United States District Court, D. Kansas
STEVE TRONSGARD & MEDBOR CHAVEZ, individually and on behalf of all others similarly situated, Plaintiffs,
FBL FINANCIAL GROUP, INC., et al., Defendants.
MEMORANDUM AND ORDER
D. Crabtree, United States District Judge.
Steve Tronsgard and Medbor Chavez are former insurance agents
for defendants-a group of entities that plaintiffs call
“the Farm Bureau family of companies.” Doc. 41 at
12. The four defendants named in plaintiffs' Complaint
are: (1) FBL Financial Group, Inc. (“FBL
Financial”); (2) Farm Bureau Property & Casualty
Insurance Co. (“FBP&C”); (3) Farm Bureau Life
Insurance (“FB Life”); and (4) Western
Agricultural Insurance Company (“WAIC”).
Plaintiffs allege that defendants improperly classified them
during their employment as independent contractors instead of
employees. And plaintiffs, both individually and on behalf of
all others similarly situated, bring this lawsuit asserting
claims arising from defendants' alleged
have responded to the lawsuit by filing a Motion to Dismiss
under Federal Rule of Civil Procedure 12(b)(6), asserting
that plaintiffs' First Amended Class Action Complaint
fails to state a claim for relief. Doc. 31. Plaintiffs filed
an Opposition to that motion. Doc. 41. And defendants
submitted a Reply. Doc. 54. After the briefing closed, the
court granted plaintiffs' motion to file a surreply and
also permitted defendant to file a sur-surreply. Doc. 59. On
January 23, 2018, plaintiffs filed their Surreply. Doc. 60.
And on January 31, 2018, defendants filed their Sur-surreply.
Doc. 62. The matter, to say the least, is fully briefed, and
the court is prepared to rule. After considering the
arguments and authorities presented in the parties'
papers,  the court grants defendants' Motion to
Dismiss in part and denies it in part. The court explains why
following facts are taken from plaintiffs' First Amended
Class Action Complaint (“Complaint”). Doc. 23.
The court accepts the facts asserted in the Complaint as true
and views them in the light most favorable to plaintiffs.
Burnett v. Mortg. Elec. Registration Sys., Inc., 706
F.3d 1231, 1235 (10th Cir. 2013) (citing Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)).
2003 to 2014, plaintiff Steve Tronsgard worked as a Farm
Bureau insurance agent in Kansas. From 2014 to 2016,
plaintiff Medbor Chavez worked as a Farm Bureau insurance
agent in Kansas. Both plaintiffs signed an Agent Contract
that classified them as independent contractors, not
employees. But, in reality, defendants retained the right to
control the manner, method, and means of virtually every
facet of their insurance agents' work. Defendants did so
by imposing various regulations, policies, and procedures
that governed all its insurance agents. Thus, plaintiffs
contend, defendants misclassified plaintiffs and other
similarly situated insurance agents as independent
contractors. And through this practice of misclassification,
plaintiffs allege, defendants shirked their legal obligations
to provide health, retirement, and other benefits to its
insurance agents while reaping the economic benefits of its
Complaint asserts that defendants' misclassification
gives rise to six causes of action: (1) Racketeer Influenced
and Corrupt Organization Act (“RICO”) violations
under 18 U.S.C. §§ 1341, 1343, 1962(c); (2)
Employee Retirement Income Security Act (“ERISA”)
violations under 29 U.S.C. § 1132(a)(1)(B); (3) Kansas
Wage Payment Act (“KWPA”) violations under Kan.
Stat. Ann. §§ 44-313 et seq.; (4) quantum
meruit/rescission; (5) unjust enrichment; and (6) declaratory
relief. Defendants assert that none of these claims states a
plausible cause of action. Defendants thus ask the court to
dismiss plaintiffs' Complaint under Rule 12(b)(6). The
court considers defendants' request below.
Civ. P. 8(a)(2) provides that a complaint must contain
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” Although this Rule
“does not require ‘detailed factual allegations,
'” it demands more than “[a] pleading that
offers ‘labels and conclusions' or ‘a
formulaic recitation of the elements of a cause of
action'” which, as the Supreme Court explained
simply, “will not do.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
complaint to survive a motion to dismiss under Rule 12(b)(6),
the pleading “must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 679 (quoting Twombly, 550 U.S. at 570). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. at 678 (citing Twombly,
550 U.S. at 556). “The plausibility standard is not
akin to a ‘probability requirement, ' but it asks
for more than a sheer possibility that a defendant has acted
unlawfully.” Id. (quoting Twombly,
550 U.S. at 556); see also Christy Sports, LLC v. Deer
Valley Resort Co., Ltd., 555 F.3d 1188, 1192 (10th Cir.
