M.V.B. Collision Inc. v. State Farm Insurance Company

Filing 31

MEMORANDUM & ORDER ADOPTING REPORT AND RECOMMENDATIONS as to 29 Report and Recommendations; denying 21 Motion to Dismiss for Failure to State a Claim. For the reasons set forth above, State Farm's objections are OVERRULED and the R&R (D.E. 29) is ADOPTED in its entirety. Accordingly, State Farm's motion to dismiss (D.E. 21) is DENIED. So Ordered by Judge Joanna Seybert on 2/20/2020. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------X
M.V.B. COLLISION INC. d/b/a
MID ISLAND COLLISION,
Plaintiff,
MEMORANDUM & ORDER
19-CV-1883(JS)(ARL)

-againstSTATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,

Defendant.
-----------------------------------X
APPEARANCES
For Plaintiff:
Gina M. Arnedos, Esq.
Steven F. Goldstein, LLP
One Old Country Road, Suite 370
Carle Place, New York 11514
Steven F. Goldstein, Esq.
Goldstein & Tanenbaum, LLP
One Old Country Road, Suite 318
Carle Place, New York 11514
For Defendant:

Alexander Seton Lorenzo, Esq.
Kyle Wallace, Esq.
Cassandra Kerkhoff Johnson, Esq.
Alston & Bird LLP
90 Park Avenue
New York, New York 10016

SEYBERT, District Judge:
Currently pending before the Court is the Report and
Recommendation of Magistrate Judge Arlene R. Lindsay (R&R, D.E.
29), recommending that the Court deny defendant State Farm Mutual
Automobile

Insurance

Company’s

(“State

Farm”

or

“Defendant”)

motion to dismiss the Complaint of plaintiff M.V.B. Collision Inc.
(“MVB” or “Plaintiff”).

For the following reasons, State Farm’s

objections are OVERRULED, the R&R is ADOPTED in its entirety, and
the motion is DENIED.
I.

Background and Proceedings
The Court assumes the parties’ familiarity with the case

and discusses the facts only as necessary for this adoption order.
State Farm filed a motion to dismiss on August 7, 2019.
(Def. Mot., D.E. 21.)

MVB opposed the motion on August 21, 2019

(Pl. Opp., D.E. 24) and State Farm replied on August 28, 2019 (Def.
Reply, D.E. 25).

On October 8, 2019, the undersigned referred the

motion to Judge Lindsay for an R&R.
on January 7, 2020.
Obj., D.E. 30.)
II.

Judge Lindsay issued her R&R

State Farm timely objected to the R&R (Def.

MVB did not respond to State Farm’s objections.

Legal Standard
This

Court

“may

accept,

reject,

or

modify

the

recommended disposition” and “must determine de novo any part of
the magistrate judge’s disposition that has been properly objected
to.”

FED. R. CIV. P. 72.

To withstand a motion to dismiss, a

complaint must contain factual allegations that “‘state a claim to
relief that is plausible on its face.’”

Ashcroft v. Iqbal, 556

U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.
Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007)).

2

III. The Claim, the R&R, and State Farm’s Objections
The Complaint alleges violations of New York General
Business Law (“GBL”) Section 349.1

(Compl., D.E. 1, ¶¶ 45, 48.)

Section 349 states that “[d]eceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing of
any service are . . . unlawful.”

N.Y. GEN. BUS. LAW § 349(a).

Section 349(h) allows a person who has been injured to bring an
action to enjoin the unlawful practice, to recover damages, or
both.

“‘To state a claim under GBL § 349, a plaintiff must prove

three elements: first, that the challenged act or practice was
consumer-oriented; second, that it was misleading in a material
way; and third, that the plaintiff suffered injury as a result of
the deceptive act.’”

Gold v. Shapiro, Dicaro & Barak, LLC, No.

18-CV-6787, 2019 WL 4752093, at *9 (E.D.N.Y. Sept. 30, 2019)
(quoting Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473,
490 (2d Cir. 2014)); see also City of N.Y. v. Smokes-Spirits.Com,
Inc., 12 N.Y.3d 616, 621, 911 N.E.2d 834, 883 N.Y.S.2d 772 (2009)
(“To successfully assert a section 349 (h) claim, a plaintiff must
allege that a defendant has engaged in (1) consumer-oriented
conduct that is (2) materially misleading and that (3) plaintiff
suffered injury as a result of the allegedly deceptive act or
practice.”).

