Civil practice – First-to-file doctrine – Stay

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Where a plaintiff has filed a count alleging improper classification as an independent contractor, the defendant’s motion for a stay under the first-to-file doctrine should be denied because the relief sought by the plaintiff (contract remedies and wages) is not the same as the Employee Retirement Income Security Act (ERISA) benefits sought in a putative class action in Ohio.

“[Plaintiff] SRH Holdings alleges that [defendant] GEICO improperly classified it as an independent contractor and it seeks lost wages under Mass. Gen L. c. 149, §148B. … GEICO argues that this misclassification claim ‘should be dismissed, or stayed in the alternative, under the first-to-file rule’ because a putative class action, Moyer v. Government Employees Insurance Company, et al., No. 23-cv-00578-MHW-EPD, was filed first on February 9, 2023 in the Southern District of Ohio (the ‘Ohio action’). …

“… Here, although both actions involve claims that GEICO misclassified captive agents as independent contractors, it cannot be said that they seek the same relief. The plaintiff in the Ohio action seeks retirement, health and other benefits under ERISA, declaratory and injunctive relief and unjust enrichment. …

“To the extent that there is any factual or legal overlap, it would be between the legal determination that must be made as to the ERISA claims in the OH class action and the misclassification claim for lost wages in this case. Under ERISA, only employees are eligible for benefits, and courts, applying the ‘common law test’ to determine whether an individual is an employee or independent contractor, consider ‘the hiring party’s right to control the manner and means by which the product is accomplished. … the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.’ … On the other hand, under Mass. Gen L. c. 149, §148B, an individual performing a service is considered an employee if he is ‘free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact,’ if ‘the service is performed outside the usual course of the business of the employer’ and if ‘the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.’

“The Court disagrees with GEICO that ERISA’s common law test is ‘virtually identical to the factors at issue’ in SRH Holdings’ claim under Mass. Gen L. c. 149, §148B. … ERISA’s common law test involves several more specific and distinguishable factors, including the skill required, the source of the instrumentalities and tools, the duration of the relationship between the parties, the method of payment, the hired party’s role in hiring and paying assistants, the provision of employee benefits and the tax treatment of the hired party. … While it can be argued that some of these factors may be considered in the context of the more broadly formulated test under Mass. Gen L. c. 149, §148B, the tests are sufficiently different that the outcome of a case applying one test would not necessarily determine the outcome of a case applying the other test. This is particularly true here where the relief sought in the two actions is distinct — ERISA benefits in the Ohio action and contract remedies and wages here.

“Accordingly, the Court declines to apply the first-to-file rule and denies GEICO’s motion to stay or dismiss Count VI.”

SRH Holdings, LLC v. Government Employees Insurance Company, et al. (Lawyers Weekly No. 02-337-23) (16 pages) (Casper, J.) (Docket No. 23-cv-10325-DJC) (July 24, 2023).

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