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

Filing 51

Judge Richard G. Stearns: ORDER entered granting in part and denying in part (35) Motion to Dismiss in case 1:15-cv-10010-RGS; granting in part and denying in part (20) Motion to Dismiss in case 1:15-cv-13019-RGS. "For the foregoing reasons, J.B. Hunt's motion to dismiss is ALLOWED IN PART (with respect to Remington's allegations of improper deductions), and otherwise DENIED. The parties will make a joint submission to the court, no later than September 30, 2016 , stating whether they intend, by agreement, to proceed to an appellate review of this court's decision, or to begin discovery (and if so, the parties will include a joint proposed pretrial schedule)." Associated Cases: 1:15-cv-10010-RGS, 1:15-cv-13019-RGS(RGS, int2)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 15-10010-RGS
WILLIAM REMINGTON and MUSAN DURAKOVIC,
on behalf of themselves and others similarly situated
v.
J.B. HUNT TRANSPORT, INC.
--CIVIL ACTION NO. 15-13019-RGS
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
September 16, 2016
Stearns, D.J.
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 drivers1 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

The term owner-operator driver derives from the fact that Remington
and Durakovic lease the trucks that they drive to J.B. Hunt. For a history of
the owner-operator business model, see Douglas C. Grawe, Have Truck, Will
Drive: The Trucking Industry and the Use of Independent OwnerOperators over Time, 35 Transp. L.J. 115 (2008).
1

Under section 148B, a worker is properly classified as an independent
contractor if the employer can show that:
2

(1) the individual is free from control and direction in connection
with the performance of the service, both under his contract for
the performance of service and in fact; and
(2) the service is performed outside the usual course of the
business of the employer; and,
(3) the individual is customarily engaged in an independently
established trade, occupation, profession or business of the same
nature as that involved in the service performed.
Id.
2

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
3

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
4

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).

3 Silfani also makes an alternative equitable claim of unjust enrichment

against J.B. Hunt (Silfani Count III).
5

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

The parties in Remington and Silfani are represented by the same
attorneys.
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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
7

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 explanation and itemization must be
delivered to the lessor before any deductions are made.
49 C.F.R. § 376.12(j)(3). The regulations finally permit the carrier to hold in
escrow funds or require a performance bond of the lessor and to make
specified deductions for obligations incurred by the lessor. See 49 C.F.R. §
376.12(k).

“The lease shall clearly specify the legal obligation of the authorized
carrier to maintain insurance coverage for the protection of the public
pursuant to FMCSA regulations under 49 U.S.C. [§] 13906.” Id.
5

“The lease shall further specify who is responsible for providing any
other insurance coverage for the operation of the leased equipment, such as
bobtail insurance. If the authorized carrier will make a charge back to the
lessor for any of this insurance, the lease shall specify the amount which will
be charged-back to the lessor.” Id.
8
6

Plaintiffs’ leases7 with J.B. Hunt, consistent with the Truth-in-Leasing
regulations, authorized J.B. Hunt to make the contested deductions. With
respect to operational expenses,
Contractor [(plaintiffs)] shall bear the [costs] incurred in
performing the transportation services requested by Carrier
under this lease agreement. Those expenses are limited to: all
fuel, oil, tires and equipment, accessories, or devices used in
connection with the operation of the equipment; maintenance
costs including repairs; taxes and assessments, fuel and fuel use
taxes; fines and penalties resulting solely from the acts or
omissions of Contractor and its employees; insurance costs
relating to insurance coverage required to comply with this
agreement; federal highway use tax on the equipment, federal,
provincial, state or city income taxes, and any self-employment
or payroll taxes; and any sales, use, excise and other taxes due
and owing to ownership or operation of the equipment.
Contractor shall also bear any expenses necessary to maintain
the equipment in compliance with all applicable federal and state
safety laws and regulations.
Silfani Lease ¶ 12(c). With respect to insurance,
[c]arrier [(J.B. Hunt)] will provide primary insurance for the
protection of the public pursuant to USDOT regulations
A copy of Silfani’s lease with J.B. Hunt was submitted as an exhibit to
J.B. Hunt’s initial motion to dismiss in that case. See Dkt. #7-1 (Silfani
Lease). On a motion to dismiss, the court may consider “documents the
authenticity of which are not disputed by the parties; [] official public
records; [] documents central to plaintiffs’ claim; or [] documents sufficiently
referred to in the complaint.” Alt. Energy, Inc. v. St. Paul Fire & Marine Ins.
Co., 267 F.3d 30, 33 (1st Cir. 2001) (citation omitted). As Silfani alleges a
claim for breach of contract, the contract is integral to the claim. The court
has no reason to believe that Remington and Durakovic’s contracts with J.B.
Hunt materially differ from Silfani’s.
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presently found under 49 U.S.C. [§] 13906. Non-Trucking
“Bobtail” insurance must be provided by Contractor in the
amount of $1,000,000 per occurrence and Carrier will be
provided with a suitable certificate of insurance naming Carrier
as additional insured. If Contractor desires to purchase
insurance through Carrier's insurance agent, Contractor will so
signify by signing Appendix C of this Agreement and will
authorize a deduction from compensation in the amount shown
thereon. Carrier will provide Contractor with a copy of any policy
for which a deduction is agreed to upon request.
Id. ¶ 13. Plaintiffs consented to indemnify J.B. Hunt for shortage, loss, and
cargo damage.
If there is any loss, shortage or damage of the freight when in
Contractor’s possession, Contractor shall indemnify Carrier as
specified in Paragraph 20 of this Agreement. In the event of any
such claim, Carrier will deliver to Contractor a written
explanation and itemization of any deductions for cargo or
property damage made from Contractor’s compensation prior to
taking such deduction from Contractor’s compensation.
Id. ¶ 16. Plaintiffs also agreed to provide J.B. Hunt with escrow funds set at
a minimum of $1,500, id. ¶ 24(a), and acknowledged that J.B. Hunt could
use the funds to offset advances made to the plaintiffs for cost incurred
because of losses or damage to cargo. See id. ¶¶ 24(b), 22-23.
It is clear from the lease documents that plaintiffs’ claim of improper
business expense deductions under the Massachusetts Independent
Contractor Statute and Wage Act conflicts with the provisions of the Truthin-Leasing regulations.

