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Daley v. Jones Motor Co., Inc.

United States District Court, S.D. Illinois

March 29, 2018

MICHAEL DALEY, individually and on behalf of all others similarly situated, Plaintiff,
v.
JONES MOTOR CO., INC., and ZURICH AMERICAN INSURANCE COMPANY, Defendants.

          MEMORANDUM AND ORDER

          Nancy J. Rosenstengel, United States District Judge

         Pending before the Court is Defendant Jones Motor Co. Inc.'s Motion to Dismiss, filed on April 25, 2017 (Doc. 24). Plaintiff Michael Daley filed a response in opposition to the Motion on May 30, 2017 (Doc. 34), and Jones Motor filed a reply on June 13, 2017. (Doc. 35). For the reasons set forth below, the Motion to Dismiss is granted.

         Factual Background[1]

         Plaintiff Michael Daley brought a six-count complaint against Defendants Jones Motor Co. Inc. (“Jones Motor”) and Zurich American Insurance Co. (“Zurich”) on behalf of himself and putative class members, all of whom are truck drivers for Jones Motor (Doc. 1). The complaint is based primarily on the allegations that Plaintiff and the other drivers were employees of Jones Motor, and therefore, Jones Motor was required by the Illinois Workers' Compensation Act to purchase workers' compensation coverage for the drivers. But Jones Motor purportedly schemed with Zurich to misclassify its drivers as independent contractors in order to evade its obligations under the Illinois Workers' Compensation Act and avoid paying workers' compensation premiums.

         Here's how Plaintiff alleges that it all worked. Jones Motor made Plaintiff and its other drivers sign Contractor Operating Agreements. The Agreements indicated that the drivers were independent contractors and that no workers' compensation benefits would be provided by Jones Motor to the drivers in the event they were injured on the job. Instead, the Agreements required the drivers to purchase an “occupational accident policy” from Zurich and to allow Jones Motor to make a deduction from their wages of to cover the cost of the policy. The deduction was approximately $38 per week.

         Jones Motor and Zurich then conspired with each other to discourage the drivers from filing workers' compensation claims so that the Illinois Workers' Compensation Commission would never have the opportunity to analyze and determine whether the drivers were actually employees of Jones Motor and entitled to workers' compensation coverage. For example, the occupational accident policies issued by Zurich included a term immediately terminating benefit payments under the policy if the driver filed a workers' compensation claim.

         In the event that a driver nevertheless filed a workers' compensation claim, Jones Motor was covered by a “contingent liability policy” through Zurich for which it paid an annual premium of approximately $1, 500. This policy required Zurich to pay for Jones Motor's liability under state workers' compensation acts and also required Zurich to pay for Jones Motor's legal defense in defending workers' compensation claims filed by its employees and drivers. Plaintiff essentially alleges, however, that the contingent liability policy was just for show. The modest premiums Jones Motor paid for the contingent liability policy were not sufficient to cover, and were never intended to cover, the costs of workers' compensation claims. Instead, when a driver filed a workers' compensation claim, Zurich used the contingent liability policy to pay the driver's initial workers' compensation benefits, but then paid the driver's subsequent benefits out of the occupational accident policies that the drivers purchased. Thus, the drivers were unwittingly paying the workers' compensation benefits they were owed by Jones Motor and also paying for an attorney to represent Jones Motor against them in the workers' compensation litigation.

         According to Daley, he and the putative class members were coerced and deceived into paying premiums for occupational accident policies that were worthless, or worth far less than represented, because the policies provided coverage for work-related injuries that were already covered by the Workers' Compensation Act. Jones Motor, on the other hand, was able to save a significant amount of money by avoiding workers' compensation premiums. Zurich turned a profit because, even though it lost money on the contingent liability policy with Jones Motor, it was able to recoup that money and then some through the substantial premiums paid by well over one hundred drivers for the occupational accident policies. Zurich also was able to save money by structuring the occupational accident policies to transfer responsibility for medical bills to the drivers' private healthcare plan, by implementing coverage limits not found in the Illinois Workers' Compensation Act, and by paying benefits less frequently than benefits are paid under the Act.

         Based on these allegations, Daley asserts claims against Jones Motor and Zurich for civil conspiracy (Count 1), for violations of the “Illinois Deceptive Business Practices Act” (Counts 2 & 3), [2] and for unjust enrichment (Counts 4 & 5). Daley also asserts a claim against Jones Motor for violations of the Illinois Wage Payment and Collection Act (Count 6).

         Jones Motor filed a motion to dismiss the complaint, contending that Daley's claims are all predicated upon a common set of facts: that under the Illinois Workers' Compensation Act, 820 Ill. Comp. Stat. 305 et seq., an employment relationship existed between Daley and Jones Motor, that Jones Motor misclassified Daley as an independent contractor, and that Jones Motor unlawfully required Daley to purchase his own Workers' Compensation insurance policy from Zurich (Doc. 24). Jones Motor argues that the resolution of these issues rests within the exclusive jurisdiction of Illinois Workers' Compensation Commission (“Commission”) (Doc. 24).

         In response, Daley argues that the Commission does not have any jurisdiction, much less exclusive jurisdiction, over the issue of whether he was misclassified as an independent contractor because he does not have a pending workers' compensation claim for a workplace injury or death (Doc. 34). Daley also argues that Jones Motor should be judicially estopped from denying that the truckers were its employees (Doc. 34).

         Analysis

         The Court begins its discussion by noting that although Jones Motor's motion appears to raise a question about the Court's jurisdiction, which would fall under Federal Rule of Civil Procedure 12(b)(1), the motion to dismiss is properly brought under Rule 12(b)(6) for failure to state a claim. See Dunlap v. Nestle USA, Inc., 431 F.3d 1015, 1017 (7th Cir. 2005); Goetzke v. Ferro Corp., 280 F.3d 766, 779 (7th Cir. 2002). The basis for subject matter jurisdiction is the Class Action Fairness Act, 28 U.S.C. § 1332(d), which is a component of the federal diversity statute, 28 U.S.C. § 1332 (Doc. 1). In matters of diversity jurisdiction, “[t]he exclusivity provisions of Illinois's workers' compensation statute do not (indeed, may not) affect the scope of the jurisdictional authority granted to the federal courts by Congress.” Dunlap, 431 F.3d at 1017 (parenthetical in original). Goetzke, 280 F.3d at 779 (“Once Congress has conferred subject matter jurisdiction on the federal courts, state law cannot expand or contract that grant of authority.”) Instead, the question is whether Daley's claims are viable causes of action in light of the exclusivity provisions of the Workers' Compensation Act. “If state substantive law has denied a plaintiff a remedy for his cause of action, the district court must dismiss the complaint for failure to state a claim upon which relief may be granted.” Goetzke, 280 F.3d at 779.

         The key consideration in this matter is whether the Illinois Workers' Compensation Act provides exclusivity of remedy over Daley's claims to the Illinois Workers' Compensation Commission, such that a federal court would be unable to grant relief. Jones Motor points to Section 18 of the Workers' Compensation Act (Doc. 24, pp. 1, 5), so the Court will start there. Section 18 provides “All questions arising under this Act, if not settled by agreement of the ...


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