Source: http://mn.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20170811_0000761.DMN.htm/qx
Timestamp: 2018-10-20 13:10:11
Document Index: 150464181

Matched Legal Cases: ['§ 72', '§ 72', '§ 65', '§ 72', '§ 72', '§ 72', '§ 2201', '§ 1983', '§ 1988', '§ 1988']

Safelite Group, Inc. and Safelite Solutions, LLC, Plaintiffs,
Michael Rothman, in his official capacity as Commissioner of the Minnesota Department of Commerce, Defendant.
Jay P. Lefkowitz, Christian R. Reigstad, and Steven J. Menashi, Kirkland & Ellis, John E. Iole, Jones Day, Emily Unger and Richard D. Snyder, Fredrikson & Byron, for Plaintiffs.
Oliver J. Larson and Michael J. Tostengard, Minnesota Attorney General's Office, for Defendant.
This matter is before the Court on Plaintiffs' Motion for Attorneys' Fees and Nontaxable Costs [Doc. No. 92]. For the reasons set forth herein, Plaintiffs' motion is granted in part and denied in part.
This case arises out of certain enforcement and regulatory actions taken by the Minnesota Department of Commerce (the “DOC”) concerning Plaintiffs Safelite Group, Inc. and Safelite Solutions LLC (collectively, “Safelite”). As set forth in more detail in this Court's Order of January 23, 2017, (the “Summary Judgment Order”), which is incorporated herein by reference, Safelite is a nationwide business that provides auto-glass replacement and repair as well as claims administration services for insurance companies. (See Summ. J. Order at 2 [Doc. No. 89].)
As to its claims administration work in Minnesota, Safelite provides services for third-party insurers Auto Club Group, Inc. (“AAA”), USAA, and American Family Insurance (“American Family”). (Id.) In this role, Safelite manages a network of non-Safelite auto-glass replacement and repair shops (the “Network”), for which there is no membership cost, although the Network shops must agree to adhere to certain pricing terms for repair work. (Id.) Shops that are not in the Network are referred to as “non-Network” or “independent” shops.
By law, Minnesota insureds have the right to select any shop to perform auto-glass repair or replacement work, Minn. Stat. § 72A.201, subd. 6(7), (14), and they pay for work done at a “competitive price that is fair and reasonable within the local industry at large.” Minn. Stat. § 72A.201, subd. 6(14). When a disagreement arises between a shop and an insurer on what constitutes a fair price, the matter is subject to arbitration. See Minn. Stat. §§ 65B.525; 72A.201, subd. 6(14). Using what is known as “balance billing, ” shops may pursue insureds for the difference between the amount that the shops charge and the insurer pays. (Summ. J. Order at 4.) Balance billing is a legal practice in Minnesota. (Id.) Alternatively, shops may write off the amount of the difference or take assignment of the policy and try to collect the difference from insurers through arbitration. (Id. at 4-5.)
For Safelite's Network shops, contracts between the insurers and the shops set the price for auto-glass repair work. (Id. at 4.) Non-Network shops can set any price that they like, even if it is more than the insurer will pay or considers fair. (Id.) Non-network shops can use balance billing to recover from customers the amounts not paid by insurers. (Id.) Some non-Network shops in Minnesota reserve the right to balance bill customers, (id.), while some do not. (Id.)
Safelite has developed phone scripts for use in its claims administrator-role when an insured calls to report auto-glass claims. (Id. at 5.) Minnesota law requires claims administrators to notify the insured that he or she may choose any auto-glass vendor, and, if the claims administrator recommends a vendor, it must give the following advisory (the “Mandatory Advisory”): “Minnesota law gives you the right to go to any glass vendor you choose, and prohibits me from pressuring you to choose a particular vendor.” Id. (quoting Minn. Stat. § 72A.201, subd. 6(14).) Minnesota law also contains a provision barring claims administrators from intimidating or inducing an insured to use a particular glass-repair company. Minn. Stat. § 72A.201, subd. 6(16) (the “Anti-Coercion Provision.”).
As discussed in the Summary Judgment Order, when insureds asked Safelite for shop recommendations, Safelite would recommend one of its own shops or a shop within the Network. (Summ. J. Order at 6.) If the insured indicated that he or she had selected a non-Network shop, Safelite would inform the insured that he or she might be balance billed for any difference between the shop's charge and the insurer's payment. (Id.) Safelite's scripts also communicated the Mandatory Advisory. (Id.)
Two non-Network shops-Alpine Glass, Inc. and Buy Rite Auto Glass, Inc. d/b/a/ Rapid Glass (collectively, “the Minnesota shops”)-and their respective owners, Michael Reid and Rick Rosar, believed that Safelite was driving down the price of auto-glass repair and replacement in Minnesota and taking away their business by steering customers to Safelite's shops or Network shops. (Id. at 6-7.) The Minnesota shops believed that Safelite told insurers that they would be balance billed in order to encourage customers to choose Safelite or Network shops. (Id.) They regularly complained to the applicable regulatory entity, the DOC. (Id.) However, as noted in the Summary Judgment Order, there was no evidence that the DOC had ever received a consumer complaint regarding Safelite's claims administration practices. (Id. at 7.)
