Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_18-cv-00378/USCOURTS-azd-4_18-cv-00378-4/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Robert Luke Adams, an individual, 

Plaintiff, 

vs.

Symetra Life Insurance Company, an Iowa

corporation, 

Defendant.

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No. CV 18-378-TUC-JGZ (LAB)

REPORT AND RECOMMENDATION 

Pending before the court is the defendant’s motion for partial summary judgment

filed on February 4, 2020. (Doc. 200) The plaintiff filed a response on March 19, 2020. (Doc.

227) The defendant filed a reply on April 3, 2020. (Doc. 240)

The plaintiff, Robert Luke Adams, claims the defendant, Symetra Life insurance

Company (Symetra), breached an insurance contract and breached the duty of good faith and

fair dealing by failing to pay benefits due in accordance with his Long Term Disability Income

Insurance Policy (Policy). (Doc. 1) Symetra argues in the pending motion that the Policy at

issue is governed by ERISA (the Employee Retirement Income Security Act of 1974) and

Adams’s state law claims are preempted. (Doc. 200)

The case has been referred to Magistrate Judge Bowman for report and

recommendation pursuant to the Local Rules of Practice. LRCiv 72.1. 

The Magistrate Judge recommends that the District Court, after its independent

review of the record, deny the motion. The Policy is not governed by ERISA. 

Standard of Review: Summary Judgment

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Summary judgment is available only “if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a). There is a genuine dispute “if the evidence is such that a reasonable jury could

return a verdict for the non[-]moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248, 106 S.Ct. 2505, 2510 (1986). 

The initial burden rests on the moving party to point out the absence of any genuine

issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553

(1986). “Where the moving party will have the burden of proof on an issue at trial, the movant

must affirmatively demonstrate that no reasonable trier of fact could find other than for the

moving party.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). “Where

the non-moving party bears the burden of proof at trial, the moving party need only prove that

there is an absence of evidence to support the non-moving party’s case.” In re Oracle Corp.

Securities Litigation, 627 F.3d 376, 387 (9th Cir. 2010).

Once initially satisfied, the burden shifts to the non-movant to demonstrate through

the production of probative evidence that an issue of fact remains to be tried. Celotex Corp.,

477 U.S. at 324, 106 S.Ct. at 2553. “If a reasonable jury viewing the summary judgment record

could find by a preponderance of the evidence that [the plaintiff is] entitled to a verdict in his

favor, then summary judgment [is] inappropriate; conversely, if a reasonable jury could not find

liability, then summary judgment [is] correct.” Cornwell v. Electra Cent. Credit Union, 439

F.3d 1018, 1027-28 (9th Cir. 2006).

“In judging evidence at the summary judgment stage, the court does not make

credibility determinations or weigh conflicting evidence.” Soremekun v. Thrifty Payless, Inc.,

509 F.3d 978, 984 (9th Cir. 2007). “Rather, it draws all inferences in the light most favorable

to the non[-]moving party.” Id.

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1 The court construes the facts in the light most favorable to the nonmovant, as it must on a

motion for summary judgment. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007).

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BACKGROUND1

Adams owned his own insurance agency. (Doc. 226, p. 20, par. 1) (plaintiff’s

controverting/separate statement of facts) He sold insurance for Farm Bureau Financial

Services (Farm Bureau) in accordance with an “exclusive agent” agreement that he signed in

October of 2012. (Doc. 201, par. 2-3) (defendant’s statement of facts); (Doc. 226, pp. 1-3, par.

1-3) He worked exclusively for Farm Bureau and associated companies. Id., par. 3; Id., pp.

1-3, par. 1-3 Under the agreement, Adams was an independent contractor, not an employee.

(Doc. 226, pp. 19-21, par. 2,5,11); (Doc. 226-1, p. 4, lines 6-10) He could control “when,

where, and how” to run his business. (Doc. 226, p. 19, par. 2,6) 

As a Farm Bureau agent, Adams was eligible for membership in The Agents

Association (TAA), which “represents the interests of Farm Bureau Agents.” (Doc. 201, par.

