Insurers waited too long to intervene in anti-trust litigation that brought settlements requiring dozens of auto parts manufacturers to pay a total of $1.2 billion to resolve price-fixing allegations, a panel of the U.S. 6th Circuit Court of Appeal ruled Wednesday.
In a published decision, the appellate panel affirmed a U.S. District Court ruling that denied a motion to intervene filed by Financial Recovery Services on behalf of eight insurers that sought “equitable subrogation” for the payments it made to insureds for the total loss of their vehicles. FRS did not seek to intervene in the litigation until long after settlement negotiations were concluded and final-approval hearings were held in 41 coordinated cases.
The 6th Circuit panel said in its opinion that allowing intervention would require the court to revisit issues that were settled while FRS “watched from the sidelines.”
“Allowing FRS to claim subrogation rights after settlement would uproot earlier efforts to define classes, expend considerable resources to amend allocation plans, and increase costs associated with the claims-administration process, thereby reducing the amount of settlement proceeds available,” the panel said in an opinion written by Justice Karen Nelson Moore.
Attorneys representing consumers in 2012 filed anti-trust lawsuits against dozens of auto manufacturers. The Department of Justice launched an investigation into price-fixing allegations, resulting in guilty pleas by 26 manufacturers that paid millions in fines.
The civil lawsuits were consolidated into a single case assigned to the U.S. District Court for Eastern Michigan in Detroit. The court approved four separate settlement agreements between the plaintiffs and 73 of the defendants from 2016 through November 2020.
FRS, a third-party administrator for auto insurers, did not get involved until May 2018. It sent a letter to US District Judge Marianne O. Battani giving notice that its eight insurer clients had a subrogation interest in the settlement payments because they made total-loss payments to policyholders. Court documents do not reveal the identities of FRS’ clients, except for a claim assignment agreement with Selective Insurance Co. that was included in the court’s electronic file.
FRS said denying the insurers equitable subrogation would “undeniably result in a double payment to total loss insureds.”
But by the time FRS gave notice of its claims, three settlement agreements had already been approved and a fourth agreement was pending a final hearing. The court had set a Dec. 31, 2019 deadline to file claims, but delayed the deadline twice at the request of the plaintiffs’ attorneys. FRS filed a formal motion to intervene on June 18, 2020, the date of the final deadline.
FRS did not provide supporting information about the claims it was attempting to subrogate. It said in pleadings that it “would not be practical to submit claims for many thousands of total loss vehicles before resolving the threshold legal question whether such claims would be permitted.”
U.S. District Judge Sean F. Cox denied the motion to intervene. He said in his order that FRS had ample opportunity to intervene earlier but failed to act until after three settlement agreements had been approved. Allowing more claims to be litigated at that late stage would delay distribution of the settlement proceeds, Cox said.
The 6th Circuit panel said Cox did not abuse his discretion.
“If it were to allow intervention, the district court would have to decide whether FRS has a right to any of the settlement proceeds,” the opinion says. “This would require, for all practical purposes, revisiting the class definition and the plan of allocation, issues that have long been resolved.”
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