SECTION 1 OF THE FAA
Bissonnette v. LePage Bakeries Park St. LLC., 601 U.S. 246
Fli-Lo Falcon LLC v. Amazon.com, Inc., 97 F. 4th 1190
Lopez v. Aircraft Service, International, Inc., 107 F. 4th 1096O
rtiz v. Randstad Inhouse Services LLC, 95 F. 4th 1152
Ortiz v. Randstad Inhouse Services LLC, 2024 US App LEXIS 5865 (unpublished)
Bissonnette v. LePage Bakeries Park St. LLC., 601 U.S. 246
Plaintiffs, distributors of baked goods for a subsidiary of Flowers Foods, filed a class action alleging violation of state and federal wage laws. Flowers moved to compel arbitration based on an arbitration clause in the distribution agreement that was subject to the Federal Arbitration Act (FAA).
Flowers baked the goods at a location not mentioned in the decision and shipped them to a warehouse in Waterbury, Connecticut where plaintiffs picked them up. The plaintiffs delivered the goods to their customers in Connecticut and did not cross state lines. They opposed the motion to compel arbitration, arguing that they were transportation workers who were exempt from arbitration pursuant to Section 1 of the FAA. The District Court granted the motion, and the Second Circuit affirmed, holding that plaintiffs worked in the bakery industry and hence could not be transportation workers.
The Supreme Court granted plaintiffs’ writ of certiorari and reversed and remanded. The Second Circuit had decided that an entity would be considered within that industry if it pegged its charges chiefly to the movement of goods or passengers and its predominant source of commercial revenue was generated by that movement. The Supreme Court felt that application of such a test would often turn on arcane riddles about the nature of a company’s services. Extensive discovery might be necessary to explore the internal structure and revenue models of a company before deciding a simple motion to compel arbitration. Mini-trials on the transportation-industry issue could become a regular, slow, and expensive practice in FAA cases. All this complexity and uncertainty would breed litigation from a statute that seeks to avoid it.
Flowers argued that if the Second Circuit’s interpretation of the Section 1 exemption was rejected, nearly all workers who load or unload goods—from pet shop employees to grocery store clerks—would be exempt from arbitration because virtually all products moved in interstate commerce. To the contrary, as the Court held in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), a transportation worker is one who is “actively” “‘engaged in transportation’ of . . . goods across borders via the channels of foreign or interstate commerce.” In other words, any exempt worker “must at least play a direct and ‘necessary role in the free flow of goods’ across borders.” These requirements undermined any attempt to give the provision a sweeping, open-ended construction, instead limiting §1 to its appropriately narrow scope.
[The Court remanded the case because the lower courts never reached the issue of whether plaintiffs were transportation workers, holding they were workers in the bakery industry.]
Fli-Lo Falcon LLC v. Amazon.com, Inc., 97 F. 4th 1190
The plaintiffs were corporate delivery service providers (DSPs) who provided delivery services for Amazon. They filed a class action against Amazon arising from Amazon’s alleged breach of the DSP agreement. Amazon moved to compel arbitration based on an arbitration clause in the DSP agreement. The plaintiffs opposed the motion, asserting that they were transportation workers and hence exempt from arbitration pursuant to Section 1 of the FAA. The magistrate’s R&R held that the FAA applied, and the R&R was adopted in its entirety by the district court.
The plaintiffs appealed and the Ninth Circuit affirmed. The text of the transportation worker exemption makes clear that the residual clause does not extend to business entities like plaintiffs. The phrase "any other class of workers" follows "seamen" and "railroad employees." 9 U.S.C. 1. And the word "seamen" and the phrase "railroad employees" describe natural persons who are individual workers. As a residual category, "any other class of workers" is to be afforded a narrow construction.
The court also held that "contracts of employment" in the transportation worker exemption do not extend to commercial contracts like the DSP Agreements. For a contract to be a contract of employment covered by Section 1, it must have a qualifying worker as one of the parties
Lopez v. Aircraft Service, International, Inc., 107 F. 4th 1096
Lopez filed a class action against Menzies Aviation, his employer, alleging violation of the labor laws. Menzies moved to compel arbitration. Lopez opposed the motion asserting that he was exempt from arbitration under Section 1 of the FAA because he was a technician who fueled aircraft that were engaged in interstate commerce. Menzies argued that Section 1 did not apply because Lopez did not move “goods”. The District Court denied the motion. Menzies appealed.
