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Orbit Corp. v. Fedex Ground Package System, Inc.

United States District Court, E.D. Virginia, Norfolk Division

November 8, 2016

ORBIT CORP, and GARY SIMON, Plaintiffs,



         This matter is before the Court on a motion for summary judgment, filed by FedEx Ground Package System, Inc., ("Defendant" or "FedEx"). ECF No. 38. After briefing was completed on the summary judgment motion, FedEx filed a request for oral argument. ECF No. 62. Shortly after such request was filed, plaintiffs Orbit Corp ("Orbit") and Gary Simon ("Simon, " and collectively with Orbit, "Plaintiffs") filed a response to Defendant's oral argument request asking that the Court deny the request for oral argument unless the Court requires additional clarity regarding the issues and arguments presented. ECF No. 63. Consistent with Plaintiffs' request, the Court determines that oral argument is unnecessary. Fed.R.Civ.P. 78(b); E.D. Va. Loc. R. 7(J).

         I. Factual and Procedural Background

         Orbit was organized as a Virginia corporation on February 27, 2012, with Simon as its President and sole shareholder. Def.'s Statement of Material Undisputed Facts 110 ("Def.'s SUF"), ECF No. 39; Pis.' Resp. to Def.'s SUF ¶ 10, ECF No. 45. Defendant FedEx is a Delaware corporation with its principal place of business in Pennsylvania. Second Am. Compl. ¶ 2, ECF No. 26; Answer ¶ 2, ECF No. 27.

         On April 25, 2012, FedEx and Orbit entered into a written contract, referred to as the Operating Agreement ("OA"), whereby Orbit agreed to provide the final delivery leg for FedEx packages in the 23455 Zip Code in Virginia Beach, Virginia. Def.'s SUF ¶ 15. The OA refers to the contractor's delivery Zip Code as its Primary Service Area ("PSA") . OA ¶ 6, ECF No. 3-1. The OA further provides that the "initial term" of the contract extends "one year" from the date the OA is signed, with the OA "automatically renew[ing] for successive terms of one year each" unless either party provides the other with "notice of non-renewal in writing at least 30 days prior to the expiration" of the annual term. Id. ¶ 8.

         Relevant to the disputes at issue in this case, the terms of the OA state that Orbit is "responsible for exercising independent discretion and judgment to achieve the business objectives and results" necessary to fully service Orbit's PSA, further stating that "no officer, agent, or employee of [FedEx] shall have the authority to prescribe hours of work, whether or when the Contractor is to take breaks, what route the Contractor is to follow, or other details of performance." Id. ¶ 1.14. Moreover, Addendum 16 to the OA, which was also executed by Simon on behalf of Orbit on April 25, 2012, states that "Contractor agrees that neither it nor any of its Personnel are to be treated as or considered to be [FedEx's] employees for any purpose." Id. Addendum 16.

         On August 21, 2012, four months into Orbit's tenure as a FedEx contractor, Orbit purchased the rights to service a second PSA in the City of Virginia Beach (Zip Code 23451) from another company acting as a FedEx contractor. Def.'s SUF ¶¶ 22, 24. On August 22, 2012, Orbit executed an Addendum to the OA reflecting its acquisition of such second PSA. Id.

         On February 1, 2013, Orbit received a "Contract Non-Renewal Review Notification Letter" from FedEx indicating that Orbit was being "considered for non-renewal." ECF No. 40-6. On March 1, 2013, FedEx notified Simon in person and by letter that "Orbit Corp.'s contract will not be renewed after its current term." ECF No. 40-7; Def.'s SUF ¶ 34.

         After receiving the non-renewal notice, Orbit marketed its routes and assets to Barry Taylor, Esq. (Mr. Simon's friend and family attorney) and to Simon's sister. Def.'s SUF ¶ 43. It is undisputed that FedEx did not approve the transfer of Orbit's PSAs to Mr. Taylor's company, and that FedEx did approve the transfer to a company owned by Simon's sister.

