LUPIAN et al v. JOSEPH CORY HOLDINGS LLC

Filing 36

OPINION. Signed by Judge William J. Martini on 3/7/17. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALEJANDRO LUPIAN, JUAN LUPIAN,
JOSE REYES, EFFRAIN LUCATERO,
ISAIAS LUNA,
Plaintiffs,

Civ. No. 2:16-05172

OPINION

v.
JOSEPH CORY HOLDINGS, LLC,
Defendant.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiffs Alejandro Lupian, Juan Lupian, Jose Reyes, Effrain Lucatero and Isaias
Luna (collectively “Plaintiffs”) bring this class action against Joseph Cory Holdings, LLC
(“Defendant”), alleging violations of Illinois and New Jersey wage laws and unjust
enrichment, in connection with Plaintiffs’ independent contractor agreements with
Defendant. This matter comes before the Court on Defendant’s motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6). There was no oral argument. Fed. R. Civ. P.
78(b). For the reasons set forth below, Defendant’s motion to dismiss is GRANTED, in
part, and, DENIED, in part.
I.

BACKGROUND

Defendant is a New Jersey motor carrier corporation that provides delivery services
for retail companies throughout the United States, delivering appliances, furniture and
other goods to the retail companies’ customers. See Compl. ¶¶ 9, 13. Plaintiffs are Illinois
residents who performed services for Defendant as delivery drivers at various times
between the years 2000 and 2016. See id. at ¶¶ 3–8. At all times, Defendant engaged
Plaintiffs as independent contractors pursuant to a contract executed by the parties. See id.
at ¶ 15; Def.’s Mem. in Supp. of Its Mot. to Dismiss (“Def.’s Mem.”) 1, n.1, ECF No. 8.
Defendant engages independent contractor delivery drivers under two types of
agreements. Where the driver transports property under Defendant’s motor carrier
authority, the parties execute a Transportation Service Agreement (“TSA”). See Def.’s
Mem., Ex. 2. Where the driver transported property under its own motor carrier authority,
the parties execute a Dedicated Contract Carrier Agreement (“DCCA”). See id., Ex. 1.
Both the TSA and DCCA contain forum selection and choice-of-law clauses, which
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provide that all disputes between the parties shall be adjudicated in the State of New Jersey
and under New Jersey law. See id. Ex. 1 at ¶ 28; Ex. 2 at ¶¶ 31–32. Plaintiffs operated
under a DCCA. See Compl. at ¶¶ 11, 15.
Plaintiffs bring a class action complaint (the “Complaint”) on behalf of themselves
and all similarly situated persons who provided delivery services to Defendant, either as
an individual or through a business entity, in the State of Illinois and throughout the United
States. Id. at ¶ 26. Plaintiffs allege violations of Illinois and New Jersey wage laws and
claims that Defendant was unjustly enriched. See id. at ¶¶ 33–56.
Defendant now moves to dismiss the Complaint, arguing: (1) the Federal Aviation
Administration Authorization Act (“FAAAA”), 49 U.S.C. § 14501(c), preempts the state
wage law claims, see Def.’s Mem. at 3–9; (2) Plaintiffs lack standing to bring the New
Jersey law claims, see id. at 9–10; and (3) Plaintiffs’ unjust enrichment claim fails because
a contract governs the relationship of the parties, see id. at 11–12. On October 24, 2016,
Plaintiffs filed a response, opposing the motion. See Pls.’ Opp’n to Def.’s Mot. to Dismiss
(“Pls.’ Opp’n”), ECF No. 19. Defendant filed a reply seven days later. See Def.’s Reply
in Supp. of Its Mot. to Dismiss (“Def.’s Reply”), ECF No. 25. Both parties filed notices
of supplemental authority and opposition responses thereto in the intervening period. See
ECF Nos. 28–35.
II.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint, in
whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The
moving party bears the burden of showing that no claim has been stated. Hedges v. United
States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule
12(b)(6), a court must take all allegations in the complaint as true and view them in the
light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump
Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).
Although a complaint need not contain detailed factual allegations, “a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations
must be sufficient to raise a plaintiff’s right to relief above a speculative level, such that it
is “plausible on its face.” See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542
F.3d 59, 64 (3d Cir. 2008). 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly,
550 U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability
requirement’ . . . it asks for more than a sheer possibility.” Id.

