Workers Compensation - Central Analysis Bureau

Shock v. LAC Logistics, LLC

United States District Court, N.D. Indiana, Fort Wayne Division.

Gary SHOCK, Plaintiff,

LAC LOGISTICS, LLC, Defendant.

Cause No. 1:24-CV-83-HAB

Signed April 16, 2024

Attorneys and Law Firms

Nathaniel O. Hubley, Theisen Hubley Law, Fort Wayne, IN, for Plaintiff.

Rachel K. Steinhofer, Anthony M. Stites, Barrett McNagny LLP, Fort Wayne, IN, for Defendant.

OPINION AND ORDER

HOLLY A. BRADY, CHIEF JUDGE

*1 Plaintiff, a citizen of Indiana, sued Defendant, an Indiana limited liability company, in Lagrange County, Indiana, Superior Court in February of this year alleging retaliatory discharge under Indiana law. (ECF No. 4). Defendant removed to this Court claiming federal question jurisdiction. (ECF No. 1). Plaintiff has now moved to remand. (ECF No. 8). That motion is fully briefed (ECF Nos. 9, 11)¹ and ready for ruling.

I. Factual and Procedural History

A. Plaintiff’s Complaint

Plaintiff was employed by Defendant as a CDL driver. He claims that he was injured on the job in June 2023, for which he sought worker’s compensation benefits. Defendant denied the worker’s compensation claim, accusing Plaintiff of faking the injury.

In August 2023, Defendant directed Plaintiff to drive a route from Ohio to North Carolina. Plaintiff refused, telling Defendant he was over his federally mandate hours of service (“HOS”) and that he needed rest. Defendant told Plaintiff to run the route under agricultural exempt status which would exclude it from HOS regulations. Plaintiff did not believe that the route qualified for agricultural exempt status and again refused. Plaintiff was then terminated by Defendant.

Plaintiff’s complaint has two counts. The first is under Frampton v. Indiana Cent. Gas Co., 297 N.E.2d 425 (Ind. 1973), which provides a claim when an employee is fired for seeking benefits under the Indiana Worker’s Compensation Act (“IWCA”). The second is under McClanahan v. Remington Freight Lines, 517 N.E.2d 390, 392 (Ind. 1988), which provides a claim when an employee is fired for refusing to engage in unlawful conduct. (ECF No. 4 at 5).

B. Federal Proceedings

Defendant removed the case to this Court in February 2024. In its Petition for Removal (ECF No. 1), Defendant stated:

The above-described action is a civil action of which this Court has original jurisdiction under the provisions of the Motor Carrier Safety Act, 49 U.S.C. § 31101 et seq. and the Motor Carrier Act, 49 U.S.C. § 31501 et seq. (collectively, “the Motor Carrier Acts”), and is one which may be removed to this Court by LAC.

(Id. at 1). No other basis for removal was stated.

Two days after removal, Defendant filed its Corporate Disclosure Statement. (ECF No. 5). It identified Kyle Lennard as the sole member of Defendant. (Id. at 1). No other citizenship information for Lennard was provided.

Magistrate Judge Collins sua sponte issued an order questioning the basis for federal jurisdiction. (ECF No. 6). The order noted that Plaintiff’s suit was brought “under state law.” (Id. at 1). With no federal claim stated in the complaint, Magistrate Judge Collins questioned “how Plaintiff’s complaint provides federal jurisdiction under the Motor Carrier Safety Act, the Motor Carrier Act, or any other federal law.” (Id. at 1-2). Defendant was ordered to file a supplemental jurisdictional statement explaining the basis for federal jurisdiction.

Before the supplemental jurisdictional statement was filed, Plaintiff moved to remand. (ECF No. 8). He argued that there was no federal jurisdiction under federal question (28 U.S.C. § 1331) or diversity (28 U.S.C. § 1332) jurisdiction.

