We first reported on the Remington v. J.B. Hunt, Inc. case last year in Flash No. 46. Based on the First Circuit Court of Appeals' decision in Massachusetts Delivery Ass'n v. Coakley, 769 F.3d 11 (1st Cir. 2014) ("MDA"), District of Massachusetts Judge Stearns dismissed the complaint on the grounds that the claims under the Massachusetts Independent Contractor Law were preempted by the Federal Aviation and Administration Authorization Act of 1994 ("FAAAA"). On appeal, the First Circuit issued an opinion affirming, in part, and reversing, in part, Judge Stearns' decision, sending the case back to Judge Stearns for further proceedings (Flash No. 53).
When the case was sent back to Judge Stearns, he consolidated the Remington case with another putative class action brought by Abe Silfani. Silfani filed his complaint against J.B. Hunt in Massachusetts state court claiming, among other things, that J.B. Hunt misclassified him as an independent contractor and improperly withheld wages in violation of the Massachusetts Wage Act. In May, J.B. Hunt renewed a motion to dismiss both complaints.
In its motion to dismiss, J.B. Hunt argued that the Federal Truth-in-Leasing Regulations (the "Leasing Regulations") preempted plaintiffs' claims. Although the court declined to adopt J.B. Hunt's entire argument, the court agreed that the Leasing Regulations preempted allegations of improper business expense deductions "insofar as [the] deductions constitute permitted cost-sharing under a compliant lease." Based on the Leasing Regulations, the court held that "[w]hat is explicitly permitted by federal regulations cannot be forbidden by state law." Thus, "[i[f the Massachusetts Independent Contractor [Law] and Wage Act were to be interpreted to require a carrier, such as J.B. Hunt, to bear the entirety of the expense associated with an equipment lease, these state laws would be preempted to this extent by the [Leasing Regulations]."
Interestingly, the First Circuit previously reversed Judge Stearns' decision that Prongs 1 and 3 of the Massachusetts Independent Contractor Law were preempted under FAAAA based, in part, upon the fact that FedEx had not sought complete preemption in Schwann, et al. v. FedEx Ground Package System, Inc. Judge Stearns acknowledged in his Remington decision that, like FedEx, J.B. Hunt did not make that argument either. However, in a footnote, Judge Stearns highlighted two Massachusetts state court decisions in which all three prongs of the Massachusetts Independent Contractor Law were preempted by FAAAA on the grounds that application of any prong of the law would have a significant impact on the carrier's prices, routes, and services. See Rice v. Diversified Specialty Pharm., LLC, 2016 WL 4060956, at *5 (Mass. Super. July 26, 2016); Chambers v. RDI Logistics, Inc., 2015 WL 9911425, at *12-14 (Mass. Super. Oct. 26, 2015).
Judge Stearns' decision is industry-positive for at least two reasons. First, the decision represents another arrow in the quiver of a motor carrier whose independent contractor classification is being challenged. Not only should those motor carrier's argue that state laws affecting prices, routes, and services are preempted by FAAAA, they should likewise argue that the Leasing Regulations preempt contractor's state law claims related to improper settlement deductions. Second, even though Judge Stearns clearly felt hamstrung by the First Circuit's ruling in Schwann, he nevertheless brilliantly encouraged motor carriers to argue that the entirety of the Massachusetts Independent Contractor Law is preempted as to motor carriers by FAAAA.
Unfortunately, Judge Stearns' opinion does not fully resolve the matter. He requested that the parties inform the court by September 30th whether they intend to seek an appeal of his decision or proceed with discovery. We will, of course, continue to monitor this case and further developments. In the meantime, should you have any questions regarding these developments or how they may impact your independent contractor operations, Benesch's Transportation & Logistics Team would be very happy to help.