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Bail bond insurer price-fixing case likely to survive dismissal bid

A class claims the California Supreme Court opened the door to a price-fixing conspiracy when it said rebates on bail bond premium rates were legal — and insurers vowed to offer no savings.

OAKLAND, Calif. (CN) — A federal judge indicated Thursday he may not dismiss the fourth crack at a class action accusing bail bond insurers of fixing the prices California defendants must pay to get out of jail while awaiting trial.

A group of insurers asked U.S. District Judge Jon Tigar to dismiss a third amended complaint from plaintiffs this past May, after he'd dismissed virtually all antitrust claims against 28 bail industry players with leave to amend. The Barack Obama appointee has in the past refused to toss claims against American Surety Company and its president, CEO and co-owner William Carmichael. The plaintiffs accuse both 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 claims 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.”

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.

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. The company said it would discourage its agents from offering or advertising rebates and urged its rivals to do the same, according to the complaint.

The insurers said in their motion to dismiss the latest effort to show they had inflated the price of bail bonds in California through a purported conspiracy to fix premium rates and suppress bail agent rebating should fail because the class didn't fix deficiencies in their complaint “despite the extraordinary benefit of extensive discovery against every named defendant” —15 months for discovery, they said.

“Plaintiffs received over 170,000 documents spanning the entirety of the alleged conspiracy, including all relevant communications between and among defendants. Yet the holes in plaintiffs’ theory remain clear and gaping,” the defendants said in the motion.

On Thursday, attorneys for the insurers told Tigar the class action recycled the same claims the judge had found deficient before, with “no factual support for any price-fixing agreement among defendants.” They also said the class relies on asserting that defendants engaged in lobbying, which the lawyers said is protected activity. 

Attorney John Hamill called plaintiffs’ assertions an “attack on trade associations."

“If anything, this third complaint goes backward," he told Tigar. "They've all but abandoned the rebate suppression conspiracy, which was the main thing the prior rounds of argument focused on.”

Class attorney Dean Harvey said the defendants have not made the discovery process as easy as they claim. He also pointed to evidence that insurers met in 2009 in Las Vegas to discuss rebates and discounts, and that a year of discovery has shown evidence of collusion between those insurers. 

“These companies got together behind closed doors and discussed exactly the subject matter of the conspiracy,” he said. 

The 116-page third amended complaint filed this past April clarified claims of a “conspiracy" involving 20 companies and American Surety Company's Carmichael. They cited new evidence they claim involves two components: to maintain the “standard” premium rate at 10% and to discourage and suppress rebating, including suppressing the advertisement of rebates, “demonstrated by the surety defendants’ nearly uniform misrepresentations and omissions that mislead consumers into believing that rebates are unavailable.”

Tigar said he is unsure if there is enough to grant the request to dismiss a lawsuit filed three years ago, but reminded both sides he can “start from scratch” with the third amended complaint's new claims.

He also said the motion to dismiss was unlike anything he had ever seen before and put him “in an unusual posture” since both sides rely on documents from the discovery and the judicial notice processes.

“At the end of the day, my guess is that the court will have to ask whether the pleadings within the four corners of the complaint are sufficient and use the documents as a help mate to determine whether those allegations are plausible,” Tiger said.

He promised to release an order shortly. 

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