Jammal et al v. American Family Insurance Company et al

Filing 137

Memorandum Opinion and Order granting plaintiffs' Motion for class certification (Related Doc #119 ). Judge Donald C. Nugent 3/2/16(C,KA)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

WALID JAMMAL, et al.,
Plaintiffs,
v.
AMERICAN FAMILY INS. GROUP, et al.,
Defendants.

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CASE NO. 1: 13 CV 437

JUDGE DONALD C. NUGENT
MEMORANDUM OPINION
AND ORDER

This matter is before the Court on the Plaintiffs’ Motion for Class Certification. (ECF
#119). Defendants filed Brief in Opposition, and Plaintiffs filed a Reply in support of the
motion. (ECF #125, 130). For the reasons that follow, Plaintiff’s Motion is GRANTED.

I. PROCEDURAL AND FACTUAL BACKGROUND
This action was originally filed in February of 2013 by named Plaintiffs Walid Jammal
and Dana LaRiche on behalf of themselves and all others similarly situated. (ECF #1). A First
Amended Complaint was filed in April of 2013, adding additional named Plaintiffs. (ECF #21).
Defendants filed a motion to dismiss, (ECF #31), which this Court denied. (ECF #42). A

Second Amended Complaint was filed in June of 2014, removing certain named Plaintiffs, and
adding one additional. (ECF #67). Defendants filed separate Motions for Summary Judgment as
to Plaintiff Jammal, Plaintiff Durachinsky, Plaintiff Tuersley, and Plaintiff Garrett’s claims on
September 10, 2014. (ECF # 70, 75, 77, 79). The Court granted summary judgment to
Defendants on Ms. Tuersley’s claim for breach of fiduciary duty, on statute of limitations
grounds. Summary judgment was denied as to all other claims and all other Plaintiffs. (ECF #
114). In October of 2015, Defendants filed yet another dispositive motion, seeking partial
summary judgment dismissing all claims asserted by named Plaintiffs Jammal and Tuersley, and
dismissing Count Four as to named Plaintiffs Durachinsky and Garrett. (ECF # 123). That
motion was denied. (ECF #132).
The Second Amended Complaint alleges that Defendants attempted to avoid compliance
with the requirements of the Employee Retirement Income Security Act (“ERISA”) by
mislabeling its sales people as “independent contractors” while treating them for all practical
purposes as employees. The Complaint alleges that Plaintiffs were all “employees” as defined
by ERISA, and as employees, were denied the benefits they were entitled to under Defendants’
(“American Family”) ERISA governed insurance and retirement plans. (ECF # 67). According
to the Complaint, the Plaintiffs in this case were all insurance agents hired by American Family
to sell the company’s insurance products (including home, auto, life, umbrella, business, health,
and farm and ranch insurance policies) and retirement products.1 (ECF #67, ¶ 3). Defendants
allegedly promised Plaintiffs that they would be treated as “independent contractors,” but
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The Court makes no determination as to the truthfulness of the allegations set forth in the
Second Amended Complaint, nor does it make any determination with regard to currently
disputed facts as argued by the parties.
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instead retained the right to exercise control over the manner and means by which they
conducted every material aspect of their business. (ECF #67, ¶ 4, 5). For example, the
Complaint alleges that American Family owns the agents’ books of business; requires its agents
to sell exclusively American Family products; controls the office hours and locations of the
agents; controls hiring and firing of office staff; controls the conduct of the agents and their staff
in the office; controls advertising, signage, compensation, production requirements, and policy
holder information; and provides and monitors agents and their staff’s use of computer hardware
and software. (ECF #67, ¶ 6). The agents are hired for an unlimited period of time, in an “atwill” relationship wherein both American Family and the agents have the ability to terminate the
relationship at any time, for any or no reason. (ECF #67, ¶ 7).
American Family offers the agents “Termination Benefits” which provide agents with
death and pension benefits using a formula based on years of service and the number of in-force
policies sold by the agent over time. (ECF #21, ¶ 8). American Family does not recognize the
Termination Benefits as an ERISA benefit plan, and allegedly often terminates agents before
these offered benefits actually vest. (ECF #21, ¶ 10).
Plaintiffs claim that they qualify as employees under ERICA and that American Family
misclassified them as independent contractors. As a result they allege that they did not receive
benefits they would have been due under ERISA, including retirement benefits and health, life,
disability and dental plans paid to properly classified employees at the company.

