IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

CHRISTOPHER CORDOVA and

TIMOTHY BERG, individually and on No. 03:14-cv-01663-HZ

behalf of all others similarly situated, 

Plaintiffs,

OPINION & ORDER

v.

FEDEX GROUND PACKAGE SYSTEMS, INC.

Defendant/Third-Party Plaintiff,

v. 

HONEY FROM THE ROCK, LLC and

TBERG TRANSPORT, INC.

Third-Party Defendants.

Steve D. Larson

Mark A. Friel

STOLL STOLL BERNE LOKTING & SHLACHTER P.C.

209 S.W. Oak Street, Fifth Floor

Portland, Oregon 97204

Attorneys for Plaintiffs/Third-Party Defendants

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Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 1 of 28
Robert C. Weaver

Eryn Karpinski Hoerster

GARVEY SCHUBERT BARER

121 S.W. Morrison Street, 11th Floor

Portland, Oregon 97204

Guy P. Michelson

Emily J. Harris

CORR CRONIN MICHELSON

BAUMGARDNER FOGG & MOORE LLP

1001 Fourth Avenue, Suite 2900

Seattle, Washington 98154

Attorneys for Defendant/Third-Party Plaintiff

HERNANDEZ, District Judge:

Plaintiffs Christopher Cordova and Timothy Berg, individually and on behalf of all others

similarly situated, bring this wage action against Defendant FedEx Ground Package System, Inc. 

Plaintiffs' claims are based on their allegation that Defendant improperly treated them as

independent contractors when they were actually employees. 

Defendant has been sued in this Court in two similar class action cases: Slayman v.

FedEx Ground Package Sys., Inc., No. 03:05-cv-01127-HZ and Leighter v. FedEx Ground

Package Sys., Inc., No. 03:07-cv-00818-HZ. Both cases were transferred to the Northern District

of Indiana which was designated a Multidistrict Litigation (MDL) Court for similar cases filed in

approximately forty states. After ruling in favor of Defendant on the question of employee

status, the cases were remanded back to the District of Oregon to resolve one remaining claim of

rescission for which class certification had not been granted. Upon transfer back to Oregon in

2011, Slayman and Leighter were assigned to me. I consolidated the cases and then, in a May 25,

2012 Opinion, granted summary judgment to Defendant on the rescission claim. 

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Plaintiffs appealed the MDL Court's determination on the employee-independent

contractor issue. On August 24, 2014, the Ninth Circuit concluded that the members of the

Slayman and Leighter classes were employees as a matter of law and ordered that the cases be

remanded to this Court for entry of summary judgment in favor of Plaintiffs and class members

on the issue of employment status. Slayman v. FedEx Ground Package Sys., Inc., 765 F.3d 1033

(9th Cir. 2014). 

As noted by the Ninth Circuit, the Slayman/Leighter cases together represent two classes

comprising approximately 363 individuals who were drivers for Defendant in Oregon at any time

between 1999 and 2009. Id. at 1037. The instant case, Cordova, picks up where the

Slayman/Leighter cases left off. As alleged in the First Amended Complaint in Cordova,

Defendant allegedly violated Oregon law after July 27, 2009 through the present by continuing to

misclassify its drivers as independent contractors. First Am. Compl. at ¶ 4. Plaintiffs bring

Cordova on behalf of those drivers working for Defendant after July 27, 2009, but only to the

extent such drivers are not included within the class definitions in Slayman/Leighter, and/or to

the extent they have damages that remain uncompensated by Slayman/Leighter. Id. In a status

conference held in Cordova in December 2014, counsel indicated that Cordova would be

procedurally aligned with Slayman/Leighter after class certification and dispositive motions are

resolved. Thus, the Slayman/Leighter cases remain idle until Cordova catches up.

Defendant responded to the First Amended Complaint raising thirty affirmative defenses. 

Additionally, in that pleading, Defendant brings a Third-Party Complaint against Honey from the

Rock, LLC and Tberg Transport, Inc. Presently, those Third-Party Defendants move to dismiss

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the third-party claims against them.1

 I grant the motion. 

BACKGROUND

In the First Amended Complaint, Plaintiffs allege that despite being tightly controlled and

regulated by Defendant, they are "nevertheless called independent contractors" by Defendant. 

First Am. Compl. at ¶ 2. They contend that the Operating Agreements they are required to sign

with Defendant contain various statements purporting to classify Plaintiffs and class members as

independent contractors while at the same time retaining various rights to Defendant. Id. at ¶ 12. 

They recite several facts which they contend establish Defendant's right to control them. E.g., id.

at ¶ 16. Despite these facts which allegedly demonstrate that the drivers are employees, Plaintiffs

assert that Defendant misclassifies its drivers as independent contractors which deprives the

drivers of the rights and protections guaranteed to them by Oregon law. Id. at ¶ 17. 

In their First Claim for Relief, Plaintiffs allege that they and the class are employees as

defined under Oregon law and are not free from Defendant's control and direction. Id. at ¶ 31. 

They contend that Defendant unlawfully withheld part of their compensation to pay for business

expenses which should have been borne by Defendant, including but not limited to vehicle

expenses, cargo claims, and insurance claims, in violation of Oregon Revised Statute § (O.R.S.)

652.610. Id. at ¶ 32. They allege that they have suffered substantial losses and have been

deprived of compensation to which they were entitled. Id. at ¶ 33. They seek damages

1

 In response to the motion, Defendant also separately moved to amend the third-party

complaint. In an April 27, 2015 Order, I denied that motion as moot because under Federal Rule

of Civil Procedure 15(a)(1)(B), Defendant was permitted to amend the third-party complaint

without leave of court. The Amended Third-Party Complaint was formally filed on April 29,

2015. As explained in the April 27, 2015 Order, I consider the Motion to Dismiss to have been

brought against the Amended Third-Party Complaint. 

