United States District Court, C.D. California
July 14, 2015
JOSE L. BERNAL, on behalf of himself and all others similarly situated, Plaintiff,
FEDEX GROUND PACKAGE SYSTEM INC., a Delaware corporation; FEDEX CORPORATION, a Delaware corporation; and FLAT RATE TRUCK REPAIR, INC., a California corporation, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT FEDEX GROUND PACKAGE SYSTEM INC.'S MOTION TO DISMISS PLAINTIFFS' FIRST CAUSE OF ACTION FOR FRAUD AND/OR STRIKE PORTIONS OF PLAINTIFFS' FIRST AMENDED COMPLAINT PURSUANT TO FRCP RULES 12(b)(6) and 12(f) [Dkt. No. 23]
DEAN D. PREGERSON, District Judge.
Presently before the Court is Defendant FedEx Ground Package System, Inc. ("FedEx Ground")'s Motion to Dismiss Plaintiffs' First Cause of Action for Fraud and/or Strike Portions of Plaintiffs' First Amended Complaint. (See Dkt. No. 23.) Having considered the parties' submissions and heard oral argument, the Court GRANTS the motion to dismiss, GRANTS in part and DENIES in part the motion to strike, and adopts the following order.
Plaintiffs, a group of 73 individuals, are current and former pickup truck drivers for FedEx Ground. (First Amended Complaint ("FAC"), Dkt. No. 15, ¶ 1.) Defendant FedEx Ground is a package shipping company and a subsidiary of Defendant FedEx Corporation. (Id. ¶ 2.) Plaintiffs allege that FedEx Ground and FedEx Corporation (collectively, "FedEx") "contracted and created various individuals and companies in California to misclassify Plaintiffs as independent contracts [sic] rather than employees." (Id. ¶ 3.) Plaintiffs allege that, as part of this alleged scheme, FedEx leased tractor vehicles from various individuals and companies in California. (Id. ¶ 4.) Plaintiffs name FedEx Ground, FedEx Corporation, and 32 of the aforementioned "individuals and companies" (the "Trucking Companies") as defendants in the FAC.
Plaintiffs bring this lawsuit on behalf of themselves and a putative class, defined in the FAC as "[a]ll persons who: 1) drove a tractor with a FedEx Ground logo which was leased to FedEx Ground Package, Inc. by other trucking companies; 2) received daily routes from terminals belonging to FedEx Ground Package, Inc located in California; 4) received a W2 or Paycheck from trucking companies; and 5) within the employment period from 2010 to the present day or date of judgment." (Id. ¶ 18.)
Plaintiffs allege that the Trucking Companies' primary business is leasing tractor vehicles to FedEx, which then uses the tractors to connect and transport trailers throughout the country. (Id. ¶ 5.) Plaintiffs allege that the Trucking Companies issue W-2s and paychecks to Plaintiffs, but that the Trucking Companies "have no other business purpose and merely serve as shell companies, payroll or staffing companies" for FedEx. (Id.) Plaintiffs allege that FedEx engaged in a fraudulent scheme to misclassify Plaintiffs as independent contractors rather than employees, and that FedEx conspired with the Trucking Companies to carry out this scheme. (Id. ¶¶ 6, 9.)
Plaintiffs allege that they are employees of both the Trucking Companies and FedEx. (Id. ¶ 9.) Plaintiffs allege that FedEx, rather than the Trucking Companies, controlled the terms of their employment and their pay, including "the method and calculation of payments... by compensating Plaintiffs using a complex method and system, and only for authorized routes and assignments." (Id. ¶ 11.) Plaintiffs allege that the Trucking Companies' relationship with FedEx should not have gone beyond the lease of the tractors; instead, Plaintiffs allege, the Trucking Companies improperly inserted themselves in Plaintiffs' employment relationship with FedEx by (1) issuing W-2s and paychecks to Plaintiffs and (2) assisting FedEx in hiring Plaintiffs. (Id. ¶ 10.) Plaintiffs allege that FedEx "decided who to hire, terminate, and suspend, " and therefore, under California law, Plaintiffs should have been classified as FedEx employees. (Id. ¶¶ 12, 13, 26.)
