With a historic law overhauling California’s cash bail system on hold, bail customers on Tuesday filed a class-action lawsuit against more than 20 surety companies and agents in the state, alleging they have conspired to keep premiums high for criminal defendants.
The antitrust case, which the plaintiffs’ attorneys said could be the first of its kind in the country, alleges that the companies worked together since at least 2004 to fix prices and prevent competition in the market, discouraging bail agents from offering discounts or rebates in private meetings and messaging at industry conferences, and retaliating against those who refused.
The lawsuit was filed by four public interest groups on behalf of people who, according to the complaint, paid maximum prices for bail bonds as they sought their or someone else’s release from jail and later struggled to pay the debt. They are requesting that a judge stop the sureties from engaging in alleged “cartel pricing” practices and collecting assets on debt, according to the complaint filed in Alameda County.
They want the court to order the bail surety businesses, companies that underwrite bonds, to pay damages to alleged victims and correct all alleged misleading statements in print and online materials.
“What makes this case particularly important is that the product being fixed is not a consumer good but someone’s freedom,” said attorney Dean Harvey, who is lead counsel on the case. “It is about whether a presumptively innocent person is able to go to their job or not, take care of their children or not.”
Greg “Topo” Padilla, president of the Golden State Bail Agents Assn., one of the associations named in the lawsuit, said he had not seen the complaint and could not speak to its allegations.
But, he said, “We have fought for years to lower bail schedules, which would lower premiums. We have been stopped at every one of these attempts by the Legislature.”
Jeffrey Clayton, a spokesman for the effort and director of the American Bail Coalition, said he and his organization were reviewing the lawsuit and not prepared to comment.
Calls to other bail agents and associations named in the lawsuit were not immediately returned on Tuesday.
The lawsuit is the latest volley against a bail industry locked in a fierce battle with California lawmakers and court officials determined to abolish a system that they say has run unchecked for years and preys on the most vulnerable.
Gov. Jerry Brown last year signed a law that would prevent courts from using fixed money bail fees in releasing people from jail while their cases are pending, granting greater power to judges and county agencies to decide which defendants pose a risk to public safety. But the effort is now on hold until voters decide its fate in November 2020 — elections officials this month certified a statewide referendum backed by a coalition of bail industry associations.
Bail companies, which can continue doing business until the election, are gearing up for a campaign fight against a law that could spell extinction for their industry in California. The state holds roughly a quarter of the $2-billion market nationwide and has 3,200 registered bail agents.
Bail companies and sureties have faced civil cases in the past over allegations of malpractice and fraud, among other things. But attorneys in the suit filed Tuesday say it appears to be the first in the country that seeks to build wider conspiracy charges based on antitrust and consumer laws.
Under the current pretrial system, judges must factor in a defendant’s ability to pay as they set bail according to lists of criminal offenses and fixed fees. If a defendant is unable to post the amount in advance, a nonrefundable fee — typically a premium of 10% or less of that amount — can be paid to a bail company to front the money.
Like other insurance companies in the state, bail sureties submit their maximum premium rates to the California Department of Insurance for approval. In 1998, California voters approved a law that allowed insurers to reduce premium rates for consumers, and a state court ruling in February 2004 confirmed “rebating” was legal, allowing bail agents to charge less than those premium rates, the class-action lawsuit states.
But lawyers for the bail customers allege sureties have kept that premium rate at the maximum of 10% for most criminal defendants by concealing their industry’s option to charge lower rates and refraining from offering competitive rebates.
Since 2004, the complaint alleges, surety representatives have agreed not to compete over premium prices and have directed bail agents not to do so, using bail industry associations “as a conduit for enforcing their price-fixing cartel down to the bail agent level.”
Through blog posts and private meetings, industry-sponsored training courses and conferences, the industry keeps agents in check, the lawsuit claims. The complaint cites a course offered by the Bail Resource Center and Career Academy that teaches “the right answer on the test: no rebates.”
A defendant named Jerry Watson, vice president of AIA Surety, the country’s largest bail surety administrator, “has publicly denounced price-cutting as a cancer” on the group’s website, according to the complaint.
“Furthermore, the cartel intimidates competitors to toe the line,” the lawsuit says. “When competitors attempt to compete by offering lower rates or rebating, cartel members brand them as ‘break[ing] the law,’ despite knowing that to be false,” it says.
At the center of the case is Aladdin Bail Bonds, the largest agency in California and its surety. The lawsuit alleges that Aladdin misleads its customers by asserting on its website that its fees “are standard and nonnegotiable” as required by law.
The plaintiffs’ attorneys say they began working on the case before California state lawmakers passed Senate Bill 10 to overhaul the cash bail system. Its fate has no bearing on their complaint moving forward, they argue, because even if the state’s money bail system is eliminated, the law does not assist residents who paid inflated premiums and does not prevent surety companies from continuing to collect on debt.
The complaint could include thousands of class members — from October 2011 to October 2015 alone, it states, about 180,000 people were released on bail ahead of trial, nearly all of whom relied on commercial surety bonds.
It’s not just criminal defendants who were affected, Harvey said, but also their relatives who often posted money for the premiums and in some cases lost homes, cars and other assets in an attempt to pay sureties back.
“What I find particularly appalling about the misconduct here is that it targeted the most vulnerable people in society at their moment of greatest duress,” Harvey said.