OAKLAND, Calif. (CN) — Bail industry players asked a federal judge to toss out allegations that they conspired to fix bail bonds prices in California, arguing at a hearing Wednesday that a consumer class cannot back up claims that they overpaid for bail bonds because bail agents and industry groups misled them about rebates.
While bail is a refundable way of ensuring defendants show up for their court dates, people who purchase bail bonds, typically defendants’ loved ones, must forfeit the steep premiums bail agencies tack on to the bonds to make their businesses profitable.
An antitrust class action brought 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.
U.S. District Judge Jon Tigar dismissed federal Sherman Act antitrust claims against the defendants in April, finding the state-regulated industry immune under the McCarran-Ferguson Act, but he allowed state law claims to stand.
Attorney John Hamill with DLA Piper which represents two of the surety companies said Wednesday that the class’ amended lawsuit is “essentially a cut and paste job” that fails to specifically allege a conspiracy between individual companies.
“There are not even any factual allegations as to how someone joined a conspiracy,” he said, “The implication is defendants automatically entered a conspiracy just by selling bonds.”
The plaintiffs rely in part on allegations that trade associations agreed at industry meetings to fix premium rates and discourage rebating.
Representing the American Bail Coalition, attorney Nicole Healy with Ropers Majeski said the plaintiffs identified only two meetings in 16 years attended by only a handful of the defendants. Healy said plaintiffs presented no evidence that any agreements were finalized at those meetings, one of which occurred nine months after the class action was initially filed.
“So what? Trade associations have members and promote the industry. That’s not a factual allegation that supports a conspiracy,” Healy said. “The mere fact that they can be misused by antitrust conspirators doesn’t mean that it did happen.”
Attorney Yaman Salahi with Lieff Cabraser who represents bond purchasers, said plaintiffs are not required to show specificity at this point.
“Here it is correct that we don’t have as much information about these closed door meetings,” he said.
While trade association meetings are just one factor to support their case, Salahi said it is further bolstered by statements made by bail industry executives “inviting the industry to collude and refrain from price competition.”
The plaintiffs point to a statement by American Surety Co. President and CEO William B. Carmichael.
“I can safely predict that if left unchecked, rampant premium discounting will result in the end of the bail bond business as we know it, to be replaced by a new model that properly reflects the proper balance of risk and reward. Simple economics dictates it,” Carmichael wrote in 2005. “I urge all of us to recognize the serious nature of the threats to our industry and work collectively to repel them. Leaving profit on the table, in the form of discounts or uncollected accounts receivable, is a fool’s game.”
Tigar did not tip his hand as to how he would rule, but he had a few questions for Blake Zollar, who represents bail agencies All-Pro and Two Jinn Inc., operating as Aladdin Bail Bonds.
Zollar said the plaintiffs’ amended lawsuit does not allege that bail agents refused to provide rebates or misled named plaintiffs Shonetta Crain and Kira Serna into believing no rebates were available.
“Instead plaintiffs ask the court to infer vague agreements among all the defendants to ‘discourage and suppress rebating,’” said Zollar, a partner with Koning Zollar LLP.
Tigar jumped in when Zollar said statements on bail agents’ websites that they are required to charge rates filed with the CDI are “an accurate statement of the law.”
Tigar said while those statements may be literally true, it could still be misleading for the average consumer.
“I’m not sure it accurately reflects the experience of the larger unsophisticated consumer who walks into bail bondsman to purchase a bond. What you mean is they are required to set the rates charged by the CDI and they have the flexibility to offer rebates, but I don’t know that the consumer who walks in the door would see it that way,” Tigar said.
“They would just think about price. When they read or they hear that ‘we are required to charge a rate set by the CDI,’ I think a reasonable person would think the price is fixed. Even though you and I both know that’s not true.”
Tigar asked both parties to submit a response to a finding of an adequately-pleaded conspiracy but insufficiently specific allegations as to certain defendants, in light of his recent order lifting a stay of discovery. This will essentially allow the plaintiffs to amend their case a third time.