Court Opinion

ID: 3048107
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:23:21.799686+00
Date Added: 2024-06-11T11:49:16.670957
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

In re: FARMERS INSURANCE               
EXCHANGE, Claims
Representatives’ Overtime Pay
Litigation,

DAVE MILLER, on behalf of himself
and the class members in MDL
Case No. 1439,
              Plaintiffs-Appellants,
                                            Nos. 05-35080
                v.
                                       
                                                 05-35145
FARMERS INSURANCE EXCHANGE,                   D.C. No.
               Defendant-Appellee,         CV-02-01439-JO
               and
FARMERS GROUP, INC.; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. PROFIT SHARING
SAVINGS PLAN TRUST; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. EMPLOYEES’ PENSION
PLAN,
                        Defendants.
                                       

                            3625
3626         IN RE: FARMERS INSURANCE EXCHANGE

In re: FARMERS INSURANCE               
EXCHANGE, Claims
Representatives’ Overtime Pay
Litigation,

DAVE MILLER, on behalf of himself
and the class members in MDL
Case No. 1439,
               Plaintiffs-Appellees,
                                            Nos. 05-35082
                v.
                                       
                                                 05-35146
FARMERS INSURANCE EXCHANGE,                   D.C. No.
              Defendant-Appellant,         CV-02-01439-JO
               and
FARMERS GROUP, INC.; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. PROFIT SHARING
SAVINGS PLAN TRUST; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. EMPLOYEES’ PENSION
PLAN,
                        Defendants.
                                       
             IN RE: FARMERS INSURANCE EXCHANGE        3627

In re: FARMERS INSURANCE               
EXCHANGE, Claims
Representatives’ Overtime Pay
Litigation,

JESSE CORRALEZ, on behalf of
himself and the class members in
MDL Case No. 1439,
              Plaintiffs-Appellants,
                v.                          No. 05-35509
FARMERS INSURANCE EXCHANGE,                  D.C. No.
               Defendant-Appellee,         CV-02-01439-JO
               and
FARMERS GROUP, INC.; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. PROFIT SHARING
SAVINGS PLAN TRUST; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. EMPLOYEES’ PENSION
PLAN,
                        Defendants.
                                       
3628         IN RE: FARMERS INSURANCE EXCHANGE

In re: FARMERS INSURANCE               
EXCHANGE, Claims
Representatives’ Overtime Pay
Litigation,

JESSE CORRALEZ, on behalf of
himself and the class members in
                                            No. 05-35501
MDL Case No. 1439,
               Plaintiffs-Appellees,          D.C. No.
                                           CV-02-01439-JO
                v.
FARMERS INSURANCE EXCHANGE,                  ORDER
                                            AMENDING
              Defendant-Appellant,
                                           OPINION AND
               and                          AMENDED
FARMERS GROUP, INC.; PLAN                    OPINION
ADMINISTRATOR OF THE FARMERS
GROUP, INC. PROFIT SHARING
SAVINGS PLAN TRUST; PLAN
ADMINISTRATOR OF THE FARMERS
GROUP, INC. EMPLOYEES’ PENSION
PLAN,
                        Defendants.
                                       
        Appeal from the United States District Court
                 for the District of Oregon
         Robert E. Jones, District Judge, Presiding

                 Argued and Submitted
          September 14, 2006—Portland, Oregon

                  Filed October 26, 2006
                 Amended March 30, 2007
               IN RE: FARMERS INSURANCE EXCHANGE                3629
     Before: Barry G. Silverman and Ronald M. Gould,
  Circuit Judges, and John S. Rhoades, Sr.,* District Judge.

                  Opinion by Judge Silverman

  *The Honorable John S. Rhoades, Sr., Senior United States District
Judge for the Southern District of California, sitting by designation.
3632         IN RE: FARMERS INSURANCE EXCHANGE

                        COUNSEL

Steven G. Zieff, Kenneth J. Sugarman, Rudy, Exelrod &
Zieff, LLP, San Francisco, California; James M. Finberg, Eve
H. Cervantez, Lieff Cabraser Heimann & Bernstein, LLP, San
Francisco, California; and Michael Rubin, Peder J. V. Thor-
een, Altshuler, Berzon, Nussbaum, Rubin & Demain, San
              IN RE: FARMERS INSURANCE EXCHANGE              3633
Francisco, California, for plaintiffs Jesse Corralez, et al., and
David Miller, et al.

Theodore J. Boutrous, Jr., Deborah J. Clarke, Elisabeth C.
Watson, Gibson, Dunn & Crutcher LLP, Los Angeles, Cali-
fornia, and Barnes H. Ellis, James N. Westwood, Stoel Rives
LLP, Portland, Oregon, for defendants Farmers Insurance
Exchange, et al.

                           ORDER

  The Opinion filed October 26, 2006, slip op. 17921, and
appearing at 466 F.3d 853 (9th Cir. 2006), is amended as fol-
lows:

    1.   At slip op. 17934, footnote 4, second paragraph,
         lines 7 & 9, insert “under the FLSA” after “the
         claims adjusters in this case are exempt” and
         “under the statute” after “liquidated damages.”

    2.   At slip op. 17939, replace citation at the end of
         the paragraph labeled headnote [6] with
         “Cheatham v. Allstate Ins. Co., 465 F.3d 578,
         586 (5th Cir. 2006) (per curiam).”

    3.   At slip op. 17941, line 3, delete “(Emphasis
         added.)” at end of sentence and replace with the
         following:

         (Quoting DOL Wage & Hour Div. Op. Ltr., at
         3 (Nov. 19, 2002) (“If an adjuster erroneously
         recommends that coverage should be denied,
         even on a claim of relatively low value, the
         insurance company may be liable for significant
         extra contractual damages for bad faith denial of
         the claim.”).)
3634          IN RE: FARMERS INSURANCE EXCHANGE
    4.   At slip op. 17941, after the first sentence of the
         first full paragraph labeled headnote [8], insert
         the following citation:

         See Cheatham, 465 F.3d at 585 (rejecting argu-
         ment that adjusters “are limited in their ability to
         negotiate by having to adhere to computer soft-
         ware”; that they must consult with manuals or
         guidelines “does not preclude their exercise of
         discretion and independent judgment”).

