A 9th Circuit ruling on an overtime case was a deep disappointment — and a bit of a surprise — to employment plaintiffs lawyers on Thursday.
The class action against Farmer’s Insurance Exchange sought overtime pay for claims adjusters allegedly misclassified as exempt, and was modeled on suits that have brought about plaintiff verdicts and high-dollar settlements in state court. But the 9th Circuit left no doubt that it found every member of the class to be exempt.
“The district court’s findings almost track word for word the language [of the law defining exempt workers],” wrote Judge Barry Silverman. That, he wrote, “says it all.”
Silverman was joined by Judge Ronald Gould and, sitting by designation, Judge John Rhoades of the Southern District of California.
Steven Zieff, one of the main lawyers for the plaintiff class of nearly 2,000 adjusters, said he was “very disappointed” by the ruling. “We believe the Farmers workers were clearly entitled to overtime.”
While the 27-page ruling makes it seem like an easy call in favor of the defense, another plaintiff’s attorney said it wasn’t so clear-cut.
“It really does highlight the difference between California State law and the federal Labor Standards Act, which is far less protective of workers,” said David Borgen, a partner at Oakland’s Goldstein, Demchak, Baller, Borgen & Dardarian.
The suit, Miller v. Farmers Insurance Exchange, 0535080, consolidated earlier suits filed both as federal and state class actions in Colorado, New Mexico, Oregon, Washington, Minnesota and Michigan. Robert Jones, a U.S. district court judge in Oregon, had ruled that some adjusters were exempt and others not, depending on the nature of their work and the size of the claims they handled.
The consolidated complaints were inspired by Bell v. Farmers Insurance Exchange, in which Zieff’s firm, Rudy, Exelrod & Zieff, won a $90 million jury award in 2001 that eventually ballooned into a $200 million judgment.
The outcome was considered a huge victory for Zieff. But a year later, one of the adjusters sued the firm for malpractice, alleging that it should have pursued an additional claim under the state’s unfair competition law, which might have secured even more money. Earlier this month, Zieff’s firm agreed to pay $1.5 million to settle the claim.
In Thursday’s case, Judge Silverman said that under the Department of Labor’s guidelines, all Farmers’ adjusters are exempt because they exercise discretion and make independent judgments, for example, in interviewing witnesses, making coverage decisions and determining liability.
The trial judge had said that those workers who dealt with fewer than $3,000 a month in claims weren’t exempt, but Silverman dismissed that distinction as unworkable.
“If the DOL should choose to distinguish between adjusters based on the type or value of the claims they handle, it is free to amend the regulations and tell employers how to do that,” Silverman wrote.
Plaintiff lawyers said Thursday’s decision won’t necessarily undercut similar cases brought in state court.
“California employers can take little comfort from this opinion,” Borgen said.
But Farmers’ attorney, Theodore Boutrous Jr. of Gibson, Dunn & Crutcher, said the ruling helps clarify the rules for other insurers. “Our main argument was that Judge Jones made correct factual findings about the duties of these claims adjusters, but simply applied the wrong legal standards,” Boutrous said. “The 9th Circuit agreed with us on that.”
James Finberg, a Lieff Cabraser Heimann & Bernstein partner also representing the class, said he was surprised the 9th Circuit lumped together the various classes of insurance adjusters, particularly in light of previous cases which resulted in rulings that auto and property adjusters were entitled to overtime pay because their jobs didn’t require the use of discretion and independent judgment.
“The 9th Circuit judge is doing what the DOL has told us for years not to do, which is to look at job titles instead of duties,” Finberg said. “If they had looked at what the auto and property adjusters do, we were confident that the 9th Circuit was going to affirm the district court’s decision.”
The next step is likely a request for en banc review by the 9th Circuit. “I’m sure they’ll be considering that,” Borgen said.
In fact, Finberg said his team is mulling exactly that move, and Zieff said he wasn’t done fighting.
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law.com
Petra Pasternak, The Recorder
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