U1it4less, Inc. v. Fedex Corp.

• Decision Date: 18 September 2017
• Docket Number: Docket No. 16-533-cv. August Term, 2016.
• Citation: 871 F.3d 199
• Parties: U1IT4LESS, INC., d/b/a Nybikergear, Plaintiff–Appellant, v. FEDEX CORPORATION, Fedex Corporate Services, Inc., Fedex Ground Package System, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

871 F.3d 199

U1IT4LESS, INC., d/b/a Nybikergear, Plaintiff–Appellant,

v.FEDEX CORPORATION, Fedex Corporate Services, Inc., Fedex Ground Package System, Inc., Defendants–Appellees.

Docket No. 16-533-cv. August Term, 2016.

United States Court of Appeals, Second Circuit.

Argued: March 7, 2017

Decided: September 18, 2017

Jay L.T. Breakstone (Amanda C. Broadwell, Jessica L. Richman, on the brief), Parker Waichman LLP, Port Washington, NY, for Plaintiff–Appellant.

Aaron T. Cassat , Federal Express Corporation, Memphis, TN, for Defendants–Appellees FedEx Corporation & FedEx Corporate Services, Inc.

Benjamin J. Ferron & Jason W. Norris, FedEx Ground Package System, Inc., Moon Township, PA, for Defendant–Appellee FedEx Ground Package System, Inc.

Before: SACK and LOHIER, Circuit Judges, and WOODS, District Judge.^*

LOHIER, Circuit Judge:

U1IT4Less, Inc., d/b/a NYBikerGear ("BikerGear"), an internet retailer of motorcycle gear, accuses FedEx Corporation and its subsidiaries FedEx Corporate Services, Inc. and FedEx Ground Package System, Inc.¹ of fraudulently marking up the weights of packages shipped by BikerGear and overcharging BikerGear for Canadian customs. In doing so, BikerGear claims, FedEx violated the Interstate Commerce Commission Termination Act of 1995 ("ICCTA"), 49 U.S.C. § 13708(b), and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c). As relevant to this appeal, the United States District Court for the Southern District of New York (Seibel, J. ) dismissed the ICCTA claim on the pleadings because, it concluded, the ICCTA is not "directed at" the type of billing dispute at issue in this case. U1IT4Less, Inc. v. FedEx Corp., 896 F.Supp.2d 275, 294 (S.D.N.Y. 2012). Following discovery, the District Court (Forrest, J. ) granted FedEx's summary judgment motion and dismissed BikerGear's substantive RICO claims because BikerGear failed to adduce evidence that FedEx Corp. and FedEx Services, the alleged RICO "persons," are distinct from FedEx Ground, the alleged RICO "enterprise." We AFFIRM.²

BACKGROUND

FedEx Corp. is the public holding company for all of FedEx's wholly-owned operating subsidiaries. FedEx Ground is FedEx's ground delivery service throughout the United States and Canada. FedEx Services provides sales, marketing, and information technology support to the other FedEx subsidiaries. FedEx Corp., which has fewer than 300 employees, does not exercise day-to-day control over FedEx Ground or FedEx Services. Each company operates mostly with its own directors and officers. FedEx Corp. and FedEx Services are headquartered in Memphis, Tennessee, while FedEx Ground is headquartered in Moon Township, Pennsylvania.

Like thousands of other retail companies, BikerGear used FedEx Ground to ship products to its customers in the United States and Canada. The relevant pricing and shipping contracts were executed by BikerGear and FedEx Services, acting as an agent of FedEx Ground and FedEx Corp.

BikerGear alleges that FedEx engaged in two schemes. Under the first scheme (BikerGear calls it the "Upweighting Scheme"), FedEx Ground rated BikerGear's packages at weights higher than their actual weight, resulting in overcharges to BikerGear. Overall, BikerGear alleges that it was overcharged for roughly 150 of the 5,490 packages it shipped via FedEx Ground from July 2008 to August 2010. Under the second scheme (dubbed the "Canadian Customs Scheme"), FedEx Ground is alleged to have improperly charged BikerGear for Canadian customs at least 150 times. FedEx admits that a glitch in its shipping software, now fixed, caused some wrongful customs charges.

After learning of the improper charges, BikerGear (both individually and on behalf of a putative class of FedEx shipping customers) sued all three defendants for violating the ICCTA and New York State's General Business Law. It also asserted civil RICO and RICO conspiracy claims against FedEx Corp. and FedEx Services under 18 U.S.C. § 1962(c) and (d). FedEx moved to dismiss the claims under Rule 12(b)(6).

Judge Seibel dismissed the ICCTA claim because BikerGear failed to allege that FedEx stated one amount on its invoices but charged a different amount. For reasons not relevant to this appeal, Judge Seibel also dismissed BikerGear's RICO conspiracy and state law claims. U1IT4Less, 896 F.Supp.2d at 291–95. Judge Seibel declined, however, to dismiss BikerGear's substantive RICO claims, holding that the defendants' separate incorporation, without more, satisfied RICO's requirement that the "person" alleged to violate 18 U.S.C. § 1962(c) be distinct from the alleged "enterprise." Id. at 287–88.

