Glanville v. Dupar, Inc.

• Decision Date: 20 July 2010
• Docket Number: Civil Action No. H-08-2537
• Parties: G. Bruce GLANVILLE, et al., Plaintiffs, v. DUPAR, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

727 F.Supp.2d 596

G. Bruce GLANVILLE, et al., Plaintiffs,

v.DUPAR, INC., et al., Defendants.

Civil Action No. H-08-2537.

United States District Court,

S.D. Texas,

Houston Division.

July 20, 2010.

G. Scott Fiddler, Attorney at Law, Houston, TX, for Plaintiffs.

Adam Smedstad, Scopelitis et al., Chicago, IL, Steven A. Pletcher, Scopelitis Garvin et al., Indianapolis, IN, William J. Wisdom, Martin Disiere et al., Houston, TX, for Defendants.

MEMORANDUM AND ORDER

LEE H. ROSENTHAL, District Judge.

The plaintiffs filed this suit on behalf of themselves and other similarly situated current and former workers of Dupar, Inc., Dupar Properties, Inc., and J. Kelly Parsons (collectively "Dupar"), alleging violations of the Fair Labor Standards Act ("FLSA"), violations of the Federal Insurance Contributions Act ("FICA") and the Federal Unemployment Tax Act ("FUTA"), breach of fiduciary duty, and negligent misrepresentation. Dupar moved under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss for failure to state a claim. (Docket Entry No. 44). The plaintiffs responded, (Docket Entry No. 46), and the parties exchanged replies and surreplies, (Docket Entry Nos. 50, 55, 56). Based on the motions, the responses and replies, and the applicable law, this court grants the motion to dismiss. Because amendment would be futile, final judgment is entered by separate order. The reasons for these rulings are explained below.

I. Background

Dupar, Inc. and Dupar Properties, Inc. provide delivery and installation services for General Electric ("GE") appliances. J. Kelly Parsons is the president of Dupar, Inc. and Dupar Properties, Inc. This lawsuit arises out of the plaintiffs' work as delivery drivers for Dupar in the Houston, Texas area. The plaintiffs signed independent-contractor agreements with Dupar and drove their own trucks and trailers to deliver GE appliances to customers.

The plaintiffs filed an FLSA collective action under 29 U.S.C. § 216 in March 2008, alleging that Dupar had misclassified them as independent contractors when they were actually employees. The plaintiffs alleged that they had not been paid at an overtime rate for hours worked in excess of forty hours per week. (Docket Entry Nos. 1, 36). The defendants filed a summary judgment motion on the FLSA and overtime claims, which this court granted based on the Motor Carrier Act ("MCA") exemption from the FLSA. (Docket Entry Nos. 32, 43). The decision did not resolve whether the plaintiffs were independent contractors or employees. (Docket Entry Nos. 34, 43).

On September 8, 2009, the plaintiffs filed an amended complaint adding four additional causes of action: (1) violations of the Federal Insurance Contributions Act ("FICA") and the Federal Unemployment Tax Act ("FUTA"); (2) declaratory judgment and injunctive relief; (3) breach of fiduciary duty; and (4) negligent misrepresentation. (Docket Entry No. 3 8). The plaintiffs claimed that they paid amounts under FICA and FUTA that Dupar should have paid and sought repayment. (Docket Entry No. 36, 38, 46). The plaintiffs also alleged that Dupar's classification of them as independent contractors and resulting FICA and FUTA violations amounted to a breach of fiduciary duty and a negligent misrepresentation under Texas law. ( Id.).

Dupar moved to dismiss, arguing that the plaintiffs do not have an express or implied right of action to recover FICA or FUTA taxes and that the tax-reimbursement claims, as well as the related declaratory judgment, injunctive relief, and breach of fiduciary duty claims, fail as a matter of law. (Docket Entry No. 44). Dupar cites holdings from the Third and Eleventh Circuits rejecting an implied private right of action under FICA. ( Id.). In response, the plaintiffs point to several district court opinions in the Fifth Circuit that have found an implied right of action under FICA. (Docket Entry No. 46). Dupar also contends that the plaintiffs' state-law claims for declaratory judgment, injunctive relief, and breach of fiduciary duty are preempted by federal law, andthat the Texas negligent misrepresentation claim has been insufficiently pleaded and cannot be proven as a matter of law. (Docket Entry No. 44).

Each argument and response is analyzed below.

II. The Applicable Law

Rule 12(b)(6) allows the court to dismiss if a plaintiff fails "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Supreme Court confirmed that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The purpose of Rule 12(b)(6) is to test the legal sufficiency of the claims advanced in the complaint. Grisham v. United States, 103 F.3d 24, 25-26 (5th Cir.1997).