    5.   At slip op. 17941-42, delete last two sentences
         of full paragraph labeled as headnote [8] and
         replace with:

         For those reasons, we disagree with the district
         court’s legal conclusion, quoting the language of
         the regulations, that an automobile damage
         adjuster’s primary duties “require the use of skill
         in applying techniques, procedures and specific
         standards, not the use of discretion and indepen-
         dent     judgment.”     (Quoting     29    C.F.R.
         § 541.207(b) (2004).)

    6.   At slip op. 17942, delete first full paragraph that
         begins “Plaintiffs argue that” and insert the fol-
         lowing two new paragraphs:

           Plaintiffs argue that § 541.203 provides
           “illustrative examples” of how some
           adjusters may meet the duties test, and
           that we have applied the regulation to
           “an overly-simplified version of the facts
           of this case.” They instead characterize
           the district court’s findings as establish-
           ing that they satisfy neither prong of the
           duties test — first, plaintiffs argue,
           because they deliver FIE’s “product”
          IN RE: FARMERS INSURANCE EXCHANGE             3635
       (i.e., insurance coverage) to its custom-
       ers, they are merely engaged in the “day-
       to-day carrying out of the business’
       affairs, rather than running the business
       itself,” Bratt, 912 F.2d at 1070 (conclud-
       ing that court probation officers do not
       engage in activities “primarily related to
       management policies or general business
       operations” and are therefore non-
       exempt), and second, they argue that
       decisions delegated to them are limited to
       the “routine and unimportant.” The dis-
       trict court’s findings support no such
       conclusion.

       An employee “whose responsibility it is
       to execute or carry . . . out” policy may
       satisfy the “directly related” prong if his
       work is otherwise of “substantial impor-
       tance” to the management or operation of
       the business. 29 C.F.R. § 541.205(c)
       (2004). The regulations also require that
       the employee’s exercise of discretion and
       independent judgment be “real and sub-
       stantial,” § 541.207(d)(1) (2004), or as
       plaintiffs phrase it, “comprise[ ] a sub-
       stantial element of [his primary] duties.”
       That is, the employee must exercise dis-
       cretion and independent judgment in
       “matters of significance.” § 541.200
       (a)(3).

7.   Slip op. 17942, delete first two sentences of
     paragraph that begins “In addition to finding”
     and replace with the following two sentences:

     In addition to finding that FIE could be sub-
     ject to state fines if reserves are set too low,
3636          IN RE: FARMERS INSURANCE EXCHANGE
         the district court found that an adjuster’s
         coverage decisions — which, as we have
         pointed out, are typically made without
         supervisor involvement — “are important
         to FIE’s reputation with the insurance-
         buying public,” and that an adjuster “repre-
         sent[s] FIE to policyholders, claimants, and
         others involved in the claim’s resolution
         (e.g., witnesses, vendors, body shops, out-
         side experts, police, fire personnel, attor-
         neys, claims representatives from other
         companies, judges, arbitrators).” See
         § 541.205(b) (2004) (“The administrative
         operations of the business include the work
         performed by so-called white-collar
         employees engaged in ‘servicing’ a busi-
         ness as, for example, . . . negotiating [and]
         representing the company.”).

    8.   Slip op. 17942, paragraph that begins “In addi-
         tion to finding,” delete last sentence that begins
         “In Cheatham, the Fifth Circuit concluded” and
         replace with the following:

         In Cheatham, the Fifth Circuit concluded
         that the duties of the adjusters were directly
         related to Allstate’s management policies or
         general business operations because they
         “advised the management, represented All-
         state, and negotiated on Allstate’s behalf,”
         all of which “required [their] exercise of
         discretion and independent judgment.”
         Cheatham, 465 F.3d at 585.

    9.   Slip op. 17943, first full paragraph, lines 4-5:
         delete “according to the district court” and insert
         the following citation at the end of that sentence:
          IN RE: FARMERS INSURANCE EXCHANGE                3637
      “DOL Wage & Hour Div. Op. Ltr., at 3 (Nov.
      19, 2002).”

10.    Slip op. 17943, first full paragraph, delete last
       sentence and its accompanying citation and
       replace with the following:

       What matters is that, because they repre-
       sent FIE to the public through their han-
       dling of claims and directly impact FIE’s
       customer base, the adjusters’ work “af-
       fects business operations to a substantial
       degree, even though their assignments are
       tasks related to the operation of a particu-
       lar    segment      of    the    business.”
       § 541.202(b).

11.    Slip op. 17944, lines 6-7, insert “under the
       FLSA” after “multi-line adjusters are exempt.”

12.    Slip op. 17944-45, paragraph labeled headnote
       [11], delete “Nor is there any indication that
       the DOL intended to carve out exceptions for
       certain types of adjusters because, in its view,
       they exercise less discretion and independent
       judgment compared to other types of adjust-
       ers.”

13.    Slip op. 17945, delete second sentence of para-
       graph labeled as headnote [11] and replace
       with:

       Moreover, § 541.203 says that adjusters
       are exempt if they, like the adjusters in
       this case, determine coverage and liability,
       prepare estimates and negotiate settle-
       ments.
3638          IN RE: FARMERS INSURANCE EXCHANGE
    14.   Slip op. 17947, paragraph labeled headnote
          [14], delete the following:

          Plaintiffs do not even mention the over-
          time laws in Illinois, New Mexico or
          Washington, so the issue of whether
          claims adjusters from those states could
          still recover under state law is waived. See
          Fields v. Palmdale Sch. Dist., 427 F.3d
1197, 1203 n.6 (9th Cir. 2005) (panel will
          not consider issue raised before district
          court but not raised on appeal).

    15.   Slip op. 17947, paragraph labeled headnote
          [14], lines 6-9, delete “As to Colorado, Minne-
          sota and Oregon law” so that sentence begins
          with “Plaintiffs assert” and insert “under state
          law” after “for the administrative exemption.”

    16.   Slip op. 17947, paragraph labeled headnote
          [14], lines 11-12, replace “in those three states”
          with “in Colorado, Minnesota and Oregon.”

    17.   Slip op. 17948, paragraph labeled headnote
          [15], last line, insert “as well as Illinois, New
          Mexico and Washington law” after “Colorado,
          Minnesota and Oregon law.”

    18.   Slip op. 17948, CONCLUSION, first paragraph,
          replace “as well as their claims under Michi-
          gan, Illinois, New Mexico and Washington
          law” with “as well as their claims under Michi-
          gan law.”

