U1IT4less, Inc. v. FedEx Corp.

157 F. Supp. 3d 341, 2016 U.S. Dist. LEXIS 9517, 2016 WL 344974
CourtDistrict Court, S.D. New York
DecidedJanuary 27, 2016
Docket11-cv-1713 (KBF)
StatusPublished
Cited by3 cases

This text of 157 F. Supp. 3d 341 (U1IT4less, Inc. v. FedEx Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
U1IT4less, Inc. v. FedEx Corp., 157 F. Supp. 3d 341, 2016 U.S. Dist. LEXIS 9517, 2016 WL 344974 (S.D.N.Y. 2016).

Opinion

OPINION & ORDER

KATHERINE B. FORREST, District Judge:

Plaintiff UlIT41ess, Inc. filed this suit against defendants FedEx Corporation (“FedEx Corp.”), FedEx Corporate Services, Inc. (“FedEx Services”), and FedEx Ground Package System, Inc. (“FedEx Ground”) on March 11, 2011. (ECF No. 1.) The gravamen of plaintiffs complaint and [343]*343its subsequent amendments (ECF Nos. 27, 41, & 134) is that defendants improperly calculated the weight of certain packages and improperly collected certain Canadian customs charges from shippers rather than recipients. (TAC1 ¶¶ 1-3.) Plaintiff alleges that these actions constitute various violations of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1962(c)-(d), a federal statute regarding motor carriers’ billing and collecting practices, 49 U.S.C. § 13708(b), and New York General Business Law § 349, which prohibits deceptive acts in commerce. (TAC ¶¶ 4, 43-159.)

Plaintiffs claims under state law and 49 U.S.C. § 13708 .have-been dismissed for failure to state a claim, as has its claim that defendants engaged in a RICO conspiracy. See U1IT41ess, Inc. v. FedEx Corp., 896 F.Supp.2d 275 (S.D.N.Y.2012). (ECF No. 55.) The Court also previously granted defendants’ motion for partial summary judgment as .to plaintiffs contractual class action waiver. (ECF No. 169.) Now before the Court is defendants’ motion for summary judgment on the two remaining RICO counts. (ECF No. 181.)

The RICO statute imposes liability on persons that improperly use a distinct entity as a vehicle for misdeeds. It is not a statute that attaches federal criminal and civil liability to routine claims of fraud involving a parent and its subsidiary, or two sister corporations. The undisputed facts of this case demonstrate that the defendant corporations, a holding company and one of its subsidiaries, are not “distinct” from the alleged enterprise, another wholly owned subsidiary, for RICO purposes. If plaintiffs theory of RICO distinctness were accepted, it would transform every routine allegation of fraud involving a company that uses the routine holding company/subsidiary structure at issue here into a RICO claim. That is not and should not be the law.

For these and the reasons stated below, the motion is GRANTED.

I. FACTUAL BACKGROUND

A. The Events

Plaintiff is an internet retailer of motorcycle-related clothing, and accessories. (Def.’s 56.12 ¶ 1.) Between July 2008 and August 2010, FedEx Ground determined a price for approximately 5,490 packages which it billed to plaintiffs FedEx account. (Id. ¶ 6.) Plaintiff alleges that approximately 150 of those packages were rated at a weight higher than their true weight, resulting in higher shipping prices. (Id. ¶ 7.) Between May 2009 and May 2010, Plaintiff shipped 395 packages to Canada using FedEx Ground. (Id. ¶¶ 40-41.) Plaintiff further alleges that, although it indicated on FedEx’s software that recipients were responsible for ■ Canadian customs, defendants nonetheless improperly charged plaintiff for such charges at least 150 times. (TAC ¶¶ 106,112.)

B. FedEx Corporate Structure ■

Plaintiffs remaining claims allege, inter alia, a RICO enterprise stemming from the actions of three related’ corporations, FedEx Corp., FedEx Services, and FedEx Ground. Defendant FedEx Corp. is a publicly traded holding company for various subsidiaries engaged .in shipping-related businesses. (Def.’s 56.1 ¶ 2.) Defendant Fe[344]*344dEx Services is a wholly-owned subsidiary of FedEx Corp., and provides sales, marketing, and information technology support to its sister subsidiaries, including FedEx Ground,.(Id. ¶3.) FedEx Ground is also a wholly-owned subsidiary of FedEx Corp., and it offers small package delivery throughout the United States and Canada. (Id. ¶ 4.)

