United States District Court, N.D. Illinois, Eastern Division.

Carlos G. Rocha and Arize 11, Inc., Plaintiffs,

v.

FedEx Corporation, a Delaware corporation, Fed Ex Ground Package System, Inc., a Delaware Corporation, FedEx Home Delivery, a division of FedEx Ground Package System, Inc. doing business in Illinois, Daniel J. Sullivan, Roger G. Marticke, Clifford P. Johnson, David F. Rebholz, William G. Margaritis, Scott Ray, Nathan Watts, Ralph Stephens, RJC 80 Inc., and Does 1–60, Defendants.

 

No. 12 C 8666

1:12–cv–08666Filed January 17, 2014

 

Lisa D. Johnson, Anchor Law Offices, PLLC, Gurnee, IL, for Plaintiff.

 

Alison G. Fox, Faegre Baker Daniels LLP, South Bend, IN, Andrew Brian Murphy, Faegre Baker Daniels LLP, Minneapolis, MN, David L. Weinstein, Faegre Baker Daniels LLP, Jonathan Hale Claydon, Matthew A.C. Zapf, Greenberg Traurig, LLP, Chicago, IL, John W. Campbell, Federal Express Legal Dept., Memphis, TN, Brian Gordon Hiatt, Brian G. Hiatt, Bourbonnais, IL, for Defendants.

 

MEMORANDUM OPINION AND ORDER

Rubén Castillo, Chief Judge, United States District Court

*1 Carlos G. Rocha and Arize 11, Inc. (collectively, “Plaintiffs”) bring this action alleging seventeen state and federal claims against various FedEx entities and employees: FedEx Corporation (“FedEx Corp.”); FedEx Ground Package System, Inc. (“FedEx Ground” and, collectively with FedEx Corp., “FedEx”); FedEx Home Delivery (“FHD”); Daniel J. Sullivan, Rodger G. Marticke, Clifford P. Johnson, David F. Rebholz, William G. Margaritis, Scott Ray, Nathan Watts (these seven individuals collectively, “FHD Management”); Ralph Stephens; RJC 80, Inc.; and unknown other persons (“Does 1–60”). Presently before the Court are three motions to dismiss Plaintiffs’ complaint for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6)—one by Stephens; one by FedEx Corp. and Margaritis; and one by FedEx Ground, FHD, and six members of FHD Management. For the reasons set forth below, these motions are granted.

 

RELEVANT FACTS

Rocha delivered packages for FedEx’s Chicago terminal, acting at various times as an employee and an independent contractor, “starting in late 2005 and ending in November 2010,” when FedEx informed him that his services were no longer needed. (R. 37, Second Am. Compl. ¶ 58.) Arize 11 is an Illinois corporation that was formed in 2008 and that is owned by Rocha with its principal place of business in Chicago, Illinois. (Id. ¶¶ 60–61.)

 

FedEx Corp., a Delaware corporation with its principal place of business in Tennessee, is the parent corporation of FedEx Ground. (Id. ¶¶ 65–66.) FedEx Ground, a Delaware corporation with its principal place of business in Pennsylvania, is in the business of providing package delivery and pick-up service, often under the label of FHD. (Id. ¶¶ 73–74, 77–79.) Sullivan is FedEx Ground’s former President and Chief Executive Officer, (id. ¶ 83), and Rebholz currently serves in that capacity, (id. ¶¶ 103). Marticke is FedEx Ground’s Executive Vice President and Chief Operating Officer, (id. ¶ 90); Johnson is FedEx Ground’s Vice President and General Counsel, (id. ¶ 95). Margaritis is the Senior Vice President of Global Communications and Investor Relations for FedEx Corp. in Tennessee. (Id. ¶¶ 110–11.) Ray worked in FedEx’s Contractor Relations department in Pennsylvania. (Id. ¶¶ 117–18.) Watts managed FHD’s Chicago terminal. (Id. ¶ 122.) Stephens manages numerous routes for FHD’s terminals in Chicago and Hammond, Indiana, (id. ¶ 125); RJC 80 was an Illinois corporation Stephens owned until it was involuntarily dissolved last year, (id. ¶¶ 125, 128–29). Plaintiffs also bring claims against “all unknown persons and entities employed by or otherwise associated with” FedEx (“Does 1–50”), and all unknown persons and entities conspiring with or acting in concert with Watts or Stephens in connection with the alleged conspiracy to extort and defraud Plaintiffs (“Does 51–60”). (Id. ¶¶ 131–36.)

 

Plaintiffs allege that in 1999 or 2000, agents of FHD “devised a deceptive business model whereby FedEx Ground would falsely represent itself … as an association of independent individuals and corporations while actually operating as a single corporation[.]” (Id. ¶ 139.) FedEx promised potential contractors the exclusive right to service all FHD customer accounts within their routes, returns on their investments, and the associated right to profits and income from those services rendered. (Id. ¶¶ 166–67.) Plaintiffs allege that FedEx did not intend to, and did not, entrust contracting individuals and corporations with the rights to offer, sell, or distribute its ground transportation services to the public. (Id. ¶¶ 140–41.) Plaintiffs allege that FedEx targeted unsophisticated individuals to be contractors, which allowed it to “retain full control” of operations and defraud its contractors. (Id. ¶¶ 140–44.)

 

*2 Plaintiffs allege that FedEx “has a substantial or controlling interest in the market available to independent contractors seeking business opportunities in the ground transportation business,” which limits the competing opportunities that are available to independent contractors. (Id. ¶¶ 53–55.) Plaintiffs state that FedEx maintains this controlling interest through “an ambiguous and misleading” Standard Operating Agreement (the “SOA”). (Id. ¶ 145.) According to Plaintiffs, the ambiguous provisions in the SOA “bolster the false belief that investing contractors would nonetheless be independent and free from FedEx’s interference and control” while actually allowing FedEx to, inter alia, approve or disapprove independent contractors’ vehicles, drivers or helpers, and vehicle sales, to assign pick-up and delivery stops to specific drivers, to require the purchase of specific insurance plans, to require drivers to perform service at certain times, and to delineate many other conditions of contractors’ employment. (Id. ¶¶ 147–48.) Plaintiffs contend that Rocha and other independent contractors would not have executed the SOA if they had known about the misrepresentations it contained. (Id. ¶ 273.) Plaintiffs further allege that FedEx prevented contractors from using their vehicles for any purpose other than driving for FedEx. (Id. ¶¶ 335–36.)

 

Rocha began driving for FedEx in 2005 as a temporary employee. (Id. ¶¶ 211–12.) In order to acquire a route, FedEx required Rocha, like other independent contractors, to purchase a specific model truck. (Id. ¶¶ 213–16, 226.) Rocha was “misled by the [Chicago] terminal manager” to believe that he was purchasing a brand new truck from FedEx when he in fact purchased a used truck. (Id. ¶¶ 231–34.) The Chicago terminal manager offered Rocha a route in January 2006, and Rocha executed the SOA on February 23, 2006. (Id. ¶¶ 170–71, 242–44.) Rocha subsequently acquired a second route and a second truck. (Id. ¶¶ 237–40.)

 

Plaintiffs also allege that independent contractors were required to purchase various bundled products and services as part of the Business Support Package (“BSP”). (Id. ¶¶ 259–62.) The costs of the BSP were collected through involuntary deductions from their wages. (Id. ¶ 251.) Plaintiffs allege, for example, that FedEx made and refused to refund involuntary deductions from Rocha’s wages for uniform rental fees even though Rocha had purchased all the uniforms necessary for his business. (Id. ¶ 261.) Plaintiffs allege that the products and services were not competitively priced and that FedEx profited from the contractors’ purchases of the products and services. (Id. ¶¶ 252–55.) The SOA Plaintiffs attached to the complaint, however, states that contractors are not required to purchase the BSP and in fact requires contractors to affirmatively elect to purchase the BSP and have the costs deducted from their wages. (R. 37–3, SOA Ex. 6.) Rocha affirmatively elected to participate in the BSP when he executed his SOA. (Id.)

 

Plaintiffs allege that after a California State court ruled that FedEx’s control over FHD drivers made them employees rather than independent contractors,FN1 FedEx did not change its business practices, but instead conspired to protect the FHD business model and sustain the “fraudulent practices” of identifying drivers as independent contractors while maintaining employer-like control over their operations. (Id. ¶¶ 149–55.)

 

FN1. Plaintiffs refer to Estrada v. Fedex Ground Package Sys., Inc., No. BC210130 (Los Angeles Cnty.Super. Ct.2004), but fail to attach the Superior Court’s disposition. In Estrada v. FedEx Ground Package System, Inc., 64 Cal.Rptr.3d 327, 335–37 (Cal.Ct.App.2007), however, the appellate court affirmed the lower court’s holding that FedEx drivers were employees and not independent contractors.

