Season 1 Episode 10. Release Date March 15, 2022
In discussing Cunningham v. Lyft, Bob and New England Legal Foundation’s Ben Robbins address recent judicial interpretations of the Federal Arbitration Act, how they impact the business and legal world and whether countermeasures employed by the plaintiffs’ bar will make big business think twice about arbitration in the future.
“We have this eccentric language that for the longest time was understood by many lower courts, arguably, to signal that, oh, well, this is how Congress in 1925, when the FAA was enacted, understood its limits under the commerce clause that it had, this was before the Supreme court in the New Deal era dramatically expanded the understanding of what interstate commerce means. So going back to 1925 and for the longest time, of course, I understood. Okay, well, we have the strange language, but we think this means that what Congress in 1925 was trying to tell us is that this is to reassure labor unions and employees out there, don’t worry, the FAA does not apply to you. But now we jumped to 2001, and in Circuit City, the court looks, five members, the majority, the court looks at this language and concludes, no, we understand as we’ve already held for the longest time, section two, we’ve already held, embraces all kinds of agreements, whether they be employer to employee, consumer, to business or business to business.”
“So that’s why it mattered so much. And that’s why it maintains itself as a hotbed issue, this exemption, and whether or not an individual, a worker, employee, or independent contractor falls under this exemption. Because if so, they can, with absolute freedom, pursue their punitive class action in court.
Again, we all know putative class action. It has to be certified. It has to, of course, there’s that approval process, but at least they would have the right to pursue a class action in court, rather than if you will, at least formally speaking big limited to an individual only claim. In Cunningham v. Lyft, as in many other cases that are actually pending now before the various state and federal courts, you have the classic set of arguments, and you can see how some of these arguments begin to sound like they resonate with the language of the exemption.”
“I think I read something, a story like this thinking, oh, be careful as you were saying, be careful what you wish for because now businesses, whether it be employers or businesses versus consumers, are faced with a battery of individual arbitrations and suddenly have to are flooded inundated with what effectively bargained for and what the Supreme court has allowed them to pursue with the class or collective action waiver in place. And I, it’s hard for me to predict I don’t have the experience or the empirical knowledge right now to make any kind of prediction. But I had limited experience with arbitration before starting at, and it was a classic business-to-business dispute.”
Bob Stetson: In the 1920s, a cotton goods merchant who moonlighted as an Indiana Jones-like Explorer for the American museum of natural history declared that the judicial system was broken. Litigation in the courts. In his words was quote the most wasteful procedure to which a businessman can resort and means strife, expense annoyance, and the rupture of business friendship sapping the very lifeblood of commerce.
This man spurred a court reform movement and, in particular, sought to borrow certain facets of the German legal system. This man Charles Bernheimer is known as the father of commercial arbitration, and his legal movement led to the passage of the federal arbitration act in 1925. The FAA, as it’s known, authorizes courts to order parties to resolve their legal disputes in private arbitration.
If the contract at issue calls for arbitration and not in the courts where there exists jury rights, arbitration is a largely unsupervised method of resolving legal disputes outside the public’s view because the FAA is a federal law. Its reach is limited by the United States constitution, namely the commerce clause.
In fact, the FAA specifically references that it only applies to contracts that quote involve commerce since the passage of the FAA in 1925. However, the Supreme court has interpreted commerce in a more expansive way, thereby increasing the scope and reach of the Fs. It isn’t hyperbole to say that the FAA impacts all aspects of modern American life, 90% of cell phone agreements, 96% of credit card agreements, practically any service agreement purchase over the internet, all require arbitration and estimated 60 million workers in the United States have agreements requiring arbitration for rideshare drivers, food delivery companies, et cetera.
Many of these arbitration provisions also contained class action waivers. These waivers force individuals to take on these large companies on a case-by-case basis, preventing them from banding together as a group, as part of the litigation process, given the chilling effect these provisions can have on litigation and, therefore, liability exposure to these cases.
Application of the FAA and enforceability of class action waivers can make the difference between a company’s survival and consumers and or employees being able to readdress their grievances in Massachusetts, several drivers for the rideshare company, Lyft commenced a lawsuit against the company for improperly classifying them as independent contractors and not as employees.
They filed a lawsuit in federal court, even though they had all signed agreements with the company that required arbitration and waved class action, rights, Lyft, move to compel arbitration. The trial court denied the motion because, in the trial court’s opinion, Lyft drivers were subject to an exemption to the FAA for transportation workers, quote, engaged in interstate commerce.
The first circuit court of appeals took the issue on appeal, freedom of contract, or unsupervised justice. This is Cunningham versus Lyft
Welcome to Legal Judg(e)ments, where we tackle litigation and trial strategy by analyzing and talking about real legal cases. I’m Bob Stetson, a Boston-based trial lawyer at Bernkopf Goodman. Today, we’re looking at a case that touches on the federal government’s power to regulate commerce, the freedom of parties to enter into agreements for arbitration, and workers’ rights with me is Ben Robbins.
