Judge signals she'll rule against Granite Bay man suing Farmers Insurance

A judge has come down against a former Sacramento district manager for the Farmers Insurance Group who wanted millions from the company over his 2009 termination.

Michael Pexa of Granite Bay filed a lawsuit that sought $13.8 million from the insurance giant, saying it treated him like an employee instead of an independent contractor and therefore owes him additional compensation for overtime and other expenses.

But in a tentative decision, Sacramento Superior Court Judge Judy Holzer Hersher found otherwise. She said in her 45-page decision that Pexa not only was an independent contractor, but that he also "suggested his own termination."

Farmers, the judge said, "took him up on his offer" – after he complained vociferously about what he saw as the company micromanaging his Sacramento operation in a way that he said was costing him money.

The judge cited an Oct. 22, 2008, letter Pexa wrote to Farmers Chief Executive Officer Paul N. Hopkins in which Pexa quoted another top company official as telling him in response to his many complaints, "Mike, you need to get over the things in the past, because people get screwed in corporate America."

"What, I got screwed, which I knew, and somehow I need to accept that?" said Pexa, who repeatedly referred to himself as "an independent contractor" in the letter to Hopkins. "That's what's changed, Paul. Remember, I don't work for corporate America since I'M A SMALL BUSINESS OWNER," he emphasized in capital letters.

Hersher issued her tentative decision Monday and told attorneys for Pexa and Farmers it will become final within 15 court days unless someone objects. Pexa's lead attorney, William B. Hanley of Newport Beach, declined to comment.

Farmers spokesman Mark S. Toohey said, "We are pleased that this tentative statement of decision upholds the position Farmers Insurance has maintained throughout this case – Mr. Pexa was an independent contractor and not a common employee."

As a district manager since April 1998, Pexa oversaw the work of 35 agents and claimed he averaged monthly production increases of 41 percent. He owned his own office building, hired his own staff and for seven years ran the business decidedly on the upper end: Hersher wrote that Pexa listed as business expenses 40 percent to 100 percent of his use "of several vehicles, including a Cadillac Escalade, GMC Sierra, BMW, Ferrari and a recreational vehicle."

He also purchased a membership at the Granite Bay Country Club "that cost him $23,500 a year to maintain, the figures for which he provided to his accountant to consider as a valid business expense," the judge said.

Pexa's relationship with Farmers soured, however, during the final four years of his career with the company, from 2005 through 2008. He claimed in court the company sought "to increase their level and degree of control over him," according to the tentative decision. In an estimated 100 emails, Pexa said Farmers was telling him what to do in a manner that "all freedom of action previously inherent in the nature of his work was effectively removed," Hersher wrote.

They told him to attend more meetings, to put on certain promotions, to dress in a manner they specified, Pexa said. He complained about paperwork and quotas. But the company said these were just suggestions, the judge wrote, that he "embraced" some of them and that he was never disciplined for doing things the way he wanted.

Hersher found that some of the emails did appear to be "directory in tone," but "they are just as capable of being characterized as a principal working with a contractor." Pexa, she said, "came and went, according to his own calendar." He recruited and trained agents as he always had and "continued to operate his business in the manner he saw fit," according to the judge.

Pexa earned $2.6 million during the four years in which he suggested he "got screwed." In his suit, he asked for $6.5 million more in overtime, $5.5 million in business expenses, $1 million for his pension, $721,000 more in additional contract value and $2,000 a month for health insurance.

A lifelong, self-described "Farmers man," Pexa ran down in his letter to Hopkins his numerous awards, his membership in Farmers' "walk of fame," the inclusion of his name in the "chairman's circle," the fact that he was a two-time Agent of the Year who got to ride in the Rose Parade as a result of that achievement.

In his 2008 letter to Hopkins, Pexa said the company CEO "should have fixed it," when things went bad. Instead, he wrote in the letter, "You made sure I could never live up to my potential."

Pexa told Hopkins, "You and your executives underestimate my resolve and determination."

He said, "I think it would be prudent for Farmers to put an exit plan together" fitting his 25-year career.

"There certainly are many avenues I could follow," Pexa wrote to Hopkins, "but my leaving quietly probably is in Farmers best interest. Wouldn't you agree?"

Hersher wrote there was no conclusive evidence the company put Pexa out of business. "In the final analysis," she wrote, Pexa "controlled his own exit." She ruled he "shall take nothing" – and pay costs.

• Read more articles by Andy Furillo

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