Derolf et al v. Risinger Bros. Transfer, Inc. et al
Filing
33
MEMORANDUM OPINION & ORDER entered by Judge Joe Billy McDade on 4/21/2017. For the foregoing reasons, Defendants Motion To Dismiss The Amended Complaint Pursuant To Federal Rule Of Civil Procedure 12(B)(6) (Doc. 22) is GRANTED in part and Plaintiff 039;s federal claims are dismissed. Although the Courtis skeptical that Plaintiffs will be able to plead viable federal claims under the theories presented, the Court will nonetheless allow Plaintiffs to move the Court for leave to file an amended co mplaint within twenty-one (21) days (5/12/2017.) An amended complaint shall be attached to the motion as an exhibit. Defendants shall have an opportunity to respond and the Court will assess whether the amended complaint will be allowed or whether su ch amendment would be futile. Jurisdiction over this matter was invoked by the Court's federal-question jurisdiction under 28 U.S.C. § 1331 and its supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367. Having disp osed of the federal claims, the Court hereby declines to exercise supplemental jurisdiction over the remaining state law claims and therefore passes no judgment on their viability. If Plaintiff fails to file for leave to file an amended complaint in the time allotted, the federal claims will be dismissed with prejudice and the action terminated. SO ORDERED. See full written Order. (VH, ilcd)
E-FILED
Friday, 21 April, 2017 02:04:39 PM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
DEBBIE DEROLF, et al.,
)
)
Plaintiff,
)
)
v.
)
)
RISINGER BROS. TRANSFER, INC., et )
al.,
)
)
Defendants.
)
Case No. 16-cv-1298
MEMORANDUM OPINION & ORDER
This matter is before the Court on the Defendants’ Motion To Dismiss The
Amended Complaint Pursuant To Federal Rule Of Civil Procedure 12(B)(6) (Doc. 22).
The motion has been fully briefed and is ready for decision. For the reasons stated
below, the motion is GRANTED in part.
BACKGROUND
Plaintiffs Debbie Derolf and Kevin Anderson were truck drivers who hauled
freight for Defendant Risinger Bros. Transfer, Inc. (referred to as “Defendant
Risinger”). Defendant Stanley K. Risinger is the Chairman of the Board of Directors
of Defendant Risinger. Defendant Dean Hoffman is the President of Defendant
Risinger. The Amended Complaint also names several John Doe Defendants as
presently unknown persons who are alleged to have either directly or indirectly,
directed, aided, abetted, and/or assisted with creating and/or executing the policies
and practices of Defendants or processed payroll regarding the Plaintiffs.
1
First, Plaintiffs allege that Defendants falsely designated them and others
similarly situated to them as independent contractors instead of employees and
unlawfully deducted from and withheld portions of the wages owed to them in
violation of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”). Second,
Plaintiffs allege that they and others similarly situated to them entered into lease
agreements with Defendant Risinger that violate the Truth in Leasing Act, 49 U.S.C.
§ 14704 by not including certain terms in the leases and by including certain terms
that actually violate the law. Third, Plaintiffs allege that Defendants have violated
the Internal Revenue Code, 26 U.S.C. § 7434, by purposefully misclassifying
Plaintiffs and others similarly situated to them as independent contractors and
willfully filing fraudulent information returns. Lastly, Plaintiffs also bring several
Illinois and Indiana state law claims that will not be discussed because the Court has
determined that the federal claims should be dismissed.
LEGAL STANDARDS
In ruling on a motion to dismiss for failure to state a claim pursuant to Rule
12(b)(6), “the court must treat all well-pleaded allegations as true and draw all
inferences in favor of the non-moving party.” In re marchFIRST Inc., 589 F.3d 901,
904 (7th Cir. 2009). The pleading must contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive
a motion to dismiss, the challenged pleading must contain sufficient detail to give
notice of the claim, and the allegations must “plausibly suggest that the [non-movant]
has a right to relief, raising that possibility above a ‘speculative level.’ ” EEOC v.
Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atl.
2
Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plausibility standard requires
enough facts “to present a story that holds together,” but does not require a
determination of probability. Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir.
2010). Though detailed factual allegations are not needed, a “formulaic recitation of
a cause of action's elements will not do.” Twombly, 550 U.S. at 545. Lastly, when a
plaintiff pleads facts demonstrating that he has no claim, dismissal of the complaint
is proper. McCready v. eBay, Inc., 453 F.3d 882, 888 (7th Cir. 2006).
DISCUSSION
I.
FLSA Claims
Plaintiffs allege that they and others similarly situated to them are employees
of Defendant Risinger but that Defendant Risinger failed to pay them statutorilyrequired minimum wages as well as unlawfully deducted from and withheld portions
of their wages by deliberately misclassifying them as independent contractors.
Defendants counter that the contracts the Plaintiffs and others entered into with
Defendant Risinger conclusively establish that the Plaintiffs and others were
independent contractors and thus, Plaintiffs’ FLSA requirements are simply not
applicable.
The FLSA requires certain employers to pay its employees certain minimum
wages. 29 U.S.C. § 206. “Employer” is defined under the Act to be “any person acting
directly or indirectly in the interest of an employer in relation to an employee….” 29
U.S.C. § 203(d). An “employee” is any individual employed by an employer. 29 U.S.C.
§ 203(e)(1). The term “employ” means “to suffer or permit to work.” 29 U.S.C. § 203(g).
The FLSA only applies when there is an employer-employee relationship; it does not
3
apply when there is a contractor-independent contractor relationship. See Goldberg
v. Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961) (Whittaker, J., dissenting) (“It
is clear and undisputed that the Fair Labor Standards Act does not apply in the
absence of an employer-employee relationship.”)
Whether a plaintiff is an employee or independent contractor is a question that
is amenable to a Rule 12(b)(6) analysis even though it is fact-intensive. See Berger v.
Nat’l Collegiate Athletic Ass’n, 843 F.3d 285, 294 (7th Cir. 2016). A proper claim under
the FLSA must allege facts that make it plausible the workers at issue are employees
covered by the Act. It is not sufficient to simply say one is an employee; indeed, mere
labels and formulaic language are not enough to satisfy the pleading requirements of
Federal Rule of Civil Procedure 8(a). See Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (a “formulaic recitation of the elements of a cause of action will not do.”).
The Seventh Circuit utilizes an “economic reality” standard to evaluate whether
workers under consideration are actual employees or independent contractors. Sec’y
of Labor, U.S. Dept. of Labor v. Lauritzen, 835 F.2d 1529, 1534-35 (7th Cir. 1987).
Under this standard, courts in this jurisdiction look for allegations indicating that
the following factors weigh in favor of the Plaintiff: (1) the employer’s control over the
manner in which the alleged employee performs the work, (2) the alleged employee’s
opportunity for profit or loss depending upon his or her skill, (3) the alleged
employee’s investment in equipment or materials or employment of workers, (4)
whether the work requires a special skill, (5) the permanency and duration of the
relationship, and (6) the extent to which the work is an “integral part” of the alleged
employer's business. Id. Courts are to look at these factors in a totality of the
4
circumstances fashion; “no criterion is by itself, or by its absence, [is] dispositive or
controlling. Id. at 1534.
A.