 

Plaintiffs allege that FedEx branches used various unlawful methods to maintain their control over the independent contractors. (Id. ¶ 298.) For example, sometime in 2006 after one of Rocha’s drivers was in an accident, FedEx notified Rocha that it would cancel his contract in 30 days if he did not acquire his own trucking insurance. (Id. ¶ 300.) Rocha’s terminal manager offered Rocha the opportunity to keep his route by transferring his routes and vehicles to another contractor for six months, to be returned to Rocha once he was in good standing. (Id. ¶ 301.) Rocha executed the transfer to the corporate contractor, Handzon Enterprise, and worked for Handzon Enterprise for six months. (Id. ¶¶ 302–03.) Plaintiffs allege that at the end of the six-month period, the owner of Handzon Enterprise told Rocha that FedEx had advised her that she did not need to return the routes and vehicles and did not need to continue to employ him. (Id. ¶¶ 303–04.) FedEx then barred Rocha from the terminal area where his trucks were parked. (Id. ¶ 305.) FedEx threatened to file a criminal complaint against Rocha if he attempted to access his trucks. (Id. ¶ 306.) Plaintiffs allege on information and belief that FedEx converted numerous trucks from other contractors in this manner and labelled the trucks and the routes “abandoned.” (Id. ¶ 307.)

 

*3 The terminal manager told Rocha that he needed to pay Handzon Enterprise $4,300.00 to have his route and his trucks returned to him, which Rocha did in January 2007. (Id. ¶¶ 310–11.) His route and trucks were still not returned to him, and he was again barred from the terminal. (Id. ¶ 311.) Plaintiffs allege that a new terminal manager induced Rocha to forbear any right he had to sue and accept an alternative business arrangement until a new route became available. (Id. ¶ 313.) Pursuant to the alternative arrangement, Rocha worked as a “swing” contractor, covering for contractors who took vacation time, and Handzon Enterprises returned his trucks to him. (Id. ¶ 314–16.) Rocha held the swing position until he was terminated in November 2010. (Id. ¶¶ 317.) Plaintiffs allege that FedEx nevertheless continued to make unauthorized deductions from his wages as though he owned a route. (Id. ¶ 323.)

 

Plaintiffs allege that as a consequence of the initiation of a class action by some independent contractors, Fluegel et al. v. FedEx Ground Package System, Inc., No. 1:05–cv–2326 (N.D.Ill.2005), FedEx moved its Illinois operations to a new terminal facility with internal cameras to monitor contractor activities in the terminal. (Id. ¶ 326.) Plaintiffs allege that FedEx retaliated against its Illinois contractors for bringing suit in various other ways, including requiring contractors to pay the costs of various screenings associated with qualifying drivers, requiring contractors to pay the insurance-related risks the SOA specifically imposed on FedEx, refusing to provide contractors with trucking insurance in violation of the SOA, restraining contractors from using their trucking vehicles for other purposes and from recruiting and hiring drivers and helpers of their choosing, and restraining contractors from freely selling or transferring their routes. (Id. ¶¶ 327–47, 349.) These allegedly retaliatory changes were imposed by FedEx without the consent of the contractors and without their receipt of any additional consideration. (Id. ¶ 355.) These changes were implemented “through mandatory, retroactive, and contractually prohibited addendums” that the contractors were forced to execute under threat of losing pay without having a chance to review. (Id. ¶¶ 357–59.)

 

Plaintiffs allege that Sullivan and other members of FHD Management conspired to revise the SOA for the purpose of concealing the continuation of practices the California court found to be unlawful and deceptive. (Id. ¶¶ 151, 155–58.) FedEx transitioned FedEx Ground from use of the SOA to what it called an “Independent Service Provider” business model (“ISP”). (Id. ¶ 160.) Plaintiffs allege that FedEx induced independent contractors to enter into ISP Agreements in place of their former SOAs through false promises of increased earning potential, but that FedEx continued “the same fraudulent and unfair practices” as before. (Id. ¶¶ 161–63, 188–97.) According to Plaintiffs, FedEx “routinely reconfigured [independent contractors’ routes] without disclosure or payment” and, rather than paying damages for its breaches of the SOA Agreements, made “illusory promises of monetary incentives and increased earning potential” in order to induce their cooperation in the ISP transition. (Id. ¶¶ 190–92.)

 

To become an ISP candidate, contractors needed to have three or more routes, acquire additional vehicles and equipment, and have a corporate entity to serve as the official ISP candidate, by November 19, 2010. (Id. ¶ 369.) Rocha and other contractors were offered the opportunity to become ISP candidates, who would be able to sign an ISP Agreement to continue doing business with FedEx. (Id. ¶ 367.) Rocha accepted the ISP offer and acquired the requisites by November 19, 2010. (Id. ¶¶ 371–72.) To acquire the required number of routes, he entered into a contract with John Valez, an FHD driver, whereby Valez would transfer the routes he owned to Rocha but would continue to operate them, and Rocha would pay Valez all profits and proceeds from the operation of those routes. (Id. ¶¶ 373–77.) Plaintiffs allege that Arize 11 was an express third-party beneficiary of the contract. (Id. ¶ 378.) FedEx informed Rocha that Valez was not a contractor and had no authority to transfer his routes, but that FedEx would transfer the routes directly to Rocha. (Id. ¶ 379.) Rocha then received confirmation from his senior manager that he had complied with the ISP candidate requirements and that he would have an opportunity to negotiate an ISP Agreement if he completed certain steps detailed in the ISP transition guide. (Id. ¶¶ 380–83, 395.)

 

*4 As a condition to signing an ISP Agreement, Rocha was asked to execute a supplemental release of all claims related to the termination of his SOA and the sale or transfer of his routes and vehicles. (Id. ¶¶ 418–23.) Rocha refused to sign the release. (Id. ¶¶ 425–27.) Although Rocha was still allowed to join the ISP, Watts subsequently called Rocha a “troublemaker” upon meeting him, (id. ¶¶ 626), and FedEx “initiated a baseless and slanderous investigation against Rocha” for alleged sexual harassment, (id. ¶¶ 437). A FedEx manager told Rocha that FedEx would cease processing his sales during the investigation, although the investigation was quickly terminated in Rocha’s favor. (Id. ¶¶ 438–45.) Plaintiffs also allege that FedEx subjected Rocha to a string of false accusations and unfounded termination reviews following his acceptance of the ISP offer. (Id. ¶¶ 446–48.)

 

Plaintiffs allege that rather than terminating undesired FHD contractors, FedEx instead made false allegations of misconduct against the contractors and used threats of physical violence or arrest to prevent them from entering or exiting the terminal to service their routes. (Id. ¶ 175.) Plaintiffs allege that FedEx used “threats of economic harm, intimidation, and sheer force” to coerce the “cooperation and continued investment” of contractors, and that contractors who did not cooperate with FHD Management’s demands faced a “likely taking of their proprietary interests.” (Id. ¶¶ 176–80.) Rocha and other contractors were “threatened with termination and/or non-renewal of their operating agreements, forfeiture of their investments and/or other economic loss” if they refused to execute FedEx’s waivers, purchase FedEx products and services, accept deductions from their pay, and adopt and enforce FedEx rules contrary to those listed in the SOA. (Id. ¶ 181.)

 

Rocha and other contractors were ultimately “forced to sell all rights and interests” they held in their routes and vehicles to avoid having such proprietary interests “simply taken.” (Id. ¶ 404.) Plaintiffs allege that FedEx security personnel physically attacked an individual who Arize 11 had subcontracted as a driver in March 2011. (Id. ¶ 186.) Plaintiffs contend that this attack and fear of others like it caused Rocha to “concede to extortionate demands from FedEx that he transfer routes and vehicles used in his business to Stephens,” (id. ¶ 187). Plaintiffs allege, however, that in February 2011, before the alleged physical attack, Watts, Stephens, Valez, and Does 51–60 fraudulently induced Rocha to assign his SOA to Arize 11 at a much lower price than its true value and then transferred Arize 11’s assets assigned to RJC 80. (Id. ¶¶ 451, 483.) Watts terminated Rocha as a qualified FedEx driver on February 18, 2011. (Id. ¶ 460.)

