MATHEUS PLAZZI; JOSHUA PRESCOTT; TULIO BRITO COSTA v. FEDEX GROUND PACKAGE SYSTEM, INC.
No. 22-1365
United States Court of Appeals For the First Circuit
October 20, 2022
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Denise J. Casper, U.S. District Judge]
Before Barron, Chief Judge, Lynch and Gelpi, Circuit Judges.
Shannon Liss-Riordan, with whom Harold L. Lichten, Michelle Cassorla, Zachary Rubin, and Lichten & Liss-Riordan, P.C. were on brief, for appellants.
Brian T. Ruocco, with whom Frederick R. Yarger and Wheeler Trigg O‘Donnell LLP were on brief, for appellee.
LYNCH,
On October 13, 2021, Plaintiffs sued FedEx in Middlesex County Superior Court, alleging as their sole count a violation of the Wage Act. After FedEx invoked diversity jurisdiction and removed the action to federal court, the district court dismissed the case, holding that Plaintiffs’ claim was statutorily barred and that Plaintiffs lacked Article III standing. Plazzi v. FedEx Ground Package Sys., Inc., No. 21-cv-12130, 2022 WL 1104586, at *2-4 (D. Mass. Apr. 13, 2022).
Because Plaintiffs have failed to plead a concrete injury, we affirm the district court‘s holding that they lack standing. But instead of dismissing the case, we remand to the district court to determine whether remand to state court is appropriate.
I.
A.
When reviewing the dismissal of a complaint for lack of Article III jurisdiction, and when reviewing the grant of a motion to dismiss for failure to state a claim, “we take as true all well-pleaded facts in the plaintiffs’ complaint . . . and draw all reasonable inferences therefrom in the plaintiffs’ favor.” Alphas Co. v. William H. Kopke, Jr., Inc., 708 F.3d 33, 36 (1st Cir. 2013) (quoting Fothergill v. United States, 566 F.3d 248, 251 (1st Cir. 2009)); see also Legal Sea Foods, LLC v. Strathmore Ins. Co., 36 F.4th 29, 34 (1st Cir. 2022).
Plaintiffs previously worked as delivery drivers for Eloah Delivery, a service provider for FedEx. When Plaintiffs’ supervisor, Felipe Souze Prado, paid Plaintiffs their weekly wages, he informed them that he was withholding taxes equaling twenty-three percent of their weekly gross pay. Plaintiffs believed this withholding would be remitted to the government to satisfy their state and federal income tax liabilities. They do not dispute that this figure
Contrary to what Prado told Plaintiffs, however, Eloah never remitted the twenty-three percent withholding to state and federal tax authorities. Additionally, Eloah never sent Plaintiffs their 2020 W-2 forms, even after Plaintiffs contacted Prado to request them.
B.
On October 13, 2021, Plaintiffs sued FedEx in Middlesex County Superior Court, alleging that FedEx violated their rights under the Massachusetts Wage Act. Plaintiffs sought restitution for the withheld wages, as well as treble damages and other relief.1 Although Plaintiffs alleged that they never received their W-2 forms, they did not claim any separate damages from this omission.
FedEx invoked diversity jurisdiction and removed the action to federal court. After removal, FedEx filed a motion to dismiss, arguing that (1) Plaintiffs’ Wage Act claim was statutorily barred by state and federal law, and (2) Plaintiffs lacked Article III standing.2
Agreeing with FedEx on both issues, the district court granted the motion and dismissed the case. First, the court held that state and federal statutes barred Plaintiffs’ Wage Act claim. Both the Internal Revenue Code and Massachusetts law, explained the court, provide that only the government -- not employees -- can hold employers liable for failure to remit withheld wages to tax authorities. Second, the court held that Plaintiffs lacked Article III standing. The court reasoned that because Plaintiffs had “no legal right to their [wages] withheld [for] taxes” and “received credit on their individual tax liabilities for the amounts withheld,” Plaintiffs had failed to allege an injury in fact.
Plaintiffs timely filed this appeal.
II.
We review de novo the district court‘s determination that Plaintiffs lacked Article III standing. ITyX Sols. AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020). Our review of the grant of a motion to dismiss for failure to state a claim is also de novo. Legal Sea Foods, 36 F.4th at 34.
To establish standing, Plaintiffs “must show [(1)] that [they] suffered an injury in fact that is concrete, particularized, and actual or imminent; [(2)] that the injury was likely caused by the defendant; and [(3)] that the injury would likely be redressed by judicial relief.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)). “Article III standing requires a concrete injury even in the context of a statutory violation.” Id. at 2205 (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 341 (2016)). To be “concrete,” the injury in fact must be “real, and not abstract.” Id. at 2204 (quoting Spokeo, 578 U.S. at 340). Plaintiffs have failed to plead such an injury.
