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.)
George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA dispute resolution forum in particular.
He is former Executive Vice President - Dispute Resolution of the Financial Industry Regulatory Authority (“FINRA”), a position he held through January 2013. He held the same title at NASD, which consolidated with NYSE Member Regulation to form FINRA in 2007. In this capacity, he was in overall charge of FINRA's dispute resolution program, carried out by the company's four regional offices and 72 hearing locations in the United States and abroad, 200 employees, and an annual budget of $50 million. He also served as Secretary of the Securities Industry Conference on Arbitration. He has been referred to by the U.S. Court of Appeals—4th Circuit as a “leading arbitration expert.” He is a member of the American Arbitration Association's National Roster of Neutrals.
Mr. Friedman is an Adjunct Professor of Law at Fordham Law School, where he has taught a course on alternative dispute resolution since 1996. He is Chairman of the Board of Directors of Arbitration Resolution Services, Inc. of Coral Springs, Florida. Arbitration Resolution Services is an innovative online arbitration services company facilitating an affordable alternative to costly courtroom litigation and in-person arbitration for resolving Business-to-Business, Business-to-Individual, and Vehicle and Property Damage disputes. ARS is unique in that its entire process can be completed online through the company website.
In his extensive dispute resolution career, he previously held a variety of positions of responsibility at the American Arbitration Association, most recently as Senior Vice President from 1994 to 1998. He joined NASD in 1998 as Senior Vice President of NASD's Dispute Resolution Division, and was named Executive Vice President in 2002.
Mr. Friedman received a B.A. in Political Science from Queens College, and a Juris Doctor from Rutgers Law School - Newark, where he was an editor of the Law Review. He is admitted to the New York and New Jersey Bars and the United States Supreme Court, and is a Certified Regulatory and Compliance Professional. Mr. Friedman is a member of the Securities Experts Roundtable, and of several bar associations. He is past chair of the Committee on Alternative Dispute Resolution of the New York County Lawyers Association. He is a member of the Banking Advisory Committee of Bergen (NJ) Community College.
Mr. Friedman has lectured extensively on the subject of alternative dispute resolution, and has the distinction of being one of the architects of the American Arbitration Association’s Due Process Fairness Protocols for both employment arbitration and health care dispute resolution, and assisted in creating the Consumer Due Process Protocol. He has published often, with articles appearing in the Securities Arbitration Commentator, the ABA's Dispute Resolution Magazine, the New York Law Journal, the Rutgers Law Review, and the National Law Journal. He has blogs at Arbitration Resolution Services, Inc., the Securities Arbitration Commentator, and the World Future Society, among others.