 

PROCEDURAL HISTORY

Plaintiffs filed their initial complaint on October 30, 2012. (R. 1, Compl.) Plaintiffs amended their complaint twice—once on November 9, 2012, (R. 5, Am.Compl.), and again on February 13, 2013, (R. 37, Second Am. Compl.). Plaintiffs allege racketeering in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. (Counts I–V); unlawful trade restraints and tying arrangements in violation of the Sherman Antitrust Act, 15 U.S.C. § 1, and the Clayton Antitrust Act, 15 U.S.C. § 14, (Counts VI and VII); retaliatory discharge in violation of the National Labor Relations Act (the “Labor Act”), 29 U.S.C. § 157 (Count XVII); and several claims under Illinois State statutes and common law.FN2 On March 28, 2013, Defendants filed three motions to dismiss the complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Stephens filed his own motion, (R. 57, Stephens’ Mot.); FedEx Ground, FHD, Johnson, Marticke, Ray, Rebholz, Sullivan, and Watts filed a separate motion, (R. 60, Defs.’ Mot.), which Stephens joined, (R. 57, Stephens’ Mot. ¶ 5); and FedEx Corp. and Margaritis filed a third motion, (R. 62, Margaritis’ Mot.), and also joined the joint motion (R. 60),FN3 (R. 63, Margaritis’ Mem. at 2). On June 4, 2013, Plaintiffs responded to FedEx’s motions. (R. 68, Pls.’ Resp.) Defendants filed a joint reply in support of their motions to dismiss on July 1, 2013. (R. 70, Defs.’ Reply.)

 

FN2. Plaintiffs’ State law claims include violations of the Business Opportunity Sales Law of 1995, 815 Ill. Comp. Stat. 602/5–1 et seq. (Count VIII); the Wage Payment and Collection Act, 820 Ill. Comp. Stat. 115/1 et seq. (Count IX); the Whistleblower Act, 740 Ill. Comp. Stat. 174/1 et seq. (Count X); and the Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. (Count XI). Plaintiffs’ common law claims include: breach of the SOA (Count XII) and the ISP Transition Agreement (Count XV); fraudulent inducement (Count XIII); promissory estoppel (Count XIV); and unjust enrichment (Count XVI).

 

FN3. The Court finds sufficient grounds to dismiss the complaint in the joint motion, (R. 60, Defs.’ Mot.), which all moving defendants have joined. Accordingly, the Court does not address the unique arguments for dismissal that pertain to individual defendants, (R. 57, Stephens’ Mot.; R. 58, Stephens’ Mot. & Mem.; R. 62, Margaritis’ Mot.; R. 63, Margaritis’ Mem.), but grants the motions to dismiss based on arguments within the joint motion.

 

LEGAL STANDARDS

*5 A motion under Rule 12(b)(6) “challenges the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir.2009). When reviewing a Rule 12(b)(6) motion to dismiss, the Court construes the complaint in the light most favorable to the nonmoving party, accepts all well-pleaded factual allegations as true, and draws all reasonable inferences in the non-movant’s favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir.2008). Pursuant to Rule 8(a)(2), a complaint must contain “a ‘short and plain statement of the claim showing that the pleader is entitled to relief,’ sufficient to provide the defendant with ‘fair notice’ of the claim and its basis.” Id. (quoting Fed.R.Civ.P. 8(a)(2) and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A document that is attached to a pleading “is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). Thus, when ruling on a Rule 12(b)(6) motion to dismiss, a court must “consider documents attached to the complaint as part of the complaint itself.” Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir.2010) (citing Int’l Mktg., Ltd. v. Archer–Daniels–Midland Co., 192 F.3d 724, 729 (7th Cir.1999)). “Such documents may permit the court to determine that the plaintiff is not entitled to judgment” in his favor. Id. (citing Hecker v. Deere & Co., 556 F.3d 575, 588 (7th Cir.2009)).

 

ANALYSIS

As an initial note, the Court finds the complaint to be “an egregious violation of Rule 8(a).” Hartz v. Friedman, 919 F.2d 469, 471 (7th Cir.1990) (finding that the district court “might well have dismissed” a 125–page, 323–paragraph complaint on Rule 8(a) grounds); see also Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 775–76 (7th Cir.1994) (finding that a 119–page, 385–paragraph complaint was “confusing, redundant, and seemingly interminable” and that it “violated the letter and the spirit of Rule 8(a)”). Plaintiffs’ second amended complaint consists of 127 pages (exclusive of exhibits), 745 paragraphs, and seventeen counts. The sheer volume and repetitiveness of Plaintiffs’ complaint raises Rule 8 concerns, as does the fact that many of Plaintiffs’ “facts” are actually legal conclusions. This Court has better things to do than “to fish a gold coin from a bucket of mud,” and the Court would be justified dismissing this complaint based solely upon its violation of Rule 8(a). U.S. ex rel. Garst v. Lockheed–Martin Corp., 328 F.3d 374, 378 (7th Cir.2003). For the sake of completeness, however, the Court addresses the merits of the motion to dismiss and finds that, despite the prolixity of the complaint, Plaintiffs have failed to state a claim upon which relief may be granted.

 

In Counts I–V, Plaintiffs allege violations of all four RICO subsections. In Count I, Plaintiffs allege that all Defendants violated section 1962(a), (R. 37, Second Am. Compl. ¶¶ 485–508); in Count II, Plaintiffs allege that all Defendants violated section 1962(b), (id. ¶¶ 509–19); in Count III, Plaintiffs allege that FedEx and FHD Management violated section 1962(c), (id. ¶¶ 520–30); in Count IV, Plaintiffs allege that all Defendants violated section 1962(d), (id. ¶¶ 531–37); and in Count V, Plaintiffs allege a separate violation of section 1962(d) by FedEx, FHD Management, Stephens, and Does 51–60, (id. ¶¶ 538–44). Defendants argue that Plaintiffs fail to state a RICO claim because they do not sufficiently allege the existence of an enterprise or a pattern of racketeering. (R. 61, Defs.’ Mem. at 8–13.) Although there are significant substantive differences among the four cited RICO provisions, the existence of an “enterprise” and a “pattern of racketeering” are elements that are fundamental to each of the RICO subsections. 18 U.S.C. §§ 1962(a)–(d); Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1303–04 (7th Cir.1987). As a result, the Court will first examine the complaint to determine whether Plaintiffs have properly alleged the existence of an enterprise and a pattern of racketeering before turning to the additional requirements specific to each subsection of the RICO statute.

 

I. Whether Plaintiffs have sufficiently pleaded the existence of an enterprise

*6 Defendants first argue that Plaintiffs have failed to identify a RICO enterprise. (R. 61, Defs.’ Mem. at 8–9.) The “first rule” of pleading a RICO claim is that the “plaintiff must identify the enterprise.” Jennings v. Emry, 910 F.2d 1434, 1439–40 (7th Cir.1990) (quotation omitted). Under the RICO statute, an “enterprise” can include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). While this definition is broad, a RICO enterprise “must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle v. United States, 556 U.S. 938, 946 (2009). Plaintiffs refer to FHD as “the FHD Enterprise” throughout the complaint, and Plaintiffs allege that FedEx and the FHD Management conducted their racketeering and extortion activities through the FHD Enterprise. (See, e.g., R. 37, Second Am. Compl. ¶¶ 179, 208.) In their response, Plaintiffs clarify that “[e]ach of the FedEx Defendants, conspiring together, are alleged to have had sufficient position, title, and authority to control the affairs of the FHD Enterprise[.]” (R. 68, Pls.’ Resp. at 3.)

 

In Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226–28 (7th Cir.1997), the plaintiff brought a RICO claim against Chrysler Corporation alleging warranty fraud. The RICO enterprise was alleged to be “a ‘Chrysler family’ consisting of subsidiaries of the Chrysler corporation engaged in various facets of production, financing, and marketing of Chrysler automobiles to the investing public.” Id. at 226. In determining whether the plaintiff adequately alleged the existence of a RICO enterprise, the Seventh Circuit considered the type of conduct meant to be targeted by the RICO statute. Id. In the court’s view, the “prototypical” RICO case is “one in which a person bent on criminal activity seizes control of a previously legitimate firm” and uses the firm’s resources to perpetrate more extensive, and less discernable, criminal acts than he could do on his own. Id. at 227. “What we cannot imagine, and what we do not find any support for in appellate case law, is applying RICO to a free-standing corporation such as Chrysler merely because Chrysler does business through agents, as virtually every manufacturer does.” Id. The court found that Chrysler’s corporate structure did not make a difference “from the standpoint of preventing the type of abuse for which RICO was designed.” Id. (“If Chrysler were even larger than it is and as a result had no agents, but only employees (it might own all its dealerships), it could not be made liable for warranty fraud under RICO.”). The Seventh Circuit held that RICO is not triggered in an ordinary case of conspiracy between a corporation and its subsidiaries or employees, and that Chrysler and the members of its “corporate family” did not constitute a RICO enterprise. Id.