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III.

DISCUSSION

Plaintiffs allege that Defendant misclassified them as independent contractors when
they should have been classified as Defendant’s employees under applicable state law. See
Compl. at ¶¶ 2, 16. Plaintiffs also allege the following:
 Count I: Defendant violated the Illinois Wage Payment and Collection Act
(“IWPCA”), 820 Ill. Comp. Stat. 115/9, by making unlawful deductions from
Plaintiffs’ wages, see id. at ¶ 37;
 Count II: Defendant violated the New Jersey Wage Payment Law (“NJWPL”), N.J.
Stat. §§ 34:11-4.2, 24:11-4.4, by failing to pay Plaintiffs wages due and subjecting
them to unlawful wage deductions, see id. at ¶ 44;
 Count III: Defendant violated New Jersey Wage and Hour Law (“NJWHL”), N.J.
Stat. § 34:11-5a(4), by failing to pay Plaintiffs overtime premiums for hours worked
over 40 hours per week, see id. at ¶ 52; and
 Count IV: Defendant was unjustly enriched by classifying Plaintiffs as independent
contractors, which forced Plaintiffs to pay for work-related expenses that should
have been provided by Defendant, see id. at ¶¶ 54–56.
Plaintiffs argue their New Jersey law claims in the alternative to their Illinois law claim.
See id. at ¶ 2. The Court, therefore, must first consider which law applies in the instant
case where the parties agreed to a New Jersey choice-of-law clause in their contracts.1 The
Court will then consider Defendant’s federal preemption argument and Plaintiffs’ unjust
enrichment claim.
A. Choice of Law
“Ordinarily, when parties to a contract have agreed to be governed by the laws of a
particular state, New Jersey courts will uphold the contractual choice if it does not violate
New Jersey’s public policy.” Instructional Sys., Inc. v. Computer Curriculum Corp., 130
N.J. 324, 341 (1992). New Jersey has adopted the Restatement (Second) of Conflicts of
Laws § 187, “which provides that the law of the state chosen by the parties will apply,
unless either: (a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties’ choice, or (b) application
of the law of the chosen state would be contrary to a fundamental policy of a state which
has a materially greater interest than the chosen state in the determination of the particular
issue and which would be the state of the applicable law in the absence of an effective
choice of law by the parties.” See id. at 342. New Jersey clearly has a substantial
relationship to the parties because Defendant is its citizen and the first exception, therefore,
does not apply.
The second exception, however, applies in the instant case. The IWPCA applies to
Illinois employees and Illinois employers. See 820 Ill. Comp. Stat. 115/1. The statute’s
“evident purpose is to protect employees in Illinois from being stiffed by their employers .
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The parties do not contest the forum selection clause. The Court, therefore, will assume its validity. See Jumara v.
State Farm Ins. Co., 55 F.3d 873, 880 (3d Cir. 1995) (“courts normally defer to a plaintiff’s choice of forum”).

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. . .” See Glass v. Kemper Corp., 133 F.3d 999, 1000 (7th Cir. 1998) (citations omitted)
(emphasis original). Courts have interpreted this purpose to mean that Illinois public policy
disallows IWPCA claims brought by out-of-state employees against Illinois employers or
claims by Illinois employees against out-of-state employers. See id.; Khan v. Van Remmen,
Inc., 756 N.E.2d 902, 913 (Ill. App. Ct. 2001).
The extraterritorial application of the NJWPL and NJWHL is less clear; however,
it is well settled that “New Jersey law does not regulate conduct outside the state.” See
D’Agostino v. Johnson & Johnson, Inc., 133 N.J. 516, 539–40 (1993). The few courts that
have considered the issue have all held “that the NJWPL does not apply to employees based
outside of New Jersey.” See Overton v. Sanofi-Aventis U.S., LLC, No. 13-cv-5535, 2014
WL 5410653, at *5–6 (D.N.J. Oct. 23, 2014) (citing multiple cases from various state and
federal courts and finding the reasoning therein persuasive that the NJWPL does not apply
to out-of-state employees) (emphasis original). This Court agrees.
Given the public policy interests against extraterritorial application of both the
Illinois and New Jersey statutes, the Court finds that the IWPCA is the proper statute to
apply in this case where Illinois workers are claiming violations of wage laws in connection
to conduct occurring within Illinois. The Court, therefore, will not enforce the choice-oflaw clauses in the parties’ contracts and instead apply Illinois law. Accordingly, the Court
will GRANT Defendant’s motion with respect to the New Jersey wage law claims and
Counts II and III of the Complaint are DISMISSED with prejudice.
B. Federal Preemption
The IWPCA provides “employees with a cause of action for the timely and complete
payment of earned wages or final compensation, without retaliation from employers,” and
prohibits certain wage deductions unless certain criteria are met. See Costello v. BeavEx,
Inc., 810 F.3d 1045, 1050 (7th Cir. 2016) (internal quotation and citation omitted). The
statute defines “employee” by incorporating a three-prong test, which provides:
As used in this Act, the term “employee” shall include any individual
permitted to work by an employer in an occupation, but shall not include
any individual:
(1) who has been and will continue to be free from control and direction
over the performance of his work, both under his contract of service
with his employer and in fact; and
(2) who performs work which is either outside the usual course of business
or is performed outside all of the places of business of the employer
unless the employer is in the business of contracting with third parties
for the placement of employees; and
(3) who is in an independently established trade, occupation, profession or
business.