10

[A] direct, facial contradiction between state and federal law is
not necessary to catalyze an ‘actual[] conflict’ within the doctrinal
parameters of the Supremacy Clause . . . [as] a state law or
regulation cannot take root if it looms as an obstacle to the
achievement of the full purposes and ends which Congress has
itself set out to accomplish.
KKW Enters., Inc. v. Gloria Jean’s Gourmet Coffees Franchising Corp., 184
F.3d 42, 49 (1st Cir. 1999) (citation omitted, ellipses in KKW). What is
explicitly permitted by federal regulations cannot be forbidden by state law.
A good illustration is Verizon New England, Inc. v. Maine Pub. Utils.
Comm’n, 509 F.3d 1 (1st Cir. 2007). In that case, the First Circuit held that
a state law requiring telephone carriers to charge lower rates in some
circumstances was preempted by a Federal Communications Commission
order permitting the carrier to charge potentially higher rates. Id. at 9. In
Rodriguez v. RWA Trucking Co., Inc., 219 Cal. App. 4th 692 (2013), as
modified (Sept. 20, 2013), publication ordered sub nom. Rodriguez v. RWA
Trucking Co., 352 P.3d 881 (Cal. 2015), the California Court of Appeals
similarly held that a California state insurance law that prohibited the charge
back of insurance costs to truck drivers was preempted by the Truth-inLeasing regulations.
[W]e conclude that if state insurance laws prohibit RWA from
charging back its liability insurance costs to its drivers, those
laws are preempted by 49 C.F.R. section 376.12. As we have said,
49 C.F.R. section 376.12 permits motor carriers to charge back
liability insurance costs to its drivers, so long as the amounts of
11

those chargebacks are clearly specified. In contrast, if California
insurance law is interpreted as plaintiffs suggest, it would forbid
such chargebacks unless the motor carriers were licensed to sell
insurance. Thus, under plaintiffs’ interpretation of California
law, it would prohibit precisely the kind of chargebacks that
federal law permits.
Id., 219 Cal. App. 4th at 710.
If the Massachusetts Independent Contractor Statute and Wage Act
were to be interpreted to require a carrier, such as J.B. Hunt, to bear the
entirety of the expense associated with an equipment lease,8 these state laws
would be preempted to this extent by the Truth-in-Leasing regulations.
While the regulations require the carrier to obtain insurance for the
protection of the public, it is for the leasing parties to decide how other
business expenses (and rewards) associated with a lease are to be allocated.
State law cannot dictate contract terms when federal law provides the
freedom to negotiate.
The court disagrees with J.B. Hunt, however, in its broader contention
that the Truth-in-Leasing regulations occupy the entire field of owner
operator compensation. Contrary to J.B. Hunt’s suggestion, the regulations
use the term “compensation” narrowly to mean “the amount to be paid.”

J.B. Hunt suggests in its papers that if state law was to relieve a truck
owner of the burden of bearing any of the expenses associated with
ownership, there would be no economic incentive for a carrier to enter into
a lease agreement with an owner-operator driver.
12
8

The amount to be paid by the authorized carrier for equipment
and driver’s services shall be clearly stated on the face of the lease
or in an addendum which is attached to the lease. . . . The amount
to be paid may be expressed as a percentage of gross revenue, a
flat rate per mile, a variable rate depending on the direction
traveled or the type of commodity transported, or by any other
method of compensation mutually agreed upon by the parties to
the lease.
49 C.F.R. § 376.12 (d) (emphasis added). The regulations are silent, however,
with respect to potential employment benefits that are not typically an
“amount to be paid,” such as accrued vacation or sick leave.
Moreover, the regulations are explicitly agnostic on the issue of the
carrier-driver relationship.

