Hix v. FedEx Corporation et al

Filing 16

MEMORANDUM OPINION AND ORDER denying 7 separate defendants FedEx Corporation and FedEx Freight, Inc., Motion to Dismiss for Failure to State a Claim. Signed by Honorable Robert T. Dawson on March 5, 2013. (sh)

IN THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF ARKANSAS
HARRISON DIVISION
BRYAN HIX

PLAINTIFF

vs.

Case No.: 3:12-CV-03050

FEDEX COPORATION
FEDEX CORPORATE SERVICES, INC.
FEDEX FREIGHT, INC.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
Plaintiff brings his Complaint (Doc. 1) under the SarbanesOxley Corporate and Criminal Fraud Accountability Act (“SOX”),
18 U.S.C. § 1514, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (“Dodd-Frank”), 12 U.S.C. § 5301, and Arkansas
common law for wrongful termination.

Currently before the Court

are Separate Defendants‟ (FedEx Corporation and FedEx Freight,
Inc.)

Motion

to

Dismiss

(Doc.

7),

Separate

Defendants‟

Memorandum in Support (Doc. 8), Plaintiff‟s Response (Doc. 10),
Plaintiff‟s

Memorandum

Defendants‟

Reply

in

(Doc.

Response

12).

For

(Doc.
the

11),

reasons

and

Separate

that

follow,

Separate Defendants‟ Motion (Doc. 7) is DENIED.
I.

Background
FedEx

Corporation

is

a

Delaware

corporation

with

its

principal place of business in Tennessee that regularly conducts
business in Arkansas.
Inc.

is

a

Delaware

(Doc. 1, ¶ 2).
Corporation

with

Page 1 of 11

FedEx Corporate Services,
its

principal

place

of

business in Tennessee that regularly conducts business in the
State of Arkansas.

(Doc. 1, ¶

4).

FedEx Freight, Inc. is an

Arkansas Corporation with its principal place of business in
Arkansas.

(Doc. 1, ¶ 6).

Plaintiff contends he is a former employee of Defendants,
employed on or around August 1, 2009, until the date of his
termination, April 25, 2011.

(Doc. 1, ¶ 12).

Prior to being

terminated, Plaintiff filed three separate SOX claims against
Defendants.

(Doc. 1, ¶ 13).

Plaintiff alleges his termination

was the result of his filing of those claims in violation of SOX
( Doc. 1, ¶ 19 – 21), Dodd-Frank (Doc. 1, ¶ 25 – 28), and
Arkansas‟ common law for wrongful termination (Doc. 1, ¶ 32 –
33, 35).
This matter is now before the Court on motion of Separate
Defendants

to

dismiss

Plaintiff‟s

complaint

against

them

for

failure to state a claim upon which relief can be granted and
misjoinder.1 (Doc. 7).

Plaintiff responded to the motion outside

1

Defendants allege Plaintiff failed to satisfy administrative prerequisites
regarding Plaintiff‟s SOX claim against FedEx Freight, Inc. by failing to
first file a complaint with the Secretary of Labor as required by 18 U.S.C.
§ 1514A(b)(1)(A). However, Miller v. Stifel, Nicolaus & Co., Inc. explains an
important exception: “If the employee has met these requirements [(employee
required to file complaint within 90 days of alleged SOX violation)] for a
particular violation, and a final administrative decision has not [been]
issued within 180 days of the filing of the administrative complaint, the
employee can proceed with an action in federal court based on that
violation.” Miller v. Stifel, Nicolaus & Co., Inc., 812 F. Supp. 2d 975, 983
(D. Minn. Sept. 20, 2011). Defendants‟ own memorandum shows that Plaintiff
filed his complaints with OSHA within the 90-day window. (Doc. 8). Plaintiff
then appealed to the Office of Administrative Law Judges and consolidated all
three SOX claims. (Doc. 8). On November 21, 2011, the Administrative Law
Judge (Judge Sellers) put a stay on the matter. (Doc. 8). After Judge Sellers

Page 2 of 11

of

the

Court‟s

fourteen

(14)

day

time

limit,

and

Separate

Defendants moved to dismiss Plaintiff‟s claims with prejudice.2
(Doc. 12).
the

Court

Despite the untimeliness of Plaintiff‟s response,
will

consider

Separate

Defendants‟

motion

on

its

merits.
II.

Discussion
Separate Defendants move for dismissal on the basis that

Plaintiff was not an employee with either FedEx Corporation or
FedEx Freight, Inc. at the time of Plaintiff‟s SOX complaints
and subsequent firing.