Ben is a senior attorney at the New England Legal Foundation or NELF who filed a friend of the court brief known as an amicus brief supporting Lyft’s position that arbitration should be compelled in this case. Now is one of the country’s premier nonprofit public interest groups, championing economic liberties, property rights, and limited government.
For someone like myself who considers themselves a libertarian, I’ve always admired Neff’s work and held this group in high esteem. Thank you for joining me today, Ben, and welcome.
Ben Robbins: Thank you. This is a pleasure.
Bob: Now, before we get to the first circuit’s decision here, I want to set the stage a bit. The precise issue, in this case, is a little bit esoteric. I would say whether or not Lyft drivers qualify as transportation workers, quote, engaged in interstate commerce. And therefore, whether or not they’d be exempt from the reach of the FAA and could litigate their claims in court.
Now, without any context, this doesn’t seem like the type of case, at least on its face, that would get people too excited. And yet you have Shannon LIS Riordan representing the workers. In this case, she’s a prominent workers’ rights lawyer who recently launched a campaign for attorney general. You have essentially a dream team of lawyers representing Lyft, including Donald Verrilli, a former solicitor general under President Obama, who successfully represented the government in the Obamacare case.
And you have several legal organizations offering an amicus brief, including now. So, you have a tremendous amount. Of legal firepower, I would say involved in this case. So, the first question, Ben, is can you provide the listeners with some context about why this case and why this issue was so important?
And in your answer, I would like for you to also tell us a little bit about Nelson and why Nelson believed it was important to file an amicus brief in this case.
Ben: To begin with, the FAA, in section two of the FAA, creates a broad national mandate to enforce arbitration agreements. As you already have already touched on in your very apt introduction and the Supreme court over the past, let’s say three decades or so has very expensively interpreted section two of the FAA. And just as a quick footnote, it was disputed for quite some time. Well, are employment contracts necessarily transactions involving commerce? Because, of course, an employment contract is that relationship, it’s not a transaction. So that was one of the first steps the court took. Oh, well, no, we think section two embraces employment contracts. We think it embraces anything involving the outside of the business context you addressed in your introduction, how the FAA really began in the context of commercial disputes, merchant to merchant, and that was the traditional understanding of arbitration and arguably in light of the very compelling four-member descent, two different descents in circuit city, the landmark case leading up this discussion now. Four members of the court with passion cited to strong record evidence, legislative history that, no, no, no, Congress did not intend the FAA to include employment agreements. And when we get to the exemption Congress that the dissent argued again, passionately with lots of evidence that this, if you will, transportation worker exemption was intended to clarify that it did not apply to employment contracts generally. But that’s not how the majority interpreted in circuit city in 2001, how the majority interpreted the FAA exemption.
So that’s why we have begun with that foundational decision of the court. I don’t mean to be long-winded or rambling, but the point here is we have to go back to circuit city, which was the court’s landmark decision for purposes now of Cunningham V Lyft to get us to the present day.
We have this eccentric language that for the longest time was understood by many lower courts, arguably, to signal that, oh, well, this is how Congress in 1925, when the FAA was enacted, understood its limits under the commerce clause that it had, this was before the Supreme court in the New Deal era dramatically expanded the understanding of what interstate commerce means. So going back to 1925 and for the longest time, of course, I understood. Okay, well, we have the strange language, but we think this means that what Congress in 1925 was trying to tell us is that this is to reassure labor unions and employees out there, don’t worry, the FAA does not apply to you. But now we jumped to 2001, and in Circuit City, the court looks, five members, the majority, the court looks at this language and concludes, no, we understand as we’ve already held for the longest time, section two, we’ve already held, embraces all kinds of agreements, whether they be employer to employee, consumer, to business or business to business.
So, section two is the vast, if you will, national mandate that the court had already set in place in its precedent. Before we get to Circuit City, that bridge had been crossed. So now we get to Circuit City, where the employee sidebar was arguing well, doesn’t this really suggest, especially in its historical context, that Congress was intending to if you will exempt all employment agreements out there that would otherwise fall under the broad potential mandate under section two. The court said no based on three basic principles of construction.
This eccentric language, “this statute shall not apply to contracts of employment of seaman, railroad employees, or” and here’s the residual phrase that is the hotbed of issue in Cunningham v. Lyft and at the very moment, there’s a case in the SJC. There’s now a case in the Supreme court.
Again, interpreting this, if you will, this residual phrase, what does this mean? Any other class of workers engaged in foreign or interstate commerce. The court, the majority, which is the court and concluded that well, based on our traditional rules of statutory construction, this residual phrase is follows specific examples under the classic rule of construction that the general follows the specific you have these name categories of classic examples of transportation workers who robustly as a central part of their job function, move goods or passengers from state to state or, particularly with seamen, across national boundaries.
So, the court looked at it in its immediate context. The court also looked at the term of art, if you will engaged in commerce, as opposed to the term in section two, involving commerce, and the court has tapped into its long-established decision-making on the difference between terms like affecting commerce or involving commerce versus something as if you will cramped as engaged in commerce.
