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Neubauer v. FedEx Corp.

United States Court of Appeals, Eighth Circuit

February 17, 2017

Mark Neubauer, an individual in North Dakota; Marken, Inc., a North Dakota corporation Plaintiffs - Appellants
FedEx Corporation, a Delaware corporation; FedEx Ground Package System, Inc., a Delaware corporation; David F. Rebholz; Rodger G. Marticke; Clifford P. Johnson Defendants-Appellees

          Submitted: November 14, 2016

         Appeal from United States District Court for the District of North Dakota - Fargo

          Before COLLOTON, BEAM, and GRUENDER, Circuit Judges.


         Mark Neubauer and his corporate entity, Marken, Inc., allege that FedEx Corporation; FedEx Ground Package System, Inc.; David Rebholz; Rodger Marticke; and Clifford Johnson (collectively "FedEx") breached contractual duties, engaged in fraud, and violated North Dakota's Franchise Investment Law and Racketeer Influenced and Corrupt Organizations (RICO) Act. Because Neubauer failed to state a claim upon which relief can be granted, we affirm the district court's[1] dismissal of his amended complaint.

         I. BACKGROUND

         We proceed based on the facts as described in Neubauer's amended complaint. See Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 846 (8th Cir. 2014) ("[A]n amended complaint supercedes an original complaint and renders the original complaint without legal effect." (quotation and citation omitted)). We also look to the Standard Operating Agreement ("SOA"), the Independent Service Provider ("ISP") Agreement, and two releases ("Releases")-all documents embraced by the pleadings or attached to the complaint as exhibits. See Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003) ("[I]n considering a motion to dismiss, the district court may sometimes consider materials outside the pleadings, such as materials that are necessarily embraced by the pleadings and exhibits attached to the complaint."); see also Gorog v. Best Buy Co., 760 F.3d 787, 790-92 (8th Cir. 2014) (finding the district court properly relied upon contracts attached to the defendant's motion to dismiss because the plaintiff's claim rested upon these contracts).

         On April 5, 2004, Neubauer and FedEx entered into the SOA, whereby Neubauer would pick up and deliver FedEx packages in return for weekly payments based on stops made and packages handled. The SOA provided that it would be "governed by and construed in accordance with the laws of . . . Pennsylvania." It also stipulated that Neubauer "will provide these services strictly as an independent contractor, and not as [a FedEx] employee" and that "no officer or employee of FedEx Ground shall have the authority to impose any term or condition on Contractor or on Contractor's continued operation which is contrary to this understanding."

         Furthermore, under the SOA, independent contractors like Neubauer held a "proprietary interest" in serving FedEx customers within a specific geographic area, known as a Primary Service Area ("PSA"). If a contractor no longer desired to provide services to FedEx during the term of the SOA, the contractor had "the right to assign his/her rights and obligations [under the SOA] to a replacement contractor." The Assignment Provision stated that FedEx had to approve the replacement contractor "as being qualified to provide [services], " but once it did, FedEx would "enter into a new agreement with Replacement Contractor on substantially the same terms and conditions" as those for the outgoing contractor. Regarding the agreement between an outgoing and replacement contractor, the Assignment Provision expressly noted that "[a]ny consideration to be paid by Replacement Contractor on account of such assignment shall be strictly a matter of agreement between Contractor . . . and Replacement Contractor." FedEx would not be party to that transaction and "[had] no other obligations whatsoever either to secure a Replacement Contractor for the benefit of Contractor, or to assure any payment to Contractor on account of Contractor's assignment."

         In 2004, pursuant to the Assignment Provision, FedEx approved Neubauer as a replacement contractor, and Neubauer paid an outgoing contractor $75, 000 to assume the outgoing contractor's rights to service its PSA. Neubauer then executed the SOA with FedEx and elected to have the initial term of the SOA last until 2007, with automatic renewals for successive one-year terms unless either party provided written notice of termination within thirty days prior to the expiration of the existing term. Over the next few years, Neubauer also negotiated assignments from two more contractors, paying them $182, 542 for the right to service PSAs and $5, 000 for a truck. On both occasions, FedEx approved of Neubauer as a replacement contractor.[2]

         The SOA was renewed and remained in place until 2011. On or about March 17, 2011-more than thirty days before the April 29, 2011 expiration of the SOA-FedEx advised Neubauer and all North Dakota independent contractors that it was transitioning to a different business model and would not renew existing SOAs. Instead, contractors who desired to transition into FedEx's new business model could enter into the new ISP Agreement. The terms of the ISP Agreement diverged from the terms of the SOA. Most importantly, under the SOA, FedEx would enter into a new SOA for a full term with a replacement contractor, but the ISP Agreement only allowed a replacement contractor to provide services for the remaining term of the original ISP Agreement. Neubauer nonetheless agreed to transition to the new ISP model on November 5, 2011, claiming that he did so in order to "mitigate . . . damages and avoid the complete loss of [his] investment in FedEx Ground's business and customer accounts." FedEx paid Neubauer $10, 000 to execute the Releases, whereby Neubauer agreed not to sue or demand arbitration from FedEx in regards to the transition from the SOA to the ISP Agreement.

         The ISP governed FedEx and Neubauer's relationship until 2014, when FedEx terminated its relationship with Neubauer due to purported breaches of the ISP Agreement. Neubauer assigned his rights under the ISP Agreement to a replacement contractor, hoping FedEx would enter into a new agreement with his replacement contractor for a full term. However, he was only able to assign his rights for the remaining term of his ISP Agreement. After FedEx refused to reimburse him for alleged damages, Neubauer brought suit in North Dakota state court, which FedEx removed to federal court. Neubauer filed a 181-paragraph amended complaint with multiple causes of action: (1) breach of contract, (2) fraud, (3) constructive fraud, (4) fraudulent inducement, (5) violations of North Dakota's Franchise Investment Law, and (6) violations of North Dakota's RICO Act. FedEx moved to dismiss all the claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the district court granted the motion in full, and Neubauer now appeals.


         Neubauer contends that all of his causes of action should survive the motion to dismiss. "We review de novo the district court's grant of a motion to dismiss, accepting as true all factual allegations in the complaint and drawing all reasonable inferences in favor of the nonmoving party." Richter v. Advance Auto Parts, Inc., 686 F.3d 847, 850 (8th Cir. 2012). To survive a motion to dismiss, an amended complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Id. (citations and quotations omitted). ...

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