Ferguson v. Texas Farm Bureau et al

BRIEF regarding 45 MOTION to Dismiss Rule 12

W.D. Tex.May 30, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION CHRISTOPHER FERGUSON, Individually and on Behalf of All Others Similarly Situated, Plaintiff, V. TEXAS FARM BUREAU BUSINESS CORPORATION, TEXAS FARM BUREAU CASUALTY INSURANCE COMPANY, TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY, TEXAS FARM BUREAU UNDERWRITERS, FARM BUREAU COUNTY MUTUAL INSURANCE COMPANY OF TEXAS, SOUTHERN FARM BUREAU LIFE, INSURANCE COMPANY, and TEXAS FARM BUREAU, Defendants. § § § § § § § § § § § § § § § § § § § § § § § CIVIL ACTION NO. 6:17-CV-00111 COLLECTIVE ACTION JURY TRIAL DEMANDED BRIEF IN SUPPORT OF THE TEXAS FARM BUREAU DEFENDANTS’ RULE 12 (B)(6) MOTION TO DISMISS Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 1 of 19 TABLE OF CONTENTS I. SUMMARY OF ARGUMENT .........................................................................................1 II. MOTION TO DISMISS STANDARD .............................................................................2 III. ARGUMENTS & AUTHORITIES ..................................................................................4 A. THE FLSA DOES NOT PROTECT BUSINESS ENTITIES: ..........................................4 B. AGENCY MANAGERS ARE INDEPENDENT CONTRACTORS:....................................5 1. Plaintiff Ferguson’s Position As A Licensed Professional, Seemingly Working On Behalf Of Christopher Ferguson Insurance Services, Inc., Weighs Heavily In Favor Of Finding He Was An Independent Contractor: ......................................................6 2. The Texas Farm Bureau Defendants Only Exercised Limited Control, Consistent With An Independent Contractor Relationship: ...............................................................................................8 3. The Parties’ Clearly Intended To Create An Independent Contractor Relationship:...........................................................................9 C. THE TWO-YEAR STATUTE OF LIMITATIONS APPLIES: .......................................11 IV. CONCLUSION AND PRAYER .....................................................................................13 i Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 2 of 19 TABLE OF AUTHORITIES Federal Cases Christopher, 567 U.S. ...................................................................................................................................... 1 Alberty-Velez v. Corporacion de Puerto Rico Para La Difusion Publica, 361 F.3d 1 (1st Cir. 2004) ........................................................................................................... 9 Alfred v. Tennessee Farmers Mut. Ins. Co., 8 F. Supp. 2d 1024 (E.D. Tenn. 1997) .................................................................................... 5, 9 Aschroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................................................ 2, 3 Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) ............................................................... 1 Bates v. Variable Annuity Life Ins. Co., 200 F.Supp.2d 1375 (N.D. Ga. 2002) ....................................................................................... 10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................................ 2, 3, 6 Birchem v. Knights of Columbus, 116 F.3d 310 (8th Cir. 1997) .................................................................................................. 5, 7 C.C.E., Inc. v. Nat'l Labor Relations Bd., 60 F.3d 855 (D.C. Cir. 1995) ...................................................................................................... 8 Carrell v. Sunland Const., Inc., 998 F.2d 330 (5th Cir. 1993) ...................................................................................................... 1 Chao v. A-One Med. Servs., 346 F.3d 908 (9th Cir. 2003) .................................................................................................... 12 Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 132 S. Ct. 2156, 183 L. Ed. 2d 153 (2012) .......................................................... 1 Clark v. Centene Co. of Texas, L.P., 104 F. Supp. 3d 813 (W.D. Tex. 2015)..................................................................................... 11 Desimone v. Allstate Ins. Co., 2000 WL 1811385 (N.D. Cal. 2000) ...................................................................................... 8, 9 Gordon v. Birmingham News, No. CV89-PT-0436-S, 1989 WL 222730 (N.D. Ala. Jun. 27, 1989) ............................... 10, 11 Gray v. Powers, 673 F.3d 352 (5th Cir. 2012) ...................................................................................................... 