And the court reiterated its classic distinction effecting involving commerce, which appears by the way in section two, indicates Congress’s intent to exercise its full reach of powers under the commerce clause. Whereas engaged in commerce is something very narrow indeed and something which while the court did not expressly define it in Circuit City, the court in effect embraced how many lower courts, including the DC circuit, understood meaning that someone such as a seaman or a railroad employee has to be actually engaged in the movement of goods.
And I would also add in parentheses or passengers the movement of goods or passengers across state or national lines. And so, what we have here is an exemption. We take a step back, and by the way, of course, the last point the court really wants to reinforce in circuit city, which I’ve already touched on, is we almost have to look at section one in the context of the FDA’s mandate in section two, which comes right after it.
Okay. This is to be interpreted narrowly because we have otherwise, at least the way the courts interpreted this broad vigorous national mandate to enforce any arbitration provisions in a nested or contained in any agreement out there, whether it be between businesses, employers, employees or consumers and businesses that involves commerce.
So, we have to interpret this exemption in the context of, if you will, this almost monolithic broad mandate to enforce agreements. It’s to be construed narrowly. So now we come to a direct answer to your question, which is now we have this Cunningham v. Lyft case, and I’ve had other cases before and now after Lyft involving the same transportation worker exemption. Just as by way of quick summary, Circuit City teaches us the following, that in order to be exempt from your arbitration agreement, again, for the purposes of the FAA, let’s keep in mind there’s also state law there. If FAA doesn’t apply, then state law could apply. Although we know in Massachusetts state law would not enforce as you were referring to a class or a collective and or collective action waivers. I’d like to refer to that with the shorthand of an individual only arbitration agreement; just it saves the work of having to spell out class actions, which are traditionally op now opt, opt out and collective actions. we have this exemption, and it’s understandable that on the employee’s side of issues, it would be wonderfully liberating to fall under this exemption because then an employee or let’s just say a worker, someone who argues they should be classified as employee or some or we know also from the court’s recent decision in new prime, the business side of the Supreme court case that the exemption applies to either independent contractors or employees.
So, the classification of someone as an independent contractor employee, while granted, is a substantive issue that matters to workers in any particular case, does not matter for purposes of the exemption. So whether I am an independent contractor employee or whether I’ve been misclassified as one or not, the other, the point is I still can get under the transportation worker exemption, and therefore be if you will excused from complying with my arbitration agreement, which typically as you identify typically has that individual only requirement, so long as I can show that I am a transportation worker engaged in interstate commerce, like, or similar to a seaman or railroad employee, certainly as they were, would have been understood at the time in 1925.
So, it’s, it would be very liberating for an employee or a worker to be able to prove that they indeed qualify for this exemption. Cause then they are now excused under the FAA from complying with the arbitration rule. They can, as you were talking about aggregation of efforts, they can Sue in court, and they can bring a putative class action.
Just as another quick aside in response to introduction, when I was briefing, for now, important recent cases, Supreme court, getting us to the present day about the FAA and its application, and enforcement of class action waivers, both the Concepcion case enough waiting, and also the American express case, which was at the, if you will under federal statutory issue.
I think there was the Sherman act. One of the points I made to the court before they decided the American express case, and they decided the way I predicted, once you have Concepcion in place, then that’s the FAA, according to again, the late Justice Scalia for the majority, in that case, the FDA’s mandate is, you proceed on an individual only basis unless the parties expressly embrace some sort of class or collective or aggregated effort. And he also doesn’t like that. He says that’s not really what Congress had in mind. You can agree to whatever you want, but you have to express the do so. Otherwise, if you will, the presumption is this is individual only anyway. In American Express in my amicus brief for NELF. I pointed out that there are other ways that parties. And I think since then parties have, let’s say employees or consumers can aggregate their efforts short of actually bringing a formal class action, whether it be a class action in court, or even more messy, a class action in arbitration, they can, for example, through the internet, which is a wonderfully, I think democratic force, they can reach out to each other, identify common issues. They can perhaps pull resources. I would imagine assuming with the right agreement in place, in case there’s any conflict among parties to pull resources to find a handful of attorneys to represent their, if you will, informal class or what I’m not trying to, if you will give a road, I’m just roadmap.
I’m just suggesting that it’s not necessarily an either-or that there, they’re always practical ways of, if you will, individuals who are similarly situated to try to reach out to each other through the internet to communicate, hey, I’ve got this issue with my employer.
I do too. Or I’ve got this issue with such and such a business as a consumer, in a business-consumer relationship. But the point is, yes, class action waivers of individual-only arbitration must be enforced. So, you can still challenge an arbitration agreement outside the class or collective waiver. You could argue that this is imposing burdens on me that I wouldn’t face in court. This is otherwise unconscionable under state law or some other generally applicable state law contract defense. There are always ways I’m not saying necessarily successful to challenge an arbitration agreement, but not if you will, the individual only provision.
So that’s why it mattered so much. And that’s why it maintains itself as a hotbed issue, this exemption, and whether or not an individual, a worker, employee, or independent contractor falls under this exemption. Because if so, they can, with absolute freedom, pursue their punitive class action in court.