2009) (“The question is whether, if the allegations are
true, it is plausible and not merely possible that the
plaintiff is entitled to relief under the relevant
law.” (citation omitted)).
considering whether a plaintiff has stated a plausible claim,
the court must assume that the complaint's factual
allegations are true. Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 555). But, the court is
“‘not bound to accept as true a legal conclusion
couched as a factual allegation.'” Id.
(quoting Twombly, 550 U.S. at 555).
“‘Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not
suffice'” to state a claim for relief. Bixler
v. Foster, 596 F.3d 751, 756 (10th Cir. 2010) (quoting
Iqbal, 556 U.S. at 678). Also, the complaint's
“[f]actual allegations must be enough to raise a right
to relief above the speculative level.”
Twombly, 550 U.S. at 555 (citations omitted).
evaluating a motion to dismiss under Fed.R.Civ.P. 12(b)(6),
the court “may consider not only the complaint itself,
but also attached exhibits and documents incorporated into
the complaint by reference.” Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009). A court
“may consider documents referred to in the complaint if
the documents are central to the plaintiff's claim and
the parties do not dispute the documents'
authenticity.” Id. (quoting Alvarado v.
KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007)).
deciding the motion to dismiss here, the court considers
plaintiff Tronsgard's January 1, 2013 Farm Bureau
Property & Casualty Insurance Company/Western
Agricultural Insurance Company Agent Contract (“Agent
Contract”) (Doc. 23-1). It does so because plaintiffs
refer to the Agent Contract in their Complaint, and they have
attached it to the Complaint as an exhibit. See Doc.
23 ¶¶ 43-45, 53, 57-58, 79, 118-24; Doc. 23-1 (the
Agent Contract). The Agent Contract also is central to
plaintiffs' claims, specifically plaintiffs' RICO
claim (see Doc. 23 ¶¶ 118-24). The parties
do not dispute its authenticity. For all these reasons, the
court considers the Agent Contract when deciding
defendants' Motion to Dismiss under Rule 12(b)(6).
ask the court to dismiss plaintiff's claims for four
reasons. First, defendants argue that the statute of
limitations bars each of plaintiff Tronsgard's claims.
Second, defendants assert that plaintiffs' ERISA claims
fail as a matter of law because plaintiffs have not pleaded
exhaustion of administrative remedies. Third, defendants
contend that plaintiffs' Complaint fails to state a
plausible RICO claim. Finally, defendants argue,
plaintiffs' Complaint fails to state a plausible claim
for quantum meruit/rescission. The court addresses each
argument, below. The court begins with the RICO claim.
Have Plaintiffs Stated a Plausible RICO Claim?
assert that plaintiffs' Complaint fails to state a
violation of RICO. Subsection 1962(c) of RICO makes it:
unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect,
interstate or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering
activity or collection of unlawful debt.
18 U.S.C. § 1962(c). Subsection 1962(d) makes it
“unlawful for any person to conspire to violate”
subsection 1962(c). Id. § 1962(d). RICO
provides a private civil cause of action for those who are
injured by violations of § 1962 and allows recovery of
treble damages, costs, and attorney fees. Id. §
addressing plaintiffs' RICO claim below, the court is
mindful that “RICO is to be read broadly.”
Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479,
497 (1985). “To successfully state a RICO claim, a
plaintiff must allege four elements: (1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering
activity.” Robbins v. Wilkie, 300 F.3d 1208,
1210 (10th Cir. 2002) (citations and internal quotation marks
omitted). Defendants argue that plaintiffs' RICO claim
falls short of these elements for several reasons: (1)
plaintiffs fail to allege a sufficient predicate act; (2)
plaintiffs have not alleged a RICO enterprise; (3) plaintiffs
have not alleged sufficiently that the members of the
enterprise associated together for a common fraudulent
purpose; and (4) plaintiffs have not alleged sufficiently
defendants' participation in the conduct of the alleged
court agrees that plaintiffs' Complaint fails to state a
plausible RICO claim for at least three of these reasons.
Each one of the three provides an independent basis for the
court to dismiss plaintiffs' RICO claim under Rule
12(b)(6). The court addresses each reason in the
Plaintiffs' Complaint fails to allege facts capable of
supporting a finding or inference that defendants committed a
RICO predicate act.
assert that plaintiffs' Complaint fails to allege a
predicate act capable of supporting a plausible RICO claim.
is founded on the concept of racketeering
activity.'” Safe Streets All. v.
Hickenlooper, 859 F.3d 865, 882 (10th Cir. 2017)
(quoting RJR Nabisco, Inc. v. European Cmty., 136
S.Ct. 2090, 2096 (2016)). “The statute defines
‘racketeering activity' to encompass dozens of
state and federal offenses, known in RICO parlance as
predicates.” Id. (quoting RJR, 136
S.Ct. at 2097). “‘These predicates include any
act “indictable” under specified federal statutes
. . . . '” Id. (quoting RJR, 136
S.Ct. at 2096 (quoting 18 U.S.C. § 1961(1))). Such acts
include those “indictable” under 18 U.S.C.
