January 29, 2020 Dispute Resolution Magazine

Case Law Update

Lindsey Anderson and Andrew Jordan

Gig Economy Delivery Driver Not Exempt from Arbitration

In Austin v. DoorDash, Inc., 1:17-CV-12498-IT, 2019 WL 4804781 (D. Mass. Sept. 30, 2019), the US District Court of Massachusetts considered whether a food delivery driver could be classified as exempt under the Federal Arbitration Act (FAA) as an interstate transportation worker. The plaintiff, Darnell Austin, argued that after deducting the expenses he incurred on the job, his wages for DoorDash, an app-based food delivery service, fell below Massachusetts’ minimum wage of $11.00 an hour and therefore violated the state’s wage act. In response, DoorDash moved to dismiss and compel arbitration based on the mutual arbitration provision that all parties had consented to. The district court allowed the motion, rejecting the assertion that Austin’s job constituted that of a transportation worker, which would have rendered him exempt from arbitration under the FAA.

In determining the validity of the agreement and Austin’s exemption status, the court looked to factors listed for consideration in Lenz v. Yellow Transp., Inc., 431 F.3d 348 (8th Cir. 2005). In particular, the court’s decision turned on whether the goods delivered by the plaintiff were involved in interstate commerce. The plaintiff argued that the meals he delivered were in the flow of interstate commerce because “the processing and transformation of the raw goods in the state in which they are ultimately delivered do not end their interstate journey.” The court noted that a worker does not need to actually drive across state lines to be engaged in interstate commerce but found that the plaintiff had established no commercial connection between interstate food distributors and the customers receiving his deliveries. The court noted the fact-intensive nature of the inquiry and indicated that the outcome of the case might have been different if Austin had crossed state lines in delivering goods or had delivered for a store that buys goods in interstate commerce but ultimately rejected Austin’s claim of exemption as a transportation worker under the FAA.

Arbitration Clause in Terminated Contract Not Sufficient to Compel Arbitration

In Hearn v. Comcast Cable Commun., LLC, 1:19-CV-1198-TWT, 2019 WL 5305460 (N.D. Ga. Oct. 21, 2019), a US District Court considered the validity of an arbitration clause embedded in a service agreement that had been terminated two years before. The case involves a class action claim brought by Michael Hearn alleging that Comcast violated the Fair Credit Reporting Act by performing a “hard pull” on his credit without consent. Comcast filed a motion to dismiss and compel arbitration based on a 2016 service agreement containing an arbitration clause that Hearn signed when he was a Comcast customer.

Hearn terminated his contract with Comcast in 2017, which, he argued, extinguished any obligations in the service agreement’s arbitration clause. The court rejected this argument, noting that the agreement contained an unambiguous survival clause. The court treated with more sympathy, however, Hearn’s argument that the clause’s scope was impermissibly broad. The arbitration provision claimed to encompass “any claim or controversy related to Comcast.” The court found that this amounted to “no limit at all,” noting that if this language were granted its broadest construction, an individual who had been “run over by a Comcast truck” would be required to submit to arbitration. The court instead looked to other precedent within the district and the language of the FAA to consider whether the dispute “related to” the agreement and “was an immediate foreseeable result of the performance of contractual duties.” The court then rejected Comcast’s argument that “but for” the parties’ contractual relationship, the Fair Credit Reporting Act violation could not have occurred and that this “but for” relationship meant that the claim was “related” to the 2016 service agreement. Instead, considering Georgia state law regarding contract formation, the court held that no reasonable customer could have understood they were signing away their right to pursue claims against Comcast in perpetuity. As a result, the court denied Comcast’s motion to compel arbitration.

Ninth Circuit Denies Motion to Compel Arbitration on Claims Seeking a Public Injunction

In Blair v. Rent-A-Ctr., Inc., 928 F.3d 819 (9th Cir. 2019), the Ninth Circuit considered the enforceability of an arbitration agreement in light of a California law state law prohibiting contractual waivers of public injunctive relief. California’s McGill rule prohibits any agreement or law that waives the right to seek public injunction, and the Ninth Circuit considered the FAA’s preemptive effect on the McGill rule in this context. In the underlying claim, the plaintiffs brought a class action alleging that Rent-A-Center structured its rent-to-own pricing in violation of California state law. The plaintiffs sought both damages under California usury laws and an injunction against future violations by Rent-A-Center. The US District Court for the Northern District of California granted Rent-a-Center’s motion to compel arbitration on the usury claims but denied the motion to compel arbitration on the plaintiff’s other claims. Citing the McGill rule, the district court held that the plaintiffs could not be compelled to arbitrate claims seeking a public injunction. Rent-A-Center appealed, arguing that the FAA preempts this application of state law.