Again, we all know putative class action. It has to be certified. It has to, of course, there’s that approval process, but at least they would have the right to pursue a class action in court, rather than if you will, at least formally speaking big limited to an individual only claim. In Cunningham v. Lyft, as in many other cases that are actually pending now before the various state and federal courts, you have the classic set of arguments, and you can see how some of these arguments begin to sound like they resonate with the language of the exemption.
Gee, I am like a taxi service. Yes. But I am driving individuals to and from Logan airport for either to begin or conclude their interstate journeys. And some of, if you will, this class of online or mobile rideshare service workers do occasionally cross state lines. So, you can see how what emerges are two factual basis for arguing.
Well, doesn’t that sort of suggest or indicates or proves that I am a member of a class of workers who are engaged in interstate commerce, comparable to what a seaman or railroad employee does, whether it be with goods or passengers. So, you can see how it becomes, at least on the surface of things, a closer issue.
Bob: I think that it’s clear that the nation’s highest courts are very interested in how these provisions work and how they apply under the FAA. There’s a lot of legal firepower across the country involved in this case, in these issues, if you could explain. And I sense that part of the reason is because the decision on what will happen in any one of these cases will have enormous.
Implications from an economic perspective throughout the country and on businesses and on workers’ rights, et cetera. So, I’d like to understand where NELF’s position fits into kind of getting involved in, in joining the fray on one side or the other here. So, if maybe if you could expand upon why, it is that Nelson has been so consistently weighing in on these issues in all the courts that we’ve talked about.
You’re talking about some very important courts, the Supreme court, the first circuit court of appeals, the Massachusetts SJC.
Bob: So maybe you could just tell the listeners, why does NELF find this particular issue so important?
Ben: Well, I think with arbitration generally as codified in the FAA, the issue is one of contract. The term freedom of contract, I understand, might raise some eyebrows when the employer employment context or consumer context, but the notion that, if I as an individual have signed an agreement agreeing to arbitrate all disputes that may arise in my particular relationship with the other entity employer business that sold me goods, whatever it may be or between businesses. Then shouldn’t I be held to my contractual promise? So, for first and foremost, it’s, it aligns with one of NELF’s classic platform of its mission, which is freedom of contract and holding parties to their if you will bargain for expectations and the promises they’ve made to each other.
And it’s also a question of adhering to the language of a statute that’s also a classic NELF concern about enforcing both an agreement, according to its terms, also a statute, according to its terms. And, folded into that is adherence to, in this case, it would be the Supreme courts, the controlling courts binding precedent that interprets that statute.
And that’s been one of our concerns, particularly with, let’s say, state courts or lower federal courts while the Supreme court has made its pronouncement on under, let’s say Concepcion or American Express or now a case pending before the court under this very same exemption. Once the Supreme court has issued its decision, NELF is very adamant about adhering to stare decisis. This issue has been decided, and also under the supremacy clause if it’s a question of a state court not wanting to necessarily abide by how the Supreme court has if you will broadly interpreted the FAA or here, maybe narrowly interpret the FAA.
It’s also question of if you will good government as codified by the supremacy clause. Not only is the stare decisis that is the court has made its pronouncement, but that is the law of the land, unless, and until Congress, which is always free to respond, amends the FAA. And I know there’ve been efforts in the past that haven’t advanced much beyond committee about if you will amending the FAA in response to the Supreme courts, mostly recent let’s in the past decade or so decisions about the FAA’s broad reach its application to employment contracts, to consumer contracts, the enforcement of class action waiver class, and collective action waivers that you’ve already addressed.
So, those who are among NELF’s concerns and NELF has been pretty consistent in filing briefs at most, any level Supreme court, the circuit court. The state Supreme courts. And if necessary mid-level state appellate courts on issues that arise under the FAA.
And what’s interesting about the exemption is that until the court, let’s say current case pending before the court involving facts that are little different from this until the Supreme court maps out if you will, the entire content or applicable application of this exemption, you have lower courts throughout the nation at any level, federal and state alike, trying to grapple with the application of this exemption, whether or not an individual worker falls under this exemption, and therefore would be under least under federal law under the FAA excused from complying with the individual only arbitration agreement. If I could address an issue with substantive law, a general issue that I’ve come to observe now through my efforts in various cases, both in the Lyft case that is the subject of discussion here, but also in another case, I’m working on now in the Massachusetts SJC for NELF, which involves food delivery drivers grub hub happens to be the employer in that case.
So, these are grub hub delivery drivers who, among other things, do deliver pre-packaged goods, food, or non-food items alike that have traveled in interstate commerce. So. It resonates with the facts here. You can substitute goods for passengers and begin to see, oh, this is along a continuum of workers who are trying to fit under the FAA exemption.
And I’ve developed a general theory, which again may not be confirmed by the Supreme court, which right now has on the merits has taken a case involving, if you will, airline cargo delivery loaders. And unloaders, that is the step just before a plane begins its undisputed interstate journey or the step just after it returns from its interstate journey.