After discovery the case was reassigned to Judge Forrest, who granted summary judgment to FedEx and dismissed the remaining RICO claims. U1IT4Less, Inc. v. FedEx Corp., 157 F.Supp.3d 341 (S.D.N.Y. 2016). Contrary to Judge Seibel's earlier ruling on the motion to dismiss, Judge Forrest held that the mere fact of separate incorporation was not enough to satisfy the requirement that the RICO "person" and "enterprise" be distinct. Id. at 351–52. In addition, Judge Forrest concluded, BikerGear's RICO claims required a showing that the separate incorporation of FedEx Ground facilitated the racketeering enterprise allegedly run by FedEx Corp. and FedEx Services. Id. at 350–51. Because the evidence showed only that BikerGear "interacted with FedEx Ground and FedEx Services precisely as it would have had those sister subsidiaries in fact been divisions of a single FedEx corporation," Judge Forrest concluded that there was "no genuine question as to whether FedEx Corp. and FedEx Services are distinct from FedEx Ground for purposes of the RICO claims." Id. at 351–52.

This appeal followed.

DISCUSSION

We first address Judge Seibel's Rule 12(b)(6) dismissal of BikerGear's claim under the ICCTA, followed by Judge Forrest's grant of summary judgment dismissing the RICO claims.

1. 49 U.S.C. § 13708

Billing and collection obligations of motor carriers are set forth in 49 U.S.C. § 13708. Section 13708(b), entitled "False or misleading information," provides as follows: "No person may cause a motor carrier to present false or misleading information on a document about the actual rate, charge, or allowance to any party to the transaction." 49 U.S.C. § 13708(b).

BikerGear claims that FedEx violated the statute by perpetrating the Upweighting Scheme and the Canadian Customs Scheme and by failing to apply certain discounts to which BikerGear was allegedly entitled under its shipping contracts with FedEx. But in the same breath BikerGear expressly disclaims that FedEx "used rates other than their published tariff rates in computing charges." Second Am. Class Action Compl. ("SAC") ¶ 145. BikerGear's disclaimer is dispositive of the inquiry before us: Section 13708(b) requires only that FedEx accurately document the charges that it actually assesses its customers.

In arriving at that conclusion, we are inclined to view the text of the ICCTA as unambiguous. Cf. Solo v. United Parcel Serv. Co., 819 F.3d 788, 799 (6th Cir. 2016) ("We disagree with the district court that the language of § 13708(b) is ambiguous and see no need to look to its sparse legislative history."). As noted, Section 13708(b) prohibits presentation of "false or misleading information" about the "actual rate, charge, or allowance." FedEx makes the compelling argument that the text requires only that the charge FedEx lists on a document match the charge FedEx assesses in fact. On the other hand, BikerGear argues that the term "actual" refers not to the charges FedEx assessed in fact, but to the lesser amounts BikerGear claims it should have been charged had FedEx properly weighed the packages. In our view, the phrases "false or misleading" and "actual" require a comparison between documented charges and those assessed in fact, and the plain text therefore favors FedEx's position. Cf. Actual, Black's Law Dictionary (10th ed. 2014) ("Existing in fact; real."); Actual, Oxford English Dictionary (3d ed. 2010) ("Existing in fact, real; carried out, acted in reality.").

On balance, then, FedEx offers the more plausible textual interpretation of Section 13708(b) and its use of the term "actual." But the issue of textual ambiguity is close enough that, in prudence, we turn to the legislative history of the statute to confirm our reading of the text.

In 1993 Congress sought to ban "off-bill discounting," "a practice by which motor carriers provide discounts, credits or allowances to parties other than the freight bill payer, without notice to the payer."³ Regulations Implementing Section 7 of the Negotiated Rates Act of 1993 ("STB Decision"), 2 S.T.B. 73 (1997), 1997 WL 106986, at *1 ; see also H.R. Rep. No. 103–359, at 11 (1993), as reprinted in 1993 U.S.C.C.A.N. 2534, 2538 (describing the "thrust" of "[t]he off-bill discounting provision"). It did so by enacting the predecessor statute to Section 13708, which required the Interstate Commerce Commission (ICC), the agency then tasked with administering the statute, to issue regulations to: (1) prohibit motor carriers "from providing a reduction in a rate set forth in its tariff or [shipping] contract" to any person other than the person "paying the motor carrier directly" for the shipping service; (2) require motor carriers to disclose the "actual rates, charges, or allowances" on documents presented to the final payer; and (3) prohibit a "person from causing a motor carrier to present false or misleading information on a document about the actual rate, charge, or allowance to any party to the transaction" (i.e., the prohibition now contained in Section 13708(b)). Negotiated Rates Act of 1993, Pub. L. No. 103–180, § 7, 107 Stat. 2044, 2051–52 (codified at 49 U.S.C. § 10767 ), repealed by ICCTA, Pub. L. No. 104–88, § 102(a), 109 Stat. 803, 873–74 (1995). According to the Surface Transportation Board (STB), which succeeded the ICC and assumed the task of administering Section 13708, Cong...