United States District Court for the District of New Mexico

August 9, 2023, Filed

Case No. 1:21-cv-00073-KWR-SCY

BOBBY GUTIERREZ, in his capacity as Wrongful Death Personal of the Estate of Robert P. Gutierrez, Plaintiff, vs. UNI TRANS, LLC, UNITRANS, LLC, CEVA LOGISITCS US, INC., CEVA GROUND US, LLP, Defendants.

Prior History: Gutierrez v. Uni Trans, LLC, 2021 U.S. Dist. LEXIS 126152, 2021 WL 2821071 (D.N.M., July 7, 2021)

Counsel:  [*1] For Bobby Gutierrez, Plaintiff: Corinne Holt, LEAD ATTORNEY, Will Ferguson & Associates, Albuquerque, NM.

For CEVA Logistics U.S. Inc., Defendant: Louis Horowitz, Alfred Robert French III, LEAD ATTORNEYS, Lorber Greenfield & Polito LLP, Phoenix, AZ.

Unitrans LLC, Defendant, Pro se.

For Uni Trans LLC, Defendant: Richard M Padilla, LEAD ATTORNEY, Daniel J O’Brien, O’BRIEN & PADILLA P.C., Albuquerque, NM.

Judges: KEA W. RIGGS, UNITED STATES DISTRICT JUDGE.

Opinion by: KEA W. RIGGS

Opinion

MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court upon Defendant CEVA Logistics U.S., Inc.’s Motion for Summary Judgment. Doc. 236. Having reviewed the pleadings and the relevant law, the Court finds that the motion is well taken, and therefore, is GRANTED.

BACKGROUND

This diversity case is a personal injury action resulting from a tragic traffic collision in New Mexico. Plaintiff Bobby Gutierrez, in his capacity as Wrongful Death Personal Representative of the Estate of Mr. Gutierrez, alleges the following claims: Negligence and Negligence per se against Saydiev¹ and vicarious liability of Defendant Uni Trans, LLC (“Uni Trans”) (Count I), and Negligence, Negligence per se, and Joint and Several Liability against all Defendants [*2]  (Count II). Doc. 80. Defendant CEVA Logistics US, Inc. (“CEVA”) seeks the instant motion for summary judgment.

LEGAL STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is material if it could have an effect on the outcome of the suit. See Smothers v. Solvay Chemicals, Inc., 740 F.3d 530, 538 (10th Cir. 2014). “A dispute over a material fact is genuine if a rational jury could find in favor of the nonmoving party on the evidence presented.” Id. (quoting Tabor v. Hilti, Inc., 703 F.3d 1206, 1215 (10th Cir. 2013)).

Initially, the moving party bears the burden of demonstrating the absence of a genuine issue of material fact. See Shapolia v. Los Alamos Nat. Lab’y, 992 F.2d 1033, 1036 (10th Cir. 1993). Once the moving party meets its initial burden, the non-movant cannot “rest on the pleadings[,] but must set forth specific facts by reference to affidavits, deposition transcripts, or other exhibits to support the claim.” See Serna v. Colorado Dep’t of Corr., 455 F.3d 1146, 1151 (10th Cir. 2006). “[A] complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial,” and the moving party will be entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

On summary judgment, the Court is to view the facts in the light most favorable to the non-moving party [*3]  and draw all reasonable inferences in favor of that party. See Shero v. City of Grove, 510 F.3d 1196, 1200 (10th Cir. 2007). The Court cannot weigh the evidence and determine the truth of the matter, but instead, must determine whether there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).

UNDISPUTED MATERIAL FACTS²

The Court may consider only admissible evidence when ruling on a summary judgment motion. See Johnson v. Weld County, 594 F.3d 1202, 1209 (10th Cir. 2010); Fed. R. Civ. P. 56(c)(2) (“A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.”). Although “the form of evidence produced by a nonmoving party at summary judgment may not need to be admissible at trial, the content or substance of the evidence must be admissible.” Johnson, 594 F.3d at 1210 (internal quotations and emphasis omitted).

Additionally, the Court may disregard a party’s version of the facts which are clearly unsupported by the record. “The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Scott v. Harris, 550 U.S. 372, 380, 127 S. Ct. 1769, 167 L. Ed. 2d 686 (2007) (internal quotations and alteration omitted) (emphasis in original). “When opposing parties tell two different stories, one of which is blatantly contradicted [*4]  by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.” Id.

CEVA and Uni Trans

CEVA is a logistic company in North America and provides trucking transportation services, freight forwarding, contract logistics, warehousing, customs house brokerage and ground delivery. Undisputed Material Facts (“UMF”) ¶¶ 15-16. CEVA Ground US, LP is certified as a motor carrier. Doc. 257-9 at 16-19.

On or about March 27, 2018, CEVA and Uni Trans agreed to a Carrier Terms and Conditions Agreement (“Carrier Agreement”). Doc. 236-2. The Carrier Agreement stated that CEVA is “a licensed property broker by the Federal Motor Carrier Safety Administration (“FMCSA”), and as a licensed broker, arranges for freight transportation.” Id. at 1. The Carrier Agreement stated that Uni Trans is a carrier and “an independent contractor . . . as such, is wholly responsible in every way for such persons as Carrier hires or employs in the performance of any of the services covered under these Terms and Conditions.” Id. at 1-3. The Carrier Agreement is missing Section 3 and Section 14 as referenced in paragraph D. [*5]  No Double Brokering and Sections 4 and Section 7 as referenced in paragraph O. Waiver of Consequential Damages.³ Id. at 2-3. Uni Trans became an authorized carrier for CEVA on or about March 29, 2015. Doc. 236-1 at 3.

CEVA sent a letter to Uni Trans and addressed Uni Trans as a “Carrier Partner.” Doc. 257-1. The letter addressed the goals for their businesses to mutually grow and discussed the advantages of partnering with CEVA. Id.

CEVA Carrier Approval Process

Carriers submit their Carrier Information Profile, which includes name of the carrier, contact information, type of equipment, number of drivers, endorsements, and motor carrier (“MC”) number. Doc. 257-9. A CEVA employee will verify the information using the MC number and public information to determine it is accurate and determine the carrier’s safety score. Doc. 266-1 at 10-11. Carriers must then sign the Carrier Agreement, which requires the carrier to represent and warrant that it is authorized as a motor carrier by all relevant federal and state law and “does not have an unsatisfactory safety rating issued from the U.S. Department of Transportation.” Doc. 236-2. The Carrier Agreement requires the carrier to “immediately notify [*6]  Broker after receiving, or upon the occurrence that has a likelihood of Carrier receiving, an unsatisfactory safety rating issued from the U.S. Department of Transportation. . .” Id. An automated system at CEVA monitors the carrier’s MC number and safety score. Doc. 266-1 at 21. If the carrier falls out of compliance with the Carrier Agreement, such as lapse on insurance or unsatisfactory safety rating, the automated system blocks the carrier from receiving dispatches for transportation. Doc. 266-1 at 21.

The Subject Shipment and Accident

On March 27, 2020, Uni Trans agreed to transport goods from San Diego, California to Groveport, Ohio. Doc. 257-9. The load was picked up from a CEVA Warehouse. Doc. 257-4 at 1-5. On or about March 28, 2020, Otabek Saydiev, a Uni Trans driver, was driving a semi-tractor and trailer on eastbound I-40 in New Mexico, at or near Milepost 73. UMF ¶¶ 1, 35. Decedent, Robert P. Gutierrez, was stopped in traffic on eastbound I-40 near Milepost 73. UMF ¶ 2. Mr. Saydiev fell asleep while operating the semi-tractor and collided with the stopped vehicles. UMF ¶ 4.

The Load and Rate Confirmation list Uni Trans as the Carrier. Doc. 257-9 at 10-11. The Bill of Lading [*7]  signed on March 30, 2020, list CEVA as the carrier, the shipper, and the consignee. Doc. 257-3. CEVA was not the owner of the tractor or trailer utilized in the shipment. Doc. 236-1 ¶ 32; Doc. 266-1. Mr. Saydiev met the minimum requirements for safe driving, had no FMCSA reportable crashes, and had 5-6 years driving experience. Doc. 266-3; Doc. 266-4; Doc. 266-5.