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820 Ill. Comp. Stat. 115/2. The failure to meet any one of the three prongs requires that
the individual in question be classified as an employee. See Costello, 810 F.3d at 1050.
Defendant argues that the FAAAA preempts the application of the IWPCA in this
case because: (1) Plaintiffs’ claims concern the transportation of property; (2) Plaintiffs’
claims relate to Defendant’s services as a motor carrier; and (3) Plaintiffs’ claims emanate
from a voluntary contractual undertaking. See Def.’s Mem. at 4–7. Plaintiffs counter that
the IWPCA is not preempted because it does not have a “significant impact” on
Defendant’s prices, routes or services. See Pls.’ Resp. at 8–15. The Court notes that there
appears to be a split between the First Circuit and the Seventh, Ninth and Eleventh Circuits,
concerning the limit of federal preemption over state wage laws. While multiple courts in
this district have considered the matter, the Third Circuit has yet to reach the issue.
i. The FAAAA Preemption Provision and Judicial Interpretations
The FAAAA preemption provision provides, in pertinent part:
[A] State, political subdivision of a State, or political authority of 2 or more
States may not enact or enforce a law, regulation, or other provision having
the force and effect of law related to a price, route, or service of any motor
carrier . . . or any motor private carrier, broker, or freight forwarder with
respect to the transportation of property.
See 49 U.S.C. § 14501(c)(1). The statute expressly provides for three exceptions to federal
preemption: safety regulations (including insurance requirements); intrastate transportation
of household goods; and tow truck operations. See § 14501(c)(2). The statute also
expressly reserves state authority to regulate such areas as uniform cargo rules and antitrust
immunity for agent-van line operations, among other similar concerns. See § 14501(c)(3).
The statute does not address state employment or wage laws.
Congress passed the FAAAA to preempt state trucking regulation and maximize
reliance on competitive market forces in the trucking industry. See Rowe v. N.H. Motor
Transp. Ass’n, 552 U.S. 364, 370–71 (2008). In so doing, it incorporated the preemption
provision found in the Airline Deregulation Act of 1978 (“ADA”), which in turn
incorporated similar preemption language found in the Employee Retirement Income
Security Act of 1974 (“ERISA”). Id.; Morales v. Trans World Airlines, Inc., 504 U.S. 374,
383–84 (1992). The Supreme Court has interpreted all three preemption provisions with
the same understanding: the provisions’ plain meaning expresses a broad preemptive
purpose. See Rowe, 552 U.S. at 370–71; Morales, 504 U.S. at 383–84.
FAAAA preemption is required: (1) when a state enforcement action has a
connection with, or reference to, motor carrier rates, routes or services; (2) even when a
state law’s effect on rates, routes or services is only indirect; (3) regardless of whether a
state law is consistent with federal law; and (4) when a state law has a significant impact
related to Congress’ deregulatory and preemption-related objectives. See Rowe, 552 U.S.
at 370–71 (citing the Morales court’s interpretation of the ADA preemption provision).
Preemption is not unlimited; however, state laws that impact the trucking industry “in only
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a ‘tenuous, remote or peripheral . . . manner’” might not be preempted. See id. at 371
(quoting Morales, 504 U.S. at 390).
The Supreme Court has identified a line between, on the one hand, a state law’s
indirect impact on the airline and trucking industries that warrants preemption and, on the
other hand, a state law’s impact that is too attenuated to warrant preemption. On one side
of that line, the Court found preemption warranted where: a state’s public health law
regulated transporters of tobacco, see Rowe, 552 U.S. at 371–377; where state regulations
restricted airline advertising, see Morales, 504 U.S. at 387–91; where a state consumer
fraud law policed airline marketing practices, see Am. Airlines, Inc. v. Wolens, 513 U.S.
219, 227–28; and where a state common law claim was asserted against the termination of
an airline’s frequent flyer program, see Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422, 1431–
33. On the other side of the that line, the Court has noted examples of state laws that would
not be preempted, such as laws prohibiting gambling and prostitution, zoning regulations,
and public health regulations that prohibit all members of the general public from certain
conduct (e.g., smoking in public places). See Dan’s City Used Cars, Inc. v. Pelkey, 133 S.
Ct. 1769, 1780 (2013); Rowe, 552 U.S. at 375; Morales, 504 U.S. at 390. Preemption was
also unwarranted where a breach-of-contract claim was confined solely to a contract’s