When a plaintiff's complaint fails to state a claim, the court should generally give the plaintiff at least one chance to amend the claim under Rule 15(a) before dismissing the complaint with prejudice. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir.2002). A plaintiff should be denied leave to amend a complaint if the court determines that "the proposed change ... advances a claim or defense that is legally insufficient on its face." 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1487 (2d ed. 1990); see also Ayers v. Johnson, 247 Fed.Appx. 534, 535 (5th Cir.2007) (per curiam) (unpublished) ("[A] district court acts within its discretion when dismissing a motion to amend that is ... futile." (quoting Martin's Herend Imports, Inc. v. Diamond & Gem Trading U.S. of Am. Co., 195 F.3d 765, 771 (5th Cir.1999))).

III. Analysis

A. The Alleged FICA Violations

Private rights of action to enforce federal law must be created by Congress. Alexander v. Sandoval, 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001); Touche Ross & Co. v. Redington, 442 U.S. 560, 578, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979). Neither party contends that FICA contains an express cause of action for a private citizen to recover FICA taxes. (Docket Entry Nos. 38, 44); see also McDonald v. S. Farm Bureau Life Ins., Co., 291 F.3d 718, 722 (11th Cir.2002) ("FICA itself is silent as to whether an employee can sue his employer for proper payment of FICA taxes."). The issue is whether FICA creates an implied private right of action such that an employee can sue his employer for a violation of the Act.

Courts use the four-part test in Cort v. Ash, 422 U.S. 66, 78-85, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), to determine if an implied private right of action exists. The factors include: (1) whether the plaintiff is one of the class for "whose especial benefit the statute was intended"; (2) whether there is any indication of legislative intent to create such a remedy; (3) whether implying a remedy is consistent with the underlying purpose of the legislative scheme; and (4) whether the cause of action is one traditionally relegated to state law. Id. The ultimate question "is one of legislative intent, not one of whether [the] Court thinks that it can improve upon the statutory scheme that Congress enacted into law." Touche Ross, 442 U.S. at 578, 99 S.Ct. 2479.

The Fifth Circuit has not considered whether a private right of action exists under FICA. The two United States Court of Appeals decisions addressing this issue within the Cort framework have found no implied private right of action. See Umland v. PLANCO Fin. Servs., Inc., 542 F.3d 59, 67 (3d Cir.2008); McDonald, 291 F.3d at 726. In McDonald v. Southern Farm Bureau Life Insurance, Co., as here, a group of workers claiming misclassification as independent contractors sued their alleged employer for its failure to pay FICA taxes on their behalf. 291 F.3d at 721. The Eleventh Circuit concluded that "[a]n analysis of the Cort factors makes it abundantly clear that no private cause of action may be implied by the language, structure, or the legislative history of FICA" and dismissed the workers' claim. Id. at 722, n. 1. In Umland v. PLANCO Financial Services, the Third Circuit adopted the reasoning in McDonald and held that no private right of action could be implied under FICA. 542 F.3d at 66-67. Numerous district courts have also followed McDonald.See Powell v. Carey Int'l, Inc., 514 F.Supp.2d 1302, 1323-24 (S.D.Fla.2007); Westfall v. Kendle Int'l, CPU, LLC, 2007 WL 486606, at *17 (N.D.W.Va. Feb. 15, 2007); Berger v. AXA Network, LLC, 2003 WL 21530370, at *4 (N.D.Ill. July 7, 2003); Paukstis v. Kenwood Golf & Country Club, 241 F.Supp.2d 551, 560-61 (D.Md.2003); Salazar v. Brown, 940 F.Supp. 160, 164-67 (W.D.Mich.1996); Spilky v. Helphand, No. 91 CIV. 3045(PKL), 1993 WL 159944, at *4-5 (S.D.N.Y. May 11, 1993).

The plaintiffs cite federal district court opinions concluding that FICA contains an implied right of action. See Ford v. Troyer, 25 F.Supp.2d 723, 726 (E.D.La.1998); Stewart v. Project Consulting Servs., Inc., No. CIV. A. 99-3595, 2001 WL 1000730, at *3 (E.D.La. Aug. 28, 2001). These Louisiana federal district court cases adopt the Cort analysis used in Sanchez v. Overmyer, 845 F.Supp. 1178, 1181-82 (N.D.Ohio 1993) (finding that "relief under FICA and FUTA is consistent with those statutes' purposes"). In Sanchez, the court found that FICA was intended for the particular benefit of workers because the Social Security system was instituted to create a trust fund to benefit workers in order to "save men and women from the rigors of the poorhouse as well as from the haunting fear that such a lot awaits them when journey's end is near." Id. at 1181 (citing Helvering v. Davis, 301 U.S. 619, 641, 57 S.Ct. 904, 909, 81 L.Ed. 1307 (1937)). In McDonald, the Eleventh Circuit found no basis to conclude that FICA was established for the special...