In an action expected to have major impacts on the huge automobile-insurance and body-repair industries, the Supreme Court yesterday nullified a decision allowing insurers to set the hourly rates they will pay body-repair shops.
The justices sent the case back to the U.S. Court of Appeals here for further consideration "in light" of last week's ruling that the antitrust immunity granted to insurance companies does not extend to anticompetitive agreements they enter into to provide goods or services.
Although that ruling directly invalidated only agreements with pharmacies under which policyholders need pay only $2 for a prescription, the court specifically included auto-body repair in a broad array of arrangements that don't have the antitrust immunity provided for the "business of insurance" under the McCarran-Ferguson Act of 1945.
The auto-body case began a decade ago when major insurers, including State Farm Mutual, Allstate and Liberty Mutual, began to try to hold down the cost of damage claims by abandoning the traditional policy of negotiating prices with body shops.
They substituted a new policy of setting the prices to be paid, based on their own determinations of "prevailing" wage rates in particular areas, the number of hours required and the discounts shops get on repair parts.
To implement the new policy, the insurers set up drive-in facilities to make damage estimates on driveable vehicles. They also channeled business to so-called "captive" shops that agreed in advance to accept, sight unseen, insureres' estimates.
Four auto-body repair shops, including the former Old Dominion Body Shop Inc. in Alexandria, sued, charging that insurers were using coercive tactics that amounted to an illegal group boycott of shops that would not succumb to their tactics. They alleged that the seting of hourly wage rates was a conspiracy to fix prices that was not protected by the 1945 law.
In December 1975, U.S. District Judge John H. Pratt, without allowing the dispute to go to a jury, granted the insurers' motions for summary judgment on the grounds that the practices complained about are "an integral part" of the "business of insurance" and are subject to state regulation.
In June 1977, a divided appeals court affirmed. The dissenter, Circuit Judge J. Skelly Wright, said that the case should have gone to a jury -- an issue not reached by the Supreme Court yesterday.
In a blow to the booming Century 21 Real Estate Corp., the court summarily affirmed a decision upholding a Nevada Real Estate Advisory Commission regulation that in an advertisement, a franchised broker must give his firm's name the same prominence as the franchiser's.
The afirmance clears the way for other states to enact similar regulations, which many brokers likely will urge them to do.
The decision was handed down by a panel of three federal judges that rejected Century 21's claim that the regulation infringed upon the freedom of expression guaranteed by the U.S. Constitution.
Starting in 1971, Century 21 has waged a nationwide campaign to promote its service-mark -- a modern building logo bordered at the top with the worlds "Century 21." In any given display, the service mark occupies 80 percent of the surface area. By July 1976, the company had licensed more than 2,000 brokers in 40 states to use its trade name and service mark.
In addition to ruling that the regulation didn't violate the First Amendment, the panel held that the 50-50 requirement didn't deny the constitutional guarantees of due process of law and the equal protection of the laws, didn't unduly burden interstate commerce, and didn't inpermissibly dilute a service mark protected by a federal law.