6 Jenkins v. S. Farm Bureau Cas., 125 F. App'x 749 (8th Cir. 2005) ................................................................................................ 6 Knight v. United Farm Bureau Mut. Ins. Co., 950 F.2d 377 (7th Cir.1991) ....................................................................................................... 5 Lockett v. Allstate Ins. Co., 364 F. Supp. 2d 1368 (M.D. Ga. 2005) .............................................................................. 7, 8, 9 Lozano v. W. Concrete Pumping, Inc., No. 1:15-CV-1192-RP, 2016 WL 4444907 (W.D. Tex. Aug. 23, 2016) ................................ 3, 4 McLaughlin v. Richland Shoe Co., 486 U.S. 128, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988) ..................................................... 11, 12 ii Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 3 of 19 Mireles v. Frio Foods, Inc., 899 F.2d 1407 (5th Cir. 1990) .................................................................................................. 12 Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008) ................................................................................................ 12 Mumby v. Pure Energy Servs. (USA), Inc., 636 F.3d 1266 (10th Cir. 2011) ................................................................................................ 12 Oestman v. National Farmers Union Ins. Co., 958 F.2d 303 (10th Cir. 1992) .................................................................................................... 5 Orozco v. Plackis, 757 F.3d 445 (5th Cir. 2014) ...................................................................................................... 6 Ramos v. Al-Bataineh, 599 F. App'x 548 (5th Cir. 2015) .............................................................................................. 11 Reich v. Bay, Inc., 23 F.3d 110 (5th Cir. 1994) ...................................................................................................... 12 Rivero v. Midtown Towing of Miami, Inc., No. 13-CIV-22211, 2014 WL 12531510 (S.D. Fla. Dec. 8, 2014) ............................................. 4 Robinson v. Bankers Life & Cas. Co., 899 F.Supp. 848 (D.N.H. 1995) .................................................................................................. 5 Scantland v. Jeffry Knight, Inc., 721 F.3d 1308 (11th Cir. 2013) .............................................................................................. 1, 2 Schwieger v. Farm Bureau Ins. Co., 207 F.3d 480 (8th Cir. 2000) ...................................................................................................... 7 Sealey v. EmCare, Inc., No. 2:11-CV-00120, 2013 WL 164040 (S.D. Tex. Jan. 14, 2013) ......................................... 12 Simpson v. Empire Truck Lines, Inc., 571 F.3d 475 (5th Cir. 2009) ...................................................................................................... 7 Singer v. City of Waco, 324 F.3d 813 (5th Cir. 2003) .................................................................................................... 12 Stewart v. Midani, 525 F.Supp. 843 (N.D. Ga. 1981) ............................................................................................... 7 Talbert v. Am. Risk Ins. Co., 405 F. App'x 848 (5th Cir. 2010) ................................................................................................ 5 Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 105 S.Ct. 613, 83 L.Ed.2d 523 (1985) ............................................................... 11 Twombly, 550 U.S. ...................................................................................................................................... 3 United States EEOC v. Catholic Knights Ins. Soc'y, 915 F.Supp. 25 (N.D. Ill. 1996) .................................................................................................. 5 Federal Statutes 28 U.S.C. § 216 (b) ......................................................................................................................... 2 29 U.S.C. § 202(a) .......................................................................................................................... 1 29 U.S.C. § 203(e)(1) ...................................................................................................................... 4 29 U.S.C. § 207(a) .......................................................................................................................... 1 29 U.S.C. § 255(a) ........................................................................................................................ 