    19.   Slip op. 17948, CONCLUSION, second para-
          graph, replace “under Colorado, Minnesota and
          Oregon law” with “under Colorado, Illinois,
              IN RE: FARMERS INSURANCE EXCHANGE              3639
          Minnesota, New Mexico, Oregon and Wash-
          ington law.”

    20.   Slip op. 17949, change “their own costs” to “its
          own costs” in the sentence setting forth the
          judgment of the Court.

  With these amendments, the panel has voted to deny the
petition for panel rehearing and the petition for rehearing en
banc.

  The full court has been advised of the petition for rehearing
en banc and no judge has requested a vote on whether to
rehear the matter en banc. See Fed. R. App. P. 35.

   The petition for panel rehearing and the petition for rehear-
ing en banc are DENIED. No further petitions shall be enter-
tained.

                          OPINION

SILVERMAN, Circuit Judge:

   For more than 50 years, the Department of Labor has con-
sidered claims adjusters exempt from the Fair Labor Standard
Act’s overtime requirement. In 2004, the DOL promulgated
29 C.F.R. § 541.203, which it viewed as “consistent with”
existing law. Section 541.203 exempts claims adjusters if they
perform activities such as interviewing witnesses, making rec-
ommendations regarding coverage and value of claims, deter-
mining fault and negotiating settlements.

  In this case, the plaintiffs are nearly 2,000 former and cur-
rent claims adjusters who handle, respectively, automobile
damage claims, non-automobile property damage claims, per-
sonal injury claims and various combinations of these. They
3640             IN RE: FARMERS INSURANCE EXCHANGE
assert that their employer improperly classified them as
exempt from the FLSA. The district court ruled that some of
them are exempt, and some of them are not. In doing so, the
district court promulgated a “$3,000 in claims paid per
month” rule, a rule that all parties to this appeal agree is nei-
ther workable nor supported by the evidence.

   We hold today that all of the adjusters in this case are
exempt. The district court’s factual findings establish that,
regardless of the type (personal injury v. property) or size
(large v. small) of the claims they handle, the adjusters are
required to do virtually all of the very things that § 541.203
contemplates: use discretion to determine whether the loss is
covered, set reserves, decide who is to blame for the loss and
negotiate with the insured or his lawyer. 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 regula-
tions and tell employers how to do that. Unless and until that
happens, we are obligated to follow § 541.203. We affirm in
part and reverse in part.

                             BACKGROUND

  A.    Farmers’ business and the role of adjusters

   Farmers Insurance Exchange (“FIE”) is a reciprocal or
inter-insurance exchange providing insurance throughout the
country.1 As a reciprocal exchange company, FIE is owned by
its policyholders, or “subscribers,” who exchange contracts
with one another and, by pooling their resources, insure one
another against certain losses. FIE, whether on its own or
  1
   Our summary of the facts is taken from the district court’s findings of
fact, which are set forth in its published decision. See 336 F. Supp. 2d
1077 (D. Ore. 2004). Neither party has shown that any of those findings
were clearly erroneous. See Cleveland v. City of Los Angeles, 420 F.3d
981, 988 (9th Cir. 2005) (district court’s factual findings in FLSA case are
reviewed for clear error).
                IN RE: FARMERS INSURANCE EXCHANGE                    3641
through its related companies, performs all the functions of a
typical insurance company, including selling policies, con-
tracting with individual agents who sell and service policies,
procuring reinsurance and adjusting claims made on its poli-
cies.2

   Around 50 percent of FIE’s 10,000 employees are claims
adjusters. Most claims adjusters work out of their homes, and
FIE provides them with company cars, phone lines, computer
support, printers and fax machines. Claims adjusters spend
significant time on the road, driving to locations where a loss
or accident occurred. Branch managers in FIE’s 120 to 160
branch offices nationwide supervise the claims adjusters.
Claims adjusters do not supervise other employees.

   FIE employs five types of claims adjusters in its personal
lines business: those who handle automobile property damage
claims (“automobile damage adjusters”), those who handle
homeowners’ claims for property and contents damage
(“property adjusters”), those who handle personal injury
claims (“liability adjusters”), those who handle unique physi-
cal damage claims (e.g., RVs, mobile homes) and personal
injury claims (“Foremost adjusters”) and another sort of
hybrid claims adjuster who handles two or more types of
claims (“multi-line adjusters”).

   FIE puts significant emphasis on paying exactly what it
owes under the policy, “nothing more, nothing less.” To that
end, FIE provides each adjuster with written guidelines and
training materials to aid them in the claims handling process.
Some procedures are mandatory, while others are merely rec-
  2
   For example, subscribers of FIE appoint Farmers Group, Inc., as their
exclusive “attorney in fact.” Farmers Group then acts as FIE’s agent in
performing or securing certain services and facilities that FIE uses in its
operations, including accounting, marketing, developing and pricing of
insurance products, financial and regulatory auditing, underwriting and
actuarial functions.
3642            IN RE: FARMERS INSURANCE EXCHANGE
ommendations. Adjusters are subject to quality assurance
audits at any time, but most are performed after the claim is
closed. The primary goal of the audits is to determine “lost
economic opportunity,” a subjective assessment of the differ-
ence between what was paid and what could have been paid
if the adjuster had correctly handled the claim. The audits
ensure that adjusters are following FIE’s “best practices,”
which are any actions that can be implemented to prevent lost
economic opportunity. FIE’s goal is to limit overpayment to
two percent for automobile damage and liability claims, and
slightly more than two percent for other property losses.

   Claims adjusters use computer software to help them esti-
mate the damage or loss; indeed, FIE expects its adjusters to
use estimating software “whenever possible or appropriate.”
Estimating software “acts as a price database,” much like
parts catalogs, vendor quotes, and jury verdicts, and its useful-
ness largely is dependent, in many cases, on the quality of the
information the adjuster develops before turning to the esti-
mating software.

   FIE’s claims adjusters are classified at one of three levels,
depending on experience and performance: claims adjuster,
senior claims adjuster and special claims adjuster. Within any
particular line of insurance, the duties of all three are mostly
the same. One difference, however, is their settlement author-
ity. The branch manager has discretion to set each adjuster’s
settlement authority, and generally, less experienced adjusters
have lower authority levels. On any given claim, an adjuster’s
settlement authority can be raised with supervisor approval.
On average, each adjuster pays approximately $1 million in
claims per year, ranging from $2,800 to $8,000 per claim.

