Court Opinion

ID: 3202826
Source: CourtListenerOpinion
Date Created: 2016-05-11 21:00:28.694207+00
Date Added: 2024-06-11T14:29:05.934122
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 15-1908

               MASSACHUSETTS DELIVERY ASSOCIATION,

                      Plaintiff, Appellee,

                               v.

          MAURA T. HEALEY, in her official capacity as
     Attorney General of the Commonwealth of Massachusetts,

                      Defendant, Appellant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Denise J. Casper, U.S. District Judge]

                             Before

                      Howard, Chief Judge,
                Selya and Lynch, Circuit Judges.

     Douglas S. Martland, Assistant Attorney General, with whom
Maura Healey, Attorney General of Massachusetts, was on brief, for
appellant.
     David C. Casey, with whom Christopher B. Kaczmarek, Stephen
T. Melnick, and Littler Mendelson, P.C. were on brief, for
appellee.

                          May 11, 2016
                LYNCH, Circuit Judge.           The question in this case is

whether the express preemption provision of the Federal Aviation

Administration Authorization Act of 1994 ("FAAAA"), 49 U.S.C.

§ 14501(c)(1), preempts the application of "Prong 2" of the

Massachusetts Independent Contractor Statute, Mass. Gen. Laws ch.

149,       §   148B(a)(2),    to    the   same-day   delivery   companies     that

constitute the Massachusetts Delivery Association ("MDA").                    This

court previously remanded this case to the district court for a

determination, on review of the full evidentiary record, of whether

Prong 2 is FAAAA-preempted because it "relate[s] to" the prices,

routes, or services of the motor carriers.                Mass. Delivery Ass'n

v. Coakley (MDA II), 769 F.3d 11, 23 (1st Cir. 2014).                On remand,

the    district      court,    at     summary     judgment,   answered   in    the

affirmative.        Mass. Delivery Ass'n v. Healey, 117 F. Supp. 3d 86,

97–98 (D. Mass. 2015).

                After the filing of the appeal in this case, this court

held in Schwann v. FedEx Ground Package System, Inc. that the FAAAA

preempts the application of Prong 21 to the nationwide package

delivery service FedEx.              813 F.3d 429, 432 (1st Cir. 2016).

Applying the reasoning in Schwann, we affirm.

       1  An earlier appeal of this case referred to this
subsection as "Prong B." We now adopt the term "Prong 2," as used
in Schwann.

                                          - 2 -
                                        I.

              The MDA is a trade organization representing same-day

delivery service companies in Massachusetts.                 The MDA brought this

suit on behalf of its members, seeking a declaration that Prong 2

is preempted by the FAAAA as well as an injunction barring the

Attorney General from enforcing Prong 2 against its members.                      The

MDA   chose    one   member,    X    Pressman      Trucking    &    Courier,      Inc.

("Xpressman"), as an exemplar for this litigation.

              Xpressman offers its clients both scheduled-route and

on-demand deliveries.          For scheduled-route deliveries, packages

are   picked   up    and   dropped    off    at    regular    times      and   places.

Xpressman's scheduled routes are serviced by forty-six couriers.

Xpressman selects scheduled-route couriers by soliciting bids

through online advertisements and awarding the route to whoever

advances the best bid.              For on-demand deliveries, the times,

locations,     and   total   number     of     deliveries     are     variable    and

unpredictable.       Each day, couriers provide Xpressman with their

availability to make on-demand deliveries, and Xpressman matches

on-demand delivery requests with available couriers.                           It was

represented to us at oral argument that up to a dozen couriers

submit their availability for on-demand deliveries each day and

that that number comprises different individuals from day to day.

              Xpressman    considers     its      couriers    to    be   independent

contractors. Xpressman's couriers drive their own cars and trucks.

                                       - 3 -
They are paid for each route they complete and they do not receive

benefits   such    as   health     insurance,        retirement,        or   workers'

compensation. Meanwhile, Xpressman has six full-time and two part-

time   workers,    whom   Xpressman        classifies       as    employees,        for

administrative and warehouse duties.             Those workers are paid on an

hourly or salary basis, and they receive benefits such as health

insurance, retirement, and workers' compensation.