Plaintiffs further allege that FedEx's practices with respect to Plaintiffs' daily routes and assignments violated California employment and labor codes. (Id. ¶ 26.) Plaintiffs allege that FedEx employees and dispatchers gave drivers their daily routes and assignments at FedEx terminals, after which the drivers' tractors would be connected to FedEx trailers in order to drive packages to various terminals and hubs across the country. (Id. ¶ 27.) Once drivers would reach their destination terminal, Plaintiffs allege that FedEx would instruct drivers either to "drop and hook" new trailers or to wait for the next assignment. (Id. ¶ 28.) Plaintiffs allege that the wait time would often take hours or days. (Id.) Plaintiffs allege that FedEx would request the drivers run quick local routes while they waited for the next assignment, and that if the drivers refused, they would be retaliated against or terminated. (Id.) Plaintiffs allege that if they returned home without waiting for a new route or assignment, they were not compensated for the return mileage. (Id.)
Additionally, Plaintiffs allege that Defendants made false statements in conjunction with Plaintiffs' employment that harmed Plaintiffs. (Id. ¶ 49.) Plaintiffs allege that Defendants falsely told Plaintiffs that (1) they would be employed and hired by FedEx, and (2) that they were employed by FedEx. (Id. ¶ 50.) Plaintiffs also allege that Defendants' representations to Plaintiffs included a badge on which the FedEx logo was printed but that stated: "NOTICE: The holder of this badge is a VENDOR to FedEx Ground. The holder is not an employee of FedEx Ground. This badge is not to be duplicated." (Id. ¶ 51 & Exh. E.) Plaintiffs further allege that Defendants posted various job listings that clearly stated that Plaintiffs would be working for FedEx. (Id. ¶ 52 & Exh. F.) Plaintiffs also allege that FedEx made it appear as if the Trucking Companies were the sole employers of Plaintiffs and instructed the Trucking Companies to issue W-2s and paychecks to Plaintiffs, despite the fact that Plaintiffs were employees of FedEx. (Id. ¶¶ 58, 60.)
Plaintiffs allege, that due to FedEx's misclassification of Plaintiffs and FedEx's driver policies, Defendants violated various California labor code provisions and committed fraud. Plaintiffs TAC alleges ten causes of action against Defendants: (1) fraud; (2) failure to pay earned wages, in violation of Labor Code § 204; (3) failure to pay overtime wages, in violation of Labor Code § 1194; (4) failure to provide meal periods, in violation of Labor Code §§ 512, 226.7, 204, and 1198; (5) failure to provide rest periods, in violation of Labor Code §§ 226.7, 204, and 1198; (6) recovery of deductions from wages, pursuant to Labor Code §§ 221 and 223; (7) waiting time penalties, pursuant to Labor Code § 203; (8) failure to provide accurate itemized statements, in violation of Labor Code § 226; (9) unlawful, unfair and fraudulent business practices, in violation of Business & Professions Code § 17200, et seq.; and (10) violation of the Labor Code Private Attorneys General Act of 2004 and Labor Code § 2698.
Defendant FedEx Ground now moves to dismiss for failure to state a claim Plaintiffs' first cause of action for fraud, and further moves to strike portions of the FAC. (Dkt. No. 23.)
II. LEGAL STANDARD
A 12(b)(6) motion to dismiss requires the court to determine the sufficiency of the plaintiff's complaint and whether or not it contains a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Under Rule 12(b)(6), a court must (1) construe the complaint in the light most favorable to the plaintiff, and (2) accept all well-pleaded factual allegations as true, as well as all reasonable inferences to be drawn from them. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001), amended on denial of reh'g, 275 F.3d 1187 (9th Cir. 2001); Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998).
In order to survive a 12(b)(6) motion to dismiss, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Dismissal is proper if the complaint "lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008); see also Twombly, 550 U.S. at 561-63 (dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief). A complaint does not suffice "if it tenders naked assertion[s]' devoid of further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . The Court need not accept as true "legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003).
A. Motion to Dismiss
FedEx Ground argues that Plaintiffs' fraud claim should be dismissed because it is predicated on alleged misrepresentations of law, which cannot form the basis of a claim for fraud. Plaintiffs contend that they do allege FedEx Ground made misrepresentations of fact - specifically, that FedEx Ground falsely stated that the staffing and work assignments for drivers would be established by the contractor Trucking Companies and not FedEx Ground. Plaintiffs also argue that the badge given to the drivers was misleading, since it had a FedEx logo and bar code, and therefore led drivers to believe they worked for FedEx.
