Today we get three Uber/Lyft cases, two of which are out of the Southern District of New York and reach opposite results on the same facts. There is also a partial resolution of California’s conflicting BMW arbitration cases and an exploration of the meaning of “seaman” for FAA exemption purposes.
Lyft and Uber drivers
The last four days have generated three cases addressing whether ride share drivers fall within the scope of the FAA’s exemption of “workers engaged in foreign or interstate commerce.” Two of them reach opposite results on essentially the same set of facts, thus capsulizing the arguments for and against coverage.
The most important of the three may be Islam v. Lyft, Inc., 2021 U.S. Dist. LEXIS 43839 (S.D.N.Y. Mar. 9, 2021), as it is one of the rare cases (I believe there may only be one other) holding that such drivers fall within the exemption. This thoughtful opinion by Judge Abrams runs forty-eight pages and is worthy of a law journal note.
The plaintiff in the case is based in New York City, where Uber and Lyft drivers have an unusual operational footprint. The city is wedged between New Jersey and Connecticut, with one of the city’s major airports, Newark International, located in another state. Thus, ridesharing drivers in New York City spend a larger proportion of their time driving across state lines than do those elsewhere. The plaintiff here estimated that four to five percent of his trips were interstate and that they accounted for about 20% of his earnings. In fact, per the court, “Lyft services from the New York City coverage area expressly contemplate rides across state lines, by providing for a $20 surcharge on all trips between New York and New Jersey and by advertising service from New York City to Newark International Airport.” However, it is clear from the opinion that ride share drivers nationwide are less likely to travel interstate, since the court opines that only two to three percent of trips on a national basis cross state lines. Thus, Judge Abrams sees the first issue to be what she calls class determination – should the court measure the impact of “interstate commerce” based on the specific New York City area in which Islam operates or look nationwide. Opining that the FAA embodies a “national” policy and “it would be illogical if Lyft drivers performing the same work for the same company in different cities were to have completely different rights and obligations under the FAA merely because of a ‘happenstance of geography,’” she chooses to establish a national standard. “Ridesharing platforms provide hundreds of millions of rides in the United States each year. . . . Two to three percent of those trips adds up to tens of millions of interstate rides in the United States each year. . . . Lyft’s platform is expressly designed to enable longer, non-local rides by allowing passengers to be dropped off up to 100 miles outside of the coverage area where the ride begins.” In fact, the court points out, Lyft drivers can be removed from the platform if they turn down too many interstate trips. In addition, the court finds that 10.1% of all Uber trips in the United States in 2019 began or ended at an airport – a percentage that Judge Abrams seems to also apply to Lyft. Therefore, “the Court finds that rideshare drivers for companies like Lyft and Uber, as a nationwide class, perform sufficient numbers of interstate rides, with sufficient regularity, to make them ‘engaged in’ interstate commerce.”
Despite finding that Uber and Lyft drivers are not within the scope of the FAA, Judge Abrams compels arbitration, finding authority to do so in New York state substantive law. The FAA “exemption,” she holds, is just that – an exception to a court’s authority to use that specific statute to enforce an arbitration clause. It is not “a substantive pronouncement that [arbitration] clauses in transportation workers’ contracts are unenforceable.” The court holds that a provision in the drivers’ agreement that “the arbitration clause is ‘governed by the FAA,’” “does not plausibly suggest that the parties intended for the clause to be discarded in the event that the FAA was found inapplicable.” Rather, she finds an intent to arbitrate in the general tone of the contract which “repeatedly emphasizes that the parties ‘agree[d] to waive [their] respective rights to resolution of disputes in a court of law.’” Since New York law favors the enforcement of arbitration agreements, Judge Abrams grants the motion to compel arbitration thereunder, even though she has held the FAA inapplicable.
