FedEx Class Action Defense Cases-In re FedEx Ground: Indiana Federal Court Certifies Kansas Class Action Under Rule 23(b)(3) And Nationwide ERISA Class Action Under Rule 23(b)(2) In Labor Law Class Action By Drivers Against FedEx

Oct 23, 2007 | By: Michael J. Hassen

Kansas Class Representatives in Labor Law Class Action by Drivers Against FedEx Adequately Established Rule 23(b)(3) State-Wide Class Action for Misclassification of Drivers under Kansas Labor Laws and for Common Law Claims Against FedEx, and Rule 23(b)(2) Nationwide Class Action for Denial of ERISA Benefits Indiana Federal Court Holds

In 2005, the Judicial Panel on Multidistrict Litigation transferred numerous class action lawsuits to the Northern District of Indiana pursuant to 28 U.S.C. § 1407; ultimately, the MDL docket included 56 class action lawsuits filed in 30 states alleging that FedEx improperly classified drivers as independent contractors rather than employees and thus failed to pay wages due under state and federal wage statutes and failed to pay benefits due under ERISA. In re FedEx Ground Package Sys., Inc., Employment Prac. Litig., ___ F.Supp.2d ___ [Slip Opn., at 1-2] (N.D. Ind. October 15, 2007). The Kansas plaintiffs moved the federal court to certify a class action on their behalf, as well as a nationwide class action on behalf of the ERISA class, id., at 1. Defense attorneys opposed class action treatment, and submitted three expert reports purporting to show (1) “that FedEx Ground workers prefer to be independent contractors by a 52% to 20% margin,” id., at 8, (2) “that FedEx Ground delivery drivers are operating a business,” id., at 15, and (3) that the workers are independent contractors because there are “important variations in the contractors’ work,” id., at 20. Plaintiffs objected to the federal court considering these expert reports in deciding whether to certify a class action, and moved to strike the reports under Federal Rule of Evidence 702. Id., at 1-2. The district court denied plaintiffs’ motion to strike, but agreed that class action treatment was warranted.

The district court explained that the Kansas plaintiffs challenged the FedEx practice “of labeling its Ground and Home Delivery division drivers as independent contractors.” FedEx, at 22. According to the class action allegations, “the FedEx Operating Agreement signed by all FedEx drivers actually reserves to FedEx the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” including “the drivers’ appearance and behavior, their pay and rates charged to customers, the vehicle they use and its appearance, their route and the number of packages they deliver each day, their delivery methods and mode of customer service, their hours of work, and their opportunity to increase their earnings.” Id., at 22-23. Class action treatment is further warranted, plaintiff argued, because “FedEx has a categorical policy of classifying its drivers as independent contractors” and because putative members of the proposed class action “share the same job title, signed the same nonnegotiable Operating Agreement, are paid under the same compensation formula, wear the same uniform, drive FedEx approved trucks bearing the FedEx logo, work exclusively for FedEx, and are all similarly integrated into FedEx’s operations.” Id., at 23. The class action sought rescission of the operating agreement and a declaration that defendant’s practices violated Kansas labor laws, id., at 30. Defense attorneys argued against class action treatment by arguing that numerous individualized factual inquiries exist, id., at 23.

The defense did not contest numerosity, and the district court independently concluded that the proposed Kansas class satisfied the requirement of Rule 23(a)(1). FedEx, at 30-31. The court also concluded that the commonality test was satisfied because “the putative class members were uniformly classified as independent contracts” and so “they share several common factual and legal questions regarding their statutory wage claim,” id., at 31, and because the class members “share several common factual and legal questions relating to the interpretation, execution, and enforcement of the agreement.,” id., at 32. The federal court next found that the class representatives’ claims were typical of the absent class members and that they would adequately represent the class if the court certified the litigation as a class action. Id., at 32-33.

Defense attorneys argued that the predominance and superiority tests of Rule 23(b)(3) cannot be met because “the court can’t make categorical decisions as to the drivers’ employment status” in that “the Kansas drivers’ varied experiences raise individualized issues,” including whether FedEx had the “right to control” their activities. FedEx, at 34. The district court rejected this argument, noting in part that it was the right to control, not whether the employer exercised actual control, that presented the common issue of fact and law, id., at 34-35. The federal court also found at page 37 that “[t]he operating agreement appears to provide common proof of FedEx’s authority to control its package and delivery drivers, which allows the court to make categorical determinations of the driver’s employment status, so the varying experiences of some drivers doesn’t preclude certification.” The court concluded that the predominance test was satisfied because “the court finds that determining whether the drivers are employees under Kansas law will depend upon the amount of control reserved by Fed Ex and will require a detailed analysis of the standard Operating Agreement” and that “[t]hese common questions of law and fact predominate over issues affecting only individual members and so support class certification.” Id., at 41. The court also found that the superiority test was met, id., at 41-42, and so granted plaintiffs’ motion to certify a Kansas class action under the state’s labor laws, id., at 42, and under plaintiffs’ common law claims of rescission, unjust enrichment and quantum meruit, id., at 45.

With respect to the motion to certify a nationwide ERISA class action, plaintiffs argued that class action treatment was appropriate because FedEx denied drivers “participant status and entitlement to benefits under the ERISA plans…as a result of their misclassification” of the drivers as independent contractors. FedEx, at 45. Defense attorneys did not contest numerosity, commonality or typicality under Rule 23(a), id., at 46, and the court independently determined that these requirements had been satisfied, id., at 46-48. The court then analyzed and rejected defendant’s argument that the class representatives could not adequately represent the class because they lacked standing, id., at 48, concluding that they possessed the requisite standing to represent the class because if they demonstrate that they are employees then they would have standing to pursue the ERISA claims, id., at 51-52. The district court also concluded that a Rule 23(b)(2) was appropriate because any monetary recovery was “incidental” to the declaratory relief sought – viz., the entitlement to ERISA benefits. Id., at 53-54.

NOTE: Preliminarily, the district court discussed in detail plaintiffs’ motions to strike the expert reports submitted by defense attorneys in opposition to the motions for class certification. See FedEx, at 2-22. In the end, the court overruled the objections but concluded that the reports were unpersuasive, see id., at 14, 19 and 22.

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