United States District Court, E.D. Virginia, Alexandria Division
MILTON MANUEL SANCHEZ, CARMELO MEDINA, GERARD EDMOND, individually and on behalf of a group of individuals similarly situated, Plaintiffs,
LASERSHIP, INC., Defendant
Decided April 3, 2013
For Manuel Milton Sanchez, individually and on behalf of a group of individuals similarly situated, Carmelo Medina, individually and on behalf of a group of individuals similarly situated, Gerard Edmond, individually and on behalf of a group of individuals similarly situated, Plaintiffs: John Thomas Harrington, Jr., Nicholas Wyckoff Woodfield, Robert Scott Oswald, The Employment Law Group PC (DC), Washington, DC.
For Lasership, Inc., Defendant: Paul DeCamp, LEAD ATTORNEY, Jackson Lewis, Reston, VA; Joseph Erwin Schuler, Jackson Lewis LLP (VA), Reston, VA.
Gerald Bruce Lee, United States District Judge.
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on Defendant's Motion for Summary Judgment (Dkt. No. 114), Defendant's Motion to Strike Portions of Plaintiffs' Evidence in Opposition to Summary Judgment (Dkt. No. 131), Defendant's Motion to Strike Portions of Plaintiffs' Declarations Submitted in Support of Their Motion for Class Certification (Dkt. No. 106), Plaintiffs' Motion to Certify Class (Dkt. No. 79), Plaintiffs' Motion for Partial Summary Judgment (Dkt. No. 118), Defendant's Motion to Strike Plaintiffs' Notice of Supplemental Authority (Dkt. No. 138), and Defendant's Motion for Leave to File Surreply in Opposition to Plaintiffs' Motion for Partial Summary Judgment (Dkt. No. 157). This case concerns an action brought by a purported class of delivery truck drivers, seeking declaratory relief that they are misclassified under the Massachusetts Independent Contractor (" IC" ) Statute, M.G.L. 149 § 148B (" Section 148B" ).
The issue before the Court is whether the Court should grant Defendant Lasership's Motion for Summary Judgment, which seeks a determination that Section 148B, which would compel Lasership to classify its independent contractors as employees, is preempted by the Federal Aviation Administration Authorization Act of 1994 (" FAAAA" ). The Court grants summary judgment because enforcement of Section 148B against motor carriers is preempted by the FAAAA. The Court concludes that Section 148B " relates to" or has a " connection with" motor carriers' prices, routes, and services because it (1) dictates the employment relationship carriers must utilize in its operations, thereby affecting carriers' routes and services; (2) significantly increases carriers' costs such
as to have a significant effect upon carriers' prices, routes, and services; and (3) materially alters the common law test for independent contractor status, leading to a patchwork of varying state laws and resulting liability under varying independent contractor regimes. Accordingly, the Court grants summary judgment in favor of Defendant and against Plaintiffs. Therefore, Plaintiffs' Motion for Partial Summary Judgment is denied.
This case is brought by Plaintiffs and similarly situated individuals who perform delivery and courier services for Defendant Lasership. (Compl. ¶ 8.) Lasership is a transportation services company that arranges for the delivery of packages for its customers along the East Coast, servicing major consumer companies such as Amazon.com. (Aryan Decl. ¶ 3, Def.'s Mot. Summ. J., Ex. A, Dkt. No. 116-1.) Lasership operates to arrange for the delivery of packages through its use of independent contractors, performing no deliveries of its own. ( Id. ¶ 5.) The independent contractors with whom Lasership contracts encompass sole proprietorships and corporate entities, which employ their own staff and agents to perform deliveries. ( Id. ¶ 6.)