On June 6, 2019, MVB withdrew its claims for violations of New
York State Insurance Law. (Letter, D.E. 15, at 1.)
1

3

State Farm’s “photo-estimating” tool allows insureds to
submit photographs of vehicle damages and from the photographs,
provides estimates of the cost of repairs.

State Farm issues

payments without an appraisal by a professional automobile body
repair shop. (Compl. ¶ 4.) MVB alleges that State Farm’s practice
of

“photo-estimating”

was

adopted

with

State

Farm’s

“express

knowledge that a significant number of insureds or claimants will
accept the [insurance] payment without ever having the vehicle
inspected by a professional repair facility such as [MVB], thereby
saving [State Farm] millions of dollars.”

(Compl. ¶ 4.)

MVB

alleges that this practice is “ineffective . . . does not meet
industry standards . . . [and t]he deception starts with a photo
that does not account for safety and liability standards.” (Compl.
¶ 5.)

Essentially, MVB argues that the process harms consumers

and MVB’s business.
In its motion, State Farm argues that MVB fails to allege
(1)

deceptive

acts

directed

at

consumers,

(2)

that

photo-

estimating is a deceptive act misleading in a material way, and
(3) any injury caused by deceptive acts.

(Def. Mem., D.E. 22, at

6, 8, 11.)
A.

Consumer Oriented Acts
The

R&R

found

that

MVB

sufficiently

pled

consumer

oriented conduct to survive a motion to dismiss, as there is “no
doubt

that

a

program

offered

to
4

consumers

via

‘television

advertisements and other methods’ is consumer oriented.”
at 6.)

(R&R

It further found that the Complaint “focusing entirely

upon the harm to insureds” was sufficient.

(R&R at 7.)

State Farm first objects because MVB does not allege
that it has a contractual relationship with State Farm.

However,

the consumers impacted by the photo-estimating tool are in a
contractual relationship with State Farm, and MVB has alleged
consumer-oriented harm.

See M.V.B. Collision, Inc. v. Allstate

Ins. Co., No. 07-CV-0187, 2007 WL 2288046, at *4 (E.D.N.Y. Aug. 8,
2007) (where MVB brought a Section 349 action against Allstate
insurance company for pressuring MVB into accepting lower labor
rates,

the

complaint

sufficiently

alleged

consumer-oriented

conduct where it “relate[d] to a number of policyholders who either
are, or potentially could be, [MVB] customers, all of whom are
subject to Allstate’s standard form insurance policy”).
State Farm next argues that the Complaint does not allege
specific examples of advertising and is thus insufficient to
establish a large marketing scheme.

(Def. Obj. at 6-7.)

However,

“[t]he consumer-oriented requirement may be satisfied by showing
that the conduct at issue potentially affects similarly situated
consumers” and “has been construed liberally.”

Gold, 2019 WL

4752093 at *10 (internal quotation marks and citations omitted).
Here, the Complaint alleges a “massive scheme whereby [State Farm]
encourages through television advertisements and other methods and
5

attempts to convince insureds . . . to agree to the photoestimating.”

(Compl. ¶ 5.)

It also references the “photo-

estimating app” used by insureds when their vehicles are damaged.
(Compl. ¶ 12.)

Allegations of a large-scale advertising campaign

and consumers’ use of an “app” are sufficient at the pleading stage
to allege consumer-oriented conduct because it demonstrates that
consumers are aware of, and using, the photo-estimating tool.
Accordingly, State Farm’s objections on this point are overruled,
and the Court finds the Complaint adequately alleges consumeroriented conduct.
B.