DISCUSSION

CEVA argues that summary judgment is appropriate because CEVA is not vicariously liable or negligent for retention and selection of a carrier. Doc. 236 at 1. Plaintiff argues that summary judgment is not appropriate because there are factual disputes related to whether CEVA was a partner to Uni Trans, whether CEVA was a motor carrier, whether CEVA had operational control over Uni Trans, and whether CEVA had a carrier approval process for Uni Trans. Doc. 257 at 1. The Court finds there are no genuine issues of material facts. The Court also finds that CEVA is not vicariously liable or negligent for retention and selection of a carrier.

I. CEVA was not a partner with Uni Trans.

CEVA argues it is not liable because it did not form a partnership with Uni Trans. Doc. 236 at 7. Plaintiff argues that CEVA and Uni Trans were [*8]  partners. Doc. 257 at 11. The Court is not convinced that CEVA and Uni Trans formed a partnership.

Partnership formation is based on state law where the partnership is domiciled or the jurisdiction in which the partnership has its chief executive office. CEVA is incorporated in Delaware and Uni Trans has its chief executive office in Ohio and Florida. Doc. 89 ¶ 4; Del. Code Ann. tit. 6, § 15-106 (“[T]he law of the jurisdiction governing a partnership agreement governs relations among the partners and between the partners and the partnership); Total Holdings USA, Inc. v. Curran Composites, Inc., 999 A.2d 873 (2009) (holding that the general partnership was domiciled in Delaware and Delaware law applied); see also Fla. Stat. Ann. § 620.8106 (the law of the jurisdiction in which a partnership has its chief executive office governs relations among partners and between the partners and a partnership); Ohio Rev. Code Ann. § 1776.06 (“[T]he law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and between the partners and the partnership). Therefore, the Court will determine the formation of partnership under Delaware, Florida, and Ohio law.

A partnership is formed when the association of two or more persons co-own a business for profit, whether or not the person intended to form a partnership. [*9]  Del. Code Ann. tit. 6, § 15-202; Fla. Stat. Ann. § 620.8202; Ohio Rev. Code Ann. § 1776.22. To support their argument, Plaintiff relies on a CEVA letter to Uni Trans. The letter addresses Uni Trans as “Carrier Partner” and states “We select partners based upon quality of services . . . We rely heavily upon our partners . . . Several advantages of partnering with CEVA are . . .We look forward to partnering with you . . .” Doc. 257-1. While the letter refers to Uni Trans as a partner, it does not establish the formation of a partnership. CEVA and Uni Trans do not co-own a business for profit. The Carrier Agreement defined the relationship between CEVA and Uni Trans as a broker and carrier relationship, not co-ownership of a business for profit. Doc. 236-2. Zerius Brittain, the Director of Ground Procurement, Head for CEVA, also stated in his affidavit that CEVA at no time entered into any formal partnership agreement with Uni Trans. Doc. 236-1 ¶ 23. The Court recognizes that CEVA described Uni Trans as a partner in a letter, but as Mr. Brittain further stated, CEVA “considers all of its business customers as informal or colloquial business partners in the shipping and logistics of goods around the world.” Id. at ¶ 24. The colloquial use of the word “partner” does not [*10]  establish a partnership because there was no co-ownership of a business for profit. Because there is no evidence that CEVA and Uni Trans co-owned a business for profit, the Court finds that CEVA and Uni Trans did not form a partnership.

II. CEVA is not vicariously liable pursuant to a principal agent relationship.

CEVA argues it is not vicariously liable because CEVA did not retain operational control of Uni Trans or Mr. Saydiev. Doc. 236 at 9. Plaintiff argues that CEVA maintained operational control over the subject shipment. Doc. 257 at 11. The Court finds that there is no vicarious liability pursuant to principal agent relationship because Uni Trans was an independent contractor and CEVA did not have operational control over Uni Trans.

“New Mexico courts have employed an agency analysis to determine whether an individual is acting as an independent contractor or as an employee.” Celaya v. Hall, 2004-NMSC-005, ¶ 11, 135 N.M. 115, 85 P.3d 239. In New Mexico, a “right to control analysis focuses on whether the principal exercised sufficient control over the agent to hold the principal liable for the acts of the agent,” and where a sufficient right to control is present, “an employer-employee relationship usually exists.” Id. ¶ 12. “The principal test is [*11]  whether the employer has the right to control the manner in which the details of the work are to be accomplished, not the exercise of any control at all.” Scott v. Murphy, 1968-NMSC-185, ¶ 10, 79 N.M. 697, 448 P.2d 803. When the right to control is not fundamentally a part of the relationship, a court may consider a number of factors when determining whether an individual is acting as an employee or independent contractor: (1) the degree of control the principal exercises over the details of the agent’s work, (2) the type of occupation and whether it is usually performed without supervision; (3) the skill required for the job; (4) whether the employer supplies the instrumentalities or tools for the person doing the work; (5) the length of time the person is employed; (6) the method of payment, whether by time or job; (7) whether the work is part of the regular business of the employer; (8) whether the parties intended to create an employment relationship; and (9) whether the principal is engaged in business. See Loya v. Gutierrez, 2015-NMSC-017, ¶¶ 55-56, 350 P.3d 1155; Celaya, 2004-NMSC-005, ¶ 15 (citing Restatement (Second) of Agency § 220(2)(a-j)).

The Carrier Agreement sets out that Uni Trans “is an independent contractor, and, as such, is wholly responsible in every way for such persons as Carrier hires or employs in the performance of any of the services covered under [*12]  these Terms and Conditions.” Doc. 236 at 2. The Carrier Agreement makes clear that Uni Trans has “the sole and exclusive responsibility for the manner in which its employees and/or independent contractors perform the transportation services, including the equipment provided.” Id. at 3. Therefore, neither CEVA and Uni Trans intended to create an employment relationship, and CEVA did not have sufficient operational control over Uni Trans. Mr. Saydiev was not an employee of CEVA, and Uni Trans owned the tractor and trailer in the subject shipment. Doc. 266-2; Doc. 266-5. The method of payment was also based on the job, not time. Doc. 257-9 at 10. Therefore, the Court finds that there is not an employer-employee relationship between CEVA and Uni Trans or CEVA and Mr. Saydiev.

Plaintiff argues that the letter CEVA sent to Uni Trans established that CEVA had operational control over Uni Trans. Doc. 257 at 11. The letter expressed goals and “ask[ed] [Uni Trans] to collaborate with [CEVA] by: committing to service/capacity/providing complete and accurate load status information and immediate notification of changes which may impact services, [and] submitting BOLs/PODs as quickly as possible [*13]  following delivery.” Doc. 257-1 at 1. The letter expresses a request, not an obligation, to Uni Trans and does not establish operational control. The Carrier Agreement sets Uni Trans’ obligations, which states that Uni Trans “shall transport shipments without delay and will comply with all agreed upon pick-up and delivery schedules. Carrier shall immediately notify Broker of any likelihood of delay.” Doc. 236-2 at 1. After reviewing the record, the Court finds that no reasonable jury could find that CEVA had operational control on how Uni Trans transported the subject shipment.

The Court finds that there is not an employer-employee relationship between CEVA and Uni Trans or CEVA and Mr. Saydiev, and thus, CEVA is not vicariously liable pursuant to a principal agent relationship.

III. CEVA is not vicariously liable pursuant to the statutory employee doctrine.

CEVA argues that it was a freight broker on the subject shipment and cannot be held vicariously liable for the accident. Doc. 236 at 7. Plaintiff argues that there is a genuine factual dispute because facts in the record suggest that Defendant was a motor carrier on the subject shipment. Doc. 257 at 11. The Court finds there is no [*14]  genuine factual dispute that CEVA was a freight broker on the subject shipment, and thus, CEVA is not vicariously liable.