On March 8, Judge Carter decided a case with essentially the same factual record as Islam. Here, too, the issue related to New York City based ride share drivers’ interstate activities. However, he holds, in Aleksanian v. Uber Technologies, Inc., 2021 U.S. Dist. LEXIS 43010 (S.D.N.Y. Mar. 8, 2021), that such drivers are not interstate transportation workers. Relying upon many of the cases that Judge Abrams distinguishes, Judge Carter holds that the issue is not the activities of a specific group of drivers, such as those in New York City, but rather the activities of the “class of workers.” (Emphasis added). Viewed in this way, he opines, Uber drivers are not dissimilar to taxicab drivers, who have consistently been held not to be engaged in interstate commerce, even when they transport airport bound passengers who may ultimately fly across state lines. He contrasts ride share drivers to Greyhound bus drivers, for whom “interstate movement of people is a central part of the job description. . . .” (Emphasis added). Accordingly, he grants Uber’s motion to compel arbitration, applying the FAA exemption to Section 1.
Islam and Aleksanian should be read together. While Islam lays out more nationwide facts, the two cases begin from the same nucleus of New York City ride share drivers, but come to different results. Hopefully, considering the importance of the issue and SCOTUS’s failure of guidance on the scope of Section 1 by denying cert. in Rittman v. Amazon.com, Inc., 971 F. 3d 904 (9th Cir. 2020), cert. denied 2021 U.S. LEXIS 906 (Feb. 22, 2021) (“last mile” delivery persons), one of these cases will be granted an interlocutory appeal to the Second Circuit.
For completeness, also see the recent decision in Hinson v Lyft, Inc., 2021 U.S. Dist. LEXIS 44491 (N.D. Ga. Feb. 26, 2021), in which Judge Cohen holds that ride share drivers, as a class, are not engaged in interstate commerce. “Accordingly, they are not covered by the exemption in § 1 of the FAA for transportation workers and are subject to . . . the agreement to arbitrate any and all claims on an individual basis, including the FLSA claims in this case.” Since the plaintiff drivers in Hinson were based in Georgia, they did not generally make the number of interstate runs associated with the New York City drivers in the cases discussed above, so the case is more typical of those arising almost weekly around the country.
“Seaman” under the FAA
Most cases dealing with the FAA’s exemptions, like those above, address the question of whether the plaintiff is a “worker in foreign or interstate commerce.” Rouzier v. American Queen Steamboat Operating Co., LLC, 2021 U.S. Dist. LEXIS 44852 (S.D. Ind. March 10, 2021) asks the question of whether the plaintiff is a seaman. Rouzier was a bartender on a steamboat offering cruises on various navigable rivers, including the Mississippi, Tennessee, and Ohio Rivers. Her job was essentially the same as a bartender on dry land. “She is charged with knowing Defendants’ bar menu, drink recipes and serving procedures.” She had no role in maintenance, docking, or safety-related services to guests. She alleged that, during her six-week tours on the vessels, she worked twelve hours a day and seven days a week, without any overtime pay. She brought this action, alleging that the cruise line’s failure to pay overtime violated the Fair Labor Standards Act. Defendant moved to compel arbitration pursuant to the terms of Rouzier’s employment agreement. The issue before the court, Barker, J., is whether, as a bartender on a cruise liner, plaintiff was a “seaman” and therefore, within the FAA carveout exempting “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
The question is an unusual one; Judge Barker finds only two cases which address the issue, Owen v. West Travel, Inc., 2003 WL 25961848 (W.D. Wash. Dec. 12, 2003)(cooks, bartenders, and customer service representatives) and Wiora v. Harrah’s Illinois Corp., 68 F. Supp. 2d 988 (N.D. Ill. 1999)(waitress). Therefore, she turns for guidance to Jones Act cases, which use the same term. Based on those authorities, the court determines that Rouzier’s status turns on whether her duties “contribute to the function of the vessel or to the accomplishment of its mission” and whether she has a “connection” with the vessel that is “substantial in both its duration and its nature.” On the “function of the vessel” prong, the court opines that “Defendants’ cruises provide entertainment and transportation to those aboard the boats.” As anyone who has ever taken a cruise knows well, a significant part of that “entertainment” takes place at the bar; thus, Rouzier satisfies the first portion of the test. Since she lives on-board throughout her six-week tour of duty, her employment is certainly “substantial.” Since Rouzier meets the Jones Act “seaman” test, which the court imports to the FAA, Judge Barker denies defendants’ motion to dismiss the case pending arbitration.
