312 F. Supp. 3d 982
D. Kan.2018Background
- Plaintiffs Tronsgard and Chavez are former Farm Bureau insurance agents who signed Agent Contracts classifying them as independent contractors; they allege actual employment-like control by the Farm Bureau entities and challenge the classification.
- Defendants are four Farm Bureau–related entities (FBL Financial; Farm Bureau P&C; Farm Bureau Life; WAIC) and affiliated managers/committees alleged to participate in the alleged scheme.
- Plaintiffs assert six causes of action (RICO, ERISA, Kansas Wage Payment Act, quantum meruit/rescission, unjust enrichment, declaratory relief) on behalf of themselves and a putative class.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6); the court considered the Agent Contract attached to the complaint.
- The court dismissed RICO and declaratory relief claims and some of Tronsgard’s state/common-law claims, but preserved ERISA claims and Chavez’s KWPA, quantum meruit, and unjust enrichment claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs pleaded actionable mail/wire fraud predicates for RICO | Misclassification statements and the Agent Contract were part of a scheme to defraud and can support mail/wire fraud predicates | Classification statements are legal conclusions (statements of law), not false statements of existing fact, so they cannot support mail/wire fraud | Dismissed RICO predicates: classification statements are legal, not fact, so mail/wire fraud predicates inadequately pleaded; RICO claim dismissed |
| Whether plaintiffs alleged a RICO "enterprise" distinct from the defendants (person vs. enterprise) | The Farm Bureau entities, advisory committee, managers, and affiliates form an association-in-fact enterprise distinct from culpable persons | Allegations show only a corporation using its subsidiaries/agents to do ordinary business; a corporation and its agents cannot usually be both person and enterprise | Dismissed RICO for failure to plead an enterprise distinct from the defendants |
| Whether plaintiffs adequately alleged that enterprise members associated for a common fraudulent purpose (rim/"rimless hub-and-spoke") | Alleged organization, advisory committee, and aligned managers show association and common purpose | Complaint shows only parallel/incidental conduct by spokes without inter-spoke relationships or a unifying rim | Dismissed RICO for failing to allege interpersonal relationships/common-purpose among members |
| Whether Tronsgard's ERISA claim is time-barred | Accrual governed by discovery rule — claim accrued when misclassification was discovered; facts on accrual date unresolved | Claim accrued when Agent Contract signed (2003); ERISA claim barred by the five-year statute applied | ERISA claim not dismissed on statute-of-limitations ground; accrual is fact-dependent and cannot be decided on Rule 12(b)(6) here |
| Whether plaintiffs were required to plead exhaustion of ERISA administrative remedies | Pleading exhaustion not required; futility alleged (long-standing corporate position that agents are independent contractors) excuses exhaustion | Failure to plead exhaustion warrants dismissal | Denied dismissal; exhaustion is an affirmative defense and futility allegations suffice at pleading stage |
| Whether Chavez pleaded quantum meruit/rescission under Kansas law | Chavez pleads benefits conferred and unjust retention; contract alleged void/unenforceable so quasi-contract relief available | A valid written contract (Agent Contract) bars quasi-contract recovery; rescission also barred by ratification/acceptance of benefits | Quantum meruit claim survives (contract alleged void/unenforceable); rescission dismissed (abandoned and impracticable); some of Tronsgard’s equitable claims dismissed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard and that legal conclusions need not be accepted as true)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (mail/wire fraud claim need not include reliance but still requires a scheme and fraudulent misrepresentations)
- Neder v. United States, 527 U.S. 1 (elements of mail/wire fraud and role of common-law fraud elements)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (distinctness requirement person vs. enterprise under RICO)
- Boyle v. United States, 556 U.S. 938 (definition and structure required for association-in-fact RICO enterprises)
- Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 (RICO read broadly; basic RICO elements)
- Robbins v. Wilkie, 300 F.3d 1208 (10th Cir. RICO element description)
- George v. Urban Settlement Servs., 833 F.3d 1242 (10th Cir. on enterprise distinctness and application of Boyle)
- Miller v. Yokohama Tire Corp., 358 F.3d 616 (9th Cir. holding that misclassification statements are statements of law and not actionable fraud predicates)