Tuesday's Supreme Court Federal Arbitration Act Exemption Arguments

Posted By: Lee Williams CPR Speaks,

The Tuesday, Feb. 20 U.S. Supreme Court arguments in Bissonnette v. LePage Bakeries Park St. LLC, No. 23-51, addressed whether commercial truck drivers who are not employed by a transportation company qualify--under the so-called residual clause of Federal Arbitration Act (FAA) Section 1--as a “class of workers engaged in interstate commerce” along the same lines as “seamen” and “railroad employees.” 

Sec. 1 explicitly exempts from the FAA “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Court questioning this morning focused on the FAA's history.  The Court showed skepticism that a broad view applying the FAA beyond transportation workers was Congress’s intent when it passed the statute nearly a century ago.  But during defense/respondent arguments, the idea of expanding the exemption beyond jobs, and adding an industry classification to the statute, also took a hit under Court questioning.

There is a circuit split on the point. The Second U.S. Circuit Court of Appeals in the case concluded that the plaintiffs were not exempt because they were in the bakery industry, not the transportation industry. Because the company’s revenue was based on sales of baked goods, the Second Circuit concluded that the FAA exemption did not apply as the petitioner’s employer was not involved in the transportation industry. For more background on the case, see Jonathan Baccay, “The Supreme Court Will Address a Circuit Split on a Federal Arbitration Act Exemption” CPR Speaks (Sep. 29) (available here).

In a key previous recent case on the FAA Sec. 1 exemption, Sw. Airlines Co. v. Saxon, 596 U.S. 450 (2022)—whose application was a hot topic in today’s arguments--the Supreme Court did not state that the exemption had an industry requirement.

Should the Court rule in Petitioners’  favor, the FAA will exempt many workers who contract or are employed by a business to market, sell, and distribute goods. On the contrary, a ruling for Respondents will limit Section 1’s reach to workers specifically within the transportation industry.

Overall, the justices appeared hesitant about adding a transportation industry requirement on top of the focus on the job itself.  To get there, the arbitration-friendly Court  explored with the advocates whether there was substantiation for such a move in legislative history--making for a lot of discussion about what Congress was targeting when it passed the law in 1925.  But even justices long inclined to expand arbitration use under the FAA like Chief Justice John R. Roberts Jr. expressed fears about over-complicating the Sec. 1 analysis by adding an industry requirement. 

The audio from the oral argument can be heard on the Supreme Court's website here. The transcript is linked on the same page (direct, here). 

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Jennifer Dale Bennett, principal in Gupta/Wessler's San Francisco office, represented petitioners Neil Bissonnette and Tyler Wojnarowski. They are commercial truck drivers tasked with transporting baked goods and snack foods from a centralized warehouse to retail stores across Connecticut.

Attorney Bennett’s opening statement on behalf of the petitioner-workers relied on the text of the FAA, claiming that no industry requirement was stated and that transportation workers, like commercial truck drivers, should be exempt from the statute. She dismissed Flowers’ position, stating that Flower’s only textual argument used the ejusdem generis canon statutory and constitutional construction principle--where general words or phrases follow specific words or phrases, the general words are construed as limited--but that argument failed because “seamen” was never defined based on a worker’s employer selling transportation services. Bennett described Flowers’ argument as “atextual and unworkable.” 

Justice Clarence Thomas opened the questioning, inquiring if whether the Court rules in the petitioners’ favor, it would affect a separate question on whether drivers are engaged in interstate commerce. The Constitutional Commerce Clause gives Congress broad power to regulate interstate commerce and restricts states from impairing interstate commerce, so if the workers were determined to be intrastate, the FAA would not apply, as it is a federal law. Thomas has frequently dissented in the Court's arbitration cases where state court actions at issue, repeatedly declaring that the FAA doesn't apply in state court cases. 

Bennett denied the possibility of the Court’s holding affecting the interstate commerce question, which arises under FAA Sec. 1’s plain wording, because it was assumed in this case’s Question Presented to the Court that the petitioners were engaged in interstate commerce.

Bennett explained that the Court in Bissonnette is deciding, “assuming that [the workers are engaged in interstate commerce], is there an additional requirement that the individual plaintiffs be employed by a company that’s in the transportation industry?”

When petitioners’ attorney Bennett said that Saxon provided the guidelines on the amount of work an employee must perform to qualify as a transportation worker—noting that the airport worker spent three of her five-day workweek loading cargo--Justice Brett Kavanaugh challenged Bennett.  Kavanaugh said that at the Saxon oral argument, it was stated repeatedly that if a company had been shipping its own goods at the time the FAA was written, they wouldn’t have qualified as railway workers under the exemption.

Kavanaugh said that it wasn’t just “Amazon department stores” workers that would be exempt.  “There was a distinction that was made between railroads that shipped things for the public,” explained Kavanaugh, “. . . and, say, a coal company's internal railroads.”

Referencing the fact that seamen and the railroads had “had preexisting dispute resolution statutes at the time and were commonly understood categories,” Kavanaugh said it was reflected in Saxon as “the common-sense understanding of counsel.”

“So,” continued Kavanaugh, “it seems odd that you would read the Saxon opinion to have blown through those limits that were being stressed by counsel for Saxon about the implications of the position.”

Bennett replied that Saxon didn’t cover the Bissonnette issue, and focused on the employment position, not the industry. Bennett criticized the respondents’ view of the FAA's contemporaneous meaning at the time of its passage, noting, “We look at what these words meant in 1925 and we also are looking for a commonality between seamen and railroad employees, and if there isn't that commonality, we're not going to add an additional requirement”--referring to the respondents’ proposal that the statute is linked to the transportation industry, rather than the jobs.