Under the doctrine of respondeat superior, an employer is vicariously liable when its employee commits negligence while acting within the course and scope of his or her employment. Ocana v. Am. Furniture Co., 2004-NMSC-018, ¶ 29, 135 N.M. 539, 91 P.3d 58; Los Ranchitos v. Tierra Grande, Inc., 1993-NMCA-107, ¶ 13, 116 N.M. 222, 226, 861 P.2d 263, 267 (citing McCauley v. Ray, 1968-NMSC-194, ¶ 28, 80 N.M. 171, 180, 453 P.2d 192). “As a general rule, an employer of an independent contractor is not responsible for the negligence of the contractor or [its] employees.” Saiz v. Belen Sch. Dist., 1992-NMSC-018, 113 N.M. 387, 393, 827 P.2d 102, 108 (1992). “One exception to the independent contractor general rule is when the independent contractor has a non-delegable duty to protect another from harm based on a duty imposed by statute.” See Dixon v. Stone Truck Line, Inc., No. 219CV000945JCHGJF, 2020 U.S. Dist. LEXIS 228168, 2020 WL 7079047, at *9 (D.N.M. Dec. 3, 2020); see also Harris v. FedEx Nat. LTL, Inc., 760 F.3d 780, 783-84 (8th Cir. 2014) (citing Nebraska law); Saiz, 113 N.M. at 393 (“The general rule has no application where the employer has nondelegable duties (1) arising out of some relation toward the public or the particular plaintiff (e.g., duty of lessor to lessee), or (2) because of work that is specially, peculiarly, or inherently dangerous.”).

The FMCSR create a statutory employee relationship between owner-lessors and authorized motor carrier-lessees. Motor carriers are required to “have exclusive possession, control, and use of the equipment. . . and shall assume complete responsibility [*15]  for the operation of the equipment . . .” 49 C.F.R. § 376.12; see also 49 U.S.C.A. § 14102 (“The Secretary may require a motor carrier . . . that uses motor vehicles not owned by it to transport property under an arrangement with another party to . . . have control of and be responsible for operating those motor vehicles in compliance with requirements prescribed by the Secretary on safety of operation and equipment, and with other applicable law as if the motor vehicles were owned by the motor carrier.”). An employee under the FMCSR is “any individual, other than an employer, who is employed by an employer and who in the course of his or her employment directly affects commercial motor vehicle safety. . . . including an independent contractor while in the course of operating a commercial motor vehicle.” 49 C.F.R. § 390.5 (emphasis added). Further, “employer” is defined as “any person engaged in a business affecting interstate commerce who owns or leases a commercial motor vehicle in connection with that business, or assigns employees to operate it….” Id. Thus, an “interstate carrier is vicariously liable as a matter of law under the FMCSR for the negligence of its statutory employee drivers.” Dixon, No. 219CV000945JCHGJF, 2020 U.S. Dist. LEXIS 228168, [WL]at *9 (quoting Morris v. JTM Materials, Inc., 78 S.W.3d 28, 38 & n.5 (Tex. Ct. App. 2002)).

Here, the issue is whether [*16]  CEVA was a motor carrier and statutory employer of Mr. Saydiev. A “motor carrier” is defined as “a person providing motor vehicle transportation for compensation.” 49 U.S.C. § 13102(14). A “broker” is defined as “a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2). According to 49 C.F.R. § 371.2, a broker is “a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier.” 49 C.F.R. § 371.2. To be a motor carrier, rather than a broker, on a certain transaction, the entity must have “arrange[d] or offer to arrange[d] the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.” 49 C.F.R. § 371.2 (emphasis added); Tryg Ins. v. C.H. Robinson Worldwide, Inc., 767 F. App’x 284, 287 (3d Cir. 2019). “If an entity accepts responsibility for ensuring the delivery of goods, then that entity qualifies as a carrier regardless of whether it conducted the physical transportation.” Id.

The key question is whether the entity accepted legal responsibility [*17]  to transport the shipment. Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292, 1301 (11th Cir. 2018). If a party makes it clear in writing that it is merely acting as a go-between to connect the shipper with a third-party carrier, it will be considered a broker, but when no writing exists, “the question will depend on how the party held itself out to the world, the nature of the party’s communications and prior dealings with the shipper, and the parties’ understanding as to who would assume responsibility for the delivery of the shipment in question.” Id. at 1302; see also Vanguard Graphics LLC v. Total Press Sales & Serv., LLC, No. 3:18-CV-55 (NAM/ML), 2020 U.S. Dist. LEXIS 189054, 2020 WL 6059872, at *4 (N.D.N.Y. Oct. 13, 2020); Hewlett-Packard Co. v. Brother’s Trucking Enterprises, Inc., 373 F. Supp. 2d 1349, 1352 (S.D. Fla. 2005) (“Whether a company is a broker or a carrier is not determined by what the company labels itself, but by how it represents itself to the world and its relationship to the shipper”). “Because the analysis of whether defendant is a carrier or a broker is fact specific, it may not be appropriate for summary judgment.” Louis M. Marson Jr., Inc. v. Alliance Shippers, Inc., 438 F. Supp. 3d 326, 332 (E.D. Pa. 2020) (citing Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292, 1302 (11th Cir. 2018) (“This is necessarily a case-specific analysis, and as a result, summary judgment might not be appropriate in many cases.”)).

Defendant established that CEVA was a freight broker during this transaction. The Carrier Agreement between CEVA and Uni Trans designates CEVA as the broker and Uni Trans as the carrier. Doc. 236-2 at 1. The Carrier Agreement states that CEVA is “a [*18]  licensed property broker by the [FMCSA], and as a licensed broker, arranges for freight transportation.” Id. The Carrier Agreement further states that “[i]n order to satisfy some of its customer’s or shipper’s (herein a “Shipper”) transportation needs, Broker desires to utilize the services of Carrier to transport of some of the Shipper’s freight.” Id. It is “clear in writing that [CEVA] is merely acting as a go-between to connect the shipper with a suitable third-party carrier.” See Essex, 885 F.3d at 1302. Additionally, Mr. Brittan testified in his deposition that CEVA was “the broker for this shipment.” Doc. 257-8 at 14. Furthermore, Uni Trans part-owner, Mr. Gaybullaev testified in his deposition that the business relationship between Uni Trans and CEVA logistics was “[j]ust like normal with any other brokers.” Doc. 236-3 at 3.

Plaintiff has not met their burden to dispute that CEVA was a freight broker during the instant transaction. Plaintiff argues that there are facts to show that CEVA was the carrier in this transaction. Plaintiff points to the Bill of Lading that list CEVA as the carrier. Doc. 257-3 at 1. However, the Carrier Agreement between CEVA and Uni Trans states, “Documents for each Shipment [*19]  shall name [CEVA] as third party payor of all freight charges and [Uni Trans] as the carrier of record. If there is a wrongly worded document, the parties will treat it as if it showed [CEVA] as “third party payor” and [Uni Trans] as “carrier”.“ Doc. 236-2 at 1. The Court agrees there is a conflict between the Bill of Lading and the Carrier Agreement, but the Carrier Agreement addresses if conflicts arise between the agreement and shipping documents. It states, “If there is a conflict between these Terms and Conditions and any transportation document related to shipment, these Terms and Conditions shall govern.” Id. Therefore, the Carrier Agreement that establishes CEVA as freight broker is correct.

Plaintiff also argues that Defendant CEVA holds itself out as a “Leading End-to-End Logistics Company” and boasts it delivers “a complete spectrum of supply chain services” and that the pickup location was at CEVA warehouse. Doc. 257-6 at 1. CEVA Ground US, LP is also certified as a motor carrier. Doc. 257-9 at 16-19. However, the issue is not whether CEVA performed as a carrier for other shipments but rather whether CEVA was a carrier for this subject shipment. Courts must “look to how [*20]  the party acted during the ‘specific transaction’ at issue, which includes ‘the understanding among the parties involved [and] consideration of how the entity held itself out.'” Louis M. Marson Jr., 438 F. Supp. 3d at 331 (emphasis added). The Carrier Agreement and both CEVA employees and Uni Trans owner referring to CEVA as the broker establish that CEVA was the freight broker on the subject shipment. Furthermore, CEVA was not the owner of the tractor trailer on this subject shipment, and Uni Trans was listed as the Carrier on the Load and Rate Confirmation for this subject shipment. Doc. 236-1 ¶ 26; Doc. 266-2. Doc. 257-9. The Court finds that no reasonable jury could conclude that CEVA was the carrier on this subject shipment. Therefore, there is not a genuine dispute that CEVA was a freight broker on this subject shipment.

Because CEVA was a freight broker, Mr. Saydiev was not CEVA’s statutory employee. Therefore, CEVA is not vicariously liable pursuant to the statutory employee doctrine.

