Well, summer is essentially over, and vacation is completed.  So, ADR Highlights is back for the fall. While it would have been good to open with a blockbuster, we start with an old friend – the Uber/FAA interface. However, there are, also, some cases of particular interest to drafters.

Interstate transportation worker exception to the FAA

In the month since the last ADR Highlights, a lot of things in the world have changed, but one has not.  The courts are still facing ride-share cases.  Davarci v. Uber Technologies, Inc., 2021 U.S. Dist. LEXIS 157948 (S.D.N.Y. August 20, 2021), is the latest addition. Joining what she characterizes as the majority of holdings, Judge Caproni rules that Uber drivers are not engaged in interstate transportation within the meaning of Section 1 of the FAA, and, therefore, the arbitration clause contained in the “Uber Platform Access Agreement” is enforceable.  Accordingly, she grants defendant’s motion to compel arbitration.

The case is worth reading for a couple of reasons.  First, Uber, as it has in other cases which Judge Caproni cites in her opinion, argued that Section 1 applies only to the carriage of goods, not to the interstate transportation of people.  In support, they rely upon language in the Supreme Court’s holding in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) defining transportation worker as “those workers ‘actually engaged in the movement of goods in interstate commerce.’” Characterizing the quoted language as “dicta,” the court holds that “there is no basis in the statutory text to distinguish between transportation workers who transport goods and those who transport passengers.”  Applying the precept of “ejusdem generis”  (Why do judges and lawyers love Latin?), she opines that seamen and railroad employees, who are exempt from the FAA, transport not only cargo, but, like Uber drivers, carry passengers. In a footnote, she distinguishes the cases relied upon by Uber.

Like other courts, however, Judge Caproni holds that Uber drivers are not engaged in interstate commerce. The court applies a national, rather than a New York City-centric, approach to determining whether Uber drivers operate on an interstate or intrastate basis. Such a broader view, Judge Caproni opines, aligns with the FAA’s attempt to create a “national policy favoring arbitration.”  The court moves on to opine that, although 2.5% of the trips booked on Uber between 2015 and 2019 began and ended in different states, “Uber drivers [are] largely equivalent to local taxi drivers for purposes of assessing their engagement in interstate commerce.”  In language that any New Yorker would appreciate, the court finds that “the fact that a passenger hails an Uber via an app on his smartphone rather than standing at the curb with his arm raised or using an old-fashioned telephone to call an equally old-fashioned taxi dispatcher does not alter the fundamental nature of the driver’s job.”   Rather than looking at data as to the frequency of interstate trips, the court holds, the appropriate test is consideration of the “central feature” of an Uber driver’s job, to which interstate trips are “merely incidental.” In a whimsical analogy, Judge Caproni references bartenders who “likely spend[] a good deal of time listening and offering advice in response to patrons’ problems,” but are not “’engaged in’ the business of therapy or counseling.” [1]

Davarci, in summary, adds one more case to the catalog of ride-share cases.  But  there is still a split in the authorities. Please, please, SCOTUS, take one of these cases, which are bound to arise with on-going frequency, and set a national standard. Until then, like weatherman Bill Murray in Groundhog Day, we just keep repeating this story.

No waiver of the scope of FAA Section 1

Drafters of arbitration clauses often invoke the FAA as the applicable law of arbitration. Romero v. Watkins and Shepard Trucking, Inc., 2021 U.S. App. LEXIS 24795 (9^th Cir. August 19, 2021), addresses the extent to which the parties may alter the scope of the statute.

Romero was a truck driver for Watkins, who alleged in this class action that he and fellow employees did not receive appropriate WARN act notices before termination of their employment.  The parties’ agreement invoked the FAA, but purported to “waive the application of any provision of the FAA which would otherwise exclude [the agreement] from its coverage.” (Brackets in opinion). Circuit Judge D. M. Fisher, sitting by designation, for himself and Circuit Judges Watford and Bumatay, invalidates the waiver.  Although he only drove within California, Romero  delivered goods which moved in interstate commerce.  Therefore, the panel holds, he is an interstate transportation worker and is exempted from coverage under the FAA by Section 1 thereof.  Relying upon New Prime, Inc. v. Oliveira, 139 S. Ct. 532 (2019), the court holds that Section 1 defines the ‘scope of the court’s powers’ to order arbitration.”  Section 1, accordingly, “prohibits a court from staying a litigation and ordering he parties to arbitrate.” (Emphasis added). In essence, the court holds, application of the statute to a transportation worker would be ultra vires regardless of the parties’ wishes. The Court of Appeals, accordingly, affirms the District Court’s denial of defendants’ motion to compel. (The panel divided its rulings in the case into two opinions. The second, a routine decision, holds that Romero, through use of the defendant’s digital platform, agreed to arbitration; it is a memorandum opinion which the panel deems “not appropriate for publication” and non-precedential, Romero v. Watkins and Shepard Trucking, Inc., 2021 U.S. App. LEXIS 24804 (9^th Cir. August 19, 2021).  There is no indication as to why the court split its holdings).