terms, with no state-imposed obligations. See Wolens, 513 U.S. at 228–33. Finally, the
Court found that preemption was unwarranted where a state regulation did not concern the
actual transportation of property but only the storage thereof. See Dan’s City, 133 S. Ct.
at 1778–81. As the First Circuit noted, “[t]hese examples demonstrate both that there is a
limit to the preemptive scope of § 14501(c)(1) and that one must move quite far afield to
confidently reach that limit.” See Schwann v. FedEx Ground Package Sys., Inc., 813 F.3d
429, 436–37 (1st Cir. 2016). Nonetheless, “[e]xactly where the boundary lies between
permissible and impermissible state regulation is not entirely clear.” Id.
The critical question before this Court is: on what side of that line does the IWPCA
fall? In Costello v. BeavEx, Inc., 810 F.3d 1045, the Seventh Circuit addressed precisely
this question as related to a misclassification claim identical to the one before the Court. It
concluded “that the IWPCA’s effect on the cost of labor is too tenuous, remote or peripheral
to have a significant impact on [the motor carrier’s] setting of prices for its consumers.”
Costello, 810 F.3d at 1055. In canvassing other circuit and district court opinions, the
Seventh Circuit reasoned:
[T]here is a relevant distinction for purposes of FAAAA preemption
between generally applicable state laws that affect the carrier’s relationship
with its customers and those that affect the carrier’s relationship with its
workforce. Laws that affect the way a carrier interacts with its customers
fall squarely within the scope of FAAAA preemption. Laws that merely
govern a carrier’s relationship with its workforce, however, are often too
tenuously connected to the carrier’s relationship with its consumers to
warrant preemption. The Supreme Court’s preemption decisions do not
counsel a different conclusion.
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Id. at 1054 (emphasis original). The court considered the impact of the IWPCA on a motor
carrier’s business model, noting that it was “precisely the type of background labor law . .
. that only indirectly affects prices by raising costs.” See id. at 1055. Despite this indirect
affect, however, preemption was unwarranted because “the IWPCA regulates the motor
carrier as an employer,” thereby making the effect on prices too tenuous. See id. The
Ninth and Eleventh Circuits have employed similar reasoning in upholding state
employment laws over FAAAA and ADA preemption. See Amerijet Int’l, Inc. v. MiamiDade Cnty., Fla., 627 F. App’x 744, 750–51 (11th Cir. 2015) (holding that a municipality’s
living wage ordinance did not warrant ADA preemption); Dilts v. Penske Logistics, Inc.,
769 F.3d 637, 646–50 (9th Cir. 2014) (holding that state meal and rest break laws did not
warrant FAAAA preemption). District courts in this district have also employed similar
reasoning in holding that the FAAAA does not preempt state wage laws. See Portillo v.
Nat’l Freight, Inc., No. 15-cv-7908, 2016 WL 5402215, at *5–6 (D.N.J. Sept. 26, 2016);
Echavarria v. Williams Sonoma, Inc., No. 15-cv-6441, 2016 WL 1047225, at *8–9 (D.N.J.
Mar. 16, 2016).
In Schwann v. FedEx Ground Package Sys., Inc., 813 F.3d 429, the First Circuit
reasoned differently.2 The Schwann court held that the second prong of the Massachusetts
employee test, which requires that “the service is performed outside the usual course of
business of the employer,” was preempted by the FAAAA because the “logical effect” of
this requirement would interfere with Congress’s deregulatory objective. See 813 F.3d at
437–40. Specifically, the Schwann court found that the “decision whether to provide a
service directly, with one’s own employee, or to procure the services of an independent
contractor is a significant decision in designing and running a business” that “implicates
the way in which a company chooses to allocate its resources and incentivize those persons
providing the service.” See id. at 438. Thus, the second prong “requires a court to define
the degree of integration that a company may employ by mandating that any services
deemed ‘usual’ to its course of business be performed by an employee.” See id. The logical
effect of the second prong would, therefore, “preclude [defendant] from providing . . .
delivery services through an independent person who bears the economic risk associated
with any inefficiencies in performance.” See id. at 439.
ii. The IWPCA’s Effect on Motor Carriers Does Not Warrant
Preemption
This Court is persuaded by the Seventh Circuit’s reasoning. “The IWPCA is a law
that regulates a labor input and ‘operate[s] one or more steps away from the moment at
which the firm offers its customers a service for a particular price.” See Costello, 810 F.
3d at 1055 (quoting S.C. Johnson & Son, Inc. v. Transp. Corp. of Am., Inc., 697 F. 3d 544,
558 (7th Cir. 2012) (emphasis added)). “In other words, the IWPCA regulates the motor

