In Domino’s Pizza LLC v. Carmona, Domino’s petitioned the U.S. Supreme Court to clarify whether drivers making only in-state deliveries of goods, ordered by in-state customers from an in-state warehouse, engaged in interstate or foreign commerce, exempting them from arbitration under Section 1 of the Federal Arbitration Act.
The Supreme Court on October 17, 2022, granted Domino’s petition for certiorari, vacated the Ninth Circuit’s ruling allowing the drivers to proceed with a class action in court, and remanded the case in light of the Supreme Court’s decision last term in Southwest Airlines Co. v. Saxon, which held that the FAA’s exemption applied to baggage handlers who loaded airplane cargo.
The remand leaves open the question whether the FAA will apply to workers like the delivery drivers in Domino’s, who never physically cross state lines but deliver goods that have traveled across state lines. The law’s application could determine whether lawsuits involving delivery drivers end up in court or private arbitration.
The FAA provides the process for carrying out arbitration disputes subject to arbitration agreements. Section 1 of the FAA provides that the statute does not apply “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
Domino’s case in California involved a putative class action brought by three delivery drivers who delivered ingredients from a centralized California warehouse to local Domino’s franchises. The drivers claimed that Domino’s did not pay them work-related expenses and violated various California labor laws.
Domino’s moved to compel arbitration under contracts with the drivers. The drivers argued that the FAA exempted them from arbitration because they engaged in interstate commerce by handling goods coming from other states, mainly ingredients being shipped to the California warehouse and distributed by the drivers. The district court denied Domino’s motion to compel arbitration, citing the FAA’s exemption and explaining that the deliveries represented the final step in the flow of goods over state lines. The Ninth Circuit affirmed.
In a one-sentence order, the Supreme Court remanded the Ninth Circuit’s decision, allowing the putative class action to continue in court in light of its June 2022 decision involving Southwest Airlines. In Saxon, the Supreme Court held that Southwest could not force baggage handlers into arbitration because they routinely loaded cargo into airplanes that crossed state lines and therefore fell under the FAA’s exception.
Justice Clarence Thomas wrote for the court that Section 1 exempts some, but not all, workers from arbitration even if they do not physically cross a border. Airplane cargo loaders perform activities within the flow of interstate commerce because they load or unload these goods for travel. However, Saxon did not set forth a bright-line rule for what other types of transportation workers fall under the FAA exemption, and thus Domino’s asked the court to clarify its holding.
The Supreme Court’s remand did not provide Domino’s with the clarity it wanted — at least not yet. But the court may be setting up a future petition after the Ninth Circuit and other courts apply Saxon to the facts of Domino’s case or other cases.
The decision whether to send these cases to arbitration or court can have an immense impact on companies in the transportation and shipping industries. In an amicus brief supporting Domino’s petition, the U.S. Chamber of Commerce argued that evading arbitration would “impose[] real costs on businesses.” More than half of private-sector U.S. employees have signed arbitration agreements, and litigation is on the rise for transportation workers who are seeking to avoid mandatory arbitration and pursue class claims. Companies such as Grubhub, Uber, and Amazon are all dealing with cases similar to Carmona. As lower courts apply the rulings from Carmona and Saxon, the case law will shape the future of commerce-based class actions in the transportation industry.