Separate Defendants assert since there

is no employer-employee relationship between them and Plaintiff,
they are improper parties and no relief can be sought against
them.
In
granted,

determining
the

court

whether
must

a

motion

determine

to

dismiss

whether

the

should

be

complaint

sufficiently alleges a cause of action against the moving party.
“In considering a Rule 12(b)(6) motion, the court views the
pleadings in the light most favorable to the nonmoving party and

issued an Order setting a 30-day deadline for Plaintiff to file the action
with the federal court, Plaintiff filed his complaint in federal court on
April 4, 2012. The timespan from when the ALJ received the complaints and the
date of decision, or lack thereof, came well outside the 180 window described
in Miller. Id. Therefore, Plaintiff‟s failure to file a complaint with the
Secretary of Labor with regards to FedEx Freight, Inc. does not require this
Court to dismiss Plaintiff‟s claim against FedEx Freight, Inc.
2
Local Rule 7.2(b) requires a party to file an opposition to a motion within
fourteen days from the date of service. Defendants FedEx Corporation and
FedEx Freight filed their motion to dismiss on April 30, 2012. Plaintiff
filed his response on July 25, 2012. Plaintiff‟s answer was more than ten
weeks tardy.

Page 3 of 11

treats the alleged facts as true.”

Erickson v. Wells Fargo

Bank, N.A., No. 11-3123, 2012 WL 1593204, at *2 (D. Minn. Apr.
19, 2012).

“A Rule 12(b)(6) motion to dismiss is granted when

the factual allegations, even assumed to be true, do not entitle
that party to relief.” Id.

Although a plaintiff need not give a

highly detailed recitation of the facts, the allegations must be
“enough to raise a right to relief above the speculative level
on the assumption that all the allegations in the complaint are
true

(even

if

doubtful

in

fact).”

Twombly, 550 U.S. 544, 555 (2007).
dismiss

is

denied

“unless

it

Bell

Atlantic

Corp.

v.

Stated further, a motion to

appears

beyond

doubt

that

the

plaintiff can prove no facts which would entitle him to relief.”
Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986)3.

Lastly, if

the Court initially determines all parties are proper, the Court
may dismiss a party during trial if facts are presented showing
a party is in fact an improper party. Fed. R. Civ. P. 21.

3

In Plaintiff‟s Memorandum in Response to Defendants‟ Motion to Dismiss (Doc.
11) Plaintiff takes issue with Defendants‟ use of three affidavits (which the
Court believes are Exhibits #1 (Doc. 8-1), #2 (Doc. 8-2), and #3 (Doc. 8-3)
attached to the Memorandum in Support of Defendants‟ Motion to Dismiss (Doc.
8))
to support their motion to dismiss (Doc. 11 ¶ 4). Under Speaker,
Plaintiff alleges that the use of extrinsic evidence by this Court generally
requires the Rule 12(b)(6) motion be converted into a motion for summary
judgment. Speaker v. United States Dep’t. of Health and Human Serv., 623 F.3d
1371, 1379 (11th Cir. 2010). Defendants respond there is a caveat to the
general rule: “[W]here certain documents and their contents are undisputed:
„In ruling upon a motion to dismiss, the district court may consider an
extrinsic document if it is (1) central to the plaintiff‟s claim, and (2) its
authenticity is not challenged.‟” Id. As in Speaker, Plaintiff has not, at
this point, challenged the authenticity of Defendants‟ affidavits. Id. at
1379-80.
Therefore
the
affidavits
are
available
for
the
Court‟s
consideration and decision. The motion to dismiss is therefore not converted
into a summary judgment motion.

Page 4 of 11

A.

Employer Requirement for Sarbanes-Oxley claim

SOX gives protection to employees who provide information,
against a “company with a class of securities registered under
section 12 of the Securities Exchange Act of 1934 (15 U.S.C.
78l), or that is required to file reports under section 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78o(d))” “which
the

employee

reasonably

believes

constitutes

a

violation

of

section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud],
or

1348

[securities

and

commodities

fraud],

any

rule

or

regulation of the Securities and Exchange Commission [“SEC”], or
any

provision

of

Federal

law

relating

to

fraud

against

shareholders[.]” 18 U.S.C. § 1514A(a) (2012).
To establish a prima facie case, the plaintiff must
show, by a preponderance of the evidence, that: (1)
[plaintiff] engaged in protected activity; (2) the
employer knew or suspected . . . the protected
activity; (3) [plaintiff] suffered an unfavorable
personnel action; and (4) the protected activity was a
contributing factor in the unfavorable personnel
action.
Miller v. Stifel, Nicolaus & Co., Inc., 812 F. Supp. 2d 975, 982
(D.