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Shortly after deciding Schwann, the First Circuit applied the same reasoning to a case involving same-day delivery
companies, such as Defendant, in holding that the second prong was preempted by the FAAAA. See Mass. Delivery
Ass’n v. Healey, 821 F.3d 187, 193 (1st Cir. 2016).

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carrier as an employer, and any indirect effect on prices is too tenuous, remote or
peripheral” to warrant preemption. See id. (emphasis original) (citation omitted).
Furthermore, the IWPCA’s prohibition on wage deductions “can be contracted
around by ‘express written consent of the employee, given freely at the time the deduction
is made.’” See id. at 1057 (quoting 820 Ill. Comp. Stat. 115/9). Under the IWPCA,
Defendant has the option “to stop making deductions or absorb the transaction costs of
acquiring consent.” See id. This flexibility mirrors that of the state common laws at issue
in Northwest, which the Supreme Court found were not preempted because the defendant
was permitted to contract around them. See Northwest, 134 S. Ct. at 1433. Defendant has
not shown at this stage that the costs of acquiring consent would have a significant impact
on Defendants’ prices, routes or services. Perhaps facts will emerge during discovery that
will show otherwise; however, the Court finds that the IWPCA is not federally preempted
on its face because the law regulates Defendant’s relationship with its employees and not
its relationship with its customers. See Costello, 810 F. 3d at 1055–56. Accordingly,
Defendant’s motion is DENIED with respect to Count I.
C. Unjust Enrichment
Under Illinois law, “where there is a specific contract which governs the relationship
of the parties, the doctrine of unjust enrichment has no application.” La Throp v. Bell Fed.
Sav. & Loan Ass’n, 370 N.E.2d 188, 195 (Ill. 1977). Here, Plaintiffs acknowledge that
they operated as delivery drivers under agreements executed by both parties. See Compl.
at ¶¶ 11, 15. Plaintiffs’ unjust enrichment claim is, therefore, barred under Illinois law.
Accordingly, Defendant’s motion is GRANTED with respect to Plaintiffs’ unjust
enrichment claim and Count IV is DISMISSED with prejudice.
IV.

CONCLUSION

For the reasons stated above, Defendants’ motion to dismiss is GRANTED with
respect to the claims concerning the NJWPL, the NJWHL and unjust enrichment.
Accordingly, Counts II, III and IV are DISMISSED WITH PREJUDICE. Defendant’s
motion with respect to the IWPCA claim under Count I is DENIED. An appropriate order
follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: March 7, 2017

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