         The instant civil action was initiated by the filing of a complaint, ECF No. 1, and shortly thereafter, Plaintiffs filed a more robust amended complaint advancing numerous legal claims. ECF No. 3. Defendant filed a motion to dismiss the amended complaint, which was granted in part, and denied in part, by a detailed Memorandum Opinion issued by this Court. ECF No. 20. Plaintiffs then filed a motion for leave to file a second amended complaint, which was opposed by Defendant. ECF Nos. 21, 24. By written Order, the motion for leave to amend was granted in part, and denied in part. ECF No. 25. Following such ruling, three grounds for relief remained: "Count One Fraudulent Misrepresentation"; "Count Two - Violations of Overtime Provisions Under the Fair Labor [] Standards Act"; and "Count Three - Breach of Contract." ECF No. 26.

         Near the close of discovery, Defendant filed the now-pending motion for summary judgment seeking a ruling in Defendant's favor as to all three remaining grounds for relief. ECF Nos. 38, 39. Plaintiffs submitted various filings in opposition, ECF Nos. 45-60, to include a brief in opposition to summary judgment and multiple exhibits. While Plaintiffs oppose summary judgment on Counts One and Three, they affirmatively state in written submissions to the Court that "Count [] 2 the Fair Labor Standard Act claim is hereby withdrawn." ECF No. 60. Accordingly, the Court deems "Count Two" WITHDRAWN, and Plaintiffs are foreclosed from pursuing further relief in this case on such legal theory.[1] The dispute regarding Counts One and Three is ripe for review.

         II. Standard of Review

         The Federal Rules of Civil Procedure provide that a district court "shall grant summary judgment if [a] movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568 (4th Cir. 2015). "[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." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A fact is "material" if it "might affect the outcome of the suit, " and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248; see Jacobs, 780 F.3d at 568.

         Rule 56(c) of the Federal Rules of Civil Procedure outlines the applicable procedure for pursuing, and defending against, summary judgment, explaining as follows:

         (c) Procedures.

(1) Supporting Factual Positions. A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

         Fed. R. Civ. P. 56(c) (emphasis added). Rule 56 further states that “[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), " the Court has discretion to "consider the fact undisputed for purposes of the motion." Fed.R.Civ.P. 56(e).

         The moving party has the initial burden to show the absence of an essential element of the nonmoving party's case and to demonstrate that the moving party is entitled to judgment as a matter of law. Honor v. Booz-Allen & Hamilton, Inc., 383 F.3d 180, 185 (4th Cir. 2004) . When the moving party has met its burden to show that there is insufficient evidence to support the nonmoving party's case, the burden then shifts to the nonmoving party to identify genuine and material factual disputes. Id.; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).

         In such circumstances, the non-moving party may not rest upon the mere allegations of the pleadings, but instead must generally set forth specific facts, supported by documents, affidavits, or other record materials illustrating a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-25 (1986); Butler v. Drive Auto. Indus, of Am., Inc., 793 F.3d 404, 408 (4th Cir. 2015) . The evidence presented by the nonmovant must be "more than a scintilla" of evidence and the nonmovant "cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another." Othentec Ltd. v. Phelan, 526 F.3d 135, 140 (4th Cir. 2008) (internal quotation marks and citations omitted). Although the Court is prohibited from "weighing the evidence" or making credibility findings at the summary judgment stage, the Court is required to review the evidence presented and "'determine whether there is a genuine issue for trial.'" Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Anderson, 477 U.S. at 24 9) . In making such determination, the Court considers the evidence presented by the parties "'in the light most favorable to the' nonmoving party." Jacobs, 780 F.3d at 568 (quoting Tolan, 134 S.Ct. at 1866).

         Ill. Discussion

         A. Count One - "Fraudulent Misrepresentations"

         Plaintiffs' first claim asserts that FedEx knowingly made false representations about the parties' business relationship in order to induce Simon/Orbit to enter into the OA. The parties both properly acknowledge that Virginia law governs such tort claim.

