Portillo v. Nat'l Freight, Inc.

JOHN F. PORTILLO, RAFAEL SUAREZ, MARTIN DURAN, GERMAN BENCOSME,EDIN VARGAS, LUIS A. HERNANDEZ, JOSUE PAZ, andALAVARO CASTANEDA, individually and on behalf ofall others similarly situated, Plaintiffs, v. NATIONAL FREIGHT, INC. and NFI INTERACTIVE LOGISTICS, INC., Defendants.

CIVIL ACTION NO. 15-cv-7908-JHR-KMW

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 11, 2021

Opinion

This matter comes before the Court on Plaintiffs' Motion to Bar Defendants from Asserting Retaliatory Counterclaims ("Motion to Bar") [Dkt. 177, 186] and Defendants National Freight, Inc. and NFI Interactive Logistics, Inc.'s ("NFI") response thereto [Dkt. 183], as well as NFI's Motion for Leave to Assert Counterclaims ("Motion for Leave") [Dkt. 194, 210] and Plaintiffs' response thereto [Dkt. 205]. For the reasons set forth below, the Court denies Plaintiffs' Motion to Bar as moot and denies NFI's Motion for Leave as futile.

I. Background

The named Plaintiffs in this case represent a class of truck drivers who contracted with NFI—a provider of logistics, transportation, and distribution services—to deliver food and other goods from NFI warehouses to Trader Joe's retail stores on the East coast. Portillo v. Nat'l Freight, Inc., 336 F.R.D. 85, 87 (D.N.J. 2020). Plaintiffs initiated this lawsuit in 2015 alleging that NFI misclassified them as independent contractors and, as a result, that certain deductions that NFI withdrew from Plaintiffs' compensation violated the New Jersey Wage Payment Law ("NJWPL"), N.J. Stat. 34:11-4.1 et seq. [Dkt 1, Compl.; see also Dkt. 102, Am. Compl.]. On July 1, 2020, the Court certified the plaintiff class under Federal Rule of Civil Procedure 23(b) to include

[a]ll individuals who: (1) entered into, either personally or through a corporate entity, an independent contractor agreement with NFI that had a New Jersey choice-of-law clause; and (2) drove a vehicle on a full-time basis to perform deliveries of goods to Trader Joe's stores anywhere on the East Coast on behalf of NFI at any time since June 22, 2009.

[Dkt. 171].

All Plaintiffs in this case—named Plaintiffs and absent class Plaintiffs alike—signed an "independent contractor agreement" ("ICA") with NFI that nominally classifies them as independent contractors rather than employees. [Id.]. NFI has used four different ICA's since 2009. [Id.]. This matter concerns an ICA which NFI began to use in 2017 (the "2017 Agreement"). The 2017 Agreement includes an indemnity clause which states the following, in pertinent part:

SECTION 18 AND OTHER PROVISIONS OF THIS AGREEMENT REFLECT THAT CONTRACTOR IS, AND BOTH CONTRACTOR AND CARRIER INTEND CONTRACTOR TO BE, AN INDEPENDENT CONTRACTOR, NOT AN EMPLOYEE OF CARRIER. IN LIGHT OF THIS FACT AND INTENT: Notwithstanding Subsection (a) of this Section and not subject to the limits of Subsection (b) of this Section, CONTRACTOR agrees to indemnify and hold CARRIER harmless from all reasonableattorney's expenses CARRIER incurs in defending against any claims, suits, actions, or administrative proceedings brought by CONTRACTOR, CONTRACTOR's owner (if any), or any employees or other personnel engaged by CONTRACTOR to perform services under this Agreement or any third party that allege that CONTRACTOR or any of CONTRACTOR's workers is an employee of CARRIER.

(the "Indemnity Clause") [Dkt. 177-2, Exh. A at ¶ 15(f) (emphasis in original)]. None of the named Plaintiffs signed the 2017 Agreement. [See Dkt. 194 at 6; Dkt. 205 at 15]. Before class notices were distributed to putative class members, NFI informed Plaintiffs' counsel that NFI would move to amend their answer to enforce the Indemnity Clause against class members who signed the 2017 Agreement by asserting counterclaims. [Dkt. 177-1 at 13]. Plaintiffs peremptorily filed their Motion to Bar NFI from asserting counterclaims based on the 2017 Agreement's Indemnity Clause. [See Dkt. 177].

After Plaintiffs filed their Motion to Bar, the Court approved the parties' agreed-upon Notice of Class Action on November 6, 2020, and Plaintiffs' counsel distributed these class notices to putative class members. [Dkt. 175, 182]. On January 6, 2021, Plaintiffs notified NFI that no putative class members objected to or opted out of the class by the December 27, 2020 opt-out deadline. [Dkt. 194-3 at 6]. Among the absent class members who did not opt out of the class, thirty-three (33) signed the 2017 Agreement. [Dkt. 194-3 at 60]. Defendants filed their Motion for Leave to assert counterclaims against these thirty-three absent class members. [Dkt. 194-3].

