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Franklin v. Ceva Freight

August 11, 2012

FRANKLIN BROWNING, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED WHO WERE EMPLOYED BY CEVA FREIGHT, LLC AND EGL, INC. AND/OR ANY OTHER ENTITIES WITH, CONTROLLING, OR CONTROLLED BY CEVA FREIGHT, LLC OR EGL, INC.,
PLAINTIFFS,
v.
CEVA FREIGHT, LLC AND EGL, LLC,
DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

This proposed class action, concerning alleged unpaid wages and overtime wages, was brought pursuant to the Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL"). The Defendants have now moved for summary judgment, arguing that the Plaintiffs are not entitled to recovery under either statute because they are properly classified as "independent contractors" rather than "employees". For the reasons set forth below, the Court grants the Defendants' motion.

I.BACKGROUND

A.Factual Background

The Plaintiffs are workers who presently are or were formerly employed by the Defendants, CEVA Freight, LLC ("CEVA") and EGL, LLC ("EGL") (collectively the "Defendants" or "CEVA"). CEVA is a supply chain management, transportation, and logistics services company. In particular, CEVA provides services such as air and ocean freight forwarding, customs brokerage, pick-up and delivery services, warehousing, and materials management. As a general matter, CEVA does not use employee drivers or CEVA-owned vehicles to provide domestic pick-up and delivery services. According to CEVA, it contracts with outside trucking businesses to provide these services, pursuant to independent contractor agreements.

There are a total of five plaintiffs who have filed consent forms in this action. Four of the five Plaintiffs-Andrew Huggins ("Huggins"), Franklin Browning ("Browning"), Trevor Halls and Winston James ("James") (the "Plaintiffs")-provided pick-up and delivery services to CEVA pursuant to Agreements for Leased Equipment and Independent Contractor Services (collectively, the "Agreements") with CEVA and/or its predecessor or affiliated entities. The remaining Plaintiff, Hugh Halls, did not execute an agreement with CEVA but provided services pursuant to the agreement executed by the Plaintiff Trevor Halls, in his capacity as the President and CEO of Halls Trucking Corporation, which is a corporation co-owned by Trevor Halls and Hugh Halls. (Defs. 56.1 Stmt., ¶ 1.) Both before and after providing services to CEVA, the Plaintiffs provided pick-up and delivery services to other companies utilizing vehicles that the Plaintiffs owned. (Defs. 56.1 Stmt., ¶ 2.)

The Agreements between the parties, entitled "Agreement for Lease Equipment and Independent Contractor Services (Pick-Up & Delivery)", governed their business relationship and described in various respects how the Plaintiffs would be treated by CEVA. The contracts stated that neither the Plaintiffs nor their employees or agents would be considered employees of CEVA, and that nothing in the Agreements would be construed to create an employment relationship between the Plaintiffs and CEVA. The Plaintiffs also agreed to immediately notify a CEVA manager if, at any time during the term of their contracts, they believed that anything other than an independent contractor relationship existed between themselves and CEVA. (See Agreements, § 1.)

In order to effectuate the pick-up and delivery services, the Plaintiffs leased to CEVA the vehicles that they owned. (Agreements, § 2.01.) The Plaintiffs were responsible for all costs and expenses incidental to the maintenance, repair and operation of the vehicles that they leased to CEVA, including automobile insurance. The trucks were covered with vinyl CEVA logos on all sides of the vehicles. After 2003, these signs were affixed so that they were permanent. (Browning Dep. at 160:13-14.)

Although another passenger was not permitted in the Leased Vehicle without the prior written approval of CEVA, under the Agreements the Plaintiffs did have the ability to hire others to perform or assist in performing their contractual obligations. In addition, the Plaintiffs were required to wear CEVA uniforms, under threat of termination.

The Agreements stated that the Plaintiffs agreed "to direct the operation of the Leased Vehicle and to determine the method, manner and means of performing the contractual obligations under [the] Agreement in all respects including, but not limited to, such matters as the rejection and acceptance of dispatches offered by [CEVA]; the days and time [the Plaintiffs] will operate the Leased Vehicle; the routes traveled; parking sites, and the repair of the Leased Vehicle, provided that [the Plaintiffs] fully and efficiently perform[ed their] obligations under [the] Agreement." (Id.) However, the Plaintiffs testified that they were typically assigned to one service area. (See, e.g., Browning Dep. at 126:14--25 ("I had the 119 zip code so I did everything going to the 119 zip code so if there was something going into Queens or Nassau County, that would not go into my truck. That would go to the guy that was doing Nassau County or the guy that was doing Queens, they got that work . . ."); Huggins Dep. at 118:15--23 ("due to dispatch giving me the work in that area consistently and a certain spot that covered a span of a certain area we considered it a route because again you go to the same spot").)