“section 1341 (relating to mail fraud)” and
“section 1343 (relating to wire fraud).” 18
U.S.C. § 1961(1)(B).
plaintiffs' Complaint alleges that defendants engaged in
a pattern of racketeering activity involving mail fraud and
wire fraud. Doc. 23 ¶¶ 9, 117, 138. “To
support the mail and wire fraud allegations, the plaintiffs
must plausibly allege ‘the existence of a scheme or
artifice to defraud or obtain money or property by false
pretenses, representations or promises, ' and that
[defendants] communicated, or caused communications to occur,
through the U.S. mail or interstate wires to execute that
fraudulent scheme.” George v. Urban Settlement
Servs., 833 F.3d 1242, 1254 (10th Cir. 2016) (quoting
Tal, 453 F.3d at 1263). “And because
Fed.R.Civ.P. 9(b) requires a plaintiff to plead mail and wire
fraud with particularity, the plaintiffs must ‘set
forth the time, place and contents of the false
representation, the identity of the party making the false
statements and the consequences thereof.'”
Id. (quoting Koch v. Koch Indus., Inc., 203
F.3d 1202, 1236 (10th Cir. 2000)).
assert that plaintiffs' Complaint fails to allege facts
supporting a requisite RICO predicate act-i.e., mail
fraud or wire fraud-because the alleged fraudulent statements
did not involve misrepresentations of fact. Instead,
defendants contend, the alleged misrepresentations are
defendants' statements to plaintiffs that they would work
as independent contractors, not employees. Defendants assert
that these alleged misrepresentations are statements of
law-not fact-and thus not actionable to support a RICO
support, defendants cite cases outside the Tenth Circuit that
have rejected misrepresentation claims arising from a
defendant's classification of the plaintiff as an
independent contractor. See, e.g.,
Miller v. Yokohama Tire Corp., 358 F.3d 616, 620-21
(9th Cir. 2004) (affirming Rule 12(b)(6) dismissal of
plaintiff's RICO claim based on defendant's alleged
failure to pay plaintiff overtime because defendant's
alleged misrepresentations-i.e., that plaintiff was
not entitled to overtime-were misrepresentations of the law
and not actionable fraud necessary to support the predicate
acts of mail and wire fraud); Bernal v. FedEx Ground
Package Sys., Inc., No. 15-01448, 2015 WL 4273034, at *3
(C.D. Cal. July 14, 2015) (holding that plaintiffs' fraud
claims failed to state a claim under Rule 12(b)(6) because
the alleged misrepresentations-i.e., that plaintiffs
were independent contractors employed by FedEx-were
misrepresentations of the law and not ones of fact);
Debnam v. FedEx Home Delivery, No. 10-11025, 2011 WL
1188437, at *2 (D. Mass. Mar. 31, 2011) (dismissing
plaintiff's misrepresentation and fraud claims because
the “sole” misrepresentation allegation was that
defendant mischaracterized plaintiff “as an independent
contractor, rather than as an employee” and that
“characterization of the relationship is not a
statement of ‘fact' but rather an assertion of a
legal conclusion” that could not support
plaintiff's claims as a matter of law).
defendants explain, “the Tenth Circuit looks to state
common law” “[t]o determine what constitutes
[mail and wire] fraud under Sections 1341 and 1343.”
Shepard v. DineEquity, Inc., No. 08-2416-KHV, 2009
WL 8518288, at *6 (D. Kan. Sept. 25, 2009) (citing
BancOklahoma Mortg. Corp. v. Capital Title Co.,
Inc., 194 F.3d 1089, 1103 (10th Cir. 1999) (applying
Missouri fraud elements to determine whether defendants
violated Sections 1341 and 1343)). And, defendants say,
common law fraud in Kansas requires “false
representations made as statements of existing and material
fact.” Id. (citing Kelly v.
VinZant, 197 P.3d 803, 808 (Kan. 2008)) (emphasis
respond that defendants' reliance on these cases is
misplaced. Plaintiffs assert that these cases considered the
elements of common law fraud under state law-not mail or wire
fraud prohibited by federal statute. And, plaintiffs contend,
the Supreme Court since has held that the elements of common
law fraud do not apply to a mail fraud claim.
Bridge v. Phoenix Bond & Indemnity Co., 553 U.S.
639 (2008), the Supreme Court held that a plaintiff asserting
a RICO claim predicated on mail fraud need not show that it
relied on defendant's alleged misrepresentations.