Though headquartered in Vienna, Virginia, Lasership maintains facilities in Woburn, Massachusetts and Meriden, Connecticut. Competing with similar businesses located in Massachusetts and the surrounding New England area, including, Maine, Rhode Island, New Hampshire, and Vermont, Lasership contracts its independent contractors to navigate within and through these states to perform its deliveries. ( Id. ¶ 4.) Independent contractors that deliver for Lasership report to its facility and are assigned delivery routes that traverse state lines. ( Id. )
Lasership's business model is designed around its customer relationships and the services demanded by its customers. ( Id. ¶ 12-16, 19-21.) Certain customers request regularly scheduled routes while others require irregular deliveries on an emergency, " as-needed," or " on demand" basis. ( Id. ¶ 12; Aryan Dep. 114:17-115:4, Dkt. No. 116-2.) Specifically, deliveries of time-sensitive medical supplies or financial materials are not scheduled in advance, and Lasership's customers rely on its availability of independent contractors to meet their time-sensitive needs. (Aryan Decl. ¶ 12.) Due to the nature of these deliveries, they are not scheduled in advance, rendering their predictability impossible. ( Id. ¶ 13; Aryan Dep. 157:12-159:9.) Likewise, Lasership's customers, such as Amazon.com, require Lasership to arrange for the delivery of their products each day by a specified time, not notifying Lasership of the upcoming day's volume until the day they are to be delivered, also rendering their predictably difficult. (Aryan Decl. ¶ 15.) The unique relationship Lasership has with each of its customers requires Lasership to employ its present business model to match the needs of its customers. ( Id. )
Plaintiffs are Massachusetts-based delivery drivers that perform delivery services for Lasership as independent contractors. (Compl. ¶ ¶ 4-6.) Based out of the Woburn facility, Plaintiffs deliver packages for Lasership's customers through a contractual relationship pursuant to Independent Contractor Agreements (" ICAs" ) entered between Lasership and each driver. (Aryan Decl. ¶ 5; Aryan Dep. 63:13-64:9.) Under the terms of the ICAs, Plaintiffs are not entitled to common employee benefits, such as overtime pay, minimum wage, and health insurance. Rather, Plaintiffs, as independent contractors, bear the burden of costs associated with the services performed on behalf of Lasership.
On April 12, 2011, Plaintiffs filed a lawsuit against Lasership in Massachusetts state court for misclassification as independent contractors under the Massachusetts IC Statute, seeking compensatory damages under Massachusetts wage laws. In June 2011, Lasership removed the case to the United States District Court for the District of Massachusetts, which dismissed the case without prejudice, based upon the forum selection clause in the ICA. On March 6, 2012, Plaintiffs filed their Complaint in this Court for compensatory, declaratory, and injunctive relief, asserting: (1) misclassification as independent contractors in violation of the Massachusetts IC Statute (Count I); (2) unlawful refusal to pay wages and improper deductions from Plaintiffs' pay (Count II); (3) failure to pay minimum wage (Count III); and (4) violation of Plaintiffs' right to overtime pay (Count IV). (Compl. ¶ ¶ 1, 35-38.) Plaintiffs' wage and overtime claims are contingent upon the determination that they are properly classified as employees under the Massachusetts IC Statute. Asserting that Lasership controls them as employees, Plaintiffs brought this suit challenging Lasership's classification of them as independent contractors under Section 148B. Specifically, Plaintiffs aver that they report to Lasership's facilities daily, drive the same delivery route daily, are required to wear Lasership-embossed clothing, and are not free to deviate from their assigned routes without Lasership withholding future assignments. ( Id. ¶ ¶ 10-11, 16, 25.) Thus, Plaintiffs argue that Lasership's control over them renders them " employees" for purposes of the statute.
On May 15, 2012, Lasership filed its first motion for summary judgment, seeking a determination that, as a matter of law, Section 148B, as applied to the motor carrier industry, is preempted by the FAAAA because it dictates how motor carriers perform their services. ( See Dkt. No. 25.) Specifically, Lasership argued that compliance with Section 148B would (1) require motor carriers to provide services outside the entity's usual course of business; (2) create a barrier to entry for other interstate motor carriers who use independent contractors, creating a patchwork of differing state laws, impacting pricing, routes, and services; and (3) require motor carriers to comply with every employment-related statute in Massachusetts, including statutes requiring meal and rest breaks, payment of minimum wage, overtime, family and medical leave, deductions from wages, and maintenance of personnel records. ( See Def.'s Mem. Supp. Mot. Summ. J. at 11-17, Dkt. No. 26.) Thus, Lasership concluded, it " would be forced to cease operations in Massachusetts if it were no longer able to use independent contractors to make deliveries." (Aryan Decl. ¶ 23.)