  During all times relevant to this appeal, FIE paid its claims
adjusters on a salary basis, not an hourly basis.3 Many adjust-
  3
    An adjuster’s salary increases with seniority. For instance, between
1998 and 2002, the average salary of an adjuster ranged from $36,000 to
$43,000, with new adjusters earning in the mid-20s and veteran adjusters
earning in the mid-60s.
               IN RE: FARMERS INSURANCE EXCHANGE               3643
ers worked more than 40 hours per week during the class
period, but FIE did not pay them overtime.

  B.   The lawsuits

   In late 2001 and early 2002, a group of current and former
claims adjusters filed a series of FLSA actions against FIE on
behalf of themselves and similarly-situated adjusters, seeking
overtime pay for the weeks in which they worked more than
40 hours. In March 2002, the Panel on Multidistrict Litigation
transferred the various actions to the district court below for
consolidated pretrial proceedings. The district court certified
a FLSA collective action, which, under the Act, required any
unnamed former or current claims adjusters to formally “opt-
in” if they wanted to participate. See 29 U.S.C. § 216(b). Of
the 6,100 notices sent to current and former claims adjusters,
approximately 1,170 opted in.

   The parties later stipulated to certification of seven state
law classes, comprised of individuals from Colorado, Illinois,
Michigan, Minnesota, New Mexico, Oregon and Washington.
In addressing whether “common questions predominate,” as
required by Fed. R. Civ. P. 23(b)(3), the district court con-
cluded that “the administrative exemption test under the laws
of the seven states at issue . . . is substantially similar to (if
not identical to in some instances) the federal test.”

   Each of the state law classes was an “opt-out” class, that is,
individuals were automatically included in the state law action
unless they filed the appropriate notice with the district court.
Some adjusters sought relief under state law only; they did not
opt-in to the FLSA collective action, nor did they opt-out of
their respective state law class.

   On the parties’ stipulation, the district court retained juris-
diction after class certification. The parties waived their right
to a jury trial, and agreed to bifurcate the bench trial into a lia-
bility phase and, if necessary, a damages phase. The sole issue
3644             IN RE: FARMERS INSURANCE EXCHANGE
at the liability phase was whether FIE properly classified its
adjusters as exempt from federal and state overtime laws, and
if not, whether FIE could assert any defenses to liability or
damages.

   The district court conducted a three-week bench trial, and
then issued its Findings of Fact and Conclusions of Law. In
its order, the district court concluded that: (i) automobile dam-
age adjusters are non-exempt; (ii) property adjusters are non-
exempt if more than 50 percent of their pay-outs in any one
month are less than $3,000; (iii) Foremost adjusters are non-
exempt if they spend more than 38-3/4 hours per week han-
dling residential property claims on which the pay-out aver-
ages, on a monthly basis, less than $3,000; (iv) multi-line
adjusters are non-exempt if they spend more than 38-3/4
hours per week handling automobile damage claims in any
amount and/or residential property claims on which the pay-
out averages, on a monthly basis, less than $3,000; (v) all
other adjusters, including liability adjusters, are exempt and
(vi) Michigan’s overtime law applied to FIE.4 The district
court awarded nearly $52.5 million to the 1,039 former and
current adjusters who filed the necessary claims paperwork.
These appeals followed.
  4
   Later, the district court wrote a letter to the parties in which it acknowl-
edged that the $3,000 rule “does permit debate over the appropriate inter-
pretation.” The letter went on to say that “in determining the dollar
amount of a claim, I intend the dollar amount to be the amount paid, not
the amount originally requested.”
   The district court also concluded that FIE’s violations of the FLSA were
“willful” after September 12, 2001, entitling plaintiffs to a three-year
(instead of a two-year) statute of limitations as to those violations. The
district court went on to conclude that FIE failed to prove it acted in good
faith after September 12, 2001, precluding any defense to FLSA liability
and permitting liquidated damages for violations after that date. Because
we conclude that all of the claims adjusters in this case are exempt under
the FLSA, we do not reach the issues of willfulness or FIE’s good faith
defenses to liability and liquidated damages under the statute.
               IN RE: FARMERS INSURANCE EXCHANGE                 3645
                              ANALYSIS

                         I.   FLSA Claim

  [1] Under the FLSA, certain employers must pay their
employees time and a half for work in excess of 40 hours per
week:

      Except as otherwise provided in this section, no
      employer shall employ any of his employees who in
      any workweek is engaged in commerce or in the pro-
      duction of goods for commerce . . . for a workweek
      longer than forty hours unless such employee
      receives compensation for his employment in excess
      of the hours above specified at a rate not less than
      one and one-half times the regular rate at which he
      is employed.

29 U.S.C. § 207(a)(1). Some employees, however, are not
covered by the Act. At issue in this case is the exemption for
persons “employed in a bona fide . . . administrative . . .
capacity.” 29 U.S.C. § 213(a)(1).

   [2] The FLSA delegates to the Secretary of Labor broad
authority to “define[ ] and delimit[ ]” the scope of the admin-
istrative exemption. Id. In accordance with that authority, the
Secretary has formulated a test, known as the “short duties
test,” to determine whether employees who earn at least $250
per week5 — as the claims adjusters in this case do — qualify
for the administrative exemption. Specifically, the employee’s
“primary duty” must (i) consist of “[t]he performance of
office or nonmanual work directly related to management pol-
icies or general business operations of his employer,” and (ii)
include the exercise of “discretion and independent judg-
  5
    That amount was increased to $455 per week in 2004. See 29 C.F.R.
§ 541.200(a)(1). Unless otherwise indicated, cites to the DOL’s regula-
tions are to the current version of Title 29 of the C.F.R.
3646          IN RE: FARMERS INSURANCE EXCHANGE
ment.” 29 C.F.R. § 541.2 (2004). As to whether the duties test
is satisfied, we must independently review the record, without
deference to the district court’s conclusions. See Bothell v.
Phase Metrics, Inc., 299 F.3d 1120, 1124 (9th Cir. 2002)
(whether an employee’s activities exclude him from the over-
time benefits of the FLSA is a question of law, and the district
court’s decision is reviewed de novo).

  There is no dispute that the claims adjusters in this case
performed “office or nonmanual work.” The dispute centers
around the remaining requirements of the duties test.

