{"id":1392,"date":"2024-04-18T16:45:43","date_gmt":"2024-04-18T20:45:43","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1392"},"modified":"2024-04-18T16:45:43","modified_gmt":"2024-04-18T20:45:43","slug":"ninth-circuit-holds-that-business-entities-cannot-qualify-as-transportation-workers-exempt-from-the-federal-arbitration-act","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/04\/18\/ninth-circuit-holds-that-business-entities-cannot-qualify-as-transportation-workers-exempt-from-the-federal-arbitration-act\/","title":{"rendered":"Ninth Circuit Holds That Business Entities Cannot Qualify As Transportation Workers Exempt From The Federal Arbitration Act"},"content":{"rendered":"

\"\"<\/a>By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr.<\/strong><\/p>\n

Duane Morris Takeaways: <\/strong>\u00a0On April 10, 2024, the Ninth Circuit held<\/a> in Fli-Lo Falcon, LLC v. Amazon.com, Case No. 22-35818 (9th Cir. Apr. 10, 2024), that business entities are not covered by the Federal Arbitration Act\u2019s (\u201cFAA\u201d) transportation worker exemption.\u00a0 The Ninth Circuit stated, \u201c[w]hile a natural person such as an independent contractor may be a transportation worker, a non-natural person such as a business entity that employs or contracts with transportation workers, is not.\u201d\u00a0 Id. at 12.\u00a0 The Ninth Circuit\u2019s opinion is a must read for companies seeking to solidify their arbitration programs and manage their litigation risks.\u00a0 <\/em><\/p>\n

Case Background <\/strong><\/p>\n

The plaintiffs in Fli-Lo Falcon<\/em> were delivery service partners (\u201cDSPs\u201d) that contracted with Amazon to deliver packages.\u00a0 To join the DSP program, an individual needed to first create a business entity.\u00a0 When plaintiffs filed a putative class action against Amazon, it sought to compel arbitration pursuant to an arbitration clause in the DSP agreements.\u00a0 The district court compelled arbitration and dismissed the case, and the Ninth Circuit affirmed.<\/p>\n

The Basis Of The Ninth Circuit\u2019s Decision<\/strong><\/p>\n

A critical issue in the case was whether the FAA\u2019s transportation worker exemption applied to the plaintiffs.\u00a0 The Ninth Circuit held it did not because the transportation worker exemption \u201cdoes not extend to business entities.\u201d\u00a0 Id<\/em>. at 12.\u00a0 The Ninth Circuit reasoned that the language of the exemption compelled this conclusion.\u00a0 Section 1 of the FAA provides that it \u201cshall not apply to contracts of employment of seamen, railroad employees, or any other class of worker engaged in interstate commerce.\u201d\u00a0 9 U.S.C. \u00a7 1.\u00a0 Applying the statutory canon of construction ejusdem generis<\/em>, which instructs that general words be construed to embrace only objects similar in nature to those objects specifically enumerated, the Ninth Circuit reasoned that the word \u201cworkers\u201d in \u00a7 1 could not be construed to include a business entity, given the \u00a7 1\u2019s\u00a0 earlier reference to \u201cseamen\u201d and \u201crailroad employees.\u201d\u00a0 Id<\/em>. at 12.\u00a0 Thus, the Ninth Circuit opined that \u201c[w]hile a natural person such as an independent contractor may be a transportation worker, a non-natural person such as a business entity that employs or contracts with transportation workers, is not.\u201d\u00a0 Id<\/em>.<\/p>\n

Relatedly, the Ninth Circuit also held that \u201c\u2018contracts of employment\u2019 in the transportation worker exemption do not extend to commercial contracts.\u201d\u00a0 Id<\/em>. at 14.\u00a0 In reaching this conclusion, the Ninth Circuit cited the language of the transportation worker exemption, which exempts \u201ccontracts of employment of . . . any other class of workers.\u201d\u00a0 The Ninth Circuit emphasized that, \u201cfor a contract to be<\/em> a contract of employment covered by \u00a7 1, it must have a qualifying worker<\/em> as one of the parties.\u201d\u00a0 Id.<\/em><\/p>\n

In a concurring opinion, Circuit Judge Holly Thomas disagreed that business entities can never be subject to the transportation worker exemption.\u00a0 Plaintiffs\u2019 expressed concern that \u201ccompanies could then contract around the FAA\u2019s exemption by forcing their transportation workers to create sham corporations, then contracting with those corporations rather than employing the workers directly\u201d resonated with Judge Thomas.\u00a0 Id<\/em>. at 25.\u00a0 However, Judge Thomas concurred in the result as to the plaintiffs because \u201cPlaintiffs are not sham corporations, but bona fide<\/em> business entities and their relationship is not an employment relationship, but a commercial one.\u201d\u00a0 Id<\/em>.<\/p>\n

Implications Of The Ruling<\/strong><\/p>\n

In spite of the concurring opinion of Circuit Judge Thomas, it is now the law in the Ninth Circuit that the transportation worker exemption does not apply to a business entity.\u00a0 The opinion sets up a split of authority in the federal circuits, and it remains to be seen if a petition for writ of certiorari will be pursued with the U.S. Supreme Court.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr. Duane Morris Takeaways: \u00a0On April 10, 2024, the Ninth Circuit held in Fli-Lo Falcon, LLC v. Amazon.com, Case No. 22-35818 (9th Cir. Apr. 10, 2024), that business entities are not covered by the Federal Arbitration Act\u2019s (\u201cFAA\u201d) transportation worker exemption.\u00a0 The Ninth Circuit … <\/p>\n

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