After receiving more complaints from the Minnesota shops about Safelite, in 2013, the DOC's Director of Investigations, Martin Fleischhacker, undertook his own investigation of Safelite's administrative practices when he needed to replace a windshield on his vehicle. (Id. at 8.) Regarding his telephone communications with Safelite, he testified initially to feeling pressured not to use his non-Network glass vendor, and later recalled that Safelite warned him that he might be balance billed if he chose a non- Network vendor. (Id.) Fleischhacker subsequently met with Reid and Rosar to focus the DOC's attention on Safelite, and pass along the best telephone recordings of Safelite allegedly violating the law. (Id. at 9.)
In 2014, the DOC launched a formal investigation into Safelite and its Network vendors AAA, USAA, and American Family. (Id. at 10.) The DOC served subpoenas on the three vendors and Safelite, to which Safelite did not respond. (Id.) The DOC threatened Safelite with a cease and desist order that would prevent it from doing business in Minnesota unless it responded to the subpoenas. (Id.) The DOC did not pursue the cease and desist order against Safelite, but instead focused on the insurers that used Safelite as a claims administrator. (Id.) In its investigation of these insurers, Defendant inspected Safelite scripts and listened to at least 100 calls between Safelite, insureds, and representatives of non-Network shops. (Id. at 11.) During the calls, Safelite would inform the insured of his or her right to choose a glass repair shop and would also indicate that the insured might be balance billed if they proceeded to have the work performed by a Minnesota shop. (Id. at 11-12.) The Minnesota shop would then inform the insured that they would not be balance billed. (Id. at 12.)
The DOC believed that these calls showed a consistent effort by Safelite to persuade insureds to use Safelite or a Network shop by stating that balance billing might occur with a non-Network shop. (Id.) The DOC also found that balance billing in Minnesota is uncommon, if it occurs at all. (Id. at 12-13.) The DOC further admitted that it was unfamiliar with the billing practices of most shops in Minnesota and reached its conclusions mainly from representations made by Reid, Rosar, and others associated with the Minnesota auto-glass industry. (Id.) The Minnesota shops repeatedly contacted the DOC during the investigation, expressing their hope that the investigation would benefit non-Network shops financially, as they had provided information to help with the investigation. (Id. at 13.) One of the DOC's investigators regularly shared confidential information about the status and likely outcome of the investigation with representatives from the Minnesota shops, even though doing so violated the DOC's policies and procedures. (Id.)
In January 2015, the DOC concluded its investigation of AAA by issuing a consent order. (Id.) The order stated that AAA's conduct violated the Mandatory Advisory and Anti-Coercion Provisions of Minn. Stat. § 72A.201, subd. 6(14) & (16) (hereinafter “Subdivision 6(14)” and “Subdivision 6(16)”). (Id. at 14.) While the DOC noted that it could pursue an enforcement action against AAA, it indicated its willingness to avoid such action if AAA agreed to drop Safelite as a claims administrator and agreed to cease and desist from telling insureds that they might be balance-billed by non-preferred glass vendors, unless AAA had specific information proving the assertion true for a particular vendor. (Id.) The DOC apparently entered into similar consent orders with USAA and American Family. (Id. at 13, n.12.)
In April 2015, Safelite filed this suit against Michael Rothman, in his official capacity as the Commissioner of the DOC, seeking declaratory and injunctive relief under 28 U.S.C. § 2201, 42 U.S.C. § 1983, and 42 U.S.C. § 1988 for alleged violations of the First Amendment, Fourteenth Amendment, and the Dormant Commerce Clause. (Compl. ¶¶ 48-85 [Doc. No. 1].) The parties resolved Plaintiffs' due process claims, and Safelite sought summary judgment on its remaining claims. (Summ. J. Order at 16.)
In the Summary Judgment Order, the Court denied Safelite's motion based on the Mandatory Advisory language in Subdivision 6(14). (Id. at 45.) However, the Court found that the DOC's prohibition on Safelite's “may-be-balance-billed” statements violated the First Amendment's protection of commercial speech. (Id.) Accordingly, the Court (1) declared void the DOC's regulatory requirements and enforcement action under Subdivision 6(16), (2) enjoined and restrained the DOC from enforcing that provision so as to prohibit Plaintiffs from providing insureds with truthful information about the possibility that insureds might be billed by particular repair shops for the difference between the shop's fee and the insurer's payment, and (3) enjoined the DOC from enforcing the consent order between it and AAA. (Id. at 47-48.) Having granted Safelite its requested relief on First Amendment grounds, the Court declined to rule on Safelite's Dormant Commerce Clause claim. (Id. at 47.)
C. Motion for Attorneys' Fees
In connection with its summary judgment motion, Plaintiffs requested attorneys' fees under 42 U.S.C. § 1988. However, because Safelite had submitted no briefing on the issue at that time, the Court denied the request without prejudice. (Summ. J. Order at 48.) Safelite subsequently filed the instant motion. It argues that as the “prevailing party, it is entitled to fully recover its attorneys' fees and costs under Section 1988(b), and no special circumstances would render an award unjust. (Pls.' Mem. Supp. Mot. for Attys' Fees at 8 [Doc. No. 102].)
In this litigation, Safelite retained the law firms Kirkland & Ellis, LLP (principally in New York), Jones Day (in Pittsburgh), and Fredrikson & Byron, P.A. (in Minneapolis). Applying the lodestar methodology, discussed in greater detail below, Safelite asserts that its attorneys' fees, including fees for paralegal work, are reasonable. (Id.) Safelite summarizes the lodestar as follows:
2, 305.5
$1, 675, 821.31
$134, 206.00
$102, 523.75
2, 715.15
$1, 912, 551.06[1]