Waithaka v. Amazon.Com, Inc.

966 F.3d 10

Bernard WAITHAKA, on behalf of himself and all others similarly situated, Plaintiff, Appellee,

v.AMAZON.COM, INC.; Amazon Logistics, Inc., Defendants, Appellants.

No. 19-1848

United States Court of Appeals, First Circuit.

July 17, 2020

David B. Salmons, with whom James P. Walsh, Jr., Noah J. Kaufman, Michael E. Kenneally, and Morgan, Lewis & Bockius LLP were on brief, for appellants.

Harold L. Lichten, with whom Shannon Liss-Riordan, Adelaide H. Pagano, and Lichten & Liss-Riordan, P.C. were on brief, for appellee.

Archis A. Parasharami and Mayer Brown LLP on brief for the Chamber of Commerce of the United States of America and the National Association of Manufacturers, amici curiae.

Corbin K. Barthold, Richard A. Samp, and Washington Legal Foundation on brief for Washington Legal Foundation, amicus curiae.

Toby J. Marshall, Blythe H. Chandler, Elizabeth A. Adams, Terrell Marshall Law Group PLLC, Jennifer D. Bennett, and Public Justice on brief for Public Justice, amicus curiae.

Before Howard, Chief Judge, Lipez, and Thompson, Circuit Judges.

LIPEZ, Circuit Judge.

This putative class action requires us to decide whether employment contracts of certain delivery workers -- those locally transporting goods on the last legs of interstate journeys -- are covered by the Federal Arbitration Act ("FAA" or the "Act"), given its exemption for "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. We have not considered the scope of the exemption since the Supreme Court held in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001), that this provision is limited to employment contracts of "transportation workers." After close examination of the text and purpose of the statute and the relevant precedent, we now hold that the exemption encompasses the contracts of transportation workers who transport goods or people within the flow of interstate commerce, not simply those who physically cross state lines in the course of their work.

Plaintiff-appellee Bernard Waithaka, a so-called "last mile" delivery driver for defendants-appellants Amazon.com, Inc. ("Amazon.com") and its subsidiary, Amazon Logistics, Inc. ("Amazon Logistics"),¹ falls within this category of transportation workers whose contracts are exempt from the FAA. Hence, we conclude that the FAA does not govern the enforceability of the mandatory arbitration provision of his employment agreement with appellants. Because that provision prohibits proceeding on a class basis, either in the arbitral or judicial forum, we also agree with the district court that the arbitration provision is unenforceable under state law. Therefore, we affirm the district court's denial of appellants' motion to compel arbitration.

I.

A. Factual Background²

Amazon.com and Amazon Logistics are based in Seattle, Washington. Amazon sells retail products online to customers throughout the United States. To "ensure that millions of packages reach their final destination as efficiently as possible," Amazon Logistics provides package delivery services "through the last mile of the order." Amazon attributes its success as "one of the world's largest online retailers," in part, to its "accurate and timely package delivery."

Historically, Amazon has used third-party delivery providers, such as FedEx, UPS, and the United States Postal Service, to deliver its products. In recent years, however, Amazon has also begun to contract with independent contractors for delivery services through its Amazon Flex ("AmFlex") smartphone application. These contractors, like Waithaka, sign up for delivery shifts and then use their own methods of transportation -- typically, a private vehicle -- to deliver products ordered through Amazon within a specified timeframe and in compliance with other Amazon service standards. AmFlex contractors are paid an hourly rate for their delivery shifts. But if contractors require more time than a normal shift to complete all of their deliveries, they are not compensated for the additional time. Nor do they receive any reimbursement for their gas, car maintenance, or cellphone data expenses.

To begin work with AmFlex, a prospective contractor must download the AmFlex app, create an account, login, and agree to the AmFlex Independent Contractor Terms of Service (the "Agreement" or the "TOS"). The second paragraph of the TOS states:

YOU AND AMAZON AGREE TO RESOLVE DISPUTES BETWEEN YOU AND AMAZON ON AN INDIVIDUAL BASIS THROUGH FINAL AND BINDING ARBITRATION , UNLESS YOU OPT OUT OF ARBITRATION WITHIN 14 CALENDAR DAYS OF THE EFFECTIVE DATE OF THIS AGREEMENT, AS DESCRIBED BELOW IN SECTION 11.