4, 9); (Doc. 226, p. 3, par. 4) Some agents who sell insurance from entities other than Farm

Bureau can join TAA, but they are only eligible for Associate Membership, and they have

restricted voting rights. (Doc. 226, p. 21, par. 8) TAA serves as a liaison between the agents,

like Adams, and Farm Bureau. (Doc. 201, par. 25); (Doc. 226, p. 21, par. 11) If TAA’s

members have an idea for attracting more customers, they submit the ideas to TAA leadership,

which passes some of those ideas on to Farm Bureau. Id., par. 26; Id., pp. 21-22, par. 11

TAA offers its members and its members’ employees a benefit package that includes

long-term disability insurance. (Doc. 201, par. 10); (Doc. 226, p. 4, par. 10) The Policy at

issue here is a group disability policy that Adams bought through TAA. Id., par. 5; Id., p. 3,

par. 5 When purchasing the policy, Adams affirmed that he was a member in TAA. Id., par.

6; Id., p. 3; par. 6 His policy premiums were deducted automatically from his Farm Bureau

commission check. Id., par. 7; Id., p. 3, par. 7 MGC Group is the insurance broker that put

together the package of benefits for TAA’s members and their staff. (Doc. 201, par. 13, 14, 23,

32, 37); (Doc. 226, p. 6, par. 13) 

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The Policy at issue here is a long-term disability insurance policy issued by the

defendant, Symetra. (Doc. 201, par. 30); (Doc. 226, p. 3, par. 5, p. 16, par. 30) TAA members

and their agency staff members are eligible to participate. Id., par. 32; Id., p. 16, par. 32

Symetra requires that 25% of TAA’s members participate. Id., par. 33; Id., pp. 16-17, par. 33

MGC Group collects the premiums from the enrollees and submits a lump sum to Symetra. Id.,

par. 38; Id., p. 18, par. 38 Adams obtained coverage under the Policy for himself and his

employee, Kim Hightower. Id., par. 40, 41, 42; Id., p. 19, par. 40, 41, 42 He also obtained

medical and dental coverage for his employee, Merien Alexander. Id., par. 40, 41, 42; Id., p.

19, par. 40, 41, 42 The cost of their premiums was deducted from Adams’s commissions. Id.,

par. 43; Id., p. 19, par. 43 Disability claim forms are obtained from MGC group. Id., par. 44;

Id., p. 19, par 44 The claim form required an “employer’s statement” that was “completed by

MGC group,” not by “the self-employed insurance agency owner.” Id., pars. 45, 46; Id., p. 20,

par. 45, 46

Discussion

In the pending motion, Symetra argues that the plaintiff’s state law claims must be

dismissed because the Policy is governed by ERISA and those claims are therefore pre-empted.

See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S. Ct. 1542, 1546 (1987). The threshold

issue here is whether the Policy is actually governed by ERISA (The Employee Retirement

Income Security Act of 1974).

“Congress enacted ERISA to protect the interests of participants in employee benefit

plans and their beneficiaries by setting out substantive regulatory requirements for employee

benefit plans and to provide for appropriate remedies, sanctions, and ready access to the Federal

courts.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S. Ct. 2488, 2495 (2004)

(punctuation modified). “Under ERISA § 3(1), 29 U.S.C. § 1002(1), an ‘employee welfare

benefit plan’ or ‘welfare plan’ is . . . (1) a plan, fund or program (2) established or maintained

(3) by an employer or by an employee organization, or by both, (4) for the purpose of providing

medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation

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benefits . . . (5) to the participants or their beneficiaries.” Kanne v. Connecticut Gen. Life Ins.