 

Here, as in Fitzgerald, Defendants are all members of the same “corporate family”—each Defendant is either a subsidiary or affiliated corporation or an individual who is named based on his activities as an agent of FedEx. As members of the FedEx corporate family, Defendants do not constitute a RICO enterprise in the scenario alleged by Plaintiff. Fitzgerald, 116 F.3d at 227; see also Stachon v. United Consumers Club, Inc., 229 F.3d 673, 676 n.3 (7th Cir.2000) (plaintiff cannot establish a RICO enterprise by naming corporation’s franchises in addition to the corporation); Emery v. Am. Gen. Fin., Inc., 134 F.3d 1321, 1324 (7th Cir.1998) (plaintiff cannot establish enterprise “merely by showing that the pattern of predicate acts … were committed by a firm that has agents or affiliates … The firm must be shown to use its agents or affiliates in a way that bears at least a family resemblance to the paradigmatic RICO case in which a criminal obtains control of a legitimate (or legitimate-appearing) firm and uses the firm as the instrument of his criminality.”). The substance of Plaintiffs’ claims involve fraud and breach of contract, and Plaintiffs have failed to allege facts that plausibly suggest that Defendants seized control of FHD and used it to perpetrate large-scale criminal activity. Instead, Plaintiffs are “trying to fit a square peg in a round hole by squeezing garden-variety business disputes into civil RICO actions.” Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1025 (7th Cir.1992).

 

*7 Plaintiffs additionally fail to attribute a common purpose to the alleged FHD Enterprise. See Boyle, 556 U.S. at 946; see also Baker v. IBP, Inc., 357 F.3d 685, 691 (7th Cir.2004) (common purpose is “essential ingredient” of any association-in-fact enterprise). A purpose aside from the predicate acts themselves is an essential element of a RICO enterprise. Stachon, 229 F.3d at 675. The absence of factual allegations regarding the operations and purpose of the alleged enterprise is fatal to the claim. See Rao v. BP Prods. N. Am., Inc., 589 F.3d 389, 400 (7th Cir.2009) (affirming dismissal of complaint that failed to “indicate how the different actors are associated” and did “not suggest a group of persons acting together for a common purpose”).

 

Confusingly, Plaintiffs also allege an enterprise consisting of “the combined business operations of both the FedEx employees responsible for directing and managing the FHD Enterprise and the network of investing home delivery contractors providing services rendered by the FHD Enterprise.” (R. 37, Second Am. Compl. ¶ 80.) Although Plaintiffs allege that “[t]he FHD Enterprise, or the collective businesses of FHD contractors associated by the SOA, constitutes an ‘enterprise’ separate and distinct from FedEx itself,” (Id. ¶ 521), and that “FHD’s Chicago terminal, as an entity separate and distinct from FedEx and other FHD terminals, is an enterprise engaged in interstate and foreign commerce,” (id. ¶ 523), these allegations of enterprises fail because “[a] firm and its employees, or a parent and its subsidiaries, are not an enterprise separate from the firm itself.” Bachman v. Bear, Stearns & Co., 178 F.3d 930, 932 (7th Cir.1999). Plaintiffs fail to allege any specific details about any separate enterprises, and allude only vaguely in their response to “various enterprises beyond the FHD Enterprise,” (R. 68, Pls.’ Resp. at 2). Even drawing all inferences in Plaintiffs’ favor, the Court cannot find a plausible suggestion of a RICO enterprise within the complaint.

 

An enterprise is an essential element of a claim under RICO. 18 U.S.C. § 1962. Because Plaintiffs have failed to allege a RICO enterprise, their RICO claims cannot survive Defendants’ motions to dismiss. Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 400 (7th Cir.2009); Stachon, 229 F.3d at 677; Fitzgerald, 116 F.3d at 228. Accordingly, the Court dismisses Counts I–V for failure to state a claim.

 

II. Whether Plaintiffs have sufficiently stated an antitrust claim in Counts VI and VII

Defendants contend that Plaintiffs have failed to state a claim for relief under the Sherman Act or the Clayton Act. (R. 61, Defs.’ Mem. at 14.) In Count VI, Plaintiffs allege that FedEx, FHD, and Does 1–50 unlawfully restrained trade in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. (R. 37, Second Am. Compl. ¶¶ 546, 548.) Plaintiffs also allege that FedEx and FHD Management unlawfully tied certain products and services in violation of Section 1 of the Sherman Act (Count VI), (id. ¶¶ 549, 551–56), and in violation of Section 3 of the Clayton Act (Count VII), (id. ¶¶ 574–76). Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies that restrain interstate trade or commerce. 15 U.S.C. § 1. Section 3 of the Clayton Act prohibits, as relevant here, the tying of sales of products, if the tying substantially lessens competition. 15 U.S.C. § 14. Defendants argue that Plaintiffs have failed to state a claim under either act.

 

A. Whether Plaintiffs sufficiently plead a conspiracy to restrain trade in violation of the Sherman Act

*8 Defendants argue that this Court should dismiss Count VI because Plaintiff does not plausibly allege the existence of a conspiracy. (R. 61, Defs.’ Mem. at 15.) Specifically, Defendants argue that a single firm’s officers and employees cannot conspire with themselves for the purposes of a Sherman Act conspiracy, and that Plaintiffs failed to allege co-conspirators with any specificity. (Id.) A prevailing claim under Section 1 of the Sherman Act “requires proof of three elements: (1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in the relevant market; and (3) an accompanying injury.” Denny’s Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir.1993). Plaintiffs allege that FedEx and FHD Management conspired “with each other and a select group of larger prospering contractors within the FHD Enterprise to restrain trade and commerce with respect to services rendered by other smaller FHD contractors.” (R. 37, Second Am. Compl. ¶ 546.) Plaintiffs further allege that FedEx and FHD Management conspired with “multiple manufacturers, vendors, service providers, and other third parties dealing in products and services forced upon FHD contractors, to restrain trade and commerce in products and services sold or rendered to FHD contractors.” (Id. ¶ 548.)

 

To plead the existence of a combination or conspiracy under the Sherman Act, Plaintiffs must allege facts that, if true, demonstrate that the conspirators “had a conscious commitment to a common scheme designed to achieve an unlawful objective.” Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 706 (7th Cir.2011) (quoting Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 764 (1984)). The Court was unable to locate any such facts within the complaint, and Plaintiffs do not identify any in response to Defendants’ motion. Plaintiffs’ allegations of conspiracy involving FedEx, FHD, and FHD Management fail to state an antitrust conspiracy because “officers or employees of the same firm do not provide the plurality of actors imperative for a § 1 conspiracy.” Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 769 (1984). And, although the Court views the facts alleged in Plaintiffs’ favor, the complaint does not provide “enough factual matter” to suggest that an agreement was made between FedEx, an amorphous group of unnamed dominant contractors, and numerous other unspecified manufacturers, vendors, suppliers, and service providers. See Twombly, 550 U.S. at 556. Plaintiffs’ “bare assertion of conspiracy” accompanied by a “conclusory allegation of agreement at some unidentified point” is inadequate to allege the existence of a combination or conspiracy. See id. at 556–57. Thus, Plaintiffs fail to plausibly plead one of the necessary elements of their Sherman Antitrust Act claim.

 

Seeking to avoid this result, Plaintiffs argue that they establish a Sherman Act conspiracy or agreement by showing a tying agreement. (R. 68, Pls.’ Resp. at 8.) Section 1 of the Sherman Act prohibits wrongful tying of products and services, and Section 3 of the Clayton Act prohibits wrongful tying of products. See Sheridan v. Marathon Petroleum Co., 530 F.3d 590, 592 (7th Cir.2008). The standards for tying claims under both acts are identical, id., and the Court will address both claims together.

 

B. Whether Plaintiffs sufficiently plead unlawful tying in violation of the Sherman Act and the Clayton Act

Plaintiffs allege that FedEx, FHD, FHD Management, and Does 1–50 unlawfully tied certain products and services in violation of Section 1 of the Sherman Act (Count VI), (id. ¶¶ 549, 551–56), and in violation of Section 3 of the Clayton Act (Count VII), (id. ¶ 574–76). A tying agreement is an “agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product[.]” N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5–6 (1958). Though tying agreements were once thought to be a per se violation of the antitrust laws, the law now provides that “[m]any tying arrangements … are fully consistent with a free, competitive market.” Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 45 (2006). “[T]he essential characteristic of an invalid tying arrangement lies in the seller’s exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984) abrogated on other grounds by Ill. Tool Works, 547 U.S. 28 (2006). Such “forcing” is indicative of an antitrust violation. Id. To state a claim of unlawful tying, Plaintiffs must allege four elements: (1) the existence of a tying arrangement between two distinct products or services; (2) that Defendants have sufficient economic power in the tying market to appreciably restrain free competition for the tied product or service; (3) that the tie “affects a not-insubstantial amount of interstate commerce” of the tied product or service; and (4) that Defendants have some economic interest in the sales of the tied product or service. Reifert v. S. Cent. Wisc. MLS Corp., 450 F.3d 312, 317 (7th Cir.2006).

