Perhaps because of the weekend holidays, the courts were quiet on Monday and Tuesday, with only a few cases worth discussing. There are two more “transportation worker” cases, one of which reviews in detail the conflicts and nuances among different Circuits. The Supreme Court passed up a chance to clarify the issue earlier this year when it denied cert. in Rittman v. Amazon.com, Inc., Dkt. No. 20-622. There are also several cases reminding us of basic principles.
“Interstate commerce worker” exception to the FAA; FLSA attorney’s fee mandate; relation of FAA and NLRA
Two cases, again, draw attention to the “worker engaged in foreign or interstate commerce” exemption the FAA’s applicability and authority.
In Bean v. ES Partners, Inc., 2021 U.S. Dist. LEXIS 65261 (S.D. Fla. April 4, 2021), Judge Altman gives a definitive, almost law journal-like, discussion of the exemption. Bean was a route driver who delivered medications and medical devices to defendant’s customers. While the materials he delivered were manufactured “all over the country” and arrived in Florida by interstate commerce, plaintiff himself made deliveries only within the state. He alleged violation of Florida’s minimum wage laws and the Fair Labor Standards Act. Defendant moved to compel arbitration pursuant to Bean’s “Independent Contractor Agreement.” The court discusses in depth authorities from the First, Seventh and Ninth Circuits, Waithaka v. Amazon.com, Inc., 966 F. 3d 10 (1st Cir. 2020); Wallace v. Grubhub Holdings, Inc., 970 F. 3d 798 (7th Cir. 2020); Rittman v. Amazon.com, Inc., 971 F. 3d 904 (9th Cir. 2020), but holds that, regardless of which Circuit’s standard it applies, Bean does not qualify under the Federal Arbitration Act’s exemption. First, the Court opines, it is undisputed that Bean himself did not deliver goods across state lines. Second, since the goods “come to rest” at warehouses in Florida before delivery drivers like Bean make their local deliveries, the medications are not “still in the ‘stream’ or ‘flow’ of interstate commerce when he delivers them.” (Emphasis in original).
Having found that the FAA exemption does not apply, the court considers Plaintiff’s other objections to arbitrability. It severs an attorneys’ fee provision from the arbitration agreement as violative of the FLSA and holds that the National Labor Relations Act does not override the FAA’s enforcement of an arbitration provision. The Court compels arbitration of the dispute.
Castro v. TCA Logistics Corp., 2021 U.S. LEXIS 66117 (E.D.N.Y. Mar. 31, 2021) also addresses the applicability of the FAA to a last mile delivery driver. Plaintiff delivered mattresses within New York and Connecticut from a warehouse on Long Island. Citing cases from throughout the Second Circuit, Judge Seybert holds that, although Castro was required to perform some non-delivery services such as setting up mattresses in customers’ homes, he was “fundamentally involved in the interstate movement of goods” and, therefore, was an exempt transportation worker. However, although the court finds that the FAA does not give it authority to act, it holds that it may do so under New York state law; it compels arbitration. Here, too, the court considers the effect of the NLRA, as Judge Seybert finds the arbitration agreement’s class action waiver enforceable, although the National Labor Relations Board, she opines, has concluded that waivers of collective action are “void and invalid.”
Applicable Fed. R. Civ. P. for resolving a motion to compel arbitration
Olympus America, Inc. v. Cintas Corp., 2021 U.S. Dist. LEXIS 65590 (D.N.J. April 5, 2021) is a deep analysis of a narrow issue. Here, Judge Hillman discusses whether a motion to dismiss an action in favor of arbitration is to be resolved under Fed. R. Civ. P. 12(b)(1), as a question of subject matter jurisdiction, or under Rule 12(b)(6), as a failure to state a claim. While the issue may seem arcane, the court discusses the differences it sees between the tests, including the material which the court may consider in reaching a resolution, and ultimately applies Rule 12(b)(6). Finding that the issue of which of two agreements between the parties governs arbitrability cannot be decided merely by considering allegations within the four corners of the complaint – the Rule 12(b)(6) test – the court denies the motion to compel without prejudice to its renewal after limited discovery. At that point, the court opines, he will consider the motion under the standards of Rule 56 as if it were a summary judgment motion. The opinion is very technical, but is important to those moving to compel arbitration in a Circuit, such as the Third, that has no binding Court of Appeals authority on the question of the applicable Civil Procedure Rule.