Co., 867 F.2d 489, 491–92 (9th Cir. 1988); see also Donovan v. Dillingham, 688 F.2d 1367,

1371 (11th Cir. 1982) (“The gist of ERISA’s definitions of employer, employee organization,

participant, and beneficiary is that a plan, fund, or program falls within the ambit of ERISA only

if the plan, fund, or program covers ERISA participants because of their employee status in an

employment relationship . . . .”). “The existence of an ERISA plan is a question of fact, to be

answered in light of all the surrounding facts and circumstances from the point of view of a

reasonable person.” Id. at 492. The burden is on Symetra to prove the facts necessary to

establish its affirmative defense. See Id. at 492, n. 4.

Symetra maintains that the Policy was “established or maintained” by TAA, which

is an “employee organization.” (Doc. 200, p. 7) “The term ‘employee organization’ means any

labor union or any organization of any kind, or any agency or employee representation

committee, association, group, or plan, in which employees participate and which exists for the

purpose, in whole or in part, of dealing with employers concerning an employee benefit plan,

or other matters incidental to employment relationships . . . .” 29 U.S.C.A. § 1002.

Symetra argues that TAA is an employee organization because its membership is

limited to a specific group, it advocates on behalf of its members, and promotes communication

with Farm Bureau “including with regard to a retirement benefit Farm Bureau offers to its

agents: the Matching Savings Program.” (Doc. 200, p. 7-8) (citing Sarraf v. Standard

Insurance Co., 102 F.3d 991 (9th Cir. 1996)) The court agrees that TAA’s membership is

limited to a specific group. It is not, however, a group of employees.

TAA is not an employee organization because its members are not employees; they

are independent contractors. In Sarraf, the Ninth Circuit considered whether a long-term

disability group insurance policy issued to the Orange County Employees Association (OCEA)

was governed by ERISA. Sarraf, 102, F.3d at 992. That court held as follows:

OCEA is clearly an “employee organization,” as defined by 29 U.S.C.

§ 1002(4). OCEA limits its membership to employees of Orange

County. No employers, self-employed individuals or independent

contractors may join.

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Sarraf, 102 F.3d at 992–93. By contrasting the word “employees” with the words “employers,

self-employed individuals or independent contractors,” the Ninth Circuit indicated that anyone

falling within the latter description cannot be considered an “employee” for the purposes of

ERISA. Id. Independent contractors are not “employees” for the purposes of ERISA. Id. And

an “employee organization” is an organization of employees, not independent contractors. Id.

Symetra offers no facts to dispute Adams’s assertion that he is an independent

contractor, not an employee of Farm Bureau. See (Doc. 226, pp. 19-21, par. 2,5,6, 11); (Doc.

226-1, p. 4, lines 6-10) (Adams’s deposition), see also Nationwide Mut. Ins. Co. v. Darden,

503 U.S. 318, 323, 112 S. Ct. 1344, 1348 (1992) (“ERISA’s nominal definition of ‘employee’

. . . is completely circular and explains nothing. . . .[t]hus, we adopt a common-law test for

determining who qualifies as an ‘employee’ under ERISA.”). This court therefore must

conclude that he and the other members of TAA are self-employed, independent contractors.

Id.; see also (Doc. 201, par. 45, 46) TAA therefore is not an employee organization, and the

Policy is not governed by ERISA. The pending motion should be denied. See, e.g., Cross v.

Bankers Multiple Line Ins. Co., 810 F. Supp. 748, 751 (N.D. Tex. 1992) (“ERISA is not

applicable to insureds such as the plaintiff who are self-employed members of a professional

association that offers group health coverage as a membership benefit.”).

Symetra argues that Hayes v. Reliance Standard Life Insurance Co., 92 F.Supp.3d

276 (M.D.Pa. 2015) is “closely on point.” (Doc. 200, p. 8) The court does not agree.