Kavanaugh said that viewing Saxon as a narrow holding involving transportation workers was “reassuring,” conceding that the limit may not be correct, but he quickly added that “to call it like that makes no sense is a little much for me at least."

“The gravamen of that answer,” responded Bennett, “is to know whether the Federal Arbitration Act exempts a particular class of workers--what we'd have to do is go back and look in 1925 and see what these words meant.”

She said that wasn’t the task in Saxon, but now, the issue has been researched.  She noted, for example, that “the word ‘seamen’ did not mean somebody who was employed by a company that sold transportation.” She developed the idea at length to emphasize that the statutory comparison is over the workers themselves, not the nature of their industries.

Bennett concluded her argument by stating that “Even if we were to accept every single one of Flowers' arguments on seamen, they still haven't shown that this employer-based industry requirement has anything to do with the words of the statute.”

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Traci L. Lovitt, a partner who heads Jones Day's Issues & Appeals Practice in its New York office, represented respondents Flowers Foods, Inc. and its subsidiaries LePage Bakeries Park St. LLC, and C.K. Sales Co.

Lovitt asserted at the outset of her argument that no other statute in 1925 used “railroad employees” and “seamen” together, so the meaning is different than other statutes and the words must be read in context of their shared commonality: transportation workers.

When she asserted that the commonality derived from the FAA case Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (available here), which  restricted the FAA Sec. 1 exemption from arbitration to transportation workers. Chief Justice Roberts responded that commonality is complicated before questioning where the Second Circuit developed its “price and revenue” transportation industry standard in finding that the Bissonnette employees were in the bakery industry, not transportation.

Lovitt said that the Second Circuit looked to the characteristics of the transportation industry, but Roberts expressed his belief that the lower court created that analysis, and that it would impose a heavy burden. Roberts predicts that the analysis will cause conflict in lower courts analyzing the FAA Sec. 1 exemption. He inquired whether Amazon would be in the transportation based on the Second Circuit’s standards. 

Lovitt responded that the test is typically whether a business transports its own goods, or a third party’s goods? If the latter, then the business is in the transportation industry. Because Amazon primarily transports third-party goods, respondents' attorney Lovitt considers them to be in the transportation industry.

Chief Justice Roberts replied that because Amazon only sometimes uses FedEx to ship items, a worker performing the same task may sometimes be considered in the transportation industry.  

Respondents' attorney Lovitt disagreed because FedEx is still within the transportation industry. She referred to the exemption as a “wholesale policy judgment by Congress that transportation industry workers are different.” She noted the FAA's 1925 context, stating that only two classes of workers were exempt because there were other statutes governing transportation workers and Congress recognized that despite the variety of job actions at that time, only transportation strikes “brought the country to a halt.” Lovitt conceded that today’s economy differs from a century ago but she encouraged the Court to respect the 1925 Congress’s intent. 

Justice Ketanji Brown Jackson agreed that transportation workers are unique and differentiated in the FAA, but she stated that she did not know why that would inspire a transportation industry requirement rather than having the FAA exempt all transportation workers. “I don't understand where the industry limitation is coming from,” said Justice Jackson. “That's not in the statute.”

In response, Lovitt discussed the evolution of the definition of seamen to include private flotillas that supported industries like lumber. Justice Sonia Sotomayor challenged the definition and asked whether Lovitt was extending her argument to the so-called last-mile drivers—the delivery workers who deliver interstate commerce goods but don’t operate across state lines—whom Lovitt earlier said would allow Amazon to avoid losing employment arbitration requirements to the FAA Sec. 1 exclusion.

Lovitt responded that exempting last-mile workers from the FAA Sec. 1 exclusion didn’t satisfy the Bissonnette issue, because until recently, the exclusion had been for transportation industry workers.

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In her petitioner’s rebuttal, Gupta Wessler’s Jennifer Bennett attacked the employers’ argument on statutory and policy bases. First, she said,

I didn't hear a single argument that any word in this text means somebody works for an employer that sells transportation. Again, even if we accept Flowers' understanding of what the word ‘seamen’ meant in 1925 and put aside fishermen and any of the other people they are worried about, even if we accept it's just people who are on vessels transporting goods for commerce, that has nothing to do with who employed those people.

On policy, Bennett, who spoke uninterrupted in her rebuttal, said that “if Congress was really trying to get at people who could disrupt commerce, . . . the way strikes worked in 1925 is they weren't employer-based. Everybody who did the same job in the same location struck together. And that's why they were so disruptive. And so, if Congress was trying to get at that, they would not have included an employer-based limitation. I think that's why we don't see one in the statute.”

Justice Samuel A. Alito Jr. asked Bennett to respond in her rebuttal on the industry requirement in some circuits, with the assumption that it was part of the background of the case.  Bennett suggested that the use of an industry requirement was overblown. She said the employer-based tests really came down to job functions.  She said the fear that the decision would pose a rush of cases didn’t address economic changes:

Flowers makes a big deal of railroad employees. There are almost no railroad employees today. Almost all of those jobs are truckers now. And so we're not making the exemption broader. We're just taking the people who would have been railroad employees, and now they're truck drivers. And it so happens that trucking works just like maritime shipping, which is that some companies use companies like FedEx, and some companies do what Flowers did, which is essentially bring a trucking company in-house themselves. There's no reason that those workers should be treated any differently.

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The author, a second-year student at the Howard University School of Law in Washington, D.C., is a full-year CPR intern as part of CPR’s consortium program with Howard Law’s ADR program. Alternatives to the High Cost of Litigation Editor Russ Bleemer assisted with research and writing.