REYES v. XPO LOGISTICS, INC.

Filing 23

MEMORANDUM OPINION. SIGNED BY HONORABLE JEFFREY L. SCHMEHL ON 7/28/16. 7/29/16 ENTERED AND COPIES E-MAILED.(er, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

VICTOR REYES
v.
XPO LAST MILE, INC.

: CIVIL ACTION
:
: NO. 15-2972
:
:

MEMORANDUM OPINION
SCHMEHL, J.

/s/ JLS

JULY 28, 2016

This proposed class action was originally filed by plaintiff in the Court of Common
Pleas of Philadelphia County, then removed by defendant to this court on the basis of
diversity of citizenship and on the basis that it meets certain requirements for a federal
class action under 28 U.S.C. § 1332(d). Plaintiff claims that the defendant violated the
Pennsylvania Wage Payment and Collection Law (“WPCL”), 43 Pa. Cons. Stat. Ann. §§
260.1, et seq., by making unauthorized deductions from the pay of plaintiff and other
putative class members. Presently before the Court is the motion of the defendant for
judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil
Procedure. Because resolution of the motion requires the Court to consider materials
outside the scope of the pleadings, the Court will treat the motion as a motion for partial
summary judgment. For the reasons that follow, the motion is granted.
Summary judgment is appropriate if there is no genuine dispute as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(a). “A motion for summary judgment will not be defeated by ‘the mere
existence’ of some disputed facts, but will be denied when there is a genuine issue of
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material fact.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir.
2009)(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248 (1986)). A fact is
“material” if proof of its existence or non-existence might affect the outcome of the
litigation, and a dispute is “genuine” if “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.
In undertaking this analysis, the court views the facts in the light most favorable
to the non-moving party. “After making all reasonable inferences in the nonmoving
party’s favor, there is a genuine issue of material fact if a reasonable jury could find for
the nonmoving party.” Pignataro v. Port Auth. of N.Y. and N.J., 593 F.3d 265, 268 (3d
Cir. 2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)).
While the moving party bears the initial burden of showing the absence of a genuine
issue of material fact, meeting this obligation shifts the burden to the non-moving party
who must “set forth specific facts showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 250.
In a Declaration in support of defendant’s motion, Duane A. Duenkel, Jr. avers
that he is the Vice President of Field Support Services at defendant XPO Last Mile, Inc.
(“XPO”). (ECF 16-2 ¶ 1.) According to the Declaration, XPO is a “federally authorized
freight forwarder and full service logistics solutions company that operates under
interstate authority issued by the Federal Motor Carrier Safety Administration
(“FMCSA”).” (Id. ¶ 2.) “As part of its freight forwarding operations, XPO arranges for the
delivery and set up of retail customer’s products by contracting with federally authorized
motor carriers (“Contract Carriers”) to perform transportation and delivery services for its
customers. XPO is not authorized or licensed to provide the motor carrier services

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provided by the Contract Carriers.” (Id. ¶ 4.) “XPO enters into a Delivery Service
Agreement (“DSA”) with each Contract Carrier. Since April 20, 2012, XPO has
contracted with 117 Contract Carrier companies, including 76 limited liability companies,
28 business corporations, 12 sole proprietors, and one partnership. For services
performed under the DSA, XPO makes payments directly to these Contract Carrier
companies through their Federal Identification Numbers. To the extent XPO offsets any
payments to Contract Carriers, the amounts would appear in the settlement payments
to the Contract Carriers. XPO does not take deductions from or make payments to any
individual. All payments to Contract Carriers are made to a federal identification
number.” (Id. ¶ 5.) In August 2013, XPO acquired 3PD Holding, Inc. (“3PD”). (ECF 1 ¶
6.)
It is undisputed that each Contract Carrier entered into an agreement with XPO
to provide delivery services. Each Contract Carrier’s agreement states that the Contract
Carrier is entering into an independent contractor relationship with XPO. (ECF 16-3 §
4.1.) (“XPO Last Mile and Contract Carrier intend that this Agreement is strictly between
two independent entities and does not create an employer/employee relationship for
any purpose.”). Under their agreements, each Contract Carrier is responsible for paying
“all contributions, taxes …required to be paid by an employer in accordance with all
applicable state unemployment insurance, disability benefits and withholding tax laws
…” (Id. § 4.4.) Contract Carriers also have discretion over the management of their
delivery operations, including “hours of work, what route. . .to follow, [and] other details
of service,” (id. § 4.2), hiring, firing and managing their workers, (id. 4.5) and the means
of ensuring that deliveries are completed in accordance with the requirements imposed

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by the retail store customers. (Id. § 4.2.) (“[T]he ultimate determination regarding the
methods by which the purposes of this Agreement are to be accomplished is entirely
committed to Contract Carrier.”)
Plaintiff defines the proposed class as consisting of “all Pennsylvania residents
who, during any time within the past three years [April 20, 2012 through April 20, 2015],
(i) delivered, assembled, and/or installed items at end-consumers’ homes or businesses
and (ii) were paid directly by XPO (including 3PD) in either their individual capacities or
through personal corporate entities.” (ECF 1 ¶ 12.) Plaintiff alleges that during the
relevant three year period, XPO(including 3PD) employed at least 50 individuals in
Pennsylvania who delivered items to end-consumers’ homes or businesses and
assembled/installed the items at the end-consumer’s homes or business [Installers”].”
(Id. ¶ 7.) Plaintiff alleges that he was employed by 3PD as an Installer from
approximately October 2008 until approximately October 2013. (Id. ¶ 8.) Plaintiff alleges
that the unlawful deductions XPO subjected plaintiffs to include, inter alia, “insurance
premiums, damage to end-consumers’ homes and businesses, loan repayments, truck
leases, service fees, settlement fees, administration fees, and driver qualification
fees.”(Id. ¶ 9.)
“The WPCL `does not create an employee’s substantive right to compensation;
rather it only establishes an employee’s right to enforce payment of wages and
compensation to which an employee is otherwise entitled by the terms of an
agreement.’” Hartman v. Baker, 766 A. 2d 347, 352 (Pa. Super. 2000)(quoting Banks
Eng’g Co., Inc. v. Polona, 697 A. 2d 1020, 1024 (Pa. Super. Ct. 1997)). The WPCL
“provides employees a statutory remedy to recover wages and other benefits that are

