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Date: 10-20-2022

Case Style:

Matheus Plazzi, et al. v. Fedex Ground Package System, Inc.

Case Number: 22-1365

Judge: Lynch

Court: United States Court of Appeals for the First Circuit on appeal from the District of Massachusetts (Suffolk County)

Plaintiff's Attorney:

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Defendant's Attorney: Brian T. Ruocco and Frederick R. Yarger

Description: Boston, Massachusetts employment law lawyers represented Plaintiffs who sued Defendant on Wage and Hour Act violation theories.

Matheus Plazzi, Joshua Prescott, and Tulio Brito Costa ("Plaintiffs") worked as delivery drivers for Eloah Delivery ("Eloah"), a service provider for FedEx Ground Package System, Inc. ("FedEx"). Plaintiffs allege that their supervisor told them he was withholding part of their weekly pay for tax remittance to federal and state tax authorities. They further allege that Eloah never sent the deducted amounts to those tax authorities. Plaintiffs claim that Eloah's actions constituted theft of their wages in violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 et seq. ("Wage Act"). They seek restitution for all unpaid wages, as well as treble damages and other relief.

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.



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 was an appropriate estimate of their income tax liabilities.

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.


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.

* * *

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," 26 U.S.C. § 3402(a)(1),
and further provides that although the "employer shall be liable
[to the government] for the payment of the tax," id. § 3403, the
employer "shall not be liable to any person for the amount of any
such payment," id. (emphasis added). These provisions ensure that
an "employer is not liable to an employee for complying with its
legal duty to withhold tax [under 26 U.S.C. § 3402]." Schagunn v.
Gilland, 617 F. App'x 814, 814 (9th Cir. 2015) (alteration in
original) (quoting Bright v. Bechtel Petrol., Inc., 780 F.2d 766,
770 (9th Cir. 1986)).

The Massachusetts tax statute contains parallel
provisions. See Mass. Gen. Laws ch. 62B, § 2 ("Every employer
making payment to employees . . . shall deduct and withhold a tax
upon such wages . . . ."); id. § 10 ("An employer shall be liable
for the payment of the tax . . . and shall not be liable . . . to
any person for the amount of any such payment."). These provisions
directly track the language and effect of the Internal Revenue
Code. See In re Nash Concrete Form Co., 159 B.R. 611, 615 (D.
Mass. 1993) ("The language of Mass. Gen. Laws ch. 62B, § 2 . . .
tracks the language of Section 3402(a)(1) of the Internal Revenue
Code. No reason exists . . . for the Massachusetts Legislature to
provide a less effective means by which the Commonwealth might
collect taxes withheld on its behalf than Congress provided the
United States.").

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." 26 U.S.C. § 7501(a); see also Slodov
v. United States, 436 U.S. 238, 242-45 (1978) (listing various
ways the IRS can procure payment of these "trust fund taxes," but
not mentioning private enforcement).

Again, the Massachusetts tax statute contains a parallel
provision. See Mass. Gen. Laws ch. 62B, § 5 ("Any sum
withheld . . . shall be considered to be held in trust for the
commonwealth."). We reject any contention that the Massachusetts
statute has a different effect than the federal one. See In re
Nash, 159 B.R. at 615 (finding that Mass. Gen. Laws ch. 62B, § 5
"is intended to replicate the effect of its counterpart in the
federal code, 26 U.S.C. § 7501").

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.").

Outcome: The Court held that Plaintiffs lack Article III standing.

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.

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