The very employees of that very same airline, which is a continuous way, are having cargo and passengers’ luggage loaded onto the plane. To begin or end unloading loading or unloading, so you can see how it went. Doesn’t it sound like a continuous movement that begins with the cargo loader? So that’s the issue before the Supreme court, but if I could just back up, my general sense is that as applied to Lyft and as applied to, for example, I mentioned grub hub, food delivery, type drivers and food and other items, I should say.
It seems to me, and I could be wrong, that based on the Supreme court’s long precedent interpreting before the FAA even, or in addition to the FAA interpreting the interstate commerce clause and what that means. Because here we were talking about workers who are if you will engage or another work to employ to primarily to move goods or passengers. When does that movement no longer involve interstate commerce? When does interstate commerce end, and when is it purely interstate? So, I’ve developed this general sense, understanding of what the Supreme court’s approach might be, that the court has always talked about interstate commerce.
That is a practical continuity of movement from, let’s say, an out-of-state location of goods or passengers to a destination. Usually, it’s at another state or could be another country. And it seems to me that what is consistent about the courts, the Supreme court, I’m referring to another, the court’s discussion and understanding of the interstate commerce clause in various contents under other statutes, even sometimes regulations going back to let’s have a new deal era more recent, it seems to be, there’s a consistent story being told, which is this, that when goods or passengers begin their interstate journey, there’s a transaction or a contract or an agreement, understanding some sort of arrangement in place at that moment in time that establishes the intended destination of that individual or that item of whatever it may be that I, that good or that passenger it’s intended to send somewhere.
It starts at another state and ends up in Massachusetts. Okay. So, if the intent is, whether in a written formal contract or a special order, let’s say, or an understanding or some sort of arrangement, some sort of as a quarter often refers a special arrangement that that, that item or that passenger is to be delivered from state a to state B.
Well, when that individual or item arrives at that intended location, as per the agreement or understanding or order or whatever was in place at the time that the travel began, then the journey has ended. And if there’s a subsequent resale or sale or subsequent movement, let’s say of a passenger. Oh, I finished my journey from the case thing in Paris.
I arrived at Logan airport and. The destination with my airline was we will take you from Paris to Boston and Logan, and then you’re on your own. Well, I’m going to take a Lyft. I think I need to obviously need to get home, and my car is not parked here, so and I’m not going to walk. So, I’m going to take I think I’ll use Lyft or Uber or traditional taxi.
It doesn’t even matter. The point is that interstate final leg of my journey is not integrated with is not part of a continuity of moving. It was not part of that prior arrangement that set me in motion from my overseas destination. And you can play that domestically.
You can play that to goods or passengers, and it’s the same consistent story. And while I don’t think that it’s necessary for the worker to actually cross state lines, hence we have Amazon. Last-mile delivery drivers being held by the first circuit and the ninth circuit, for example, as indeed exempt under the FAA exemption as, as indeed as interstate transportation workers, because they complete the integrated preplanned, if you will bargain, contracted for last necessary, interesting leg of a continuous journey of goods that I, the customer and the end recipient of in my poem or apartment wherever I may live in Massachusetts, for example, that is the intended endpoint, the intended destination.
So, the Amazon driver is part of that continuous movement of the goods. It’s all integrated. It’s all planned. There may be an if you will, a temporary interruption, oh, it’s at a warehouse now in 10 miles from my home. But that warehouse is also a necessary and planned and prearranged waystation, if you will, a prearranged interim movement or interim location of those goods.
So that’s all part of the same story. That’s all-interstate commerce, hence an Amazon last-mile delivery driver. And by the way, the Supreme court denied cert in both the Amazon case before the first circuit and the virtually identical Amazon case in the ninth circuit. I believe cert was denied yet, cert was taken in this as I referred to this recent case involving airline cargo loaders. And I think there’s a lot of confusion among the lower courts. And I also see it in party’s briefs about why the Supreme court took this claim case. And does that mean they’re going to decide that you must cross state lines in order to qualify to be engaged in your state commerce?
I don’t think that’s right. I think the issue let’s say, among cargo loaders is that they’re not moving goods. They are a necessary first step, but the goods haven’t started their journey yet. You see the difference? That it’s one thing. If I let’s say, imagine if there were an Amazon first, first-mile driver, that must start the interstate movement of goods from, let’s say the good start Massachusetts have to go to California. I’m just using an extreme example for the sake of making it more visual and more graspable that if there’s an integrated first interstate step as part of a continuous movement of goods or passengers, that also would be part of it.
I would argue, I would think would be part of interesting conversation. It’s not a question of having to cross state lines, but you have to be moving goods in some capacity as a transportation worker, and a cargo loader is not moving goods. They are handling goods, and they’re arranging those goods to begin their interstate journey, but they precede the, if you read the beginning, the commencement of that actual journey.
So that’s what’s before the Supreme court now, and my guess is that’s how the court will decide that case. But that decision, I don’t think, undermines my understanding that as an Amazon last-mile driver, which again, which the court confirmed That I need not be a transportation worker, engaging your state commerce.