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contractually due to them.” Oberneder v. Link Computer Corp., 696 A. 2d 148, 150 (Pa.
1997).
In its motion, XPO seeks to exclude from the putative class all business
corporations, limited liability companies and partnerships which contracted with XPO,
and all individuals who were paid through those corporate entities. This amounts to
excluding the claims of 105 of the 117 putative class members. Defendant does not at
this time seek to exclude the claims of the 12 putative class members, including those
of plaintiff, who signed DSAs as sole proprietors.
We begin with the individuals who were paid through corporate entities. XPO
argues that these individuals must be excluded because they were not parties to any
employment contract with XPO to which WPCL-protected wages are due.
Judge Berle M. Schiller of this Court has recently concluded that “the current
state of the case law requires a contractual obligation to compensation to state a WPCL
claim.” Drummond v. Herr Foods, Inc., Civ. A. No. 13-5991, 2014 WL 80729 at *3 (E.D.
Pa. Jan. 9, 2014) (citing DeAsencio v . Tyson Foods, Inc., 342 F. 3d 301, 309 (3d Cir.
2003); Scott v. Bimbo Bakeries, USA Inc., Civ. A. No. 10-3154, 2012 WL 645905 (E.D.
Pa. Feb. 29, 2012; Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 954 (Pa. Super. 2011)
( “[A]bsent a formal employment contract or collective bargaining agreement, an
employee raising a WPCL claim would have to establish, at a minimum, an implied oral
contract between the employee and employer.”)) Indeed, Judge Harvey Bartle III of this
Court has even more recently come to the same conclusion. See Gordon v. Maxim
Healthcare Services, 2014 WL 3438007 (E.D. Pa. July 15, 2014).

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Here, there is no contractual obligation either written or oral for wages between
the individual plaintiffs and XPO. Rather, any contractual obligation for wages is
between the individual plaintiffs and numerous corporate entities. Therefore, the
individual plaintiffs lack standing to bring a claim against XPO under the WPCL.
Plaintiff admits that the corporate entities that contracted with XPO cannot bring
suit against XPO under the WPCL because they do not qualify as “employees” of XPO.
See Frank Burns, Inc. v. Interdigital Communications Corp., 704 A.2d 678, 680-81 (Pa.
Super. 1997) (“a corporation cannot qualify as an employee for purposes of the
WPCL.”)
Plaintiff contends, however, that he, as a natural person, can bring claims against
XPO under the WPCL based on the fact that he was paid through a corporate entity that
contracted with XPO.
Judge Robert F. Kelly of this Court rejected a similar argument by the plaintiff in
Little v. USSC Group, Inc., 404 F. Supp. 2d 849 (E.D. Pa. 2005). Little, like many of the
putative plaintiffs here, created a corporate entity (LTS) at USSC’s request that
contracted with USSC. The Court found that having done so, Little could not ignore that
corporate entity’s existence. Specifically, the Court stated:
Regardless of how he viewed himself or how he was viewed by USSC,
Little was not a party to the . . .Agreement between LTS and USSC . . .
Although Little viewed LTS as a corporate entity of himself, by receiving
the protections of the corporate entity, he created an intermediary
between himself and USSC . . .By creating a corporate entity to
accommodate USSC’s request, Little also created a corporate entity that
contracted with USSC. Little cannot now ignore that corporate entity’s
existence. Little is not a party to the Agreement between LTS and USSC.
He, therefore, cannot claim a violation of the Pennsylvania WPCL.

404 F.Supp. 2d 849, 853-54 (E.D. Pa. 2005).
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Likewise, the plaintiffs that formed corporations, limited liability companies and
partnerships which contracted with XPO and paid the individuals through the corporate
entity cannot ignore that corporate entity’s existence and assert a claim directly against
XPO.
Finally, plaintiff argues that discovery is necessary to determine whether the
individuals who signed DSAs on behalf of corporations actually signed in their personal
capacities. It is well-established that a natural person who signs a contract on behalf of
a corporation is not personally bound by the contract’s terms. See, e.g. Accurso v. InfraRed Servs. Inc., 23 F.Supp. 3d 494, 506 (E.D. Pa. 2014) (corporate officer who signed
as company representative was not personally bound as a contracting party). Here, the
sample DSA submitted by XPO expressly states on the signature block that the
signatory is signing on behalf of the companies he represents. (ECF 16-3 at 13.) There
is absolutely no mention of any personal responsibility. Nevertheless, out of an
abundance of caution, the Court will direct XPO to turn over to plaintiff for inspection all
117 Contract Carrier Agreements so that plaintiff can make sure that no such individual
signed an agreement with XPO in their personal capacity which could lead to a cause of
action.

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