The recent practice of “Highlights” has been to give shorter descriptions of more cases.  Today is an exception, since the Second Circuit has issued a complicated – and important – “transportation worker” case that reviews recent SCOTUS holdings. That case needs a deeper look.

FAA “Transport Worker Exclusion” post-Saxon

Earlier this year, the Second Circuit decided Bissonnette v. LePage Bakeries Park St., LLC. 33 F. 4^th 650 (2^nd Cir. 2022)(“Bissonnette I”), in which it held that workers who delivered Wonder Bread to retail outlets were not “transportation workers” and, therefore, were not excluded from the provisions of the Federal Arbitration Act.  Accordingly, it held, a provision in their distributor agreement compelled arbitration of their Fair Labor Standards Act claims. Shortly after that decision, the U.S. Supreme Court decided Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), in which it held that one of the airline’s ramp supervisors was a “transportation worker” “engaged “ in interstate or foreign commerce. The Second Circuit, then, withdrew its opinion in Bisonette I in order to consider the effect of Saxon.  Bissonnette v. LePage Bakeries Park St., LLC , 2022 U.S. App. LEXIS 27628 (2^nd Cir. September 26, 2022), is the result of that reconsideration.

The court does not change its holding in Bissonnette I, and the alignment of the judges remains the same.  Judge Jacobs writes for himself and District Judge Gujarati and also writes a separate concurring opinion.  Judge Pooler continues to dissent.  The interesting issue is how they deal with Saxon. In determining whether a plaintiff is a “worker[] engaged in foreign or interstate commerce,” 9 U.S.C. § 1¸ the majority continues to look to the nature of the worker’s industry, not his or her particular job.  The employer itself must have a business which is “in the context of a transportation industry.” (Emphasis in original).  “We conclude that an individual works in a transportation industry if the industry in which the individual works pegs its charges chiefly to the movement of goods or passengers, and the industry’s predominant source of commercial revenue is generated by that movement.” Saxon, it holds, does not change the court’s previous opinion, since “there the plaintiff worked for an airline.  An airline . . . . is in the business of moving people and freight, and its charges are for activity related to that movement. (Customers do not fly for the infotainment or the food).”  Conversely, the defendant in Bisonette is a bakery. “[T]he decisive fact is that the stores and restaurants are not buying the movement of the baked goods, so long as they arrive. . . . The commerce is in bread, buns, rolls, and snack cakes – not transportation services.”

In dissent, Judge Pooler argues that the majority “tries to sidestep Saxon.”  As she reads SCOTUS’s opinion, “Someone ‘is therefore a member of a “class of workers” based on what she does’ for her employer, ‘not what [the employer] does generally’.” Quoting Saxon at 1788.  In fact, she opines, “the Court squarely foreclosed that Southwest Airlines’ ‘predominant source of commercial revenue’ could be relevant to whether Saxon was a transportation worker.” (Quoting Saxon at 1788.   With that focus, she holds that the plaintiffs are transportation workers. Their work “principally consists of driving Department of Transportation -registered commercial trucks” to stores within their territory.  Thus, she opines – throwing the majority’s language back at them –  they “spend appreciable parts of their working days moving goods from place to place by truck.”  In an interesting argument, Judge Pooler points to the presence of drivers “who work directly for beverage companies, furniture companies, retailers, food manufacturers, energy companies and grocery stores.  One cannot get far on an interstate without seeing an eighteen-wheeler soliciting for ‘Driver4Walmart.com.’”  The “moment they are brought in-house,” she opines, their “principal daily tasks” do not change; they are still “transportation workers.”

In a side argument, the judges line up differently in lengthy dictum over the issuance of a stay, rather than a dismissal, of an action when the District Court compels arbitration.  In his concurrence, Judge Jacobs argues that a court is required under Section 3 of the FAA to issue a stay of the pending action (rather than dismiss it), even if none of the parties moves for a stay. To the extent that Katz v. Cellco Partnership, 794 F. 3d 341 (2nd Cir. 2015), holds otherwise, he finds that opinion to be “regrettable.”  The concurrence relies heavily on the policy effects of Badgerow v. Walters, 142 S. Ct. 1310 (2022), which holds that there is no look-through federal question jurisdiction over an application to compel or vacate an arbitration.  In a footnote, Judge Jacobs refers specifically to Justice Breyer’s dissent in Badgerow, in which the Justice recommended stays pending arbitration, rather than dismissals, so that the parties would retain the right to have the arbitration’s award reviewed in the same court that compelled the arbitration itself. Judge Pooler, in dictum within her dissent, rejects Judge Jacobs’ argument. “Section 3 is triggered ‘on application of one of the parties [to] stay the trial’. . . .”  Accordingly, “where a party does not request a stay. . . a district court retains the authority to dismiss the action.”  District Judge Gujarati, as a District Judge sitting by designation, wisely lies low and voices no view on the wisdom of the Circuit’s Katz precedent.[1]