IV. CEVA is not negligent for retention or selection of carrier.

Plaintiff argues that there is a genuine factual dispute as to how CEVA vetted Uni Trans as an approved carrier, and thus, a jury could conclude that CEVA failed to meet their [*21]  duty to use reasonable care it its selection. Doc. 257 at 13-14. The Court finds that there is no genuine factual dispute that CEVA had a process for verifying their approved carriers. The Court also finds that CEVA is not negligent for retention or selection of the carrier.

“An employer is liable for physical harm to third persons caused by its failure to use reasonable care to select a competent and careful contractor (a) to perform work that will involve a risk of physical harm unless it is skillfully and carefully done or (b) to perform any duty that the employer owes to third persons.” Talbott v. Roswell Hospital Corp., 2008-NMCA-114 ¶¶ 10-12, 144 N.M. 753, 192 P.3d 267 (quoting and adopting Restatement (Second) of Torts § 411). To succeed on a negligent hiring claim, the plaintiff must show that “the employee was unfit, considering the nature of the employment and the risk he posed to those with whom he would foreseeably associate, and that the employer knew or should have known that the employee was unfit.” Valdez v. Warner, 1987-NMCA-076, ¶ 11, 106 N.M. 305, 742 P.2d 517 (internal citation omitted). The harm the plaintiff suffered must have arisen out of the particular quality of the independent contractor which made it negligent for the employer to select that contractor to perform the work. See Jones v. C.H. Robinson Worldwide, Inc., 558 F.Supp.2d 630, 643 (W.D. Va. 2008) (citing Restatement (Second) of Torts § 411 comment (b)).

“Numerous courts have recognized a claim for negligent [*22]  hiring of an independent contractor in the context of the selection of a motor carrier by a broker or shipper.” Dixon, No. 219CV000945JCHGJF, 2020 U.S. Dist. LEXIS 228168, [WL] at *8; See also Jones, 558 F.Supp.2d at 641-42 (and cases cited therein, L.B. Foster Co. v. Hurnblad, 418 F.2d 727, 729 (9th Cir. 1969); Hudgens v. Cook Indus., Inc., 1973 OK 145, 521 P.2d 813, 816 (Okl. 1973); Puckrein v. ATI Transport, Inc., 186 N.J. 563, 575, 897 A.2d 1034 (N.J. 2006)). “A company whose core purpose is the transportation of goods on the highways has a duty to use reasonable care in the hiring of an independent trucker.” Id. (quoting Puckrein, 186 N.J. at 579). “A fact finder may reasonably infer that a carrier or broker would be incompetent based on a lack of experience, poor financial condition, failure to respect federal certificate requirements, and willingness to do business at cut rates.” Id. (quoting Hurnblad, 418 F.2d at 729-730.

Plaintiff argues that CEVA lacked information as to how Defendant Uni Trans was vetted as an approved carrier. Doc. 257 at 3. The Court has reviewed the record and finds that no reasonable jury could conclude that CEVA did not have a process for vetting approved carriers. Mr. Brittain described how CEVA vetted approved carriers. Mr. Jeff Nichols would “check to make sure that all of the information that’s presented here is accurate, their MC number checks out as stating who they are, which all of that is public information. Their [SCAC]⁴ codes and everything. So the due diligence just to ensure that they are who they [*23]  say they are.” Doc. 266-1 at 10-11. Mr. Nichols “refers to carrier’s information, such as MC number, address, phone number, all the public information that is available, [SCAC] code, safety scores, and all of that to ensure that this carrier is who they say they are and this information is accurate.” Id. To ensure compliance, an automated system monitors the carrier’s [SCAC] and MC numbers, and “[i]f the carrier’s safety scores go down, they — they’re blocked out of the system, you can’t dispatch them. If they lapse on insurance, blocked out system, you can’t dispatch them.” Id. at 21. A carrier falls out of compliance “by violating the carrier terms.” Id.

In addition to having a process for verifying approved carriers, Uni Trans also warranted “that it is authorized as a motor carrier by all relevant federal, state and/or provincial authorities in order to lawfully perform all services undertaken pursuant to this Agreement, including but not limited to registration with the US Department of Transportation pursuant to 49 U.S.C. 13902 and 13905” and “that it does not have an unsatisfactory safety rating issued from the US Department of Transportation.” Doc. 236-2. Mr. Saydiev also met the minimum requirements [*24]  for safe driving in his annual review, had no FMCSA reportable crashes, and was a tractor and trailer driver for 5-6 years. Doc. 266-4; Doc. 266-5. The Court finds that CEVA is not negligent for retention and selection of a motor carrier because CEVA did not know or should have known that Uni Trans or Uni Trans’ employees were unfit.

IT IS THEREFORE ORDERED that Defendant CEVA Logistics US, Inc.’s Motion for Summary Judgment (Doc. 236) is GRANTED.

/s/ Kea W. Riggs

KEA W. RIGGS

UNITED STATES DISTRICT JUDGE

End of Document

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¹ Plaintiff’s claims against Saydiev were dismissed without prejudice for failure to serve him. See Doc. 78.

² The Court has determined the relevant facts based on the parties’ submissions, while omitting extraneous detail, party arguments, and facts not supported by the record.

³ Plaintiff argues the Carrier Agreement is not the entirety of the agreement because Defendant has failed to provide the sections referenced. Doc. 257 at 6. Paragraph D and Paragraph O in the Carrier Agreement are not at issue in this case because the Court is not addressing double brokering or waiver of consequential damages.

⁴ The deposition spells this “SCAT”. The National Motor Freight Traffic Association Inc has a Standard Carrier Alpha Code (“SCAC”). Doc. 257-9. Mr. Brittain explained the “SCAT” Code “are safety and compliance codes that are required for every carrier, every motor carrier.” Doc. 266-1 at 11.

United States District Court for the District of Connecticut

August 24, 2023, Decided; August 24, 2023, Filed

No. 3:19-cv-1896 (JAM)

LEON GREEN and WALDO TEJADA, Plaintiffs, v. RXO LAST MILE, INC., Defendant.

Prior History: Green v. XPO Last Mile, Inc., 504 F. Supp. 3d 60, 2020 U.S. Dist. LEXIS 222716, 2020 WL 7021704 (D. Conn., Nov. 30, 2020)

Counsel:  [*1] For Leon Green, on behalf of themselves and all others similarly situated, Waldo Tejada, on behalf of themselves and all others similarly situated, Plaintiffs: Benjamin Weber, Harold L. Lichten, Olena Savytska, LEAD ATTORNEYS, Lichten & Liss-Riordan, P.C., Boston, MA; Zachary L. Rubin, LEAD ATTORNEY, Lichten & Liss-Riordan,-P.-C, Boston, MA.

For RXO Last Mile, Inc., Defendant: Adam Lewis Lounsbury, LEAD ATTORNEY, PRO HAC VICE, Jackson Lewis, PC, Richmond, VA; Carolyn A. Trotta, LEAD ATTORNEY, Jackson Lewis PC, Hartford, CT; David R. Golder, LEAD ATTORNEY, PRO HAC VICE, Jackson Lewis – P.C. Htfd, CT, Hartford, CT; Juan Obregon, LEAD ATTORNEY, PRO HAC VICE, Holland & Hart, LLP, Denver, CO.

Judges: Jeffrey Alker Meyer, United States District Judge.

Opinion by: Jeffrey Alker Meyer

Opinion

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ CROSS-MOTION FOR SUMMARY JUDGMENT

Plaintiffs Leon Green and Waldo Tejada have filed this action on behalf of a class of delivery drivers alleging that defendant RXO Last Mile, Inc. (“RXO”) took illegal deductions from their wages in violation of Connecticut law and that RXO was unjustly enriched by misclassifying their drivers as independent contractors rather [*2]  than employees.

RXO has filed a motion for summary judgment arguing that the terms of the contract between RXO and independent business entities formed by the delivery drivers preclude both claims. In the meantime, the plaintiffs have cross-moved for partial summary judgment to seek a finding that they and class members are employees of RXO under Connecticut state law. Because I conclude that RXO has shown that there are no genuine issues of fact to support the plaintiffs’ claim for unlawful wage deductions and for unjust enrichment, I will grant RXO’s motion for summary judgment and deny as moot the plaintiffs’ cross-motion for summary judgment.

