The lead case today is the Third Circuit’s resolution of the issue of whether rideshare drivers are exempt from a District Court’s ability to compel arbitration under the provisions of the Federal Arbitration Act.  However, there are six other cases that are worth reading, so don’t stop after Singh.

Uber Drivers and the FAA

On Wednesday, the Third Circuit held that Uber drivers are not sufficiently involved in the interstate transportation of riders to fall within the Federal Arbitration Act’s exemption for “contracts of employment of seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. §  1 (Emphasis added).  In Singh v. Uber Technologies, Inc., 2023 U.S. App. LEXIS 10137 (3^rd Cir. April 26, 2023)(Scirica, J., writing for himself and Judges Jordan and Rendell).  The Circuit joins the First and Third in holding that rideshare drivers are not exempt from coverage under the FAA, see Cunningham v. Lyft, Inc.., 17 F. 4^th 244 (1^st Cir. 2022); Capriole Uber Technologies, Inc., 7 F. 4^th 854 (9^th Cir. 2021).

The issue, the court holds, focuses on the “centrality of interstate work” to an Uber driver’s job functions. It rejects the concept that “even a trivial amount of interstate transportation work suffices to bring a worker within the exception.”  Such an “interpretation would cover even ‘a pizza delivery person who delivered pizza across state lines to a customer in a neighboring town.’” (Quoted citation omitted).  Rather, the court looks to “the ‘actual work’ that class members ‘typically carry out,’” quoting Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783, 1788 (2022)(Emphasis added).  In making that analysis, the court looks at national statistics. The court rejects Plaintiffs’ argument that it is relevant that between 2010  and 2020, Uber drivers made 141.5 million interstate trips; such figures, the court opines, may be skewed “if a small proportion of the class is responsible for most of the trips.”  Rather, it is more determinative that nearly sixty-five percent of “the most active Uber drivers. . . have never made a single interstate trip.”  In addition, “although the average trip length [which the court finds is 6.1 miles] is not dispositive, a short average trip length makes it more likely that drivers serve local communities that may, by happenstance of geography, cross state lines.”  The court distinguishes workers who are “part of an unbroken stream of interstate commerce,” quoting Saxon at 1790.  Thus, Amazon drivers fall within the exemption because they carry “locally transport[ed] goods on the last legs of interstate journeys. . . “, quoting Waithaka v. Amazon.com, Inc., 966 F. 3d 10, 13 (1^st Cir. 2020).  The court further rejects the argument that, because Uber drivers take  passengers who may be traveling interstate to and from airports and train stations to begin and end their journeys, the drivers are in that “unbroken chain” of interstate travel.  As have many courts before it, the panel rejects a comparison of Uber drivers to the taxi drivers who ferried cross-country passengers between stations in Chicago in order to change trains, United States v. Yellow Cab Co., 332 U.S. 218 (1947). “The rides in Yellow Cab were part of an exclusive contract between a taxi service and the railroad – passengers bought a single ticket which included both the train and taxi portions of their journey. . . . Rather, rideshare trips to airports are done as part of drivers’ ‘independent local service,’” quoting Yellow Cab at 232-33.

Having found that the FAA applies to the Uber drivers’ contract, the court considers and rejects various challenges to the arbitration provision itself and leaves other issues to the arbitrator. Despite Uber’s rights to change the arbitration agreement’s terms, the delegation provision thereof is not illusory, as any such change must be made in writing and become effective only if the driver continues to the Uber app.  Nor does the existence of a forum selection clause invalidate the delegation provision. “[T]he forum selection clause here ‘was intended’ to identify the proper venue for ‘an action in court to enforce’ the agreement, and ‘to identify the venue for any other claims that are not covered by the arbitration agreement.’” (Quoted citation omitted).

Accordingly, the Court affirms the District Court’s judgment compelling arbitration.

Arbitration as an “action”

In Encana Oil & Gas (USA) Inc. v. D&L Manufacturing, Inc., 2023 U.S. Dist. LEXIS 71483 (W.D. Tex. February 28, 2023), an arbitration panel considered a third-party defendant, WFR, which settled a product liability case with D & L, but left open the issue of whether D & L owed it indemnification under a Texas statute, known as Chapter 82. That statute provided for indemnification for “a loss arising out of a products liability action.”  Magistrate Judge Farrer holds that, for purposes of indemnification, an “action” includes an arbitral proceeding, at least where the alleged indemnitor was aware that the arbitration covered the incident underlying the civil litigation.

Who Decides a Condition Precedent to Arbitration?