Competence-competence and the Chicago Board of Trade Rules

Chopper Trading, LLC. v. Allston Trading , LLC, 2021 U.S. Dist. LEXIS 157815 (N.D. Ill. August 20, 2021), addresses whether the court or arbitrator should decide the issue of arbitrability under the CBOT’s dispute resolution rules.  Chopper alleged that defendant “spoofed” the market for U.S. Treasuries and Treasury future contracts by issuing deceptive orders that it never intended to execute. Allston moved to compel arbitration under the Board’s rules, while plaintiff maintained that certain of its claims fell outside the scope of those rules. Rule 606 of the CBOT member rules provides that “any party may file a challenge to the arbitrability of a dispute submitted for arbitration at the Exchange” and sets a time frame for such a challenge, which is resolved by the panel chair.  The court, Pacold, J., holds that invocation of that rule establishes the “clear and manifest” intent which Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019), requires in order to delegate the gateway issue of arbitrability from court to arbitral tribunal.  Accordingly, Judge Pacol grants the motion to arbitrate, staying the case pending resolution of the arbitration and directing that the matter be reopened if the arbitration panel decides it does not have jurisdiction over the dispute.  The case, thus, is in line with precedents holding that delegation occurs through the application of AAA and other tribunal rules allowing the arbitrator to decide his or her own jurisdiction.

Sign-wrap agreement to arbitrate – Cases in which the parties dispute whether a website adequately discloses that a user thereof is agreeing to arbitration have become routine, and I usually do not include them in Highlights.  However, In re: Juul Labs, Inc. Antitrust Litigation, 2021 U.S. Dist. LEXIS 157126 (N.D. Cal. August 19, 2021), is an exception. In the process of distinguishing his own ruling in Colgate v. JUUL Labs, Inc., 402 F. Supp. 3d 728 (N.D. Cal. 2019), Judge Orrick provides a tutorial on the layout of a webpage which he believes makes terms and conditions sufficiently noticeable so as to create a binding agreement.  In discussing changes Juul made to its site post-Colgate, the court emphasizes “the addition of the affirmative assent click box, drawing attention to the text immediately following [the Signup button, which] contains the somewhat highlighted hyperlinked Terms and Conditions link. . . .”  Unlike the cases on which Plaintiffs relied, the court opines, the Juul site did not have “the same amount of clutter.”

The opinion contains an exhaustive list of cases upholding and rejecting clickwrap agreements, with extensive parentheticals as to their holdings.  Anyone wanting to create an enforceable web-accessed arbitration clause needs to study this case and those cited therein.

Quick Hits –

Dismissal for failure to arbitrate

On March 20, 2020, the Court granted a motion by American Wind to compel arbitration of its dispute with R & C Oilfield Services.  However, R & C refused to initiate arbitration proceedings and represented that it “does not plan to do so.”  In R & C Oilfield Services, LLC v. American Wind Transport Group, LLC., 2021 U.S. Dist. LEXIS 157140 (W.D. Pa. August 19, 2021), the Court, Stickman, J., grants defendant’s motion to dismiss.  Reviewing the factors which Poulis v. State Farm Fire and Casualty Co., 747 F. 2^nd 863 (3d Cir. 1984) establishes for determining dismissal, he holds that all six “weigh[] strongly in favor of dismissal.”  Dismissal is “an adequate and effective sanction to address a party’s absolute refusal to proceed.”

Timing of a motion to confirm under the FAA

While a losing party has three months in which to seek to vacate an arbitration award, Chief Magistrate Judge O’Sullivan holds that the winner need not wait that long in order to move to confirm. In Darden v. Fly Low, Inc., 2021 U.S. Dist. LEXIS 157351 (S.D. Fla. August 19, 2021), he grants a motion to confirm which Plaintiff filed one day after the issuance of the arbitrator’s award. Since the defendants, in their opposition to the motion to confirm, did not provide any grounds to vacate, modify or correct the award, the court holds that Section 9 of the FAA mandates confirmation. Section 12, which establishes the three-month time frame for vacatur, is a “statute of limitations,” not a hiatus for confirmation. One wonders if there is some background to the case that does not appear in the opinion, since the court chose not to exercise its discretion to give the defendant more time to consider grounds for vacatur, allowed defendant only two days for briefing, and issued its opinion only eight days after the completion thereof.

Here in New Haven, we avoided Hurricane Henri, as it pushed to the east.  I hope those of you in the Mid-Atlantic region and Rhode Island did not fare too badly.  Be safe- and I’ll see you Wednesday.

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

[1] Is the Court’s argument that data is irrelevant to consideration of the Uber drivers’ status as interstate transportation workers logical?  How can one determine the “central feature” of the drivers’ job without determining whether they drive across state lines with frequency – an issue that is driven by data?  If the “central feature” is just driving itself, then are even Greyhound bus drivers not “interstate” transportation workers?