There were some parameters to the Plaintiffs' tasks; namely, CEVA would issue certain instructions regarding the results that the Plaintiffs were to accomplish under the Agreements, such as meeting time-sensitive service parameters, when required by CEVA customers. James testified at his deposition that they were required to comply with whatever decisions the dispatcher made when any issues arose during the course of performing their assignments. Further, the Plaintiffs were in constant contact with the Defendants through the use of Nextel cellular communication devices tied into CEVA's computer system. (Browning Dep. at 198.)

Under the Agreements, the Plaintiffs had the opportunity to decline to perform any pickup or delivery services they wished, provided they advised CEVA. Thus, the Plaintiffs could provide services to CEVA at days and times of their choosing. On the other hand, the Plaintiffs have testified that in practice, they were told that if they were going to go away for a couple of days and hence not do pick-ups and deliveries for CEVA, they needed to notify the Defendants in advance so that the company could find someone to replace them. (See James Dep. at 213:7-- 11; Huggins Dep. at 115:8--10.) The Plaintiffs also testified that they were in essence "forced" to work certain days or times, or else CEVA would give the service areas to other drivers. Accordingly, some of the Plaintiffs' testimony indicates that if they refused an assignment, they could end up with no work for that day. Thus, the Plaintiffs allege that a rejection of a delivery would figure into future delivery orders.

The Plaintiffs had the contractual right under the Agreements to provide pick-up and delivery services to other carriers. However, the Plaintiffs argue that this right was merely theoretical, because in practice the trucks were only to be used for CEVA business. In addition, according to the Plaintiffs, they were required to attend mandatory monthly meetings at CEVA's offices. If the Plaintiffs did not attend these meetings, they claim that they would not be dispatched. (H. Halls Dep. at 91:11--15.)

CEVA never guaranteed that the Plaintiffs would secure a certain amount of work. Rather, it was clear under the Agreement that the provision of services to CEVA could result in a profit or loss. It is undisputed that CEVA did not pay the Plaintiffs based upon the hours that they worked. Rather, CEVA paid the Plaintiffs a fee per pick-up or delivery, based upon the rates included in the Agreements. (See, e.g., Def. Ex. A, § 4.01 ("For performance by Contractor of the contractual obligations under this Agreement, [CEVA] shall compensate Contractor on the basis set forth in Appendix III . . . "). CEVA did not withhold taxes from the compensation that it paid to the Plaintiffs. Instead, it issued IRS Form 1099s to them at the end of each year. Thus, the Plaintiffs were responsible for filing their own income tax returns in connection with their earnings. (See Agreements, § 4.09; Def. 56.1, at ¶ 5.) Also, it is undisputed that the Plaintiffs regularly took significant tax deductions for expenses they incurred in providing services to CEVA.

1.Andrew Huggins

The Plaintiff Andrew Huggins, through his corporation, AAH Trucking, Inc., began contracting with CEVA on April 20, 2005. Huggins understood that he would be an independent contractor when providing services for CEVA, and it was important to him that he would provide services to CEVA as an independent contractor, in part because he wanted to operate a truck that he owned. (Huggins Dep. at 79-80, 86.) His schedule varied, and he would consent to certain assignments when they were available if he was interested. However, he understood that he was never obligated to accept pick-ups or deliveries. At some point, Huggins was regularly servicing a particular geographic area, because he made more money doing so. (Id. at 119--121, 207--8.) Nevertheless, he had control over the specifics within the geographic region he chose to take assignments in, so that he would decide what route to take. Huggins testified that he was not usually supervised by CEVA. However, on one occasion, CEVA sent someone to follow his truck in a random fashion and he was subsequently informed by the company that he was being followed. (Id. at 249--50.) He further stated that he did not think the company monitored him in any way.