         Pursuant to Virginia law, "a 'false representation of a material fact, constituting an inducement to the contract, on which [a party] had a right to rely, is . ground for an action for damages in a court of law.'" Augusta Mut. Ins. Co. v. Mason, 274 Va. 199, 204 (2007) (quoting George Robberecht Seafood, Inc. v. Maitland Bros. Co., 220 Va. 109, 111-12 (1979)). However, in a focused effort to "avoid turning every breach of contract into a tort, " the Supreme Court of Virginia has adopted the rule that "in order to recover in tort, 'the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract.'" Id. at 205 (quoting Foreign Mission Bd. v. Wade, 242 Va. 234, 241 (1991)). Accordingly, a cause of action in fraud will generally not lie when "each particular misrepresentation by [the defendant] related to a duty or an obligation that was specifically required by the . . . [c]ontract." Id. at 205-06 (quoting Richmond Metro. Auth. v. McDevitt St. Bovis, Inc., 256 Va. 553, 559 (1998)) (omission and second alternation in original).

         In addition to the requirement that a fraud claim be predicated on a duty arising outside of the contract, a fraud claim "must aver the misrepresentation of present pre-existing facts, and cannot ordinarily be predicated on unfulfilled promises or statements as to future events." Abi-Najm v. Concord Condo., LLC, 280 Va. 350, 362 (2010) (quoting Lloyd v. Smith, 150 Va. 132, 145 (1928)). Otherwise, "every breach of contract could be made the basis of an action in tort for fraud." Id. (quoting Lloyd, 150 Va. at 145). Although the general rule is that actionable fraud must be predicated on factual misstatements, "fraud may sometimes be predicated on promises which are made with a present intention not to perform them"; that is, the "false representation of an existing intention to perform ... is the misrepresentation of a fact." Id. at 362-63 (quoting Boykin v. Hermitage Realty, 234 Va. 26, 29 (1987) (omission in original) (emphasis added).

         Further clarifying the requirement that an actionable fraud claim be predicated on misstatements regarding "an existing fact, " Virginia law provides:

The mere expression of an opinion, however strong and positive the language may be, is no fraud. Such statements are not fraudulent in law, because . they do not ordinarily deceive or mislead. Statements which are vague and indefinite in their nature and terms, or are merely loose, conjectural or exaggerated, go for nothing, though they may not be true, for a man is not justified in placing reliance upon them.

Mortarino v. Consultant Eng'g Servs., Inc., 251 Va. 289, 293, (1996) (emphasis added) (quoting Saxby v. Southern Land Co., 109 Va. 196, 198 (1909)). Accordingly, "commendatory statements, trade talk, or puffing, do not constitute fraud because statements of this nature are generally regarded as mere expressions of opinion." Glaser v. Enzo Biochem, Inc., 126 F.App'x 593, 600 (4th Cir. 2005) (quoting Lambert v. Downtown Garage, Inc., 262 Va. 707, 713 (2001)). Because a fraud claim requires a misstatement of fact, such a claim "cannot rest on a misstatement of the legal effect of a contract, " Wells Fargo Bank, Nat. Ass'n v. Smith, No. 3:10cv411, 2010 WL 4622176, at *3 (E.D. Va. Nov. 5, 2010), or a misstatement regarding "what the law will or will not permit to be done, " Hicks v. Wynn, 137 Va. 186, 196 (1923) (citation omitted).

         Notwithstanding the above, the Virginia courts have not adopted "a bright line test to ascertain whether false representations constitute matters of opinion or statements of fact." Mortarino, 251 Va. at 293. "Rather, each case must in a large measure be adjudged upon its own facts, taking into consideration the nature of the representation and the meaning of the language used as applied to the subject matter and as interpreted by the surrounding circumstances." Id. (internal quotation marks and citation omitted).

