Mejia v. RXO Last Mile, Inc.

• Court: District Court, N.D. California
• Decided: January 9, 2024
• Docket: 3:22-cv-08976
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MAYNOR MEJIA, Case No. 22-cv-08976-SI

8 Plaintiff, ORDER GRANTING DEFENDANT'S 9 v. MOTION FOR LEAVE TO FILE A THIRD-PARTY COMPLAINT 10 RXO LAST MILE, INC., Re: Dkt. No. 49 11 Defendant.

12 13 Before the Court is defendant’s motion for leave to file a third-party complaint for indemnity 14 against ABC Logistics, Inc. Dkt. No. 49. Plaintiff opposes. Dkt. No. 50. Pursuant to Civil Local 15 Rule 7-1(b), the Court determines that the motion is suitable for resolution without oral argument, 16 and VACATES the January 12, 2024 hearing. For the reasons set forth below, the Court GRANTS 17 defendant’s motion. 18 19 BACKGROUND 20 Plaintiff Maynor Mejia Lopez brings this proposed class action against RXO Last Mile, Inc.1 21 and Does 1 through 25 (“defendants” or “RXO”) alleging RXO denied plaintiff and other “Delivery 22 Drivers”2 the benefits and protections required under the California Labor Code and other state laws3 23 1 Defendant changed its name from XPO Last Mile, Inc. to RXO Last Mile, Inc. on or about 24 November 2, 2022. Dkt. No. 1-1 at ECF 52 n.1.

25 2 “Delivery Drivers” include non-employee workers who worked in California as a Contract Carrier, Driver, and/or Helper. Dkt. No. 43 (“Amended Compl.”) ¶ 1. 26

3 Specifically, plaintiffs allege failure to pay minimum wage, failure to pay overtime 27 compensation, failure to reimburse employment expenses, unlawful deductions from wages, failure 1 by classifying and treating the Drivers as independent contractors rather than employees. Dkt. No. 2 43 (“Amended Compl.”) ¶¶ 1-3, 26. Per plaintiff’s complaint, RXO provides logistics and delivery 3 services to retail merchants and uses Delivery Drivers for “last mile” delivery: the drivers pick up 4 merchandise at the merchants’ stores or warehouses and deliver and install it at RXO’s customers’ 5 homes or businesses. Id. ¶ 7. Plaintiff filed suit in the Superior Court of California, County of 6 Alameda on October 24, 2022. Defendant removed the case to federal court on December 19, 2022. 7 See Dkt. No. 1. 8 Plaintiff alleges that defendants unlawfully classified him and other proposed class members 9 as independent contractors, when they were in fact “heavily regulated through a series of work- 10 related restrictions and directives.” Amended Compl. ¶ 14. RXO allegedly exercises “pervasive 11 control” over the work of Delivery Drivers and has established “an elaborate system and scheme in 12 an attempt to conceal its true status as the employer of its Delivery Drivers.” Id. ¶¶ 14, 16. As part 13 of this scheme, RXO allegedly hires Delivery Drivers as independent contractors but controls the 14 terms, manner, and means of their work through RXO’s Delivery Service Agreement (“DSA”), 15 which it requires Delivery Drivers to sign. Id. ¶¶ 16–17. The DSAs also require Delivery Drivers 16 to “agree” to pay numerous expenses incident to employment. Id. ¶ 17. Plaintiff alleges that the 17 DSAs are “pre-printed contracts of adhesion [] drafted exclusively by [RXO] and/or on behalf of its 18 agents.” Id. ¶ 16. Plaintiff also lists an extensive series of directives Delivery Drivers allegedly 19 must abide by despite being classified as independent contractors. Id. ¶¶ 19-23. 20 RXO also requires each Contract Carrier to create their own “corporation” or “limited 21 liability company.” Id. ¶ 18. RXO refers its Drivers “to a company that processes the paperwork 22 to create a purported corporate or limited liability company entity for each Contract Carrier, and 23 requires the Contract Carrier to go through the process.” Id. ¶ 18. Plaintiff alleges that “these 24 business entities are nothing more than fictitious business names for the Contract Carrier themselves 25 and serve no purpose other than to perpetuate and shield [RXO’s] scheme of mischaracterizing its 26

