Oliveira v. New Prime, Inc. , 857 F.3d 7 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 15-2364
DOMINIC OLIVEIRA,
on his behalf and on behalf of all others similarly situated,
Plaintiff, Appellee,
v.
NEW PRIME, INC.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Thompson and Kayatta, Circuit Judges,
and Barbadoro,* District Judge.
Theodore J. Boutrous, Jr., with whom Joshua S. Lipshutz, Jason
C. Schwartz, Thomas M. Johnson, Jr., Lindsay S. See, Gibson, Dunn
& Crutcher LLP, William E. Quirk, James C. Sullivan, Robert J.
Hingula, Polsinelli PC, Judith A. Leggett, and Leggett Law Firm,
P.C. were on brief, for appellant.
Jennifer D. Bennett, with whom Public Justice, P.C., Hillary
Schwab, Fair Work, P.C., Andrew Schmidt, and Andrew Schmidt Law,
PLLC were on brief, for appellee.
Richard Frankel on brief for amicus curiae in support of
appellee.
* Of the District of New Hampshire, sitting by designation.
May 12, 2017
THOMPSON, Circuit Judge. This case raises two questions
of first impression in this circuit. First, when a federal
district court is confronted with a motion to compel arbitration
under the Federal Arbitration Act (FAA or Act), 9 U.S.C. §§ 1-16,
in a case where the parties have delegated questions of
arbitrability to the arbitrator, must the court first determine
whether the FAA applies or must it grant the motion and let the
arbitrator determine the applicability of the Act? We hold that
the applicability of the FAA is a threshold question for the court
to determine before compelling arbitration under the Act. Second,
we must decide whether a provision of the FAA that exempts
contracts of employment of transportation workers from the Act's
coverage, see id. § 1 (the § 1 exemption), applies to a
transportation-worker agreement that establishes or purports to
establish an independent-contractor relationship. We answer this
question in the affirmative. Accordingly, we affirm the district
court's order denying the motion to compel arbitration and dismiss
this appeal for lack of appellate jurisdiction.
Background1
The defendant, New Prime, Inc. (Prime), operates an
interstate trucking company. Under its Student Truck Driver
1Because the motion to compel arbitration was made in
connection with a motion to dismiss or stay, we glean the relevant
facts from the operative complaint and the documents submitted to
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Program (apprenticeship program), Prime recruits and trains new
drivers. Prime touts its program as offering "[p]aid
[a]pprenticeship [Commercial Driver's License (CDL)] [t]raining."
After attending a four-day orientation, student drivers hit the
road with a Prime truck driver, who acts as an on-the-job
instructor. In this phase of the apprenticeship program, student
drivers must log 10,000 miles as a driver or passenger, and, apart
from an advance of $200 per week for food (which eventually must
be repaid), the apprentices are not paid.2 After completing the
supervised-driving period, the student driver takes the
examination for a CDL and then must drive 30,000 more miles as a
B2 company driver trainee (B2 trainee). Prime pays its B2 trainees
fourteen cents per mile. At the conclusion of the B2 trainee
portion of the apprenticeship program, the apprentices attend
the district court in support of the motion. See Gove v. Career
Sys. Dev. Corp., 689 F.3d 1, 2 (1st Cir. 2012).
2
This arrangement allows Prime to transport its shipments in
a more economical and efficient manner. Under United States
Department of Transportation regulations, a truck driver's "[o]n-
duty time" includes "[a]ll driving time" as well as a host of other
non-driving tasks, including time spent supervising a student
driver who is behind the wheel. 49 C.F.R. § 395.2. In any
fourteen-hour period of on-duty time, a truck driver has only
eleven hours of driving time. Id. § 395.3(a)(2)-(3)(i). After a
Prime instructor driver has maxed out his or her eleven hours of
driving time, the instructor driver still has three more hours of
on-duty time remaining. Thus, once an instructor driver has
exhausted his or her own driving time, a student driver can drive
the truck toward its ultimate destination for up to three more
hours, and Prime does not pay the student driver for this bonus
driving time.
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additional orientation classes for approximately one week.
Apprentices are not paid for time spent in this orientation.
The plaintiff, Dominic Oliveira, is an alum of Prime's
apprenticeship program. He was not paid for the time he spent in
orientation and was paid on a per-mile basis while driving as a B2
trainee, although Prime docked his pay during this period to recoup
the $200 advances that it paid him during the supervised-driving
period.
Drivers are relieved of paying tuition for the
apprenticeship program as long as they remain with Prime for one
year as either company drivers or independent contractors. After
completing the program, drivers choose between the two options,
and Prime offers a $100 bonus to those who elect independent-
contractor status. When Oliveira finished the apprenticeship
program, Prime representatives informed him that he would make
more money as an independent contractor than a company driver.
Prime directed Oliveira to Abacus Accounting (Abacus) — a company
with offices on the second floor of Prime's building — to assist
him in forming a limited liability company (LLC). After Oliveira
filled out a form provided by Abacus and listed his preferred LLC
names, Abacus created Hallmark Trucking LLC (Hallmark) on
Oliveira's behalf.
Prime then directed Oliveira to the offices of Success
Leasing (Success) — located on the first floor of the same building
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— for help in securing a truck. After selecting a truck, Oliveira
was informed that his first load of freight was ready to be trucked
for Prime, and he was instructed to sign the highlighted portions
of several documents before hitting the road. He hastily did so,
and Prime then steered him towards its company store, where he
purchased — on credit — $5,000 worth of truck equipment and fuel.