  A.   The DOL regulation

  [3] 29 C.F.R. § 541.203 provides that:

    Insurance claims adjusters generally meet the duties
    requirements for the administrative exemption,
    whether they work for an insurance company or
    other type of company, if their duties include activi-
    ties such as interviewing insureds, witnesses and
    physicians; inspecting property damage; reviewing
    factual information to prepare damage estimates;
    evaluating and making recommendations regarding
    coverage of claims; determining liability and total
    value of a claim; negotiating settlements; and mak-
    ing recommendations regarding litigation.

29 C.F.R. § 541.203(a). The district court did not rely on this
regulation, presumably because it was not in effect at the time
the plaintiffs filed these actions. Nevertheless, § 541.203
bears directly on our analysis. See Bratt v. County of Los
Angeles, 912 F.2d 1066, 1070 (9th Cir. 1990) (FLSA case;
“[w]e must give due deference to the interpretation of statutes
and regulations by the agency charged with their administra-
tion.” (internal quotations and ellipsis omitted)).

   [4] For starters, § 541.203 does not represent a change in
the law. When the DOL promulgated § 541.203, it said that
              IN RE: FARMERS INSURANCE EXCHANGE            3647
the new regulation “is consistent with existing section
541.205(c)(5).” 69 Fed. Reg. 22122, 22144 (April 23, 2004).
The former 29 C.F.R. § 541.205(c)(5) provided that the test
of “directly related to management policies or general busi-
ness operations” is met by, among other persons, “claim
agents and adjusters.” The parties agree that § 541.205(c)(5)’s
reference to “claim adjusters” originated in a 1940 DOL
Report that created the administrative exemption. Plaintiffs
argue, however, that the 1940 Report was not referring to
insurance claims adjusters generally, but only a “claim agent”
who, unlike the adjusters in this case, was a “higher-level
employee” with independent authority to settle all types of
sizeable damage claims. The record shows otherwise. In a
2002 Opinion Letter addressing insurance claims adjusters,
the DOL specifically referenced that 1940 Report in conclud-
ing that “Wage and Hour has long recognized that claims
adjusters typically perform work that is administrative in
nature.” DOL Wage & Hour Div. Op. Ltr., at 2 (Nov. 19,
2002) (emphasis added).

   That same Opinion Letter concluded that, within their
established authority, claims adjusters exercise the requisite
discretion and independent judgment if they: (i) make all
decisions regarding coverage and liability, (ii) negotiate with
full authority to attempt to achieve a settlement, (iii) make
recommendations to their supervisors on the appropriate value
of “much larger” claims, which are “frequently accepted” and
(iv) work with counsel to represent the company in any litiga-
tion that ensues. Id. at 4. Essential to the DOL’s opinion was
the fact that the adjusters “are not merely pursuing a standard-
ized format for resolving claims, but rather are using their
own judgment about what the facts show, who is liable, what
a claim is worth, and how to handle the negotiations with
either a policyholder or a third-party.” Id. at 4-5.

  Plaintiffs dispute the relevancy of the 2002 Opinion Letter,
arguing that it represents an “about-face” on the issue of
whether claims adjusters are exempt. But earlier guidance
3648          IN RE: FARMERS INSURANCE EXCHANGE
from the DOL is consistent with the 2002 Opinion Letter. In
1985, for example, the DOL concluded that an insurer’s “field
service representative” is exempt to the extent he “investi-
gates the claims, determines the extent of the damages, nego-
tiates the settlements within the parameters of the established
monetary limits, and makes recommendations with respect to
larger case settlements.” DOL Wage & Hour Div. Op. Ltr., at
2 (Oct. 29, 1985). In a 1963 Opinion Letter, the DOL distin-
guished appraisers from adjusters:

    Appraisers who merely inspect damaged vehicles to
    estimate the cost of labor and materials and to reach
    an agreed price for repairs with the repair shop have
    not been considered as the type of employees who
    customarily and regularly exercise discretion and
    independent judgment . . . . In making their esti-
    mates, they are guided primarily by their skill and
    experience and by written manuals of established
    labor and material costs . . . .

DOL Wage & Hour Div. Op. Ltr., at 1-2 (Feb. 18, 1963). In
contrast, an adjuster “investigates the validity and the extent
of liability of a claim and negotiates settlement . . . irrespec-
tive of whether the claim is one for property damage or for
personal injury.” Id. at 2. And in 1957, the DOL opined that
if adjusters are given “reasonable latitude in carrying on nego-
tiations with the insured, the results of which form the basis
of their recommendations, they may be [exempt].” DOL
Wage & Hour Div. Op. Ltr., at 2 (Oct. 24, 1957). If those
adjusters had authority to make settlements, that would be
“stronger evidence of their exercise of discretion and indepen-
dent judgment.” Id.

   [5] We must give deference to the DOL’s interpretation of
its own regulations through, for example, Opinion Letters.
Webster v. Pub. Sch. Employees of Washington, 247 F.3d 910,
914 n.2 (9th Cir. 2001) (citing Auer v. Robbins, 519 U.S. 452
(1997)). The DOL’s position on claims adjusters — as articu-
                IN RE: FARMERS INSURANCE EXCHANGE                  3649
lated in § 541.203 — has been consistent over the years, see
Alvarez v. IBP, Inc., 339 F.3d 894, 905 n.9 (9th Cir. 2003)
(“an agency interpretation . . . which conflicts with the agen-
cy’s earlier interpretation is entitled to considerably less def-
erence than a consistently held agency view” (internal
quotations and alteration omitted)), and we are persuaded by
its reasoning, see Christensen v. Harris County, 529 U.S. 576,
587 (2000) (“interpretations . . . such as opinion letters are
entitled to respect . . . to the extent that those interpretations
have the power to persuade” (internal quotations and citation
omitted)); see also Auer, 519 U.S. at 461 (DOL’s interpreta-
tion of its own regulations is controlling unless “plainly erro-
neous or inconsistent with the regulation” (internal quotations
omitted)).

  B.    The district court’s findings

   The district court found that all claims adjusters in this
case: (i) determine whether the policy covers the loss, (ii) rec-
ommend a reserve upon estimating FIE’s exposure on the
claim, in accordance with state law requirements, (iii) inter-
view the insured and assess his (or others’) credibility, (iv)
advise FIE regarding any fraud indicators or the potential for
subrogation and underwriting risk, (v) negotiate settlements,
(vi) seek additional authority from their supervisors, which is
granted “75-100 percent of the time,”6 when the recom-
mended settlement exceeds their established authority and
(vii) communicate with opposing counsel and FIE’s counsel.