Arbitration agreement submitted during litigation
In 2019, the plaintiff in Salazar v. Driver Provider Phoenix LLC, 2021 U.S. Dist. LEXIS 66082 (D. Ariz. April 5, 2021) brought a collective action, alleging that defendant failed to pay minimum wages in violation of the Fair Labor Standards Act and state minimum wage laws. In December 2021, as the case was proceeding, defendant emailed an arbitration agreement to all its “active Chauffeurs,” including plaintiff and members of the class he represented, requiring that they execute and return the new provision “as a condition of your employment and continued employment with the Company.” It gave them two business days to do so. The Court precludes the defendant from enforcing arbitration in this specific action, holding that the circumstances under which the agreement was presented were coercive and misleading in light of the limited time allowed for its execution, the language used, and what the court considers to be the vulnerability of low-income limousine drivers during the COVID pandemic.
Infinite arbitration clauses
In Hearn v. Comcast Cable Communications, LLC, 2021 U.S. App. LEXIS 9758 (11th Cir. April 5, 2021), the Court of Appeals considers the District Court’s dismissal of an application to arbitrate a dispute under the Fair Credit Reporting Act. In 2016, plaintiff signed up for Comcast services at his home; at that time, he received a “Subscriber Agreement” which contained an arbitration clause, purporting to cover “any claim or controversy related to Comcast, including . . . . claims that arise after expiration or termination of this Agreement. . . .” In 2017, he terminated service. In 2019, he called about “pricing and obtaining services at the Mableton address again.” He alleges that, in connection with that call, Comcast ran a credit check “which lowered Hearn’s credit score.” The District Court denied Comcast’s motion to compel arbitration of the claim under the provisions of the 2016 agreement, holding “no reasonable person would believe that the Arbitration Provision was so all-encompassing as to apply to all claims regardless of whether they related to the  agreement” and that this dispute did not arise out of that agreement.
The Court of Appeals, Wilson, J. writing for himself and Judges Grant and Tjoflat, reverses, holding that the dispute did relate to the 2016 Subscriber Agreement and, therefore, was arbitrable under the terms thereof. What is more broadly interesting is the Court’s dictum discussing the extent to which an arbitration clause may reach “beyond the matters addressed in the underlying contract.”
Dodd-Frank Act’s prohibition on mandating arbitration of mortgage disputes
Thomas-Lawson v. Carrington Mortgage Services, LLC, 2021 U.S. Dist. LEXIS 65841 (C.D. Cal. April 5, 2021)(Wright, J.) is a reminder that the Dodd-Frank Act provides that “no residential mortgage loan. . . . may include terms which require arbitration . . . as a method of resolving any controversy or settling any claims arising out of the transaction.” Further, no other agreement between the parties related to the loan may bar an action in the U.S. District Court for damages or other relief. Applying Dodd-Frank, the court invalidates an arbitration clause which defendant claimed covered the dispute. In addition, since the act “renders the clause invalid,” the Court holds that it, not the arbitrator, decides arbitrability, despite the agreement’s incorporation of the AAA’s rules regarding competence-competence.
Confirming an award against a non-appearing defendant
Trustees for the Mason Tenders District Council Welfare Fund v. CAC Specialties, Inc. 2021 U.S. Dist. LEXIS 65692 (S.D.N.Y. April 4, 2021) is a routine petition to confirm an arbitrator’s award finding that defendant did not make required contributions to the employee benefit plan. I include it only as a reminder that where, as here, the defendant does not appear, the court must still review the award “as an unopposed motion for summary judgment” to determine whether it is enforceable. Applying the narrow standard applicable to the review of arbitration awards, the court confirms and enters a judgment on the award in the amount of approximately $1.2 million.
See you later in the week. Be safe.
David A. Reif