Former Insurance Manager Sues Farmers For $13.8 Million

Oct. 09--A former Sacramento area district manager for the Farmers Insurance Group who made $2.6 million over four years is suing the company for more than five times that amount on grounds that he got jobbed on an unfair business practices violation.

Michael J. Pexa of Granite Bay claims Farmers misclassified him as an independent contractor in a suit that's heading toward a showdown in Sacramento Superior Court. He says the insurance giant still owes him $13.8 million for overtime, business expenses, a pension program, health insurance and the value of his contract.

By characterizing the managers as independent contractors, Pexa says Farmers avoids tax obligations and reimbursements required by the state Labor Code.

But in court papers, Farmers has shot back hard at Pexa. The company said Pexa ran his own office, "handpicked" his employees, including his wife, and that he "apparently" wrote off expenses, such as the purchase of a Ferrari. He also had his business pay his $66,000 entry fee to join a country club and the $25,000 in monthly dues to stay in it, Farmers' lawyers said.

"This case presents a strange spectacle of a man who, having reaped all of the enormous monetary benefits of operating an independent business, now wants to rewrite history," Farmers says in its trial brief. "Having always had the freedom to run his business, to come and go as he pleased, to decide his own schedule, to hire his own employees, to take vacations when he wished, Plaintiff now wants all the benefits and protections that the law provides to time-card punching employees who made minimum wage."

Pexa, 52, could not be reached for comment Monday. Neither could his Sacramento attorney, Patrick K. Hanly. Farmers' Los Angeles lawyer, Royal F. Oakes, also could not be reached for comment.

The suit, originally filed in 2009, sought damages on six causes of action such as breach of contract and fraud. Only one action -- unfair competition -- remains, under which Pexa is seeking millions in restitution.

Attorneys representing two groups of Farmers defendants who have succeeded in getting most of the suit thrown out are now going for the kill shot. They've scheduled hearings for this month in front of Judge Judy Holzer Hersher to have the rest of the matter dismissed.

Lawyers for Pexa said he never sold insurance. "His job was to recruit for appointment and train agents and have the agents produce sales pursuant to goals, objectives and policies established by Farmers," they said in their trial brief. They said Pexa couldn't hire or fire and "was not permitted to represent any other insurance company."

According to the suit, Pexa became a district manager in 1998 and "built a huge network of business for Farmers." For 10 years, his office boosted production at an annual rate of 41 percent, the suit says. Pexa won dozens of performance awards for the company, his suit said.

"Farmers established a scheme of having District Managers sign an Appointment Agreement, which contains a provision that the District Managers are independent contractors, when in fact the District Managers are employees," Pexa's suit says.

The court papers don't say why Pexa left the company, around 2009. "(T)he parties' relationship broke down, and the contract was terminated" is all Farmers said in its trial brief.

Whatever the reason, Pexa's suit says he is owned $6.5 million in unpaid overtime hours, $5.5 million in unspecified business expenses, $1 million for his pension, $721,000 for "contract value" and $2,000 a month for four years of medical insurance.

Farmers said in its trial brief that "equity recoils" at the thought of Pexa obtaining restitution under the state's unfair competition law.

Pexa "represented himself to the IRS and State Franchise Tax Board" that he was self-employed "and fully exploited that status to reduce his taxable income from the high six-figures to low five-figures," the company said. Besides the Ferrari, Pexa also "apparently" wrote off a BMW and an Escalade, as well as miles from gas-guzzling motor home trips, the Farmers brief said.

"In short, Plaintiff made a very large income over the period encompassed by this lawsuit, doing things that bear no resemblance to the things employees do, but which are common to people running their own businesses," the brief said. "The absurdity of Plaintiff's assertion that he was an employee is matched only by the inequity that would result if he was permitted to cash in on this fiction."

Order Story Reprint iconOrder Reprint

Call The Bee'sAndy Furillo, (916) 321-1141.

___

(c)2012 The Sacramento Bee (Sacramento, Calif.)

Visit The Sacramento Bee (Sacramento, Calif.) at www.sacbee.com

Distributed by MCT Information Services