The Employer’s Control Over The Manner In Which The
Alleged Employee Performs The Work
The Operating Agreements (“OAs”), which are the contracts and leases
between Defendant Risinger and the Plaintiffs, provide ample evidence that the
Plaintiffs exercised vast control over the ways in which they performed their work. 1
The OAs refer to Defendant Risinger as the Carrier. The “work” at issue was
transporting goods for Risinger by driving trucks. The OAs make clear that the
Plaintiffs, known under the OAs as the “Contractors”, did not even have to engage in
the “work” themselves, they could hire their own drivers to do so. (See e.g., Doc. 23-1
at 7, 10). In such case, it was the Plaintiffs and those similarly situated to them who
bore the responsibility “for the selection, training, hiring, setting of grooming and
dress standards, disciplining, discharging, setting of hours, meal and rest breaks,
wages, and salaries, providing for unemployment insurance, state and federal taxes,
fringe benefits, workers’ compensation insurance (or, if Contractor prefers,
occupational accident insurance where both state law allows and Carrier approves),
adjustment of grievances, all acts and omissions, and all other matters relating to or
arising out of Contractor’s use or employment of drivers, drivers’ helpers, and other
The OAs were provided by Defendants as an attachment to their motion to dismiss.
(Docs. 23-1, 23-2). Normally, a motion to dismiss is decided solely on the allegations
of the operative complaint, but a notable exception to this rule, which applies here, is
when the operative complaint refers to documents that are so central to the claims,
courts can consider them if they accompany the motion to dismiss. Wright v.
Associated Ins. Companies Inc., 29 F.3d 1244, 1248 (7th Cir. 1994).
5
1
personnel to perform any aspect of this Agreement.” (E.g., Doc. 23-1 at 18). Moreover,
the OAs provide that it is the Contractor’s sole responsibility “to select, purchase or
lease, and finance the Equipment; to decide when, where, and how maintenance and
repairs are to be performed on the Equipment; and to select all routes and decide all
meal, rest, and refueling stops, provided that to meet Carrier’s customers’ demands.”
(E.g., Doc. 23-1 at 18). This all indicates that Plaintiffs were not employees. The Court
is unaware of any instances where an employee can contract with a third party to
perform the actual work of the employer.
Plaintiff alleges that Defendant Risinger required Plaintiffs and others
similarly situated to them to attend an orientation, which lasted several days. During
this orientation, Defendant Risinger required Plaintiffs and others to watch
presentations and videos regarding the rules and policies of Defendant Risinger, take
a drug test, undergo a medical, physical, and take a road test. The Amended
Complaint is silent as to whether the Plaintiffs and those similarly situated were
compensated for the time they spent during such orientations. Obviously, if they were
compensated for their attendance that would be a factor weighing towards finding
the relationship to be one of employer-employee. But absent such pleading, the Court
is left with the understanding that undergoing driving and skill tests at an
orientation is not, in and of itself, indicative of an employer-employee relationship.
See Nance v. May Trucking Company, No. 14-35640, 2017 WL 1164403, at *1 (9th
Cir. Mar. 29, 2017).
Plaintiffs also allege that they and others similarly situated to them were not
permitted by the OAs with Defendant Risinger, to use the commercial vehicles leased
6
to them by Defendant Risinger, for any carrier other than Defendant Risinger unless
Defendant Risinger gave prior written consent. Plaintiffs go on to allege that absent
written permission from Defendant Risinger, Plaintiffs and others similarly situated
to them could accept only jobs that were assigned to them by Defendant Risinger from
the Risinger freight system. (Doc. 13 at 14-15). That may very well be, but the Court
does not think these points are of much significance.
The Court is unaware of any traditional employer-employee relationship where
an employer would ever allow an employee to use the employer’s equipment for a
competitor under any circumstances. The OAs provide that the Equipment, the
commercial motor vehicle, is being leased to the Plaintiffs as part of the agreement
to provide for the hauling of the goods in exchange for no down payment and no
advance credit requirements. (E.g., Doc 23-1 at 43). The fact that the Equipment can
be used by the Plaintiffs to haul freight for other carriers is a clear indication that
they are not the Defendant Risinger’s employees. There is no allegation in the
Amended Complaint that Defendants did not give such permission or that the
Plaintiffs or others ever even asked for such permission.