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amounting to the greater of monetary or statutory damages, civil penalties, prejudgment interest,

costs, and reasonable attorney's fees. Id. 

In their Second Claim for Relief, Plaintiffs allege that this unlawful withholding or

deduction from their compensation separately violates O.R.S. 652.140 by failing to pay Plaintiffs

all compensation due to Plaintiffs at the termination of their employment relationship with

Defendant. Id. at ¶ 36. They seek damages in the amount of their respective unpaid wages and

penalties under O.R.S. 652.140 and 652.150, as well as costs and attorney's fees under O.R.S.

652.200(2). Id.

In the Amended Third-Party Complaint, Defendant alleges that Honey from the Rock,

LLC is an Oregon limited liability company which had a written Operating Agreement with

Defendant from January 1, 2009 to April 1, 2011. Am. Third-Party Compl. at ¶ 1. Plaintiff

Cordova was allegedly employed by Honey From the Rock to assist that company in performing

its obligations to Defendant during time periods relevant to the claims asserted in the First

Amended Complaint. Id. Similar allegations are made about Tberg Transport, Inc., which is

alleged to be an Oregon corporation which had a written Operating Agreement with Defendant

from December 11, 2010 to September 2, 2014. Id. at ¶ 2. Tberg Transport employed Plaintiff

Berg to assist Tberg Transport in performing its obligations to Defendant. Id. 

Defendant alleges that Third-Party Defendants were responsible for managing Plaintiffs'

employment, including deciding who would perform particular services to satisfy Third-Party

Defendants' contractual responsibilities under their Operating Agreements with Defendant. Id. at

¶ 3. According to Defendant, Third-Party Defendants had discretion to hire and terminate their

own employees, including Plaintiffs, instructed employees to perform a variety of tasks related to

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the Operating Agreements, and supplied the vehicles and other equipment and tools used by

Plaintiffs to perform services pursuant to the Operating Agreements. Id. Third-Party Defendants

allegedly had sole responsibility for setting and paying Plaintiffs' wages, along with calculating

and withholding any deductions. Id. 

Defendant alleges that pursuant to the Operating Agreements, Third-Party Defendants 

undertook contractual obligations to Defendant including an obligation to indemnify Defendant

against claims or liabilities related to the relationship between Third-Party Defendants and their

employees, to bear all expenses associated with employment of their employees, and to treat all

of their personnel as their own employees for all purposes. Id. at ¶ 4. Defendant alleges that

Third-Party Defendants enjoyed various benefits by contracting with Defendant. Id. at ¶ 11.

Defendant asserts that it would not have entered into the Operating Agreements if ThirdParty Defendants had not promised to comply with state and federal laws governing the

relationships between Third-Party Defendants and their employees, including laws governing

proper deductions. Id. at ¶ 12. Defendant also would not have agreed to enter into the Operating

Agreements if Third-Party Defendants had not promised to indemnify Defendant against any

claims relating to Third-Party Defendants' compliance with Oregon law. Id. at ¶ 13. 

Defendant brings three claims against Third-Party Defendants. First, Defendant brings a

breach of contract claim alleging that Third-Party Defendants "undertook a contractual obligation

to indemnify and hold harmless FedEx Ground against claims or liabilities related to the

relationship between Third-Party Defendants and their employees." Id. at ¶ 17. Defendant

alleges that Third-Party Defendants have breached their contractual duties and that as a result,

Defendant has suffered and will continue to suffer damages. Id. at ¶¶ 18, 19. 

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The second claim is also a breach of contract claim. Defendant alleges that Third-Party

Defendants "undertook contractual obligations to bear all expenses associated with employment

of their employees and to treat all of their personnel as their own employees for all purposes." Id.

at ¶ 21. Defendant further alleges that Third-Party Defendants "undertook contractual

obligations to bear sole responsibility for compliance with all applicable laws regarding

Plaintiffs' payroll deductions." Id. at ¶ 22. Defendant alleges that "[i]f Plaintiffs are adjudged to

have been employees of FedEx Ground during time periods relevant to the claims asserted in the

First Amended Complaint, Third-Party Defendants would be in breach of their contractual

duties" and that Defendant will suffer damages as a result. Id. at ¶¶ 23, 24. 

The third claim is one for unjust enrichment. Defendant alleges that Third-Party

Defendants enjoyed certain benefits by contracting with Defendant as independent contractors,

were aware of those benefits, and that if Plaintiffs prevail on their claims against Defendant,

Third-Party Defendants would be unjustly enriched by retaining benefits conferred on them by

Defendant. Id. at ¶¶ 26, 27, 28. 

STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "All allegations of material

fact are taken as true and construed in the light most favorable to the nonmoving party." Am.

Family Ass'n, Inc. v. City & Cnty. of S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). However, the

court need not accept conclusory allegations as truthful. See Warren v. Fox Family Worldwide,

Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) ("[W]e are not required to accept as true conclusory

allegations which are contradicted by documents referred to in the complaint, and we do not

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necessarily assume the truth of legal conclusions merely because they are cast in the form of

factual allegations") (internal quotation marks, citation, and alterations omitted).

A Rule 12(b)(6) motion will be granted if a plaintiff alleges the "grounds" of his

"entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation

of the elements of a cause of action[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 

"Factual allegations must be enough to raise a right to relief above the speculative level on the

assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]"

Id. (citations and footnote omitted).

To survive a motion to dismiss, a complaint "must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face[,]" meaning "when the

plaintiff pleads factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(internal quotation marks omitted). Additionally, "only a complaint that states a plausible claim

for relief survives a motion to dismiss." Id. at 679. A complaint must contain "well-pleaded

facts" which "permit the court to infer more than the mere possibility of misconduct[.]" Id. at

679.

