Trucker or baker? Appeals court splits over Supreme Court arbitration precedent

Transportation trucks are parked at a logistic facility in Tokyo, Japan June 8, 2018. REUTERS/Issei Kato

(Reuters) - Are truck drivers who deliver commercial baked goods to stores and restaurants engaged in the bakery business? Or are they in the transportation business?

That distinction may seem like mere semantics, but it’s actually of enormous consequence for delivery workers with wage-and-hour claims. The Federal Arbitration Act has a carve-out for “workers engaged in foreign or interstate commerce,” so if the bakery delivery drivers – or, for that matter, delivery drivers for any sort of interstate product – are transportation workers, they can litigate their claims in a class action. But if they are deemed to be in the bakery business, they’re outside of the FAA’s exemption and can be compelled to arbitrate their claims.

On Monday, a divided panel of the 2nd U.S. Circuit Court of Appeals ruled in Bissonnette v. LePage Bakeries Park St. LLC that delivery drivers for Wonder Bread baker Flowers Foods Inc and two of its subsidiaries are not transportation workers because, ultimately, they are selling baked goods, not transportation services. (The drivers allege they are owed unpaid or withheld wages and overtime wages.)

According to the majority – Circuit Court Judge Dennis Jacobs and U.S. District Judge Diane Gujarati of Brooklyn, sitting by designation – workers are only exempt from mandatory arbitration if they work for companies that make money from providing transport services.

“Those who work in the bakery industry are not transportation workers, even those who drive a truck from which they sell and deliver the breads and cakes,” Jacobs wrote in the majority opinion.

But in a compelling dissent, Judge Rosemary Pooler accused the majority of ignoring the U.S. Supreme Court’s latest interpretation of the Federal Arbitration Act's loophole.

Last June, in Southwest Airlines Co v. Saxon, the justices ruled that Southwest could not force a baggage handling supervisor to arbitrate her overtime pay claims. Crucially, the Supreme Court rejected arguments that because Southwest is a transportation company, all of its employees are exempt from arbitration. Instead, the justices held that the key consideration is the nature of an employee’s actual work. Saxon, the Supreme Court concluded, should be considered a transportation worker “based on what she does at Southwest, not what Southwest does generally.”

Under that framework, Pooler said, the bakery delivery drivers are truckers. And because they transport baked goods that have been delivered from out-of-state bakeries to Connecticut warehouses, she said, they are engaged in interstate commerce – so, according to Pooler, are exempt from mandatory arbitration.

Pooler derided the majority’s contrary conclusion. “Long story short, [the majority says] the plaintiffs are not transportation workers because they do not work for a trucking company. Can this really be the law?” she wrote. “Certainly not under Saxon.”

Pooler’s dissent highlighted the consequences of the majority’s interpretation by pointing out that an untold number of truckers in the U.S. work directly for retailers, beverage distributors, grocers, furniture companies – you name the business. Under the Supreme Court’s Saxon precedent, she said, drivers do not cease to be transportation workers simply because they are employed by companies outside of the trucking industry.

“If the workers’ principal daily tasks involve them in the actual movement of goods through interstate commerce, they are transportation workers,” Pooler said. “By focusing on the nature of the defendants’ business, and not on the nature of the plaintiffs’ work, the majority offers the sort of industrywide approach Saxon proscribes.”

Monday’s ruling was the panel’s second take on the question of whether the bakery drivers are exempt from arbitration as transportation workers. After the Supreme Court’s ruling in the Saxon case, plaintiffs lawyers from Lichten & Liss-Riordan asked for reconsideration of the 2nd Circuit’s initial May 5 ruling initial May 5 ruling, which also concluded that the drivers were not exempt. The panel agreed to reconsider without even hearing from Flowers, which is represented by Jones Day and Ogletree, Deakins, Nash, Smoak & Stewart.

Defense counsel did suggest in a letter to the 2nd Circuit panel that the judges consider their interpretation of Saxon in a related 1st Circuit appeal. (In that case, Flowers is appealing a trial court ruling that Massachusetts bakery drivers were exempt from arbitration.) The bakery argued in its 1st Circuit brief that the drivers are not engaged in interstate transportation because they only deliver bakery products within Massachusetts. Flowers also told the 1st Circuit that the drivers have many responsibilities in addition to transporting products so they can’t be solely categorized as transportation workers. The 2nd Circuit majority did not rely on either of those theories in Monday’s ruling.

Defense counsel Traci Lovitt of Jones Day did not respond to my email query.

The 2nd Circuit is one of the first appellate courts to interpret the Supreme Court’s Saxon decision. The other two post-Saxon appellate decisions reported by Westlaw – the 5th Circuit’s ruling in Lopez v. Cintas Corp and the Massachusetts Supreme Judicial Court’s decision in Archer v. Grubhub Inc – addressed whether delivery drivers who work primarily within one state are engaged in interstate commerce and therefore exempt from arbitration.

The 2nd Circuit majority’s interpretation would significantly restrict Saxon’s impact by limiting the arbitration exemption to workers at transportation companies who are themselves engaged in interstate transportation. It’s going to be interesting to see if the 1st Circuit splits from the 2nd Circuit interpretation when it hears the Massachusetts drivers’ case against the same defendants.

Plaintiffs' lawyer Harold Lichten told me he plans to ask the 2nd Circuit for en banc review of the panel majority’s novel holding. After the Supreme Court’s Saxon ruling, Lichten said, “We were ecstatic. The justices answered the same question as the 2nd Circuit and said you don’t look at the industry, you look at what the workers are doing.” It was quite an unpleasant surprise, Lichten said, that in Monday’s ruling, the 2nd Circuit majority stuck by its initial analysis.

“It’s just wrong,” he said. “It’s not consistent with what the Supreme Court said.”

Read more:

U.S. Supreme Court rules Southwest Airlines cannot force wage suit into arbitration

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.