27 and the Minimum Wage Order; violations of the California Unfair Competition Act; and violations 1 employees as independent contractors.” Id. Plaintiff alleges he was required to form ABC 2 Logistics, LLC, the entity defendant moves for leave to file a third-party complaint against, to secure 3 work from RXO. See id.; Dkt. No. 50-2, Lopez Decl. ¶ 3. Defendant asserts that ABC Logistics, 4 which plaintiff owns and operates, “is one of the independent, federally authorized, motor carriers 5 that agreed to complete deliveries arranged by RXO LM.” Dkt. No. 49-2, Schnayerson Decl., ¶ 7. 6 Attached to the complaint and at issue in this motion is a DSA (“Agreement”) between ABC 7 Logistics, LLC and XPO Last Mile, Inc executed on June 21, 2018. Dkt. No. 43, Ex. 1. In this 8 Agreement, ABC Logistics is referred as “Contract Carrier” and the Agreement indicates that 9 “Contract Carrier” is an “established motor carrier” which “owns and operates an independent 10 delivery business.” Id. The Agreement specifies that “Contract Carrier and XPO Last Mile are 11 independent entities having their own established business.” Id. ¶ 4.1. The Agreement includes an 12 indemnification provision that provides that “Contract Carrier shall at all times… defend, indemnify 13 and hold harmless XPO Last Mile, its customers, agents, employees, and affiliates against and from 14 any and all settlements, losses, damages, costs, counsel fees and all other expenses relating to or 15 arising from any and all claims… of every nature or character… asserted against XPO Last Mile … 16 by Contract Carrier or any agent or employee of Contract Carrier…” Id. ¶ 15. 17 18 LEGAL STANDARD 19 A defendant may “serve a summons and complaint on a nonparty who is or may be liable to 20 it for all or part of the claim against it” with “the court’s leave if it files the third-party complaint 21 more than 14 days after serving the original answer.” Fed. R. Civ. P. 14(a). “The decision whether 22 to implead a third-party defendant is addressed to the sound discretion of the trial court.” Southwest 23 Administrators, Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir. 1986). The purpose of Rule 24 14 “is to promote judicial efficiency by eliminating the necessity for the defendant to bring a separate 25 action against a third individual who may be secondarily or derivatively liable to the defendant for 26 all or part of the plaintiff’s original claim.” Id. “Therefore, courts have construed the rule liberally 27 in favor of allowing impleader.” Universal Green Solutions, LLC v. VII Pac Shores Investors LLC, 1 deciding whether to allow a third-party complaint, courts usually consider: “(1) prejudice to the 2 original plaintiff; (2) complication of issues at trial; (3) likelihood of trial delay; and (4) timeliness 3 of the motion to implead.” Webb v. Healthcare Recovery Group, LLC, Case No. 13-CV-00737, 4 2014 U.S. Dist. LEXIS 89742, at *7 (N.D. Cal. June 30, 2014).4 5 6 DISCUSSION 7 I. Timeliness of Motion 8 Plaintiff argues that defendant’s motion is untimely and should be denied for that reason 9 alone. Dkt. No. 50 at 1. Plaintiff alleges that defendant stated in the parties’ Rule 26(f) report that 10 it might file a cross-claim or implead ABC Logistics. Id. at 4-5. Defendant allegedly then informed 11 plaintiff it would move forward with a motion requesting leave to file a third-party complaint on 12 October 10, 2023, but did not include any cross-claim against plaintiff when it filed its answer to 13 plaintiff’s first amended complaint on October 13, 2023. Id. at 5; Dkt. No. 48, Kizirian Decl. ¶ 4. 14 RXO argues its motion is timely because the Court denied its motion to compel arbitration on 15 August 10, 2023, defendants answered plaintiff’s amended complaint on October 13, 2023, and this 16 motion was filed shortly thereafter. Dkt. No. 49-1 at 6; Dkt. No. 51 at 3. 17 The Court considers that RXO was aware of facts supporting impleader when plaintiff’s 18 initial complaint was filed in October 2022; the DSA with the indemnification provision was 19 attached as an exhibit to the initial complaint. See Dkt. No. 1-1. However, RXO reasonably may 20 have wanted to wait until its motion to compel arbitration was resolved before impleading ABC 21 Logistics. Additionally, courts in this District have found lapses of time between three and six 22 months after filing an answer to be timely. See Clarke v. Public Emples. Union Local 1, 2017 U.S. 23