11 iii Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 4 of 19 Federal Rules FED. R. CIV. P. 12(b)(6) ......................................................................................................... 2, 6, 13 Fed. R. Civ. P. 5(b)(2)(E) and 5(b)(3) .......................................................................................... 14 Fed. R. Civ. P. 8(a)(2) ..................................................................................................................... 3 Rule 8 of the Federal Rules of Civil Procedure .............................................................................. 2 Federal Regulations 5 C.F.R. § 551.104 ........................................................................................................................ 17 iv Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 5 of 19 Defendants Texas Farm Bureau Business Corporation, Texas Farm Bureau Casualty Insurance Company, Texas Farm Bureau Mutual Insurance Company, Texas Farm Bureau Underwriters, Farm Bureau County Mutual Insurance Company and Texas Farm Bureau (collectively, the “Texas Farm Bureau Defendants”) submit their brief in support of their Rule 12(b)(6) Motion to Dismiss Plaintiff’s Original Complaint, and would respectfully show the Court as follows: I. SUMMARY OF ARGUMENT Congress enacted the Fair Labor Standards Act (“FLSA”) in 1938 with the goal of “protect[ing] all covered workers from substandard wages and oppressive working hours.” Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 132 S. Ct. 2156, 2162, 183 L. Ed. 2d 153 (2012) (citing Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981)); see also 29 U.S.C. § 202(a). Among other requirements, the FLSA obligates employers to compensate employees for hours in excess of 40 per week at a rate of one and one-half times the employees' regular wages. Christopher, 567 U.S. at 132 (citing 29 U.S.C. § 207(a)). It is well understood, however, that the FLSA does not apply to independent contractors. See Carrell v. Sunland Const., Inc., 998 F.2d 330, 334 (5th Cir. 1993) (affirming dismissal of plaintiffs’ FLSA claims because they were independent contractors); see also Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir. 2013) (“The FLSA's overtime and minimum wage protections ... extend only to ‘employees.’”). Accordingly, several courts have held that independent agents and agency managers were independent contractors, even when they have had exclusive relationships with insurance companies. On April 20, 2017, Plaintiff Christopher Ferguson filed the instant action on behalf of himself and others allegedly “similarly situated,” claiming agency managers were Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 1 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 6 of 19 “misclassified” as independent contractors. (Doc. 1 at ¶ 3). However, given the long-standing history of agency managers being properly classified as independent contractors and the limitations on the FLSA’s application, Plaintiff is not a proper representative. As evidenced in Defendant Ferguson’s agent contracts, which were attached to his Original Complaint, Plaintiff Ferguson did not contract to perform work for the Texas Farm Bureau Defendants on his own behalf. (Doc. 1-2 at p. 1 and Doc. 1-3 at p. 1). Instead, Defendant Ferguson’s company, Christopher Ferguson Insurance Services, Inc. entered into contracts with the Texas Farm Bureau Defendants. Id. The FLSA does not protect business entities. See 28 U.S.C. § 216 (b) (FLSA action may be maintained “by any one or more employees for and in behalf of himself or themselves and other employees”). Moreover, while Plaintiff Ferguson seeks to apply a three-year statute of limitations, he has failed to plead any basis for applying the extended statute of limitations for FLSA claims, which would not apply unless a defendant acted willfully. Under Rule 8, Plaintiff’s wholly conclusory claim that Defendants acted willfully is insufficient to extend the statute of limitations. (See, e.g., Doc.1 at ¶¶ 59 and 70). Accordingly, the two-year statute of limitations period must be applied, as a matter of law. II. MOTION TO DISMISS STANDARD Following the United States Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the pleading standard under Rule 8 of the Federal Rules of Civil Procedure demands more than “unadorned accusations” that the defendants caused unlawful harm. Aschroft v. Iqbal, 556 U.S. 662, 678 (2009). In order to survive a Rule 12(b)(6) motion, a plaintiff’s complaint must state the grounds for entitlement to relief, including factual allegations sufficient to show that the claim is facially plausible. Twombly, 550 U.S. at 555-56; see also FED. R. CIV. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 2 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 7 of 19 P. 12(b)(6). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 663 (quoting Twombly, 550 U.S. at 556). A claim is not facially plausible unless the facts alleged in the complaint, taken as true, allow the court to draw a reasonable inference that defendants are liable for the misconduct alleged. Twombly, 550 U.S. 555-56; Iqbal, 556 U.S. at 663 (“Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.”) (internal citations omitted). While the court should accept as true all allegations in the complaint and the reasonable inferences that can be drawn from them, the court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 at 679. In fact, the court may disregard such legal conclusions when the complaint includes only “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Twombly, 550 U.S. at 678-79. Simply put, under Twombly and Iqbal, a pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 557. And a complaint that tenders “naked assertions” devoid of further factual enhancement will not suffice. Id.; see also Iqbal, 556 U.S. at 678. Thus, “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’ ” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). Lozano v. W. Concrete Pumping, Inc., No. 1:15-CV-1192-RP, 2016 WL 4444907, at *3 (W.D. Tex. Aug. 23, 2016) (Pitman, J.). As set forth below, Plaintiff’s Original Complaint fails to meet the most basic of pleading standards and should be dismissed as to the Texas Farm Bureau Defendants. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 3 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 8 of 19 III. ARGUMENTS & AUTHORITIES A. THE FLSA DOES NOT PROTECT BUSINESS ENTITIES: The FLSA’s protections only extend to “employees.” See 29 U.S.C. § 203(e)(1).That term is defined by the Act as “any individual employed by an employer.” Id; see also Rivero v. Midtown Towing of Miami, Inc., No. 13-CIV-22211, 2014 WL 12531510, at *6 (S.D. Fla. Dec. 8, 2014). The Texas Farm Bureau Defendants did not hire Plaintiff Ferguson. Rather, they contracted with Plaintiff Ferguson’s company, Christopher Ferguson Insurance Services, Inc., to provide services as agency manager. (See Doc. 1-2 at p. 1 and Doc. 1-3 at p. 1). As noted in the first section of the first agency contract, which was first attached to Plaintiff Ferguson’s Original Complaint (See Doc. 1-2 at p. 1): Texas Farm Bureau Casualty Insurance Company, and Farm Bureau County Mutual Insurance Company of Texas (herein called the “Companies”) hereby appoint Christopher Ferguson Insurance Services, Inc., a corporation organized and existing under the laws of the State of Texas (herein called “You,” “Your,” or “Agency Manager”), in accordance with the provisions of this Contract, to act as Agency Manager for the Companies. The company’s agency contract with Texas Farm Bureau Mutual Insurance Company and Texas Farm Bureau Underwriters also states: Texas Farm Bureau Mutual Insurance Company, and Texas Farm Bureau Underwriters (herein called the “Companies”) hereby appoint Christopher Ferguson Insurance Services, Inc., a corporation organized and existing under the laws of the State of Texas (herein called “You,” “Your,” or “Agency Manager”), in accordance with the provisions of this Contract, to act as Agency Manager for the Companies. (Doc. 1-3 at p. 1). Furthermore, each time Plaintiff Ferguson, through his company, contracted to do business with the Texas Farm Bureau Defendants, he signed as president of Chris Ferguson Insurance Services, Inc. and provided the company’s Employer ID Number. (See Doc. 1-2 at p. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 4 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 9 of 19 12; see also Doc. 1-3 at p. 13). Thus, under the agent contracts, any work Plaintiff Ferguson did for the Texas Farm Bureau Defendants was as a shareholder of Christopher Ferguson Insurance Services, Inc. (See, e.g., Doc. 1-2 at p. 8). Plaintiff Ferguson, therefore, is not entitled to the protections of the FLSA and cannot seek to be re-classified where he did not have a direct relationship with the Texas Farm Bureau Defendants and any work performed was on behalf of a separate entity, Christopher Ferguson Insurances Services, Inc. Accordingly, Plaintiff Ferguson cannot sustain a claim under the FLSA and is not a proper representative. Plaintiff Ferguson’s lawsuit should be dismissed in its entirety. B. AGENCY MANAGERS ARE INDEPENDENT CONTRACTORS: If, however, the Court declines to decide whether Plaintiff Ferguson has standing to file an FLSA claim against the Texas Farm Bureau Defendants, it is worth nothing that