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Rocha v. FedEx Corp.

United States District Court, N.D. Illinois, Eastern Division

January 17, 2014

CARLOS G. ROCHA and ARIZE 11, INC., Plaintiffs,
FEDEX CORPORATION, a Delaware corporation, FED EX GROUND PACKAGE SYSTEM, INC., a Delaware Corporation, FEDEX HOME DELIVERY, a division of FedEx Ground Package System, Inc. doing business in Illinois, DANIEL J. SULLIVAN, ROGER G. MARTICKE, CLIFFORD P. JOHNSON, DAVID F. REBHOLZ, WILLIAM G. MARGARITIS, SCOTT RAY, NATHAN WATTS, RALPH STEPHENS, RJC 80 INC., and DOES 1-60, Defendants

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For Carlos G Rocha, Arize 11, Inc, an Illinois corporation, Plaintiffs: Lisa D Johnson, LEAD ATTORNEY, Anchor Law Offices, PLLC, Gurnee, IL.

For FedEx Ground Package System, Inc., a Pennsylvania corporation, David F. Rebholz, Scott Ray, Nathan Watts, FedEx Home Delivery, a division of FedEx Gorund Package System, Inc. doing business in Illinois, Defendants: Alison G Fox, LEAD ATTORNEY, Faegre Baker Daniels LLP - SB/IN, South Bend, IN; Andrew Brian Murphy, PRO HAC VICE, Faegre Baker Daniels LLP, Minneapolis, MN; David L. Weinstein, Faegre Baker Daniels LLP, Chicago, IL.

For Daniel J. Sullivan, Rodger G. Marticke, Clifford P. Johnson, Defendants: Alison G Fox, LEAD ATTORNEY, Faegre Baker Daniels LLP - SB/IN, South Bend, IN; David L. Weinstein, Faegre Baker Daniels LLP, Chicago, IL.

For William G. Margaritis, FedEx Corporation, a Delaware corporation, Defendants: John W. Campbell, PRO HAC VICE, Federal Express Legal Dept., Memphis, TN; Jonathan Hale Claydon, Matthew A. C. Zapf, Greenberg Traurig, LLP, Chicago, IL.

For Ralph Stephens, and unknown other persons acting in concert with Ralph Stephens and Fed Ex Ground Package System, Inc. to defraun Plaintiffs (" Does 21-25" ), Defendant: Brian Gordon Hiatt, LEAD ATTORNEY, Brian G. Hiatt, Attorney at Law, Bourbonnais, IL.


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Rubé n Castillo, Chief United States District Judge.

Carlos G. Rocha and Arize 11, Inc. (collectively, " Plaintiffs" ) bring this action alleging seventeen state and federal claims against various FedEx entities and employees: FedEx Corporation (" FedEx Corp." ); FedEx Ground Package System, Inc. (" FedEx Ground" and, collectively with FedEx Corp., " FedEx" ); FedEx Home Delivery (" FHD" ); Daniel J. Sullivan, Rodger G. Marticke, Clifford P. Johnson, David F. Rebholz, William G. Margaritis, Scott Ray, Nathan Watts (these seven individuals collectively, " FHD Management" ); Ralph Stephens; RJC 80, Inc.; and unknown other persons (" Does 1-60" ). Presently before the Court are three motions to dismiss Plaintiffs' complaint for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6)--one by Stephens; one by FedEx Corp. and Margaritis; and one by FedEx Ground, FHD, and six members of FHD Management. For the reasons set forth below, these motions are granted.


Rocha delivered packages for FedEx's Chicago terminal, acting at various times as an employee and an independent contractor, " starting in late 2005 and ending in November 2010," when FedEx informed him that his services were no longer needed. (R. 37, Second Am. Compl. ¶ 58.) Arize 11 is an Illinois corporation that was formed in 2008 and that is owned by Rocha with its principal place of business in Chicago, Illinois. ( Id. ¶ ¶ 60-61.)

FedEx Corp., a Delaware corporation with its principal place of business in Tennessee, is the parent corporation of FedEx Ground. ( Id. ¶ ¶ 65-66.) FedEx Ground, a Delaware corporation with its principal place of business in Pennsylvania, is in the business of providing package delivery and pick-up service, often under the label of FHD. ( Id. ¶ ¶ 73-74, 77-79.) Sullivan is FedEx Ground's former President and Chief Executive Officer, ( id. ¶ 83), and Rebholz currently serves in that capacity, ( id. ¶ ¶ 103). Marticke is FedEx Ground's Executive Vice President and Chief Operating Officer, ( id. ¶ 90); Johnson is FedEx Ground's Vice President and General Counsel, ( id. ¶ 95). Margaritis is the Senior Vice President of Global Communications and Investor Relations for FedEx Corp. in Tennessee. ( Id. ¶ ¶ 110-11.) Ray worked in FedEx's Contractor Relations department in Pennsylvania. ( Id. ¶ ¶ 117-18.)

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Watts managed FHD's Chicago terminal. ( Id. ¶ 122.) Stephens manages numerous routes for FHD's terminals in Chicago and Hammond, Indiana, ( id. ¶ 125); RJC 80 was an Illinois corporation Stephens owned until it was involuntarily dissolved last year, ( id. ¶ ¶ 125, 128-29). Plaintiffs also bring claims against " all unknown persons and entities employed by or otherwise associated with" FedEx (" Does 1-50" ), and all unknown persons and entities conspiring with or acting in concert with Watts or Stephens in connection with the alleged conspiracy to extort and defraud Plaintiffs (" Does 51-60" ). ( Id. ¶ ¶ 131-36.)