Plaintiffs allege further that in the event that Plaintiffs and others similarly
situated to them stopped hauling the majority of their freight for Defendant Risinger,
Defendant Risinger required them to pay Defendant Risinger a lump sum of $24,000
within seven days of a written demand and notification from Defendant Risinger.
(Doc. 13 at 14-15). Again, this point is not of much consequence. That lump sum
represents a value the Defendant Risinger contracted for to cover its risk of extending
the equipment to a party that provided no down payment and no advance credit
7
requirements for hauling freight primarily for other carriers, other carriers being
Defendant Risinger’s competitors of course. This payment is directly tied to the fact
that the Plaintiffs are free to perform the work of hauling freight for others—they
simply have to pay a premium if they choose to primarily haul for other carriers—
and thus, it supports the conclusion that they are independent contractors and not
employees.
Lastly, Plaintiffs allege that Defendant Risinger assigned Plaintiffs and others
similarly situated to them, “driver managers” who acted as their supervisors
throughout their employment. At all times, Defendant Risinger directed, provided,
and supervised the work performed by Plaintiffs on Defendant Risinger’s behalf.
These allegations clearly weigh in favor of a finding that the drivers may have been
employees. However, once again, the OAs clearly provide that the Contractors need
not be the actual people driving the trucks, thus the Court finds that the allegations
do not counsel towards concluding the Defendant Risinger exercised the requisite
amount of control over the Contractors to make it plausible that the Plaintiffs—the
Contractors in the OAs—were employees rather than independent contractors.
Consequently, the Court finds that Defendant Risinger’s control over the
manner in which the Plaintiffs performed the work of hauling freight does not weigh
in favor of concluding Plaintiffs were employees.
B.
The Alleged Employee’s Opportunity For Profit Or Loss
Depending Upon His Or Her Skill
The Plaintiffs allege neither they nor others similarly situated to them had a
meaningful opportunity to increase their revenues by recruiting new customers, as
8
they were not permitted to recruit new customers as a consequence of being permitted
to accept only loads assigned to them from Defendant Risinger. The Court does not
understand this allegation. The OAs unambiguously permit contractors to haul
freight for other carriers after securing permission, and to accept or decline any
specific delivery for Risinger. (E.g., Doc. 23-1 at 22). So there does not appear to be
any restriction on the Plaintiffs ability to engage “new customers,” which the Court
takes to mean other carriers. If this is incorrect and the Plaintiffs mean that they
were denied the opportunity to recruit new customers—people or entities that have
goods they wish to be hauled—for Risinger, then the Court is at a loss to understand
how they can simultaneously argue that their “work” consisted of driving trucks for
Risinger.
Recruiting new customers does not seem to be something within the tasks of a
mere driver. Such “work” would obviously entail identifying customers, soliciting
their business and engaging in salesmanship, which entails much more than simply
driving trucks for an alleged master. Moreover, there does not appear to be any
mention of how Risinger was to compensate Plaintiffs and others for bringing
Risinger new customers.
The whole crux of the Plaintiffs’ Amended Complaint is that they allege that
they were driving trucks containing freight to be delivered to Risinger’s customers
and they had little discretion on how this work was to be done. But the Plaintiffs’
profits depended on how much hauling they accomplished, which was something
completely within their own control, subject to limitations on driving contained in
federal regulations.
9
Plaintiffs and others similarly situated to them also allege that they were paid
a flat cents-per-mile rate, which was not subject to negotiation based on the
individual loads assigned to Plaintiffs. This point does not persuade the Court
because again, the OAs permitted the contractors to haul freight for other carriers.
One would presume, although no allegation has been made in the Amended
Complaint, that other carriers had their own rates of compensation. Since Plaintiffs
were free to do business with these other carriers, it does not follow that their
inability to negotiate rates with Risinger would necessarily foreclose their
profitability.
