This article first appeared on the Securities Arbitration Alert (SAA) Blog, here.
As we’ve suggested every time we report on this issue, the Supreme Court is being asked to review whether FAA section 1 exempts from coverage only workers actually moving goods or people in interstate commerce.
We covered in SAA 2020-32 (Aug. 26) Rittmann v. Amazon.com, Inc., No. 19-35381 (9th Cir. Aug. 19, 2020), where a divided Ninth Circuit held that Federal Arbitration Act (“FAA”) section 1 exempted from coverage Amazon “last mile” drivers, who delivered goods that had moved in interstate commerce, even though the drivers did not cross state lines. The majority sided with those Circuits finding it sufficient that the goods have been part of the “stream” of interstate commerce. Dissenting Judge Daniel J. Bress drew a distinction between the definition of interstate commerce in FAA sections 1 and 2, noting that the former is very narrow. We later reported in SAA 2020-34 (Sep. 9) that Amazon on September 2 filed a Petition for Panel Rehearing and Petition for Rehearing En Banc. The three arguments (ed: set forth verbatim) were: 1) The Majority’s stream-of-commerce standard conflicts with decisions of other circuit courts; 2) The Majority’s stream-of-commerce standard conflicts with the FAA’s language and purposes and Supreme Court precedent; and 3) The Majority’s invalidation of the parties’ arbitration agreement also warrants review. As reported in SAA 2020-37 (Oct. 7, 2020), the Court on September 25 denied both Petitions in a one-page Order.
A Primer on the Section 1 Carveout
To review, it is hornbook law that the FAA enforces predispute arbitration agreements involving a hint of interstate commerce. Section 1, however, has a carveout providing: “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” SCOTUS has addressed the section 1 carveout more than once. The Court held in Circuit City Stores v. Adams, 532 U.S. 105 (2001), that the exemption covers only workers actually engaged in interstate commerce. More recently in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), SCOTUS held that the carveout was not limited to employees, and in fact covered independent contractors.
Circuit Courts are Split
There is a clear Circuit Court split on whether the section 1 exemption embraces only workers actually moving goods or people in interstate commerce (Fifth, Seventh, and Eleventh Circuits) or is to be construed more broadly to cover those who are part of the “flow” or “stream” of interstate commerce (First and Ninth Circuits). See, for example, Waithaka v. Amazon.com, Inc., No. 19-1848 (1st Cir. Jul. 17, 2020), covered in SAA 2020-27 (Jul. 22): “… the exemption encompasses the contracts of transportation workers who transport goods or people within the flow of interstate commerce, not simply those who physically cross state lines in the course of their work.” Compare to then-Judge Coney Barrett’s Opinion in Wallace v. Grubhub Holdings, Inc., Nos. 19-1564 & 19-2156 (7th Cir. Aug. 4, 2020), covered in SAA 2020-31 (Aug. 19): “But to fall within the exemption, the workers must be connected not simply to the goods, but to the act of moving those goods across state or national borders.”
Certiorari Petition Filed
We’ve suggested several times that SCOTUS sooner or later would be asked to review the clear split on this issue, and that moment has arrived. Amazon on November 9 filed a Petition for Certiorari. The issue presented: “whether the Federal Arbitration Act’s exemption for classes of workers engaged in foreign or interstate commerce prevents the Act’s application to local transportation workers who, as a class, are not engaged to transport goods or passengers across state or national boundaries.”
(ed: *The case is Amazon.com, Inc. v. Rittmann, No. 20-622. **We’re betting SCOTUS will take on this significant split in the Circuits. In fact, there’s a split within a Circuit. As reported in #37, a different Ninth Circuit Panel in Grice v. United States District Court for the Central District of California, No. 20-70780 (9th Cir. Sep. 4, 2020), sided with the more stringent “cross state lines” standard, in a case involving Uber drivers who regularly picked up arriving passengers at Huntsville International Airport and Birmingham-Shuttlesworth International Airport. Although the passengers clearly had crossed state lines, the Uber drivers did not.)