*2 Defendant filed its supplemental jurisdictional statement one week later. (ECF No. 10). Defendant now, for the first time, argued that diversity existed. It claimed, without evidence, that Lennard was a “citizen” of Michigan. Because an LLC is a citizen of the state(s) where its members live, and because Defendant believes that the amount in controversy exceeds $75,000, it argued that the parties were diverse. (Id. at 1-2). Defendant also argued for federal question jurisdiction. It noted that both the HOS regulations and the agricultural exempt status are creatures of federal law. Because the complaint references federal regulations, Defendant argued that “the Complaint raises theories on the face of the Complaint which distinctively demonstrate that Plaintiff’s claims extend beyond state law and removal would be proper on the basis of a federal question.” (Id. at 4).

Defendant then responded to the motion to remand, largely repeating the arguments from its supplemental jurisdictional statement. (ECF No. 11). The same day, Defendant filed an amended corporate disclosure statement. (ECF No. 12). In this amended statement, Defendant identified Lennard as a “resident of the State of Michigan.” (Id. at 1). Later, Defendant stated, “Defendant LAC Logistics, LLC is a resident of the State of Michigan by virtue of the fact that its sole member is a resident and citizen of the State of Michigan.” (Id. at 2).

II. Legal Analysis

As the party invoking federal jurisdiction, Defendant bears the burden of proving the propriety of removal, and any doubt regarding jurisdiction should be resolved in favor of remand. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009).

A. Federal Question

Defendant concedes that “Plaintiff has relied exclusively on state law” in bringing this suit. (ECF No. 11 at 2). But it still presses federal question jurisdiction, though without any caselaw support. Defendant’s argument is that, because Plaintiff’s refusal to accept the route was based on his belief that it would violate federal regulations, the claim arises under federal law.

“A civil action filed in a state court may be removed to federal court if the claim is one ‘arising under’ federal law.” Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 6 (2003) (citing 28 U.S.C. § 1441). And a civil action arises under federal law when federal law is present in the original cause of action. See Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 153 (1908). In other words, “absent diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege a federal claim.” Anderson, 539 U.S. at 6. This well-pleaded complaint rule embodies the “paramount policies … that the plaintiff is master of the complaint … and that the plaintiff may, by eschewing claims based on federal law, choose to have the case heard in state court.” Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987). Again, Defendant concedes that Plaintiff has only pleaded state-law claims, so the default rule does not establish federal question jurisdiction.

That said, “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn v. Minton, 568 U.S. 251, 258 (2013). Unfortunately, Defendant does not discuss, much less establish, these requirements. Instead, it simply repeats that, because federal regulations govern HOS and the agricultural exempt status, the claim must arise under federal law. (ECF No. 11 at 1-3). The Court cannot agree.

As the Seventh Circuit has made clear, “[t]hat some standards of care used in tort litigation come from federal law does not make the tort claim one ‘arising under’ federal law.” Bennett v. Southwest Airlines Co., 484 F.3d 907, 912 (7th Cir. 2007). That’s what the Court sees here. Defendant’s order to drive from Ohio to North Carolina might have violated federal law. But Plaintiff’s claim is one for wrongful discharge under Indiana law. McClanahan, 517 N.E.2d at 393 (“McClanahan stated a cause of action when he alleged he was wrongfully discharged for refusing to commit an illegal act for which he would have been personally liable.”). And Defendant’s potential assertion that it complied with federal law is of no consequence. Rice v. Panchal, 65 F.3d 637, 639 (7th Cir. 1995) (defenses do not establish federal question jurisdiction). The well-pleaded allegations of Plaintiff’s complaint establish only state-law claims. With no other basis for federal question jurisdiction argued or established, the Court finds that this case is properly decided under state law. Removal under § 1331 was improper.

B. Diversity

*3 “[A] proponent of federal jurisdiction must, if material factual allegations are contested, prove those jurisdictional facts by a preponderance of the evidence.” Meridian Sec. Ins. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006). Plaintiff has challenged the existence of diversity (ECF No. 9 at 4), so Defendant must establish the requirements for diversity jurisdiction. The Court finds that it has done so, if only just.

