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M.V.B. Collision, Inc. v. Allstate Insurance Co.

August 8, 2007

M.V.B. COLLISION, INC., D/B/A MID ISLAND COLLISION, PLAINTIFF,
v.
ALLSTATE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Joseph F. Bianco, District Judge

MEMORANDUM AND ORDER

Plaintiff M.V.B. Collision, Inc., doing business as Mid Island Collision ("Mid Island" or "plaintiff") filed the instant action on January 12, 2007, asserting claims for (1) tortious interference with prospective business relations, (2) violation of the New York General Business Law § 349, (3) permanent injunctive relief,*fn1 and (4) a declaratory judgment against defendant Allstate Insurance Company ("Allstate" or "defendant"). Plaintiff seeks compensatory damages and a declaratory judgment.

Defendant now moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss plaintiff's claim under New York General Business Law § 349 and plaintiff's claim for a declaratory judgment. Defendant does not seek to dismiss plaintiff's tortious interference claim. Oral argument was held on July 9, 2007. For the reasons set forth herein, defendant's motion is granted as to the declaratory judgment claim and denied as to the Section 349 claim.

I. BACKGROUND

The following facts are taken from the amended complaint and are not findings of fact by the Court, but rather are assumed to be true for the purpose of deciding this motion and are construed in a light most favorable to plaintiff, the non-moving party.

Plaintiff Mid Island is a premier auto collision repair shop located at 20 Lakeview Avenue, Rockville Centre, New York. (Compl. ¶ 8.) Mid Island repairs and reconstructs both ordinary vehicles, as well as high-end luxury and foreign automobiles. (Id. ¶ 13.) Mid Island is also one of a small number of collision shops nationwide that is Mercedes-Benz factory-trained and factorytooled - that is, Mid Island's employees are actually trained on, and utilize, the same repair tools that are used at the Mercedes-Benz factories. (Id.) The owner and operator of Mid Island is Robert Jesberger ("Jesberger"), who has worked in the automobile repair business for over thirty-five years. (Id. ¶ 12.) Defendant Allstate provides auto collision insurance policies. Mid Island services Allstate policyholders involved in collisions ("First Party Customers"), pursuant to the Allstate collision coverage in their policies. (Id. ¶ 3.) In cases where Allstate is required to pay for the damage caused by its policyholders to third-party vehicles, Mid Island also services such third parties ("Third Party Customers"). (Id.) Allstate has set a labor rate of $38 to $42 per hour for auto collision services provided by Mid Island to First Party and Third Party Customers. (Id. ¶ 4.) Mid Island's labor rate for ordinary automobiles ranges from $55 to $65 per hour. (Id. ¶ 19.)

According to Mid Island, since Jersberger became the owner of Mid Island, Allstate has consistently pressured Mid Island to accept its lower labor rates and has refused to negotiate labor rates in good faith. (Id. ¶ 17.) Mid Island asserts that Allstate has employed - and continues to employ - a "take it or leave it" approach to negotiating labor rates. (Id.) Mid Island has refused to accept Allstate's lower rate. (Id. ¶ 3.) In 2003, in response to complaints from Allstate policyholders that Allstate would not approve Mid Island's labor rate, Mid Island began to testify on behalf of Allstate policyholders in first and third-party litigation in Nassau County. (Id. ¶ 19.) These lawsuits involved the policyholders' pursuit of costs associated with the difference between Allstate and Mid Island's labor rates. (Id.)

As an example of Allstate's alleged failure to negotiate labor rates, Mid Island contends that, in May 2005, Patrick Nash ("Nash"), an Allstate policyholder, brought his vehicle to Mid Island for repair. (Id. ¶ 23.) Bill Launders ("Launders"), an Allstate adjuster, inspected Nash's vehicle on May 19, 2005. (Id. ¶ 24.) After completing the inspection, Launders told Jesberger that Allstate would not negotiate a labor rate. (Id. ¶ 24.) Launders also stated that he had been given orders from Allstate management "not to negotiate [a] labor rate [with Mid Island] under any circumstances." (Id.)