while not yet specifically addressed in this Circuit, other courts have held agency managers (or those with similar responsibilities) were independent contractors. Indeed, federal courts, including the Fifth Circuit, have already held that certain insurance professionals are unprotected independent contractors. See Talbert v. Am. Risk Ins. Co., 405 F. App'x 848 (5th Cir. 2010) (affirming summary judgment for employer, holding that insurance adjuster was an independent contractor); see also Birchem v. Knights of Columbus, 116 F.3d 310, 313 (8th Cir. 1997) (citing Oestman v. National Farmers Union Ins. Co., 958 F.2d 303 (10th Cir. 1992) (ADEA); Knight v. United Farm Bureau Mut. Ins. Co., 950 F.2d 377 (7th Cir.1991) (Title VII); United States EEOC v. Catholic Knights Ins. Soc'y, 915 F.Supp. 25 (N.D. Ill. 1996) (Title VII); and Robinson v. Bankers Life & Cas. Co., 899 F.Supp. 848 (D.N.H. 1995) (ADA)). Thus, it is no surprise that cases specifically addressing agency managers have also found in favor of independent contractor status. For example, in Alfred v. Tennessee Farmers Mut. Ins. Co., 8 F. Supp. 2d 1024, 1028, 1030 (E.D. Tenn. 1997), aff'd sub nom. Alfred v. Tennesee Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 5 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 10 of 19 Farmers Mut. Ins. Co., 145 F.3d 1329 (6th Cir. 1998), the court found agency managers and agents were independent contractors and noted, “An insurance agent's status as a captive agent . . . is no more determinative of the issue presented than, for example, a manufacturer's representative's agreement to market the manufacturer's products exclusively.” More recently, the Eighth Circuit, in Jenkins v. S. Farm Bureau Cas., 125 F. App'x 749 (8th Cir. 2005), affirmed judgment for Southern Farm Bureau Casualty after the court - and later a jury - found plaintiff, an agency manager, was an independent contractor. Thus, as discussed more fully below, Plaintiff has failed to state a claim because he failed to plead factual allegations sufficient to show that the claim is facially plausible as a matter of law. Id. at 555-56; Twombly, 550 U.S. at 555-56; see also FED. R. CIV. P. 12(b)(6). 1. Plaintiff Ferguson’s Position As A Licensed Professional, Seemingly Working On Behalf Of Christopher Ferguson Insurance Services, Inc., Weighs Heavily In Favor Of Finding He Was An Independent Contractor: Courts rely on the economic reality test when determining a party's status as an employer under the FLSA. Orozco v. Plackis, 757 F.3d 445, 448 (5th Cir. 2014) (citing Gray v. Powers, 673 F.3d 352, 354 (5th Cir. 2012)). Under the economic reality test, the court evaluates “whether the alleged employer: (1) possessed the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” Gray, 673 F.3d at 355 (citation and internal quotation marks omitted). Using the economic realities test, however, courts have found insurance professionals like Plaintiff Ferguson were independent contractors because the alleged employer did not exercise the necessary level of control and the individual professional was not economically dependent upon the company. The same holds true in the instant case. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 6 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 11 of 19 First, Plaintiff Ferguson’s job selling insurance is not only specialized, but also requires that he be licensed by the state of Texas. (Doc. 1-10 at ¶ 2, Section 2G). His status as a professional employee, in an industry regulated by the state of Texas, supports his classification as an independent contractor. See, e.g., Simpson v. Empire Truck Lines, Inc., 571 F.3d 475, 477 (5th Cir. 2009) (discussing certain controls required by statute in a workers’ compensation case not noting, “[T]he type of control required by the regulation does not affect “employment” status. . .”) Lockett v. Allstate Ins. Co., 364 F. Supp. 2d 1368, 1374 (M.D. Ga. 2005), provides a helpful example of how one court addressed an insurance professional’s claim of misclassification. In Lockett, plaintiff was similarly licensed by his home state of Georgia to sell insurance and was a long-term professional in the insurance industry. Id. The Lockett court found plaintiff was an independent contractor because, among other things, his position as an insurance agent required substantial training, licensing, and expertise. Id. (citing Schwieger v. Farm Bureau Ins. Co., 207 F.3d 480, 485 (8th Cir. 2000) (finding “factor weighs heavily in favor of independent contractor status” when agent considered herself professional, had state license); see also Stewart v. Midani, 525 F.Supp. 843, 849 (N.D. Ga. 1981) (“The more skilled