Montoya v. CRST Expedited, Inc.

• Decision Date: 24 May 2018
• Docket Number: Civil Action No. 16–10095–PBS
• Citation: 311 F.Supp.3d 411
• Parties: Juan Carlos MONTOYA, on behalf of himself and all others similarly situated, Plaintiff, v. CRST EXPEDITED, INC., and CRST International, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

311 F.Supp.3d 411

Juan Carlos MONTOYA, on behalf of himself and all others similarly situated, Plaintiff,

v.CRST EXPEDITED, INC., and CRST International, Inc., Defendants.

Civil Action No. 16–10095–PBS

United States District Court, D. Massachusetts.

Signed May 24, 2018

Hillary A. Schwab, Rachel J. Smit, Fair Work, P.C., Boston, MA, Andrew Schmidt, Peter G. Mancuso, Andrew Schmidt Law PLLC, Portland, ME, for Plaintiff.

Elizabeth A. Olivier, Gregory P. Hansel, Randall B. Weill, Preti Flaherty Beliveau & Pachios, Portland, ME, Wesley S. Chused, Preti Flaherty Beliveau & Pachios LLP, Daniel R. Sonneborn, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

Saris, C.J.

INTRODUCTION

Plaintiff Juan Carlos Montoya alleges that Defendants CRST Expedited, Inc., and CRST International, Inc. (collectively, "CRST"), underpaid their long-haul truck drivers, misled them regarding the costs of driver training, and imposed excessive charges to recoup those costs in violation of the federal Fair Labor Standards Act ("FLSA") and Iowa law. Plaintiff has filed motions asking the Court to certify a collective action under the FLSA and three classes for the state-law claims.

After hearing, Plaintiff's motion to certify the FLSA collective action (Dkt. No. 72) is ALLOWED. The motion to certify the proposed Iowa wage class (Dkt. No. 72) is ALLOWED IN PART and DENIED IN PART. The motion to certify a consumer-fraud class (Dkt. No. 95) is ALLOWED IN PART and DENIED IN PART. The motion to certify the Iowa usury class (Dkt. No. 95) is ALLOWED IN PART and DENIED IN PART.

FACTUAL BACKGROUND

The following facts are drawn from the First Amended Complaint and materials in the class-discovery record.

I. Complaint

Montoya, a Boston resident, worked for Defendants as a truck driver in late 2014. Defendants are Iowa corporations that transport goods in interstate commerce.

Montoya's complaint asserts four theories of liability. Count I alleges that CRST violated the FLSA, 29 U.S.C. § 201, et seq., because it failed to pay drivers at least minimum wage for all hours worked, took unlawful deductions from drivers' pay, and did not pay drivers' wages "free and clear." Count II alleges that this conduct also runs afoul of Iowa's wage laws, including the Iowa Wage Payment Collection Law, Iowa Code § 91A.1, et seq., and the Iowa minimum wage law, Iowa Code § 91D.1.

Count III arises under the Iowa Private Right of Action for Consumer Frauds Act ("Consumer Frauds Act"), Iowa Code § 714H.1, et seq. It alleges that CRST engaged in a variety of consumer frauds, such as misleading drivers about "free" training, charging drivers more than their actual costs for educational programs, and failing to disclose the training program's high dropout rate. The complaint also challenges CRST's collection tactics. Count IV asserts that Defendants violated the Iowa usury law, Iowa Code § 535.2, by requiring drivers to sign contracts that provided for a higher rate of interest (18 percent or more per year) than the law permitted (between 3.5 and 7.25 percent annually).

Plaintiff seeks to certify four classes:

- Count I (a collective action under the FLSA): All individuals who have participated as contract drivers in any phase of CRST's Driver Training Program, at any time since December 22, 2013.

- Counts II and III (classes under Iowa's wage laws and Consumer Frauds Act): All individuals who have participated as contract drivers in any phase of CRST's Driver Training Program, at any time since January 21, 2014.

- Count IV (a class under Iowa's usury law): All individuals who have signed pre-employment contracts and/or driver employment contracts with CRST that have provided for an interest rate on amounts owed at a rate higher than the maximum lawful rate of interest determined by the Iowa Superintendent of Banking (ranging between 3.5 percent and 7.25 percent per annum) at any time since January 21, 2006.

II. Driver Training Program

CRST recruits drivers like Montoya by promising "free," "sponsored," or "cover[ed]" commercial driver's license ("CDL") training, as well as sign-on bonuses. New recruits must complete a four-phase Driver Training Program.

A. Phase 1

Prior to Phase 1, CRST recruiters arrange for drivers' transportation to the Phase 1 facility. Drivers must later repay this cost as an "advance." On the first day of Phase 1, drivers are required to sign a Pre–Employment Driver Training Agreement ("Training Agreement").

