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IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

SARA SHANNON and ROSA PALACIOS and 

DEBRA CORBELLO, Individually and on 

behalf of all others similarly situated,

Plaintiffs,

v.

THE ALLSTATE CORPORATION and 

ALLSTATE INSURANCE COMPANY,

Defendants.

Civil Action No. 1:20cv448-LY

PLAINTIFFS’ SURREPLY IN OPPOSITION TO DEFENDANTS’ MOTION TO 

DISMISS

COME NOW, Plaintiffs Sara Shannon, Rosa Palacios, and Debra Corbello (“Plaintiffs”), 

who file this Surreply in Opposition to Defendants The Allstate Corporation and Allstate Insurance 

Company’s (collectively “Allstate”) Motion to Dismiss.

Allstate’s Reply Brief (Dkt. No. 45) raises two (2) additional arguments not briefed in their 

Motion to Dismiss (Dkt. No. 35). Plaintiffs are duty-bound to respond to these arguments not only 

because they are new, but because they both contain substantial inaccuracies that must be 

addressed for purposes of clarity. 

First, regarding the Price Tolerance claim, Allstate now insists that Plaintiffs’ allegations,

namely that Allstate’s CGR assignments are done unilaterally and internally by Allstate pursuant 

to secret Allstate algorithm(s) projecting each customer’s price “tolerance” or “elasticity”, are 

“demonstrably false.” (Dkt. No. 45, at 10.) To support this, Allstate cites a statement in its manual 

rules which provides, inter alia, that “Each policy will be assigned to a Micro-Segment based on 

the following criteria: (a) the birth date of the oldest operator on the policy, (b) the number of 
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Years with Prior Carrier, as defined in Rule 57, (c) Territory as defined by current address, and (d) 

the gender of the oldest operator on the policy” (Dkt. No. 45 at 11). 

Allstate implies the assignment process at issue for Plaintiffs’ Price Tolerance claim is not 

internal, as is alleged, but is set forth in its rate filings. However, the above language relates to 

how Allstate establishes the “microsegments” themselves in the first place, not to the purely 

internal Allstate assignment process whereby customers are actually assigned by Allstate among 

the nearly infinite number of rates. Allstate discloses in its filings how the microsegments are 

set up (i.e., the four criteria identified above)—as alleged, there are ~900 million permutations of 

the four criteria, virtually ensuring each customer has their own personal “microsegment.” (FAC, 

¶¶ 8, 10, 73, 90.) But the pertinent assignment process here is the next step—the microsegmentto-“Complementary Group” assignment process, only vaguely referenced in the next sentence of 

the Manual rules from which Allstate quotes. This next step involves Allstate assigning the 

“microsegments” (i.e., the individual customers each comprising their own personal 

“microsegment”) among the various Complementary Groups and thus the corresponding rates 

associated with the Complementary Groups (the “CGRs”).

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 As alleged, those assignments are 

made internally by Allstate completely at its discretion, pursuant to secret algorithm(s) that project 

each customer’s relative price “elasticity” or “tolerance.” (FAC, ¶¶ 90-94.) None of that is filed 

with the TDI or publically available; if it was, certainly Allstate would have cited it in its Reply.

And the very limited information Allstate does tell the TDI about it is alleged to have been false

and misleading. (FAC, ¶¶ 91, 93, 94.) Thus, while Allstate may take issue with the exact language 

1 Plaintiffs have already seen evidence of and expect further discovery to reveal that Allstate 

decided to assign each of its Texas policies to their own personal “microsegment” prior to 

application of its internal price elasticity projections as an artifice to gin up an argument, if 

challenged, that Section 544.052 would not apply to its conduct.
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Plaintiffs use to describe the internal Allstate assignment process at issue (e.g., “microsegment 

assignment” as opposed to a different term), the substance of Plaintiffs’ allegations are not false 

(nor even disputed, apparently). 