The parties’ contract in Anhui Powerguard Technology Co. Ltd. v. DRE Health Corp., 2023 U.S. Dist. LEXIS 70651 (W.D. Mo. March 21, 2023)(Fenner, J.), required the defendant to pay plaintiff approximately $6M in three  instalments.   After receipt of an initial payment and “in consideration of future payment commitments,” Anhui would release Powergard. The agreement further provided that “the venue for any future disputes shall be binding arbitration with Hong Kong International Arbitration Centre.” Plaintiff alleged that DRE only made one installment payment. When Anhui brought this suit for breach of contract, DRE moved to compel arbitration under the quoted language. The court holds that the question of whether full payment is a precondition to arbitration under the agreement is one of contract formation and, therefore, is not delegated to the HKIAC.  “Under the contracted terms, Plaintiff has not agreed to arbitrate anything, including arbitrability, under AFTER the condition precedent is met.”(Capitals in opinion).  While recognizing that “the Eighth Circuit has not expressly addressed the issue,” Judge Fenner cites to the Second Circuit in NASDAQ OMX Group, Inc. v. UBS Securities, LLC, 770 F. 3d 1010 (2^nd Cir. 2014).

Quick Hits

Resolution of Class Certification While Issues of Arbitrability Pending

In Sunshine Children’s Learning Center, LLC v. Waste Connections of Florida, Inc, 2023 U.S. Dist. LEXIS 71203 (S.D. Fla. April 24, 2023)(Bloom, J.), the court holds that it may determine the appropriateness of class treatment under Fed. R. Civ. P. 23 before deciding whether some of the class members might be bound by arbitration agreements. “[T]he issue of arbitration clauses in some putative class member’s [sic] agreements was best ‘resolved by creating a subclass of loan agreement holders whose contracts contain arbitration provisions rather than denying certification.’” (Quoted Citation omitted).

Stay of Litigation During Pendency of the Appeal of Denial of a Motion to Compel Arbitration

In Stover v. Fluent Home, LLC, 2023 U.S. Dist. LEXIS 71881 (S.D.W.Va. April 25, 2023), Judge Volk considers whether to stay the pending case while defendant appeals the court’s earlier denial of a motion to compel arbitration.  The court holds that the appeal divests the District Court of jurisdiction to proceed with other aspects of the case, unless the appeal is frivolous. Therefore, he grants the stay.  SCOTUS is expected to resolve this issue when it decides Coinbase, Inc. v. Bielski, Dkt. No. 22-105, argued on March 21^st.

Attorney’s Signature on Arbitration Agreement Binds Client

In Bajwa v. Prime Healthcare Services – Lehigh Acres, LLC., 2023 U.S. Dist. LEXIS 71179 (M.D. Fla. April 24, 2023), Plaintiff’s then-counsel stipulated to arbitrate this discrimination action; the court approved the stipulation and stayed the action. Thereafter, counsel withdrew, and Bajwa moved to vacate the order sending the case to arbitration.  Magistrate Judge Dudek denies the motion.  The issue under Florida law, the court opines, is “whether a stipulation to arbitrate is procedural and within the scope of an attorney’s binding authority, or merits-based and outside it.”  Since a party agreeing to arbitrate does not waive any substantive rights, but “simply agrees to submit those rights to an arbitral forum,” the attorney was acting within his or her authority. (Quoted citation omitted). The court, though, goes out of its way to point out that “Bajwa may address her grievances with her former attorney directly.”

Sealing Arbitration Awards

Catholic Mutual Relief Society of America v. Markel International Insurance Co., 2023 U.S. Dist. LEXIS 72168 (S.D.N.Y. April 24, 2023)(Failla, J.), is a reminder that arbitration proceedings are private, not confidential. Catholic Mutual obtained a final arbitral award, which it sought to confirm.  It attached the award to its petition as an exhibit. Markel “insisted” that Plaintiff ask the court to seal the award “pursuant to the terms of the parties’ arbitration confidentiality agreement. . . .” The court declines to seal the entire award, citing several cases in the District which hold that the public interest in judicial transparency overrides any party expectations of confidentiality.  However, it does redact the names of survivors of sexual abuse who are listed in the award. Because Judge Failla cites several cases on both wholesale and limited sealing of awards, the case is a good starting point for research on those issues.

Have a good weekend.  If you’re a member of the TIPS Section of the ABA, there is still time to sign up for the Spring Conference in New York next week.  There are two stellar panels on both domestic and international arbitration.

David Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com