10th Circuit Revives Races Discrimination Suit by Former Farmers Agent

A federal appellate court revived a former insurance agent’s race discrimination claim against Farmers Insurance Exchange.

A panel of the 10th Circuit Court of Appeals ruled Wednesday that the trial court erred by determining that a manager’s alleged comment about “a crazy brown man running around with a gun” was inadmissible hearsay. The panel said US Magistrate Judge Michael E. Hegarty in Denver misapplied the federal rules of evidence when dismissing a lawsuit filed by former Farmers agent Michael Cruz.

Because the case was dismissed before any findings of fact were made, the appellate panel said it had to view the facts in the light most favorable to the plaintiff.

“Viewed in such a light, we conclude that this statement constitutes direct evidence of racial discrimination, thereby raising a genuine issue of material fact as to whether Farmers terminated the contract based on Cruz’s race,” the opinion says.

Cruz, who is of Mexican descent, worked as an independent contractor for Farmers more than 30 years under an agency appointment agreement. The ruckus that led to the termination of that contract started in January 2017 when Cruz received a complaint by a customer who was upset about receiving junk mail from the insurer.

Dan French called Cruz’s office in Greeley, Colorado and asked to be removed from Farmers’ mailing list. Cruz says French was rude and disrespectful, so he hung up the phone. French called back. Cruz hung up again.

French reached out to a Farmers executive, sending a message through Linkedin. The executive referred the complaint to a territory manager, who asked area sales manager Curt Elsbury and district manager Clint Sales to look into it.

In the meantime, French called Cruz’s office a third time and reached Cruz’s office assistant, who also happened to be his wife Candace Diekman. She says French was “raging,” “belligerent” and “screaming” and threatened to come to the office personally to “fix it.”

Diekman used her husband’s email account to send a message to Sales about the incident. In it, she said she carries a firearm “and if I feel threatened I will blow a hole in him the size of Uganda.”

About two weeks later, Elsbury wrote a letter to Cruz explaining that he had resolved the issue with French by removing him from Farmers’ mailing list. He also cautioned Cruz to “maintain professionalism.”

But that didn’t end the matter. Upper-level Farmers managers reopened the investigation when they learned about Diekman’s email a month or two later. Elsbury told Sales to notify Cruz that the company was considering terminating his agency contract.

Sales called the office and spoke with Diekman. When she asked why Farmers had reopened the investigation, he allegedly said: “[I]t comes down to[,] they don’t want a brown man running around—some crazy brown man running around with a gun.”

Sales denies making that comment.

Elsbury reviewed Cruz’s file and discovered an incident seven years earlier in which Cruz had allegedly threatened a claims adjuster. Farmers terminated Cruz’s agency contract.

Cruz filed a lawsuit accusing Farmers of violating US Code Section 1981, which prohibits treating parties to contracts differently because of their race.

Cruz’s attorney, Ralph Lamar IV, said Wednesday that Farmers executives apparently thought Cruz had written the email with the veiled threat about gunplay. He said Elsbury made no effort to correct that misunderstanding. Like a childhood game of telephone, each time the story about Diekman’s mention of firearms and the Uganda-sized hole was relayed from one Farmers executive to another, the narrative changed slightly, he said.

Lamar said the comment by Sales about “a crazy brown man” is direct evidence of discrimination.

“You wouldn’t say a crazy white man,” he said. “That’s the distinction. At the end of the day, it just had the smell of discrimination on it.”

In its opinion, the 10th Circuit panel said the magistrate judge who dismissed the case incorrectly determined that Sales’ comment was hearsay under Rule 801 because he did not have ultimate decision-making authority over Cruz. The judge overlooked the fact that Sales was an agent for Farmers and is alleged to have made an admission about the company’s motives. Previous cases have established that such admissions by a party’s agent may be entered as evidence, the panel said.

“And because that admission constitutes direct evidence of discrimination, it precludes summary judgment for defendants,” the panel concluded.

The panel reversed the order dismissing the lawsuit and remanded the case to the trial court.