           The    basic    premise        of   the     MDA's      claim      is    that

Massachusetts     law   forces    Xpressman      and   other      MDA    members     to

designate their couriers as employees rather than as independent

contractors, as its member companies have classified them.                          The

relevant   Massachusetts     law     is    the    Massachusetts         Independent

Contractor   Statute,     Mass.    Gen.    Laws      ch.   149,    §    148B,     which

establishes a three-prong test to determine who is an "employee"

for the purposes of Massachusetts General Laws Chapters 149 and

151. A worker is considered an employee rather than an independent

contractor unless the employer can meet all three prongs:

           For the purpose of this chapter and chapter
           151, an individual performing any service,
           except as authorized under this chapter, shall
           be considered to be an employee under those
           chapters unless:
                (1) the individual is free from control
                and direction in connection with the
                performance of the service, both under
                his contract for the performance of
                service and in fact; and
                (2) the service is performed outside the
                usual course of the business of the
                employer; and,

                                     - 4 -
                (3) the individual is customarily engaged
                in an independently established trade,
                occupation, profession or business of the
                same nature as that involved in the
                service performed.

Mass. Gen. Laws ch. 149, § 148B(a).      The second requirement is

what we have termed "Prong 2."    Schwann, 813 F.3d at 433.   The MDA

claims that Prong 2's requirement that an independent contractor

only perform services "outside the usual course of the business of

the employer" makes it impossible for its member delivery companies

to treat their couriers as independent contractors.   We recognized

in Schwann that this characteristic of Prong 2 -- that "it makes

any person who performs a service within the usual course of the

enterprise's business an employee" -- is "something of an anomaly"

among state wage laws.   Id. at 438.

          The MDA argues that because the application of Prong 2

would require its member companies to treat their couriers as

employees, the application of Prong 2 to its members is preempted

by the FAAAA.   The FAAAA's express preemption provision states:

          Except as provided in paragraphs (2) and (3),
          a State, political subdivision of a State, or
          political authority of 2 or more States may
          not enact or enforce a law, regulation, or
          other provision having the force and effect of
          law related to a price, route, or service of
          any motor carrier (other than a carrier
          affiliated with a direct air carrier covered
          by section 41713(b)(4)) or any motor private
          carrier, broker, or freight forwarder with
          respect to the transportation of property.

                                 - 5 -
49 U.S.C. § 14501(c)(1) (emphases added).       The MDA argues that by

requiring its member companies to treat their couriers as employees

rather than as independent contractors, the Massachusetts law

"relate[s] to" their prices, routes, or services and is FAAAA-

preempted.

             The MDA filed this suit on September 7, 2010.      On April

8, 2011, the district court dismissed the case on the basis of

abstention under Younger v. Harris, 401 U.S. 37 (1971).          In the

first appeal in this case, this court reversed and remanded. Mass.

Delivery Ass'n v. Coakley (MDA I), 671 F.3d 33, 35 (1st Cir. 2012).

             On remand, the parties filed cross-motions for summary

judgment.    The district court denied the MDA's motion and allowed

the Attorney General's motion in part, holding that Prong 2 was

not preempted by the FAAAA.      In the second appeal in this case,

this court vacated and remanded.          MDA II, 769 F.3d at 23.       We

instructed the district court on remand to determine, on a full

evidentiary record, id., whether Prong 2 "expressly references, or

has   a   significant   impact   on,   carriers'   prices,   routes,    or

services," id. at 17–18.    In doing so, we "express[ed] no view on

the sufficiency of the evidence before the district court."            Id.

at 22.

             On remand, the parties renewed their cross-motions for

summary judgment.    The MDA argued that Prong 2 was preempted both

as a matter of logical effect and by record evidence showing an

                                  - 6 -
impermissible significant impact on prices, routes, or services.

The Attorney General argued for summary judgment based on the lack

of any such significant impact.       In the alternative, the Attorney

General argued that the MDA's motion for summary judgment should

be denied because of the existence of genuine issues of material

fact.

