44 F.4th 1048
7th Cir.2022Background
- Diakon Logistics, a Delaware corporation with its principal place of business in Virginia, contracted with Innovel to deliver/install Sears merchandise and engaged independent truck drivers in Illinois.
- Plaintiffs Timothy Johnson and Darryl Moore (Illinois residents) worked out of Innovel warehouses in Illinois and signed Service Agreements labeling them independent contractors; agreements included Virginia choice-of-law clauses and authorized various payroll deductions.
- Plaintiffs sued under the Illinois Wage Payment and Collection Act (WPCA), alleging misclassification and unlawful deductions because Illinois law permits deductions only with contemporaneous written employee consent.
- The district court certified an Illinois-based class, and later granted summary judgment for Diakon, concluding the Service Agreements’ Virginia choice-of-law clauses governed and foreclosed the WPCA claims.
- Plaintiffs had added Sears and Innovel as defendants mid-litigation (both Illinois citizens), raising a potential CAFA single-state exception issue; those defendants were later dismissed.
- On appeal, the Seventh Circuit held CAFA abstention was not required and reversed the summary judgment, concluding the WPCA claims arise under Illinois law independent of the contracts and thus are not defeated by the Virginia choice-of-law clauses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CAFA single-state abstention (28 U.S.C. §1332(d)(4)) | Addition of Illinois defendants does not change original jurisdiction; abstention inapplicable because Sears/Innovel are not required parties | Inclusion of Illinois defendants could trigger the single-state exception and require abstention | No abstention: Sears/Innovel were not parties at filing and were later dismissed, so §1332(d)(4) does not require declining jurisdiction |
| Enforceability of Virginia choice-of-law clause over WPCA claims | WPCA claims govern wages for work in Illinois and are independent of the contract; Illinois would apply its statute regardless of contractual clauses | Choice-of-law clauses in the Service Agreements mandate application of Virginia law, which would treat drivers as contractors | Virginia clause does not bar WPCA claims: Illinois law governs wage-payment rights for work in Illinois and the statute’s definition of "employee" controls |
| Waiver of Diakon’s choice-of-law defense | Diakon waited to press the choice-of-law defense and thus waived it | Diakon consistently argued Illinois law did not apply (preemption/class issues) and did not sit on the defense | No waiver: court found Diakon preserved the choice-of-law defense and did not forfeit it through litigation conduct |
| Whether WPCA wage-deduction claims require interpreting the Service Agreements | WPCA claims arise from statute, not contract; they do not require contract interpretation and therefore are not "inextricably intertwined" with the Agreements | Claims depend on the Agreements (deduction provisions) so choice-of-law applies and forecloses WPCA remedies | WPCA claims do not depend on contract interpretation; they exist independently and Illinois courts would apply the statute to work performed in Illinois |
Key Cases Cited
- Mullen v. GLV, Inc., 37 F.4th 1326 (7th Cir. 2022) (CAFA abstention may be raised sua sponte)
- Vukadinovich v. McCarthy, 59 F.3d 58 (7th Cir. 1995) (choice-of-law is waivable and not jurisdictional)
- Novakovic v. Samutin, 354 Ill. App. 3d 660 (Ill. App. Ct.) (describing Illinois ABC test for employee status)
- Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325 (Ill. 2002) (Illinois courts routinely enforce contractual choice-of-law clauses)
- Cohen Furniture Co. v. Department of Employment Security, 307 Ill. App. 3d 978 (Ill. App. Ct.) (contractual labels do not control employee status under Illinois law)
- Landers-Scelfo v. Corporate Office Systems, Inc., 356 Ill. App. 3d 1060 (Ill. App. Ct.) (WPCA claims do not require a formally negotiated contract)
- Zabinsky v. Gelber Group, Inc., 347 Ill. App. 3d 243 (Ill. App. Ct.) (an agreement need not be formal for WPCA purposes)