Federal courts have jurisdiction over all civil actions between “citizens of different States” when the amount in controversy exceeds $75,000.00. 28 U.S.C. § 1332(a)(1). For a business entity that is not a corporation, like Defendant, its “citizenship is the citizenship of its owners, partners, or other principles.” Meyerson v. Harrah’s E. Chicago Casino, 299 F.3d 616, 617 (7th Cir. 2002). And residence is irrelevant, as “residence and citizenship are not synonyms and it is the latter that matters for purposes of the diversity jurisdiction.” Id.

Defendant’s filings on the issue of diversity are less than clear. Its notice of removal does not mention diversity. (ECF No. 1). Its initial corporate disclosure statement says nothing about the citizenship of Defendant or Lennard. (ECF No. 5). While its supplemental jurisdictional statement and its briefing on the motion for remand talk of Defendant’s and Lennard’s Michigan citizenship, no evidence is offered. And its amended corporate disclosure statement, where one would think that evidence would be provided, states only that Defendant is “a resident of the State of Michigan,” while inconsistently identifying Lennard as either a resident or “resident and citizen” of Michigan. (ECF No. 12).

That said, the amended disclosure does identify Lennard as a “citizen” of Michigan. And, by operation of corporate law, that makes Defendant a citizen of Michigan, inconsistent labelling notwithstanding. The Court further notes that Plaintiff has not challenged the citizenship of Defendant or Lennard by way of a reply. Taken together, the Court finds that diversity of citizenship has been established. This Court has jurisdiction under § 1332.

III. Conclusion

For these reasons, Plaintiff’s motion to remand (ECF No. 8) is DENIED.

SO ORDERED on April 16, 2024.

All Citations

Slip Copy, 2024 WL 1653528

Footnotes

Plaintiff did not file a reply and the time to do so has expired.

End of Document

Ayala v. Fundamental Labor Strategies, Inc.

See Pa. Commonwealth Court Internal Operating Procedures, Sec. 414 before citing.

Commonwealth Court of Pennsylvania.

Wilfredo Ayala, Petitioner

Fundamental Labor Strategies, Inc. (Workers’ Compensation Appeal Board), Respondent

No. 1037 C.D. 2022

Submitted: April 28, 2023

FILED: January 2, 2024

BEFORE: HONORABLE ANNE E. COVEY, Judge HONORABLE MICHAEL H. WOJCIK, Judge HONORABLE STACY WALLACE, Judge

OPINION NOT REPORTED

STACY WALLACE, Judge

*1 Wilfredo Ayala (Claimant) petitions for review of the order of the Workers’ Compensation Appeal Board (Board) dated August 31, 2022, which affirmed the decision and order of a workers’ compensation judge (WCJ), circulated February 16, 2022 (WCJ’s Decision). On appeal, Claimant argues it was error for the Board to affirm the WCJ’s finding he was an independent contractor at the time of his injury and, therefore, not entitled to workers’ compensation (WC) benefits. After review, we affirm the Board’s order.

BACKGROUND

Claimant, a commercial truck driver, began working as a delivery driver for Fundamental Labor Strategies, Inc. (FLS) in March 2019. Certified Record (C.R.), Item No. 13. On February 17, 2021, Claimant filed a claim petition alleging on February 6, 2020, he sustained a lumbar disc injury while unloading a window during the course and scope of his employment with FLS. Id. Claimant then filed a petition for penalties alleging FLS violated the Pennsylvania Workers’ Compensation Act¹ by failing to timely file Bureau of Workers’ Compensation documents accepting or rejecting liability for his work injury. Id. Claimant filed an additional claim petition alleging that also on February 6, 2020, he sustained adjustment disorder with anxious and depressed mood and chronic pain syndrome from his work injury. Id. After each of Claimant’s filings, FLS filed an answer denying an employment relationship with Claimant.