Beginning in 2004, Allstate's "Downstate" team allegedly threatened Mid Island with economic harm and other repercussions if Mid Island continued to aid Allstate policyholders in litigation. (Id. ¶ 27.) On January 21, 2004, Allstate adjuster Todd Keith ("Keith") arrived at Mid Island and told Jersberger that "today is the day." (Id. ¶¶ 28-29.) Jersberger also heard Peter Martin ("Martin"), Allstate's Downstate Manager, instruct Keith to "teach him a lesson," allegedly referring to Jersberger. (Id. ¶ 31.) Keith then deemed a vehicle owned by an Allstate policyholder to be "totaled," thereby depriving Mid Island of the opportunity to repair the car. (Id. ¶ 28.) According to Mid Island, Keith had been directed by Allstate management to label a car as "totaled," regardless of its condition, prior to his arrival at Mid Island that day. (Id. ¶ 30.) Following this incident, Allstate adjusters "totaled" several other "minimally damaged" automobiles. (Id. ¶ 32.) On one occasion, Allstate adjuster Steve Russo ("Russo") had given Mid Island an estimate for the repair of a vehicle. (Id. ¶ 33.) However, when Mid Island refused to accept the "take it or leave it" rate offered by Allstate, Martin instructed Russo to "total" the vehicle. (Id. ¶ 34.) Russo explained that it was "management's decision" to total the vehicle, and said that this would be the manner in which Allstate would deal with Mid Island going forward. (Id. ¶ 35.)

Plaintiff also alleges that Allstate "steered" its customers away from using Mid Island and towards shops chosen by the insurance company by advising its policyholders that, if they brought their cars to Mid Island for repair, the cars were "destined for a total." (Id. ¶ 36.) However, Allstate allegedly told its customers that, if the same cars were brought to an Allstate-approved repair shop, then Allstate would authorize the cars to be repaired. (Id.) In May 2005, a new Mid Island customer, Hope Di Fazio, informed Jesberger that she had been told by Allstate that she would be "involved in litigation" if her car were repaired at Mid Island. (Id. ¶ 39.) In September 2005, a longtime Mid Island customer, Annette Ercolano, told Jesberger that Allstate had pressured her not to bring her car to Mid Island because it was "overpriced" and "did not do good repair work." (Id. ¶ 40.) In April 2006, another Mid Island customer, Christopher Bailey ("Bailey"), spoke with Vincent Veshetta ("Veshetta") of Allstate. (Id. ¶ 41.) Veshetta told Bailey that Mid Island overcharged on its labor rates and that Allstate had experienced problems with the quality of Mid Island's work in the past. (Id.) In addition, on several occasions between 2004 and the present, Allstate allegedly threatened its policyholders with litigation if they used Mid Island as a repair shop. (Id. ¶ 43.)

In April 2005, Allstate placed an "observer," Gary Cromwell ("Cromwell") at Mid Island's facility, in order to "oversee" the interaction between Allstate, Mid Island and Allstate policyholders. (Id. ¶ 9.) When Mid Island objected to Cromwell's presence, Allstate informed Mid Island that it would not "sign off" on any work if Cromwell was not on the premises. (Id. ¶ 46.) According to Mid Island, Cromwell "harassed" Mid Island employees and customers with "incessant questions, comments, and interjections, and attempted on several occasions to bait Jesberger into a physical confrontation." (Id. ¶ 47.) Mid Island alleges that Cromwell's presence caused them to take two to three times longer to process claims. (Id.) According to Mid Island, Allstate required Cromwell's presence at its facility for six months - Cromwell was only removed after Mid Island notified Allstate's national headquarters about his presence. (Id. ¶ 48.)

II. STANDARD OF REVIEW

In reviewing a motion to dismiss, the court must accept the factual allegations set forth in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. See Cleveland v. Caplaw Enter., 448 F.3d 518, 521 (2d Cir. 2006); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005). The plaintiff must satisfy "a flexible `plausibility standard.'" Iqbal v. Hasty, - F.3d -, Nos. 05-CV-5768 (L), 05-CV-5844 (con), O5-CV-6379 (con), 05-CV-6352 (con), 05-CV-6386 (con), 05-CV-6358 (con), 05-CV-6388 (con), 2007 U.S. App. LEXIS 13911, at *36 (2d Cir. Jun. 14, 2007). "Once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, ...


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