Green v. RXO Last Mile, Inc.

1

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

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

United States District Court, D. Connecticut

August 24, 2023

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

Jeffrey Alker Meyer United States District Judge

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 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 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 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 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 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 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.” Id. 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 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 (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 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 (2002), the Connecticut Supreme Court addressed how to define what constitutes “wages” under Connecticut 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...