurance.

Bond purchasers claim American Surety Company “sprung into action” after that decision and told rivals it would not lower its 10% premium rates or offer rebates. ASC said it would discourage its agents from offering or advertising rebates and urged its rivals to do the same, according to the complaint.

ASC put out a statement saying “rival bail agents are ‘our industry’s eyes, ears and mouths in recognizing and alerting all to the impending attack [on the industry]. When you [agents] become aware of a situation, please contact us so that we may assess the depth of the threat and work alongside of you to craft an appropriate response,” according to the lawsuit, which also includes statements made by Carmichael.

“I urge all of us to recognize the serious nature of the threats to our industry and work collectively to repel them,” Carmichael wrote in a statement posted on the company’s website in 2005. “Leaving profit on the table, in the form of discounts or uncollected accounts receivable, is a fool’s game.”

Tigar found those statements provided an adequate basis for claims that ASC had a “role in spearheading the conspiracy.”

The judge dismissed similar claims against Jerry Watson, who worked for the surety company AIA and for the trade association American Bail Coalition Inc. According to the plaintiffs, Watson described price-cutting as “a form of cancer in the bail industry.”

Tigar found that and similar statements by Watson were more open-ended, “unlike Carmichael’s statements, which can be construed as invitations to conspire.”

The judge also dismissed claims against trade associations — including the California Bail Agents Association, Golden State Bail Agents Association and American Bail Coalition — finding the complaint did not allege they entered into an agreement with others to fix premium rates or suppress rebates.

Tigar dismissed the claims with leave to amend. An amended complaint must be filed by Feb. 4.

Plaintiffs’ attorney Polina Brandler of HammondLaw in Baltimore and American Surety Company’s lawyer John Sebastinelli of Greenberg Traurig in San Francisco did not immediately return emails seeking comment Tuesday.

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