Plaintiffs allege their cause of action arises under
For the reasons explained below, we hold that Plaintiffs lack Article III standing because state and federal statutes make clear that wages withheld for taxes belong to the government and not to employees. These statutes are separate from the Wage Act. As to each of federal law and state law, two different statutory provisions compel this result.
First, federal and Massachusetts laws shield employers from liability to nongovernment actors for nonpayment of wages withheld for taxes. At the federal level, the Internal Revenue Code requires that “every employer making payment of wages shall deduct and withhold upon such wages a tax,”
The Massachusetts tax statute contains parallel provisions. See
Second, federal and Massachusetts laws provide that once wages are withheld by employers for remittance to tax authorities, those sums are not property of the employees, but rather are held “in trust” for the government. At the federal level, the Internal Revenue Code specifies that “[w]henever any person is required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States.”
Again, the Massachusetts tax statute contains a parallel provision. See
The unambiguous text of these tax statutes dictates that only the relevant governments -- not the employees -- suffer an injury when an employer fails to remit wages withheld for taxes to tax authorities. This conclusion also aligns with traditional principles of trust law. See Restatement (Second) of Trusts § 200 cmt. b (Am. L. Inst. 1959) (“Neither the settlor nor his heirs or personal representatives, as such, can maintain a suit against the trustee . . . .“); Restatement (Third) of Trusts § 94 cmt. d(2) (Am. L. Inst. 2012) (“Settlor, as such, lacks standing.“). Accordingly, Plaintiffs lack Article III standing.
Plaintiffs argue that the tax statutes are inapposite because Eloah “never in fact withheld any wages . . . [but] instead stole their wages.” This proposition -- that the amounts in question do not constitute a “withholding” -- lacks legal foundation. Plaintiffs cannot rely solely on the fact that the sums were never remitted to tax authorities, because doing so would render superfluous the above statutes which describe that exact situation. And Plaintiffs fail to identify any authority requiring employers to undertake special procedures before deducted amounts can constitute a “withholding.” See Slodov, 436 U.S. at 243 (“There is no general requirement that the withheld sums be segregated from the employer‘s general funds . . . [or] deposited in a separate bank account . . . .“); In re Nash, 159 B.R. at 615 (noting that an employer cannot avoid the trust nature of these withheld sums “simply by refusing to segregate the funds“). Further, Plaintiffs do not dispute that twenty-three percent of their gross wages was an appropriate estimate of their income tax liabilities, and they acknowledge that their supervisor represented to them that the wages were being withheld for tax remittance. The deducted amounts thus constitute wages withheld for taxes, and the above tax statutes apply.
Plaintiffs next argue that under the plain language of
the tax imposed thereon.“). Because the employee receives credit for the withheld amounts, the employee is not injured by the employer‘s failure to remit
Plaintiffs’ remaining arguments for standing are unavailing. First, they assert that the “wage theft” might “impact their Social Security benefits.” Plaintiffs do not explain this argument, so we deem it waived. United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.“).5 Second, although Plaintiffs never received their W-2 forms, they have not alleged that this omission hampered their ability to file tax returns, reduced the amount of any tax
refund they received, or caused any other concrete injury. Finally, Plaintiffs claim standing based on the Wage Act‘s imposition of strict liability and mandatory treble damages upon offending employers. But regardless of whether the Wage Act supports Plaintiffs’ cause of action, the possibility of a remedy is not alone sufficient to confer standing. See TransUnion, 141 S. Ct. at 2205 (“[T]his Court has rejected the proposition that ‘a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.‘” (quoting Spokeo, 578 U.S. at 341)).6
Because Plaintiffs cannot recover wages withheld for taxes, and because they have failed to allege any other concrete injury, they lack Article III standing.
III.
The parties failed to address to the district court, or to us, an issue which we have identified under First Circuit precedent as to the appropriate disposition of this case upon a ruling that we lack Article III jurisdiction. In any case removed from a state court, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”
As neither party has addressed this issue (either on appeal or before the district court),7 we deem it premature to decide whether remand to state court is required here. Rather, we remand the action to the district court to order supplemental briefing on whether remand to state court is appropriate.
IV.
For the foregoing reasons, we vacate the district court‘s judgment and remand with instructions to conduct supplemental briefing on whether to remand the action to state court. Costs are awarded to FedEx Ground Package System, Inc.