On July 7, the Louisiana First Circuit Court of Appeals awarded judgment for State Farm on an agent’s antitrust claims against the insurer, reversing the lower court’s refusal to dismiss the claims. The action, Van Hoose v. State Farm, provides another example that “vertical” antitrust claims by agents against the insurers they represent, while not uncommon, are often unsuccessful because the plaintiff often cannot establish “antitrust injury.”
In Van Hoose v. State Farm, the plaintiff, a State Farm insurance agent, claimed that his regional State Farm field representative unlawfully blocked the transfer of State Farm policies to him, allegedly to benefit a favored agent who previously had been a State Farm employee. Van Hoose alleged that this conduct violated both the Louisiana antitrust statute (La. R.S. 51:122) and the Louisiana Unfair Trade Practices Act (La. R.S. 51:1401 et seq.). State Farm filed exceptions to the complaint (the Louisiana equivalent of a motion to dismiss in federal court), contending that the claims failed as a matter of law. In May, the trial court heard oral argument on the issue and subsequently denied State Farm’s motion.
Unlike in federal court, where the denial of a motion to dismiss typically is not immediately appealable, Louisiana state procedure provides a right to appeal all adverse rulings in antitrust cases. Taking advantage of this opportunity, State Farm appealed the decision to Louisiana’s First Circuit Court of Appeals, arguing that plaintiff’s allegations failed as a matter of law because they plainly demonstrated an absence of harm to competition (i.e., no allegation of “antitrust injury.”) The First Circuit agreed with State Farm, noting that “There are no allegations that the State Farm policyholders in question were not allowed to transfer their policies to any other State Farm agency or any other insurance company. Therefore, the allegations of injury to competition in the petition are insufficient to state a valid antitrust claim under La. Revised Statute 51:122.” In addition, because the Louisiana Unfair Trade Practices Act is “patterned after” the Federal Trade Commission Act, which has a similar “harm to competition” component, plaintiff’s unfair trade practices claim also was deficient as a matter of law. Accordingly, the trial court’s ruling on the antitrust and unfair trade practices claims was reversed, providing a victory for State Farm.