The Defendants claim that the vehicle Huggins used for his work at CEVA was also his personal vehicle when he was not performing services for the Defendants. For example, he would use this vehicle to go to the movies and go shopping. (Id. at 180--81.) However, the other Plaintiffs testified that CEVA supervisors repeatedly warned the Plaintiffs that they were not permitted to use their trucks for non-CEVA purposes. (See, e.g., Browning Dep. at 172:17-- 173:11 ("the loading dock supervisor said to me----pointed at me and said you can get terminated for hauling other people's freight around. I said it's my own personal merchandise . . . he told me that I could not use the truck for personal business, that's what he said to me."); Murphy Dep. at 123:19--22 ("you could not use the truck to do anything else. They tell you this. If you need to make extra bucks, a few extra bucks on Sunday, you can't.").)

IRS Form 1099 documents for the years 2005 to 2010 reflect non-employee compensation paid by CEVA to "AAH Trucking Inc., Andrew Huggins" in the following amounts: $54,240.75 (2005), $68,313.73 (2006), $73,314.76 (2007), $62,489.30 (2008), $38,828.44 (2009), and $20,270.65 (2010). (Defs. 56.1 Stmt., at ¶ 38.) In addition, Huggins' corporation, AAH Trucking Inc., took tax deductions for expenses it incurred in providing services for CEVA, such as renting office space and cell phone expenses. (Huggins Dep. at 212, 214--15.) In July 2010, CEVA exercised its right to terminate its contractual relationship with Andrew Huggins, effective August 2010.

2.Franklin Browning

The Plaintiff Franklin Browning had more than 25 years of experience in the trucking industry prior to his relationship with the Defendants. Browning entered into six separate agreements with CEVA over a ten year period. (Browning Dep. at 66, 69-70). He entered into these agreements with the intention of providing pick-up and delivery services as an independent contractor, which was important to him. (Id. at 245 [testifying that he will "always be an independent contractor"].) During the years that he was contracting with CEVA, Browning owned a total of three different vehicles, which he used to provide pick-up and delivery services under the terms of his contract. Browning also hired his son to help him provide pick-up and delivery services for CEVA, and Browning paid him $14,000 for his services over a two-month period. While contracting with CEVA, Browning turned down assignments that were offered to him. (Id. at 206.) Browning testified that he knew that there was no guarantee that he would make any minimum amount of money per year when contracting with CEVA. (Id. at 151.) IRS Form 1099 documents for the years 2001 to 2010 reflect non-employee compensation paid by CEVA to Franklin Browning in the following amounts: $49,741.25 (2001); $55,979.29 (2002); $60,868.15 (2003); $88,660.84 (2004); $130,186.47 (2005); $127,589.96 (2006); $135,943.66 (2007); $149,630.81 (2008); $38,093.45 (2009); and $89,992.05 (2010). (Defs. 56.1 Stmt., at ¶ 67.)

3.Trevor Halls and Hugh Halls

Halls Trucking is co-owned by Trevor Halls and his uncle Hugh Halls. Trevor Halls is the President and CEO of Halls Trucking Corporation and Hugh Halls is its Vice President and CFO. (T. Halls Dep. at 44; H. Halls Dep. at 86.) Primarily, Trevor drives and maintains the trucks, while Hugh handles all of the bookkeeping and assists with deliveries by acting as a navigator on the road. The contractual agreements governing the business relationship between CEVA and Halls Trucking Corporation were Agreements For Leased Equipment And Independent Contractor Services dated August 2, 2004 and May 15, 2006, which were entered into between CEVA and Trevor Halls, in his capacity as the President and CEO of Halls Trucking. Trevor Halls understood that his company would have an independent contractor relationship with CEVA, and that largely meant to him that he would have the right to refuse work. (T. Halls Dep. at 54--55.) In fact, Trevor testified that at times he did refuse dispatches offered by CEVA on behalf of Halls Trucking Corporation. (Id. at 85.) In addition, Halls Trucking owned the equipment and tools that it used to provide pick-up and delivery services to CEVA. (H. Halls Dep. at 79, 99-100.)

An IRS Form 1099 for 2004 reflects that, in 2004, non-employee compensation in the amount of $54,333.89 was paid by CEVA to Trevor Halls. An IRS Form 1099 for 2005 reflects that, in 2005, non-employee compensation in the amount of $156,728.32 was paid by CEVA to Trevor Halls. An IRS Form 1099 for 2006 reflects that, in 2006, non-employee compensation in the amount of $207,076.73 was paid by CEVA to "Halls Trucking Corp." An IRS Form 1099 for 2007 reflects that, in 2007, non-employee compensation in the amount of $211,620.95 was paid by CEVA to "Trevor A. Halls, Halls Trucking Corp." An IRS Form 1099 for 2008 reflects that, in 2008, non-employee compensation in the amount of $189,132.18 was paid by CEVA to "Trevor A. Halls, Halls Trucking Corp." An IRS Form 1099 for 2009 reflects that, in 2009, non-employee compensation in the amount of $171,363.22 was paid by CEVA to "Trevor A. Halls, Halls Trucking Corp." An IRS Form 1099 for 2010 reflects that, in 2010, non-employee compensation in the amount of $107,767.10 was paid by CEVA to "Trevor A. Halls, Halls Trucking Corp." In July 2010, CEVA exercised its right to terminate its contractual relationship with Halls Trucking Corporation, effective August 2010.