Background

RXO—formerly known as XPO Last Mile, Inc.—is a third-party logistics coordinator and freight forwarder that arranges and facilitates deliveries of large footprint consumer goods on behalf of retailers to the customers who purchase them.¹ RXO engages with retailers such as Costco and Lowe’s to coordinate “last-mile” deliveries of consumer goods to the homes of customers.²

RXO then contracts with motor carriers—which RXO refers to as Delivery Service Providers (“DSPs”)—to complete these deliveries.³ The contractual relationship between RXO [*3]  and motor carriers is reflected in a standardized Delivery Service Agreement.⁴

Pursuant to the terms of the Agreement, each DSP must be a motor carrier authorized by the Federal Motor Carrier Safety Administration and own and operate an independent delivery business, typically a limited liability company (“LLC”).⁵ Motor carriers contracting with RXO may earn revenue on either a per-delivery-stop basis or by means of a flat, daily rate that varies based on services offered, locations, and the addition of services like “walk up” deliveries or fuel surcharges evaluated on an ad hoc basis.⁶ The exact revenue structure for each motor carrier is set forth in Schedule A appended to each Agreement.⁷

The Delivery Service Agreement includes a provision for “Loss or Damage to Product.”⁸ It states that the contract carrier “shall be fully liable for the loss, theft, or destruction of or any damage to any merchandise in its custody or control in the delivery process” and that RXO “shall have the right to offset such damages from Contract Carrier’s reconciliation for services performed under this Agreement, provided such amounts are reasonably substantiated.”⁹ The Delivery Service Agreement [*4]  includes a similar provision for “Damage to Property.”¹⁰ And the Agreement provides for an escrow fund to pay for damage or loss claims.¹¹

The Delivery Service Agreement states that “Payment shall be made pursuant to any Schedule A(s) attached hereto and made part of this Agreement,” but that RXO shall engage in a weekly reconciliation process to “reconcile the amount of Payments due to Contract Carrier for services rendered under this Agreement with any offsets for claims or losses resulting from Contract Carrier’s services under this Agreement as set forth in Sections 6, 7 and 8 above” relating to loss or damage to products or property.¹² Following this reconciliation, RXO then transfers the remaining sum of money to CMS/Openforce, a third-party settlement administrator, to make the actual payment to the carriers.¹³

The Delivery Service Agreement does not otherwise provide for any deductions to be made from payments for service. It does, however, require that the carrier assume certain expenses. For example, the carrier must “[b]ear all expenses associated with the employment of such persons [whom it hires as employees], including, without limitation, wages, salaries, employment [*5]  taxes, workers’ compensation coverage, health care, retirement benefits and insurance coverages.”¹⁴ And it further provides that the carrier “at its own expense . . . shall maintain insurance of the kinds and amounts specified in” Schedule D to the Agreement.¹⁵ Schedule D in turn prescribes specific insurance coverage requirements for motor truck and cargo liability, general liability and personal injury liability, excess liability, and workers’ compensation (“As required by state authorities”).¹⁶

The Agreement specifies that it constitutes a contract between RXO and the independent business entity only, and that the carrier “retains complete and exclusive direction and control over its employees and all those working for it in any capacity.”¹⁷ The Agreement states that it “is strictly between two independent entities and does not create an employer/employee relationship for any purpose.”¹⁸

The plaintiffs Leon Green and Waldo Tejada own and operate DSP entities that contracted with RXO—LG Family LLC and Tejada Express LLC, respectively.¹⁹ They have filed this action on behalf of a class of similarly situated delivery drivers alleging that RXO made illegal wage deductions in violation of Conn. Gen. Stat. § 31-71e (Count [*6]  One) and that RXO was unjustly enriched by misclassifying its drivers as independent contractors rather than as employees because the misclassification allowed it to shift business costs to the plaintiffs that RXO would otherwise have had to bear (Count Two).

At the outset of this litigation, I denied RXO’s motion to compel arbitration. I found that because the Delivery Service Agreements were between the limited liability companies and RXO only, RXO had not shown that individual drivers such as the plaintiffs should be bound by the Agreement’s arbitration clause. See Green v. XPO Last Mile, Inc., 504 F. Supp. 3d 60 (D. Conn. 2020).

I later granted a motion for class certification of about 275 delivery drivers working for RXO, with Green and Tejada as named plaintiffs. See Green v. XPO Last Mile, Inc., 2022 U.S. Dist. LEXIS 171324, 2022 WL 4380959 (D. Conn. 2022). The class I certified did not include all persons who drove trucks for RXO. Instead, it was limited to “[a]ll individuals who personally or on behalf of their business entity, signed a Delivery Service Agreement with [RXO] and who personally performed deliveries for [RXO] full-time in Connecticut between November 2017 and the present.” 2022 U.S. Dist. LEXIS 171324, [WL] at *2. Thus, the class excluded persons who were drivers or employees of the carrier companies but who had not themselves signed a Delivery Service [*7]  Agreement with RXO.

RXO now moves for summary judgment on both counts of the complaint.²⁰ The plaintiffs have cross-moved for partial summary judgment to seek a finding that they and class members are employees rather than independent contractors.²¹

Discussion

The principles governing my review of a motion for summary judgment are well established. Summary judgment may be granted only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). I must view the facts in the light most favorable to the party who opposes the motion for summary judgment and then decide if those facts would be enough—if eventually proved at trial—to allow a reasonable jury to decide the case in favor of the opposing party. My role at summary judgment is not to judge the credibility of witnesses or to resolve close contested issues of fact but solely to decide if there are enough facts that remain in dispute to warrant a trial. See generally Tolan v. Cotton, 572 U.S. 650, 656-57, 134 S. Ct. 1861, 188 L. Ed. 2d 895 (2014) (per curiam); Union Mut. Fire Ins. Co. v. Ace Caribbean Mkt., 64 F.4th 441, 445 (2d Cir. 2023).²²

Count One—illegal wage deductions

RXO moves for summary judgment as to Count One of the complaint which alleges that RXO engaged in unlawful wage deductions in violation of Conn. Gen. Stat. § 31-71e. That [*8]  statute provides in relevant part that an employer may not “withhold or divert any portion of an employee’s wages unless . . . the employer has written authorization from the employee for deductions on a form approved by the commissioner.”

RXO argues that, even assuming the plaintiffs were RXO employees, the deductions it made from the gross amounts payable to the plaintiffs’ LLCs did not amount to the “withhold[ing] or divert[ing] [of] any portion of an employee’s wages” as is prohibited under § 31-71e. Its argument critically turns on the definition of “wages” under Connecticut law. Connecticut law defines “wages” as “compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation.” Conn. Gen. Stat. § 31-71a(3). Although the plaintiffs rely on that portion of the statute that measures wages by reference to compensation as determined by means of “time, task, piece, [or] commission,” RXO relies on the ending words of this definition that refer in open-ended terms to compensation as determined by any “other basis of calculation.” Ibid.

In Mytych v. May Department Stores Co., 260 Conn. 152, 793 A.2d 1068 (2002), the Connecticut Supreme Court addressed how to define what constitutes “wages” under Connecticut [*9]  law. The facts in Mytych involved a class of plaintiff salespersons who were employed at department stores and who earned compensation in accordance with a commission sales agreement. The agreement provided for compensation in the amount of an 8% commission on “net sales” which was defined in relevant part to mean gross sales minus customer returns. Id. at 155-56. The plaintiffs argued that the reduction of their compensation for customer returns amounted to an improper withholding or diversion of their wages in violation of Conn. Gen. Stat. § 31-71e. They also argued this reduction was a violation of Connecticut’s anti-kickback law—Conn. Gen. Stat. § 31-73(b)—which provides in relevant part that “[n]o employer . . . shall, directly or indirectly, demand, request, receive or exact any refund of wages . . . or deduct any part of the wages agreed to be paid, upon the representation or the understanding that such refund of wages . . . or deduction is necessary to secure employment or continue in employment.”

