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FLANAGAN v. ALLSTATE INSURANCE COMPANY

June 21, 2004.

JAY R. FLANAGAN, JAMES W. CARSON JOHN M. CHANEY, and DONALD W. JONES, individually and on behalf of all others similarly situated, Plaintiffs,
v.
ALLSTATE INSURANCE COMPANY, an Illinois corporation, and the AGENT TRANSITION SEVERANCE PLAN, Defendants.



The opinion of the court was delivered by: JAMES MORAN, Senior District Judge

MEMORANDUM OPINION AND ORDER

Four named plaintiffs, Jay Flanagan, James Carson, John Chaney and Donald Jones, remain in this class action against Allstate Insurance Company (Allstate) and the Agent Transition Severance Plan (severance plan) for violations of the Employee Retirement Income Security Act (ERISA). Plaintiffs were Allstate employee-agents who retired or became independent contractors for Allstate before the company altered its severance plan to provide more lucrative benefits for employees who left the company or changed their status. After the court's dismissal of two counts in the complaint, see Flanagan v. Allstate Insurance Company, 213 F. Supp.2d 862 (N.D.Ill. 2001), the named plaintiffs are left with two ERISA claims: 1) constructive discharge with the intent to interfere with the receipt of benefits, under both then-existing plans and a new plan being seriously considered, in violation of § 510, 29 U.S.C. § 1140, and 2) failure to disclose serious consideration of the plan in breach of Allstate's fiduciary duty. Plaintiffs now seek to certify a class to pursue these claims. Their motion for class certification is granted in part and denied in part.

BACKGROUND

  The following facts are taken from plaintiffs' complaint. In 1998, Allstate, an insurance provider, planned the elimination of employee-agents in favor of independent contractors. Plaintiffs claim Allstate was motivated, in part, by a desire to avoid future contributions to employee ERISA plans. In an effort to achieve its goal, Allstate allegedly harassed its employee-agents — asserting more control over them by requiring attendance at training sessions and mandatory meetings, and participation in a skills management program; extending their office hours; reducing or eliminating reimbursable office expenses; setting unrealistic sales quotas, threatening termination; creating make-work; and imposing burdensome reporting requirements. In October 1998, Allstate also informed employee-agents of increased service availability standards they had to meet. These standards included keeping the office open six days a week and staffing the office with a licensed representative during business hours. Further, Allstate informed its agents that managers would monitor compliance with the standards and that failure to maintain the standards could result in reprimand and/or termination.

  Plaintiffs allege that these new requirements and standards were a successfully orchestrated campaign to drive out agents before Allstate announced a new severance package. Between December 1, 1998 and May 31, 1999, 176 agents quit and 1,106 agents became independent contractors. Two hundred and fifty-one additional agents converted to independent contractors between June 1, 1999 and November 30, 1999.

  In November 1999, Allstate publicly unveiled its plan to use only independent contractors as sales agents. In conjunction with the introduction of its new business model, Allstate announced the availability of bonuses and severance benefits for employee-agents who converted to independent contractors or retired. Allstate also offered to buy the books of business from those agents who wanted to leave the company. The company wrote the revised Agent Transition Severance Plan to provide these benefits only to agents who left their positions after November 30, 1999, After plaintiffs' attorneys filed a class action lawsuit in state court requesting benefits for employee-agents who retired or left prior to November 30, 1999, Allstate amended the severance plan to allow benefits to any employee-agents who left between June 1, 1999 and November 30, 1999, as well. Plaintiffs were all employee-agents who retired, quit or became independent contractors before June 1, 1999, and thus were ineligible for benefits. They allege that Allstate seriously considered the revised severance plan prior to June 1, 1999, but did not inform them of these new benefits before they left their positions — a breach of its fiduciary duty.

  Plaintiffs seek to certify a class consisting of "Allstate employee-agents who, retired, terminated, or converted to independent contractor status between April 1, 1998 and November 30, 1999, who had not submitted notice of their retirement or resignation prior to April 1, 1998 and who have not been offered the opportunity to participate in the Agent Transition Severance Plan or were harassed to leave Allstate prior to June 30, 2000." Plaintiffs also seek to certify a subclass of "employee-agents who submitted a retirement or termination letter in substance reserving rights to future benefits to be offered in 1999."

  DISCUSSION

  Courts employ a two-step process in deciding whether to certify a class. First, the court analyzes whether the proposed class meets the four requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality and adequate representation. Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993). Then, it determines whether the action satisfies one of the subsections of Rule 23(b). Levin v. Kluever & Platt, LLC, 2003 WL 22757764 at *1 (N.D.Ill. 2003). For purposes of this motion the court accepts the allegations of the complaint as true, though it may probe the evidence, if necessary, to determine whether class certification is appropriate. See Retired Chicago Police Ass'n, 7 F.3d at 599. In deciding whether or not to certify a class, the court does not evaluate the merits of the underlying action.*fn1 Spencer v. Central States, Southeast and Southwest Areas Pension Fund, 778 F. Supp. 985, 989 (N.D.Ill. 1991).

  Federal Rule of Civil Procedure 23(a)

  Failure to meet any one of the four requirements of Rule 23(a) defeats a bid for class certification. Allen v. Chicago Transit Authority, 2000 WL 1207408 at *5 (N.D.Ill. 2000). The rule provides that parties may sue as representatives of a class if

 
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
The Seventh Circuit has stated that Rule 23 should be liberally interpreted and that, when using its broad discretion regarding the certification of a class, a court should err in favor of maintaining the class action. King v. Kansas City Southern Indus., 519 F.2d 20, 26 (7th Cir. 1975). Numerosity

  The numerosity requirement does not rest solely on the number of individuals who would constitute the proposed class. The central inquiry is the practicality of joining all the interested parties in a single suit. Arenson v. Whitehall Convalescent and Nursing Home, 164 F.R.D. 659, 663 (N.D.Ill. 1996). When determining whether joinder is impracticable, the court considers not only the size of the class, but also its geographic dispersion, the relief sought, and the ability of individuals to bring their own claims. See Barner v. City of Harvey, 1997 WL 139469 at *2 (N.D.Ill. 1997). While there is no threshold number required to prove numerosity, "permissive joinder is usually deemed impracticable where the class members number 40 or more." Chandler v. Southwest Jeep-Eagle, Inc., 162 F.R.D. 302, 307 (N.D.Ill. 1995) (citations omitted). In response to plaintiffs' interrogatories, defendants stated that between December 1, 1998 and May 31, 1999, 176 Allstate agents terminated their employment and 1,106 agents became independent contractors. The number of potential class members (which is even higher than 1,282, since the above figures only cover a portion of the time period for the proposed class) clearly suffices in order to establish numerosity.*fn2

  The other considerations also support a finding of numerosity. The named plaintiffs reside in Florida and Illinois, and, as Allstate operates nationally, class members likely live throughout the country. The injunctive and declaratory relief that plaintiffs seek also support a finding that the class is sufficiently numerous, for that relief would apply to all who can establish that they are members of the class. Furthermore, a class member's ability to pursue a claim individually may be curtailed due to the likely imbalance between the costs of litigation and the potential award. See Barner, 1997 WL 139469 at *3 (court considers ...


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