A federal judge has denied State Farm’s attempts to end a class action that alleges the insurance giant “systematically discriminates” against Black employees.
Seven current and former State Farm agents sued the State Farm’s various corporate identities, alleging a set of practices and policies that result in Black agents earning less than other agents, enduring differential treatment and experiencing greater attrition rates. State Farm moved to dismiss, and although U.S. District Judge Franklin Valderrama said it was “a close call,” he ultimately agreed the “plaintiffs have done enough at this stage” to allow their complaint to proceed.
According to Valderrama, who issued his opinion July 1, the agents worked in Chicago, Houston, Michigan, Alabama and Virginia. Some said the company recruited them through its Term Independent Contract Agents program, which includes a 17-week training and personal investment in office space, marketing materials, sales leads and staff hiring.
Linda D. Friedman
| stowellfriedman.com
The agents allege State Farm disproportionately relegates Black agents to lower-income areas and accused the company of “race matching” based on population statistics of its markets. They say the company perpetuates start-up disadvantages whenever an agent retires or otherwise leaves the company by assigning customers and policies, meaning Black “agents are largely excluded from being assigned lucrative insurance policies,” according to Valderrama.
The complaint also challenged State Farm’s Scorecard Bonus program, a commission-based and cumulative-advantage system they say discriminates against Black agents because those agents were initially assigned to areas where the customers necessarily can’t afford as much investment. They also said State Farm targets its Black agents for compliance issues, hampering their abilities to offer financial products to clients, while disproportionately disciplining or rescinding rights of Black agents versus the larger agent pool.
In arguing for dismissal, State Farm said the complaint fails to plausibly allege intentional discrimination, doesn’t show the plaintiffs would’ve been treated differently but for their race, doesn’t adequately allege the agents suffered retaliation and invoked statutory limitations.
Some of the agent’s allegations are conclusory, Valderrama acknowledged, but the complaint “also contains factual allegations that support a reasonable inference of intent to discriminate,” he said. He noted the plaintiffs accused State Farm of refusing to assign Black agents outside “their originally ‘race matched’ territories,” and of requiring Black agents to build client lists from scratch, whereas others “were given substantial books of business.”
State Farm noted some of the agents’ allegations included success notwithstanding those circumstances, but Valderrama noted they also alleged being denied chances to open second offices, an opportunity allegedly afforded to non-Black agents.
“Whether Plaintiffs will be able to show that State Farm actually had the intent to discriminate is a question for another day,” Valderrama wrote. “While, as a general matter, it is not logical for a company to act in a way that reduces the company’s profits, that does not make a salesperson’s racial discrimination allegations categorically implausible.”
Valderrama further said the complaint has factual allegations sufficient to survive a motion to dismiss and said State Farm attempted to invoke some standards appropriate only for summary judgment motions. He also explained the agents have the better of a disagreement on applicable Supreme Court precedent in discrimination lawsuits.
“Plaintiffs allege that they would not have been subject to these purportedly adverse events had they been white,” Valderrama wrote. “Plaintiffs’ allegations, moreover, are plausible because they support their ‘because of their race’ allegations with specifics and do not merely tack ‘because of race’ onto their allegations.”
Although State Farm said it terminated some of the agents for cause, Valderrama noted the agents both disputed the circumstances of those terminations and noted the complaint includes allegations from the entirely of their employment, not just the conclusion. He also said the agents who said State Farm punished them after they made discrimination reports didn’t all offer extensive cause-and-effect details, but noted they offered enough to survive a motion to dismiss.
Finally, Valderrama rejected State Farm’s argument the agents’ complaints were time-barred because he said although the allegations started with the beginning of their employment, well before 2016, they also included the ongoing effects of corporate policies during the relevant timeframe.
Valderrama ordered State Farm to answer the complaint by July 25.
Plaintiffs are represented by attorneys Linda D. Friedman, George S. Robot and Suzanne E. Bish, of Stowell & Friedman; and Justin L. Leinenweber, of Leinenweber Baroni & Daffada, all of Chicago.
State Farm is represented in the action by attorneys Patricia Brown Holmes, Joseph A. Cancila Jr., Sondra A. Hemeryck and Amy C. Andrews, of the firm of Riley Safer Holmes & Cancila; and Michael A. Warner Jr. and Erin Fowler, of the firm of Franczek P.C., all of Chicago.