 

*9 Plaintiffs allege that FedEx, its management, and the same unspecified third parties alleged in Count VI of the amended complaint “entered into unlawful contracts, agreements and understandings” to tie products and services in a way which “substantially limited competition and tended to create a monopoly.” (R. 37, Second Am. Compl. ¶¶ 574–75.) Specifically, Plaintiffs allege that FedEx and FHD Management tied the purchase of specific vehicles and various services and products in the BSP to the acquisition of a route, the execution of a SOA, and the renewal of the SOA. (Id. ¶¶ 549, 551–52.) These products and services include scanners, vehicle washing services, locks, uniforms, driver screenings, vehicle inspections, and auditing and mapping software services. (Id. ¶¶ 552.) Plaintiffs allege that they were forced to purchase these products and services, which “served no legitimate business purpose,” ( id. ¶ 554), and which were more expensive than other reasonable alternatives, (id. ¶¶ 563–66). Plaintiffs allege that they and other contractors would not have purchased these products and services if they were not unlawfully tied to the contractors’ SOAs and routes. ( Id. ¶ 553.)

 

In short, Plaintiffs have alleged that they were forced to purchase vehicles and the BSP (the tied products and services) in order to acquire and maintain an SOA (the tying product). The vehicles and the BSP are clearly distinct from the SOA; however, the Court is not convinced that the SOA is a tying product. Although the Seventh Circuit has not addressed this issue, the Second Circuit has held that employment as an independent contractor is not a tying product. De Jesus v. Sears, Roebuck & Co., Inc., 87 F.3d 65, 71 (2d Cir.1996); see also Castegneto v. Corporate Exp., Inc., 13 F.Supp.2d 114, 117 (D.Mass.1998) (finding that an independent contractor in the package delivery service failed to state a tying claim because an employment contract is not a tying product). The Second Circuit stated that the “tying claim fails at the threshold,” reasoning that “[i]t is simply implausible to regard Plaintiffs’ employment, a service which they provide to [Defendant] and for which they are paid by [Defendant], as something that [Defendants are] selling to Plaintiffs.” De Jesus, 87 F.3d at 71. This Court finds the Second Circuit’s reasoning sound and concludes that the SOA—an agreement by which independent contractors sell their services to FedEx—is not a tying product. Plaintiffs have thus failed to plead the first element of a tying claim. See Reifert, 450 F.3d at 317.

 

Even if the SOA was a tying product, Plaintiffs have failed to adequately allege that Defendants have sufficient market power in the tying market to appreciably restrain competition in the markets for the tied products and services. See id. Plaintiffs allege that purchasing one of a few specific models of truck was a precondition to being hired by FedEx as an independent contractor. (R. 37, Second Am. Compl. ¶ 213.) Plaintiffs also allege that FedEx forced FHD contractors to purchase the BSP and deducted the cost of the BSP from Rocha’s wages without Rocha’s prior voluntary consent. ( Id. ¶ 249.) This allegation is belied by Addendum 6 to the SOA, which lists the products and services that are included in the BSP and states: “Contractor is not required to purchase the Business Support Package. The cost of the Package is $4.25 per day, per van, for each business day Contractor is entitled to receive van availability.” (R. 37–3, SOA Ex. 6.) At the bottom of Addendum 6, Rocha affirmatively elected to participate in the Business Support Package. (Id.)

 

“A tying claim generally requires that the defendant’s economic power be derived from the market, not from a contractual relationship that the plaintiff has entered into voluntarily.” Rick–Mik Enters., Inc. v. Equilon Enters. LLC, 532 F.3d 963, 973 (9th Cir.2008) (collecting cases). Plaintiffs purchased specific vehicles and the BSP because they contractually agreed to do so, (R. 37, Second Am. Compl. ¶¶ 270–72), not because of FedEx’s “overwhelming market power.” See Siemer v. Quizno’s Franchise Co. LLC, No. 07 C 2170, 2008 WL 904874, at *11 (N.D.Ill. Mar. 31, 2008) (holding that franchisees’ allegations that they were forced to purchase certain equipment in order to obtain a franchise did not state a tying claim); see also Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 441 (3d Cir.1997) (“plaintiffs’ acceptance of a franchise package that included purchase requirements and contractual restrictions is consistent with the existence of a competitive market … Plaintiffs need not have become Domino’s franchisees.”). Plaintiffs allege that although Rocha initially agreed, he was not given an opportunity to discontinue his participation in the BSP, in direct violation of the SOA. (Id. ¶¶ 258–59.) This allegation may state a claim for breach of contract, but it does not establish that FedEx used its market power to force Plaintiffs to pay for unwanted products and services, a necessary element of a tying claim.

 

*10 Accordingly, the Court dismisses the antitrust claims in Counts VI and VII of the complaint for failure to state a claim upon which relief may be granted.

 

III. Whether Plaintiffs have sufficiently stated a claim in Count XVII for retaliatory discharge

Defendants argue that the Labor Act deprives the Court of subject matter jurisdiction over Plaintiffs’ retaliatory discharge claim. (R. 61, Defs.’ Mem. at 33–34.) Section 7 of the Labor Act protects employees’ rights to organize for the purpose of collective bargaining or other mutual protection. 29 U.S.C. § 157. Plaintiffs allege that FedEx Ground and FHD retaliated against and ultimately discharged Rocha for “concerted activity” that was protected under Section 7 of the Labor Act. (R. 37, Second Am. Compl. ¶¶ 739–40.) Plaintiffs seek relief pursuant to the Illinois Whistleblower Act, the Illinois Wage Payment and Collection Act, and the Labor Act. (Id. ¶ 734.)

 

The Labor Act is one of those “exceptional” federal statutes that receives “such wide berths as to displace virtually all state laws in the neighborhood.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 577 (7th Cir.2012). “Much conduct that is arguably forbidden as an unfair labor practice by the National Labor Relations Act, or arguably protected by that statute, is covered by the complete-preemption doctrine.” Hughes v. United Air Lines, Inc., 634 F.3d 391, 395 (7th Cir.2011). Federal courts “do not entertain suits about unfair labor practices; only the National Labor Relations Board can adjudicate disputes under sections 7 or 8 of the NLRA.” Id.; see also San Diego Bldg. Trades Council, Millmen’s Union, Local 2020 v. Garmon, 359 U.S. 236, 245 (1959) (“When an activity is arguably subject to s 7 or s 8 of the Act, the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted.”). Rather, dismissal of the claim for lack of jurisdiction is appropriate. Carr v. Metals, 351 Fed.Appx. 128, 129 (7th Cir.2009) (“To the extent that Carr can show he was disciplined in retaliation for participating in union activities, the district court was correct to find that it lacked jurisdiction over that claim. The National Labor Relations Board has primary jurisdiction over suits based on practices regulated by the National Labor Relations Act.”).

 

Seeking to avoid this result, Plaintiffs argue that they “engaged in no union activities” and that the concerted activity alleged “involved the support of a class action lawsuit brought by FHD contractors[.]” (R. 68, Pls.’ Resp. at 14.) Plaintiffs argue that their claims are of peripheral concern to federal labor law and thus are excepted from preemption. (Id. at 14–15.) The protections of the Labor Act are not limited to unions, however, and the involvement in a class action law suit “designed to … protect FHD contractors,” (R. 37, Second Am. Compl. ¶ 738), falls squarely within the Labor Act. 29 U.S.C. § 157 (“Employees shall have the right to … engage in other concerted activities for the purpose of … mutual aid or protection”). In fact, Plaintiffs invoke the protections of the Labor Act within Count XVII. (R. 37, Second Am. Compl. ¶ 739.)

 

*11 The preemption doctrine set out in Garmon “not only mandates the substantive preemption by the federal labor law in the areas to which it applies, but also protects the exclusive jurisdiction of the NLRB over matters arguably within the reach of the Act.” Local 926, Int’l Union of Operating Engineers, AFL–CIO v. Jones, 460 U.S. 669, 680 (1983). Plaintiffs allege that Rocha was discharged for engaging in protected concerted activity. Pursuant to the Labor Act, Plaintiffs must file a complaint with the NLRB for the resolution of their retaliatory discharge claim, and Count XVII is dismissed.