On August 27, 2012, the Court issued its Memorandum Opinion and Order, ruling on the parties' then-pending motions listed above. See Sanchez v. Lasership, Inc., 2012 WL 3730636, at *1-*2 (E.D. Va. Aug. 27, 2012). First, the Court granted Plaintiffs' Motion for Partial Summary Judgment, concluding that Massachusetts law applied because the case concerned an issue of the contractual relationship between parties and the contract was formed in Massachusetts. Id. Second, and relevant to the present Motion, the Court granted Plaintiffs' Rule 56(d) Motion and denied Defendant's First Motion for Summary Judgment, concluding that Plaintiffs had demonstrated that they were entitled to more time to conduct discovery on the issue of FAAAA preemption. Id.
Following the Court's August 27, 2012 Order, the parties entered limited discovery on the FAAAA preemption issue and are now before the Court with their renewed motions. Specifically, Defendant Lasership filed its Second Renewed Motion for Summary Judgment, seeking a
determination that enforcement of Section 148B is preempted by the FAAAA. (Dkt. No. 114.) Lasership has also filed three evidentiary motions. Specifically, Lasership has filed a Motion to Strike Portions of Plaintiffs' Evidence Submitted in Opposition to Summary Judgment (Dkt. No. 131), Motion to Exclude Portions of Plaintiffs' Evidence Submitted in Support of Their Motion to Certify Class (Dkt. No. 106), and Motion to Strike Plaintiffs' Notice of Supplemental Authority (Dkt. No. 138). Lasership argues in each motion that portions of Plaintiffs' evidence are inadmissible on various grounds and, therefore, are not proper for the Court to consider on summary judgment. Lasership also has filed a Motion for Leave to File a Surreply in Opposition to Plaintiffs' Motion for Partial Summary Judgment. (Dkt. No. 157.)
Also pending before the Court are Plaintiffs' Motion to Certify Class (Dkt. No. 79) and Plaintiffs' Motion for Partial Summary Judgment (Dkt. No. 118). In their Motions, Plaintiffs seek to assert their claims against Lasership on behalf of a class of similarly situated individuals as well as on behalf of themselves and thus move for certification under Federal Rule of Civil Procedure 23. (Pls.' Mem. Supp. Mot. Class Certification at 11-22, Dkt. No. 81.) Specifically, Plaintiffs seek to certify the following class: " All individuals who performed delivery and/or courier services primarily in Massachusetts for Defendant Lasership, Inc., at any time since March 6, 2009." ( Id. at 1-2.) In their Motion for Partial Summary Judgment, Plaintiffs' seek summary judgment on their central claim of misclassification under Section 148B. (Pls.' Mem. Supp. Mot. Partial Summ. J. at 2, Dkt. No. 119.) Plaintiffs argue that, because Lasership cannot satisfy Section 148B's independent contractor test, they are misclassified under the statute as a matter of law. ( Id. at 2-3.)
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56, the Court must grant summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c) (2013).
In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the non-moving party. Boitnott v. Corning, Inc., 669 F.3d 172, 175 (4th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (citations omitted). " [T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008) (quoting Anderson, 477 U.S. at 247-48).
A " material fact" is a fact that might affect the outcome of a party's case. Anderson, 477 U.S. at 248; JKC Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). Whether a fact is considered to be " material" is determined by the substantive law, and " [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248; Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001).
A " genuine" issue concerning a " material" fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (quoting Anderson, 477 U.S. at 248). Rule 56(e) requires the nonmoving party to go beyond the pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
Lasership argues that it is entitled to judgment as a matter of law because Section 148B as applied to motor carriers is preempted by the FAAAA. The crux of Lasership's argument is that Section 148B fundamentally alters Massachusetts's independent contractor law in such a way that it is precluded from employing independent contractors, resulting in a substantial impact on its prices, routes, and services. Plaintiffs respond by arguing that Section 148B is merely a prevailing wage law and, as such, was not intended by Congress to be preempted by the FAAAA. Additionally, Plaintiffs argue that preemption should not apply because any impact Section 148B may have on motor carriers is far too tenuous or remote to be preempted.