Section 11 of the Agreement (the "dispute resolution section") further explains the arbitration requirement and also states that the parties waive their rights to bring class actions:

11. Dispute Resolution, Submission to Arbitration.

a) SUBJECT TO YOUR RIGHT TO OPT OUT OF ARBITRATION, THE PARTIES WILL RESOLVE BY FINAL AND BINDING ARBITRATION, RATHER THAN IN COURT, ANY DISPUTE OR CLAIM, WHETHER BASED ON CONTRACT, COMMON LAW, OR STATUTE, ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT, INCLUDING TERMINATION OF THIS AGREEMENT, TO YOUR PARTICIPATION IN THE PROGRAM OR TO YOUR PERFORMANCE OF SERVICES. TO THE EXTENT PERMITTED BY LAW, THE PRECEDING SENTENCE APPLIES TO ANY DISPUTE OR CLAIM THAT COULD OTHERWISE BE ASSERTED BEFORE A GOVERNMENT ADMINISTRATIVE AGENCY.

b) TO THE EXTENT PERMITTED BY LAW, THE PARTIES AGREE THAT ANY DISPUTE RESOLUTION PROCEEDINGS WILL BE CONDUCTED ONLY ON AN INDIVIDUAL BASIS AND NOT ON A CLASS OR COLLECTIVE BASIS.

...

g) THIS AGREEMENT SHALL NOT BE INTERPRETED AS REQUIRING EITHER PARTY TO ARBITRATE

DISPUTES ON A CLASS, COLLECTIVE OR REPRESENTATIVE BASIS, EVEN IF A COURT OR ARBITRATOR INVALIDATES OR MODIFIES OR DECLINES TO ENFORCE THIS AGREEMENT IN WHOLE OR IN PART.³

Two parts of the Agreement pertain to the parties' choice of law. The dispute resolution section includes a provision stating that "the Federal Arbitration Act and applicable federal law will govern any dispute that may arise between the parties." In a separate section (the "governing law section"), the TOS indicates the law that governs the interpretation of the Agreement:

12. Governing Law.

The interpretation of this Agreement is governed by the law of the state of Washington without regard to its conflict of laws principles, except for Section 11 of this Agreement, which is governed by the Federal Arbitration Act and applicable federal law.

Finally, the Agreement includes a severability provision, which states that "[i]f any provision of this Agreement is determined to be unenforceable, the parties intend that this Agreement be enforced as if the unenforceable provisions were not present and that any partially valid and enforceable provisions be enforced to the fullest extent permissible under applicable law."

Waithaka, a resident of Massachusetts, "on-boarded" into the AmFlex program on January 13, 2017, and accepted the TOS on that same date. He did not opt out of the arbitration agreement. Since 2017, Waithaka has collected packages for delivery in Massachusetts and has not crossed state lines in the course of his deliveries.

B. Procedural Background

Waithaka filed this action in Massachusetts state court in August 2017, asserting three claims against Amazon: (1) misclassification of AmFlex drivers as independent contractors, rather than employees; (2) violation of the Massachusetts Wage Act by requiring AmFlex drivers to "bear business expenses necessary to perform their work"; and (3) violation of the Massachusetts Minimum Wage Law. He seeks to bring these claims on behalf of himself and "individuals who have worked as delivery drivers for [appellants] in the Commonwealth of Massachusetts and have been classified as independent contractors."

Although Amazon timely removed the case to federal court, the district court remanded the case after concluding that the putative class did not meet the requisite amount in controversy for jurisdiction pursuant to the Class Action Fairness Act ("CAFA"). Waithaka v. Amazon.com, Inc., No. 17-40141-TSH, 2018 WL 4092074, at *3 (D. Mass. Aug. 28, 2018). However, Amazon was successful when it again removed the case in September 2018. Concluding that the amount in controversy had increased since the first removal and that the second removal was not time-barred, the district court denied Waithaka's second motion to remand. Waithaka v. Amazon.com, Inc., 363 F. Supp. 3d 210, 212-14 (D. Mass. 2019).

In April 2019, Amazon moved to compel arbitration pursuant to the TOS, or, in the alternative, to transfer the case to the United States District Court for the Western District of Washington so that the case could proceed with similar, earlier-filed litigation that was pending. In August 2019, the district court denied in part and granted in part the motion. Waithaka v. Amazon.com, Inc., 404 F. Supp. 3d 335, 339 (D. Mass. 2019). Specifically, the district court concluded that Waithaka's Agreement was exempt from the FAA, that Massachusetts law therefore governed the enforceability of the arbitration provision, and that the provision was unenforceable based on Massachusetts public policy. Id. at 343, 346, 348. However, the court granted appellants' alternative request to transfer the case, which has since occurred.⁴ Id. at 349-51.

Amazon timely filed this appeal, challenging the district court's denial of the motion to compel arbitration. The parties agreed to stay the Washington proceedings pending the resolution of the appeal.

II.

The interpretation of arbitration agreements and the issuance of orders compelling arbitration, or declining to do so, are subject to de novo review. Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 4 (1st Cir. 2012). Similarly, we review de novo choice of law determinations. Robidoux v. Muholland, 642 F.3d 20, 22 (1st Cir. 2011).

A. Background of the...