This post first appeared on the Securities Arbitration Alert blog. The blog’s editor-in-chief is George H. Friedman, Chairman of the Board of Directors for Arbitartion Resolution Services, Inc.
A unanimous Court holds in Bissonnette v. LePage Bakeries Park St. LLC, No. 23-51, that the Federal Arbitration Act (“FAA”) section one exemption does not require that the worker be engaged in the transportation industry.
As reported in SAA 2024-05 (Feb. 15), the Supreme Court on February 20 heard the oral argument in Bissonnette. The audio is here and the transcript can be found here.
Certiorari Petition
The July 2023 Petition states: “The Federal Arbitration Act exempts the ‘contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.’ 9 U.S.C. § 1. The First and Seventh Circuits have held that this exemption applies to any member of a class of workers that is engaged in foreign or interstate commerce in the same way as seamen and railroad employees—that is, any worker ‘actively engaged’ in the interstate transportation of goods. The Second and Eleventh Circuits have added an additional requirement: The worker’s employer must also be in the ‘transportation industry.’ The question presented is: To be exempt from the Federal Arbitration Act, must a class of workers that is actively engaged in interstate transportation also be employed by a company in the transportation industry?”
Several amicus briefs were filed. Noteworthy briefs were filed by Amazon.com, the California Employment Law Council, and the Chamber of Commerce of the United States.
The Oral Argument
With a full complement of Justices, the oral argument in this case was audio livestreamed via the SCOTUS Website. The discussion focused squarely on Congress’ intent on the scope of the FAA section 1 exemption, with several references to the situation when the FAA was enacted in 1925. (ed: who knew that a coal strike caused a famine in Chicago in 1903?) Bissonnette’s counsel Jennifer Dale Bennett urged that the Court reject an additional requirement that a company be part of the transportation industry: “Less than two years ago, in Southwest versus Saxon, this Court carefully examined the text and history of the Federal Arbitration Act’s worker exemption, and it held that the exemption applies to ‘any class of workers directly involved in transporting goods across state or international borders.’” Traci L. Lovitt, Counsel for the Respondent, led with: “[i]n Circuit City, this Court said that the Section 1 exemption should be read narrowly and should be interpreted with reference to the ejusdem canon, context, and history, all three of which demonstrate that the exemption is limited to transportation industry workers. After all, in 1925 … seamen and railroad employees were defined by the industry in which they work. And that commonality should carry through to the residual clause. Context and history tell you why this line makes sense.” The Court’s pro-arbitration wing was relatively quiet, with the bulk of the questions coming from Justices Kagan; Jackson, and Sotomayor (although Justice Thomas was atypically active). Several Justices on both sides struggled with additional complications posed by defining the “transportation industry.”
Unanimous Court Rejects Transportation Industry Requirement
Chief Justice John G. Roberts’ unanimous opinion rejects the argument that an individual must work in the transportation industry to be exempt under FAA section 1:
“In other words, any exempt worker ‘must at least play a direct and “necessary role in the free flow of goods’ across borders.’” 596 U. S., at 458 (quoting Circuit City, 532 U. S., at 121). These requirements ‘undermine[] any attempt to give the provision a sweeping, open-ended construction,’ instead limiting §1 to its appropriately ‘narrow’ scope. Id., at 118. * * * A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act. The Second Circuit accordingly erred in compelling arbitration on the basis that petitioners work in the bakery industry.”
Closing Caveat
The opinion closes with this limiting language:,
“We express no opinion on any alternative grounds in favor of arbitration raised below, including that petitioners are not transportation workers and that petitioners are not “engaged in foreign or interstate commerce” within the meaning of §1 because they deliver baked goods only in Connecticut.”
(ed: *Our old editorial comment referenced a February 21 Reuters blog post, US Supreme Court Seems Unlikely to Limit FAA Exemption to Transportation Companies, and added: “We’re with Reuters.” **For an excellent analysis, see this April 12 CPR blog post, Supreme Court Expands Federal Arbitration Act Exemption from ADR. ***The Court also granted certiorari in another arbitration-related case, Coinbase v. Suski, No. 23-3, which was heard February 28. A decision should be issued soon, we think.)