In Hayes, the court considered whether ERISA applied to the plaintiff’s long term

disability benefit plan. Hayes, 92 F.Supp.3d at 283. The plaintiff was self-employed and

bought a policy sponsored by the Pennsylvania Builders Association (PBA) of which he was

a member. Id. “[I]ndividual members of the PBA could not enroll in the Plan [by themselves],

rather the employer members of the PBA [such as the plaintiff] had to enroll their employees

[first].” Id., pp. 287, 289. The Hayes court found that the PBA was an employee organization

because it “exist[ed], at least in part, to deal with its members’ employers concerning

employment matters.” Id., p. 285. The long term disability benefit plan was “a policy issued

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to PBA for its employee organization members. . . .” Id., p. 289. And Hayes’s claim to benefits

under this policy was governed by ERISA.

The Hayes opinion is not a model of clarity, but apparently that court found that an

“employee organization” for ERISA purposes must have employee members, but it need not

limit its membership to employees only. It can have both employee members and employer

members. And if an employer, such as Hayes, makes a claim under a policy established by an

employee organization that covered both employers and their employees, then that policy is

governed by ERISA.

Hayes does not stand for the proposition that an organization whose members are

all independent contractors qualifies as an “employee organization” for the purposes of ERISA

if it offers a disability policy under which the members and their employees can be covered.

Hayes is distinguishable. And if this court has misinterpreted Hayes, then this court finds Hayes

unpersuasive.

Symetra argues in the alternative that the Policy is an ERISA welfare plan because

Adams provided disability coverage under the Policy for his employees, Kim Hightower and

Merien Alexander. (Doc. 240, pp. 2-4) For this argument, Adams is not the employee, he is

the employer. And by providing coverage for his employees, he has created “an ‘employee

welfare benefit plan’ . . . established or maintained . . . by an employer. . . .” Kanne v.

Connecticut Gen. Life Ins. Co., 867 F.2d 489, 491–92 (9th Cir. 1988).

In support of its argument, Symetra cites Peterson v. Am. Life & Health Ins., Co.,

48 F.3d 404, 407-08 (9th Cir. 1995). In that case, the plaintiff employer and his partner obtained

a health plan for the benefit of the two partners and their employee. Id., p. 406. The other

partner and the employee later moved their coverage to a different policy. Id. At issue in

Peterson was whether the original policy covering the plaintiff employer alone was governed

by ERISA. Id., p. 407. The Peterson court held that the policy was covered by ERISA because

it was part of a larger “employee welfare benefit plan” established by the partnership that

“continued to provide insurance to at least one non-partner employee. . . .” Id., pp. 407-408.

The court went on to note that “[the partnership] not only paid its partners’ and employees’

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insurance premiums but also played an active role in the administration of the coverage,

including choosing the insurance, adding and deleting employees and partners from various

policies, contacting insurance companies for employees and partners, and distributing

information relevant to the coverage.” Id., p. 408. In other words, this “‘employee welfare

benefit plan’ . . . [was] established or maintained . . . by an employer. . . .” See Kanne v.

Connecticut Gen. Life Ins. Co., 867 F.2d 489, 491–92 (9th Cir. 1988) (emphasis added).

In the pending action, however, the Policy was not “established or maintained” by

Adams. It was established and maintained by TAA. Adams did not administer the coverage,

choose the insurance, determine policy eligibility, or distribute information relevant to the

coverage (at least not in an official capacity). See Peterson, 48 F.3d at 408. Adams was an

employer, and he was covered by the same Policy that covered his employees, but he did not

“establish[] or maintain[]” that Policy himself. Kanne, 867 F.2d at 491-92. That Policy

therefore was not an ERISA policy.

 RECOMMENDATION

The Magistrate Judge recommends the District Court, after its independent review

of the record, enter an order DENYING the defendant’s motion for partial summary judgment

filed on February 4, 2020. (Doc. 200) Adams’s Policy is not governed by ERISA. His state

law claims are not preempted.

Pursuant to 28 U.S.C. §636(b), any party may serve and file written objections

within 14 days of being served with a copy of this report and recommendation. If objections

are not timely filed, the party’s right to de novo review may be waived. The Local Rules permit

the filing of a response to an objection. They do not permit the filing of a reply to a response

without the permission of the District Court.

DATED this 30th day of April, 2020.

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