Ninth Circuit Holds Last-Leg Drivers Exempt from FAA

On July 21, 2023, the Ninth Circuit Court of Appeals decided Carmona v. Domino’s Pizza, LLC, for the second time affirming a district court ruling finding in-state delivery drivers who delivered out-of-state products from a California warehouse to franchise locations within California were exempt from the Federal Arbitration Act (FAA).

Previously, the Ninth Circuit affirmed the district court ruling denying Domino’s motion to compel arbitration. The district court’s ruling rested solely on the Ninth Circuit’s 2020 decision in Rittmann v. Amazon.com, Inc. In Rittmann, the Ninth Circuit found delivery drivers who transported goods from warehouses to in-state customers were transportation workers engaged in interstate commerce and therefore not subject to the FAA. The Ninth Circuit focused on a key factor in Rittmann: When the delivery drivers picked up the goods from the warehouse, the goods were still in the flow of interstate commerce because they had not reached their final destination.

After granting certiorari in Carmona, the Supreme Court decided Southwest Airlines Co. v. Saxon, which considered whether airplane cargo loaders and ramp supervisors who frequently loaded and unloaded airplane cargo belonged to a “class of workers” engaged in interstate commerce exempt from the FAA’s coverage. In finding these workers exempt, the Court focused on the actual work carried out by the workers, holding the critical question was whether the workers were actively “engaged in transportation” of goods in interstate commerce and played a “direct and necessary” role in the free flow of goods across borders. The Court rejected Southwest’s argument that the cargo workers themselves must cross state lines to be engaged in interstate commerce.

In light of Saxon, the Supreme Court then vacated and remanded Carmona to address whether drivers making solely in-state deliveries of goods ordered by in-state customers from an in-state warehouse were a “class of workers engaged in foreign or interstate commerce” subject to the transportation worker exemption.

On remand, the Ninth Circuit again affirmed the district court’s order, finding the drivers delivering ingredients from Domino’s warehouses to California franchisees for the “last leg to their final destination” were engaged in interstate commerce under section 1 of the FAA.

While Domino’s attempted to distinguish Rittmann on the grounds that, unlike Amazon customers, its franchisees do not order goods until after they have arrived at the warehouse, the Ninth Circuit found the argument unpersuasive, stressing the issue is not how the purchase order is placed, but whether the goods remain in the stream of commerce. The Ninth Circuit concluded the drivers were still “engaged in a single, unbroken stream of commerce” and the “pause” in the journey of goods to the warehouse did not remove them from the stream of interstate commerce where the goods were inevitably destined from the outset. Because Saxon was neither inconsistent nor irreconcilable with Rittmann, the Court affirmed the order denying arbitration.