In a March 18, 2021 Order, the Court advised the parties that it would consider Plaintiffs' Motion to Bar alongside NFI's Motion for Leave because the parties' briefs present substantially similar arguments and largely rely on the same authority for both motions. [Dkt. 220]. Theparties also incorporate their Motion to Bar briefing into their Motion for Leave briefing by reference. [Dkt. 194 at 14-15; Dkt. 205 at 16]. Because the parties have incorporated their Motion to Bar briefing by reference, the Court will deny Plaintiffs' Motion to Bar as moot and rule on the arguments presented therein on NFI's Motion for Leave.

II. Standing and Ripeness

In its opposition to Plaintiffs' Motion to Bar, NFI argues that Plaintiffs' challenge to NFI's counterclaims were premature and not ripe for adjudication. [Dkt. 183 at 12-13]. NFI also argues that Plaintiffs lack prudential standing to defend against counterclaims on behalf of absent class members. [Id. at 11-12]. While Plaintiffs' Motion to Bar was pending, NFI moved to assert the counterclaims which Plaintiffs sought to preempt with their Motion to Bar. NFI's Motion for Leave established a live controversy between the parties with respect to NFI's indemnity counterclaims. See Lewis v. Alexander, 685 F.3d 325, 341 (3d Cir. 2012) ("Ripeness requires 'a substantial controversy, between parties having'" immediately adverse legal interests (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S. Ct. 510, 85 L. Ed. 826 (1941))). NFI's ripeness argument is therefore moot. United Steel Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers Int'l Union AFL-CIO-CLC v. Gov't of Virgin Islands, 842 F.3d 201, 208, 65 V.I. 468, 477 (3d Cir. 2016) ("A case is moot when 'the issues presented are no longer live....'" (quoting County of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S. Ct. 1379, 59 L.Ed.2d 642 (1979))).

To the extent that NFI has incorporated its prudential standing argument by reference, the Court rejects this argument as well. Prudential standing "'embodies judicially self-imposed limits on the exercise of federal jurisdiction.'" Fife v. Barr, 469 F. Supp. 3d 279, 290 (D.N.J.2020) (quoting Sprint Commc'ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 289, 128 S. Ct. 2531, 2544, 171 L. Ed. 2d 424 (2008)). Among other concerns, "prudential standing encompasses the general prohibition on a litigant's raising another person's legal rights...." Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12, 124 S. Ct. 2301, 2309, 159 L. Ed. 2d 98 (2004), abrogated by Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S. Ct. 1377, 188 L. Ed. 2d 392 (2014) (citations and quotations omitted).

NFI argues that the named Plaintiffs lack prudential standing to contest NFI's counterclaims because the named Plaintiffs did not sign the 2017 Agreement and cannot assert claims on behalf of absent class members who did sign the 2017 Agreement. [Dkt. 183 at 10-11]. But by its very nature, "a class action is a representative action brought by a named plaintiff or plaintiffs." Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353, 364 (3d Cir. 2015) (emphasis in the original). When certifying a class, a district court must confirm that "the representative parties will fairly and adequately protect the interests of the class," Fed. R. Civ. P. 23(a)(4), and that "the named plaintiffs have the ability and the incentive to vigorously represent the claims of the class." In re Cmty. Bank of N. Virginia Mortg. Lending Practices Litig., 795 F.3d 380, 393 (3d Cir. 2015). Indeed, named plaintiffs must "protect the interests of all class members." Com. of Pa. v. Loc. Union 542, Int'l Union of Operating Engineers, 90 F.R.D. 589, 593 (E.D. Pa. 1981) (quoting Gonzales v. Cassidy, 474 F.2d 67, 76 (5th Cir. 1973)). Throughout class litigation, the district court must serve as "the guardian of the rights of the absentees" to ensure that named plaintiffs satisfy this obligation. Larson v. AT & T Mobility LLC, 687 F.3d 109, 130 (3d Cir. 2012) (quoting Greenfield v. Villager Indus., Inc., 483 F.2d 824, 832 (3d Cir. 1973)). See also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810, 105 S. Ct. 2965, 2974, 86 L. Ed. 2d628 (1985) ("[An absent class member] may sit back and allow the litigation to run its course, content in knowing that there are safeguards provided for his protection.").

Due to the representative nature of class actions and the class representatives' obligation to "vigorously represent" all class members, "[w]hether or not the named plaintiff who meets individual standing requirements may assert the rights of absent class members is not a standing issue, but depends rather on meeting the prerequisites of [Federal Rule of Civil Procedure 23]...." In re Asbestos Sch. Litig., 104 F.R.D. 422, 425 (E.D. Pa. 1984), amended, 107 F.R.D. 215 (E.D. Pa. 1985), and aff'd in part, rev'd in part sub nom. In re Sch. Asbestos Litig., 789 F.2d 996 (3d Cir. 1986) (quoting 1 H. Newberg, Newberg on Class Actions § 1072a, at 124 (1977)). Here, the Court already determined that the named Plaintiffs satisfied Rule 23's requirements when it certified the class. The named Plaintiffs thus have prudential standing to defend against NFI's counterclaims on behalf of absent class members.

III. Motion for Leave

a. Standard of Review

Federal Rule of Civil Procedure 15 governs amended pleadings and provides that a party ...