Deluca v. Farmers Ins. Exch.

• Decision Date: 15 May 2019
• Docket Number: Case No.17-cv-00034-EDL
• Citation: 386 F.Supp.3d 1235
• Parties: David DELUCA, et al., Plaintiffs, v. FARMERS INSURANCE EXCHANGE, Defendant.
• Court: U.S. District Court — Northern District of California

386 F.Supp.3d 1235

David DELUCA, et al., Plaintiffs,

v.FARMERS INSURANCE EXCHANGE, Defendant.

Case No.17-cv-00034-EDL

United States District Court, N.D. California.

Signed May 15, 2019

Matthew C. Helland, Daniel S. Brome, Nichols Kaster, LLP, San Francisco, CA, Matthew H. Morgan, Pro Hac Vice, Reena Ishver Desai, Pro Hac Vice, Nichols Kaster & Anderson, PLLP, Minneapolis, MN, for Plaintiffs.

Andrew Marc Paley, Seyfarth Shaw LLP, Los Angeles, CA, Ryan Ashley McCoy, Seyfarth Shaw LLP, San Francisco, CA, for Defendant.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 125, 128

ELIZABETH D. LAPORTE, United States Magistrate Judge

The parties to this employee misclassification case arising under the Federal Labor Standards Act ("FLSA") and California, Michigan, and New York state law filed cross motions for summary judgment. As discussed below in great detail, the Court resolves the cross motions for summary judgment as follows:

• GRANTS Plaintiffs' motion for summary judgment on the administrative exemption and DENIES Farmers' cross motion for summary judgment on the administrative exemption.

• DENIES Plaintiffs' motion for summary judgment on willfulness.

• DENIES Plaintiffs' motion for summary judgment on liquidated damages.

• GRANTS Plaintiffs' motion for summary judgment on the calculation of FLSA damages at 1.5x.

• GRANTS Farmers' motion for summary judgment on Plaintiff Laughlin's FLSA claim.

• DENIES Plaintiffs' motion for summary judgment on the Section 203 waiting time penalties.

• DENIES Plaintiffs' motion for summary judgment on the meal period claim.

• GRANTS Plaintiffs' motion for summary judgment on the itemized wage claims under New York ( N.Y. Lab. Law § 195(3) ) and California Law ( Cal. Lab. Code § 226(a)(2) ) and the claim that Farmers failed to provide Plaintiff Laughlin with required information about the timing, method, and amount of pay when she was hired, as required by New York Labor Law § 195(1).

• DENIES Farmers' motion for summary judgment on the California unfair competition law claim.

I. FACTUAL BACKGROUND

The following facts are undisputed, except where noted. There are approximately 80 individual Plaintiffs in this case as special investigators employed by Farmers, comprised of approximately 40 named Plaintiffs and Opt-In Plaintiffs (members of the FLSA collective) and 57 Federal Rule of Civil Procedure 23 California-based class members, 17 of whom are also Opt-In Plaintiffs (collectively, "Plaintiffs"). Defendant Farmers Insurance Exchange ("Farmers" or "FIE") is an inter-insurance exchange that sells homeowners insurance, auto insurance, commercial insurance, and financial services throughout the United States. Am. Compl., ¶ 9; Am. Answer, ¶¶ 9, 10. Farmers is the only entity that employed special investigators, including all Plaintiffs and absent class members. Gendell Decl., ¶¶ 5-6 (Head Human Resources Business Partner—Claims for Farmers Group, Inc.); Ex. 8, Masuen Dep. at 37:11-16; Ex. 15, Serafin Dep. at 121:25-122:16.

A. Special Investigations Unit's Purpose and Structure

Farmers' Special Investigations Unit ("SIU") provides investigatory services to Farmers' Claims Organization ("Claims") when fraud is suspected in the submission of any insurance claim. Ex. 18, Wedding¹ Decl., ¶ 2. SIU's purpose is to "educate, identify, detect, [and] resist fraudulent payments, or attempts to defraud the company through the insurance claims process." Ex. 15, Serafin² Dep. at 123:5-8. SIU's "calculated impact" in deterring fraud is valued at approximately $50-60 million per year while it operates on a budget of approximately $28 million. Ex. 15, Serafin Dep. at 124:11-17.

In the SIU hierarchy of employees, special investigators are at the lowest level. Ex. 31, Wedding Depo. at 41:19-25. Special investigators report to SIU Managers ("SIMs")³ (5-7 in each zone), who report to five Zone Managers, who report to the SIU Director. Ex. 31, Wedding Dep. at 39:18-25. The five zones are: east, central, west, centralized support, and national. Id. at 40:19-21. According to Plaintiffs, the special investigators in this case are or were in the east, central, and west zones. Special investigators are salaried employees and, during the relevant period, no special investigator employed by Farmers in California made less than $49,920 per year and some made more than $100,000 annually. Rupert⁴ Decl., ¶ 5, Ex. 2; Francis Dep. at 96:15-20 (salary of approximately $110,000 when he left Farmers). Some Plaintiffs testified that they understood at the time they were hired that the special investigator position was overtime exempt and that they would be paid the same salary regardless of the number of hours worked. Ex. 7, Grimes Dep. at 32:16-20, 33:2-8, 35:11-21, 155:5-8; Ex. 6, Reyes Dep. at 32:7-11, 37:7-21; Ex. 4, Daszko Dep. at 51:15-18, 56:19-57:2; Ex. 21, Hsieh⁵ Decl., ¶ 3.