The Ninth Circuit upheld the district court’s rejection of Rent-A-Center’s preemption argument and analogized the prohibition against waivers of public injunctions to prohibitions against interference with private attorney general actions, which the Ninth Circuit had previously held not to be preempted. Noting the California law’s applicability to all contracts, not just to arbitration contracts, the Ninth Circuit held them to fall within the scope of the savings clause of Section 2 of the FAA. The court then rejected the argument that such a ruling would frustrate the FAA’s fundamental objectives and upheld the district court’s denial of the motion to compel the public injunction aspects of the class claim.

Second Circuit “Looks Through” Dispute and Confirms Award

In Landau v. Eisenberg, 922 F.3d 495 (2019), the Second Circuit “looked through” a motion to confirm an arbitral award, finding subject matter jurisdiction over the underlying dispute. Two groups from the Bobov Hasidic Jewish community in Brooklyn convened a rabbinical tribunal to resolve a dispute over who owns the trademark for the name “Bobov,” as that term was “used in commerce to distinguish the goods and services of the Bobov community.” The rabbinical panel issued its ruling, and of the 613 potential parties, Baruch Eisenberg was the only one to file an opposition. The district court confirmed the arbitration award and Eisenberg appealed, arguing that the court lacked subject matter jurisdiction to do so.

The court noted that Vaden v. Discover Bank, 556 U.S. 49, 66 129 S. Ct. 1262, 173 L. Ed. 2d 206 (2009) held that in a motion to compel arbitration, subject matter would be determined by “looking through” to the subject matter of the underlying dispute, not at the FAA as a statutory basis for subject matter jurisdiction. The Second Circuit considered a motion to confirm as analogous to a motion to confirm an award and examined the underlying dispute in this case. As trademark disputes are clearly federal questions, the Second Circuit affirmed the district court’s finding that it had subject matter jurisdiction. The court then affirmed the limited nature of review of arbitration awards, and after assuring itself that the award was not the product of fraud or dishonesty, confirmed the award.

Employees Have No Right of Access to Mandatory Mediation Proceedings under Agricultural Labor Relations Act

In Gerawan Farming, Inc. v. Agricultural Labor Relations Board, 253 Cal. Rptr. 3d 136 (Ct. App. 2019), employees of a farming company challenged the constitutionality of barring employees from mandatory mediation proceedings concerning a collective bargaining agreement (CBA). The employees argued that the First Amendment right of public right of access to hearings and proceedings applied to mediation sessions held pursuant to California’s Agricultural Labor Relations Act (ALRA). Mediations under the ALRA include some “on the record” sessions, but mediators are empowered to “go off the record” at any time. Furthermore, under the ALRA statutory system, mediators serve an arbitral function in the event parties are unable to reach an agreement, holding hearings, receiving evidence, and writing a report of findings and conclusions. That report is then normally given effect through a system referred to as “mandatory mediation and conciliation,” or MMC. A Gerawan employee sought access to an “on the record” session during the MMC process, but the mediator refused.

The employees argued that the First Amendment, along with related provisions in the California Constitution, guarantees the public right of access to trials and pretrial proceedings. The California Court of Appeals noted that these ALRA sessions have historically treated MMC meetings as though they were private labor negotiations sessions, although it recognized that unlike typical labor negotiations, MMC sessions are both mandatory and may result in an imposed decision. The court considered the “qualified right of access” to “attend certain governmental proceedings.” Consistent with US Supreme Court precedent in Press-Enterprise II, the court considered the historical practice and whether public access plays “a significant positive role in the functioning of the particular process in question.” Here, the court found that there was no historical right of access to MMC sessions. The court rejected the employees’ argument that MMC sessions should be treated like court sessions and that therefore the burden is on those who sought to exclude them from the process. It then analyzed the potential effects of having public access to MMC sessions, finding ultimately that the presence of the general public or employees at the proceedings would risk “weakening the independence of the employees’ union representative.” As a result, the court rejected the employees’ claim to a constitutional right of access to MMC proceedings.

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Lindsey Anderson and Andrew Jordan

Lindsey Anderson and Andrew Jordan are law students at the University of Oregon School of Law and serve as law student editors for Dispute Resolution Magazine.