Thomas Costello v. BeavEx, Incorporated
810 F.3d 1045
| 7th Cir. | 2016Background
- BeavEx operates same-day delivery in Illinois and classifies roughly 104 couriers as independent contractors; plaintiffs are ~825 couriers who worked for BeavEx in Illinois since 2002.
- Plaintiffs sued claiming misclassification: (1) IWPCA illegal wage deductions (central), (2) Illinois Minimum Wage overtime, and (3) unjust enrichment; plaintiffs sought class certification and partial summary judgment on the IWPCA claim.
- BeavEx argued the FAAAA (49 U.S.C. § 14501(c)(1)) preempts the IWPCA insofar as the IWPCA’s employee-definition (an ABC test) affects motor carriers’ prices, routes, or services.
- District court denied BeavEx’s summary judgment (no FAAAA preemption), denied class certification under Rule 23(b)(3) (predominance), but granted plaintiffs partial summary judgment holding couriers were "employees" under the IWPCA (prong two failure).
- Seventh Circuit affirmed denial of BeavEx’s summary judgment (IWPCA not preempted), vacated denial of class certification, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAAAA preempts prong two of the IWPCA employee test (work "outside the usual course of business") | IWPCA is a generally applicable labor law regulating wage deductions and does not meaningfully affect carriers’ prices/routes/services | FAAAA bars state laws that relate to a motor carrier's prices, routes, or services; requiring couriers be employees will significantly affect BeavEx’s prices, routes, and services | Held: No preemption—IWPCA’s prohibition on unauthorized wage deductions is too remote/indirect to be "related to" prices/routes/services under FAAAA; affirm denial of BeavEx summary judgment. |
| Whether class certification under Rule 23(b)(3) should be denied because employment-status inquiries are individualized | Common evidence can resolve prong two for all class members; certification is appropriate at least as to prong two | Individualized inquiries into control (prong one) and independent business status (prong three) defeat predominance | Held: District court erred—common questions (especially prong two) predominate; denial of certification was abused of discretion; vacated and remanded. |
| Applicability of the one-way intervention rule (moving for certification after a favorable merits ruling) | Plaintiffs sought class certification contemporaneously with partial summary judgment; rule should not bar certification | BeavEx argued the prior merits ruling would unfairly bind absent class members | Held: Rule against one-way intervention does not bar certification here because district court decided certification before granting partial summary judgment; caution advised for sequencing motions. |
| Proper scope of merits peek at class-certification stage | Court may "peek" at merits to determine if common evidence could sustain classwide claims | Defendant warned that such a peek improperly decides merits | Held: Court may take a limited merits look to assess predominance; here it should have determined whether common evidence could suffice for prong two without deciding the merits. |
Key Cases Cited
- Morales v. Trans World Airlines, 504 U.S. 374 (1992) (preemption analysis: state laws "related to" prices/routes/services may be preempted even if effect is indirect)
- Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364 (2008) (state law requiring carriers to provide particular services was preempted as regulating services)
- American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (consumer-protection suits that police carrier marketing practices may be preempted; ordinary breach-of-contract claims are not)
- Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422 (2014) (state common-law claims preempted where they enlarge voluntary contractual obligations; states may avoid preemption by allowing contracting around rules)
- S.C. Johnson & Son, Inc. v. Transport Corp. of Am., 697 F.3d 544 (7th Cir. 2012) (distinguishes laws that directly regulate carrier–customer relations from background laws regulating employment; background labor rules typically too remote for preemption)
- Massachusetts Delivery Ass’n v. Coakley, 769 F.3d 11 (1st Cir. 2014) (no categorical exemption for state labor laws from FAAAA preemption; courts must examine potential significant impacts)
- Dilts v. Penske Logistics, Inc., 769 F.3d 637 (9th Cir. 2014) (generally applicable workplace laws several steps removed from prices/routes/services are not preempted)
- DiFiore v. American Airlines, Inc., 646 F.3d 81 (1st Cir. 2011) (law directly regulating how a carrier displays prices or performs services can be preempted)