In support of his two claim petitions, Claimant testified FLS was not a motor carrier, and explained FLS sent him to different driving assignments with various clients. Id. After finishing his previous assignment, FLS emailed Claimant his assignments for the next day, which included the required arrival time, the address, and the items he was to deliver. Id. Claimant first testified he was permitted to accept or reject assignments, but later testified he did not feel he could decline an assignment. Id. When carrying out an assignment, Claimant received routing instructions from the motor carrier, and he drove trucks owned by the clients. Id.

Regarding his employment relationship with FLS, Claimant understood FLS treated him as an independent contractor, and he had worked as an independent contractor for other companies. Id. Claimant testified FLS provided him a hat with FLS’s logo, but he was not required to wear it. Id. Claimant never drove a truck owned by FLS or displaying FLS’s logo. Id. FLS paid Claimant by check and Claimant understood FLS made no tax deductions, and he was responsible for paying his own taxes. Id. Claimant admitted he signed an independent contractor occupational accident insurance enrollment form in March 2019, but claimed he did not understand FLS would take deductions from his pay for the insurance. Id.

In response, Curtis Ball (Ball), the president of FLS, testified FLS is a transportation broker with two brokerage services. Id. FLS offers a dedicated driver service, which private motor carriers use to haul their own goods, rather than hauling another’s goods for a fee. Id. Ball testified FLS considers dedicated service drivers employees of FLS and closely manages them. Id. FLS dictates the assignments and hours of dedicated service drivers, and these drivers are required to report to work to perform their assignments. Id. The dedicated service drivers receive life insurance, disability insurance, and health benefits, and are subject to FLS’s internal rules and regulations. Id. They also receive W2 tax forms. Id.

*2 Ball explained the other service offered by FLS is the flex driver brokerage service. Id. This service matches motor carriers having a short term need for a driver with drivers who want to work. Id. These assignments can range from a day to a week or a month. Id. Ball indicated flex drivers determine how much they want to work. Id. The flex drivers transport themselves to the clients’ locations and drive the clients’ vehicles. Id. The client provides any trip sheet or routing information. Id. The motor carrier or shipper sets the start time for the job and the number of stops to be made during the assignment. Id. Flex drivers are paid a flat fee and receive a 1099 tax form. Id. Flex drivers are free to accept or reject assignments. Id. In order to provide flex drivers with as much information as possible to make decisions about accepting assignments, FLS obtains as much information about the assignment from the client as possible including the work days available, the start times, the equipment that will be operated, the number of deliveries to be made, whether the equipment is temperature controlled, the type of transmission in the vehicle, and any other relevant information. Id. There are no repercussions if a flex driver rejects an assignment. Id. Additionally, flex drivers are permitted to drive for other companies. Id.

Regarding Claimant’s work with FLS, Ball testified Claimant was a flex driver and received driving assignments from FLS in 2019 and 2020. Id. Claimant executed a W2 in July 2018 on which he indicated he was a sole proprietor or LLC. Id. Additionally, Ball testified Claimant executed an application for independent contractor occupational accident insurance. Id. In his testimony, Ball explained flex drivers provide FLS with proof they are insured so FLS knows the driver is covered in the event of a loss, but FLS does not provide coverage or require specific accident insurance coverage for flex drivers. C.R., Item No. 26. Ball testified that as a flex driver, Claimant was permitted to accept or reject assignments, and he had documentation Claimant rejected 11 assignment offers. C.R., Item No. 13. There were no repercussions for Claimant rejecting the assignments. Id.

Based on the testimony presented, the WCJ found Claimant did not establish an employment relationship with FLS and dismissed Claimant’s claim petitions and petition for penalties. Id. The WCJ noted that to the extent “Claimant and [Ball’s testimony] differs, [Ball’s] testimony is accepted as credible, particularly where he testified that there were at least 11 instances of refused assignments, but ongoing assignments offered to Claimant.” Id. The WCJ found Ball’s testimony regarding the flex driver program crucial in establishing Claimant was an independent contractor rather than FLS’s employee. Id.