“Nothing in the provisions required by

paragraph (c)(1) of this section is intended to affect whether the lessor or
driver provided by the lessor is an independent contractor or an employee of
the authorized carrier lessee.” 49 C.F.R. § 376.12(c)(4). Prior to the insertion
of subsection (c)(4) in § 376.12 in 1992, some courts applied a “logo liability
rule” in interpreting the Truth-in-Leasing regulations concerning leased
equipment to imply an employment relationship with owner-operator
drivers as a matter of law as a matter of law. See, e.g., Rodriguez v. Ager,
705 F.2d 1229, 1231-1236 (10th Cir. 1983).

13

The Interstate Commerce

Commission (ICC), the federal agency that had promulgated9 the
regulations, disagreed.
As noted by the comments, certain courts have relied on
Commission regulations in holding carriers liable for the acts of
equipment owners who continue to display the carrier’s
identification on equipment after termination of the lease
contract. We prefer that courts decide suits of this nature by
applying the ordinary principles of State tort, contract, and
agency law. The Commission did not intend that its leasing
regulations would supersede otherwise applicable principles of
State tort, contract, and agency law and create carrier liability
where none would otherwise exist. Our regulations should have
no bearing on this subject. Application of State law will produce
appropriate results.
Lease & Interchange of Vehicles (Identification Devices) (49 C.F.R. Part
1057), 3 I.C.C.2d 92, 93 (I.C.C. Oct. 10, 1986).
In 1992, in response to a petition by the American Trucking
Association, Inc., and the Interstate Truckload Carriers Conference, the ICC
codified its position in subsection (c)(4) with the following explanation.
While most courts have correctly interpreted the appropriate
scope of the control regulation and have held that the type of
control required by the regulation does not affect “employment”
status, it has been shown here that some courts and State
The ICC Termination Act of 1995, Pub. L. 104-88, 109 Stat. 803,
“eliminated unnecessary ICC regulatory functions and transferred residual
functions partly to the Surface Transportation Board within the DOT and
partly to the Secretary of Transportation. . . . [A]ll rules legally enacted by the
ICC that are not based upon repealed law or were not substantially reenacted
by the ICCTA remain[ed] in effect.” Thomas v. Johnson Agri-Trucking, 802
F. Supp. 2d 1242, 1246 n.14 (D. Kan. 2011).
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workers’ compensation and employment agencies have relied on
our current control regulation and have held the language to be
prima facie evidence of an employer-employee relationship.
These State agencies often find that the current regulation
evidences the type of control that is indicative of an employeremployee relationship.
We conclude that adopting the proposed amendment will
reinforce our view of the neutral effect of the control regulation
and place our stated view squarely before any court or agency
asked to interpret the regulation’s impact. The proposed
amendment should eliminate the need for such tribunals to
undertake any lengthy legal analysis of the control regulation and
lessen the likelihood that they will reach the wrong conclusions.
By presenting a clear statement of the neutrality of the
regulation, we hope to bring a halt to erroneous assertions about
the effect and intent of the control regulation, saving both the
factfinders and the carriers time and expense.
Petition to Amend Lease & Interchange of Vehicle Regulations, 8 I.C.C.2d
669, 671 (I.C.C. June 29, 1992). Given this unequivocal disclaimer, the court
cannot conclude that the Truth-in-Leasing regulations occupy the entire field
of owner-operator compensation.10

The court does not decide at this time whether the FAAAA preempts
the application of the remaining first and third prongs of the Massachusetts
Independent Contractor Statute to an interstate carrier such as J.B. Hunt.
Like FedEx, J.B. Hunt has not made this argument. The court notes,
however, that several sessions of the Superior Court have “rejected [the]
premise [that defendant may be liable solely under the first and third prongs
of section 148B] where it was evident that the effects of all three prongs
would have a significant impact on the routes, prices, and services of the
motor carrier.” Rice v. Diversified Specialty Pharm., LLC, 2016 WL
4060956, at *5 (Mass. Super. July 26, 2016), citing Chambers v. RDI
Logistics, Inc., 2015 WL 9911425, at *12-14 (Mass. Super. Oct. 26, 2015)
(finding that an application of section 148B would have a significant impact
15
10

ORDER
For the foregoing reasons, J.B. Hunt’s motion to dismiss is ALLOWED
IN PART (with respect to Remington’s allegations of improper deductions),
and otherwise DENIED.11 The parties will make a joint submission to the
court, no later than September 30, 2016, stating whether they intend, by
agreement, to proceed to an appellate review of this court’s decision, or to
begin discovery (and if so, the parties will include a joint proposed pretrial
schedule).
/s/ Richard G. Stearns
__________________________
UNITED STATES DISTRICT JUDGE

on the prices, routes, and services of a carrier, and is thus preempted by the
FAAAA).
J.B. Hunt does not argue that Silfani’s breach of contract claim is
preempted. J.B. Hunt contends, however, that Silfani’s exclusive remedy is
under 49 U.S.C. § 14702(a)(2) (which creates a private cause of action for
violations of the Truth-in-Leasing regulations). Silfani, however, does not
allege that J.B. Hunt’s lease contravenes any provision of the regulations, but
rather, that J.B. Hunt did not make the payments that it promised in the
lease. This is properly a claim for breach of contract.
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11