II. DISCUSSION

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A. Standard of Review
The plaintiff bears the burden of proof in arguing that a potential class should be
certified. General Tel. Co. v. Falcon, 457 U.S. at 161; Senter v. Gen. Motors Corp., 532 F.2d
511, 522 (6th Cir. 1976). “The class determination generally involves considerations that are
‘enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.’” Coopers &
Lybrand, 437 U.S. at 469 (quoting Mercantile Nat’l Bank at Dallas v. Langdeau, 371 U.S. 555,
558 (1963)). Therefore, while a court deciding a motion for class certification does not seek to
resolve the merits of the claims, the required analysis often “will entail some overlap with the
merits of the plaintiffs’ underlying claim.” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541
(2011).
A court must perform a “rigorous analysis” of the requirements of Federal Rule of Civil
Procedure 23 in deciding whether to certify a class. Falcon, 457 U.S. at 147; accord Stout v.
J.D. Byrider, 47 F.3d 709, 716 (6th Cir. 2000). Rule 23 of the Federal Rules of Civil Procedure
includes four prerequisites to maintaining a class action. FED. R. CIV. P. 23(a). Members of a
class
[M]ay sue . . . as representative parties on behalf of all only if (1) the class is so
numerous that joinder of all members is impracticable, (2) there are questions of
law or fact common to the class, (3) the claims or defenses of the representative
parties are typical of the claims or defenses of the class, and (4) the representative
parties will fairly and adequately protect the interests of the class.
FED. R. CIV. P. 23(a). Thus, the named representatives may only be certified as a class under
Rule 23 if the representatives meet the requirements of numerosity, commonality, typicality, and
adequacy of representation. Assuming the requirements of Rule 23(a) are met, the class action
may be maintained only if it also meets the requirements of one of the subsections of Rule 23(b).

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FED. R. CIV. P. 23(b). Under Rule 23(b),
An action may be maintained as a class action if . . .
(1) prosecuting separate actions by or against individual class members would create a
risk of
(A) inconsistent or varying adjudications with respect to individual class members
that would establish incompatible standards of conduct for the party opposing the
class; or
(B) adjudications with respect to individual class members that, as a practical
matter, would be dispositive of the interests of other members not parties to the
individual adjudications or would substantially impair or impede their ability to
protect their interests;
(2) the party opposing the class has acted or refused to act on grounds that apply
generally to the class, so that final injunctive relief or corresponding declaratory relief is
appropriate respecting the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class
predominate over any questions affecting only individual members, and that a class
action is superior to other available methods for the fair and efficient adjudication of the
controversy.
FED. R. CIV. P. 23(b).
While the pleadings may be enough to determine “whether the interests of the absent
parties are fairly encompassed within the named plaintiff’s claim . . . sometimes it may be
necessary for the court to probe behind the pleadings” before deciding the issue of certification.
Falcon, 457 U.S. at 160. Thus, it is appropriate for the Court to look not only to the pleadings
but also to additional exhibits and information submitted by the parties in deciding the motion
for certification.

B. Analysis
There are three classes proposed class in this case, two relating to termination benefits, and
one relating to Health/Dental/Life/Disability benefits:

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(1) Termination Benefits Class: Each person who signed an American Family
Agent Agreement and (1) was an active agent as of February 28, 2013, or (2) is a
former agent whose Agent Agreement was terminated on or after February 8, 2007.
(2) Termination Benefits Breach of Fiduciary Duty Class: Each person who signed
an American Family Agent Agreement and (1) was an active agent as of February
28, 2013, or (2) is a former agent whose Agent Agreement was terminated on or after
February 8, 2010.
(3) Termination Benefits Class: Each person who signed an American Family
Agent Agreement and (1) was an active agent as of February 28, 2013, or (2) was a
former agent whose became a full-time American Family Agent and came off an
agent financing program on or after February 28, 2007.
(ECF #119, at 8).
Plaintiffs allege that these classes meet the requirements of Rule 23(a) and all three sections
of 23(b). Defendants do not contest that the numerosity, ascertainability, and adequacy requirements
for class certification are met in this case. Defendants argue, however, that Plaintiffs have failed to
demonstrate commonality for any of the proposed classes, and that the named Plaintiffs do not
satisfy the typicality requirement. Further, Defendants contend the alleged need for individual
factual inquiries and findings preclude eligibility under any of the provisions of Fed. R. Civ. P.
23(b).
A. Commonality
“The commonality requirement is satisfied if there is a single factual or legal question
common to the entire class.” Powers v. Hamilton Cty. Public Defender Comm’n, 501 F.2d 592, 618
(6th Cir. 2007); see also Whirlpool Corp. Front-Loading Washer Product Liab. Litig., 722 F.3d 838,
850 (6th Cir. 2013). “Commonality does not require that all class members share identical claims
and facts.” Siding and Insulation Co. v. Combined Ins. Grp. Ltd., Inc., No. 1:11-CV-1062 at 4
(N.D. Ohio April 23, 2012). The commonality inquiry focuses on “whether a class action will

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generate common answers that are likely to drive resolution of the lawsuit.” In re Whirlpool, 722
F.3d at 852.
Plaintiff argues that there are four questions common to the class: (1) whether American
Family misclassified its agents as independent contractors rather than employees; (2) whether
American Family’s Plans violate ERISA; (3) whether American Family breached its fiduciary duty
to ERISA beneficiaries; and (4) whether the agents are “participants” under the terms of American
Family’s health and other welfare benefits. (ECF #119, at 10). Defendant appears to agree that the
first question, whether the agents were misclassified, is a common question upon which all of
Plaintiffs’ claims rely. (ECF #125, at 7). This should be enough under Powers and Whirlpool to
establish commonality.
Defendants argue that this common question is insufficient to establish the commonality
requirement under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), however, because the
question is not capable of class wide resolution. In order to determine employment status under
ERISA, courts are instructed to look at the degree to which the hiring party retains the right to
control the manner and means by which the service is accomplished. Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318, 320-21 (1992). The question of whether American Family retained the right
to control its agents should be class wide. Indeed, Plaintiff cites to several company documents,
allegedly applicable to all class members, that it believes evidence the company’s policy of retaining
the right to control means and manners of the agents service. Defendants argue that in order to show
misclassification, however, the company must not just retain the right to control, but also exercise
it. They further argue that deposition testimony shows the exercise of this alleged right was not
uniform among the class members.

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Nothing in Darden requires proof of the universal exercise of control over service providers
by a hiring party in order to establish that those providers are employees for purposes of ERISA.
The cases cited by Defendants in attempt to establish such a requirement do not support this
contention, Plaintiffs have cited several cases where ERISA misclassification cases have been
certified on the because there was a common question regarding the employee status of workers.
See, e.g., In re Fedex Ground Packaging Sys., Inc., 2007 WL 3027405 (N.D. Ind. Oct. 15,
2007)(“This argument confuses the test: it isn’t the actual practice of who and how FedEx
terminates, but rather whether FedEx reserved the right to terminate drivers at will); Swigart v. Fifth
Third Bank, 288 F.R.D. 177 (S.D. Ohio 2012)(“courts routinely certify misclassification cases with
similar common questions because the central question of whether the employees were wrongfully
classified.... is common to the class.”). Further, the Sixth Circuit has explicitly denounced such a
requirement in the context of the Federal Insurance Contributions Act, and the Federal
Unemployment Tax Act, both of which utilize an employment test that is similar to the ERISA
employment test. Peno Trucking , Inc. v. C.I.R., 296 F.App’x 449, 456 (6th Cir. 2008). Further, any
claim that American Family did not retain the right to control the agents is clearly disputed and
cannot be used a basis for denying class certification. For these reasons, the Court finds that
Defendants’ arguments on this point are not supported by the applicable case law. Plaintiffs have
met the requirements for commonality under Fed. R. Civ. P. 23(a).
B. Typicality
Defendants’ case against typicality generally re-states the same arguments raised under the
commonality issue. For the same reasons, these arguments fail. “A claim is typical if it arises from
the same event or practice or course of conduct that gives rise to the claims of the other class