Deceptive Acts
The R&R concludes that MVB’s general allegation that the

program misled consumers about the extent of the damage to their
vehicles,

“coupled

with

MVB’s

allegations

describing

three

instances where the . . . [p]rogram provided estimates dramatically
less

than

the

sufficiently
practice.

supplemental

alleges

a

in

person

deceptive

or

estimates
materially

received”
misleading

(R&R at 8-9.)
State

Farm

argues

that

the

Complaint’s

examples

of

insureds all allege that the photo-estimates were lower than the
subsequent professional appraisal, and that State Farm further
compensated these insureds after the in-person appraisal.

Thus,

according to State Farm, it is “unclear how there can be a
plausible inference of deception alleged when the insureds were
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all fully compensated.”
the mark.

(Def. Obj. at 7-8.)

This argument misses

A fair reading of the Complaint demonstrates that MVB

alleges that consumers who do not ultimately follow up with inperson estimates are deceived and underpaid.

This allegation,

combined with specific examples of drastic under-evaluations from
the photo-estimates, is sufficient to allege deceptive conduct.
It would be difficult to ascertain, at the pleading stage, the
disparity in estimates from insureds who did not follow up with a
professional estimate.

State Farm’s objections on this point are

thus overruled, as the Complaint alleges deceptive conduct.
C.

Injury
Lastly, the R&R finds that although MVB has not claimed

direct injury in the Complaint, “a non-consumer plaintiff has
standing to pursue a Section 349 claim when the gravamen of the
[C]omplaint is consumer injury or harm to the public interest and
plaintiff alleges conduct that has significant ramifications for
the

public

at

large.”

(R&R

quotation marks omitted).)

at

10

(citing

cases)

(internal

The R&R concludes that the Complaint

adequately alleged harm to the public interest and thus, to MVB.
State

Farm

again

argues

that

the

insureds

in

the

Complaint were fully compensated because they followed up with inperson appraisals and State Farm paid their claims.

For the same

reasons discussed above with respect to deceptive acts, this
argument is without merit.
7

State Farm also contends that MVB must “allege its own
harm”

and

receiving

that
full

its

“speculation

repairs

.

.

.

about
does

unknown

not

insureds

constitute

not

factual

allegations of how it has been harmed by State Farm’s alleged
conduct.”

(Def. Obj. at 8.)

However, “[a]lthough the statute is,

at its core, a consumer protection device, corporate competitors
have standing to bring a claim under this statute so long as some
harm to the public at large is at issue.”

Wolo Mfg. Corp. v. ABC

Corp., 349 F. Supp. 3d 176, 209 (E.D.N.Y. 2018) (internal quotation
marks and citations omitted; alterations omitted).
Here,

though

MVB

is

not

alleging

it

is

a

direct

competitor of State Farm, it has adequately alleged that State
Farm’s

consumer-oriented

deceptive

acts

have

harmed

MVB

by

“depriving [MVB] of the opportunity to repair certain vehicles.”
(Compl. ¶ 10.)

MVB also alleges that State Farm “reward[s] [ ]

employees and/or independent contractors who purposely undervalued
the cost of repairs.”

(Compl. ¶ 44.)

The Complaint thus contains

conduct that harms MVB’s business and the public at large, and
sufficiently

alleges

injury.

“[C]ontrary

to

[State

Farm]’s

assertions, the fact that [MVB] is a business--not an individual
consumer--and stands to lose potential revenue as a result of
[State Farm]’s challenged conduct does not undermine its ability
to bring a claim pursuant to Section 349.”

8

M.V.B. v. Allstate,

2007 WL 2288046 at *4.

State Farm’s objections are overruled on

this point.
IV.

State Farm’s General Objection to R&R Legal Standard
State Farm also lodges a general objection to the R&R’s

passing reference to “notice pleading.”

(Def. Obj. at 3-5.)

The

Court finds that the R&R recites the correct standard for a motion
to dismiss and applies it for each element.

In any event, the

Court has conducted an independent review of the Complaint and
finds that it contains sufficient factual allegations to state a
plausible General Business Law claim.
V.

Conclusion
For the reasons set forth above, State Farm’s objections

are OVERRULED and the R&R (D.E. 29) is ADOPTED in its entirety.
Accordingly, State Farm’s motion to dismiss (D.E. 21) is DENIED.

SO ORDERED.

/s/_JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated: February
20 , 2020
Central Islip, New York

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