FedEx Corp,. has its principal place of business in Memphis, Tennessee. (PL’s 56.13 ¶ 46.) Memphis is also FedEx Services’ principal place of business; (Id.) FedEx Ground’s principal place of business is located outside Pittsburgh, in Moon Township, Pennsylvania. (Id. ¶ 45.) FedEx Ground was previously known as Roadway Package System (“RPS”) and was a subsidiary of Caliber Systems, Inc. (TAC ¶ 30; ECF No. 140 ¶ 30.) FedEx Corp. acquired Caliber Systems, Inc. in 1998 and subsequently rebranded RPS as FedEx Ground. (TAC ¶ 30; ECF No. 140 1130.)

FedEx Corp. does not exercise day-today control over the operations of its subsidiaries, including FedEx Services and FedEx Ground. (Def.’s 56.1 ¶ 2.) Each corporation has its own officers and board of directors; there is little overlap between these officers and directors. (Pl.’s 56.1 ¶ 50.) Plaintiff has identified numerous instances of court proceedings in which FedEx and its representatives represented and testified to the legal separation between the holding company and all of its subsidiaries. (Id. ¶ 44.) In one characteristic instance, a FedEx representative testified as follows when asked *‘[W]hat is the difference between the sepai'ate corporations and, say, looking at them as just separate divisions of one company?”

Well, legally because they’re a separate corporate entity, they’re their own legal , entity. They have their own management and they have their own Board of Directors so it is different than operating as a division within the same company.

(Id.)

C. Litigation History

As stated above, plaintiff initiated this case on March 11, 2011. (ECF No. 1.) Defendants moved to dismiss the complaint for failure to state a claim in September 2011. (ECF No. 42.) In September 2012, Judge Seibel, to whom the case was originally assigned, dismissed counts II, IV, and V. U1IT41ess, Inc. v. FedEx Corp., 896 F.Supp.2d 275, 291-95 (S.D.N.Y.2012). (ECF No. 55, at 21-28.)

Judge Seibel denied defendants’ motion as to counts I and III against FedEx Corp. and FedEx Services, both of which allege RICO violations. Id. at 287-91. (ECF No. 55, at 13-21.) These counts assert the existence of a RICO enterprise, defined as “the FedEx Ground Enterprise consisting solely of FedEx Ground.” (Id. ¶¶ 65, 117.) Plaintiff alleges that defendants “conducted] and participate^] in the affairs of the Enterprise through a pattern of racketeering activity.” (Id. ¶¶ 67, 118.)

In their original motion to dismiss these counts, which Judge Seibel denied, defendants “argue[d] that Plaintiffs Section 1962(c) RICO claim fails as a matter of law because Plaintiff fails to allege (1) an adequately distinct enterprise ...; (2) the required ‘pattern of racketeering activity,’ ...; (3) plausible or particularly-pleaded predicate acts of mail and/or wire fraud ...; and (4) the required operation or control.” U1IT4less, 896 F.Supp.2d at 287 (ECF No. 55, at 13.) The Court rejected each of these arguments at that stage. The first of those alleged shortcomings, the [345]*345asserted failure to plead distinctness, is most relevant to the instant motion.

Judge Seibel wrote that “[defendants, relying principally on Discon, Inc. v.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Sonterra Capital Master Fund Ltd. v. Credit Suisse Group AG
277 F. Supp. 3d 521 (S.D. New York, 2017)
U1IT4Less Inc. v. FedEx Corp.
Second Circuit, 2017

Cite This Page — Counsel Stack

Bluebook (online)
157 F. Supp. 3d 341, 2016 U.S. Dist. LEXIS 9517, 2016 WL 344974, Counsel Stack Legal Research, https://law.counselstack.com/opinion/u1it4less-inc-v-fedex-corp-nysd-2016.