The Court grants summary judgment because enforcement of Section 148B against motor carriers is preempted by the FAAAA. The Court concludes that Section 148B " relates to" or has a " connection with" motor carriers' prices, routes, and services for three reasons. First, the Court concludes that Section 148B is an unprecedented change in independent contractor law that dictates an end to independent contractor carriers in Massachusetts and imposes an anticompetitive, government-driven mandate that motor carriers change their business models to avoid liability under the statute. The effect of this material change in independent contractor law dictates the employment relationship carriers must utilize in their operations, thereby affecting carriers' routes and services. Second, the Court concludes that Section 148B's enforcement against motor carriers significantly increases carriers' costs such as to have a significant effect upon carriers' prices, routes, and services. Third, the Court concludes that, as applied to motor carriers, Section 148B materially alters the common law test for independent contractor status, leading to a patchwork of varying state laws and resulting liability under varying independent contractor regimes. Accordingly, the Court grants summary judgment in favor of Defendant.
The Supremacy Clause of the United States Constitution implicates the doctrine of federal preemption. See U.S. Const. art. VI, cl. 2. A state law conflicting with federal law is said to be preempted and is " without effect." AES Sparrows Point LNG, LLC v. Smith, 527 F.3d 120, 125 (4th Cir. 2008) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)). A federal statute may preempt state law in any of three manners: (1) expressly by it terms, (2) impliedly by Congress's intent to occupy an entire field of regulation, or (3) by the state law's direct conflict with the federal statute. Abbot by Abbot v. Am. Cyanamid Co., 844 F.2d 1108, 1111 (4th Cir. 1988) (citing Mi. Canners & Freezers Assoc. Agric. Mktg. & Bargaining Bd., 467 U.S. 461, 469, 104 S.Ct. 2518, 81 L.Ed.2d 399 (1984)).
There are " two cornerstones" of federal preemption. First, " the purpose of Congress is the ultimate touchstone in every preemption case." Wyeth v. Levine,
555 U.S. 555, 129 S.Ct. 1187, 1194, 173 L.Ed.2d 51 (2009) (quoting Lohr, 518 U.S. at 485). Second, where Congress has legislated in a field traditionally occupied by states, there is a presumption against preemption. Id. Courts do not lightly presume that Congress intended to supplant state law but instead begin with the opposite conclusion, as federalism militates respect for states as " independent sovereigns in our federal system." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). This is especially true in areas of traditional state regulation, such as relevant here--labor and employment laws. See Cal. Div. of Labor v. Dillingham Constr., N.A., 519 U.S. 316, 330, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997). " [W]here federal law is said to bar state action in fields of traditional state regulation," the assumption is that " the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Id. at 1194-95. Thus, to identify congressional intent with respect to the FAAAA, the Court must not only examine the text of the statute itself but also review the history and purpose behind its passage. In doing so, the Court must remain " mindful of the Supreme Court's admonition that preemption 'is compelled whether Congress' command is explicitly stated in the state's language or implicitly contained in its structure and purpose.'" Dilts v. Penske Logistics LLC, 819 F.Supp.2d 1109, 1116 (S.D. Cal. 2011) (quoting Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992)).
The FAAAA provides that no state " may enact or enforce a law related to a price, route, or service of any motor carrier . . . ." 49 U.S.C. § 14501(c)(1) (2012). The statute is categorized by certain types of motor carriers, including, as relevant here, motor carriers of property. See 49 U.S.C. § 14501(c). Each subsection, however, shares an identical preemption provision and serves to give effect to the statute's purpose--to preclude states from enacting laws related to motor carriers' prices, routes, or services. As discussed more fully below, the two textually operative phrases are " related to" and " prices, routes, or services." However, the statute offers little insight in terms of its breadth, and its preemption language does not explicitly encompass state regulation of wage and independent contractor laws relevant to this case. Therefore, the Court must look to the legislative history to determine whether it was Congress's " clear and manifest purpose" that Section 148B be preempted. Dilts, 819 F.Supp.2d at 1116.
At the time of the FAAAA's enactment, forty-one states regulated, in varying degrees, intrastate motor carriers' prices, routes, and services. H.R. Conf. Rep. No. 103-677, at 87 (1994), reprinted in 1994 U.S.C.C.A.N. 1715, 1758. Those regulations included entry controls, price regulation, and types of commodities transported. Id. Strict entry control regulations impeded competition for certain routes while others strictly regulated trucking prices. Id. The diversity of state regulation in this field yielded a patchwork of state laws, resulting in " significant inefficiencies, ...