Claimant appealed to the Board. Ultimately, the Board determined the WCJ did not err in finding Claimant was an independent contractor. C.R., Item No. 16. The Board rejected Claimant’s challenges to the WCJ’s weight and credibility determinations, which determinations are binding on appeal. Id. Noting the WCJ’s findings were supported by substantial, competent evidence, the Board affirmed the WCJ’s Decision. Id.

Claimant now petitions this Court for review of the Board’s order. On appeal, Claimant argues the Board erred in concluding he was an independent contractor at the time of his injury. Claimant’s Br. at 10. Specifically, Claimant contends he was not an independent contractor because FLS exercised control over his work. Id. at 18. In response, FLS contends the Board properly affirmed the WCJ’s Decision as substantial evidence supported the WCJ’s finding Claimant was an independent contractor. FLS’s Br. at 6.

DISCUSSION

Our review in WC appeals is limited to “determining whether the WCJ’s findings of fact were supported by substantial evidence, whether an error of law was committed, or whether constitutional rights were violated.” Pierson v. Workers’ Comp. Appeal Bd. (Consol Pa. Coal Co. LLC), 252 A.3d 1169, 1172 n.3 (Pa. Cmwlth.), appeal denied, 261 A.3d 378 (Pa. 2021). Relevant to this appeal, the question of whether an employee-employer relationship exists is a question of law subject to our plenary, de novo review. Am. Rd. Lines v. Workers’ Comp. Appeal Bd. (Royal), 39 A.3d 603, 610-11 n.6 (Pa. Cmwlth. 2012). However, where substantial evidence supports the WCJ’s findings, we defer to those findings as the WCJ is the ultimate fact finder in workers’ compensation cases and “has exclusive province over questions of credibility and evidentiary weight.” Anderson v. Workers’ Comp. Appeal Bd. (Penn Ctr. for Rehab.), 15 A.3d 944, 949 (Pa. Cmwlth. 2010). The WCJ is free to accept or reject the testimony of any witness, Edward v. Workers’ Compensation Appeal Board (Epicure Home Care, Inc.), 134 A.3d 1156, 1161 (Pa. Cmwlth. 2016), and this Court is bound by those credibility determinations. A&J Builders, Inc. v. Workers’ Comp. Appeal Bd. (Verdi), 78 A.3d 1233 (Pa. Cmwlth. 2013).

*3 For a claimant to receive WC benefits, the claimant must prove an employer-employee relationship exists because “[a]n independent contractor is not entitled to benefits.” Universal Am-Can v. Workers’ Comp. Appeal Bd. (Minteer), 762 A.2d 328, 330 (Pa. 2000). Whether an employer-employee relationship exists depends on the unique facts and circumstances of each case. 3D Trucking v. Workers’ Comp. Appeal Bd. (Fine and Anthony Holdings Int’l), 921 A.2d 1281 (Pa. Cmwlth. 2007). In considering whether a claimant is an independent contractor versus an employee, we consider many factors, including:

(1) control of manner the work is done; (2) responsibility for result only; (3) terms of agreement between the parties; (4) nature of the work/occupation; (5) skill required for performance; (6) whether one is engaged in a distinct occupation or business; (7) which party supplies the tools/equipment; (8) whether payment is by time or by the job; (9) whether work is part of the regular business of employer; and, (10) the right to terminate employment.

