A federal district court in Virginia has dismissed a complaint against more than a dozen insurance companies filed by two contractors that provided disaster recovery services, challenging what the contractors characterized as the insurers' use of a “preferred provider list.”
The Case
Panhandle Cleaning and Restoration, Inc., and Master Dry LLC asserted in the lawsuit they filed against 13 separate insurance companies that they provided “disaster recovery services” to clients in West Virginia and that the insurers “engaged in a process of steering policy holders exclusively to contractors on their preferred provider lists[,]” which excluded Panhandle and Master Dry because they were not on the list.
Panhandle and Master Dry sought damages and declaratory relief, alleging that the insurers had tortiously interfered with business relations and had conspired in violation of the West Virginia antitrust law to restrain trade and commerce by steering work to preferred contractors.
The insurers moved to dismiss.
The District Court's Decision
The district court dismissed the complaint.
In its decision, the district court first decided that the allegation that the insurers had tortiously interfered with the plaintiffs' business relationships with the defendants' insureds was “without merit.” The district court reasoned that this cause of action required that the one who interfered with the business relation or contract had to be a stranger to that relationship or contract. Panhandle and Master Dry, by alleging that they themselves were “unquestionably” outside the relationship between the insurers and their policyholders, “misunderst[oo]d the law,” the district court said. In a case alleging tortious interference, it was “the defendant who must be a stranger to the relationship,” the district court ruled.
The district court also rejected the antitrust claim asserted by Panhandle and Master Dry, declaring that it fell “woefully short of the modest, required pleading standards.” In the district court's opinion, they had filed “a shotgun pleading” that relied on “indeterminate assertions against all defendants without any specific facts regarding any particular defendants.”
Moreover, the district court said, the “scheme” described by Panhandle and Master Dry lacked “any identifiable antitrust injury” and described only “economic harm” to Panhandle and Master Dry. According to the district court, nothing in their complaint “adequately describe[d] any injury to competition.” The district court stated that even assuming that a vertical restraint existed between a defendant insurance company and other, unnamed, contractors who competed with Panhandle and Master Dry, there was “no identifiable anticompetitive effect.”
It concluded that in addition to “completely failing to articulate an antitrust injury,” Panhandle and Master Dry failed to plead “a relevant product or geographic market” and “grossly failed to allege the necessary elements of an antitrust violation.”
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].