542 F.3d 59 (3rd Cir. 2008), 06-4688, Umland v. PLANCO Financial Services, Inc.

Docket Nº:06-4688.
Citation:542 F.3d 59
Party Name:Carrie UMLAND, on behalf of herself and all others similarly situated, Appellant v. PLANCO FINANCIAL SERVICES, INC.
Case Date:September 09, 2008
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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542 F.3d 59 (3rd Cir. 2008)

Carrie UMLAND, on behalf of herself and all others similarly situated, Appellant

v.

PLANCO FINANCIAL SERVICES, INC.

No. 06-4688.

United States Court of Appeals, Third Circuit.

September 9, 2008

Argued Nov. 6, 2007.

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Robert L. King, Esquire (Argued), St. Louis, MO, Counsel for Appellant.

James N. Boudreau, Esquire (Argued), Littler Mendelson, Philadelphia, PA, Counsel for Appellee.

Before SCIRICA, Chief Judge, AMBRO, and JORDAN, Circuit Judges.

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OPINION

AMBRO, Circuit Judge.

Carrie Umland worked for PLANCO Financial Services, Inc. from 2000 to 2005. She argues that PLANCO misclassified her as an independent contractor for several years. She also alleges that, after finally reclassifying her as an employee, PLANCO deducted its share of the Federal Insurance Contributions Act (FICA) taxes-owed as a result of Umland's status as an employee-from her paychecks. The United States District Court for the Eastern District of Pennsylvania dismissed Umland's putative class action, consisting of state-law claims for breach of contract and unjust enrichment, as preempted by federal income tax law. We affirm, albeit for reasons different from those of the District Court.

I. Facts and Procedural History

In November 2000, Umland began working for PLANCO, a wholly owned subsidiary of The Hartford Financial Services Group, Inc. PLANCO sells annuities, mutual funds, and other financial products at wholesale. Umland served as a Regional Marketing Director for PLANCO. Her job involved marketing financial products, such as mutual funds and insurance, of The Hartford. She was not allowed to affiliate with or sell the products of other financial services companies.

As a Regional Marketing Director, Umland had to perform numerous tasks for PLANCO and comply with company requirements.1 For example, she underwent training, lived within the boundary of her sales territory, made a required minimum number of sales calls per day, participated in conference calls, and adopted company talking points in her sales calls. Although Umland alleges that PLANCO exerted a high degree of control over her work, PLANCO classified Umland and her fellow Regional Marketing Directors as independent contractors rather than employees.

When PLANCO hired Umland, she signed an “Independent Contractor Agreement." As a result of this classification, Umland and her fellow Regional Marketing Directors were required to remit 15.3 percent of their self-employment income in taxes under the Self-Employment Contributions Act (SECA), 26 U.S.C. §§ 1401-03.2 (SECA imposes the equivalent of the sum of the employee and employer FICA taxes for employees.) Thus, PLANCO did not withhold taxes from Umland's paychecks, nor did it pay employer FICA taxes on Umland's wages. This arrangement continued for over three years.

In a letter dated December 9, 2003, PLANCO “offered to make [Umland] a [PLANCO] employee as a Regional Marketing Director" with an effective date of January 1, 2004. PLANCO enclosed an “Employee Confidentiality, Non-Solicitation, and Work Product Ownership Agreement" with its offer.3 Umland alleges that

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her title and her job characteristics remained the same, notwithstanding the reclassification from independent contractor to employee. What did change was PLANCO's withholding scheme for Umland's paychecks. As of January 1, 2004, PLANCO allegedly withheld 15.3 percent, which equals the sum of two distinct amounts of 7.65 percent each: (1) Umland's employee tax under FICA, 26 U.S.C. § 3101; 4 and (2) PLANCO's employer tax under FICA, 26 U.S.C. § 3111.5 Umland stopped working for PLANCO on July 1, 2005. Approximately one month later, PLANCO allegedly ceased withholding amount (2), the employer FICA tax, and deducted only amount (1), the employee FICA tax, from the paychecks of its remaining Regional Marketing Directors.