Plaintiffs allege that in 1999 or 2000, agents of FHD " devised a deceptive business model whereby FedEx Ground would falsely represent itself . . . as an association of independent individuals and corporations while actually operating as a single corporation[.]" ( Id. ¶ 139.) FedEx promised potential contractors the exclusive right to service all FHD customer accounts within their routes, returns on their investments, and the associated right to profits and income from those services rendered. ( Id. ¶ ¶ 166-67.) Plaintiffs allege that FedEx did not intend to, and did not, entrust contracting individuals and corporations with the rights to offer, sell, or distribute its ground transportation services to the public. ( Id. ¶ ¶ 140-41.) Plaintiffs allege that FedEx targeted unsophisticated individuals to be contractors, which allowed it to " retain full control" of operations and defraud its contractors. ( Id. ¶ ¶ 140-44.)

Plaintiffs allege that FedEx " has a substantial or controlling interest in the market available to independent contractors seeking business opportunities in the ground transportation business," which limits the competing opportunities that are available to independent contractors. ( Id. ¶ ¶ 53-55.) Plaintiffs state that FedEx maintains this controlling interest through " an ambiguous and misleading" Standard Operating Agreement (the " SOA" ). ( Id. ¶ ¶ 145.) According to Plaintiffs, the ambiguous provisions in the SOA " bolster the false belief that investing contractors would nonetheless be independent and free from FedEx's interference and control" while actually allowing FedEx to, inter alia, approve or disapprove independent contractors' vehicles, drivers or helpers, and vehicle sales, to assign pick-up and delivery stops to specific drivers, to require the purchase of specific insurance plans, to require drivers to perform service at certain times, and to delineate many other conditions of contractors' employment. ( Id. ¶ ¶ 147-48.) Plaintiffs contend that Rocha and other independent contractors would not have executed the SOA if they had known about the misrepresentations it contained. ( Id. ¶ 273.) Plaintiffs further allege that FedEx prevented contractors from using their vehicles for any purpose other than driving for FedEx. ( Id. ¶ ¶ 335-36.)

Rocha began driving for FedEx in 2005 as a temporary employee. ( Id. ¶ ¶ 211-12.) In order to acquire a route, FedEx required Rocha, like other independent contractors, to purchase a specific model truck. ( Id. ¶ ¶ 213-16, 226.) Rocha was " misled by the [Chicago] terminal manager" to believe that he was purchasing a brand new truck from FedEx when he in fact purchased a used truck. ( Id. ¶ ¶ 231-34.) The Chicago terminal manager offered Rocha a route in January 2006, and Rocha executed the SOA on February 23, 2006. ( Id. ¶ ¶ 170-71, 242-44.) Rocha subsequently acquired a second route and a second truck. ( Id. ¶ ¶ 237-40.)

Plaintiffs also allege that independent contractors were required to purchase various bundled products and services as part

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of the Business Support Package (" BSP" ). ( Id. ¶ ¶ 259-62.) The costs of the BSP were collected through involuntary deductions from their wages. ( Id. ¶ 251.) Plaintiffs allege, for example, that FedEx made and refused to refund involuntary deductions from Rocha's wages for uniform rental fees even though Rocha had purchased all the uniforms necessary for his business. ( Id. ¶ 261.) Plaintiffs allege that the products and services were not competitively priced and that FedEx profited from the contractors' purchases of the products and services. ( Id. ¶ ¶ 252-55.) The SOA Plaintiffs attached to the complaint, however, states that contractors are not required to purchase the BSP and in fact requires contractors to affirmatively elect to purchase the BSP and have the costs deducted from their wages. (R. 37-3, SOA Ex. 6.) Rocha affirmatively elected to participate in the BSP when he executed his SOA. ( Id. )

Plaintiffs allege that after a California State court ruled that FedEx's control over FHD drivers made them employees rather than independent contractors,[1] FedEx did not change its business practices, but instead conspired to protect the FHD business model and sustain the " fraudulent practices" of identifying drivers as independent contractors while maintaining employer-like control over their operations. ( Id. ¶ ¶ 149-55.)

Plaintiffs allege that FedEx branches used various unlawful methods to maintain their control over the independent contractors. ( Id. ¶ 298.) For example, sometime in 2006 after one of Rocha's drivers was in an accident, FedEx notified Rocha that it would cancel his contract in 30 days if he did not acquire his own trucking insurance. ( Id. ¶ 300.) Rocha's terminal manager offered Rocha the opportunity to keep his route by transferring his routes and vehicles to another contractor for six months, to be returned to Rocha once he was in good standing. ( Id. ¶ 301.) Rocha executed the transfer to the corporate contractor, Handzon Enterprise, and worked for Handzon Enterprise for six months. ( Id. ¶ ¶ 302-03.) Plaintiffs allege that at the end of the six-month period, the owner of Handzon Enterprise told Rocha that FedEx had advised her that she did not need to return the routes and vehicles and did not need to continue to employ him. ( Id. ¶ ¶ 303-04.) FedEx then barred Rocha from the terminal area where his trucks were parked. ( Id. ΒΆ 305.) FedEx threatened to file a ...

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