Attorneys Differ Over Who Fits Within FAA’s Transportation Exemption Before High Court

Thousands of workers would not be subject to their employers’ mandatory arbitration agreements unless the Supreme Court says workers must be in the transportation industry to qualify for the Federal Arbitration Act’s (FAA’s) foreign or interstate transportation exemption, an employer’s attorney argued before the U.S. Supreme Court on Feb. 20.

However, the attorney representing bakery truck drivers said the FAA exemption doesn’t target only those in the transportation industry, like FedEx employees, but applies more broadly to include other transportation workers in private fleets run by nontransportation companies, like LePage Bakeries.

Last year, the court agreed to hear Bissonnette v. LePage Bakeries to examine the extent of the transportation exemption for mandatory arbitration agreements. In this case, truck drivers for a large bakery company claimed they shouldn’t be subject to mandatory arbitration, noting that the FAA, enacted in 1925, states that the act does not apply to “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.”

Case’s Impact Could Be ‘Massive’

Justice Brett Kavanaugh asked how many workers will be exempt if the defendant loses, and how many companies will potentially face lawsuits rather than arbitration. “Spell that out for me,” he said. “I’m not sure how to quantify it.”

“It’s massive,” answered Traci Lovitt, an attorney with Jones Day in New York City, who was representing LePage Bakeries, which is owned by Flowers Foods.

The restaurant industry faces significant exposure. For example, in recent years Domino’s franchisees have faced cases in lower courts testing the exemption. The 9th U.S. Circuit Court of Appeals decided last year that in-state delivery drivers who delivered out-of-state products from a California warehouse to franchise locations within California are exempt from having to arbitrate under the FAA’s transportation exemption. Domino’s has appealed to the Supreme Court. That’s why the Restaurant Law Center, a restaurant industry group, filed on Flowers Foods’ behalf, Lovitt said.

In its friend-of-the-court brief, the Restaurant Law Center stated, “The broader restaurant industry is similar to bakeries, selling meals to customers, and in some cases delivering pizzas and other meals to customers mere blocks away from the restaurant’s location.” It asserted, “Congress did not intend to sweep into the limited exemption, delivery drivers traveling two blocks to drop off a pizza.”

The entire food industry would be brought into the exemption if the court doesn’t adopt a transportation industry requirement, Lovitt said.

“And the way that the modern economy works, this is how retail works,” she said. “You’re now bringing in every retail industry that is shipping their own” goods.

Lovitt added that the medical industry would also be affected because it ships products quickly from one place to another, using a transportation model similar to Flowers—one that arguably doesn’t meet a transportation industry requirement.

“The reason why this hasn’t been a problem to date is, again, because the background rule has been that it’s the transportation industry,” she said.

“That’s an important point,” said Justice Samuel Alito Jr. He said he hoped the plaintiffs’ counsel would address it in rebuttal.

Plaintiffs’ Rebuttal

Jennifer Bennett, an attorney with Gupta Wessler in San Francisco, argued for the plaintiffs, saying that she didn’t hear a single argument that any word in the text of the FAA's exemption has a transportation industry requirement.

“Flowers says, ‘don’t worry so much about the text, what we really want to think about is policy and purpose,’ ” Bennett continued.

In 1925, strikes involving transportation industry workers “could cause famines in Chicago,” Lovitt said. In response, Congress passed two federal arbitration statutes, one governing railroad employees in the rail industry and one governing seamen, who, under the Shipping Commissioners Act, were limited to those in the shipping industry, she said.

If Congress were trying to get at people who disrupt commerce through strikes, it wouldn’t have included an employer-based transportation industry limitation in the FAA, Bennett said. Strikes weren’t employer-based but job- and location-based, “and that’s why they were so disruptive,” she said.

Only the 2nd U.S. Circuit Court of Appeals and the 11th Circuit have adopted the transportation industry requirement, Bennett said.

“As the dissent in this case said in the 2nd Circuit, the well-established rule has been forever that if the residual clause covers anyone, it’s truck drivers,” Bennett said. “And given that long-standing principle, I still haven’t seen a single case where you have, you know, pizza delivery drivers or pest control workers people or any of the people they’re worried about—actually any court saying that they’re exempt.”

In conclusion, she said, “We ask that this court reject Flowers’ request to add this requirement that both has no basis in the text and would just make the statute harder to apply.”