On December 30, 2005, Umland filed a class-action lawsuit, on behalf of all PLANCO's Regional Marketing Directors, seeking recovery of two distinct sums. First, for the period from November 20, 2000 through December 31, 2003, Umland claims that PLANCO owes her and those similarly situated half of the SECA taxes they paid during this time because they should have been classified as employees (in which case the total FICA tax would have been split between an employee FICA tax and an employer FICA tax). Second, for the period from January 1, 2004 through July 1, 2005, Umland claims that PLANCO owes her and those similarly situated the sums withheld from their paychecks corresponding to the employer's share of FICA taxes under 26 U.S.C. § 3111.

Umland, on behalf of the class, seeks to recover these two sums on the basis of three state-law claims outlined in the complaint: (1) breach of contract, because all employment contracts incorporate the requirements of federal law, including FICA, 26 U.S.C. §§ 3101-28; (2) breach of contract, because all employment contracts incorporate the requirements of state law, including Pennsylvania's requirement that “other deductions" not enumerated as authorized by law in the Pennsylvania Administrative Code receive written authorization from employees,

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34 Pa.Code § 9.1(13); 6 and (3) unjust enrichment. The complaint applies only legal theories (1) and (3) to the time period from November 20, 2000 to December 31, 2003 [hereinafter “2000-03" ], when Umland alleges that she was misclassified as an independent contractor. It applies all three legal theories to the time period from January 1, 2004 to July 1, 2005 [hereinafter “2004-05" ], when Umland alleges that PLANCO engaged in wrongful withholding.

In response to Umland's complaint, PLANCO moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. On October 2, 2006, the District Court dismissed the case for lack of subject matter jurisdiction under Rule 12(b)(1). Umland now appeals to our Court.

II. Jurisdiction and Standard of Review

In granting PLANCO's motion to dismiss, the District Court referred to the motion as having been made under Rule 12(b)(1) for lack of subject matter jurisdiction. Yet PLANCO had moved for dismissal under Rule 12(b)(6) rather than Rule 12(b)(1). We must decide whether the District Court correctly assessed that it lacked jurisdiction and applied the appropriate procedural rule. We have plenary review over district courts' jurisdictional determinations. In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 273 (3d Cir.1999).

In her complaint, Umland alleged that PLANCO is a citizen of Pennsylvania and that she is a citizen of Washington State. She also alleged that the matter in controversy exceeds $5,000,000, exclusive of interest and costs. Thus, she properly invoked federal subject matter jurisdiction. See 28 U.S.C. § 1332(d)(2) (giving district courts jurisdiction over “any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which ... (A) any member of a class of plaintiffs is a citizen of a State different from any defendant" ).

The District Court, as noted, granted the motion to dismiss under Rule 12(b)(1). Yet the only two cases cited in support of its decision dismissed complaints under Rule 12(b)(6) for failure to state a claim. See McDonald v. S. Farm Bureau Life Ins. Co., 291 F.3d 718, 726 (11th Cir.2002) (affirming District Court's dismissal for failure to state a claim because FICA does not imply a private right of action); Berger v. AXA Network, LLC, No. 03-C-125, 2003 WL 21530370, at *4 (N.D.Ill. July 7, 2003) (dismissing federal claim under FICA because the latter does not imply a private right of action and dismissing state-law claims as preempted by the federal regulatory scheme Congress created to implement FICA). Because the issue presented is whether Umland has stated a claim on which relief can be granted, we will construe the District Court's dismissal as though it was granted under Rule 12(b)(6). See Petruska v. Gannon Univ., 462 F.3d 294, 302-03 (3d Cir.2006) (construing a Rule 12(b)(1) dismissal as a Rule 12(b)(6) dismissal because jurisdiction was not at issue while the legal sufficiency of the plaintiff's claims was).

We have appellate jurisdiction over district courts' final decisions under 28 U.S.C. § 1291. Our standard of review over (what we are construing as) the District Court's dimissal for failure to state a claim

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is plenary. Frederico v. Home Depot, 507 F.3d 188, 199 (3d Cir.2007).

When considering a district court's grant of a motion to dismiss under Rule 12(b)(6), “we accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.2006). We...

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