United States District Court, D. Minnesota
Safelite Group, Inc. and Safelite Solutions, LLC, Plaintiffs,
Michael Rothman, in his official capacity as Commissioner of the Minnesota Department of Commerce, Defendant.
Lefkowitz, Christian R. Reigstad, and Steven J. Menashi,
Kirkland & Ellis, John E. Iole, Jones Day, Emily Unger
and Richard D. Snyder, Fredrikson & Byron, for
J. Larson and Michael J. Tostengard, Minnesota Attorney
General's Office, for Defendant.
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, UNITED STATES DISTRICT COURT JUDGE
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.
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].)
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
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.)
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.)
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.”).
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.)
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.)
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.)
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.)
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.)
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.)
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
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.
Motion for Attorneys' Fees
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.
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
Kirkland & Ellis, LLP
$1, 675, 821.31
Fredrikson & Byron, P.A.
$1, 912, 551.06