   [6] As far as we are concerned, that says it all. The district
court’s findings almost track word for word the language in
§ 541.203, and thus establish that FIE’s claims adjusters are
exempt from the FLSA. The lone exception appears to be that
  6
   See DOL Wage & Hour Div. Op. Ltr., at 4 (Nov. 19, 2002) (adjusters
are exempt where they make recommendations to their supervisors on the
appropriate value of claims beyond their authority, which are “frequently
accepted”).
3650          IN RE: FARMERS INSURANCE EXCHANGE
only liability adjusters make recommendations regarding liti-
gation. The regulation, however, does not require the adjuster
to perform each and every activity listed. See 69 Fed. Reg. at
22144 (“[541.203] identifies the typical duties of an exempt
claims adjuster” (emphasis added)). And the Fifth Circuit has
just held that claims adjusters for Allstate Insurance are
exempt where they, like FIE’s adjusters, “exercised discretion
in determining coverage, conducting investigations, determin-
ing liability and assigning percentages of fault to parties, . . .
negotiating a final settlement [and] setting and adjusting
reserves based upon a preliminary evaluation of the case.”
Cheatham v. Allstate Ins. Co., 465 F.3d 578, 586 (5th Cir.
2006) (per curiam).

   [7] Unlike the district court, we make no exceptions for
those adjusters who handle “smaller” claims. Even for claims
on the lower end of his established settlement authority, the
adjuster must first determine whether the claim is covered.
Once he determines that the loss is covered, the adjuster can
settle it without supervisor approval. And while supervisor
approval is necessary before FIE denies a claim, in such cases
the adjuster often prepares a draft denial letter with the recom-
mendation to deny coverage. Discretion and independent
judgment do not necessarily imply that the decisions made by
the employee have a “finality that goes with unlimited author-
ity and a complete absence of review.” § 541.202(c).

   Moreover, an adjuster must estimate FIE’s exposure on a
claim before his investigation into the loss — and thus his ini-
tial settlement offer — is completed. Generally, reserves are
set without supervisor approval; while automobile damage
adjusters do not set the reserves, they do recommend an
amount. See id. Adjusters also conduct their own investiga-
tions, and often decide whether to obtain the assistance of
experts in determining the cause of the loss. Given the author-
ity that FIE’s adjusters have, this case is distinguishable from
a recent DOL Opinion Letter, cited by plaintiffs, in which the
adjuster had to “frequently seek approval” before settling a
              IN RE: FARMERS INSURANCE EXCHANGE             3651
claim, could not conduct additional investigation without
supervisor approval and was “so closely supervised” that he
“d[id] not have the authority to make independent choices.”
DOL Wage & Hour Div. Op. Ltr., at 2, 6 (Aug. 26, 2005).

   In separating out certain property adjusters, the district
court went on to say that, in major losses (i.e., those resulting
in settlements of over $3,000), erroneous coverage decisions
can impact FIE’s bottom line or result in bad faith claims. But
the same is true of claims that cost FIE less than $3,000: the
district court found that “an erroneous denial of coverage,
even on claims of relatively low value, may expose FIE to
legal action and extra-contractual damages in many jurisdic-
tions.” (Quoting DOL Wage & Hour Div. Op. Ltr., at 3 (Nov.
19, 2002) (“If an adjuster erroneously recommends that cov-
erage should be denied, even on a claim of relatively low
value, the insurance company may be liable for significant
extra contractual damages for bad faith denial of the claim.”).)
Also, that coverage decisions can be more “complicated”
because some residential losses are “major” is no basis to dif-
ferentiate among FIE’s property adjusters. Again, the adjuster
must decide if the loss is covered, which, according to the dis-
trict court, requires him to make credibility determinations,
evaluate the insured’s lifestyle and possibly use outside
experts. That FIE ultimately denies the bulk of the coverage
and pays only $500, based in no small part on the adjuster’s
recommendations, should not render his work — which other-
wise qualifies for the exemption — non-exempt. In any event,
we see no reason (nor did the district court provide one) why
the insured’s lifestyle could not be just as relevant for losses
less than $3,000; indeed, even small claims require scrutiny:
FIE’s stated philosophy is “we pay what we owe, nothing
more, nothing less.”

  [8] Finally, the use of computer software to estimate claims
does not eliminate the need for discretion and judgment any
more than does resort to other reference works or to the opin-
ions of appraisers and other experts. See Cheatham, 465 F.3d
3652          IN RE: FARMERS INSURANCE EXCHANGE
at 585 (rejecting argument that adjusters “are limited in their
ability to negotiate by having to adhere to computer soft-
ware”; that they must consult with manuals or guidelines
“does not preclude their exercise of discretion and indepen-
dent judgment”). For instance, with respect to antique or spe-
ciality automobiles, an automobile damage adjuster cannot
use computer software; instead, he must generate an estimate
manually. Also, while software exists for estimating the value
of totaled vehicles, an automobile damage adjuster “must use
good judgment” in deciding whether it is the “best tool” for
a total loss, which accounts for 30 to 50 percent of his file.
Total loss claims that reach or exceed policy limits are “often
difficult to negotiate and settle, and require a very detailed
evaluation.” For those reasons, we disagree with the district
court’s legal conclusion, quoting the language of the regula-
tions, that an automobile damage adjuster’s primary duties
“require the use of skill in applying techniques, procedures
and specific standards, not the use of discretion and indepen-
dent judgment.” (Quoting 29 C.F.R. § 541.207(b) (2004).)

   Plaintiffs argue that § 541.203 provides “illustrative exam-
ples” of how some adjusters may meet the duties test, and that
we have applied the regulation to “an overly-simplified ver-
sion of the facts of this case.” They instead characterize the
district court’s findings as establishing that they satisfy nei-
ther prong of the duties test — first, plaintiffs argue, because
they deliver FIE’s “product” (i.e., insurance coverage) to its
customers, they are merely engaged in the “day-to-day carry-
ing out of the business’ affairs rather than running the busi-
ness itself,” Bratt, 912 F.2d at 1070 (concluding that court
probation officers do not engage in activities “primarily
related to management policies or general business opera-
tions” and are therefore non-exempt), and second, they argue
that decisions delegated to them are limited to the “routine
and unimportant.” The district court’s findings support no
such conclusion.