Additionally, Plaintiffs allege that Defendants retained the right to
unilaterally change Named Plaintiffs’, Collective Plaintiffs’, and Class Plaintiffs’
compensation structure by changing the fuel surcharge, the amount of the nonrefundable maintenance escrow deductions, and the amount of the base
compensation. Consequently, Plaintiffs and others could do little to increase their
profitability other than attempt to improve their fuel efficiency. This is not supported
by the freedoms Plaintiffs had under the OAs. Again, Plaintiffs’ profits depended on
how much hauling of freight they did; something they controlled. To ignore that their
profitability hinged on how much they drove—as opposed to fuel efficiency—would be
to ignore the reality of their business. This factor also weighs in favor of Defendants.
C.
The Alleged Employee’s Investment In Equipment Or Materials
Or Employment Of Workers
The Court is of the opinion that this factor also weighs in favor of Defendants.
First of all, as discussed above, the Plaintiffs and other similarly situated to them are
10
fully empowered under the OAs to hire their own drivers, driver’s assistants, and so
on. The Plaintiffs are required to lease the trucks from Risinger as contractors; they
are not simply given the trucks to complete their work. The whole set up may be
unfair but there is little question that the system requires the Plaintiffs to take a
huge risk and invest in their own ability to arrange for as much freight to be hauled
so as to turn a profit.
In traditional employer-employee settings, employees are not asked to take
such risk upon themselves to ensure compensation. Instead, they know that by doing
a specific set of tasks for a given amount of time, they can expect certain
remuneration. That is not the case here. Here, the so-called “Base Compensation”
depends on the mileage the Contractor accumulates hauling the freight. (E.g., Doc.
23-1 at 34). That mileage is controlled by how much the Contractor or her drivers
drive. How much mileage is driven, what trips are accepted, what routes are taken,
and when the driving occurs are all variables controlled by the Plaintiffs not
Defendant Risinger.
D.
Whether The Work Requires A Special Skill
The Court did not find allegations in the Amended Complaint pertaining to
this factor. Nevertheless, in a case unrelated to concerns under the FLSA, the
Seventh Circuit explained that driving commercial trucks was a special skill. United
States v. Lewis, 41 F.3d 1209, 1214 (7th Cir. 1994). However, driving the truck in and
of itself is not the only skill at issue here. Plaintiffs clearly need to possess business
acumen, diligence, and managerial skills as they are much more like businesspeople
rather than merely drivers, even though they may drive the trucks themselves. They
11
control what hauls they accept. They control what routes they take. They control
when they work. The Court finds this factor weighs in favor of Defendants.
E.
The Permanency And Duration Of The Relationship
This factor also weighs in favor of Defendants. Temporary relationships
suggest independent contractor status while open-ended relationships suggest
employee status. Lauritzen, 835 F.2d at 1537. While the Court could not find a
termination date within the OAs, the actual Lease Agreements clearly state fixed
terms for the leases of the trucks to operate. (See Doc. 23-1 at 41, 23-2 at 41). So,
unlike in Doe v. Swift Transp. Co., 2017 U.S. Dist. LEXIS 2410 (D. Ariz. Jan. 5, 2017),
where the court found that the agreements at issue did not contemplate an end to the
service relationship, id. at *14, here there is a fixed termination of the Lease
Agreements in place.
F.
The Extent To Which The Work Is An “Integral Part” Of The
Alleged Employer’s Business
The Court finds that this factor weighs heavily in favor of the Plaintiffs. It
cannot be argued seriously that the hauling of freight is not an integral part of
Defendants’ business. Without the Plaintiffs and others similarly-situated, the
Defendants’ business model could hardly exist.
G.
Dependence Of The Plaintiff’s And Others On Defendant
Risinger
The Plaintiffs make a bald allegation that they are economically dependent
upon Defendant Risinger. In Lauritzen, the Seventh Circuit concluded that migrant
workers on a pickle farm were the employees of the pickle farm because they were
wholly dependent on the defendant’s land, crops, agricultural expertise, equipment,
12
and marketing skills. 835 F.2d 1529. There is no indication in the pleadings beyond
Plaintiff’s bald allegation that they are as dependent upon Risinger as the migrant
workers in Lauritzen were dependent on the pickle farm.