DISCUSSION

Third-Party Defendants seek dismissal of all three third-party claims against them

because (1) Defendant fails to sufficiently allege the bases for its third-party claims; (2) the

alleged contractual provisions do not apply to Plaintiffs' claims against Defendant; (3) Defendant

has not alleged that the parties to any alleged agreement intended to indemnify Defendant for its

own conduct; (4) Defendant fails to allege sufficient facts to support its unjust enrichment claim;

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and (5) Defendant's third-party claims attempt to shield Defendant from the application of

Oregon wage laws which is contrary to the public policy of Oregon. I reject the first argument in

light of Defendant's now operative Amended Third-Party Complaint which quotes various

contractual provisions in support of the claims. Additionally, in response to the motion to

dismiss, Defendant submits copies of the relevant contract documents which I consider to be

incorporated into the Amended Third-Party Complaint. Coto Settlement v. Eisenberg, 593 F.3d

1031, 1038 (9th Cir. 2010) (court may consider materials as incorporated into the complaint

when complaint necessarily relies upon a document, the document's authenticity is not in

question, and there are no disputed issues as to the document's relevance). I address Third-Party

Defendants' remaining arguments as necessary. 

I. Application of Contractual Provisions to Plaintiffs' Claims Against Defendant

A. Breach of Contract - Indemnification

Defendant alleges that the Operating Agreements contained provisions under which the

Third-Party Defendants agreed to "[h]old FedEx Ground harmless from any liability and claims

by others . . . arising from [Third-Party Defendants'] relationship with [Third-Party Defendants']

employees . . . whether under industrial accident prevention laws or any other federal, state or

municipal laws applicable to the relationship between employers and employees." Am. ThirdParty Compl. at ¶ 5; see also Ex. A to Harris Decl. at p. 17 (§2.2(d) of Op. Agmt); Ex. B to

Harris Decl. at p. 14 (§ 2.2(d) of Op. Agmt); Ex. C to Harris Decl. at p. 17 (§ 2.2(d) of Op.

Agmt). Further, Defendant alleges that the Third-Party Defendants agreed to indemnify and save

FedEx Ground harmless against liabilities for 

[a]ny or all claims brought against FedEx Ground and liabilities incurred by

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FedEx Ground arising from the [Third-Party Defendants'] relationship with

[Third-Party Defendants'] employees, whether under industrial accident

prevention laws, or any other federal, state or municipal laws, rules, regulations

and orders applicable to the relationship between employers and employees; [and

for]

[a]ny and all claims brought against FedEx Ground or liabilities incurred by

FedEx Ground for or on account of [Third-Party Defendants'] failure or failure of

[Third-Party Defendants'] agents, servants, or employees to comply with any laws,

rules, regulations or orders applicable to [Third-Party Defendants'] business[.]

Id.; see also Ex. A to Harris Decl. at pp. 21-22 (§3.5(d), (e) of Op. Agmt.); Ex. B to Harris Decl.

at 17 (§ 3.5(d), (e) of Op. Agmt.); Ex. C to Harris Decl. at 22 (§ 3.5(d), (e) of Op. Agmt.). 

Third-Party Defendants argue that the indemnity provisions of the Operating Agreements

do not apply to Plaintiffs' claims against Defendant because those claims are not against the

Third-Party Defendants and do not concern Plaintiffs' relationship with them. The claims by

Plaintiffs concern Plaintiffs' relationship with Defendant and do not mention or relate to ThirdParty Defendants.

Third-Party Defendants rely on a 2008 decision by Judge Brown in a similar case. Phelps

v. 3PD, Inc., No. 03:08-cv-00387-HU, 2008 WL 4911909 (D. Or. Nov. 12, 2008). In Phelps,

two individual plaintiffs brought wage and other claims against the defendant alleging that the

defendant "purposefully misclassified" the plaintiffs and others similarly situated who provided

home-delivery services as independent contractors when they were actually the defendant's

employees. Id. at *1. The defendant brought a counterclaim for indemnity against plaintiff

Phelps, contending that he did business with defendant as a limited liability company (LLC)

pursuant to an operating agreement in which he allegedly agreed to provide transportation

services to the defendant. Id. at *1, *3; see also Ex. 1 to Friel Decl. (excerpt from Answer in

10 - OPINION & ORDER

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Phelps containing counterclaim allegations). In support of the counterclaim, the defendant

alleged that the claims asserted by the other individual plaintiff, Lugauer, and any expenses the

defendant incurred in defending against those claims, "arise out of and relate to Phelps'

relationship with Lugauer (or any other employee or substitute hired or retained by Phelps)." Ex.

1 to Friel Decl. at ¶ 126. Pursuant to the operating agreement with Phelps, the defendant alleged

that Phelps had to indemnify the defendant from all costs, expenses, damages, etc. Phelps, 2008

WL 4911909, at *3; Ex. 1 to Friel Decl.

The plaintiffs moved to dismiss the counterclaim. Judge Brown observed that the

"contractor" in the operating agreement was identified as "David Phelps, dba Dave Phelps

Trucking LCC [sic]." Id. at *2. The relevant indemnity provision provided, in part, that the

"contractor" would indemnify and hold the defendant "harmless from and against any liability

and claims by others . . . arising from or relating to CONTRACTOR'S relationship with

CONTRACTOR'S employees . . . whether under industrial accident prevention laws, workers'

compensation laws or any other federal, state, or municipal laws applicable to the relationship

between employers and employees." Id. 

With the contract provisions fully disclosed, Judge Brown dismissed the counterclaim

because 

the claims asserted by Plaintiffs are based on Defendant's allegedly improper

classification of Plaintiffs as independent contractors rather than employees. Such

allegedly improper classification does not arise from or relate to Plaintiffs'

relationship with Plaintiffs' employees . . . or from Plaintiffs' omissions resulting

from or arising out of the operation of the equipment.