            On July 8, 2015, the district court entered summary

judgment for the MDA and held that the FAAAA preempts Prong 2 as

to the members of the MDA as a matter of logical effect.        Mass.

Delivery Ass'n, 117 F. Supp. 3d at 97–98.       At the same time, the

district court denied the Attorney General's motion for summary

judgment.    Id.

            This appeal followed.

                                    II.

            We review the district court's grant of summary judgment

de novo, viewing the facts in the light most favorable to the non-

moving party.      Flovac, Inc. v. Airvac, Inc., No. 15-1571, 2016 WL
1319274, at *2 (1st Cir. Apr. 4, 2016).           Summary judgment is

appropriate when there is "no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(a).

            Recently, in Schwann, this court faced a suit by delivery

drivers who claimed that, under the same Massachusetts statute at

issue here, FedEx should have treated them as employees rather

                                  - 7 -
than as independent contractors. 813 F.3d at 432.          We affirmed

the   district   court's    holding    that   the    FAAAA    preempted    the

application of the Prong 2 requirement to FedEx.             Id.

             Our analysis in Schwann began by recognizing that FAAAA

preemption is purposefully expansive and may occur even when the

state law has only an indirect effect on prices, routes, or

services.    Id. at 436 (citing MDA II, 769 F.3d at 18).            "[A] state

statute   is   preempted   if   it    expressly     references,     or   has   a

significant impact on, carriers' prices, routes, or services."

Id. (quoting MDA II, 769 F.3d at 17–18); see also Morales v. Trans

World Airlines, Inc., 504 U.S. 374, 388 (1992). Significant impact

may be proven by "empirical evidence" or "the logical effect that

a particular scheme has on the delivery of services," or some

combination of each.       Schwann, 813 F.3d at 437 (quoting MDA II,
769 F.3d at 21).

             We concluded that the application of Prong 2 to FedEx

would both expressly reference and have a significant impact on

FedEx's prices, routes, or services.          As to the former, we found

express reference because the application of Prong 2 to FedEx would

require "a judicial determination of the extent and types of motor

carrier services that FedEx provides" in order to determine whether

that service is within the usual course of business of FedEx.              Id.

at 437–38.

                                     - 8 -
               As to the latter, we found that the application of Prong

2 would have a significant impact, as a matter of logical effect,

on FedEx's services and routes.             The application of Prong 2 would

logically have a significant impact on FedEx's services because it

would take away from FedEx "[t]he decision whether to provide a

service directly, with one's own employee, or to procure the

services      of    an   independent     contractor."           Id.   at   438.     The

application of Prong 2 would deprive FedEx of the choice of

"providing for first-and-last mile pick-up and delivery services

through       an    independent    person    who    bears       the   economic      risk

associated with any inefficiencies in performance," id. at 439,

and as a result, "a court, rather than the market participant,

would ultimately determine what services that company provides and

how it chooses to provide them," id. at 438. We went on to conclude

that the application of Prong 2 would also have a logical effect

on FedEx's routes because it would not allow "delegat[ion of] the

precise design of the route to [a] contractor, who assume[s] the

risks and benefits of increased or decreased efficiencies achieved

by the selected routes."           Id. at 439.

               In Remington v. J.B. Hunt Transport, Inc., decided the

same    day    as    Schwann,     this   court     faced    a    challenge    to     the

application of Prong 2 to another freight and package delivery

company in Massachusetts.           No. 15-1252 (1st Cir. Feb. 22, 2016).

Faced     with      arguments     that   "materially       mirror[ed]       those    in

                                         - 9 -
Schwann," we concluded that as in Schwann, "application of Prong

2    to   the   independent-contractor         drivers    for    J.B.    Hunt   is

preempted."     Id., slip op. at 2.