For example, there is no allegation in the Amended Complaint that Risinger is
the only carrier available. Indeed, the OAs specifically mention that other carriers
exists and under certain conditions the Plaintiffs and others similarly situated to
them can haul freight for such other carriers with the trucks leased to them by
Risinger.
H.
Conclusion
In conclusion, this Court finds that the allegations of the Amended Complaint
fail to state a claim for which relief can be granted when viewed in conjunction with
the OAs. The Plaintiffs and others operating under the OAs were independent
contractors, not employees. Plaintiffs exercised more control on how they worked
than traditional employees. They were responsible for their own profitability in a way
that suggested they were entrepreneurs, not simply truck drivers. They were
required to make significant investment in their own equipment. The leases they
operated under had fixed termination dates. Lastly, there was no indication that they
were dependent on Risinger exclusively, since the OAs clearly contemplated the
existence of other carriers. The one factor that weighed heavily for Plaintiffs was the
fact that they are an integral part of Risinger’s business, but the Court finds this
factor does not outweigh the several others. Therefore, the FLSA claims should be
dismissed by way of the Defendants’ 12(b)(6) motion.
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II.
IRS Section 7434 Claims
Plaintiffs allege that Defendant Risinger violated 26 U.S.C. § 7434 by
purposefully misclassifying Plaintiffs and those similarly situated to them as
independent contractors and issuing them 1099 tax information returns instead of
W-2 tax information returns. In so doing, Risinger allegedly willfully filed fraudulent
information returns with respect to payments purported to be made to Plaintiffs and
those similarly situated. As the Court has found the Plaintiffs and others similarly
situated to them were independent contractors, no misclassification occurred as
Risinger was correct to file Form 1099 information returns.
Regardless, the Court also finds these claims are not cognizable as pled.
Section 7434 provides in relevant part that “[i]f any person willfully files a fraudulent
information return with respect to payments purported to be made to any other
person, such other person may bring a civil action for damages against the person so
filing such return.” 26 U.S.C. § 7434(a). Thus, clearly § 7434 provides a private right
of action to aggrieved persons.
However, there appears to be a split amongst the district courts, and no
authoritative precedent as to whether the nature of the fraud pertains solely to the
pecuniary value of the payments at issue or whether the scope of the fraud
encompasses broader concepts. Indeed, the Plaintiffs seem to be arguing that
whenever someone can be identified as harmed by the purposeful filing of an
information return that is fraudulent in any respect, such a harmed individual may
bring an action under § 7434. (See Doc. 27 at 19-20). Plaintiffs cite three cases in
support of their proposition; Leon v. Tapas & Tintos, Inc., 51 F.Supp.3d 1290, 1298
14
(S.D. Fla. 2014); Bolling v. PP&G Inc., No. WDQ-15-911, 2015 WL 9255330, at *6–7
(D. Md. Dec. 17, 2015); and Diaz v. In Season Distributors, LLC, No. 1:16-CV-21877UU, 2016 WL 4401141, at *1–2 (S.D. Fla. Aug. 17, 2016). The Court finds none of
these cases analyzed the specific issue of whether § 7434 only targets fraud pertaining
solely to the pecuniary value of the payments referenced in the information returns.
Consequently, those cases are of little use to the Court as opposed to the case cited
by Defendants, Liverett v. Torres Advanced Enter. Sols. LLC, 192 F. Supp. 3d 648
(E.D. Va. 2016), where the court discussed at length whether § 7434 creates a private
cause of action for tax fraud where an alleged misrepresentation giving rise to the
action is unrelated to the amount of payments. Id. at 649.