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members, and if his or her claims are based on the same legal theory.” Beattie v. CenturyTel, Inc.,
511 F.3d 554, 561 (6th Cir. 2007). The Court finds that the named Plaintiffs have claims that are
typical of the class members. All of the Plaintiffs have the same claims, which will be determined
based on a common question: were the agents mis-classified as independent contractors rather than
employees. Further, as set forth above, Plaintiffs are relying, in large part, on common documents
and allegedly universal corporate policies to prove their case.
With regard to the statute of limitations argument, Defendants claim that the statute of
limitations issues will play out differently for different members of the class, and, therefore, the
named plaintiffs claims cannot be typical of the class. This Court has held already that the claims
arising under the termination benefits plans could not have arisen until after the Plaintiffs were
entitled to the payment of benefits and failed to receive them. It appears that all of the class
members for the termination benefits claims, by virtue of the class definition, are within the statute
of limitations on those claims. Further, the only statute of limitations issue that exists with regard
to the other benefits claims is whether time in training should count against the statute of limitations.
This issue can also be resolved on a class wide basis and does not, therefore, preclude typicality.
C. Fed. R. Civ. P. 23(b)
To certify a class, the Court must also find that one of the requirements of Rule 23(b) has
been met. Fed. R. Civ. Pro. 23(b) states that even if Rule 23(a) requirements are satisfied, a class
action may be maintained only if:
(1)

prosecuting separate actions by or against individual class members would
create a risk of:
(A)

inconsistent or varying adjudications with respect to individual class
members that would establish incompatible standards of conduct for
the party opposing the class; or
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(B)

adjudications with respect to individual class members that, as a
practical matter, would be dispositive of the interests of the other
members not parties to the individual adjudications or would
substantially impair or impede their ability to protect their interests;

(2)

the party opposing the class has acted or refused to act on grounds that apply
generally to the class, so that final injunctive relief or corresponding
declaratory relief is appropriate respecting the class as a whole; or

(3)

the court finds that questions of law or fact common to class members
predominate over any questions affecting only individual members, and that
a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.

Fed. R. Civ. Pro. 23(b). Plaintiffs contend that, in fact, all three requirements are met in this
case.
1. Fed. R. Civ. Pro. 23(b)(1)
“[A] class action is appropriate under [23(b)(1)(A)] when the party is obliged by law to treat
the members of the class alike.” Pipefitters Local 636 Ins. Fund, 654 F.3d 618, 633 (6th Cir. 2011).
Defendants argue that in this case Plaintiffs “have not and cannot show that defendants are legally
obligated to treat all agents as either independent contractors or “employees” under ERISA.”
However, this really challenges Plaintiffs’ eventual ability to successfully prove their case, rather
than testing the validity of the class allegations. Plaintiff has alleged that all agents within the
defined class periods and descriptions were “employees” as defined by ERISA because American
Family, as a matter of universal policy, retained the right to control the manner and means by which
the agents provided their service to the company. If they can prove this at trial, Defendants would
indeed be legally required, under Darden, to treat all of those class members as employees under
ERISA, whether or not the right to control was exercised as to each and every agent in the class.
Further, although Defendants also argue that an employer may be allowed to distinguish
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between groups or categories of employees, that has never been the issue in this case. There are no
allegations that certain categories of agents are employees that were somehow properly exempted
from benefits. Defendants have always contended and continue to argue that agents are independent
contractors not subject to ERISA; Plaintiffs argue otherwise. If a jury finds that they are employees,
Defendants will have a legal obligation under ERISA that applies equally to all class members; if
the jury finds they have been properly classified as independent contractors, Defendants will have
no ERISA obligations to any of the class members. Therefore, class certification is appropriate
under Rule 23(B)(1)(a).2
2. Fed. R. Civ. Pro. 23(B)(2)
Defendant has not directly addressed Plaintiffs argument that Section 23(B)(2) also provides
a road to certification in this case. For the reasons set forth above, it appears obvious that if
Plaintiffs can prove their allegation that American Family agents were employees under ERISA,
then classifying those agents as independent contractors and denying them benefits is an act that
applies generally to the class, and “final injunctive relief or corresponding declaratory relief” if
appropriate, would be appropriate for the class as a whole. This is all that is required under Section
23(B)(2).
3. Fed. R. Civ. Pro. 23(B)(3).
It is not necessary to find that common questions predominate in this case because class
certification is appropriate under both Fed. R. Civ Pro. 23(B)(1) and (2). However, it appears that

