A Ninth Circuit panel denied a mandamus petition attempting to overturn a district court order requiring arbitration of a putative class action brought by an Uber driver. The action claimed that Uber failed to protect drivers’ and riders’ personal information and botched a data security breach by online hackers.

The district court ultimately concluded that William Grice, an Alabama based Uber driver who never crosses state lines, did not qualify for the Federal Arbitration Act’s (FAA) § 1 exemption. As a reminder, 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). This case concerned the scope of that exception as applied to a ride-sharing service.

The Ninth Circuit’s Analysis

The Ninth Circuit’s opinion evaluated whether the district court’s decision requiring arbitration was “clearly erroneous as a matter of law,” citing Bauman v. U.S. Dist. Court, 557 F. 2d 650, 654-55 (9th Cir. 1977). It was not. Grice v. Uber Technologies, Inc., No. 20-70780 (9th Cir. Sept. 4, 2020).

The appellate opinion began with an analysis of existing case law involving the residual clause. While neither the nature of the item transported in commerce nor the crossing of state lines was determinative, according to the panel, it was instead the nature of the business involved. But there were limits. “[F]urniture salespeople or food delivery drivers generally are not classified as ‘transportation workers’ within the meaning of § 1 even when they occasionally travel interstate to deliver their products to out-of-state customers.”, citing Wallace v. Grubhub Holdings, Inc., 2020 WL 4463062 at *2 (7th Cir. 2020). We covered the Wallace decision in our blog article of Aug. 7, 2020.

Armed with existing decisions, the panel turned to the nature of the ride-share industry. Considering Rogers v. Lyft, Inc., No. 20-CV-01938-VC, 2020 WL 1684151 (N.D. Cal. Apr. 7, 2020), the opinion noted, “Even though ‘some drivers . . . regularly transport passengers across state lines, the company is in the general business of giving people rides, not the particular business of offering interstate transportation of passengers.”” So, Lyft was found to be “in essence, a technologically advanced taxicab company . . . .” Id.

Responding to Grice’s arguments, the panel noted that while Uber had agreements with the Huntsville and Birmingham airports to allow Uber drivers like Grice to collect arriving passengers, he did not argue that passengers contracted with the airlines to retain him or that Grice provided any between-airport transport to assist passengers’ interstate travel. Instead, Grice argued that the residual clause applied to those who operated in the flow of interstate commerce. But, agreeing with the Wallace case analysis, the panel stated:

“this ‘interpretation would sweep in numerous categories of workers whose occupations have nothing to do with interstate transport – for example, dry cleaners who deliver pressed shirts manufactured in Taiwan and ice cream truck drivers selling treats made with milk from an out-of-state dairy.”” 2020 WL 4463062, at *3.

The residual exemption is about “what the worker does,” not only “where the goods [or people] have been.” Id. Recoiling from such a broad-based interpretation, the panel recognized “[t]oday almost every object we buy has some component that comes from out-of-state. Grice’s proposed reading of § 1 would allow the exception to swallow the rule . . . .”

Because no controlling precedent foreclosed the district court’s ruling, the Ninth Circuit panel was not convinced that the lower court erred. Yet, the battle over the status of rideshare drivers continues. The Capriole v. Uber Technologies Inc., Case No. 20-16030, is currently pending before the Ninth Circuit and raises FAA exemption issues.

Bottom Line:

The Ninth Circuit rejected a construction of the FAA exemption for a ride-share driver that would “swallow the rule”.