I don’t have to actually literally be crossing state lines. And that’s also consistent with how the Supreme court has always understood the, if you will, the practice they call the practical continuity of movement in other contexts under other statutes. I do think that would funnel into the court’s understanding of what it means to be gauged as an injury interstate transportation worker under this exemption.
So the Lyft decision is correctly decided as part of the continuum of my understanding of the limits, the very narrow scope of this exemption because again, the two factual basis that the plaintiffs were pressing were one that they were, they argued in effect either beginning or ending passengers interstate journey by picking them up or taking them to Logan airport. Although, of course, it wasn’t arranged, it wasn’t contracted for, it wasn’t planned. And they were occasionally crossing state lines. Well, some of them were occasionally, so it’s not even a question of all of this class, wherever you want to define the class of workers who are online or mobile rideshare service workers.
So, the first circuit rejected both basis. And just for the sake of clarification, that the first basis, which I thought was in a way, a closer issue than the second one, because the second one that is occasionally, some members of the task might cross state lines in their local driving activity. How does that even come close to the repetitive and, if you will, central function of a seaman or railroad employee who does nothing, but that’s there, if you will, the essence of their job? So, the court had no, no difficulty dismissing that as a basis, but going back to the first issue about gee, I’m beginning or ending some engineer, interstate journey.
Well, I looked at it, I thought a very compelling case, which the first circuit also adopted from the Supreme court, going back to shortly after World War II, involving a cab company in Chicago, yellow cab and under the Sherman act and nothing to do with the FAA nothing to do with this exemption in its eccentric wording.
And the court there made a clear distinction. And again, this is consistent with the court’s distinction in many other cases and under many other statutes that in that case where you had contracts arranged in advance between railroad companies, passengers railroad companies, and local Chicago cab drivers.
When a passenger at the time was beginning, let’s say a long travel across the country from, let’s say, let’s start off in Boston. Well, determinants for that, apparently Chicago was a Terminus before they could proceed beyond west, beyond Chicago. They would have to stop in Chicago and switch from one train station to the next.
So, there was this interesting interim leg that had to be completed for them to continue their interstate journey. And in that case, there was an arrangement between the railroad companies and local cab drivers to provide passengers with even just a two-mile drive. But the point is that was a necessary interim interest state leg of an otherwise.
Continuous interest rate journey and the core degree. Yes. Under yellow cab, the Supreme court decision, but yellow cab also involved in another set of claims where the much like the Lyft drivers here the cab drivers. And again, the yellow cab was a Sherman at claim. So, it was a question of trying to enforce the Sherman act against cab drivers for interfering with free trade.
So. of course, the proof of the government had to be that they were somehow involved in interstate commerce. And the other set of claims in, in a yellow cab were rejected by the court. And those are the claims brought by effectively the same claims brought by the Lyft workers here, which is, there’s no prior arrangement, but I happen to be picking up a local resident of Chicago and bringing them to the train station so they can begin their interstate journey from Chicago to somewhere else, another state in the union or I’m picking up someone who’s just hailed me from a train station. Who’s just ended much like, oh, I’ve just arrived. Or I’m beginning arriving at Logan airport or beginning my journey. I’m looking at her. It’s the same notion.
It’s not prearranged. It’s not planned. It’s fortuitous. It’s random. And without that, if you will, transactional continuity, that’s planned in advance. It’s known in advance. Then there cannot be a showing then necessarily showing that this is the continuous movement through interstate commerce. And I do think that’s the continuous, that’s the thread that unites many of these decisions, Supreme court, and lower courts, state, and federal like under various bodies of law, including the exemption that we have before us today.
Bob: I think another, another big question here. And you touched on it a little bit when you, I think you were talking about justice Scalia’s decision in which he, I guess, talked about, well, there’s some ability for workers to pool their resources, even if not in a traditional class action type setting.
And I read about in preparing for today’s recording, I read about a case involving door dash, in which as you had alluded to a bunch of plaintiff’s attorneys had banded together and door dash, just as I understand it had a similar set of agreements that we’re talking about all day today with arbitration individual only arbitrate.
Essentially what I would consider a class action waiver. And what happened with these door dash drivers is they banded together, and they all filed for arbitration. And so, door dash was, it’s like one of these things where be, be careful what you ask for, because, because, you know, and it’s funny, I have my own personal opinions on the court system versus arbitration.
And just as a very quick detour from my question, I would say, and I deal with arbitration a lot in the construction litigation context because in construction litigation, it almost invariably involves AIA forms. And the typical forms that are the most widely used in the industry include arbitration as a method for resolving disputes.
And so, I do have some experience—arbitration versus litigation. And my personal opinion is that litigation is a better, more efficient alternative for a variety of reasons. Number one, you don’t have to pay for a judge. I guess we all pay for them in our taxes, but in arbitration, it can be very expensive.
The whole argument that we learn in law school is that, well, arbitration is also more efficient. Well, it can be, I’m sure. And maybe in certain consumer contexts, but, especially in the construction context that I’m used to, discovery is typically just as complicated as in the courts.