Id. at 641-42. In reaching this conclusion, the
Court recognized that the federal mail fraud statute included
no reliance requirement. Id. at 647-50. The Court
also acknowledged that “a person can be injured
‘by reason of' a pattern of mail fraud even if he
has not relied on any misrepresentations.” Id.
at 649. In rejecting the argument that the common law meaning
of fraud should apply to federal mail fraud claims, the
Supreme Court explained that “the indictable act under
§ 1341 is not the fraudulent misrepresentation, but
rather the use of the mails with the purpose of executing or
attempting to execute a scheme to defraud.”
Id. at 652.
extent plaintiffs take Bridge's broad statement
to mean they need not plead a fraudulent misrepresentation of
fact to support the requirement of a predicate act of mail or
wire fraud, the court rejects that argument. Bridge
merely held that a plaintiff need not show reliance; it never
held that a federal mail fraud claim does not require the
other elements of a common law fraud claim-such as the
existence of a material misrepresentation of fact. See
Cal. Pharm. Mgmt., LLC v. Redwood & Cas. Ins. Co.,
No. SACV 09-141 DOC, 2009 WL 10669956, at *8 (C.D. Cal. July
29, 2009) (“While Bridge holds that
first-party reliance need not be shown, it does not even
speak of an ‘intent to deceive' or categorically
state that common law elements of fraud have no place in a
RICO claim predicated on mail or wire fraud.”). The
court declines to adopt plaintiff's interpretation of
Bridge suggests just the opposite; that is, the
common law fraud element requiring a false representation of
existing and material fact is a required element in a federal
mail fraud claim. Bridge approvingly cited an
earlier Supreme Court decision, recognizing that Neder v.
United States, 527 U.S. 1 (1999), had concluded that
“[t]he common-law requiremen[t] of ‘justifiable
reliance' . . . plainly ha[s] no place in the [mail,
wire, or bank] fraud statutes.'” Bridge,
553 U.S. at 648-49 (quoting Neder, 527 U.S. at
24-25). And Neder also recognized that
misrepresentation of a material fact is one element of
federal mail fraud. 527 U.S. 24-25.
none of plaintiffs' arguments support the conclusion that
federal mail fraud does not require the common law fraud
element of a material misrepresentation of fact. And,
importantly, to the extent plaintiffs argue to the contrary,
the court is not convinced that Bridge somehow
diminishes the persuasive value of the Ninth Circuit's
decision in Miller v. Yokohama Tire Corp. Like the
Miller plaintiff, plaintiffs here predicate their
RICO claims on purported acts of mail and wire fraud
involving their employers' alleged misrepresentations
about their employment classification. 358 F.3d at 618-19.
See also Doc. 23 ¶¶ 57-78, 117-40. As the
Ninth Circuit held in Miller, such alleged
misrepresentations are not misrepresentations of
fact. Miller, 358 F.3d at 621-22. Instead,
they are misrepresentations of law that are not actionable in
fraud. Id. Following Miller's
reasoning,  the court concludes that plaintiffs'
Complaint fails to allege plausible mail or wire fraud
capable of supporting their RICO claim. This conclusion is
consistent with other federal court opinions holding that
misrepresentations of the law cannot support the predicate
act of mail or wire fraud. See, e.g.,
Sosa v. DIRECTV, Inc., 437 F.3d 923, 940 (9th Cir.
2006) (affirming Rule 12(b)(6) dismissal of RICO claims
premised on prelitigation demand letters and phone
conversations where defendant allegedly made false
representations of law because such statements “are not
actionable as fraud, including under the mail and wire fraud
statutes”); Apache Tribe of Okla. v. Brown,
966 F.Supp.2d 1188, 1195 (W.D. Okla. 2013) (dismissing RICO
claim under Rule 12(b)(6) because the alleged
misrepresentations were legal opinions and not “false
statements of material fact” sufficient to plead the
predicate acts of mail or wire fraud); Va. Sur. Co., Inc.
v. Macedo, No. 08-5586 (JAG), 2009 WL 3230909, at *8
(D.N.J. Sept. 30, 2009) (dismissing RICO claim under Rule
12(b)(6) because “Plaintiff's allegations that . .
. Defendants committed wire and mail fraud by virtue of
falsely claiming that Defendant Jose Moreira was an employee
of the Macedos Construction Co., Inc. in order [to] obtain
Workers' Compensation benefits is not actionable as mail
and wire fraud”).
their RICO claim from dismissal on this ground, plaintiffs
argue that their Complaint alleges a scheme to defraud based
on representations made by the Agent Contract that present,
at minimum, a mixed question of law and fact and thus are
actionable in fraud. Doc. 41 at 26. Citing Kansas case law,
plaintiffs assert that the question whether an individual is
an employee or independent contractor is a question of fact.
Falls v. Scott, 815 P.2d 1104, 1112 (Kan. 1991)
(“[G]enerally speaking, the question of whether an
individual is an employee or an independent contractor is
considered a question of fact for the jury or trier of
facts.”); Craig v. FedEx Ground Package Sys.,