In this time of concern regarding the COVID-19 pandemic, there are other challenges still confronting companies. One involves the standard for enforcing arbitration agreements involving transportation workers. Or, stated differently, when drivers may be exempt from the Federal Arbitration Act (FAA). We have previously covered the courts’ struggles to deal with the fallout from New Prime v. Oliveira, 139 S. Ct. 232 (Jan. 12, 2019), on the transportation industry and gig drivers. See our blog posts of Jan. 17, 2019, Mar. 12, 2019, Apr. 29, 2019 and Sept. 13, 2019.

Now, U.S. District Court Judge Indira Talwani has waded into the legal thicket to determine those workers who are covered by the FAA Section 1 exemption and if the arbitration agreement with class waivers could be enforced under the Massachusetts Uniform Arbitration Act. See Cunningham v. Lyft, Inc., Case No 1:19-cv-11974, Order of Mar. 27, 2020.

In Cunningham District Judge Talwani considered the application of the FAA’s Section 1 exemption in the context of a class action alleging misclassification as independent contractors, brought by ride sharing drivers who transport paying passengers rather than goods. After analyzing Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), and Singh v. Uber Techs. Inc., 939 F. 3d 210 (3d Cir. 2019), (among others) the court concluded that there was “no basis in the statute or precedent” to restrict the Section 1 exclusion only to workers who transport goods rather than passengers. (Slip Op. at 12).

The court then moved on to consider whether the plaintiffs were actually engaged in interstate commerce. After weighing the factors in Lenz v. Yellow Transp., Inc., 431 F.3d 3481, 351-52 (8th Cir. 2005), and the fact that some of the passengers were in interstate travel, the court found that the plaintiffs were “transportation workers” excluded from the FAA.

Finally, because the FAA did not apply, the court looked to the potential application of Massachusetts law. An earlier decision, Feeney v. Dell, Inc., 454 Mass. 192, 199-200 (2009), precluded enforcing class action waivers because they contravened Massachusetts public policy. Without the preemptive force of the FAA, that public policy would prevent class action waivers in arbitration. Slip Op. at 17.

So, the District Court concluded that the plaintiffs’ arbitration agreements were not covered by the FAA and not enforceable under applicable law. But that finding does not end the inquiry, as the decision has now been appealed to the First Circuit. Indeed, (as indicated in earlier blogs) it will join other cases involving the scope and application of the FAA Section 1 exemption now before the Seventh and Ninth Circuits. See Wallace v. GrubHub Holdings, Inc., Case Nos. 19-1564 and 19-2156 (7th Cir. Docketed Mar. 28, 2019), and Rittmann v., Inc., No. 19-35381 (9th Cir. Docketed May 3, 2019). Hence, the quest for the proper interpretation of Section 1 will continue for some time – perhaps all the way to the Supreme Court.

Bottom Line:

This District Court found that transportation workers excluded by the FAA Section 1, includes those who transport passengers in interstate travel. Yet, this is anything but a final answer.