Id. (internal quotation marks, ellipses, and brackets omitted). In other words, the plaintiffs'

claims arose out of or were related to their relationship with the defendant and did not arise out

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of their relationship with their own employees. As such, the indemnity provision did not apply to

the plaintiffs' claims.

The contractual language at issue in Phelps is nearly identical to the language in the

Operating Agreements here. Third-Party Defendants argue that the result should be the same as

in Phelps: the indemnity provisions have no application to Plaintiffs' claims. 

In response, Defendant argues that Third-Party Defendants' argument misses the point 

and that Phelps is distinguishable. First, Defendant contends that the fact that Plaintiffs are not

seeking relief against the Third-Party Defendants in their First Amended Complaint is irrelevant. 

For the purposes of assessing the viability of the third-party claims, Defendant argues that its

allegation that Plaintiffs were employed by the Third-Party Defendants controls. Once it is

understood that the individual Plaintiffs were employees of the Third-Party Defendants, then,

Defendant argues, Plaintiffs' claims arise from the relationship between the Third-Party

Defendants and Plaintiffs because Plaintiffs seek recovery for alleged illegal deductions which

could only have been taken by their employing entities - the Third Party Defendants. 

As to Phelps, Defendant suggests that the indemnity counterclaim in that case was based

on an operating agreement between the plaintiff and the defendant, whereas in this case the

Operating Agreements are between Defendant and Third-Party Defendants. Thus, Defendant

continues, the indemnity claim in Phelps was brought against the plaintiffs themselves and not

against a third-party that employed the plaintiffs. Defendant argues that unlike in Phelps, the

facts here "fall squarely within the indemnity provision" of the applicable Operating Agreements

"because it is the employees (the Plaintiffs) of the contracting party (the Third-Party Defendants),

not the contracting party itself, that are asserting claims against the Defendant." Def.'s Opp. at 8. 

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Third-Party Defendants argue that Defendant attempts to re-draft Plaintiffs' First

Amended Complaint to make it fit within the alleged contractual indemnity provisions. They

contend that Defendant's focus on its allegations in the Third-Party Complaint is misplaced

because Defendant must allege facts showing that the contractual indemnity language applies to

the claims as alleged by Plaintiffs in their First Amended Complaint. Third-Party Defendants

state that Plaintiffs' claims depend on proof that Defendant misclassified them as independent

contractors when they were actually employees, and as employees of Defendant, Defendant

unlawfully failed to make proper deductions from their wages and pay them all wages due upon

termination. As a result, under those allegations, they argue that the alleged contractual

provisions do not apply to their claims. 

Furthermore, Third-Party Defendants contend that the counterclaim in Phelps is not

distinguishable. The counterclaim was brought against plaintiff Phelps whom the defendant

alleged had employed Lugauer. In the counterclaim, the defendant alleged that the operating

agreement's indemnity provision entitled the defendant to be indemnified as to the claims of

Lugauer. Thus, Third-Party Defendants argue that the relationship between Phelps, Lugauer, and

the defendant in Phelps is the same as presented here: Phelps's LLC employed Lugauer and the

defendant sought indemnity from Phelps for the claims brought against the defendant by

Lugauer. Here, the Third-Party Defendants allegedly employed Plaintiffs and Defendant seeks

indemnity from the Plaintiffs' LLC or corporation for the claims brought against Defendant by

the Plaintiffs. 

The same result should occur here. As to Phelps, the only difference is that the defendant

in Phelps did not bring the counterclaim against Phelps's LLC but brought it against Phelps

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individually, likely because the contracting party was identified as David Phelps, dba Dave

Phelps Trucking LLC. The defendant in Phelps perhaps could have brought a third-party

indemnity claim against the LLC instead of a counterclaim against the individual Phelps. But, in

the end, the distinction is without meaning as either way, the application of the indemnity claim

as to the claims brought by Lugauer is no different than the application of the indemnity claim

Defendant asserts here: Lugauer (Plaintiffs here) had an employment relationship with another

person/entity (Third-Party Defendants here) who had an indemnity agreement with the defendant

(Defendant here) and thus, that person/entity (Third-Party Defendants here) should indemnify the

defendant (Defendant here) for claims brought by Lugauer (Plaintiffs here) against the defendant

(Defendant here). The fact that the claim in Phelps was brought against Phelps as opposed to his

LLC had no bearing on Judge Brown's conclusion that the fundamental allegation of the

plaintiffs' claims, the alleged improper classification as independent contractors rather than

employees, did not arise from or relate to the plaintiffs' relationship to the plaintiffs' employees. 

Additionally, an indemnity claim presumes the existence of a pre-existing, independent

claim asserted against Defendant, not one created by Defendant's own allegations. The

controlling allegations are the claims as brought and framed by Plaintiffs.2 Accordingly, I reach

the same conclusion that Judge Brown did in Phelps: the indemnity provisions in the Operating

Agreements at issue here in which Defendant is indemnified for liabilities and claims arising

from the Third-Party Defendants' relationships with their employees, do not apply to Plaintiffs'

2

 Even Defendant seems to recognize this in its Memorandum in Opposition when it

states that "[w]hat matters for purposes of the Third-Party Complaint is whether . . . FedEx

Ground has a basis for a claim against [Third-Party Defendants], based on Plaintiffs' allegations."

Def.'s Opp. at 5-6 (emphasis added). 

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claims against Defendant. Additionally, the indemnity provision regarding liabilities incurred for

or on account of Third Party Defendant's failure to comply with any laws, rules, etc. is equally

inapplicable to Plaintiffs' claims against Defendant. This provision, like the others, applies to

claims based on conduct by the Third Party Defendants which is not at issue in Plaintiffs' claims.