         While no "bright-line" test exists for separating fact from opinion, Tate v. Colony House Builders, Inc., 257 Va. 78 (1999) is instructive on this point. Addressing statements about a newly constructed house, Tate held that statements that the house was "free from structural defects" and was "constructed in a workmanlike manner" were statements of fact, noting that "whether the house was actually in the condition represented can be determined factually." Id. at 83-84. In contrast, the "alleged representation that the plaintiffs 'would enjoy quiet possession in the sense that apart from minor corrective work, no significant work would be required by way of restoration, rebuilding, or extensive repair'" were "representations predicated upon future events or promises" and thus could not support a claim for fraud. Id. at 84. Similarly, statements that the house was "'competently designed commensurate with the consideration of $345, 000.00' and 'the design and construction [of the dwelling were] of the highest quality' are more in the nature of puffing or opinion and cannot form the basis of an action for constructive fraud." Id. (alteration in original).

         Turning to the actual elements of a fraud claim under Virginia law, a Plaintiff must ultimately prove that the allegedly false representation relates to a "material fact, " that it was made "intentionally and knowingly" and "with an intent to misled, " and that it was both relied on and caused "damage to the party misled." Evaluation Research Corp. v. Alequin, 247 Va. 143, 148 (1994) . Moreover, a plaintiff must prove fraud by clear and convincing evidence, to include proof not only that "one has represented as true what is really false, " but that such representation was made "in such a way as to induce a reasonable person to believe it, with the intent that the person will act upon this representation." Id. (citation omitted). "The touchstone of reasonableness is prudent investigation, " and "a plaintiff cannot claim that its reliance was reasonable and justified when it makes a partial inquiry, with full opportunity of complete investigation, and elects to act upon the knowledge obtained from the partial inquiry." Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 629 (4th Cir. 1999) (citing Harris v. Dunham, 203 Va. 760, 768 (1962)).

         Here, Plaintiffs' opposition to summary judgment relies on three categories of fraudulent statements that Plaintiffs assert induced Simon/Orbit to execute the OA: (1) statements asserting that FedEx would be Orbit's "business partner"; (2) statements asserting that Orbit would be an "independent contractor"; and (3) statements regarding whether Plaintiffs would be required to plan Orbit's delivery routes using FedEx's Vehicle Route Planning ("VRP") computer software.

         The Court's analysis of these claims is necessarily predicated on a review of the record evidence through a "clear and convincing" lens as a juror would only be permitted to award to Plaintiffs damages in fraud if such elevated burden was satisfied. Such elevated burden requires proof "as will establish in the trier of fact a firm belief or conviction" that a knowingly false statement was made, with the intention to mislead, for the purpose of inducing Plaintiffs to execute the OA. Thompson v. Bacon, 245 Va. 107, 111 (1993) (emphasis added) (citation omitted). Because such proof is lacking in this case, summary judgment in Defendant's favor is warranted.[2]

         1. "Business Partners"

         Plaintiffs assert that, prior to executing the OA, FedEx made false statements to Simon indicating that FedEx would be his "business partner." It is somewhat unclear from Plaintiffs' summary judgment brief, ECF No. 45, at 19-20, as well as the evidence cited by the parties, see, e.g., Simon Tr. 56-57, ECF No. 39-1, how Simon purportedly interpreted such phrase at the time it was made. Arguably, Plaintiffs advance two different theories: (1) that FedEx falsely promised that it had a "stake" or common "symbiotic" interest with Orbit such that FedEx would treat Orbit as an "equal"; or (2) that FedEx falsely promised that it would provide Orbit with business "support" of some kind in order to assist Orbit in satisfying Orbit/s contractual duties.[3]

         a. Shared Financial Incentives

         To the extent that Plaintiffs contend that FedEx's promises to be a "business partner" were interpreted by Simon/Orbit as asserting that FedEx had a business incentive for Orbit to succeed, Plaintiffs lack evidence sufficient to prove that such statements were false when made. To the contrary, Plaintiffs' own summary judgment brief affirmatively argues (and highlights evidence) in support of the accuracy of such statements. ECF No. 45, at 19-20.[4] Accordingly, in light of the record evidence supporting Plaintiffs' common-sense contention that FedEx had a financial interest in Orbit's success, Plaintiffs have failed to point to evidence that could support a reasonable juror in concluding, by clear and convincing evidence, that FedEx made a knowingly false statement, with intent to deceive, that it did in fact deceive Plaintiffs, or ...

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