Am. Rd. Lines, 39 A.3d at 611 (internal citation omitted). While no factor is dispositive, control over the work and the manner it is performed are primary factors in determining employment status. Universal Am-Can, 762 A.2d at 333. Where an alleged employer has the right to select the employee, the right and power to discharge the employee, the power to direct the manner of performance, and the power to control the employee, there is sufficient control to establish an employer-employee relationship. 3D Trucking, 921 A.2d at 1288. Additionally, payment of wages and payroll deductions are a significant consideration, as is a tax filing noting self-employment. Id. See also Guthrie v. Workers’ Comp. Appeal Bd. (The Travelers’ Club, Inc.), 854 A.2d 653, 662-63 (Pa. Cmwlth. 2004).

Because of the relationships among drivers, owner-operators and motor carriers and the thorough regulation of them, the trucking industry presents unique challenges in determining whether an employer-employee relationship exists. Am. Rd. Lines, 39 A.3d at 611. In these cases, in addition to the previously outlined factors, we also consider the degree of supervision and control over delivery routes and the timing of work or schedule. Id.

Here, the WCJ analyzed and weighed the testimony and each of the WCJ’s findings are supported by evidence in the record. See generally C.R., Item No. 13. Accordingly, we conclude substantial evidence supports the WCJ’s factual findings about Claimant’s employment relationship with FLS. Because the Board is bound by the same standard of review we are, it did not err in reaching the same conclusion.

Turning to the WCJ’s legal conclusion Claimant was an independent contractor, we note the WCJ rejected Claimant’s testimony to the extent it conflicted with Ball’s testimony. Ball testified Claimant had no guarantee of work and was free to refuse work or even work for another company. He also testified FLS paid Claimant by check and took no tax deductions, instead FLS provided Claimant a Form 1099 and he was responsible for paying his own taxes. As to the amount of control, FLS provided Claimant with assignments and information from the client about pick-up and drop-off locations. While requests about the manner of work may have come from the clients, FLS did not dictate to Claimant which assignments to accept, how to complete the assignments, what routes to travel, and what times to drive each day or for how long. FLS did not provide a uniform or the vehicles for Claimant to drive, nor did FLS train Claimant. While none of these facts are individually dispositive, taken as a whole, these findings reflect Claimant controlled the time and manner of his work, primarily by his ability to accept or reject assignments.

*4 In analyzing the WCJ’s legal conclusion Claimant was an independent contractor at the time of his injury, the Board explained:

Herein, the WCJ credited the testimony of Claimant and [Ball] that Claimant signed an independent contractor occupational accident insurance form so he would have his own insurance in the case of an accident since he was treated as an independent contractor with [FLS] similar to his prior independent contractor driving jobs. Additionally, the credible testimony of Claimant and [Ball] supports the Claimant did not drive [FLS’s] truck, since [FLS] did not own any trucks, trailers, or warehouses, and the hat provided by [FLS] with the company logo on it was a gift which was not required to be worn by Claimant during driving assignments as a uniform. Moreover, the credible testimony establishes that [FLS] had no control over Claimant’s daily routes, starting or ending times, etc., and that Claimant was entitled to, and in fact took advantage of, rejecting job assignments without repercussions. This credible evidence constitutes substantial evidence to support the WCJ’s finding that Claimant was an independent contractor rather than an employee for [FLS] based on the terms of the agreement that Claimant would be an independent contractor for [FLS], that [FLS] did not supply Claimant’s tools to perform his job, and [FLS] did not retain control [over] the manner of Claimant’s driving on assignments. Consequently, the WCJ properly determined Claimant failed to meet his burden establishing an employment relationship with [FLS].

C.R., Item No.16. We agree with the Board’s determination.

CONCLUSION

Because this Court may not reweigh the evidence or second-guess the WCJ’s credibility determinations, and because substantial evidence in the record supports the WCJ’s findings of fact and conclusions of law, we discern no error by the Board in affirming the WCJ’s Decision Claimant was an independent contractor. As an independent contractor, Claimant was not entitled to WC benefits. Accordingly, we affirm the Board’s Order.

Judge Fizzano Cannon did not participate in the decision of this case.

IN THE COMMONWEALTH COURT OF PENNSYLVANIA