B. Breach of Contract - Employment 

In this claim, Defendant alleges that Third-Party Defendants "undertook contractual

obligations to bear all expenses associated with employment of their employees and to treat all of

their personnel as their own employees for all purposes." Am. Third-Party Compl. at ¶ 21; see

also id. at ¶ 5. Third-Party Defendants undertook additional contractual obligations to bear sole

responsibility for complying with applicable laws regarding Plaintiffs' payroll deductions. Id. at

¶ 22; see also id. at ¶ 5. 

These contract provisions appear in the "Vehicle Operations" section of the Operating

Agreements governing the employment of "qualified persons." Ex. A to Harris Decl. at 17

(§2.2(b), (c)); Ex. B to Harris Decl. at 13 (§2.2(b), (c)); Ex. C to Harris Decl. at 17 (§2.2(b), (c)). 

Third-Party Defendants argue that these contractual provisions do not apply to Plaintiffs' claims

for the same reason as the indemnity provisions do not apply to Plaintiffs' claims. They contend

that Plaintiffs' claims do not concern any employment relationships involving the Third-Party

Defendants. The claims address only Plaintiffs' relationship with Defendant and are not

"associated with" Third-Party Defendants. The claims do not involve any "expenses" attributable

to Third-Party Defendants. Additionally, Third-Party Defendants argue, the contractual

provision requiring the contractor to "[a]ssume sole responsibility for compliance with all

applicable laws, rules, regulations and orders respecting payroll deductions and maintenance of

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payroll and employment records[,]" does not apply to Plaintiffs' claims because their claims

relate to Defendant's failure to comply with Oregon wage laws, not to any failure by Third-Party

Defendants and not to any employment relationships involving Third-Party Defendants. 

Defendant argues that these Operating Agreement provisions support its claim as to the

contractual obligations relating to the Third-Party Defendants' employment of Plaintiffs. Both of

the employment-related provisions address the relationship between Third-Party Defendants and

their own employees. The first states this expressly by referring to the obligation to "[b]ear all

expenses associated with the employment of such persons, . . . " with "such persons" referring to

the contractor's employees. The second provision addresses the Third-Party Defendant's

assumption of responsibility for complying with various laws regarding payroll deductions and

payroll and employment records. While the second provision does not mention "employees"

expressly, it is clear from the context that this provision applies to Third-Party Defendants'

obligations vis-a-vis their own employees. 

Defendant argues that Plaintiffs seek recovery for illegal deductions from payroll from

Defendant but under the Operating Agreements, those deductions could have been taken only by

Third-Party Defendants. Thus, Defendant contends, a victory for Plaintiffs establishes that

Third-Party Defendants breached their contractual obligations. 

Unlike the contractual indemnity/hold harmless provisions which expressly refer to other,

independent liabilities and claims, the contractual employment provisions do not contain such

language and therefore do not on their face refer to a preexisting claim or liability. Defendant

does not plead this claim as an indemnification claim but instead as a claim based on the breach

of contractual employment provisions. However, at least one court has, in a similar case,

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rejected a defendant's "attempt to characterize [its] claim as a request for breach of contract

damages rather than an action for indemnification[.]" Gustafson v. Bell Atl. Corp., 171 F. Supp.

2d 311, 328 (S.D.N.Y. 2001). There, the plaintiff, a chauffeur, brought claims against the

defendant for violating various employment-related laws, including overtime violations under the

federal Fair Labor Standards Act (FLSA), by intentionally misclassifying him as an independent

contractor rather than an employee. The defendant had required the plaintiff to form his own

corporation, which was required to carry workers' compensation, unemployment compensation,

and other liability insurance. Id. at 317. The defendant then contracted with the plaintiff's

company for chauffeur services. Id. Although the court rejected some of the plaintiff's claims, it

concluded that the plaintiff was the defendant's employee for purposes of the FLSA. Id. at 326.

In third-party claims brought against the plaintiff's company, the defendant sought

indemnification from the plaintiff's company for any damages awarded to the plaintiff. Id. at

327. The defendant, in an attempt to distinguish this claim from precedent holding that a

company in violation of the FLSA has no right to indemnification, argued that its request for

indemnification was one for damages for breach of contract by a third party. Id. It noted that

under the contract between the defendant and the plaintiff's corporation, the plaintiff's

corporation was required to comply with any applicable federal and state laws. The defendant

argued that any overtime wage liability it had to plaintiff was because of the plaintiff's company's

breach of its contractual obligation to comply with that law. Id. at 327-28.

The court rejected this "characterization" of the claim, stating that "[w]hether or not [the

plaintiff's company] breached a contractual obligation, defendants' attempt to recover damages

from [the plaintiff's company] for overtime violations is an attempt to receive indemnification for

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FLSA liability." Id. at 328. As such, the defendant could not escape the application of prior

cases holding that there is no right to indemnification for employers under the FLSA. Id. (further

explaining that allowing the defendant to obtain indemnification from the plaintiff's company

contradicted the policies of the FLSA). 

Defendant's second third-party claim here is indistinguishable from the breach of contract

claim at issue in Gustafson. As such, regardless of the appellation given the claim by Defendant,

I view it as an attempt by Defendant to obtain indemnification for its alleged state wage law

liability. As a result, the previous discussion regarding Defendant's first third-party claim

expressly denoted as an indemnity claim, applies with equal force here. Accordingly, the

contractual provisions at issue in Defendant's second claim against Third-Party Defendants do

not apply to Plaintiffs' claims.