Out of the millions of claims for insurance benefits filed by Farmers' insureds every year, approximately 2% of those claims are referred to SIU for investigation. Ex. 15, Serafin Dep. at 122:17-123:1. The role of special investigators is to "investigate potentially fraudulent claims, resolve indicators of fraud, and to help Farmers from paying out on illegitimate claims." Ex. 19, Bear⁶ Decl., ¶ 5. They "conduct investigations into those claims, they resolve the indicators and then they report their findings to the CR [claims representative] for them to make a decision." Ex. 24, Martinez Dep. at 34:9-11. Sometimes the insurance claims they investigate involve millions of dollars. Ex. 7, Grimes Dep. at 72:12-22 (worked several claims exceeding $1 million); Ex. 4, Daszko Dep. at 145:19-146:3 (investigated $2.5 million property claim involving stolen microchips). Special investigators are expected to collaborate with their "customers," the claims representatives. Ex. 28, Page⁷ Dep. at 18:12-17. Several Farmers employees testified that investigating claims is the special investigators' main responsibility. Ex. 28, Page Dep. at 18:12-19:1 ("their primary role is to investigate claims or indicators of fraud that might be present, and they are collaborative with our claims partners"); Ex. 30, Serafin Dep. at 74:20-22 ("I think investigating is a critical core piece of what an investigator's time should be spent doing, but naturally there is [sic] other duties that are critical ... but if you were to pull the job description for an investigator, I think the core of it would be centered around the investigative activity."); Ex 24, Martinez⁸ Dep. at 34:16-24 (Q: "So would you agree with me that the main job of the special investigator is to investigate claims and report what they investigated or what they found to the claims rep?" A: "Yes.").

Plaintiff David Deluca was employed as a special investigator from approximately April 2012 to May 2014. Am. Compl., ¶ 3. He was assigned to a territory that covered Santa Clara, Contra Costa, and Alameda Counties, and he reported to offices in San Jose and Concord, California. Id. Plaintiff Barry Francis was employed as a special investigator from approximately April 2006 to June 2016. Id., ¶ 4. He was assigned to cover San Francisco, Contra Costa, and San Mateo Counties, and reported to an office in Daly City, California. Id. Plaintiff Melissa Laughlin was employed as a special investigator from approximately December 2011 to September 2014 and covered territory on Long Island, New York. Id., ¶ 5. These named Plaintiffs, as with all other special investigators, were classified as exempt employees. Am. Answer, ¶ 13.

B. Investigations Process

A claim is routed to SIU for investigation after being identified by Claims as a suspect file. Ex. 31, Wedding Dep. at 87:2-88:6. Sometimes the Claims representative will initially contact a special investigator to discuss whether a claim has fraud indicators⁹ that warrant an investigation and other times the Claims representative will submit the claim through a system called the assignment manager. Id.; Ex. 6, Reyes Dep. at 68:17-70:1 (describing situation where Claims representative would call to obtain his opinion on whether a claim had a fraud indicator and should be referred to SIU for investigation). If the claim is routed through the assignment manager, that manager system assigns the file to a special investigator based on their proximity to the claim, who then reviews the file to determine whether an investigation is warranted and if s/he is the person who will conduct the investigation. Ex. 31, Wedding Dep. at 88:7-22. A special investigator does not need to accept every claim that is referred to the SIU. Ex. 25, Masuen¹⁰ Dep. at 61:10-12 ("It's the investigator's job to take a look at that file and see if they think we can have any impact on that claim."); Ex. 22, Newell Decl., ¶ 6; Ex. 21, Hsieh Decl., ¶ 15 ("the decision to decline SIU involvement is my own" and she does not need to confer with her SIM before declining a file). At times, a special investigator may close a file mid-investigation because s/he decided that the claim did not warrant SIU involvement. Ex. 2, Francis Dep. at 85:17-25.

Once they have the file, special investigators contact the claim representative early on to consult about an investigation plan. Ex. 28, Page Dep. at 31:15-32:1. SIMs do not officially approve an investigation plan once it is drafted, although SIMs generally initially review them. Id. at 32:2-7. Each claim is unique and special investigators have "the freedom to tailor their tasks to that claim." Ex. 13, Newell Dep. at 86:6-17. Plans are subject to change depending on whether developments in the investigation warrant a new direction. Ex. 6, Reyes Dep. at 75:20-76:23 (may need to make mid-investigation changes to the plan but would not need to seek approval first from Claims representative or SIM).

An investigation plan may include one or more of the following tasks: running background reports; taking detailed in-person statements; canvassing the relevant cite; following up with...