 

VIII. Plaintiffs’ remaining claims under state law

Plaintiffs have also asserted claims under the Illinois Business Opportunity Sales Law of 1995, 815 Ill. Comp. Stat. 602/5 et seq. (Count VIII); the Illinois Wage Payment and Collection Act, 820 Ill Comp. Stat. 115/1 et seq. (Count IX); the Illinois Whistleblower Act, 740 Ill. Comp. Stat. 174/1 et seq. (Count X); and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill Comp. Stat. 505/1 et seq. (Count XI); as well as claims of breach contract (Counts XII and XV); fraudulent inducement (Count XIII); promissory estoppel (Count XIV); and unjust enrichment (Count XVI). Plaintiffs’ RICO, Sherman Act, and Clayton Act claims were the basis of the Court’s subject matter jurisdiction, and their state law claims are before the Court only under federal supplemental jurisdiction.FN4 28 U.S.C. § 1367(a). Where all federal claims are dismissed before trial, the “usual practice” is that a federal district court should generally dismiss the supplemental claims. Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir.1999). There is no compelling reason for this Court to retain jurisdiction. As a result, the Court dismisses Counts VIII through XVI without prejudice to their refiling in state court.

 

FN4. Plaintiffs only allege that this Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331. (R. 37, Second Am. Compl. ¶ 15.) Arize 11 is an Illinois corporation, (id. ¶ 60); thus diversity jurisdiction pursuant to 28 U.S.C. § 1332 is precluded.

 

CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’ motions to dismiss (R. 57, Stephens’ Mot.; R. 58, Stephens’ Mot. & Mem.; R. 60, Defs.’ Mot.; R. 62, Margaritis’ Mot.; R. 63, Margaritis’ Mem.). Plaintiffs are granted leave to file an amended federal complaint in this case if they can address the fundamental deficiencies set forth in this opinion in no more than 300 clear paragraphs that are not repetitive, speculative, or conclusory. In the alternative, plaintiffs remain free to proceed in state court instead of trying to establish federal jurisdiction for this dispute where none may exist.

United States District Court, E.D. Texas, Sherman Division.

Barbara J. Stewart, Plaintiff,

v.

American Van Lines, et al., Defendants.

 

CASE NO. 4:12CV394

4:12–cv–00394Filed January 21, 2014

 

Susan J. Foster, Law Office of Foster & Foster, PC, Plano, TX, for Plaintiff.

 

Darryl Jan Silvera, Silvera & Associates, Colin Ronald Hatcher, The Silvera Firm, Carlos Alberto Balido, Walters Balido & Crain, Dallas, TX, Nicholas J. Lanza, McCormick, Lanza & McNeel, LLP, Bellaire, TX, for Defendants.

 

REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

DON D. BUSH, UNITED STATES MAGISTRATE JUDGE

*1 Now before the Court are Defendants American Van Lines, United States Van Lines, Kentron Phillips and Marsha Smith’s Motions to Dismiss and Strike in Response to Plaintiff’s Fourth Amended Complaint (Dkt.92), USAA’s Motion to Dismiss for Lack of Subject Matter Jurisdiction (Dkt.94), and Plaintiff’s Motion for Summary Judgment (Dkt.96). Having reviewed the motions, the Court finds as follows:

 

Plaintiff, Barbara Stewart, in her Fourth Amended Complaint has sued American Van Lines, United States Van Lines, Kentron Phillips, Marsha Smith (“the Moving Company Defendants”) and United Services Automobile Association (USAA). See Dkt. 89. Stewart contracted with United States Van Lines to move her personal property from Texas to Mississippi. United States Van Lines then subcontracted with American Van Lines to do the move. Stewart claims that American did not pick up all items at her residence. American then moved some of her property to Mississippi with less than 24 hours notice of its arrival. However, when the truck arrived at her home in Mississippi, the driveway and streets were too narrow for the truck to use and American told her that an additional $300.00 was required to transfer the goods to a smaller truck to complete the move.

 

The parties disagree on what happened next. American stated that it was against company policy to accept a check from Ms. Stewart and she would only pay by check. Ms. Stewart says that American would not take her credit card and would only take cash. The long and short of this story is that American took the goods to Florida where they remain in storage, and United States Van Lines will not release the goods until the storage fee and remaining move fee is paid. Plaintiff has also sued USAA for loss of personal property insured through her policy with USAA.

 

As to the Moving Company Defendants, Plaintiff alleges violations of 49 U.S.C. § 14706 for value of her personal goods. Plaintiff also claims Smith, American Van Lines and United States Van Lines violated 49 C.F.R. § 375 by failing to abide by regulations required of household movers.FN1 With respect to Defendant USAA, Plaintiff asserts a breach of contract claim. The Court will address the claims asserted against each set of Defendants separately.

 

FN1. To the extent Plaintiff now asserts or has attempted to any state claims against the Moving Company Defendants, they are preempted by the Carmack Amendment. See Moffit v. Bekins Van Lines Co., 6 F.3d 305 (5th Cir.1993).

 

USAA

Plaintiff has sued USAA, alleging that her insurance policy with USAA covered the loss of her personal property moved by the Moving Company Defendants but that USAA has declined to cover that loss. USAA has sought to dismiss this case for lack of subject matter jurisdiction. The Court agrees that there is no diversity as to Plaintiff’s claims against USAA. Therefore, the only inquiry is whether the Court has supplemental jurisdiction under 28 U.S.C. § 1367.

 

The Court has original jurisdiction over Plaintiff’s claims against the Moving Company Defendants pursuant to the Carmack Amendment and federal question jurisdiction. Therefore, if Plaintiff’s claims against USAA are so related to the claims within the Court’s original jurisdiction to form part of the same case or controversy under Article III of the United States Constitution, then the Court may entertain jurisdiction. 28 U.S.C. § 1367(a). Section 1367(a) clearly grants jurisdiction over claims that do not independently come within the jurisdiction of the district court but form part of the same Article III “case or controversy” as the federal claim. State Nat’l Ins. Co. v. Yates, 391 F.3d 577, 579 (5th Cir.2004) (citing Jinks v. Richland County, S.C., 538 U.S. 456, 458 (2003)).

 

*2 To determine whether claims fall under Section 1367(a), a court must ask “whether the supplemental claims are so related to the original claims that they form part of the same case or controversy, or in other words, that they ‘derive from a common nucleus of operative fact.’ ” Mendoza v. Murphy, 532 F.3d 342, 346 (5th Cir.2008) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966)); City of Chicago v. Int’l College of Surgeons, 522 U.S. 156, 118 S.Ct. 523 (1997) (“federal courts’ original jurisdiction over federal questions carries with it jurisdiction over state law claims that ‘derive from a common nucleus of operative fact’ ”); see also WRIGHT & MILLER, 13D FEDERAL PRACTICE & PROCEDURE § 3567.1 (explaining that supplemental jurisdiction “embraces at least the Gibbs standard” and “the key to applying Gibbs, and therefore § 1367(a), is giving meaning to the phrase ‘common nucleus of operative fact.’ ”). A loose factual connection between the claims is generally sufficient. See WRIGHT & MILLER, 13D FEDERAL PRACTICE & PROCEDURE § 3567.1; Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir.1995). A court’s determination of whether to exercise supplemental jurisdiction is guided by considerations of judicial economy, convenience and fairness to litigants. Carnegie–Mellon Univ. v. Cohill, 484 U.S. 343, 350, 108 S.Ct. 614, 619, 98 L.Ed.2d 720 (1988).

 

The question is thus whether Plaintiff’s claims against USAA and the Moving Company Defendants would ordinarily be expected to be tried all in one judicial proceeding. Id. at 349 (quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)). If so, then supplemental jurisdiction would be appropriate.

 

The Court finds that the claims against USAA do not form part of the same case or controversy to warrant supplemental jurisdiction. At best, there is only a loose factual connection between the claims. Ultimately, Plaintiff’s claims against USAA constitute a coverage dispute reserved for state court and do not lie with Plaintiff’s controversy with the Moving Company Defendants as to the shipment of her belongings. USAA’s Motion to Dismiss for Lack of Subject Matter Jurisdiction (Dkt.94) should be GRANTED and the claims against USAA dismissed without prejudice to refiling in a court of competent jurisdiction.

 

The Moving Company Defendants

The remaining defendants, The Moving Company Defendants, also seek dismissal of the claims against them on several grounds (see Dkt. 92). As shown below, the Court finds that the motion should be GRANTED in part and DENIED in part.

