United States District Court, N.D. Illinois, Eastern Division
Joseph Woerner, individually and on behalf of all others similarly situated, Plaintiff,
Bankers Life and Casualty Company, Defendant.
MEMORANDUM OPINION AND ORDER
Honorable Thomas M. Durkin, United States District Judge.
Woerner was an insurance agent for Bankers Life and Casualty
Company. He alleges that his hiring by Bankers Life was part
of a pyramid scheme in which Bankers Life hires more agents
than it needs in order to exact the fees it charges new
agents, and to claw back sales commissions under false
pretenses when surplus agents inevitably leave the company.
Woerner alleges that Bankers Life's conduct constitutes:
a violation of his agency contract (Count I); a violation of
the covenant of good faith and fair dealing under Illinois
law (Count II); and a violation of the Illinois Consumer
Fraud Act (Count III). R. 1-1. Bankers Life has moved to
dismiss for failure to state a claim pursuant to Federal Rule
of Civil Procedure 12(b)(6). R. 16. For the following
reasons, that motion is denied in part and granted in part.
12(b)(6) motion challenges the sufficiency of the
complaint. See, e.g., Hallinan v. Fraternal Order of
Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir.
2009). A complaint must provide “a short and plain
statement of the claim showing that the pleader is entitled
to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to
provide defendant with “fair notice” of the claim
and the basis for it. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). This standard “demands more
than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). While “detailed factual allegations”
are not required, “labels and conclusions, and a
formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555. The
complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 678 (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.'” Mann v.
Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting
Iqbal, 556 U.S. at 678). In applying this standard,
the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party.
Mann, 707 F.3d at 877.
is a resident of Virginia, and Bankers Life is a Delaware
corporation headquartered in Chicago. R. 1-1 at 7
(¶¶ 9-10). In October 2014, Woerner signed a
contract to be an insurance agent for Bankers Life.
Id. at 9 (¶¶ 17). The contract was a
standard form signed by all Bankers Life agents (the
“Agent Contract”). Id. at 4-5 (¶
2), 37-48. The Agent Contract provides that the agent will be
compensated by commissions on policies the agent sells.
Id. at 9-10 (¶ 19), 39 (¶ 9). The Agent
Contract also allows Bankers Life to “reject any
application for insurance submitted by the agent without
specifying the reason therefore, ” id. at 40
(¶ 12), and provides that “[w]henever a premium
has been refunded to an applicant or policyholder, the agent
agrees to immediately return to [Bankers Life] any
commissions received on the amount refunded.”
Id. at 40 (¶ 13). Bankers Life also has
permission to “deduct” any commissions an agent
is obligated to return to Bankers Life from any future
commissions (or other payments Bankers Life may owe to the
agent). Id. at 41 (¶ 14). When Bankers Life
requires an agent to return a commission it is known as a
“chargeback.” Id. at 5 (¶ 4).
Agents generally continue to receive commissions on premiums
for renewal of policies they sold even after they have left
Bankers Life. Id.
alleges that Bankers Life's business model
“requires a huge number of agents, ” and that
many agents quit or are fired within less than a year of
their state date. Id. at 8 (¶ 13). Bankers Life
requires new agents to pay “hundreds of dollars in
non-refundable fees, ” including “licensing fees
[and] list fees.” Id. at 8 (¶ 15).
Bankers Life also requires new agents to pay
“approximately $300” to create a
“holdback” account out of which Bankers Life
deducts chargebacks. Id.
alleges that “it is common company practice at Bankers
Life for senior agents to ‘re-write' policies
[sold] by former agents in order to justify commission
chargebacks and to reassign the policy [renewal] commission
stream from the [former agent] to a current senior
agent.” Id. at 5 (¶ 4). According to
Woerner, “the ‘re-writing' of the policies is
pretextual, with Bankers Life typically making nothing more
than an immaterial change, such as altering the policy
name.” Id. Bankers Life then seeks repayment
of commissions from the former agent based on these
“re-writes, ” while a current agent receives the
commission for the “rewritten” policy.
form letter Bankers Life sends to former agents seeking
repayment of commissions, Bankers Life does not provide a
specific justification for the chargeback, but instead lists
the potential reasons for the chargeback. According
to the form letter, these potential reasons include the
following: the relevant policy “lapsed, canceled or
issued as out for signature and not completed [sic], ”
or the policy's “automatic bank draft was canceled,
” the policy's “Errors and Omissions
Insurance premiums were unrecovered, ” or “other
contractual charges were applied.” Id. at 11
(¶ 24). Woerner alleges that none of these stated
reasons “is a legitimate basis for requiring a [former
agent] to refund a commission” under the terms of the
Agent Contract. Id. at 11 (¶ 25). Indeed,
according to Woerner, the “rewrite” process does
not “typically” involve refunding the premium to
the policy-holder, id. at 11-12 (¶ 25), and
Woerner contends that a premium refund is the only basis for
a chargeback under the terms of the Agent Contract.
alleges that his agency agreement with Bankers Life was
terminated because he expressed that he did not want to
participate in the “re- write” process.
Id. at 12-13 (¶¶ 28-30). After his
termination, Woerner received a letter from Bankers Life
requesting the return of $473.96 in commissions. Id.
at 14 (¶ 33). The letter did not specify the relevant
policies for which premiums had been returned. Woerner
alleges that Bankers Life responded to his request for an
accounting with “a largely indecipherable account log
which does not validate the debts or otherwise explain the
charges or how they are derived.” Id. at 15
(¶ 38). Bankers Life sent two additional letters to
Woerner explaining that the amount of commissions he was
obligated to return had increased to $696.58. Id. at
14-15 (¶¶ 34, 37). Woerner then received a notice
from a debt collator regarding this amount due. Id.
at 15 (¶ 39). Woerner's complaint includes many
statements posted to the internet by other former Bankers
Life agents complaining of similar chargeback demands by
Bankers Life. Id. at 16-28 (¶¶ 40-57).
Breach of Contract
claims that Bankers Life breached his Agent Contract by
seeking chargebacks on policies for which the premiums were
not returned. Woerner also alleges that Bankers Life's
policy of charging new agents certain fees violates the Agent