Phase 1 consists of driver training at an educational facility. Specifically, it involves a learner's permit course for drivers who lack such a permit, followed by one or two weeks of "truck-driving school" to obtain a CDL. Between 50 and 60 percent of those enrolled in the Driver Training Program attend Phase 1 training in Cedar Rapids, Iowa, at the North American Driver Training Academy ("NADTA"). NADTA is owned by Admiralty Holdings, which also owns the two CRST Defendants. The remaining drivers attend one of approximately 12 other schools with which CRST has contracted.

B. Phase 2

Phase 2 consists of an orientation program held at a CRST facility. In this phase, drivers fill out paperwork and provide CRST with required documentation, such as I–9 Forms, CDLs, Social Security cards, and birth certificates. They also must take a drug test, pass a physical examination, and complete a skills assessment. Drivers attend training sessions on a variety of topics, including driver wellness, filling out time logs, transporting hazardous materials, customer service, truck maintenance, and harassment prevention.

At some point before Phase 3, drivers must sign a Driver Employment Contract ("Employment Contract"). The precise timing of when the Employment Contract gets signed remains unclear on this record. Some students may sign it at the end of Phase 1. Others, like Montoya, sign it at the end of Phase 2.

C. Phase 3

After completing orientation, drivers are placed on CRST's payroll, which initiates Phase 3. Phase 3 consists of approximately 28 days of driving with a "lead driver" who has at least six months of driving experience.

D. Phase 4

Upon entering Phase 4, drivers are paired with a "codriver" for the remaining seven to nine months of their contract terms.

III. Training Agreement and Employment Contract

The Training Agreement and Employment Contract are both standardized documents that CRST uses nationwide. The Training Agreement designates which educational facility a driver will attend, describing the facility as an "independent contractor" that is a "separate non CRST affiliated" entity. This agreement also explains that if a driver satisfies certain preconditions, CRST will advance certain of the driver's Phase 1 and Phase 2 expenses, such as travel, lodging, and tuition, subject to the repayment conditions discussed below.

The lodging cost is based on an average for all participants in the Driver Training Program and does not change based on the actual cost of lodging provided to a particular driver. Similarly, the tuition fees, which range between $3,950 and $6,500,¹ are based on averages that take into account all of CRST's costs associated with the Driver Training Program, including meals, housing, transportation, advertising, recruiting, signing bonuses, and other costs. CRST actually pays the third-party schools between $1,400 and $2,500 per student. It does not disclose those actual costs to drivers.

In the Training Agreement, the driver acknowledges that all of these advances "will equal or exceed the sum of $2,000." The driver agrees that if he is dismissed or withdraws prior to completing Phase 3, he must repay the advances with interest "at a rate equal to the lesser of 1.5 [percent] per month or the maximum rate permitted by applicable federal and state usury laws."

In addition, the Training Agreement previews the terms of the Employment Contract that drivers must sign. The Employment Contract contemplates two scenarios for repayment of the advances. In one, so long as the driver remains employed by CRST, the company will deduct up to $40 per week from the driver's paycheck until the Phase 1 expenses (but not tuition), plus interest, are repaid in full. The other scenario arises when the driver breaches the Employment Contract or is terminated for cause. Under those circumstances, the driver immediately owes CRST between $3,950 and $6,500 for tuition at the educational facility, plus any remaining Phase 1 expenses, plus interest.

The Employment Contract authorizes CRST to deduct these amounts from any compensation owed to the driver or to employ a collection agency to enforce the obligation. It also contains a non-competition agreement that prohibits drivers from working for any CRST competitor in the United States for the term of the contract or until the driver repays any amounts owed to CRST.

IV. Drivers' Wages and Deductions

During Phases 1 and 2, CRST does not consider drivers to be employees and does not pay them. During Phases 3 and 4, CRST employs a "team driver" model, in which two drivers take turns either driving the truck, or spending time in the sleeper berth or passenger seat. This tag-team approach is necessary to comply with federal regulations limiting the amount of time a driver is permitted to be "on duty."

Team drivers are paid using a "split mileage" formula. For example, new drivers entering Phase 3 are paid 25 cents per mile; so, if a driving team completes a 2,000–mile trip, each driver gets credit for 1,000 miles (regardless of how many miles each drove) and earns $250. During Phase 4, drivers' per-mile rates periodically increase until CRST converts them to a "per diem" program, which reduces their per-mile rate by 12 cents and shifts some of their compensation to non-taxable "reimbursements."

Based on CRST payroll records, Montoya has calculated the hourly pay rate that he and three other opt-in plaintiffs received over the course of several weeks in 2014 and 2015. Those hourly rates range from $0 to $7.19 per hour depending on several...