v_kyr, thanks for your help and the time you've spend on this issue.
With your assessment, I played around with the file I posted in order to reproduce and understand your suggestions.
Part of the artwork was imported from a 3rd party app (Image Vectorizer) that creates vector outline traces from pixel artwork, and saved the file as an .eps. When the .eps file was imported in AD, the individual elements come in as children of a parent layer...in this case it's named "Layer 1 (Layer)". I believe this parent layer is either corrupt or at least not up to the AD standards. Creating a new parent and moving all the children into it solves the problem. It now groups just fine.
I played with other output file types from Image Vectorizer (.pdf and .svg) with no issues...it just seems to be with .eps file types, and only with some of the files I traced.
Just so you all know, I think Image Vecorizer is still an incredible tracing app...the best I've used in my 30+ years doing this stuff.
We all need to work through the idiosyncrasies each little app brings to the table.