It may be done on, in a more, in a quicker manner. Like you might be able to get discovery done in a few months. So, there is some efficiency from a cost perspective. I don’t really see it. And the other thing that in terms of efficiency overall, is that at least in the courts, there’s a chance that you can resolve the dispute short of a trial.
We have motion to dismiss procedures. We have motion for summary, judgment procedures, et cetera, and so forth. I don’t think I’ve ever seen an arbitrator throw out a case. It’s almost if it’s in arbitration; chances are you’re going to go to trial, which of course, is the most expensive part of any litigation.
So, from my personal perspective, I personally, considering that we’re not dealing with the types of courts that Charles Bernheimer was lamenting about back in the 1920s, I think the courts nowadays have responded they’re more efficient. I think they handled the pandemic reasonably well.
It’s not the same type of venue companies were looking at back in the 1920s that were really at that time built for horse and buggy times. And they hadn’t quite caught up to the industrial revolution and the roaring twenties or whatever. But you’ve got these, this proliferation of arbitration provisions over the years, and you’ve got this door dash example in which all these lawyers and, and workers banded together and you have door dash making the argument that while we actually don’t want arbitration.
Now, even though that’s what our agreements say. And one of the primary impetuses for that position that they took was the fact that they were going to have to front $10 or $12 million in arbitration fees before you even get to talking about, well, what are the legal fees going to be, and never mind any potential liability exposure.
So, yeah. Kind of the plaintiff’s bar, if you will be calling these companies bluff to some extent.
Bob: My question to you does this signal perhaps the, I don’t want to call it the beginning of the end for arbitration but are we going to see a change in attitude now that you know, these plaintiff’s lawyers have responded and are starting to, whether it’s through the internet, as you had mentioned in one of your earlier responses, pool resources, are we going to see a change in how arbitration is, is perceived by some of these larger companies?
Ben: I mean, that’s a great question because I’d read fears back. Even, I think I read something, a story like this thinking, oh, be careful as you were saying, be careful what you wish for because now businesses, whether it be employers or businesses versus consumers, are faced with a battery of individual arbitrations and suddenly have to are flooded inundated with what effectively bargained for and what the Supreme court has allowed them to pursue with the class or collective action waiver in place. And I, it’s hard for me to predict I don’t have the experience or the empirical knowledge right now to make any kind of prediction. But I had limited experience with arbitration before starting at, and it was a classic business-to-business dispute.
And I must say though, in defense, yes, you’re right that we had to pay much like paying the meter in a cab. We had to pay the arbitrators fee on a daily basis, but we did attempt, I think initially to again. It was all through the FAA rules over here. Parties, freedom to contract. We contracted for FAA rules, and we didn’t contract for certain kinds of discoveries.
So, I remember the partner in charge my boss at the time, made it clear. No, we did not agree to such and such discovery so that, unless we agree to it, now we don’t have to comply. And he was right on that. But my point is that because arbitration was, it’s all customized. We did agree.
We did have those, if you will, court-like stages in the litigate, in the arbitration litigation-like stages. So again, pardon is just to reiterate, just to reinforce my point here, which is that parties are still free. Depending on the nature of whatever agreement you have in place to customize arbitration, the procedures involved with the arbitration, whether it goes, go right to it here, trial type, hearing the marriage where you have these preliminary motions, that’s again, offer the parties.
So, there is still that luxury, that freedom to customize it. But I agree with you on other points, and yes, this phenomenon that I think arguably could bring things full circle. Well, now businesses are getting what they wish for. You’re now going to be faced with a battery of individual arbitration, look at the cost involved, and I could be wrong in this, but I would think in probably many arbitration agreements in the employment context that employers typically agree either to assume the entire cost of the arbitration or at most share the costs with the worker. Because then you could start arguing about unconscionability against state law. Under section two of the FAA, state law contracts with fences are always available. Gee, you’re posing this burden on me to pay for an arbitrator.
I have a $200 claim about non-payment of minimum wage, or I’m not trying to minimize the importance of that to an employee, but the point is if you have a small value claim and something you’re burning me with. The daily cost of arbitration or half the cost, I’m going to argue. That’s unconscionable.
I wouldn’t have to do that. As you were saying, I wouldn’t have to do that in court. So that becomes a basis for challenging. So that’s why I think that arguably many implements employment agreements out there as you were just identifying, probably put the onus, the employer puts the onus on itself. We will assume the costs of the daily cost of arbitration.
You’re right. And that, that can be enormous. When you have multiple individual claims being bought by otherwise, what could be arguably a more effective aggregated mechanism? At least in court, more efficient because courts are used to it as opposed to an arbitrator who might not even know how to deal or deal with all the procedural issues and due process issues about absent class members, this, and that.
So, you’re right. I wish I could predict more. And to answer your question, I wish I could say, well, where are we going? I just to add a footnote to that, though, addressing your same question. Where are we going with arbitration? Is it so desirable? Is it so efficient even though the Supreme court through justice Scalia?