    An employee “whose responsibility it is to execute or carry
. . . out” policy may satisfy the “directly related” prong if his
              IN RE: FARMERS INSURANCE EXCHANGE              3653
work is otherwise of “substantial importance” to the manage-
ment or operation of the business. 29 C.F.R. § 541.205(c)
(2004). The regulations also require that the employee’s exer-
cise of discretion and independent judgment be “real and sub-
stantial,” § 541.207(d)(1) (2004), or as plaintiffs phrase it,
“comprise[ ] a substantial element of [his primary] duties.”
That is, the employee must exercise discretion and indepen-
dent judgment in “matters of significance.” § 541.200(a)(3).

   In addition to finding that FIE could be subject to state
fines if reserves are set too low, the district court found that
an adjuster’s coverage decisions — which, as we have pointed
out, are typically made without supervisor involvement —
“are important to FIE’s reputation with the insurance-buying
public,” and that an adjuster “represent[s] FIE to policyhold-
ers, claimants, and others involved in the claim’s resolution
(e.g., witnesses, vendors, body shops, outside experts, police,
fire personnel, attorneys, claims representatives from other
companies, judges, arbitrators).” See § 541.205(b) (2004)
(“The administrative operations of the business include the
work performed by so-called white-collar employees engaged
in ‘servicing’ a business as, for example, . . . negotiating [and]
representing the company.”). In Cheatham, the Fifth Circuit
concluded that the duties of the adjusters were directly related
to Allstate’s management policies or general business opera-
tions because they “advised the management, represented All-
state, and negotiated on Allstate’s behalf,” all of which
“required [their] exercise of discretion and independent judg-
ment.” Cheatham, 465 F.3d at 585.

  On a related point, the district court found that FIE’s busi-
ness is not limited to claims adjusting; it also sells insurance
products. Thus, the decisions made by claims adjusters affect
FIE’s customer base (e.g., the policyholders) in that “their eli-
gibility for continued coverage may be affected and their pre-
mium level may be affected.” DOL Wage & Hour Div. Op.
Ltr., at 3 (Nov. 19, 2002.) This point was somehow over-
looked in Bell v. Farmers Ins. Exch., 87 Cal. App. 4th 805
3654          IN RE: FARMERS INSURANCE EXCHANGE
(2001) (decided under California law), in which the state
court characterized FIE’s business as “perform[ing] a special-
ized function . . . having delegated activities normally associ-
ated with an insurance business to other related companies.”
Id. at 823. That FIE’s adjusters represent the “claims handling
arm of the Farmers Insurance Group of Companies,” id.
(internal quotations omitted), does not mean they fall on the
production side of the “administrative/production worker
dichotomy.” To place them there would elevate form — cor-
porate form, to be precise — over substance. What matters is
that, because they represent FIE to the public through their
handling of claims and directly impact FIE’s customer base,
the adjusters’ work “affects business operations to a substan-
tial degree, even though their assignments are tasks related to
the operation of a particular segment of the business.”
§ 541.202(b).

   [9] In summary, the district court’s factual findings confirm
that FIE’s liability, automobile damage and property adjusters
satisfy both prongs of the duties test. They are therefore
exempt from the FLSA’s requirements. It necessarily follows,
then, that Foremost adjusters are, too. The district court found
that Foremost adjusters, to the extent they handle property
damage to “mobile homes, RVs, and the like,” rely on “spe-
cialized knowledge and discretion.” In that respect, Foremost
adjusters are akin to property adjusters; indeed, Foremost
adjusters use the same computer software as property adjust-
ers, with additions tailored to the unique structures that Fore-
most adjusters handle. And it naturally follows that multi-line
adjusters are exempt under the FLSA, since they handle a mix
of liability, property and automobile damage claims.

  C.   The $3,000 rule

  [10] We make one additional point. In addition to lacking
support in the record, the district court’s “$3,000 rule” is, as
both parties agree, simply unworkable in practice. As FIE
points out, many states require employers to pay wages,
              IN RE: FARMERS INSURANCE EXCHANGE             3655
including overtime, to nonexempt employees more frequently
than once a month. Under the $3,000 rule, FIE would not
know whether a particular employee is due overtime until
months or years down the road when the claim is finally
resolved, because only then would FIE be able to calculate the
average value of the claims on the adjuster’s desk during any
given pay period. And from pay period to pay period, an
adjuster’s status could change from exempt to nonexempt,
even though his core duties stayed the same. Thus, to ensure
it complied with payroll laws, FIE would have to track the
daily activities of each adjuster, creating a significant admin-
istrative burden while denying it the flexibility the short test
promises. See Counts v. S.C. Elec. & Gas Co., 317 F.3d 453,
457 (4th Cir. 2003) (proposal requiring regular periodic
reevaluation of an employee’s exemption status is “untena-
ble”). Even more problematic is the fact that the $3,000 rule
runs afoul of public policy: an adjuster’s right to overtime is
tied to his ability to keep low his settlements with insured par-
ties.

   [11] Moreover, § 541.203 says that adjusters are exempt if
they, like the adjusters in this case, determine coverage and
liability, prepare estimates and negotiate settlements. Nothing
in the regulation suggests that “smaller” claims — however
that term would be defined — should be treated differently.
If the DOL changes its view, it is, of course, free to amend
the regulations.

                   II.   State Law Claims

  A.   Michigan law

  FIE argues that it is not subject to Michigan’s overtime
law, and that as a result, the district court’s award of damages
under that law was error. We agree.

  [12] Under Michigan Compiled Laws 408.394, an
employee cannot sue his employer under Michigan’s mini-
3656           IN RE: FARMERS INSURANCE EXCHANGE
mum wage law (see Mich. Comp. Laws § 408.381 et seq.)
unless application of the FLSA’s minimum wage provisions
results in a lower “minimum wage.” Like the FLSA, Michi-
gan’s minimum wage law requires employers to, among other
things, pay employees time and one-half for any hours that
the employee works over 40 in a workweek, unless one of the
exemptions in the statute apply. See Mich. Comp. Laws
§ 408.384a.

   Plaintiffs do not dispute that Michigan’s minimum wage
rate is equal to the FLSA’s. Plaintiffs, though, argue that they
may sue for overtime pay under Michigan’s minimum wage
law because its exemption for administrative employees is
more narrowly defined than the FLSA exemption, resulting in
a greater entitlement to wages under state law. That, plaintiffs
argue, is the equivalent of a greater “minimum wage” for pur-
poses of Mich. Comp. Laws § 408.394.