 

First, the Moving Company Defendants seek dismissal of the suit pursuant to Rule 12(b)(3) or transfer of the suit under 28 U.S.C. §§ 1404(a) and 1406(a) for improper venue. The Moving Company Defendants argue that, pursuant to a number of forum-selection clauses in its bill of lading and other contracts related to this case, the matter must be transferred to Florida. See generally Exhibits A–D attached to Affidavit of Aldo Disorbo, Dkt. 92–1. The various contracts first describe United States Van Lines as a shipping agent presumably for the shipper (Stewart) and then as a carrier. According to the affidavit of Disorbo, United States Van Lines acts as agent and broker for American. He says that American’s principal place of business is Florida, but in its answer to Plaintiff’s First Amended Complaint, Defendant admits it is a corporation with offices in San Antonio, Texas. The records of the Texas Secretary of State indicate that it is registered as a Texas domestic corporation.

 

Contrary to Disorbo’s Affidavit, the Court can find no contracts which state that American is to do the move. Put another way, there is no written contract between American and Stewart. Exhibit A to the affidavit states that United States Van Lines is the moving coordinator/shipper agent. Dkt. 92–1 at 7. United States Van Lines specifically states it is not responsible for any damage caused by the (unnamed) carrier. The contract ends with language that United has the authority to act as the shipper or the move can be assigned to a properly licensed mover or carrier operating under their independent authority. As stated, none of the referenced exhibits mention American Van Lines.

 

*3 In this case, Exhibits A, B and D to Disorbo’s Affidavit state that any dispute arising out of or relating to the agreements shall be brought in the Courts of Record of the State of Florida in Broward County or the Court of the United States, Southern District Florida in Broward County. See Dkt. 92–1. Historically, in the Fifth Circuit, forum-selection clauses have been enforced unless it is shown by the resisting party to be unreasonable under the circumstances. Haynsworth v. The Corporation, 121 F.3d 956, 962–63 (5th Cir.1997). Enforcement of a forum-selection clause may be unreasonable where: “(1) the incorporation of the forum selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection clause would contravene a strong public policy of the forum state.” Id. at 963 (internal citations and quotations omitted). The party arguing against enforcement of the forum-selection clause bears the heavy burden of proving its enforcement is unreasonable. Id.

 

As to the Moving Defendants’ motion to dismiss under Federal Rule of Civil Procedure 12(b)(3), it has been waived in that it was not raised in the Defendant’s first responsive pleading. See FED. R. CIV. P. 12(h)(1)(A); Albany Ins. Co. v. Almacendora Somex, S.A., 5 F.3d 907 (5th Cir.1993). The case cannot be dismissed based on the forum-selection clause choosing a Florida, rather than Texas, venue.

 

However, the Supreme Court has recently held that forum-selection clauses may be enforced by a motion to transfer under 28 U.S.C. § 1404(a). See Atlantic Marine Constr. Co., Inc. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S.Ct. 568, ––– U.S. ––––, (2013). In fact, the Supreme Court goes on to state that valid forum-selection clauses are to be given controlling weight in all but the most exceptional cases. Id. at 579. As the Court notes, when the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the specified forum. Id. at 581. Convenience of the parties is not a consideration. Id. The Supreme Court then goes on to hold that the burden is on the plaintiff to show why the transfer should not occur. Id. And, as stated, the Supreme Court holds that the parties’ private interests are of no concern. Id. at 582. The Court then goes on to hold that the district court may only consider public-interest factors, but those factors will rarely prevent transfer and only in the most exceptional cases. Id.

 

In light of the Supreme Court’s recent holding and prevalent Fifth Circuit authority, the Court is limited in its analysis to whether the four factors noted above are such exceptional factors which would warrant the Court’s denial of a motion to transfer. Overreaching is defined as “(t)he act or an instance of taking unfair commercial advantage of another, esp. by fraudulent means.” Ginter ex. rel. Ballard v. Blecher Prendergast & Laporte, 536 F.3d 439 at 449 (5th Cir.2008) (Dennis J., dissenting) (quoting BLACK’S LAW DICTIONARY 1136 (8th ed.2004)).

 

Plaintiff has submitted a declaration stating that requiring her to submit to jurisdiction in Florida would effectively deprive her of her day in court. See Dkt. 93–2. The Court notes that, early on in this suit, Plaintiff was pro se. She was eventually able to secure the services of counsel who, it appears, is not licensed in Florida. She states that she cannot afford an attorney in Florida and cannot afford to travel for depositions, hearings or a trial. She says she has no personal funds nor does she have credit cards and is unable to borrow any money to finance litigation or travel. She claims that, at some pont in time when the move was made, she was disabled and unable to work. She lost everything in the move and has experienced extreme financial hardship in trying to replace personal property. The Court finds that a transfer to Florida would effectively deprive her of redress.

 

*4 Further, the Carmack Amendment has its own venue provision and the Carmack Amendment governs the enforceability of any forum-selection clause contained in the bill of lading. Section 14706(d)(1) of the Carmack Amendment provides that a civil action may be brought against a delivering carrier in a district court of the United States through which the carrier operates. 49 U.S.C. § 14706(d)(1).

 

In general, venue statutes exist for two primary reasons: “(1) to lay venue in a place that has a logical connection with the parties to the litigation; and (2) to protect the defendant against the hardship of having to litigate in a distance place.” Energy Res. Group, Inc. v. Energy Res. Corp., 297 F.Supp. 232, 234 (S.D.Tex.1969). Here, the Carmack Amendment codifies “the right of the shipper to sue the carrier in a convenient forum of the shipper’s choice.” Aaacon Auto Transp., Inc. v. State Farm Mut. Auto. Ins. Co., 537 F.2d 648, 654 (2nd Cir.1976). Thus, the Carmack Amendment essentially prohibits enforcement of forum-selection clauses and provides that suit may be brought against a carrier in a forum convenient to the shipper. See id.; see also Seko Air Freight, Inc. v. Direct Transit, Inc., 859 F.Supp. 306 (N. D.Ill.1994); Smallwood v. Allied Van Lines, Inc., 660 F.3d 1115 (9th Cir.2011); Aluminum Products Distributors, Inc. v. Aacon Auto Transp., Inc., 549 F.2d 1381, 1385 (6th Cir.1977); Siaci Saint Honore v. Ironbound Exp., Inc., 884 F.Supp.2d 100 (S.D.N.Y.2012); Travelers Prop. Cas. Co. of America v. Legacy Transp. Servs., Inc., 2010 WL 1463574 (N.D.Cal.2010); Kyodo U.S.A., Inc. v. Cosco North Am., Inc., 2001 WL 1835158 (C.D.Cal.2001) but see J.B. Hunt Transp., Inc. v. S & D Transp., Inc., 2011 WL 3703607 ( W.D. Ark.2011).

 

The Court finds that the Supreme Court’s decision in Kawasaki Kisen Kaisha, Ltd. v. Regal–Beloit Corp. does not overrule long standing holdings as to cases involving the Carmack Amendment. Kawasaki Kisen Kaisha, Ltd. v. Regal–Beloit Corp., 561 U.S. 89, 130 S.Ct. 2433, 177 L.Ed.2d 424 (2010). Kawaski ‘s analysis focused on whether the inland portion of an international shipment under a bill of lading designating a selected forum was trumped by the Carmack Amendment. The Court held that the Carmack Amendment did not apply not and that such a clause could not be trumped by the Amendment. 130 S.Ct. at 2447–2448.

 

In matters involving household shipments within the United States, however, Congressional intent as to venue overrides a forum-selection clause particularly where such is in reality only a matter of contract adhesion. The shipper has for all practical purposes little choice in the matter and if the shipper desires to move household goods, she is at the mercy of the carrier. Although the Court recognizes that there is no direct Fifth Circuit authority on this matter, the Court finds that the forum-selection clause is unenforceable in actions like this brought under the Carmack Amendment.

 

In this case, it is undisputed that American Van Lines was the delivering carrier. American picked up Stewart’s household goods in this District for transport to Mississippi. American was not a party to the contracts relied upon by United States Van Lines. In fact, United States Van Lines, as Stewart’s broker agent, explicitly repudiates any loss or damage caused by the motor carrier. Yet, United States Van Lines then goes on to explain that it and American really operate as one company and that American should reap whatever benefits accrue to United States Van Lines under the contracts.

 

*5 Moreover, the Court views United States Van Lines’ explanation of the role of American Van Lines to be nothing more than a “shell game.” United States Van Lines appears to disclaim any liability for American, but, at the same time, has some sort of a brokerage relationship and possibly business relationship with American. There is some merit in an argument that the clause was the product of commercial overreaching and that to enforce it would effectively deprive Stewart of redress.