Alternatively, third-party claims require a relationship between the third-party claim and

the claim brought by the plaintiff. Federal Rule of Civil Procedure 14(a) provides that a

"defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who

is or may be liable to it for all or part of the claim against it." Fed. R. Civ. P. 14(a). Under this

provision, the third-party claim is appropriate only when liability is "dependent on the outcome

of the main claim and is secondary or derivative thereto." Stewart v. Am. Int'l Oil & Gas Co.,

845 F.2d 196, 199 (9th Cir. 1988) (citing United States v. One 1977 Mercedes Benz, 708 F.2d

444, 452 (9th Cir. 1983)). The third-party claim cannot simply be "'independent or related" but

"'must be based upon plaintiff's claim against defendant.'" Id. (quoting 6 Charles Alan Wright &

Arthur R. Miller, Federal Practices & Procedure § 1446 at 257 (1971)). The "'crucial

characteristic'" of the third-party claim is that "'defendant is attempting to transfer to the third18 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 18 of 28
party defendant the liability asserted against him by the original plaintiff.'" Id. (quoting 6 Fed.

Prac. & Proc., § 1446 at 257). 

The third-party claim based on the employment-based contractual language in the

Operating Agreements is not derivative of Plaintiffs' claims because it relies on facts asserted by

Defendant that are contrary to Plaintiffs' allegations. The liability asserted against Defendant by

Plaintiffs is based on the recognition that as a matter of law, Plaintiffs were employees of

Defendant's, despite agreements expressly declaring them to be independent contractors and

despite agreements expressly declaring that anyone working with an independent contractor to

assist him or her in performing the obligations under the Operating Agreements is also not

employed by Defendant. The basis for Defendant's third-party claim is the viability of the

Operating Agreements. But, Plaintiffs' allegations and claims undercut those Operating

Agreements. If Plaintiffs are employees of Defendant's, as they allege and as must be assumed to

be true (and has already been determined to be the case in Slayman/Leighter for what appear to

be almost identically situated drivers), then the independent contractor agreements which provide

the basis of Defendant's third-party claims, are invalid. See Def.'s Opp. at 11 (noting that if

Plaintiffs are determined to be employees of Defendant's as Plaintiffs allege and they prevail on

their wage claims against Defendant, the provisions of the Operating Agreements Defendant

relies on would be unenforceable). Defendant's liability to Plaintiffs would not be "transferred"

to the Third-Party Defendants by Defendant's third-party claim because once Defendant's liability

to Plaintiffs is established, it ends there. Defendant cannot attempt to transfer its liability to

Plaintiff via the third-party claim because the third-party claim requires an independent liability

which is contrary to Plaintiffs' claims. 

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Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 19 of 28
I agree with Plaintiff that neither of the third-party claims based on the provisions in the

Operating Agreements state a viable third-party claim. 

II. Indemnification for Defendant's Own Conduct

Judge Brown dismissed the indemnity claim in Phelps for a separate reason. 2008 WL

4911909, at *2. Relying on a 1965 Oregon case, she found that the alleged misconduct of the

defendant was based solely on the action of the defendant and thus, the defendant could not seek

indemnity. Id. (citing Waterway Terminals v. P.S. Lord, 242 Or. 1, 406 P.2d 556 (1965)). In

Waterway Terminals, the court explained that "in this state," there is a "presumption . . . against

an intention to contract for immunity from the consequences of one's own negligence[.]"

Waterway Terminals, 242 Or. at 19, 406 P.2d at 564. The presumption may be overcome by

"unequivocal language" in the contract establishing the intent to indemnify the indemnitee for its

own wrongdoing. Id.; see also Steele v. Mt. Hood Meadows Or., Ltd., 159 Or. App. 272, 276,

974 P.2d 794, 796 (1999) ("when one party seeks to contract away liability for its own

negligence in advance of any harm, the intent to do so must be clearly and unequivocally

expressed") (internal quotation marks omitted). In analyzing the contract provision at issue, the

court must consider both the "language of the contract and the possibility of a harsh or

inequitable result that would fall on one party if the other were immunized from the

consequences of its own negligence." Steele, 159 Or. App. at 276, 974 P.2d at 796 (internal

quotation marks omitted). 

Third-Party Defendants argue that the contractual provisions alleged by Defendant do not

unequivocally apply to claims that might be brought against Defendant for Defendant's own

violations of Oregon wage laws. Additionally, Defendant does not allege that requiring Third20 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 20 of 28
Party Defendants to indemnify Defendant for its own wage violations would not be harsh or

inequitable. Instead, Third-Party Defendants maintain, allowing the third-party claims in this

case would be in violation of Oregon public policy by allowing Defendant to shift responsibility

for wage violations to third parties. Accordingly, the third-party claims would cause a harsh and

inequitable result on Third-Party Defendants.

Defendant responds that it does not seek indemnification from Third-Party Defendants for

Defendant's own conduct. It seeks indemnification for Third-Party Defendants' conduct because

as Plaintiffs' employers, Third-Party Defendants are responsible for any illegal deductions taken

from the wages paid to the Plaintiffs by Third-Party Defendants. Additionally, Defendant argues

that the presumption against contracting away liability for one's own conduct is overcome here by

the contractual language covering this particular loss, meaning claims arising from Third-Party

Defendants' relationship with their employees. Moreover, because Third-Party Defendants

affirmatively undertook the obligation of complying with applicable laws regarding payroll

deductions, pursuit of the indemnification claim does not improperly shift that responsibility to

Defendant.

The problem with Defendants' argument is that regardless of the relationship between the

Third-Party Defendants and their employees and any contractual provisions in the Operating

Agreements governing those relationships, the conduct at issue in Plaintiffs' claims is

Defendant's conduct. The only liabilities and claims Defendant faces are as a result of its own

actions. Because no other liabilities and claims are at issue, Defendant seeks indemnification for

its own misconduct. Thus, the presumption in Waterway Terminals applies. The contractual

language does not unequivocally overcome the presumption because, as previously explained, it

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Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 21 of 28
governs claims and liabilities arising from the employment relationship between Third-Party

Defendants and their employees and does not apply to claims, such as those asserted by Plaintiffs

here, that arise from the employment relationship between Plaintiffs and Defendant. As in

Phelps, Waterway Terminals requires dismissal of the indemnity claim. And, because

Defendant's second breach of contract claim regarding employment-related obligations is, under

Gustafson, properly understood as seeking indemnity, Waterway Terminals requires dismissal of

that claim as well.