The Connecticut Supreme Court rejected the plaintiffs’ arguments, concluding in essence that what the plaintiffs chose to characterize as improper deductions from wages were in fact inherent by the terms of the employment agreement to the very definition [*10]  of what constituted “wages” in the first place. The court explained that while Connecticut laws provide “an enhanced remedy for the collection of wages,” they do “not embody substantive standards to determine the amount of wages that are payable.” Id. at 162. Citing the statutory definition of “wages” under Conn. Gen. Stat. § 31-71a(3), the court concluded that Connecticut law “expressly leaves the determination of the wage to the employer-employee agreement, assuming some specific conditions, such as a minimum hourly wage, are met.” Id. at 163 (emphasis added).

Thus, the court rejected “the plaintiffs[‘] claim that wages accrue at the time the service is rendered; in this case, at the time the sale of shoes is completed” and that “any deduction that occurs after the rendering of services, i.e., after the completed sale, is a deduction from wages and prohibited by statute.” Ibid. Instead, the “wages” due to the plaintiffs were calculated by reference to “the specific commission agreement . . . [which] provided that wages would accrue or vest after the agreed to calculations were made to the plaintiffs’ gross sales, including the deduction of the plaintiffs’ pro rata share of unidentified returns.” Id. at 163-64.

The Connecticut Supreme [*11]  Court would later recognize Mytych to stand for the proposition that “when an employee has agreed to a specific formula for the calculation of . . . wages, the part of the formula that allows deductions does not constitute a deduction from earned wages.” Ziotas v. Reardon Law Firm, P.C., 296 Conn. 579, 592, 997 A.2d 453 (2010). Still later, the Connecticut Supreme Court has again cited and quoted Mytych with approval for the propositions that “the wage statutes, as a whole, do not provide substantive rights regarding how a wage is earned” and that “the Connecticut wage statutes do not purport to define the wages due; they merely require that those wages agreed to will not be withheld for any reason.” Geysen v. Securitas Sec. Services USA Inc., 322 Conn. 385, 394, 142 A.3d 227 (2016) (internal quotations and bracket omitted).

The Second Circuit has recently applied Mytych to conclude that wages include agreed-upon deductions from a worker’s earned revenue. See Mujo v. Jani-King Int’l, Inc., 13 F.4th 204 (2d Cir. 2021). The plaintiffs in Mujo were franchisees who contracted with a company to perform cleaning services for clients under the company name. Id. at 207-08. The franchise agreement between the plaintiffs and the company required the plaintiffs to pay “accounting fees, royalty fees, advertising fees, and insurance fees,” which the company collected “by deducting them from the revenue it receives from [*12]  customers.” Id. at 208.

The Second Circuit rejected the plaintiffs’ claims that these fees amounted to unlawful wage deductions. The court concluded that the gross customer revenue was “not the baseline ‘wage’ from which the Connecticut Minimum Wage Act prohibits deductions.” Id. at 211. Rather, “even assuming that the [plaintiffs] are employees . . . their wages under the franchise agreement are the funds that remain after Jani-King deducts its fees under the franchise agreement.” Ibid.

The same holds true in this case. The plaintiffs’ theory rests on the notion that their “wages” are solely those payments to which they are entitled to under Schedule A of the Agreement in terms of the payment rate for their particular services performed.²³ But the Agreement itself explicitly lays out the process by which revenue earned under Schedule A is reconciled with the value of lost or damaged goods before being paid out to the carriers. A “contract must be viewed in its entirety, with each provision read in light of the other provisions . . . and every provision must be given effect if it is possible to do so.” Cruz v. Visual Perceptions, LLC, 311 Conn. 93, 103, 84 A.3d 828 (2014). When read in its entirety, the Agreement here makes clear that the final sum owed to the carrier includes [*13]  deductions for losses and damages. And just as in Mytych and Mujo, any deductions provided for in the Agreement are inherent to the very definition of what the plaintiffs’ “wages” are in the first place.

The plaintiffs misplace their reliance on Weems v. Citigroup, Inc., 289 Conn. 769, 961 A.2d 349 (2008), a case involving whether an employer company’s enforcement of certain stock forfeiture provisions violated Connecticut’s wage statutes. For those employees in Weems who voluntarily left their employment with or were fired by the employer, they lost interests in stock that had been purchased during the course of their employment by means of employee contributions to a stock purchase plan. Id. at 773-74.

According to the plaintiffs, “the Court [in Weems] concluded that deductions taken from the employees’ gross payments were deductions under the Connecticut Minimum Wage Act even though they were agreed to.”²⁴ But that is not true. The Connecticut Supreme Court stated only that it was assuming without deciding that the employee contributions were deductions from wages. See id. at 783-84 (noting that “[w]e begin by assuming, without deciding, that the contributions to the plans were deductions from wages under § 31-71a(3), as explained by Mytych v. May Dep’t Stores Co., 260 Conn. 152, 159-60, 793 A.2d 1068 (2002)” and that “we assume that, under the plaintiffs’ employment [*14]  agreement with the defendants, the wages due to them would be the gross compensation amount that had accrued during the relevant pay period, with the contribution to the plans being, therefore, a deduction from that gross amount”). The Connecticut Supreme Court in Weems only assumed a proposition and did not purport to retreat from or overrule its decision in Mytych.

The plaintiffs further argue that the deductions allowed by the Agreement for loss and damage cannot be considered to be a part of their wages because they do not know in advance how much the deductions will be. But that is no different from the compensation schemes in Mytych and Mujo. In Mytych, deductions were defined in part as a percentage of customer returns, see 260 Conn. at 155-56, and a salesperson could not know in advance whether a customer was going to return an item. Likewise, in Mujo, deductions were defined in part to include fees for accounting, royalties, advertising, and insurance, see 13 F.4th at 208, and there was no suggestion that the franchisees knew those specific amounts in advance when they performed their services. Whether the deductions are a part of wages turns on whether they were agreed to in accordance with a calculation procedure [*15]  or formula, not whether the specific amount of deductions was known by the plaintiffs at the time that they rendered their services.

Beyond deductions or offsets for loss or damage to goods, the complaint alleges that there were “deductions for insurances (including auto liability, cargo, general liability, umbrella and workers’ compensation insurance), gift cards, administrative costs such as processing fees, uniforms.”²⁵ But the parties’ statements of material facts address only the issue of deduction for loss or damage to goods.²⁶ Moreover, although the Agreement required contractors to assume some costs such as for insurance, it did not provide that these costs would be deducted by RXO from the amounts that RXO paid, much less that they be “withheld” or “diverted” as required to violate Conn. Gen. Stat. § 31-71e.

Regardless, even assuming that there were such deductions for items other than loss or damage to goods, the plaintiffs do not show that they were made in a manner that is not provided for or inconsistent with the terms of the Delivery Service Agreement. Instead, the plaintiffs’ theory is that the Agreement improperly allowed for such deductions or offsets. At oral argument, plaintiffs made clear that [*16]  their claim is based on deductions authorized by the Agreement, not on the basis of deductions outside the scope of the Agreement.²⁷ It is undisputed that RXO made payments “in accordance with the contractually specified reconciliation process.”²⁸ Therefore, any such claims with respect to such additional deductions or offsets fail for the same reasons that I have explained with respect to deductions for lost or damaged goods—that is, because they were an agreed-to component of the calculation of the plaintiffs’ wages rather than an unlawful deduction from wages.

The plaintiffs argue that the Agreement’s payment formula violates Connecticut’s anti-kickback statute, Conn. Gen. Stat. § 31-73(b). But that same argument was rejected in both Mytych and Mujo, because the deductions were agreed-upon and therefore under Connecticut law a component of the calculation of wages, rather than an unlawful refund or kickback of wages. See Mytych, 260 Conn. at 165 (noting that “the defendant’s policy here does not violate §§ 31-71e and 31-73(b))”); Mujo, 13 F.4th at 213-14 (“[W]hile § 31-73(b) prohibits employers from seeking a ‘refund of wages,’ § 31-73(a) defines ‘refund of wages’ as ‘[t]he return by an employee to his employer . . . of any sum of money actually paid or owed to the employee in return [*17]  for services performed,’ and ‘the sum of money . . . owed to the employee’ is defined by the employment contract”).²⁹

The plaintiffs additionally argue that the Agreement is void against public policy because it misclassifies employees as independent contractors.³⁰ But as the Second Circuit observed in Mujo, “even if the [plaintiffs] should have been classified as employees under Connecticut law, Mytych forecloses the . . . § 31-71e claim.” 13 F.4th at 211. Regardless of any misclassification, the holding in Mytych applies to employees and independent contractors alike: both can enter into a contractual agreement that defines wages to include deductions for certain items.