 

The Court finds that there is no valid forum-selection clause as to American and that there are no arguments which would warrant a transfer even without consideration of the forum-selection clause. American is registered in Texas and doing business in this District, and the dispute originates from its acts and omissions, at least in part, in this District.

 

In the end, Atlantic Marine does not alter the Court’s analysis of venue. In this case, Congress has provided a specific venue provision to govern whether the dispute may be held. The Court notes that Atlantic Marine dealt with two businesses which can deal at arms length. Such is not the case in this consumer setting. Under the facts of this case and given Congress’s preemptive regulation of household shippers through the Carmack Amendment, the Court holds that enforcement of the forum-selection clause relied upon by the Moving Company Defendants would be unreasonable under the circumstances.

 

For all the reasons cited above, venue is proper in this Court as to Plaintiff’s disputes with the Moving Company Defendants and the Court should not dismiss or transfer on those grounds.

 

The Moving Company Defendants also move to dismiss all claims made against Kentron Phillips and Marsha Smith individually. The Court agrees that Stewart’s claims against Phillips and Smith should be dismissed. All claims asserted by Stewart may only be brought against the carriers. There is nothing in Stewart’s last filed complaint that would demonstrate any independent liability as to the named individuals. Anything they are alleged to have done would have been done in their representative capacities for United States Van Lines or American Van Lines. All of Plaintiffs’ claims against Kentron Phillips and Marsha Smith should be DISMISSED.

 

This leaves for resolution Plaintiff’s claims under 49 U.S.C. § 14706 and 49 C.F.R. 375 against United States Van Lines and American Van Lines.

 

The remaining Moving Company Defendants ask the Court to either dismiss the C.F.R. claims for lack of subject matter jurisdiction, failure to state a claim, or strike, for the reasons that 49 C.F.R. § 375 does not create a private cause of action. The shipment of household goods by individual consumers is governed in part by the regulations found in 49 C.F.R. § 375. A household goods motor carrier must follow Part 375’s regulations when offering its services to individual shippers in interstate commerce. 49 C.F.R. § 375.101. The Secretary of Transportation has jurisdiction over consumer protection matters, which has been delegated to the Federal Motor Carrier Safety Administration. See Transportation of Household Goods in Interstate Commerce; Consumer Protection Regulations: Released Rates of Motor Carriers of Household Goods, 77 Fed.Reg. 25371 (Apr. 30, 2012).

 

Private causes of action to enforce federal law must be created by Congress. See Touche Ross & Co. v. Reddington, 442 U.S. 560, 568, 99 S.Ct. 2479, 2485, 61 L.Ed.2d 82 (1979). Thus, the task before the Court is to determine not only whether the regulation creates a federal right but also whether a private remedy exists. See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15 (1979). Statutory intent on the latter point is determinative. Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 812 n.9 (1986). “Statutes that focus on the person regulated rather than the individuals protected create ‘no implication of an intent to confer rights on a particular class of persons.’ ” Alexander, 532 U.S. at 289, 121 S.Ct. 1511 (quoting California v. Sierra Club, 451 U.S. 287, 294, 101 S.Ct. 1775, 68 L.Ed.2d 101 (1981)). The Court has been unable to find no cases—and no cases have been cited—as to applicable Fifth Circuit authority. A few cases have recognized explicitly or by implication a private cause of action for violation of the 49 C.F.R. § 375. See Hargrove v. Universe Exp. Inc. Moving & Storage, 2013 WL 5218104 (E.D.N.C.2013); Buchanan v. Neighbors Van Lines, 2011 WL 5005769 (C.D.Cal.2011) (Section 375.703(b)); Frey v. Bekins Van Lines, Inc., 2012 WL 1107719 (E.D.N.Y.2012), but see Isupov v. Am. Relocation Moving Specialist, 2011 WL 2462880 (E.D.Cal.2011).

 

*6 Stewart claims that United States Van Lines violated 49 C.F.R. § 375 part 213(a)(1)(3)(4)(5) by failing in part to notify her of the arbitration program. Violation of this regulation is actionable under 49 U.S.C. § 14708. If a carrier does not inform a shipper of the dispute program it may be liable for attorneys fees. Thus, to the extent Stewart can show that United (or American) violated the appropriate regulation as to arbitration as implemented by the above statute, she may maintain a cause of action for attorney fees. Courts have also construed “actual loss or damage” under the Carmack Amendment to include damages for delay. See Am. Nat’l Fire Ins. Co. v. Yellow Freight Sys., Inc. 325 F.3d 924,931 (7th Cir.2003). Stewart has alleged sufficient facts as to such a complaint.

 

49 U.S.C. §§ 14710 and 14711 express an intent at least to restrict enforcement as to the Secretary or the State in its parens patriae authority as to consumer protection. Therefore, some of the regulations relied upon by Stewart may not provide for a right of private action. The Court finds that, absent reliance on a statute, there is no private cause of action under the Regulations. Plaintiff however has stated a claim for violation of the Carmack Amendment for damages, for delay damages and failure to disclose arbitration provisions. Claims for improper storage, lack of notice as to an estimate of charges and tariffs and removing fees are subsumed in the Amendment’s provision for damages or limitation of carrier defenses. In summation, the statutes provide all Plaintiff wishes to achieve through the Regulations. To the extent necessary, Plaintiff is granted leave to amend her complaint consistent with any findings herein.

 

As to Plaintiff’s surviving claims under 49 U.S.C. § 14706 against Defendants United States Van Lines and American Van Lines, the Court has reviewed the record and finds that there is a fact issue as to Plaintiff’s claims and that “the evidence presents a sufficient disagreement to require submission to a jury …” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The parties’ summary judgment evidence presents issues of credibility as to whether Plaintiff delivered the goods to the carrier in good condition, whether the goods were damaged or lost, whether the carrier was free from negligence or whether the damage was due to the inherent nature of the goods or attributable to an act of God, public enemy, the shipper, or public authority, and what damages Plaintiff has suffered. See Man Roland, Inc. v. Kreitz Motor Exp., Inc., 438 F.3d 476, 479 (5th Cir.2006). Such are matters only appropriate for a jury to resolve. Plaintiff’s Motion for Summary Judgment (Dkt.96) should be DENIED and those claims should proceed to trial.

 

RECOMMENDATION

Therefore, it is recommended that USAA’s Motion to Dismiss for Lack of Subject Matter Jurisdiction (Dkt.94) be GRANTED, that Plaintiff’s claims against Defendant USAA be dismissed without prejudice to refiling in a court of competent jurisdiction, that Defendants American Van Lines, United States Van Lines, Kentron Phillips and Marsha Smith’s Motions to Dismiss and Strike in Response to Plaintiff’s Fourth Amended Complaint (Dkt.92) be GRANTED as to Plaintiff’s claims against Defendants Smith and Phillips and Plaintiff’s claims under 49 C.F.R. § 375 and that Plaintiff’s claims against Defendants Smith and Phillips and Plaintiff’s claims under 49 C.F.R. § 375 be dismissed with prejudice. It is further recommended that Defendants American Van Lines, United States Van Lines, Kentron Phillips and Marsha Smith’s Motions to Dismiss and Strike in Response to Plaintiff’s Fourth Amended Complaint (Dkt.92) be DENIED as to Defendants’ venue arguments, that Plaintiff’s Motion for Summary Judgment (Dkt.96) be DENIED, and that Plaintiff’s remaining claims against United States Van Lines and American Van Lines for damages, delay damages, failure to furnish arbitration notice, and other damages FN2 cognizable under the Carmack Amendment should proceed to trial in this District.

 

FN2. Although holding possession of household goods hostage may subject a carrier to criminal as well as civil penalties there is no private cause of action for violation of 49 U.S.C. § 14915. However, the Secretary may assign a any portion of the civil fine to the aggrieved shipper. See 49 U.S.C. 14915(a). Therefore, Stewart could seek redress from the Secretary.

 

*7 Within fourteen (14) days after service of the magistrate judge’s report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C.A. § 636(b)(1)(C).

 

A party is entitled to a de novo review by the district court of the findings and conclusions contained in this report only if specific objections are made, and failure to timely file written objections to any proposed findings, conclusions, and recommendations contained in this report shall bar an aggrieved party from appellate review of those factual findings and legal conclusions accepted by the district court, except on grounds of plain error, provided that the party has been served with notice that such consequences will result from a failure to object. Id.; Thomas v. Arn, 474 U.S. 140, 148 (1985); Douglass v. United Servs. Auto Ass’n, 79 F.3d 1415, 1417 (5th Cir.1996) (en banc), superseded by statute on other grounds, 28 U.S.C. § 636(b)(1) (extending the time to file objections from ten to fourteen days).