Second, also related to the Price Tolerance claim, Allstate attempts to distinguish its price 

tolerance-based internal assignment conduct from the internal assignment conduct at issue in the 

Cortez case as follows:

In Cortez v. Progressive Cty. Mut. Ins. Co., plaintiffs alleged that an 

insurance carrier allowed its agents to charge three different 

commission levels, thus altering the total amount paid for insurance 

by the insureds; however, the claim was unrelated to the rates for 

the insurance that were charged and attributed to the insurer.

(Dkt. No. 45, at 13 & n.9 (emphasis in original).) By asserting Progressive’s commission levels 

in Cortez were “unrelated to the rates for the insurance that were charged and attributed to the 

insurer” Allstate appears to suggest the commission levels were separate from, and assessed on 

top of, the rates filed by the defendant (Progressive) in that case. 

Plaintiffs had occasion to review the pleadings in Cortez when Farmers made a similar 

misstatement, see Grigson v. Farmers Group, Inc., No. 1:17cv88, at Dkt. No. 44, and while not 

clear in the published opinion, it is apparent from Progressive’s papers in the case that the varying

commissions at issue in Cortez were not separate from the rates filed. Progressive made individual 

rate filings with TDI, one for each of the agent commission levels. As stated by Progressive in its 

pleadings filed with the Texas Supreme Court in Cortez:

[T]he different commission rates are filed as different commission

classes. The proof shows that, for many years, Progressive has

made separate filings of rate schedules with [TDI] for each of its

commission plans. Thus, the lowest "Supersaver" commission (7%) 

is filed as a premium classification, and the "Advantage" plan (10%) 

is a separate and different premium class. The differences in

premium [for each such filed rate plan] reflect the difference in

commission cost, which is an actual expense that properly is
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reflected in the rate, or premiums.

Progressive Cnty. Mut. Ins. Co. v. Cortez, No. 01-1026, Pet’r Br. on the Merits, at 6 (Tex. Filed

Feb. 13, 2002) (emphasis added).

2 Progressive and its agents, in turn, exercised their own 

discretion to assign the customers among the three sets of rates based on their internal assessment 

of how much money each customer would be willing to pay.

Dated: November 20, 2020. RESPECTFULLY SUBMITTED,

____/s/ John R. Davis___________

John R. Davis (TX Bar 24099518)

Michael L. Slack (TX Bar 18476800)

SLACK DAVIS SANGER, LLP

6001 Bold Ruler Way, Suite 100

Austin, TX 78746

Tel.: 512-795-8686

Fax: 512-795-8787

jdavis@slackdavis.com

mslack@slackdavis.com

Joe K. Longley (TX Bar No. 00000114)

LAW OFFICES OF JOE K. LONGLEY

3305 Northland Dr. Suite 500

Austin, Texas 78731

Tel.: 512-477-4444 

Fax: 512-477-4470 

joe@joelongley.com

Roger N. Heller (CA Bar 215348) (pro hac vice)

Jallé H. Dafa (CA Bar 290637) (pro hac vice)

LIEFF CABRASER HEIMANN & BERNSTEIN, 

LLP

275 Battery Street, 29th Floor

San Francisco, CA 94111

Tel.: 415-956-1000

Fax: 415-956-1008

rheller@lchb.com

jdafa@lchb.com

2 The Supreme Court docket for Cortez, where this brief can be accessed for free as a pdf, is 

available at http://www.search.txcourts.gov/Case.aspx?cn=01-1026&coa=cossup. 
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Jonathan D. Selbin (NY Bar 3948684 (pro hac vice)

LIEFF CABRASER HEIMANN & BERNSTEIN, 

LLP

250 Hudson Street, 8th Floor

New York, NY 10013

Tel.: 212-355-9500

Fax: 212-355-9592

jselbin@lchb.com

CERTIFICATE OF SERVICE

I hereby certify that on November 20, 2020, I electronically filed the foregoing with the 

Clerk of Court using the CM/ECF system which will send notification of such filing to counsel for 

Defendants.

/s/ John R. Davis