Lastly, the plaintiffs point out that—as I previously ruled when I denied RXO’s motion to compel arbitration—the Delivery Service Agreements are between the motor carriers as corporate entities and RXO, rather than between the plaintiffs personally and RXO. So, according to the plaintiffs, the deductions were not agreed to by them because they were not even parties to the Agreements.

But this argument is self-defeating. After all, the plaintiffs’ theory of recovery in this case is that they were entitled to “wages” as calculated by [*18]  payments due under Schedule A of the Agreement. Yet if the plaintiffs want to argue that—as non-parties to the Agreement—they did not agree to its provisions for deductions, then this same argument must also mean that they have no contractual right to be paid under Schedule A as they insist.

The plaintiffs must take the bitter with the sweet. Indeed, when I queried plaintiffs’ counsel at oral argument that “I didn’t think that there was any dispute here that your contention is they’re entitled to be paid as stated in Schedule A,” counsel responded: “Correct.”³¹ Plaintiffs’ counsel went on to argue: “I’m not trying to say that the agreement is completely void. They had this agreement. I’m just dealing with the deductions because deductions have a special place in the Connecticut statutes. And if it is a deduction, that it has to meet the requirements of the statute.”³²

Apart from my conclusions concerning the formal contractual signatories at the early stage of this case when I addressed the motion to compel arbitration, the full summary judgment record now shows that the plaintiffs by their course of conduct personally agreed to be paid in accordance with all of the terms of the Agreement [*19]  including to be subject to the deductions specified in the Agreement. A contrary conclusion would mean that the plaintiffs have no rights at all under the Agreement, including as they claim the rights to be paid as calculated under Schedule A of the Agreement.

In short, there is no genuine issue of fact remaining to support the plaintiffs’ claim that they were subject to unlawful wage deductions in violation of Conn. Gen. Stat. § 31-71e. Accordingly, I will grant RXO’s motion for summary judgment as to Count One of the complaint.³³

Count Two—unjust enrichment

Count Two of the complaint alleges a claim for unjust enrichment. To establish a claim of unjust enrichment under Connecticut law, a plaintiff “must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs’ detriment.” Vertex, Inc. v. City of Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).

Unjust enrichment is a broad and flexible remedy, and “the ultimate question for courts . . . is whether, under a given set of circumstances, the party liable, to the detriment of someone else, obtained something of value to which the party liable was not entitled.” Mujo, 13 F.4th at 213 (citing Town of New Hartford v. Conn. Res. Recovery Auth., 291 Conn. 433, 452, 970 A.2d 592 (2009)). In order to survive summary judgment [*20]  on an unjust enrichment claim, plaintiffs must provide “hard evidence . . . from which a reasonable inference” may be drawn that the defendants unjustly obtained a benefit to the detriment of the plaintiffs. Id. at 214.

Plaintiffs argue that Connecticut law bars an employer from contracting around its statutory obligation to furnish workers’ compensation insurance for its employees. See Conn. Gen. Stats. §§ 31-284(b), 31-290; Welch v. Arthur A. Fogarty, Inc., 157 Conn. 538, 545, 255 A.2d 627 (1969). According to the plaintiffs, because RXO misclassified them as independent contractors rather than employees, this allowed RXO to be unjustly enriched by allowing it to shift the burden to the plaintiffs to pay for workers’ compensation insurance rather than RXO’s assuming the burden itself.

As noted above, the Agreement required contract carrier companies to “[b]ear all expenses” for their own employees, including for “workers’ compensation coverage.”³⁴ And it further required that the carrier company provide “at its own expense” such workers’ compensation insurance “[a]s required by state authorities.”³⁵ But even accepting that the contract carrier companies were required to assume such expenses, there is no evidence that RXO required the plaintiffs themselves to pay for their own workers’ compensation insurance. [*21] 

The plaintiffs point to business ledgers from a third party, CMS/Openforce, that show regular deductions for items including “Workers Compensation Insurance” and “Occupational Accident.”³⁶ But these statements reflect money paid by RXO to the contract carriers, not to the individual plaintiffs. The ledger for plaintiff Green, for example, indicates that it was “[p]repared for LG Family LLC.”³⁷ Because RXO’s contractual agreement was with the LLCs, not the individual drivers, it would make no sense for RXO to pay the plaintiffs directly. So while the statements show that deductions were taken from the amount paid by RXO to the contract carriers, they do not show that the plaintiffs themselves bore any of those costs, much less that RXO required them to do so.

Nor do the plaintiffs demonstrate that amounts paid by the contract carriers for workers’ compensation or occupational accident insurance went toward the plaintiffs’ own insurance coverage, rather than for other employees of the contract carriers. Green and Tejada did not testify that they received workers’ compensation from their own carrier companies (Green stated that he instead took out an occupational accident policy [*22]  but did not elaborate).³⁸ But Tejada Express LLC and LG Family LLC provided its other employees, including helpers and other drivers, with workers’ compensation plans.³⁹ This shows that the insurance deductions reflected in the Openforce statements paid for coverage of other employees of the companies rather than for Tejada or Green.

These other employees of the contract carriers are not necessarily members of the class, and there is no claim that they also should have been considered employees of RXO. See XPO Last Mile, Inc., 2022 U.S. Dist. LEXIS 171324, 2022 WL 4390959 (certifying a class composed only of delivery drivers who signed contract carrier agreements with RXO). And so even if RXO had classified the plaintiffs as its employees, the contract carriers would still have had to pay for workers’ compensation and other insurance coverage for their non-plaintiff employees. The “detriment” of these insurance costs is therefore not traceable to RXO’s alleged misclassification of the plaintiffs as independent contractors rather than employees.

An unjust enrichment claim may also involve a transfer of a benefit from a third party to a defendant “when the plaintiff has a superior equitable entitlement to that benefit.” Geriatrics, Inc. v. McGee, 332 Conn. 1, 25, 208 A.3d 1197 (2019). But the standard [*23]  for such an indirect unjust enrichment claim is high—”the plaintiff must prove that it has a better legal or equitable right to the disputed benefit than the defendant” and that “its right is both recognized, and accorded priority over the interest of the defendant.” Ibid. Because it appears that the insurance deductions went towards coverage for the contract carriers’ other employees rather than the plaintiffs, the plaintiffs cannot show that their interest in the insurance deductions was a “paramount interest of the kind recognized in law or equity,” and so any indirect claim for unjust enrichment based on the plaintiffs’ third-party status also fails. Ibid.

Because there is no genuine fact issue to suggest that RXO required the plaintiffs themselves to personally pay for workers’ compensation insurance, I will dismiss the plaintiffs’ unjust enrichment claim to the extent that it is based on the plaintiffs’ claim that RXO was unjustly enriched by requiring the plaintiffs to pay workers’ compensation insurance premiums that the law required RXO to pay in the first instance. While Count Two of the complaint additionally lists “employer payroll taxes, administrative fees, fuel and vehicle [*24]  maintenance costs” as examples of business costs RXO shifted to the plaintiffs, the claim is underdeveloped in light of subsequent briefing and the record at summary judgment which focus almost exclusively on workers’ compensation as the cost that was allegedly unjustly shifted to the plaintiffs in violation of Connecticut law.⁴⁰ In any event, the plaintiffs do not show that it was against public policy for RXO to shift these additional costs to the contract carriers. Nor do they show a genuine issue of fact that RXO was unjustly enriched by any such shifting of these costs.

All in all, there is no “hard evidence . . . from which a reasonable inference” may be drawn that RXO unjustly obtained a benefit to the detriment of the plaintiffs. Mujo, 13 F.4th at 214. Accordingly, I will grant RXO’s motion for summary judgment on the plaintiffs’ unjust enrichment claim. See Mujo v. Jani-King Int’l, Inc., 431 F. Supp. 3d 18, 43-44 (D. Conn. 2019) (granting summary judgment on unjust enrichment claim where plaintiffs failed to identify the fees added beyond the value of the franchise agreement), aff’d on other grounds Mujo, 13 F.4th 204; Levy v. World Wrestling Ent., Inc., 2009 U.S. Dist. LEXIS 13538, 2009 WL 455258, at *3 (D. Conn. 2009) (dismissing employee misclassification claim of unjust enrichment stated as a “legal conclusion without factual substantiation” and noting that “[w]here parties [*25]  have an express contract which delineates the rights and obligations with respect to services to be provided and the compensation to be paid therefor, unjust enrichment does not lie”). Accordingly, I will grant RXO’s motion for summary judgment as to Count Two of the complaint.