Anyone who follows “ADR Highlights” knows that the U.S. District Courts in California have split over whether BMW of North America, the U.S. arm of the German car manufacturer, can enforce arbitration agreements between BMW purchasers and their dealers. Hajibekyan v. BMW of North America, 2021 U.S. App. LEXIS 6780 (9th Cir. Mar. 9, 2021) resolves the issue under at least one version of the sales and financing contract. In a short memorandum opinion, a panel of Circuit Judges, Graber, Miller, and Higginson (sitting by designation from the Fifth Circuit) holds that language requiring arbitration of “any claim dispute or controversy. . . between me and you or your employees, officers, directors, affiliates, successors or assigns” (Emphasis added) covers BMW as the parent company of BMW Financial services, one of the parties subject to the agreement. Whether this opinion, which focuses on specific contract language, covers the broad range of BMW contracts is unclear, as the court does not give the date of the parties’ agreement. However, to the extent that it does so, the panel’s resolution of the issue creates a much brighter line than do the equitable estoppel and agency arguments in the split District Court cases cited elsewhere in “Highlights.”
Arbitrator conflicts based on former associates
Many arbitrators were formerly affiliated with a law firm. Raymond James & Associates, 2021 U.S. App. LEXIS 6791 (9th Cir. Mar. 9, 2021) addresses the potential conflicts arising from those relationships. In a short memorandum opinion, a panel of Circuit Judges Graber, Higginson, and Miller (the same panel that decided Rouzier above), affirms the District Court’s confirming of an award over the objection that the arbitrator’s former law firm represented Raymond James. “The arbitrator left his former firm five years before the arbitration panel was selected and there is no evidence that he ever personally represented RJA or that he had any interest in the firm at the time of the arbitration.” Thus, there was no “reasonable impression of partiality.” Any connection was “long past, attenuated, or insubstantial.” The Court also holds that there is no obligation, under either the FAA or the rules of the AAA, for an arbitrator to investigate whether a former law firm ever represented one of the parties in an unrelated matter – an obligation that would raise immense practical problems. Although the opinion does not address the issue, best practice is still for an arbitrator, in his or her conflict disclosure, to advise the parties whether he or she checked a former firm’s client lists.
Venezuela as an arbitral forum
Northrup Grumman Ship Systems, Inc. v. Ministry of Defense of the Republic of Venezuela, 2021 U.S. App. LEXIS 6961 (5th Cir. Mar. 10, 2021) addresses the ability of a party to obtain a fair arbitration in Venezuela after the ascendence of Hugo Chavez. About a year before Chavez came to power, Plaintiff agreed to refurbish two warships for the Defendant. After the Ministry refused to pay for cost overruns, Plaintiff moved to compel arbitration. Although the parties’ agreement venued arbitration in Venezuela, Plaintiff sought to seat the proceeding in an alternative location, maintaining that a fair hearing was impractical in the defendant country. Ultimately, arbitration took place in Rio de Janeiro, Brazil. The arbitration panel found in favor of Plaintiff and awarded damages in the amount of $128M. Venezuela claimed error in the panel’s change of venue and sought to vacate the award; Plaintiff sought to confirm. At various times in the proceedings, one expert opined that the government summarily sacks “judges,” replacing them with provisional, political replacements who are beholden to those in power. Another testified that the Venezuelan government “exerted various forms of undue influence on Venezuelan judges,” making them unable “to enforce rulings that conflicted with the government” and exposing them to violence and even death “instigated by government officials.” Two Venezuelan lawyers joined in the chorus. The District Court, therefore, confirmed the award based on the “impracticality” of holding an arbitration against Venezuela in that nation. On appeal, the panel, Haynes, Duncan, and Engelhardt, Circuit Judges, likewise holds that a fair arbitration was not practical in Venezuela and that, since Chavez was not in power when the plaintiff agreed to that venue in the original contract, such impracticality was not foreseeable. Therefore, it affirms the District Court, thus confirming the award.
Earlier this week, the House of Representatives passed HR 842, the Protecting the Right to Organize Act (“PRO”), which would make it an unfair labor practice to require employees to execute arbitration agreements which prohibit class or collective actions. The bill now moves to the Senate. For a more detailed discussion of the legislation, see the CPR Blog at blog.cpradr.org
Have a good weekend. See you Monday.
David A. Reif