   In Alexander v. Perfection Bakeries, Inc., 705 N.W.2d 31
(Mich. Ct. App. 2005), the Michigan Court of Appeals held
that the term “minimum wage” in MCL 408.394 does not
include overtime pay. Id. at 165 (MCL 408.394 precluded
employees’ state law claims for overtime when minimum
wage rates in federal and state law were equal). And in Allen
v. MGM Grand Detroit, LLC, 675 N.W.2d 907 (Mich. Ct.
App. 2003) (per curiam), the Michigan Court of Appeals held
that merely because the statute of limitations for overtime
claims under Michigan’s minimum wage law is longer than
its federal counterpart does not mean that the FLSA provides
for a lower “minimum wage” during a period when the
FLSA’s limitations period has expired. Id. at 908. Contrary to
plaintiffs’ argument, Allen did not validate the view, origi-
nally espoused by a federal district court in Michigan,7 that
  7
    See Zimmer v. Bergstrom, Quinn & Oole, No. G88-506-CA1, 1989
WL 223111, at *3 (W.D. Mich. Oct. 16, 1989) (unpublished order)
(“minimum wage” in MCL 408.394 encompasses overtime pay). Zimmer
was decided before Alexander, and thus is of little, if any, persuasive
value.
                IN RE: FARMERS INSURANCE EXCHANGE                   3657
the term “minimum wage” encompasses the total sum which
may be owing to the employee. In fact, Allen did just the
opposite: after noting that the trial court had relied on the fed-
eral district court decision, the Michigan Court of Appeals
concluded that “the trial court erroneously interpreted MCL
408.394.” Id. at 909-10.8

   [13] Alexander is indistinguishable from this case, and
plaintiffs cite no authority that undermines its rationale.
Accordingly, the district court erred by not dismissing plain-
tiffs’ claims under Michigan law.

  B.    The remaining states

   The district court said that its conclusions regarding
whether FIE’s adjusters are exempt under the FLSA apply
with equal force to their state law overtime claims. If that
were true, we would have to vacate the judgment below to the
extent it awarded relief under state law, since we have already
determined that all adjusters are exempt under the FLSA. Sur-
prisingly, the parties dedicated little more than a few lines to
this issue in the six briefs between them.

   [14] Plaintiffs assert that FIE did not satisfy certain require-
ments for the administrative exemption under state law,
requirements that go above and beyond what is required by
the FLSA. At least on their face, the authorities that plaintiffs
cite support their argument. For example, in Colorado, Min-
  8
   Another panel of this Court, see Veliz v. Cintas Corp., No. 04-16843,
2006 U.S. App. LEXIS 11997, at *7 n.2 (May 3, 2006), had certified the
same issue to the Michigan Supreme Court, which denied review. The
panel went on to hold, consistent with Alexander, that the term “minimum
wage” does not include overtime pay. Id. at *7-8 (“There is no evidence
that the Michigan Supreme Court would decide the issue differently from
Alexander. We are, therefore, obligated to defer to the Michigan Court of
Appeals’ interpretation of ‘minimum wage’ . . . in [MCL] 408.394.”).
Since Veliz was unpublished, we are not bound by its ruling. Nevertheless,
we agree with its analysis.
3658          IN RE: FARMERS INSURANCE EXCHANGE
nesota and Oregon, exempt employees must regularly exer-
cise discretion and independent judgment, see Minn. R.
5200.0200, Subp. 1.C; Or. Admin. R. § 839-020-0005(2)(b);
7 Colo. Code Regs. § 1103-1(5)(a), while the FLSA requires
that their work “include the exercise of discretion and inde-
pendent judgment,” 29 C.F.R. § 541.200(a)(3) (emphasis
added). Colorado and Oregon even impose somewhat unique
requirements for exempt status. See Or. Rev. Stat.
§ 653.020(3)(a) (employee must “[p]erform[ ] predominantly
intellectual, managerial or creative tasks”); 7 Colo. Code
Regs. § 1103-1(5)(a) (employee must “directly serve[ ] the
executive, and regularly perform[ ] duties important to the
decision-making process of the executive”).

   [15] If the administrative exemption in Colorado, Minne-
sota and Oregon is truly narrower than the FLSA’s adminis-
trative exemption, our decision today would not necessarily
bar claims adjusters in those states from obtaining relief. See
Pac. Merch. Shipping Assoc. v. Aubry, 918 F.2d 1409, 1425
(9th Cir. 1990) (“There is no indication that Congress, in
enacting the FLSA[ ], intended to preempt states from accord-
ing more generous protection to [its] employees. [T]he pur-
pose behind the FLSA is to establish a national floor under
which wage protections cannot drop, not to establish absolute
uniformity in minimum wage and overtime standards nation-
wide at levels established in the FLSA.” (emphasis omitted)).
The record, however, is not sufficiently developed for us to
tackle — in the first instance — the nuances of state law.
Most importantly, it is unclear whether a requirement that the
employee “regularly” exercise discretion and independent
judgment entails something more than what the district court
found in this case, or is simply another way of articulating the
FLSA exemption. Cf. Becker v. F&H Restaurant Group, Inc.,
413 N.W.2d 202, 205 (Minn. Ct. App. 1987) (describing
state’s administrative exemption as containing “similar provi-
sions of analogous federal law”). And the answer to that ques-
tion may very well necessitate an in-depth look at opinion
letters and other guidance released by the respective state
              IN RE: FARMERS INSURANCE EXCHANGE           3659
agencies. Before we tell the parties what state law requires in
this area, we believe it is prudent to have the district court
take another swipe at this, after the parties fully brief the
scope of the administrative exemption under Colorado, Min-
nesota and Oregon law, as well as Illinois, New Mexico and
Washington law.

                         CONCLUSION

   As to plaintiffs’ FLSA claim, as well as their claims under
Michigan law, we AFFIRM the district court’s judgment as to
the adjusters whom it ruled are exempt. We REVERSE the
district court’s judgment as to the remaining adjusters, with
instructions to enter judgment in FIE’s favor consistent with
this opinion.

  We REVERSE the judgment as to all claims under Colo-
rado, Illinois, Minnesota, New Mexico, Oregon and Washing-
ton law, and REMAND them to the district court for further
proceedings consistent with this opinion.

 AFFIRMED IN PART, REVERSED IN PART AND
REMANDED. EACH PARTY TO BEAR ITS OWN
COSTS ON APPEAL.