Misrepresentations of law cannot form the basis for a fraud claim. See Miller v. Yokohama Tire Corp., 358 F.3d 616, 621 (9th Cir. 2004). Statements of law are "normally regarded as expressions of opinion which are generally not actionable in fraud even if they are false." Id . However, reliance on misrepresentations of law could form the basis of an actionable fraud claim when the party making the representation: "1) purports to have special knowledge; 2) stands in a fiduciary or similar relation of trust and confidence to the recipient; 3) has successfully endeavored to secure the confidence of the recipient; 4) or has some other special reason to expect that the recipient will rely on his opinion, misrepresentations of law may result in actionable fraud." Id.
As an initial matter, none of the four exceptions to the rule in Miller appear to be present here. Plaintiffs have not alleged that FedEx purported to have some special knowledge, and the Court cannot see how FedEx would have some special knowledge of employment law in this context. Plaintiffs similarly have not alleged that Defendants stood in a fiduciary relationship with Plaintiffs or that Defendants "endeavored to secure the confidence" of any of the Plaintiffs. Finally, Plaintiffs have not alleged that Defendants had a special reason to expect that any of the Plaintiffs would rely on the alleged misrepresentations. All of the relationships alleged in the FAC would appear to the Court to be standard employee/employer or contractor/employer relationships.
Furthermore, the alleged misrepresentations in the FAC appear to be misrepresentations of law. The alleged misrepresentations in the FAC fall seemingly into two categories of misrepresentations that form the basis of the alleged fraud: (1) Defendants misled Plaintiffs in materials stating that Plaintiffs were contractors, because Plaintiffs were in actuality employees of FedEx; and (2) Defendants misled Plaintiffs to believe they were employed by FedEx when in fact they were employed by the independent Trucking Companies. These allegations appear to be self-contradictory. Plaintiffs cannot have it both ways; they cannot argue on one hand that the fraud was committed when FedEx lied to them by convincing them they were hired and employed by FedEx, while at the same time arguing that the fraud was based on misrepresentations that Plaintiffs were contractors when in fact they should have been classified as employees.
As for the first category of misrepresentations, the Court concludes that these are misrepresentations of law, not fact. A statement that an individual is a contractor, vendor, or an employee of a contractor, is a statement of law. See Harris v. Vector Mktg. Corp., 656 F.Supp.2d 1128, 1136 (N.D. Cal. 2009) (stating that under federal and state law, the legal conclusion of whether workers are employees or independent contractors is a question of law). Therefore, although the facts may ultimately show that Plaintiffs were misclassified as contractors rather than employees, a misrepresentation by Defendants that Plaintiffs were employed by the Trucking Companies could not form the basis of a fraud claim.
As for the second category of misrepresentations, the FAC does not allege facts that support Plaintiffs' contention that FedEx Ground told Plaintiffs they would be employed by FedEx. The FAC references a badge that has the FedEx logo; however, the FAC also alleges that the badge (an image of which is attached to the FAC as Exhibit E) clearly states that the bearer is a "vendor" of FedEx and disclaims that the bearer is an employee. Furthermore, the Craigslist ad attached as Exhibit F to the FAC states that a "FedEx ground contractor" is hiring, not FedEx itself. (FAC ¶ 52 & Exh. F.)
B. Motion to Strike
FedEx Ground also moved to strike portions of the FAC. First, FedEx Ground requested that the Court strike Item 11 in the "Prayer for Relief, " which pertains to Plaintiffs' request for punitive damages with respect to the fraud claim. (See FAC at 34.) Second, FedEx Ground requests that the Court strike the portion of the class definition that includes individuals who were employed "from 2010, " arguing that the longest statute of limitations for any of Plaintiffs' claims reaches back only to July 22, 2010. (See id. ¶ 18.)
Because Plaintiffs do not oppose the motion to strike the "from 2010" portion of the class definition, the Court GRANTS the motion to strike this language from the FAC. Because the Court is dismissing Plaintiffs' fraud claim with leave to amend, the Court DENIES the motion to strike Plaintiffs' request for punitive damages as moot.
For the foregoing reasons, FedEx Ground's motion to dismiss is GRANTED without prejudice. The motion to strike is GRANTED in part as to the date portion of the class definition and DENIED as to the request for punitive damages.
IT IS SO ORDERED.