In Liverett, the Court analyzed the text of the statute and Congressional intent
and concluded that Ҥ 7434(a) creates a private cause of action only where an
information return is fraudulent with respect to the amount purportedly paid to the
plaintiff.” 192 F. Supp. 3d at 653. A much more recent case out of the Middle District
of Florida agreed with the Liverett court after analyzing the issue in even greater
detail. Tran v. Tran, No. 8:16-CV-1356-T-23AEP, 2017 WL 894370, at *1 (M.D. Fla.
Mar. 7, 2017) (“liability under Section 7434 requires a misstatement of the amount of
payment”). This Court agrees with the Liverett and Tran courts and finds that the
Plaintiff’s claims do not state plausible violations of § 7434.
The Liverett court clarified the purported ambiguity of § 7434 with respect to
the facts of that case, which also apply equally here: “a Form 1099 that identifies
plaintiff as an independent contractor when he is in fact an employee is an
information return that is false with respect to plaintiff's employment status, but so
15
long as the Form 1099 accurately reports the amount of wages defendant paid to
plaintiff, the return is not fraudulent with respect to the amount of the payments
made.” 192 F. Supp. 3d at 650. This is supported from the clear language of the
statute, which states that a person is prohibited from willfully filing “a fraudulent
information return with respect to payments purported to be made to any other
person….” 26 U.S.C.A. § 7434(a). Furthermore, the statute provides that an
“information return” is “any statement described in section 6724(d)(1)(A).” 26 U.S.C.
§ 7434(f). Section 6724(d)(1)(A) then provides a definition of the term “information
return,” which is “any statement of the amount of payments to another person
required by” any of ten provisions of law. 26 U.S.C. § 6724(d)(1)(A); Liverett, 192 F.
Supp. 3d at 652. Therefore, a proper § 7434 violation must be predicated on a
purported misstatement of amount.
The Liverett court also explained that § 7434(e) provides meaningful context to
lead a court to interpret § 7434’s private right of action to only extend to instances
where an operative complaint alleges that the amounts of the payments at issue in
information returns under consideration are fraudulent. Id. at 653. That provision
requires that the “decision of the court awarding damages in an action brought under
subsection (a) shall include a finding of the correct amount which should have been
reported in the information return.” 26 U.S.C. § 7434(e); 192 F. Supp. 3d at 653. If
the relief contemplated under the statute is limited to the amount of money that
should have been documented on the information return, then as a matter of logic the
right of action is similarly limited to alleged false statements of the amounts earned
16
and documented on the information return. Consequently, this claim fails as a matter
of law and the claims must be dismissed.
III.
TILA Claims
Plaintiffs allege that Defendants violated the federal Truth in Leasing Act, 49
U.S.C. §14704, et. seq. and its accompanying regulations because the OAs do not
purportedly conform to requirements set out in those laws and regulations. First,
Plaintiffs allege that the OAs violate 49 C.F.R. § 376.12(a) because the Plaintiffs were
not “owners” of the equipment as that term is defined by the regulations at the time
the OAs were signed. Next, Plaintiffs allege that several of the provisions of the OA
are designed to impermissibly limit Defendant Risinger’s legal obligations under 49
C.F.R. § 376.12 or to impose conditions that are prohibited by that regulation. Next,
the Plaintiffs allege that the OAs lack certain provisions that are required by 49
C.F.R. § 376.12.
These claims will be dismissed because Plaintiffs do not plead that they have
suffered any actual damages from the alleged TILA violations. As was recognized in
Owner-Operator Indep. Drivers Ass'n, Inc. v. Landstar Sys., Inc., “[a] carrier ‘is liable
for damages sustained by a person as a result of an act or omission of that carrier or
broker in violation [of the regulations].’” 622 F.3d 1307, 1325 (11th Cir. 2010) (citing
49 U.S.C. § 14704(a)(2). The Court interprets 49 U.S.C. § 14704(a)(2) to confer upon
TILA plaintiffs a pleading requirement to plausibly allege that they were injured, i.e.
they were financially harmed, because of defendants’ failures to adhere to the TILA
regulations.
