Williams v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 01 July 2022 |
| Docket Number | 20-cv-01121 |
| Citation | 609 F.Supp.3d 662 |
| Parties | Alton WILLIAMS, Brandon Herndon, Markus Tolson, Jeffrey Flowers, Brooke Cluse, Vvonaka Richardson, and Vera Dixon, on behalf of themselves and all others similarly situated, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., State Farm Life Insurance Co., State Farm Fire and Casualty Co., State Farm General Insurance Co., and State Farm Bank, F.S.B., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Linda Debra Friedman, Suzanne E. Bish, George S. Robot, Stowell & Friedman, Ltd., Chicago, IL, for Plaintiffs.
Patricia Brown Holmes, Amy C. Andrews, Joseph Anthony Cancila, Jr., Sondra A. Hemeryck, Riley Safer Holmes & Cancila LLP, Chicago, IL, Erin D. Fowler, Michael A. Warner, Jr., Franczek Radelet PC, Chicago, IL, for Defendants.
Plaintiffs Alton Williams, Brandon Herndon, Markus Tolson, Jeffrey Flowers, Vvonaka Richardson, Vera Dixon and Brooke Cluse (collectively, Plaintiffs), all former or current State Farm Agents, have filed a two-count Amended Complaint against State Farm Mutual Automobile Insurance Co., State Farm Life Insurance Co., State Farm Fire and Casualty Co., State Farm General Insurance Co., and State Farm Bank, F.S.B. (collectively, State Farm), on behalf of themselves and a similarly situated class,1 alleging racial discrimination in violation of 42 U.S.C. § 1981 (Count I) and retaliation in violation of 42 U.S.C. § 1981 (Count II). R. 31, FAC.2 State Farm's Motion to Dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6) is before the Court. R. 38, Mot. Dismiss.
In this lawsuit, Plaintiffs allege that through a uniform set of firm-wide policies and practices, State Farm systematically discriminates against its African American Agents, resulting in lower pay, differential treatment, and higher rates of attrition for African American Agents. State Farm's motion presents questions about the level of pleading required to survive a motion to dismiss with respect to the intent and causation elements of a Section 1981 racial discrimination claim. While a close call, for the reasons that follow, the Court finds that Plaintiffs have done enough at this stage and denies State Farm's motion to dismiss.
State Farm Mutual Automobile Insurance Company4 is a leading auto and home insurer in the United States. FAC ¶ 1. State Farm offers insurance and financial products to customers through its network of agents across the United States. Id. ¶ 2.
Plaintiffs are African American individuals who have worked as State Farm Agents and State Farm Term Independent Contract Agents (TICA Agents). Plaintiff Alton Williams (Williams) worked as a State Farm Agent in Chicago's north side from 1999 until he was terminated on December 31, 2017. FAC ¶¶ 8, 51, 52. Plaintiff Brandon Herndon (Herndon) worked as a State Farm Agent in the Houston area from 2010 until he was terminated in March 2017. Id. ¶¶ 9, 59. Plaintiff Markus Tolson (Tolson) worked as a State Farm Agent, also in the Houston area, from October 2009 until he was terminated in approximately August 2016. Id. ¶¶ 10, 21. Plaintiff Jeffrey Flowers (Flowers) worked as a State Farm Agent in Michigan from December 2002 until approximately December 2019. Id. ¶¶ 11, 79. Plaintiff Brooke Cluse (Cluse) became a TICA Agent in 2011, signed an Agent Agreement in 2013, and is currently working as a State Farm Agent in Houston. Id. ¶¶ 88–90.
Plaintiff Vvonaka Richardson (Richardson) worked as a State Farm TICA Agent in Alabama from June 2019 until she was terminated in approximately July 2020. FAC ¶ 13. Plaintiff Vera Dixon (Dixon) worked as a State Farm TICA Agent in Virginia from June 2019 until she was terminated in approximately July 2020. Id. ¶ 14.
State Farm recruits African American individuals to join State Farm as agents through its TICA program with the promise of lucrative business opportunities and careers. FAC ¶ 25. State Farm then requires TICA agents to invest substantial sums of their own money in rent, offices, marketing, sales leads, and hiring a team. Id. TICA Agents must complete a 17-week State Farm training course before they may open an agency and begin selling insurance. Id. ¶ 26.