I dunno, did I forget if he also wrote the Stolt Neilson opinion for the court, which preceded the Concepcion decision, addressing a similar issue about, is there a contractual in that case, was there a contractual basis to impose class in that case class arbitration? The question there is.
When you have, the court sort of making, if you will, almost these normative assertions about arbitration is more efficient. Arbitration is more desirable. You have also another issue that at least I know businesses have been concerned about. And this goes back to my first case, my first brief for NELF involving the FAA in the Supreme court, which was the hall street case, going back to 2000 and wow, 2008, I forget when that was decided justice Souter for the majority that parties and that was business to business are not free to expand at least when they were in federal.
To expand the limited basis for judicial review of an arbitrator’s decision. It can’t be reviewed on the merits. It can’t be a pallet-type review, at least when you’re in federal court. And that section 10, I believe, are the limited basis for basically, it’s the process as opposed to the substance of the decision.
So, when you’re in federal court, for sure, section 10, cause that is limited, I think on its face to federal courts, as opposed to section two which is any court that is state or federal life. So again, another, if you will strike against arbitration from the prospective business, gee, if we’re going to have to arbitrary, but we can’t have the losing side, can’t have substantive review appellate review of the issues of law.
When you get to the appellate stage, then gee, is arbitration so desirable, so that’s another reason I just factor into why arbitration may not be the, be all and end all that it was purported to be, or at least sold to Congress in 25. And the Supreme court in various, if you will, normative pronouncements, which arguably don’t align as you’re identifying don’t align with present-day reality or the practical concerns that businesses as business, as employer whether it be dispute with a consumer and an employee or another business may find that arbitration presents headaches that they wouldn’t face in court. I don’t know where it’s all going. I wish I knew more.
That’s the fascinating question because it’s now gives me an incentive to look into this as for another day, where’s this all taking us? It’s one thing to talk about judicial decisions. It’s one thing to talk about this exemption under the FAA and case-by-case step-by-step decisions, but what’s the larger landscape and that’s a very fascinating and very important question.
I wish I could answer it better.
Bob: I just have one last question for you. How can listeners find out more about NELF and what you guys are working on currently?
Ben: Great. So, thank you for asking that. NELF is, as you’ve already identified, as a nonprofit public interest law firm filing primarily amicus briefs in the state, federal courts in New England, and also in the Supreme court involving, as you already identified a host of issues affecting businesses, employers, and property owners as well.
And so, our website is at newenglandlegal.org. That’s all one word, and listeners can check out that website and they can also choose to support NELF if they wish to as members, by making contributions of any range, any amounts since now is nonprofit it really survives on, depends on contributions by individuals, by law firms, foundations, all levels of contribution.
And so, in addition to this case that we’ve been talking about cutting in the Lyft, I have now begun the process of getting internal approval that has enough approval to pursue yet another FAA transportation worker case. Now, before the SJC involving grub hub drivers, as I already alluded to.
And I think it involves in a nice analogous way, some of the same issues that were presented in the Lyft case the argument that, oh, we are delivering goods that we are if you will, the last leg much like an Amazon driver. No, you’re not because it wasn’t arranged that way. These goods came to rest in Massachusetts at retail stores, let’s say.
And so again, it’s similar arguments about picking someone up or taking them from Logan by pure fortuitous happenstance that’s not a continuous stream of interstate commerce. That’s that is indeed, as you would say, purely interstate. So, there’s that case. And just as another quick example, I filed a brief in the SJC just last week involving a fascinating issue of property law and a very important issue in light of climate change involving the protected use given to solar energy structures and so energy facilities under the Massachusetts zoning act it’s before the SJC in an amicus announcement whereby state law, a local authority, a town or city cannot prohibit or unreasonably regulate the use of my property. Use of private property for solar energy facility or supporting structure, unless the city or town shows that it’s necessary, such prohibition or unreasonable regulation is necessary to protect the public health, safety, or welfare.
And that’s before the SJC on whether or not, in this case, the city of Waltham has violated. We argued, yes, they have violated that protected use provision by summarily prohibiting a private property owner, residential property from using their land to build a proposed access road, to lead them to proposed solar energy facility, panel array, if you will, in the bordering town of Lexington.
So that’s just another exempt that involves property rights. It also involves, I think, rights that concern, all of us about it, making sure that somewhere we can mitigate the effects or consequences of climate change under what’s already been established by our state legislature in Massachusetts. And then there are a host of other issues.
My colleague has just filed, I believe in amicus brief in the Supreme Court RISA related brief in support of a cert petition where I think the arguments are that I don’t remember where this arose from, but the concern is that this could be a copycat case where other jurisdictions, states could decide to have what we would argue to be an end-run around RISA’s preemption clause and its requirements by employers. I don’t know much more about that. So, there’s a whole range of cases we get involved in, and listeners can check out our website. They can read about recent cases recent research filed decisions we’ve received our briefs themselves to learn more about the range of cases we get involved with that involve businesses and property owners.
And I hope that they do take some time just to check out the wide scope of our mission.
Bob: Ben. Thank you so much for joining me today.
Ben: Thank you for listening.