III. Unjust Enrichment Claim

In support of its unjust enrichment third-party claim, Defendant alleges that Third-Party

Defendants enjoyed "benefits" by contracting with Defendant and being treated by Defendant as

independent contractors. Am. Third-Party Compl. at ¶ 26. Defendant alleges that Third-Party

Defendants were aware of the benefits conferred. Id. at ¶ 27. Then, Defendant asserts that if

Plaintiffs are adjudged to have been employees of Defendant and if employee compensation is

awarded to Plaintiffs, "Third-Party Defendants would unjustly retain the extra benefits conferred

by FedEx Ground without incurring the costs of employee compensation due to their employees."

Id. at ¶ 28. Further, Defendant contends, "Third-Party Defendants would avoid losses arising

from their failure to comply with laws governing Plaintiffs' employment, by shifting the costs of

their wrongdoing onto FedEx Ground." Id. "Accordingly," Defendant asserts, "Third-Party

Defendants should be ordered to pay to FedEx Ground the amount of the extra benefits

conferred." Id. at ¶ 29. 

The "benefits" that Third-Party Defendants enjoyed by contracting with Defendant refer

to those asserted in Paragraph 11 of the Amended Third-Party Complaint, including, "the right to

22 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 22 of 28
enter a business relationship with FedEx Ground, the flexibility of independent business

ownership, and a contract price negotiated in reliance on the allocation of risk and responsibility

set forth in the Operating Agreement." Id. at ¶ 11. Defendant alleges that Third-Party

Defendants also received tax benefits, such as deductions for home offices, depreciation of

vehicles and routes, and other business expenses that are unavailable to employees. Id. 

To state a claim for unjust enrichment, a party must allege "(1) a benefit conferred, (2)

awareness by the recipient that she has received the benefit, and (3) it would be unjust to allow

the recipient to retain the benefit without requiring her to pay for it." Commerce & Indus. Ins.

Co. v. HR Staffing, No. 03:14-cv-00559–HZ, 2014 WL 4983671, at *3 (D. Or. Oct. 1, 2014)

(internal quotation marks omitted). Third-Party Defendants initially argued that the unjust

enrichment third-party claim failed to state a claim because there were no allegations of what

"benefits" were allegedly received, no allegations of how Third-Party Defendants were made

aware of the benefits, and no allegations of what injustice would result from not requiring ThirdParty Defendants to compensate Defendant. In light of the Amended Third-Party Complaint, this

argument is largely moot.

While Third-Party Defendants initially raised other arguments as well, their Reply

Memorandum focuses on two. First, they argue that the claim fails as a matter of law because

Defendant does not allege that Third-Party Defendants must repay Defendant for the same

benefits allegedly received by Third-Party Defendants. Instead, Defendant alleges that ThirdParty Defendants must repay Defendant for any unlawful wage deductions and penalties that

Defendant may be required to pay as a result of Defendant's own misconduct. "In other words,"

Third-Party Defendants continue, "FedEx's unjust enrichment fails because it is not an unjust

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Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 23 of 28
enrichment claim at all; it is, just like FedEx's other third party claims, a claim for indemnity."

Third-Party Defs.' Reply at 10. Second, Third-Party Defendants argue that Defendant cannot

plausibly allege injustice because Oregon public policy precludes the shifting of responsibility for

wage violations to third parties and any finding of liability and resulting judgment would be

based on Defendant's own conduct. 

I agree with Third-Party Defendants. Defendant alleges that if Plaintiffs prevail in their

claims, Third-Party Defendants would "unjustly retain the extra benefits" conferred on them by

Defendant under their Operating Agreements without incurring the costs of employee

compensation due to their employees, and to avoid this injustice, Third-Party Defendants must

pay Defendant "the amount of the extra benefits conferred." Am. Third-Party Compl. at ¶¶ 28,

29. As indicated above, the "benefits" allegedly conferred by the agreements concern items such

as tax benefits and a particular contract price. Id. at ¶ 11. But, the alleged "injustice" here is

triggered by a determination that Defendant owes Plaintiffs compensation for unlawful

deductions and related penalties. And, the "amount of extra benefits conferred" Defendant

alleges Third-Party Defendants must pay to Defendant appears to be the damages Defendant will

be ordered to pay to Plaintiffs if Plaintiffs prevail, not the amount of the tax benefits or the value

of the "flexibility of independent business ownership[.]" See id. at ¶ 28 (alleging that an award

of compensation to Plaintiffs means that Third-Party Defendants avoided their obligation to pay

the compensation due to their employees); id. at ¶ 15 (alleging that if Plaintiffs are employees of

Defendant, it would be "unjust" for Defendant to pay for the benefits obtained by Third-Party

Defendants who should have expected to pay for the wage penalties). 

Despite Defendant's attempt to plead the claim as an unjust enrichment claim, the

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Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 24 of 28
allegations amount to an indemnification claim for the damages Defendant may owe to Plaintiffs. 

Understood as such, and for the reasons previously explained, the unjust enrichment claim cannot

survive. Additionally, as noted above, the unjust enrichment claim, as with the other two claims,

is not dependent on Plaintiffs' claims and Defendant does not seek to transfer the liability

asserted against it by Plaintiffs to Third-Party Defendants. Thus, it is not a viable third-party

claim under Rule 14(a). The liability established by Plaintiffs' claims is based on wage

violations. The third-party claims address alleged unjust or inequitable enrichment based on

separate and independent contractual expectations and violations. 