State Farm disproportionately assigns non-African American Agents to territories and agency locations in more affluent areas, while relegating African American agents to areas with significantly less wealth. FAC ¶ 31. State Farm also engages in "race matching," by assigning African American Agents to areas with higher African American and minority populations. Id. As a result, State Farm gives non-African American Agents a head start in their careers.
When an agent retires or leaves State Farm, State Farm reassigns the agent's customers and existing insurance policies to other agents. FAC ¶ 35. Agents who receive these assignments gain the value of the policies and any financial products the customers may have and the ongoing commissions and opportunities to grow the customers’ accounts or to gain new customers through leads and referrals. Id. Due to State Farm's policies and practices, African American agents are largely excluded from being assigned lucrative insurance policies. Id.
State Farm provides substantial compensation to its Agents pursuant to a uniform, nationwide compensation policy and practice called the "Scorecard Bonus." FAC ¶ 40. Yet State Farm intentionally selects and relies on factors that disadvantage African Americans to calculate the Scorecard Bonus paid to agents. Id. State Farm uses commissions-based and cumulative-advantage systems to evaluate and compensate its agents. Id. ¶ 41. However, because State Farm steers African American Agents to less affluent territories or assigns them to territories in which the clientele matches the agents’ race, African American Agents are at a disadvantage because many of their clientele cannot afford to purchase financial service products and purchase fewer or less expensive insurance products. Id. ¶ 42. Furthermore, State Farm targets African American Agents for compliance issues, thereby denying those agents the opportunity to offer financial products to their clients. Id. As a result, African American Agents are substantially less likely than non-African American Agents to meet the requirements of the Score Card Bonus policy. Id. ¶ 43.
State Farm also subjects African American agents to heightened scrutiny, holds them to higher compliance standards and, imposes greater discipline, including termination for alleged violations of State Farm policies. FAC ¶ 45. For instance, State Farm disproportionately denies or rescinds the right of African American agents to offer financial products. Id. ¶ 46. This restriction, in turn, limits an Agent's compensation, ability to attract and maintain customers, and makes an agent ineligible to open a second agency location or receive policy assignments. Id. Non-African American Agents’ policy violations, by contrast, are routinely ignored or result in lesser discipline, thereby allowing those agents to offer financial products. Id.
State Farm employs a centralized practice called the "Termination Review Plan." FAC ¶ 47. An agent who has been informed that State Farm intends to terminate the agent's agreement may request a termination review from State Farm's CEO. Id. A State Farm review team makes findings and/or recommendations to the CEO, who makes the final decision whether to terminate the Agent. Id. ¶ 48.
When Williams applied to open up a State Farm agency on Chicago's north side, there were two available options: one in the "prosperous" Lakeview neighborhood and the other in a more racially diverse, "working class" neighborhood further west. FAC ¶ 52. Williams requested the Lakeview location, but State Farm assigned a white agent to the more lucrative Lakeview location and gave Williams the less lucrative location further west. Id. Williams was forced to stay in his territory and was never offered a more lucrative agency or location for the rest of his time as a State Farm agent. Id.
The FAC alleges that despite excelling as an agent, because of his race, Williams was denied business opportunities and valuable business resources and support, including but not limited to policy assignments and the right to open an additional agency office. FAC ¶ 53. State Farm additionally targeted Williams for heightened, unwarranted scrutiny and ultimately terminated his employment because of his race. Around September 2017, State Farm audited Williams’ business. Id. ¶ 54. State Farm identified a small number of auto policies that had incorrect vehicle purchase dates listed on the applications. Id. State Farm charged Williams with "rate manipulation" and terminated his employment, even though any inaccuracies were the result of customer or clerical error, not intentional manipulation. Id. Significantly, the inaccuracies had no material impact on the price of the supposedly manipulated policies. Id. In contrast to Williams’ treatment, Non-African American agents who were accused of more severe "rate manipulation" were subjected to far less or no discipline by State Farm. Id. Williams participated in the Termination Review Plan, and CEO Michael Tipsord decided to terminate Williams’ relationship with State Farm. Id. ¶ 55.
On several occasions prior to his termination, Williams reported to his superiors at State Farm that he was being treated differently than his non-African American colleagues. FAC ¶ 56. For instance, Williams explained to State Farm management that there was a racial disparity in the level of compliance auditing and...
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