Minn.

Sept.

20,

2011)

(emphasis

added).

Therefore,

a

plaintiff must establish an employer-employee relationship with
the defendants in order to seek relief.4

4

Defendants initially denied they were companies with the securities necessary
or report filing requirement that would make Defendants subject to the
Securities Exchange Act of 1934. However, neither Defendants‟ Memorandum in
Support of Defendants‟ Motion to Dismiss (Doc. 8) nor Defendants FedEx
Corporation and FedEx Freight, Inc.‟s Reply to Plaintiff‟s Response to their
Motion to Dismiss (Doc. 12) raise any argument against the claim that

Page 5 of 11

i.

Plaintiff’s employment status with regards to FedEx
Corporation

Plaintiff should be given the opportunity to show FedEx
Corporation was his employer. In the Eighth Circuit, there is a
“„strong presumption that a parent company is not the employer
of

its

subsidiary‟s

otherwise

only

in

employees,

and

extraordinary

the

courts

circumstances.‟”

have

found

Brown

v.

Fred’s, Inc., 494 F.3d 736, 739 (8th Cir. 2007) (quoting Frank
v. United States West, Inc., 3 F.3d 1357, 1362 (10th Cir. 1993).
These “extraordinary circumstances” are put forth in the “alter
ego/level of control” test:
[a] parent company may employ its subsidiary‟s
employees if (a) the parent company so dominates the
subsidiary‟s operations that the two are one entity
and therefore on employer or (b) the parent company is
linked to the alleged discriminatory action because it
controls individual employment decisions.
Brown at 739 (quoting Leichihman v. Pickwick Int’l, 814 F.2d
1263, 1268 (8th Cir. 1987)) (quotations omitted); see Humphries
v. Bray, 611 S.W.2d 791 (Ark. Ct. App. 1981) (holding a sole
proprietor‟s
proprietor

corporation

and

therefore

was

the

alter

ego

sole

proprietor

was

corporation‟s employee‟s injuries).
the

employment

practices

of

its

of

the

liable

sole

to

the

A parent company controls

subsidiary

“[i]f

the

parent

Defendants fit into the securities and reporting requirement of the
Securities Exchange Act of 1934. Instead, both Defendants and Plaintiff focus
on whether Defendants FedEx Corporation and FedEx Freight, Inc. were
Plaintiff‟s “employer” for purposes of Plaintiff‟s SOX, Dodd-Frank, and
Arkansas common law for wrongful termination allegations.

Page 6 of 11

company

hired

and

fired

the

subsidiary

employees,

routinely

shifted them between the two companies, and supervised their
daily operations.” Johnson v. Flowers Indus., Inc., 814 F.2d
978, 981 (4th Cir. 1987). Some other relevant factors used by
the courts are “1) the commingling of funds and assets; . . . 3)
the severe undercapitalization of the subsidiary; and 4) the
parent

corporation

failing

to

observe

basic

corporate

formalities such as keeping separate books and holding separate
shareholder meetings.”

E.E.O.C. v. Chemtura Corp., No. 07-1025,

2009 WL 1940076 (W. D. Ark. 2009).
In Exhibit #1 Defendants assert that FedEx Corporation does
not exercise day-to-day control over the employment decisions of
FedEx Freight, Inc., or FedEx Corporate Services, Inc. (Doc. 8-1
¶ 11), that FedEx Freight, Inc. does not exercise day-to-day
control over the employment decisions of FedEx Corporation or
FedEx

Corporate

Services,

Inc.

(Doc.

8-1

¶

12),

and

FedEx

Corporate Services, Inc. does not exercise day-to-day control
over the employment decisions of FedEx Corporation and FedEx
Freight, Inc. (Doc. 8-1 ¶ 13).
FedEx

Corporation,

Freight,

Inc.

are

FedEx

Defendants further assert that

Corporate

separate

and

Services,

distinct

Inc.,

corporate

and

FedEx

entities.

(Doc. 8-1 ¶ 9). Even assuming these facts as true, the plaintiff
may still prove that FedEx Corporation had sufficient “control”
over FedEx Freight, Inc. and FedEx Corporate Services, Inc. to
Page 7 of 11

justify a finding that all three entities are actually a single
entity.

Therefore, Plaintiff will be given the opportunity to

prove his case.
ii.

Plaintiff’s Employment Status with regards to FedEx
Freight, Inc.

Although never an employee of FedEx Freight, Inc., Separate
Defendant may be liable for the employment decisions of its
sister company based on an extension of “alter ego liability.”5
The Eighth Circuit has no case law on the subject of sister
company liability; however, the Arkansas Supreme Court discussed
the concept in Missouri Pacific R. Co. v. Mackey, 760 S.W.2d 59
(Ark. 1988).

