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Remington v. J.B. Hunt Transport, Inc.

United States District Court, D. Massachusetts

September 16, 2016

WILLIAM REMINGTON and MUSAN DURAKOVIC, on behalf of themselves and others similarly situated
v.
J.B. HUNT TRANSPORT, INC. ABE SILFANI, on behalf of himself and others similarly situated
v.
J.B. HUNT TRANSPORT, INC.

          MEMORANDUM AND ORDER ON DEFENDANT'S CONSOLIDATED MOTION TO DISMISS

          RICHARD G. STEARNS DISTRICT JUDGE

         Plaintiffs are owner-operator truck drivers for defendant J.B. Hunt Transport Inc., a freight and package delivery service. They allege that J.B. Hunt improperly classified them to their detriment as independent contractors, instead of company employees. J.B. Hunt moves to dismiss the two Complaints as preempted by the federal Truth-in-Leasing regulations, 49 C.F.R. Part 376.

         BACKGROUND

         William Remington and Musan Durakovic contracted with J.B. Hunt as owner-operator drivers[1] in October and November of 2013, respectively. Remington Compl. ¶¶ 2-3. In December of 2014, Remington and Durakovic brought a class action against J.B. Hunt in Middlesex Superior Court, asserting violations of the Massachusetts Independent Contractor Statute, Mass. Gen. Laws ch. 149, § 148B, [2] (Remington Count I) and the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §§ 148, 150 (Remington Count II), or, in the alternative, unjust enrichment (Remington Count III). Remington alleges that J.B. Hunt hires two classes of truck drivers - employee drivers and owner-operator drivers. Remington Compl. ¶ 11. While the job descriptions and work requirements are essentially the same for both classes, id. ¶¶ 14-17, 26-41, owner-operator drivers do not receive the same benefits as do the employee drivers, including paid vacation time, personal days, and sick days. Id. ¶ 18. Remington also alleges that J.B. Hunt improperly deducts company expenses from the pay of the owner-operator drivers, including the costs of equipment repairs, cargo loss and damage, vehicle insurance, and administrative fees. Id. ¶¶ 19-24.

         J.B. Hunt removed the Remington Complaint to the federal district court on diversity grounds. This court, adhering to its decision in Schwann v. FedEx Ground Package Sys., Inc., 2015 WL 501512 (D. Mass. Feb. 5, 2015), allowed J.B. Hunt's motion to dismiss, determining that the Federal Aviation Administration Authorization Act (FAAAA), 49 U.S.C. § 14501(c)(1), preempted the second prong of the Massachusetts Independent Contractor Statute. Remington v. J.B. Hunt Transp., Inc., 2015 WL 501884, at *1-2 (D. Mass. Feb. 5, 2015).

The FAAAA explicitly preempts state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). . . . [T]he First Circuit [has] emphasized that “a statute's ‘potential' impact on carriers' prices, routes, and services can be sufficient if it is significant, rather than tenuous, remote, or peripheral.” [Massachusetts Delivery Ass'n v. Coakley, 769 F.3d, 11, ] 21 [(1st Cir. 2014)]. Empirical evidence in this regard is not necessary, and “courts [may] look [ ] to the logical effect that a particular scheme has on the delivery of services or the setting of rates.” Id. Such “logical effect can be sufficient even if indirect.” Id.
Looking to such logical (if indirect) effects, the application of section 148B to J.B. Hunt and other similar motor carriers would unquestionably have an impact on “price, route[s], [and] services” by in effect proscribing the carrier's preferred business model.

Id., at *1. The court also held that the second prong of section 148B was not severable from the remaining two prongs, and that enforcing prongs one and three of section 148B against motor carriers would produce the same result - the “‘price, route[s], [and] services' offered by motor carriers would be impacted by forbidding the preferred business model.” Id., at *2.

