Plaintiff Jacob McGrath filed a nationwide Fair Labor Standards Act (FLSA) action ultimately involving approximately 4,000 food delivery drivers for DoorDash Inc. alleging that the drivers, known as “Dashers,” were misclassified as independent contractors and not paid for all hours they worked. DoorDash responded by filing a motion to compel arbitration for those individuals who joined the litigation via consent forms but had not opted out of arbitration under the provisions of the relevant arbitration agreements.
Judge Edward M. Chen of the Northern District of California granted the motion on November 5th after rejecting a number of potentially impactful arguments made by the plaintiffs. McGrath v. DoorDash, Inc., No. 19-cv-05279 (N.D. Cal. Nov. 5, 2020).
One of the most highly publicized issues was the application of International Institute for Conflict Prevention & Resolution (CPR) Administered Arbitration Rules (CPR Rules) and the CPR Employment-Related Mass-Claims Protocol to the plaintiffs’ claims. DoorDash initially used the American Arbitration Association (AAA) Commercial Arbitration Rules for arbitrations but moved to the CPR in November 2019. The Mass-Claims Protocol applies “[a]ny time greater than 30 individual employment-related claims of a nearly identical nature are, or have been, filed with the CPR against the same Respondent(s) in close proximity one to another.”
Then, under the Protocol, claims are randomly given numbers and generally claims 1-10 will be “the initial Test Cases” sent to arbitration. The Test Cases are to be resolved within 120 days of the initial pre-hearing conferences. The results of the Test Cases will be given to a mediator, who then will seek to resolve the remaining cases. After 90 days of mediation, the parties “may choose to opt out of the arbitration process and proceed to court with the remaining claims.”
Plaintiffs argued that the CPR Rules and Mass-Claims Protocol would deprive them of an impartial forum and “delay the arbitration demand for years.” After an extensive review, the Court saw it differently. Judge Chen found the plaintiffs’ arguments unpersuasive “as a factual matter.” While DoorDash’s counsel did have input into the preparation of the Mass-Claims Protocol, the record in Abernathy v. DoorDash, Inc., No. C-19-7545 (N.D. Cal. 2020) (J. William Alsup, Doc. No. 177), reveals that “CPR did not work with [Defense Counsel] Gibson Dunn exclusively and that [the Firm] did not otherwise control the development of the Protocol.”
Indeed, Judge Chen reached a number of meaningful conclusions supporting the use of the CPR Rules:
- “[T]he Court is hard pressed to see any … catering or favoritism.”
- “There is little concrete evidence to support Plaintiffs’ argument that the Mass-Claims Protocol would result in significant delay in resolution of the Dashers’ claims.”
- “The terms of the . . . Protocol appear fair.” For example, Test cases “are chosen randomly”; the claimants have “a greater role in selecting the arbitrator than the respondent . . .”; the respondent pays for the fees of the mediation process that follows arbitration; and after mediation, “a claimant can choose to opt out of the arbitration process and go back to court – an option not generally available under . . . AAA rules.” So, the Protocol “is not so biased that it negates the agreement to arbitrate.”
Finally, the Court left any issues of unconscionability for the arbitrator under the agreement’s delegation clause.
Judge Chen’s Order strengthens the use of the CPR Rules and Protocol as a means to respond to the mass individual arbitration tactic used by some plaintiffs’ counsel to overcome class or collective action waivers.
FAA Exemption Issues
Not unexpectedly, the issue of the Federal Arbitration Act (FAA) transportation workers exemption was raised by the plaintiff, but to no avail. Section 1 of the FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” – the Section’s “residual clause.” 9 U.S.C. § 1 (emphasis added). Judge Chen found significant decisional authority to support FAA coverage of food delivery drivers, which is an issue for the court to resolve.
Undeterred, the plaintiffs asserted that the Dashers sometimes crossed state lines or could be called upon to do so. Citing Capriole v. Uber Techs., Inc., No. 20-cv-02211-EMC, 2020 U.S. Dist. LEXIS 90687, at *9 (N.D. Cal. May 13, 2020) Judge Chen pointed out that the “relevant inquiry is not whether an individual driver has crossed state lines” but “whether the class of drivers crosses state lines.” Id. at *22 (emphasis added).
In addition to Capriole, the court found support in the Ninth Circuit opinion in Rittmann v. Amazon.com, Inc., 971 F.3d 904, 916 (9th Cir. 2020) which found:
“Cases involving food delivery services like Postmates or DoorDash . . . distinguishable. Those cases recognize local food delivery drivers are not “engaged in the interstate transport of goods” because the prepared meals from local restaurants are not a type of good that are ‘indisputably part of the stream of commerce’.” Citing Wallace v. Grubhub Holdings, Inc., No. 19-1564, 2020 U.S. App. LEXIS 24494 (7th Cir. Aug. 4, 2020).
DoorDash’s Address Issues
Last and least, the fact that DoorDash had two different addresses for sending arbitration opt-out notices was moot. DoorDash already agreed that three opt-outs were valid. And the reason for the two addresses was simple: The company moved offices and its mail was forwarded, so mail sent to both offices was properly received for opt-out purposes.
The 19-page DoorDash decision provides welcome input on at least two significant arbitration-related issues. First, the CPR Rules and Employment-Related Mass-Claim Protocol were found enforceable. Second, the DoorDash food delivery drivers did not fall within the FAA Section 1 exemption. While future appellate review is possible, Judge Chen’s analysis provides helpful guidance to litigants. No one, however, can determine the future impact of California’s Proposition 22, which modified the state’s worker classification test applicable to app-based ride handling and delivery companies.
Food delivery drivers are not exempt from the FAA, and the DoorDash arbitration agreements – including new CPR provisions – are enforceable.