In Missouri Pacific, the Court held there was no

“nexus” that connected the corporation at issue with its sister
corporation; therefore, the sister corporation was not a proper
party to the action.

Missouri Pacific at 65.

The concept is

further explained in Greenspan v. LADT, LLC:
Generally, alter ego liability is reserved for the
parent-subsidiary relationship. However, under the
single-enterprise rule, liability can be found between
sister companies. The theory has been described as
follows: In effect what happens is that the court, for
sufficient reason, has determined that though there
are two or more personalities, there is but one
enterprise; and that this enterprise has been so
handled
that
it
should
respond,
as
a
[single
corporation][.]

5

Plaintiff admits to being an employee of FedEx Corporate Services, Inc., but
makes no such assertion with regards to FedEx Corporation or FedEx Corporate
Services, Inc. (Doc. 11 ¶ 3).

Page 8 of 11

Greenspan v. LADT, LLC, 121 Cal. Rptr. 3d 118, 138 (Ca. Ct. App.
4th

2010)

(quotations

omitted).

Once

again,

liability

is

determined by whether FedEx Corporation was involved with its
subsidiaries to such an extent as to find there to be a “single
enterprise.”
opportunity

As discussed above, Plaintiff will be given the
to

prove

such

a

“single

enterprise”

through

discovery and trial.
B.

Dodd-Frank extension of Sarbanes-Oxley

The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, 124 Stat. 376 (2010) (West), amended
SOX “by inserting „including any subsidiary or affiliate whose
financial information is included in the consolidated financial
statements

of

such

[parent]

company‟

after

„the

Exchange Act of 1934 (15 U.S.C. 78o(d)).‟”

Securities

Dodd-Frank Wall

Street Reform and Consumer Protection Act, Pub. L. No. 111-203,
§

929A,

124

Stat.

376

(2010)

(West).

This

means

that

a

plaintiff bringing a cause of action against a subsidiary may
also have a cause of action against the parent company depending
on

whether

the

parent

includes

the

subsidiary‟s

financial

information within its own consolidated financial statement.
Separate Defendants assert FedEx Corporate Services, Inc.
and FedEx Freight, Inc. are wholly-owned subsidiaries of FedEx

Page 9 of 11

Corporation.6

(Doc. 8-1 ¶ 5, 7).

provide

information

no

However, Separate Defendants

regarding

Corporation‟s financial statements.

the

makeup

of

FedEx

Therefore, a dismissal at

this point in the proceedings would be premature.
C.

Plaintiff’s Arkansas Common Law Wrongful Termination Claim
Plaintiff alleges he was terminated in violation of the

public policy of the State of Arkansas which is a violation of
Arkansas common law.

(Doc. 1 ¶ 35).

An exception to the

“employment-at-will doctrine” is the “public policy exception.”
Northport Health Serv., Inc. v. Owens, 158 S.W.3d 164, 175 (Ark.
2004).

This public policy exception is stated as “an at-will

employee has a cause of action for wrongful discharge if he or
she is fired in violation of a well-established public policy of
the state.” Id.; see City of Green Forest v. Morse, 873 S.W.2d
155 (Ark. 1994) (holding “the exceptions to the at-will doctrine
will be recognized to protect a well-established and substantial
public

policy

proprietary

and

not

interests

of

merely
the

to

protect

employee.”

the

(emphasis

private

or

omitted)).

“The public policy of [Arkansas] is contravened if an employer
discharges an employee for reporting a violation of state or
federal law.”

Lynn v. Wal-Mart Stores, Inc., 280 S.W.3d 574,

579 (Ark. Ct. App. 2008).

6

FedEx Freight, Inc. is a wholly-owned subsidiary of FedEx Freight Corporation
which is a wholly-owned subsidiary of FedEx Corporation.

Page 10 of 11

SOX and Dodd-Frank are

federal laws and

a violation of

either would constitute a violation of Arkansas common law.

As

such, if Plaintiff is able to prove at trial that he was an
employee

of

either

defendant

and

fired

because

of

his

SOX

complaints, Plaintiff‟s wrongful termination claim is justified.
III. Conclusion
For the reasons stated above, Separate Defendants‟ Motion
to Dismiss (Doc. 7) is DENIED, and Separate Defendants shall
have ten (10) days to respond to Plaintiff‟s Complaint.
IT IS SO ORDERED this 5th day of March, 2013.
/s/ Robert T. Dawson
Honorable Robert T. Dawson
United States District Judge

Page 11 of 11