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Other courts have also found that cases alleging misclassification of employees under
ERISA are appropriate for class certification under this section of the Rule. See, e.g.,
Kanawi v. Bechtel Corp., 254 F.R.D. 102, 111 (N.D. Cal. 2008); Kolar v. Rite Aid Corp.,
No. 01-1229, 2003 WL 1257272, *3 (E.D. Pa. March 11, 2003).
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section 23(B)(3) would also justify class certification in this instance. For a class action to be
maintained under Rule 23(b)(3), the court must find that “questions of law or fact common to the
members of the class predominate over any questions affecting only individual members.” FED. R.
CIV. P. 23(b)(3). Further, the court must find that “a class action is superior to other available
methods for the fair and efficient adjudication of the controversy.” FED. R. CIV. P. 23(b)(3).
According to the Supreme Court,
[T]he predominance requirement of Rule 23(b)(3) is similar to the requirement of
Rule 23(a)(3) that “claims or defenses” of the names representatives must be “typical
of the claims or defenses of the class.” The words “claims or defenses” in this
context . . . “manifestly refer to the kinds of claims or defenses that can be raised in
courts of law as part of an actual or impending law suit.”
Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623 n.18 (1997) (citing Diamond v. Charles, 476 U.S.
54, 76-77 (1986) (O’Connor, J., concurring in part and concurring in judgment)). Further, while
“[s]ubdivision (b)(3) parallels subdivision (a)(2) in that both require that common questions exist
. . . subdivision (b)(3) contains the more stringent requirement that common issues ‘predominate’
over individual issues.” In re Am. Med Sys., Inc. 754 F.3d at 1084 (quoting 1 Newberg, supra,
§3.10, at 3-56). Essentially, “[t]he Rule 23(b)(3) predominance inquiry tests whether proposed
classes are sufficiently cohesive to warrant adjudication by representation.” Amchem, 521 U.S. at
623.
When a court determines whether common issues predominate, it “‘is under a duty to
evaluate the relationship between the common and individual issues’ . . . and determine the relative
weight and importance of the common and individual issues.” Rockey v. Courtesy Motors, Inc., 199
F.R.D. 578, 588 (W.D. Mich. 2001) (quoting 7A Charles Alan Wright, Arthur R. Miller, and Mary
Kay Kane, Federal Practice and Procedure: Civil, § 1778 at 518 (2d ed. 1986)). A finding of

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predominance does not require the Court to determine that no individual issues exist amongst the
class members, only that the common issues predominate.
The Court finds based on the totality of the record, thus far, that common issues do indeed
predominate in this instance. There is one predominate question in this case that even Defendants
have acknowledged must be decided before any other issues can be addressed, and that is whether
American Family agents are employees under ERISA. Under the requirements of Darden, Plaintiffs
need only show that American Family retained the right control the manner and means of the
agents’service, and Plaintiff has alleged that there are documents common to all class members and
universal policies that affected all class members equally, which are sufficient to prove this point.
The truth of this allegation will determine the primary issue of the proper ERISA classification for
every class member, and nearly every remaining issue will necessarily be determined by that answer.
Therefore, this common issue of classification predominates over any individual issues that exist in
this case, and class certification would also be appropriate on these grounds.

III. CONCLUSION
For the reasons stated above, the Court finds that class certification should be granted in this
instance. The Plaintiff’s Motion for Class Certification is, therefore, GRANTED. IT IS SO
ORDERED.
/s/ Donald C. Nugent
DONALD C. NUGENT
United States District Judge
DATED: March 2, 2016

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