            The Attorney General asks us to reconsider Schwann,

saying that it was wrongly decided.              But under the law of the

circuit doctrine, we are "bound by a prior panel decision, absent

any intervening authority."        United States v. Mouscardy, 722 F.3d
68, 77 (1st Cir. 2013) (quoting United States v. Grupee, 682 F.3d
143, 149 (1st Cir. 2012)).       The Attorney General points to no such

intervening authority.        The decisions from other circuits that the

Attorney General argues are inconsistent with Schwann -- Costello

v.   BeavEx,    Inc.,   810 F.3d 1045    (7th   Cir.      2016),   Amerijet

International, Inc. v. Miami-Dade County, 627 F. App'x 744 (11th

Cir. 2015) (per curiam), and Dilts v. Penske Logistics, LLC, 769
F.3d 637 (9th Cir. 2014) -- were already considered by this court

in Schwann.     Those decisions were also raised in the petition for

rehearing and the petition for rehearing en banc in Schwann, which

were both denied.

            Applying the reasoning in Schwann, we find that the FAAAA

preempts the application of Prong 2 to Xpressman.                As in Schwann,

application of Prong 2 to Xpressman would require a judicial

determination of whether a particular service offered by Xpressman

fits within its usual course of business.                See Schwann, 813 F.3d

                                      - 10 -
at 437–38.      As such, Prong 2 expressly references Xpressman's

services.

            Also, as in Schwann, application of Prong 2 to Xpressman

would logically have a significant effect on Xpressman's routes

and services. The Attorney General attempts to distinguish Schwann

on the basis that in Schwann, FedEx's relationship with its drivers

was governed by an Operating Agreement under which each contractor

acquired an exclusive and transferable interest in the customer

accounts located in particular FedEx delivery areas.           Id. at 432.

By contrast, the Attorney General points out, Xpressman's couriers

do not operate under such agreements but are instead chosen by

bidding for routes in response to online advertisements.

            It is true that FedEx's particular arrangement with its

drivers was significant to the Schwann decision.             We recognized

that by relying on such an arrangement, FedEx gave drivers "an

economic    incentive    to   keep    costs   low,   to   deliver   packages

efficiently, and to provide excellent customer service."             Id. at

439.     We reasoned that the application of Prong 2, by preventing

FedEx from employing such an arrangement, would "substantially

restrain the free-market pursuit of perceived efficiencies and

competitive advantage" of such an arrangement and thereby dictate

"what services that company provides and how it chooses to provide

them."     Id. at 438.    Additionally, we concluded that preventing

FedEx from offering such economic incentives to drivers would

                                     - 11 -
logically be expected to have a significant impact on routes.             Id.

at 439.    In Remington, we concluded that the application of Prong

2 to the motor carrier J.B. Hunt would similarly deprive J.B. Hunt

of its pursuit of perceived efficiencies, even though J.B. Hunt's

particular arrangement with its drivers was different from that of

FedEx.    Remington, slip op. at 2.

            Xpressman does not use the same arrangement as either

FedEx or J.B. Hunt, but Schwann's reasoning applies nonetheless.

Like FedEx's drivers, Xpressman's couriers bear the expenses of

delivering packages and receive compensation based on the number

of packages delivered. As far as the record indicates, Xpressman's

couriers   are   free   to   decide   what   route   to   follow   in   making

deliveries, just as the FedEx drivers were.           As such, Xpressman,

like FedEx, has structured its relationship with its couriers to

incentivize its couriers to keep costs low and to deliver packages

efficiently.     See Schwann, 813 F.3d at 439.            Further bolstering

such an incentive is Xpressman's competitive bidding system in

which routes are awarded to the couriers that submit the lowest

bids.

            Application of Prong 2 to Xpressman would, as in Schwann,

deprive Xpressman of its choice of method of providing for delivery

services and incentivizing the persons providing those services.

As a matter of logic, such a restraint on Xpressman's pursuit of

perceived economic efficiencies "would ultimately determine what

                                  - 12 -
services that company provides and how it chooses to provide them."

Id. at 438.     Likewise, application of Prong 2 would logically be

expected to have a significant impact on Xpressman's routes.

             Applying   the   logic   of   Schwann,   we   hold   that   the

application of Prong 2 to the members of the MDA is preempted by

the FAAAA.    We affirm.

                                  - 13 -