the employee, the more likely he is an independent contractor.”) Plaintiff also takes issue with the fact that he was paid commissions based on production. (Doc. 1 at ¶¶ 27-30; see also, e.g., Doc. 1-3 at p. 11). However, payment by commission is recognized as signaling an independent contractor relationship. See, e.g., Lockett, 364 F. Supp. 2d at 1378 (citing Sica v. Equitable Life Asurr. Soc. Of U.S., 756 F.Supp.539, 542 (S.D. Fla. 1990)); see also Birchem, 116 F.3d at 313. Moreover, because Plaintiff Ferguson’s compensation Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 7 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 12 of 19 is determined by his agency’s productivity, he controls how much he earns. See Lockett, 364 F. Supp. 2d at 1374. This factor, thus, also weighs in favor of independent contractor status. Finally, Plaintiff Ferguson, under his company’s agreement with the Texas Farm Bureau Defendants, pays various taxes and expenses associated with the agency and his employment. (Doc. 1. at ¶¶ 29-30, 48-51; see also Doc. 1-3 at p. 1). This factor also weighs in favor of independent contractor status. See Lockett, 364 F. Supp. 2d at 1374. 2. The Texas Farm Bureau Defendants Only Exercised Limited Control, Consistent With An Independent Contractor Relationship: Furthermore, the Texas Farm Bureau Defendants’ reporting requirement1 cannot be viewed as an attempt to exercise control over how Plaintiff Ferguson sells insurance to customers on a daily basis; rather, reports are a permissible way to monitor results and ensure accuracy. Lockett, 364 F. Supp. 2d at 1377-78 (citing Desimone v. Allstate Ins. Co., 2000 WL 1811385 at *13 (N.D. Cal. 2000)) (finding that monitoring results did not equate to controlling manner and means by which work is accomplished). Similarly, the agency managers’ evaluations2 are nothing more than the Texas Farm Bureau Defendants’ way of monitoring and improving upon the results of each agency manger. See, e.g., C.C.E., Inc. v. Nat'l Labor Relations Bd., 60 F.3d 855, 858 (D.C. Cir. 1995) (finding that steps taken to “monitor, evaluate, and improve” the results of work without supervision over manner and means by which work is done indicates independent contractor status)). Plaintiff Ferguson also argues that Defendant exercises control over him by requiring him to seek approval for various business activities. For example, Plaintiff Ferguson mentions the restrictions the Texas Farm Bureau Defendants place on subcontracting3, but such restrictions do 1 See Doc. 1 at ¶ 43. 2 Id. ¶ 44. 3 Doc. 1 at ¶¶ 38-39. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 8 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 13 of 19 not make Plaintiff Ferguson an employee. Lockett, 364 F. Supp. 2d at 1378 (citing Alberty-Velez v. Corporacion de Puerto Rico Para La Difusion Publica, 361 F.3d 1, 8 n. 8 (1st Cir. 2004) (“A company may require that it provide prior approval before an independent contractor takes action or associates with an entity that could reflect poorly on the company)); see also Desimone v. Allstate Ins. Co., No. C 96-03606 CW, 2000 WL 1811385, at *11 (N.D. Cal. Nov. 7, 2000) (holding company approval of insurance professionals was not proof of an employment relationship because the company was required to truthfully declare to the Department of Insurance that the applicant is “of good reputation” and “worthy of the license sought.”). In addition, Plaintiff Ferguson’s inability to sell insurance for other companies is not determinative of employment status. As discussed above, when considering the restriction on an agent to sell exclusively for one insurance company and whether that restriction determined if the agent was an independent contractor, other courts have noted that “[a]n insurance agent's status as a captive agent,..., is no more determinative of the issue presented than, for example, a manufacturer's representative's agreement to market the manufacturer's products exclusively.” Lockett, 364 F. Supp. 2d at 1378 (citing Alfred v. Tenn. Farmers Mut. Ins. Co., 8 F.Supp.2d 1024, 1028 (E.D. Tenn. 1997). And, therefore, the fact that Plaintiff is an exclusive agent for Defendant does not make him an employee of Defendant. Id. 3. The Parties’ Clearly Intended To Create An Independent Contractor Relationship: Furthermore, to the extent Plaintiff attempts to ignore the terms of his company’s agent contracts with the Texas Farm Bureau Defendants, it is clear all parties intended to create an independent contractor relationship. That fact cannot be ignored simply because Plaintiff finds that it is inconvenient. See Lockett, 364 F. Supp. 2d at 1375 (noting, “As the terms of the