4.Winston James

Winston James entered into a contractual relationship with CEVA in September 2005. James testified that he knew before entering into a contractual relationship with CEVA that he would be providing services to CEVA as an independent contractor. (James Dep. at 103--04.) Shortly after initiating his relationship with CEVA, James incorporated his trucking business, forming Triple J Trucking International, Inc. An IRS Form 1099 for 2005 reflects that, in 2005, non-employee compensation in the amount of $23,566.58 was paid by CEVA to Winston James. An IRS Form 1099 for 2006 reflects that, in 2006, non-employee compensation in the amount of $121,721.46 was paid by CEVA to "Winston James, Triple J Trucking International Inc." An IRS Form 1099 for 2007 reflects that, in 2007, non-employee compensation in the amount of $91,268.09 was paid by CEVA to "Triple J Trucking Intern. Inc." An IRS Form 1099 for 2008 reflects that, in 2008, non-employee compensation in the amount of $112,079.96 was paid by CEVA to "Triple J Trucking Intern. Inc." An IRS Form 1099 for 2009 reflects that, in 2009, non-employee compensation in the amount of $76,938.66 was paid by CEVA to "Triple J Trucking Intern. Inc." In January 2010, CEVA exercised its right to terminate its contractual relationship with James, effective January 2010.

B.Procedural History

On December 2, 2010, the named Plaintiff Franklin Browning, individually and on behalf of all other persons similarly situated who were employed by the Defendants, commenced this proposed Rule 23 class action and FLSA collective action for violations of the FLSA, 29 U.S.C. §§ 206, 207, 216(b), as well as Articles 6 and 19 of the NYLL and the wage orders, rules and regulations promulgated pursuant to these laws. The action is to recover unpaid wages and overtime wages allegedly owed to the Plaintiffs. The Plaintiffs allege that beginning in approximately 2004, and continuing through the present, the Defendants have engaged in a pattern and practice of withholding all earned wages and overtime payments through means of improperly classifying the named Plaintiff and others similarly situated as "independent contractors."

On January 13, 2012, the Defendants CEVA and EGL filed the instant motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 ("Fed. R. Civ. P. 56").

II.DISCUSSION

A.Legal Standard on a Motion for Summary Judgment

It is well-settled that summary judgment under the provisions of Fed. R. Civ. P. 56(c) is proper only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is "material" within the meaning of Fed. R. Civ. P. 56 when its resolution "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). An issue is "genuine" when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

In determining whether an issue is genuine, "[t]he inferences to be drawn from the underlying affidavits, exhibits, interrogatory answers, and depositions must be viewed in the light most favorable to the party opposing the motion." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962) (per curiam), and Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989)). Once the moving party has met its burden, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (quoting Fed. R. Civ. P. 56(e)). However, the nonmoving party cannot survive summary judgment by casting mere "metaphysical doubt" upon the evidence produced by the moving party. Matsushita, 475 U.S. at 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538. Summary judgment is appropriate when the moving party can show that "little or no evidence may be found in support of the nonmoving party's case." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223--24 (2d Cir. 1994) (citations omitted).

B.As to Whether the Plaintiffs are Employees or Independent Contractors

As stated above, the Plaintiffs, who previously provided pick-up and delivery services to the Defendants, are bringing suit pursuant to the NYLL and the FLSA. However, the threshold issue that forms the core of the instant summary judgment motion is whether the Plaintiffs are properly qualified under these statutes as independent contractors or employees. See Deboissiere v. Am. Mod. Agency, No. 09 Civ. 2316, 2010 WL 4340642, at *3 (E.D.N.Y. Oct. 22, 2010) ("New York's labor laws apply only to employees, not independent contractors."); Campos v. Zopounidis, No. 09 Civ. 1138, 2011 WL 2971298, at *3 (D. Conn. July 20, 2011) ("The FLSA broadly defines an employee as 'any individual ...


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