CONCLUSION

For the reasons stated above, the Court GRANTS the defendant RXO’s motion for summary judgment (Doc. #111). In light of the granting of the defendant’s motion, the Court DENIES as moot the plaintiffs’ cross-motion for partial summary judgment with respect to their employment status (Doc. #114).

The Clerk of Court shall enter judgment and close this case.

It is so ordered. Dated at New Haven this 24th day of August 2023.

/s/ Jeffrey Alker Meyer

Jeffrey Alker Meyer

United States District Judge

End of Document

---

¹ Doc. #111-2 at 1 (¶ 1) (RXO Rule 56(a)(1) statement of material facts); Doc. #130 at 1 (¶ 1) (Plaintiffs’ Rule 56(a)(2) statement of facts in opposition).

² Doc. #130 at 1 (¶ 1); Doc. #116 at 2-3 (¶¶ 4, 6); Doc. #128-1 at 2-4 (¶¶ 4, 6). RXO takes issue with the plaintiffs’ representations that RXO “performs” deliveries or “provides” delivery services but does not otherwise deny that it contracts with specific businesses to arrange delivery of their goods to their customers’ homes.

³ Doc. #111-2 at 1 (¶ 2); Doc. #130 at 1-2 (¶ 2).

⁴ Doc. #111-2 at 2 (¶¶ 4-5); Doc. #130 at 2-3 (¶¶ 4-5). The record includes various examples of these Delivery Service Agreements. See, e.g., Doc. #19-4.

⁵ See, e.g., Doc. #128-5 at 2 (LG Family LLC Delivery Service Agreement).

⁶ Doc. #111-2 at 2 (¶ 10); Doc. #130 at 5 (¶ 10). The plaintiffs dispute that drivers are able to negotiate their rates but do not take issue with the statement that revenue schemes vary as set forth in each specific Agreement.

⁷ See Doc. #128-5 at 8 (¶ 9.2) (“Payment shall be made pursuant to any Schedule A(s) attached hereto.”); Doc. #144 (sample Schedule A).

⁸ Doc. #128-5 at 7 (¶ 7).

⁹ Ibid.

¹⁰ Id. at 7-8 (¶ 8).

¹¹ Id. at 6-7 (¶¶ 6.1, 6.2, 6.3).

¹² Id. at 8 (¶¶ 9.2, 9.3).

¹³ Doc. #111-2 at 3 (¶ 14); Doc. #130 at 6 (¶ 14).

¹⁴ Doc. #128-5 at 6 (¶ 5(c)).

¹⁵ Id. at 8 (¶ 12).

¹⁶ Doc. #90-1 (Schedule D).

¹⁷ Doc. #128-5 at 6 (¶ 5).

¹⁸ Id. at 4 (¶ 4.1).

¹⁹ Doc. #111-2 at 1 (¶ 3); Doc. #130 at 2 (¶ 3). The plaintiffs dispute this statement but their response does not refute that the two named plaintiffs in this action did own and operate DSPs that were legally separate corporate entities.

²⁰ Doc. #111.

²¹ Doc. #114.

²² Unless otherwise indicated, this ruling omits internal quotation marks, alterations, citations, and footnotes in text quoted from court decisions.

²³ Doc. #129 at 13 (plaintiffs’ contention that “the DSA expressly states that Plaintiffs are paid for completed delivery based on amounts listed in Schedule A which is attached to the DSA”).

²⁴ Id. at 2-3.

²⁵ Doc. #1 at 6-7 (¶ 25).

²⁶ Doc. #130 at 5-6, 12-13 (¶¶ 11-13, 23); Doc. #128-1 at 28-29, 32-33 (¶¶ 73-75, 88).

²⁷ Doc. #150 at 15. The plaintiffs likewise claimed at the class certification stage that all unlawful deductions were “pursuant to the DSA.” Doc. 73-1 at 5; see also id. at 18 (noting that the plaintiffs “signed identical DSAs” such that “[t]hey were subject to . . . the same policies for deductions”).

²⁸ Doc. #130 at 10 (¶18).

²⁹ The plaintiffs misplace their reliance on Lockwood v. Pro. Wheelchair Transp., Inc., 37 Conn. App. 85, 654 A.2d 1252 (1995), in which the Connecticut Appellate Court concluded that an employer violated the anti-kickback statute when it required an at-will employee to pay a $1,000 insurance deductible resulting from the employee’s involvement in a traffic accident involving the employer’s vehicle. Id. at 93. But Lockwood was decided before Mytych, and Mytych distinguished Lockwood on the ground that “[t]he amount of the deductible [in Lockwood] was not part of the employee’s wages” but “was an amount completely separate and distinct from the money he had earned in his employment pursuant to any wage agreement he might have had with the employer.” Mytych, 260 Conn. at 166.

³⁰ Doc. #129 at 10.

³¹ Doc. #150 at 17.

³² Id. at 17-18 (emphasis added).

³³ For the same reasons that the Second Circuit declined to certify to the Connecticut Supreme Court questions concerning the issue of how to define wages and lawful deductions under Connecticut law, see 13 F.4th at 214-16, I also decline plaintiffs’ request to certify such questions to the Connecticut Supreme Court.

³⁴ Doc. #128-5 at 6 (¶ 5(c)).

³⁵ Id. at 8 (¶ 12); Doc. #90-1 at 22 (Schedule D); see also Doc. #151-3 (Schedule D for Tejada Express requiring furnishing of certificate of insurance for workers’ compensation or occupational accident coverage).

³⁶ Doc. #151 at 3; Doc. #151-6. The plaintiffs describe these worksheets as “pay statements” from CMS/Openforce but the actual sheets are titled “Self Employment Business Ledger.”

³⁷ Doc. #151-6. The ledger for Tejada states that it was prepared for “Waldo Tejada” rather than for his LLC. See Doc. #151-7. As the defendant explains this is because Tejada contracted with CMS before he established Tejada Express LLC, the entity that contracted with RXO. See Doc. #156 at 6.

³⁸ See Doc. #117-12 at 33 (Green deposition) (“Q. [D]id you get workers’ comp through LG Family LLC? A. No I took—what is it called? Q. An occupational accident policy? A. Yeah, yeah, that’s the one, yes.”); Doc. #128-9 at 15 (Tejada deposition) (“Q. Did Tejada Express LLC provide you with workers’ compensation insurance? A. For me? Q. Yes. A. I don’t remember that.”). To the extent Tejada and Green’s subsequent supplemental affidavits (Docs. #151-1 and #151-2) conclusorily contradict their prior deposition testimony, I decline to give weight to the later-filed contradictory affidavits. See In re Fosamax Prods. Liab. Litig., 707 F.3d 189, 193 (2d Cir. 2013) (noting that “the ‘sham issue of fact’ doctrine . . . prohibits a party from defeating summary judgment simply by submitting an affidavit that contradicts the party’s previous sworn testimony”).

³⁹ See Doc. #128-10 at 5 (“Q. Did [Tejada Express] provide its employees workers’ compensation insurance? A. Yes.”); Doc. #128-9 at 15 (“Q. Did Tejada Express LLC provide Felix Olguin workers’ compensation insurance? A. Yes.”); Doc. #117-12 at 33 (“Q. Did LG Family LLC provide workers’ comp coverage for its employees? A. Yes, for—yes, for most of them, yes. Not the part-timers, but yes. Q. Just the full-timers? A. Yes. I believe it was all of them.”); see also Doc. #117-12 at 34 (“Q. LG Family offered workers’ compensation to James Searcy from November 2020 to November of 2021; is that correct? A. He had insurance, yes, but not on that truck” continuing a conversation about how the workers’ comp policies covered specific workers driving specific trucks).

⁴⁰ See, e.g., Doc. #129 at 9-10; Doc. #155 at 1.