17
The only allegations that plausibly link real damages—financial harm—to the
alleged acts of Defendant Risinger are those concerning the underpayment for miles
driven. Plaintiffs allege that the OAs state that Plaintiffs would be paid a flat mileage
rate “for all loaded and dispatched empty miles operated under [Defendant Risinger]
dispatch (as specifically directed or authorized by [Defendant Risinger] based on
[Defendant Risinger’s] most current . . . version of Rand McNally computerized
mileage guide…”, but does not inform the driver that Defendant Risinger’s Rand
McNally computerized mileage guide has different settings that Defendant Risinger
is able to control, allowing Defendant Risinger to determine Named Plaintiffs and
Class Plaintiffs’ compensation. (Doc. 13 at 29). Defendant Risinger’s version of the
Rand McNally guide consistently yielded smaller distances than a publicly available
mileage calculator that Plaintiffs have used. For example, on one occasion, Plaintiff
Derolf hauled a load from Harvey, IL to Allen Park, MI. Defendant Risinger
calculated the distance to be 253 miles, whereas the publicly available Rand McNally
guide calculated the distance to be 259.8 miles. Risinger’s use of the smaller number
multiplied by the flat rate yielded less compensation remunerated to Plaintiff Derolf
than what she was actually entitled. Plaintiffs allege that this scenario played out
with the Named Plaintiffs for many of their hauls, as well as those of other drivers
similarly situated to them. Clearly then, these allegations set out a plausible scenario
in which the Plaintiffs, and others similarly situated, are being systematically
undercompensated due to the smaller distance inputs.
However, the cause of this under-compensation is not attributable to any
alleged deficiency in the transparency of the lease terms, but rather to the alleged
18
inputting of incorrect distance amounts into the compensation calculation. The lease
unambiguously states that compensation will be calculated based on Risinger’s most
current version of the Rand McNally computerized mileage guide. (E.g., Doc. 23-1 at
34 (emphasis added)). It says nothing about utilizing the publicly available Rand
McNally mileage calculator. Nor does the Amended Complaint allege that Risinger
failed to use its most current version of the Rand McNally computerized mileage
guide in deciding what distances to use. If anything then, as pled in the Amended
Complaint this under-compensation is the result of Risinger’s breach of a duty of good
faith and fair dealing attributable to all parties to all contracts, see, e.g., Chartrand
Equipment Co. v. Admiral Ins. Co., 609 F.Supp. 810 (S.D.Ill. 1985), not from alleged
violations of TILA in respect to ambiguous or absent lease terms. These claims are
dismissed for failing to set out plausible claims that the Plaintiffs or others were
harmed due to the alleged TILA violations.
CONCLUSION
For the foregoing reasons, Defendants’ Motion To Dismiss The Amended
Complaint Pursuant To Federal Rule Of Civil Procedure 12(B)(6) (Doc. 22) is
GRANTED in part and Plaintiff’s federal claims are dismissed. Although the Court
is skeptical that Plaintiffs will be able to plead viable federal claims under the
theories presented, the Court will nonetheless allow Plaintiffs to move the Court for
leave to file an amended complaint within twenty-one (21) days. An amended
complaint shall be attached to the motion as an exhibit. Defendants shall have an
opportunity to respond and the Court will assess whether the amended complaint
will be allowed or whether such amendment would be futile.
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Jurisdiction over this matter was invoked by the Court’s federal-question
jurisdiction under 28 U.S.C. § 1331 and its supplemental jurisdiction over the state
law claims under 28 U.S.C. § 1367. Having disposed of the federal claims, the Court
hereby declines to exercise supplemental jurisdiction over the remaining state law
claims and therefore passes no judgment on their viability. If Plaintiff fails to file for
leave to file an amended complaint in the time allotted, the federal claims will be
dismissed with prejudice and the action terminated. SO ORDERED.
Entered this 21st day of April, 2017.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge
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