24 4 Plaintiff argues courts also consider a fifth factor: the merits of the third-party complaint. The Court agrees with RXO that it would be inappropriate to consider the merits of the proposed 25 complaint at this stage; plaintiff’s arguments about the validity of the claim would be better addressed in a fully briefed motion. See Kormylo v. Forever Resorts, LLC, Case No. 3:13-CV-0511, 26 2013 U.S. Dist. LEXIS 131419, at *6 (S.D. Cal, Sept. 13, 2013); see also Clarke v. Public Emples. Union Local 1, No. 16-cv-04954-JSC, 2017 U.S. Dist. LEXIS 19524, at *7 (N.D. Cal. Feb. 10, 27 2017) (noting that courts have rejected the argument that courts may deny leave to file a third-party 1 Dist. LEXIS 19524, at *7 (N.D. Cal. Feb. 10, 2017). RXO filed this motion less than two months 2 after filing its answer. The motion is thus timely. 3 4 II. Complication of Issues at Trial 5 RXO argues that its “simple claim for indemnification does not add any complicating factors 6 that would result in delay,” and even if its third-party complaint creates some complicating factors, 7 the Court can bifurcate the trial. Dkt. No. 49-1 at 5. RXO further argues that the DSA and its 8 indemnification requirements are directly related to the alleged Labor Code violations in plaintiff’s 9 class action claims and the indemnification claim relies on the same discovery. Id. at 6; Dkt. No. 10 51 at 7. 11 Plaintiff argues that adding a third-party defendant would “vastly complicate trial” because 12 if class certification is achieved, numerous other entities would presumably be in a similar position 13 as ABC Logistics, and defendant may seek to implead all those entities as well. Dkt. No. 50 at 2. 14 And if defendant does not implead these other entities, plaintiff argues the Court would then 15 potentially have to coordinate a class trial with an individual action focused on ABC Logistics. Id. 16 at 13. RXO responds that this not a basis to deny this motion for leave to file a third-party complaint 17 against a single entity and at this time, neither the Court nor RXO need determine whether RXO 18 will pursue indemnification against any other entities because this case has not yet been certified for 19 class treatment. Dkt. No. 51 at 7. 20 If this matter is certified for class treatment and RXO impleads other class member owned 21 Contract Carriers, the matter may well become more complicated. However, these considerations 22 could be addressed through bifurcation or other procedures at trial. See Fed. R. Civ. P. 14(a)(4). 23 While granting impleader will create some procedural wrinkles, the Court does not find this will 24 pose major complications rendering impleader inadvisable. 25 26 III. Likelihood of Trial Delay 27 RXO argues granting it leave to file a third-party complaint will not unduly delay 1 complaint on October 13, 2023, the motion for class certification is to be completed by July 5, 2024, 2 and discovery will continue into 2024. Dkt. No. 49-1 at 5. RXO also argues that its “relatively 3 simple” indemnification claim “will primarily rely on discovery from the underlying cause and will 4 not slow down the present class action.” Dkt. No. 51 at 2. Plaintiff responds that “[t]here is no 5 doubt that, if the motion were granted, the deadline set by the Court for Plaintiff to move for class 6 certification, July 5, 2024, would have to be continued” and that trial would have to be set for a later 7 date than it otherwise would be to allow the proposed third-party defendant to join the suit and 8 participate in discovery. Dkt. No. 50 at 12-13. 9 The Court does not find that granting defendant leave to file a third-party complaint will 10 unduly delay trial. The case is still in its discovery stage and the class certification hearing is set for 11 October 2024. A trial date has not yet been set. Although some additional discovery may be 12 necessary, the case schedule can accommodate that. 13 14 IV. Prejudice to Plaintiff 15 Plaintiff argues that the addition of ABC Logistics will “distract” plaintiff from the 16 misclassification suit in “what is already a complex matter.” Dkt. No. 50 at 12. Plaintiff further 17 argues that the resulting delay and complication would prejudice his “interest in a speedy resolution 18 of this matter” because the parties will have to dedicate time and resources “to an issue that is 19 ultimately irrelevant to the question of misclassification [and resulting wage and hour violations by 20 RXO]—whether RXO may try and recoup any liability for its actions in misclassifying Plaintiff by 21 looking to Plaintiff’s entity.” Id. at 12, 13. 22 RXO responds that plaintiff will not be “distracted” from anything, and even if he was, “that 23 is not a basis for denying a motion for leave.” Dkt. No. 51 at 6. RXO further argues that just because 24 this case was labeled as “complex” when filed in state court does not mean that it is complicated. 25 Id. RXO also takes issue with plaintiff’s characterization of a claim against ABC Logistics as a 26 claim against him. See Dkt. No. 51 at 6. RXO argues that ABC Logistics has had employees other 27 than plaintiff, and as the owner of ABC Logistics, plaintiff benefitted from its profits. Id. RXO 1 corporation for himself.” See id. 2 The Court finds that granting RXO’s motion will not impact key case management 3 deadlines, the class certification hearing, or trial. In addition, allowing the third-party complaint to 4 || be filed does not mean RXO will necessarily prevail on it. Whether RXO can prevail on the 5 indemnification claim remains to be seen. Consequently, the Court does not find that the prejudice 6 || to plaintiff factor weighs against permitting impleader. 7 In sum, construing Rule 14(a) liberally in favor of impleader, to the extent RXO has an 8 actionable claim against ABC Logistics, that claim belongs in this Court. Resolving all disputes 9 || arising from plaintiffs alleged misclassification in one litigation will further judicial economy, 10 || outweighing any prejudice to plaintiff and additional complications that may result. 11 12 CONCLUSION 13 For the foregoing reasons and for good cause shown, the Court hereby GRANTS defendant’s 14 || motion.

a 16 IT IS SO ORDERED. 3 17 Dated: January 9, 2024 18 tn SUSAN ILLSTON 19 United States District Judge 20 21 22 23 24 25 26 27 28