The Ninth Circuit affirmed. A fuel technician who places fuel in an airplane used for foreign and interstate commerce is a transportation worker engaged in commerce because a fuel technician plays a direct and necessary role in the free flow of goods across borders. Lopez's fueling of the airplane—a vital component of its ability to engage in the interstate and foreign transportation of goods—was so closely related to interstate and foreign commerce as to be in practical effect part of it. Thus, Lopez was engaged in the channels of foreign or interstate commerce for purposes of the FAA exemption.
Ortiz v. Randstad Inhouse Services LLC, 95 F. 4th 1152
Ortiz was an employee of Randstad, a staffing agency, and was assigned to work in a warehouse operated by GXO. The warehouse received Adidas products from out of state, stored them for up to several weeks pending their purchases by Adidas’ customers, and then caused them to be delivered to the customers. Ortiz was not involved in either the arrival or departure of the products from the warehouse. His job duties included exclusively warehouse work: transporting packages to and from storage racks, helping other employees in obtaining packages so they could be shipped, and assisting in the preparation of packages for their subsequent shipment. Ortiz was not involved in unloading shipping containers upon their arrival or loading them into trucks when they left the warehouse. After his employment ended, he sued Randstad and GXO alleging violation of the labor laws. The defendants’ motions to compel arbitration based on an arbitration agreement subject to the FAA were denied on the ground that Ortiz was a transportation worker and not covered by the FAA. The defendants appealed.
The Ninth Circuit affirmed. Ortiz played a direct and necessary role in the free flow of goods across borders and actively engaged in transportation of such goods. The relevant goods were still moving in interstate commerce when he interacted with them, and he played a necessary part in facilitating their continued movement. Ortiz's job description met all the benchmarks laid out by the United States Supreme Court in Southwest Airlines Co. v. Saxon, supra. Both Ortiz and Saxon fulfilled an admittedly small but nevertheless "direct and necessary" role in the interstate commerce of goods: Saxon ensured that baggage would reach its final destination by taking it on and off planes, while Ortiz ensured that goods would reach their final destination by processing and storing them while they awaited further interstate transport. Both were also actively engaged and intimately involved with transportation: Saxon handled goods as they journeyed from terminal to plane, plane to plane, or plane to terminal, while Ortiz handled them as they went through the process of entering, temporarily occupying, and subsequently leaving the warehouse—a necessary step in their ongoing interstate journey to their final destination. Both were actively engaged in the interstate commerce of goods. If Saxon was an exempt transportation worker, Ortiz was, too.
Ortiz v. Randstad Inhouse Services LLC, 2024 US App LEXIS 5865 (unpublished)
As noted above, the defendants’ motions to compel arbitration were denied on the ground that Ortiz was a transportation worker and thus not covered by the FAA. But the defendants asserted that the agreement was also subject to the California Arbitration Act (CAA). The agreement read as follows:
This Agreement shall be governed by the Federal Arbitration Act ("FAA"). Any federal, state or local laws preempted by the FAA shall not apply to this Agreement or its interpretation. I agree that this Agreement may be enforced and administered by a court of competent jurisdiction through the filing of a petition to: compel arbitration; confirm, vacate or modify an arbitration award; or otherwise pursuant to the FAA.
The Ninth Circuit agreed with the defendants. The choice-of-law provision unambiguously contemplated application of both the FAA and state law to the extent it was not preempted by the FAA. Both the first sentence, which provided "[the] [a]greement shall be governed by the Federal Arbitration Act," and the third, which contemplated enforcement "pursuant to the FAA," clearly expressed the parties' intent to apply the FAA. But it did not follow, however, that the arbitration clause was unenforceable simply because it was outside the scope of the FAA. The parties' agreement also clearly expressed their intent to alternatively enforce the arbitration agreement under state law. The second sentence of the choice-oflaw clause provided that "[a]ny ... state ... laws preempted by the FAA shall not apply to this Agreement." From this provision, it stood to reason that the parties expected state laws not preempted by the FAA—including state laws that guarantee the enforceability of arbitration agreements—applied to the agreement.