Alternatively, for the reasons discussed below, I agree with Third-Party Defendants that

based on the allegations in the Third-Party Complaint, the third-party claims are contrary to the

public policy of Oregon and thus, Defendant cannot, as a matter of law, establish the requisite

injustice to support the unjust enrichment claim.

IV. Public Policy

Third-Party Defendants argue that all of Defendant's third-party claims must be dismissed

because they attempt to shield Defendant from the application of Oregon wage laws, contrary to

the public policy of the State of Oregon. As noted in Gustafson, which addressed a federal wage

claim, allowing indemnification in such situations permits employers to contract away their

wage-related obligations. 171 F. Supp. 2d at 328. Oregon cases have reached similar

conclusions although sometimes in different contexts. Sch. Dist. No. 1, Multnomah Cnty. v.

Teachers' Ret. Fund Ass'n, 163 Or. 103, 110, 95 P.2d 720, 723 (1939) (contractual waiver of

statutory entitlement to disability benefits held invalid; waiver was "inimical to the public policy

of the state" as expressed in the statute); Turney v. J.H. Tillman Co., 112 Or. 122, 132, 228 P.

25 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 25 of 28
933, 132 (1924) (in case discussing wages paid for work on state construction project, court

noted the "general rule" that "[u]sually a person may waive by agreement the benefit of a

statutory provision[,]" but noted an exception for statutory provisions "whose waiver would

violate public policy expressed therein, or where rights of third parties which the statute was

intended to protect are involved."); Young v. Mobil Oil Corp., 85 Or. App. 64, 72-73, 735 P.2d

654, 659 (1987) (indemnity provision in foreign contract held invalid because indemnity would

subvert public policy as expressed in the exclusive liability provision of the Workers'

Compensation Law); McKinney v. Employment Division, 21 Or. App. 730, 737, 537 P.2d 126,

130 (1975) ("Where legislation is intended to secure general objectives of public policy as well

as to protect the interests of individuals, it may not be circumvented by private agreement."). 

Oregon law expressly provides: 

An employer may not by special contract or any other means exempt the employer

from any provision of or liability or penalty imposed by . . . any statute relating to

the payment of wages, except insofar as the Commissioner of the Bureau of Labor

and Industries in writing approves a special contract or other arrangement between

an employer and one or more of such employer's employees.

O.R.S. 652.360(1)

In a similar case, the Oregon Supreme Court considered the wage-related claims of the

truck driver plaintiff who signed an employment agreement with a company which was a whollyowned subsidiary of the defendant. Taylor v. Werner Enters., Inc., 329 Or. 461, 988 P.2d 384

(1999). Despite that employment agreement with the subsidiary, the court concluded that the

defendant, not the subsidiary, was the employer given various factors such as serving under the

direction and control of the defendant. Id. at 468, 988 P.2d at 388. The court rejected the

defendant's argument that the employment agreement between the plaintiff and the subsidiary

26 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 26 of 28
controlled the relationship. Id. at 468, 988 P.2d at 388-89. It made clear that under O.R.S.

652.360, such agreements "cannot exempt [the defendant employer] from liability or any penalty

imposed by [the defendant employer's] violations of [Oregon wage statutes]." Id. at 468, 988

P.2d at 389. 

While many of these cases have addressed the validity of agreements which contravene

wage and similar statutes, Gustafson and other cases have applied the governing principle to

dismiss indemnity claims. E.g., Local 1035, Int'l Bhd. of Teamsters v. Pepsi Allied Bottlers, Inc.,

99 F. Supp. 2d 219, 221 (D. Conn. 2000) (court dismissed employer counterclaim based on

indemnity provision in collective bargaining agreement in overtime wage case because "a

holding that the indemnification clause is enforceable would indeed mean that employers would

have little reason to be concerned over whether labor agreements comply with the statutorily

mandated and unwaivable overtime pay requirements of the FLSA, knowing full well that if they

are later found to have violated such requirements, such employers would be totally compensated

for any injuries resulting from such action[.]"); Thurmond v. Drive Auto. Indus. of Am., Inc., 974

F. Supp. 2d 900, 908 (D.S.C. 2013) (dismissing employer's third-party contractual indemnity

claim against staffing agency in Title VII discrimination case because Title VII's goal of

eradicating discriminatory conduct "would be thwarted if [a party] were permitted to contract

around its obligations and shift its entire responsibility for complying with Title VII") (internal

quotation marks omitted).

Defendant's third-party claims violate O.R.S. 652.360 and the public policy of Oregon.

Assuming Plaintiffs are Defendant's employees as Plaintiffs allege, Defendant cannot avoid its

liability for unlawful deductions and associated penalties by relying on its contracts with Third27 - OPINION & ORDER

Case 3:14-cv-01663-HZ Document 34 Filed 05/08/15 Page 27 of 28
Party Defendants. Allowing Defendant to assert indemnification and indemnification-type

claims against the Third-Party Defendants based on those contracts contravenes the law in O.R.S.

652.360 and the public policies it enforces. 

Defendant argues that O.R.S. 652.360 does not apply because it, and the public policy

argument based on it, presupposes that Defendant is Plaintiffs' employer. Because the third-party

claims deny that Defendant was Plaintiffs' employer and assert that Third-Party Defendants were

Plaintiffs' employer, Defendants contend that its third-party claims do not violate public policy. I

disagree. Two of Defendant's third-party claims are expressly conditioned on a finding that

Plaintiffs were Defendant's employees. Am. Third Party Compl. at ¶¶ 23, 24, 28, 29. The other

claim implies the same condition. Once that condition is satisfied, the claims are not viable. 

CONCLUSION

Third-Party Defendants' motion to dismiss the third-party claims [24] is granted. Because

the claims are not susceptible to re-pleading, they are dismissed with prejudice. 

IT IS SO ORDERED.

Dated this day of , 2015

 

Marco A. Hernandez

United States District Judge

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