         The plaintiffs in Remington and Schwann appealed. While the consolidated appeal was pending, in July of 2015, plaintiff Abe Silfani filed a similar putative class action in Middlesex Superior Court. Silfani had contracted as an owner-operator driver with J.B. Hunt in October of 2013. Silfani Compl. ¶ 2. In his Complaint, Silfani alleges that J.B. Hunt failed to pay him the contractually agreed rate for all of the miles, pick-ups, and deliveries that he was required to make (Silfani Count I), and because of his misclassification as an independent contractor, see Id. ¶¶ 22-38, his wages were effectively withheld in violation of the Massachusetts Wage Act (Silfani Count II).[3] J.B. Hunt promptly removed the Silfani Complaint to this court. At the joint request of the parties, the court stayed the Silfani matter pending the outcome of the Remington and Schwann appeals. See Silfani Dkt. # 12. On appeal, the First Circuit agreed with this court that the FAAAA preempted the second prong of section 148B, see Schwann v. FedEx Ground Package Sys., Inc., 813 F.3d 429, 437-440 (1st Cir. 2016), but disagreed with the ruling of non-severability. Id. at 442 (“We therefore think that the legislature's plain aim in enacting this statute favors two-thirds of this loaf over no loaf at all as applied to motor carriers with respect to the transportation of property.”). The First Circuit also reversed this court's holding that the FAAAA preempted prongs one and three of section 148B, not on substantive grounds, but “based on FedEx's decision not to advance any argument that Prongs 1 and 3 were preempted by the FAAAA.” Remington v. J.B. Hunt Transp., No. 15-1252 (1st Cir. Feb. 22, 2016).

         On remand, the court consolidated the Remington and Silfani cases for pretrial proceedings.[4] In May of 2016, J.B. Hunt filed a renewed motion to dismiss the Complaints. The court heard oral argument on the motion on August 31, 2016.

         DISCUSSION

         Rooted as it is in the Supremacy Clause of the United States Constitution, federal preemption is a “pure question of law.” United States v. Rhode Island Insurers' Insolvency Fund, 80 F.3d 616, 619 (1st Cir. 1996). Noting the three separate categories of preemption - express, field, and conflict, see SPGGC, LLC v. Ayotte, 488 F.3d 525, 530-531 (1st Cir. 2007) - J.B. Hunt argues that plaintiffs' claims are preempted not only because they conflict with the federal Truth-in-Leasing regulations, 49 C.F.R. Part 376, but also because the Truth-in-Leasing regulations occupy the entire field of owner-operator driver compensation. Conflict preemption arises “when compliance with both state and federal statutes and regulations is a physical impossibility, or when compliance with the state statute would frustrate the purposes of the federal scheme.” Id. at 531. Field preemption occurs when “Congress [] enact[s] a regulatory scheme ‘so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.'” Id. at 530 (citation omitted). “Federal statutes and the regulations adopted thereunder have equal preemptive effect.” Id.

         The court agrees with J.B. Hunt that the Truth-in-Leasing regulations preempt Remington's allegations of improper deductions insofar as these deductions constitute permitted cost-sharing under a compliant lease. The Truth-in-Leasing regulations govern “[t]he leasing of equipment with which to perform transportation regulated by the Secretary [of Transportation].” 49 C.F.R. § 376.1. The regulations mandate that when “[an] authorized carrier [] perform[s] authorized transportation in equipment it does not own, ” “[t]here shall be a written lease granting the use of the equipment.” 49 C.F.R. § 376.11.

         Section 376.12 sets out the requirements of a compliant written lease.

The lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease.

49 C.F.R. § 376.12(c)(1). With respect to operational costs, “[t]he lease shall clearly specify the responsibility of each party with respect to the cost of fuel, fuel taxes, empty mileage, permits of all types, tolls, ferries, detention and accessorial services, base plates and licenses, and any unused portions of such items.” 49 C.F.R. § 376.12(e). Although the lessee is required to obtain certain types of insurance for its operations, 49 C.F.R. § 376.12(j)(1), [5] the regulations leave it to the parties to negotiate the responsibility for other types of insurance.[6]

         The regulations further permit the lessee to make deductions from the lessor's compensation for cargo or property damage.

The lease shall clearly specify the conditions under which deductions for cargo or property damage may be made from the lessor's settlements. The lease shall further specify that the authorized carrier must provide the lessor with a written explanation and itemization of any deductions for cargo or property damage made from any compensation of money owed to the lessor. The written ...

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