I am sure that there will be a petition for cert.; let’s hope that the Supreme Court, which certainly showed an interest in arbitration last Term, decides to take it up. This case is an ideal vehicle for SCOTUS to explore an issue still left open after Saxon and to state in clear, uncertain terms whether FAA Section 1 looks to the employer’s industry or the worker’s job functions.  Unlike Southwest Airlines, the employer in Bissonnette is not a classic transportation company; it is a bakery.  Thus, addressing this case will also end (maybe?) disputes over whether Amazon drivers, furniture delivery folks, and the growing number of Walmart and similar in-house truckers fall within the scope of the “transportation worker” exception.[2]

Scope of Badgerow

Smartsky Networks, LLC. v.  Wireless Systems Solutions, LLC., 2022 U.S. Dist. LEXIS (M.D. N.C.  September 29, 2022)(Schroeder, J.), addresses the scope of the Supreme Court’s decision in Badgerow.  The case revolves around a motion to stay certain proceedings pending the appeal of an earlier decision confirming an arbitration award.  Defendants argue that, under Badgerow, the court lacked subject matter jurisdiction to confirm the award.  Judge Schroeder distinguishes Badgerow based on a difference in its procedural posture from that being resolved here.  Badgerow arose from a free-standing application to vacate an award. Here, the case was originally brought to compel arbitration of a dispute which centered on the federal Defend Trade Secrets and Lanham acts.  There was clearly a federal question involved; therefore, there was “look-through” jurisdiction over the application  see 9 U.S.C. § 4.  The court, when it previously granted the motion to compel arbitration, stayed the underlying case; it did not dismiss it. Therefore, the case never left the court’s initial subject matter jurisdiction, and it could hear the motion to confirm the award.  In summary, both the application to compel and the motion to confirm were within a single proceeding.

As in Bissonnette, the court cites to the dissent in Badgerow. “If a party to an arbitration agreement files a lawsuit in federal court but is then ordered to resolve the claims in arbitration, the federal court may stay the suit and possibly retain jurisdiction over related FAA matters.” (Citation omitted).

The lesson to litigators is clear.  Whether you are asking a federal court to compel arbitration or are opposing the motion, you need to make a strategic decision on whether you want your post-award proceedings to be in front of the same judge.  If so, be sure to seek a stay  pending arbitration.  Conversely, if you think your potential challenges to the award will fly better in state court, ask for a dismissal.  Absent diversity jurisdiction, your opponent may not be able to get back into federal court.

No Summons Needed in an Action to Confirm an Arbitration under the New York Convention

In an important case for a limited audience, the Second Circuit holds that a party seeking to confirm an arbitration award against a foreign sovereign under the New York Convention does not need to serve a summons along with its notice of the application to confirm, Commodities & Minerals Enterprise, Ltd. v. CVG Ferrominera Orinoco, C.A., 2022 U.S. App. LEXIS 27556 (2^nd Cir. October 2, 2022).  Judge Nardini, writing for himself and Judges Cabranes and Lynch, undertakes a “journey” through Chapter 2 of the FAA, the New York Convention, and the Federal Rules of Civil Procedure related to service. In a footnote, the court recognizes that two District Courts in Florida have held to the contrary, ruling that the absence of a summons deprives the court of personal jurisdiction.  In the Circuit’s view, “those courts erred in failing to start their analysis with the FAA, which incorporates the FSIA’s [Foreign Sovereign Immunities Act] requirements only as to the manner of service, not what must be served.” (Emphasis in original).

Literature

There are a number of interesting articles in the ABA Dispute Resolution’s current issue of “Dispute Resolution” magazine. Lionel Schooler has a really good summary of SCOTUS’s arbitration decisions in the last term, Schooler, Arbitration at the Supreme Court: a Record-Setting Term”, 28 Dispute Resolution Magazine, No. 3, p. 29 (Sept. 2022). Also, Debra Berman has a data driven analysis of mediator proposals, Berman, The Use of Mediator Proposals in Practice; What the Data Tells Us, 28 Dispute Resolution Magazine, No. 3, p. 24 (Sept. 2022).   Joel Levine has written a thoughtful article on selecting an arbitrator for tech matters, Feature: Special Feature: Focus on Tech and Innovation: Tech Arbitration Tips (And More), 59 Arizona Attorney 48.  While, as an arbitrator, I feel some of his pre-retention questions get too close to the merits of the dispute, the article is well worth your time as it addresses the expertise element of arbitrator selection.   You can find the article on Lexis Advance by searching the citation.

Have a good weekend.  Sorry to have been away from the keyboard for so long, but a number of hearings got in the way of my writing.

David A. Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com

[1] The opinion has a release date of May 5, 2022, with this case showing as “Amended: September 6, 2022.”  I wonder how the West Reporter system will deal with the existence of two final opinions in the same case, one of which “amends” the other, as it moves into the hard-cover publishing process.  One the of the advantages of on-line research – yes, I remember Decennial Digests and weekly soft  parts – is that that the reader is alerted to these kinds of changes.

[2] In dictum, the Bissonnette majority specifically states that it is not addressing the status of Grubhub, Uber, Amazon or similar drivers.