agreement serve as the manifestation of the parties' intent, it is apparent that the parties intended Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 9 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 14 of 19 for Plaintiff to operate as an independent contractor.”) (citing Bates v. Variable Annuity Life Ins. Co., 200 F.Supp.2d 1375, 1379 (N.D. Ga. 2002) (looking to terms of contract to find insurance agent independent contractor for purposes of ADEA)); see also Gordon v. Birmingham News, No. CV89-PT-0436-S, 1989 WL 222730 *2 (N.D. Ala. Jun. 27, 1989) (looking at applicable paragraph of contract for clear intention of parties). Indeed, the first page of Christopher Ferguson Insurance Services, Inc.’s contract with the Texas Farm Bureau Defendants specifically outlines the independent contractor nature of the company’s relationship with the Texas Farm Bureau Defendants: As an independent contractor, Agency Manager agrees: A. To operate as an independent contractor and provide the creative selling, professional counseling, and prompt and skillful service essential to the creation and maintenance of successful multiple-line companies and agencies. The relationship between Agency Manager and the Companies created by this Contract shall be governed by those rules of law governing the status of and relationships consistent with independent contractors, and not those rules of law governing employer/employee relations. Agency Manager understand and agrees that, as an independent contractor, Agency Manager shall not participate in any plans, benefits, programs, or be subject to any employment rules, regulations or policies of the Companies which are applicable to the Companies’ employees. According, Agency Manager has the right to control its daily activities and the means by which the provisions of this Contract are carried out. Agency Manager, by and through Christopher Ferguson Insurance Services, Inc., hereinafter referred to as Sole Shareholder, a licensed agent, shall have the right to exercise independent judgment as to the persons from whom applications for insurance policies will be solicited, and the right to determine the time, place and manner of soliciting and servicing policyholders of the Companies. Companies will not prescribe and furnish the details of the kind and character of work to be done by Agency Manager hereunder . . .4 Furthermore, Plaintiff Ferguson, through his company, was responsible for a number of expenses related to his business. Not only did he pay the Texas Farm Bureau Defendants $350 per month for certain general expenses, but he also was responsible for paying 100% of the gross 4 See Doc. 1-2 at p. 1, Section 2A. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 10 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 15 of 19 wages, plus an additional 10% of the gross amount to cover all applicable employer payroll and unemployment taxes and worker’s compensation insurance premiums, for any additional employees his company hired. (Doc. 1-8 at p. 3). Christopher Ferguson Insurance Services, Inc.’s “Memorandum of Understanding” also noted: Agents as independent contractors generally bear all costs related to the conduct of their insurance sales profession. Hence, notwithstanding the availability of service fees, CFB is not required to provide services other than as strictly provided above, and . . .under no circumstances hall CFB pay for the following agent or Agency Manager expenses: travel, transportation, Insurance Agency/product advertising, or training and licensing fees. Also, CFB is not required to provide, or pay for, any services, equipment, furniture and other supplies not described above and used for the sale and servicing of insurance products.5 C. THE TWO-YEAR STATUTE OF LIMITATIONS APPLIES: Furthermore, the relevant section of the FLSA imposes a two-year statute of limitations for violations of the FLSA. See 29 U.S.C. § 255(a). The statute of limitations is only extended to three years for willful violations of the FLSA. See id. The plaintiff bears the burden of proving willfulness. McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988). To prove a willful violation, the plaintiff must establish that “the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by statute.” Ramos v. Al-Bataineh, 599 F. App'x 548, 551 (5th Cir. 2015) (citing McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988) and Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 128, 105 S.Ct. 613, 83 L.Ed.2d 523 (1985)). An employer willfully violates the FLSA if the employer “knew or showed reckless disregard for ... whether its conduct was prohibited by the [FLSA.]” Clark v. Centene Co. of Texas, L.P., 104 F. Supp. 3d 813, 825-26 (W.D. Tex. 2015) (citing McLaughlin v. Richland Shoe 5 See Doc. 1-8 at pp. 2-3. Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 11 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 16 of 19 Co., 486 U.S. 128, 133, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988)). The regulations implementing the FLSA define “reckless disregard” as “failure to make adequate inquiry into whether conduct is in compliance with the act.” 5 C.F.R. § 551.104. Read consistently with McLaughlin, a “failure to make adequate inquiry” must mean more than a negligent or unreasonable failure. See McLaughlin, 486 U.S. at 135 & n. 13, 108 S.Ct. 1677. Further, the failure to seek legal advice concerning pay practices does not, taken alone, demonstrate a willful violation, Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1416 (5th Cir. 1990) (citing McLaughlin, 486 U.S. at 134-35, 108 S.Ct. 1677), although consultation with an attorney may help prove that an employer lacked willfulness, Mumby v. Pure Energy Servs. (USA), Inc., 636 F.3d 1266, 1270 (10th Cir. 2011). Courts in this Circuit, and others, have found the following types of evidence support a finding of willfulness: an employer's admission it knew it was violating the FLSA prior to suit, see Singer v. City of Waco, 324 F.3d 813, 821-22 (5th Cir. 2003) (fire chief admitted he was aware firefighters were being paid incorrectly); an employer's continuation of a pay practice after being put on notice the practice violated the FLSA, see Reich v. Bay, Inc., 23 F.3d 110, 117 (5th Cir. 1994) (local Wage and Hour office director informed employer its overtime practices violated the FLSA); an employer's prior violations of the FLSA, see Chao v. A-One Med. Servs., 346 F.3d 908, 919 (9th Cir. 2003) (noting prior FLSA violations, even though not found willful, put employer on notice of FLSA requirements); Sealey v. EmCare, Inc., No. 2:11-CV-00120, 2013 WL 164040, at *4 (S.D. Tex. Jan. 14, 2013) (evidence employer previously litigated “a closely related overtime issue” sufficient to find willfulness); and an employer's reliance on a blanket policy a certain type of employee was exempt, absent any review or study of whether any exemption applied, see Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1280-81 (11th Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 12 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 17 of 19 Cir. 2008) (employer never studied whether employees were exempt yet knew the employees in question spent most of their time performing manual labor). Here, aside from conclusory statements and inadmissible attorney argument, Plaintiff Ferguson has failed to plead any basis for applying a three-year statute of limitations. Accordingly, a two-year statute of limitations must be applied in the event the court declines to grant the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss. IV. CONCLUSION AND PRAYER Plaintiff Ferguson has failed to allege any facts to support his claims against the Texas Farm Bureau Defendants. Thus, the Texas Farm Bureau Defendants respectfully request the Court dismiss Plaintiff’s Complaint as to these causes of action against them pursuant to Federal Rule of Civil Procedure 12(b)(6). Respectfully submitted, By: /s/ Barry A. Moscowitz BARRY A. MOSCOWITZ State Bar No. 24004830 CHANTEL L. LEE State Bar No. 24081001 THOMPSON, COE, COUSINS & IRONS, L.L.P. Plaza of the Americas, 700 N. Pearl Street Twenty-Fifth Floor Dallas, TX 75201-2832 Telephone: (214) 871-8200 Telecopy: (214) 871-8209 E-mail: bmoscowitz@thompsoncoe.com E-mail: clee@thompsoncoe.com ~ and ~ LAURA ALANIZ Texas State Bar No. 00796110 Email: lalaniz@thompsoncoe.com Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 13 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 18 of 19 THOMPSON, COE, COUSINS & IRONS, L.L.P. One Riverway, Suite 1400 Houston, Texas 77056-1988 (713) 403-8210 Telephone (713) 403-8299 Facsimile ATTORNEYS FOR DEFENDANTS TEXAS FARM BUREAU BUSINESS CORPORATION, TEXAS FARM BUREAU CASUALTY INSURANCE COMPANY, TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY, TEXAS FARM BUREAU UNDERWRITERS, FARM BUREAU COUNTY MUTUAL INSURANCE COMPANY AND TEXAS FARM BUREAU CERTIFICATE OF SERVICE Pursuant to Fed. R. Civ. P. 5(b)(2)(E) and 5(b)(3), I hereby certify a true and correct copy of the foregoing was filed electronically on this 30th day of May, 2017. The parties may access this filing through the court’s electronic filing system. /s/ Barry A. Moscowitz Barry A. Moscowitz Brief in Support of the Texas Farm Bureau Defendants’ Rule 12(b)(6) Motion to Dismiss - Page 14 Case 6:17-cv-00111-RP-JCM Document 46 Filed 05/30/17 Page 19 of 19