Among the documents Oliveira signed was an Independent
Contractor Operating Agreement (the contract) between Prime and
Hallmark.3 The contract specified that the relationship between
the parties was that "of carrier and independent contractor and
not an employer/employee relationship" and that "[Oliveira is] and
shall be deemed for all purposes to be an independent contractor,
not an employee of Prime."4 Additionally, under the contract,
Oliveira retained the rights to provide transportation services to
companies besides Prime,5 refuse to haul any load offered by Prime,
3Around ten months later, Hallmark and Prime executed another
Independent Contractor Operating Agreement. Because the pertinent
language of the two agreements is identical, we refer to them
collectively as "the contract." When quoting the contract in this
opinion, we omit any unnecessary capitalization.
4 Although the contract was between Prime and Hallmark, Prime
has — with one small exception discussed below, see note 15, infra
— treated the contract as one between Prime and Oliveira. We
similarly treat Oliveira and Hallmark interchangeably.
5 Before he could drive for another carrier, however, Oliveira
was contractually obligated to give Prime five days' advance notice
and to "remove all identification devices, licenses and base plates
from the [truck] and return [them] to Prime."
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and determine his own driving times and delivery routes. The
contract also obligated Oliveira to pay all operating and
maintenance expenses, including taxes, incurred in connection with
his use of the truck leased from Success. Finally, the contract
contained an arbitration clause under which the parties agreed to
arbitrate "any disputes arising under, arising out of or relating
to [the contract], . . . including the arbitrability of disputes
between the parties."6
Oliveira alleges that, during his Hallmark days, Prime
exercised significant control over his work. According to
Oliveira, Prime required him to transport Prime shipments,
mandated that he complete Prime training courses and abide by its
procedures, and controlled his schedule. Because of Prime's
pervasive involvement in his trucking operation, Oliveira was
unable to work for any other trucking or shipping companies.
Prime consistently shortchanged Oliveira during his time
as an independent contractor. Eventually, Oliveira — frustrated
and, he alleges, unlawfully underpaid — stopped driving for Prime.
It was a short-lived separation, however; Prime rehired Oliveira
a month later, this time as a company driver. Oliveira alleges
that his job responsibilities as a company driver were
6
The arbitration provision also specified that "arbitration
between the parties will be governed by the Commercial Arbitration
Rules of the American Arbitration Association [(AAA)]."
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"substantially identical" to those he had as an independent
contractor. Job responsibilities were not the only constant;
Oliveira's pay as a company driver was as paltry as ever.
Oliveira filed this class action against Prime, alleging
that Prime violated the Fair Labor Standards Act (FLSA), 29 U.S.C.
§§ 201-219, as well as the Missouri minimum-wage statute, by
failing to pay its truck drivers minimum wage. Oliveira also
asserted a class claim for breach of contract or unjust enrichment
and an individual claim for violation of Maine labor statutes.
Prime moved to compel arbitration under the FAA and stay the
proceedings or, alternatively, to dismiss the complaint for
improper venue and the breach of contract/unjust enrichment count
for failure to state a claim upon which relief may be granted.7
In its motion, Prime asserted that "Oliveira . . . entered into an
Independent Contractor Operating Agreement with . . . Prime . . .
to work as an owner-operator truck driver." (Emphasis added.)
In response, Oliveira argued that, because he was not a
party to the contract between Prime and Hallmark, he could not be
personally bound by any of its provisions, including the
arbitration clause. He further contended that the motion to compel
arbitration should be denied because, among other reasons, the
7 Because the district court never addressed the alternative
arguments for dismissal and Prime has not pressed them on appeal,
we focus only on the motion to compel arbitration.
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contract is exempted from the FAA under § 1. He also argued that
the question of the applicability of the § 1 exemption was one for
the court, and not an arbitrator, to decide.
Prime disputed Oliveira's argument that he could not be
personally bound by the contract between Prime and Hallmark,
stating that "Oliveira and Hallmark Trucking are factually one and
the same." Prime also took issue with both of Oliveira's other
arguments, contending that the § 1 exemption does not include
independent-contractor agreements and, in any event, the question
of whether the § 1 exemption applies is a question of arbitrability
that the parties had delegated to the arbitrator.8
The district court proceeded straight to the FAA issues
and concluded that the question of the applicability of the § 1
exemption was for the court, and not an arbitrator, to decide.
And it determined that it could not yet answer that question
because (1) the "contracts of employment" language of the § 1
exemption does not extend to independent contractors; and (2)
discovery was needed on the issue of whether Oliveira was a Prime
employee or an independent contractor before the court could decide
8 The parties also squabbled over whether Oliveira's claims
arising from periods of time in which the contract was not in
effect — during Oliveira's pre-contract time in the apprenticeship
program and his post-contract stint as a company driver — were
arbitrable under the arbitration clause of the contract. The
district court did not resolve the issue, electing instead to focus
on the question of whether the § 1 exemption applied.
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whether the contract was a contract of employment under the § 1
exemption.9 The district court therefore denied Prime's motion to
compel arbitration without prejudice and permitted the parties to
conduct discovery on Oliveira's employment status. Prime timely
appealed.10
Analysis
The FAA lies at the center of the two questions raised
by this appeal. Thus, before tackling those questions, we first
briefly outline the statutory framework.
To combat deep-rooted judicial hostility towards
arbitration agreements, Congress enacted the FAA in 1925. See
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111 (2001).
Section 2 of the FAA enshrines the "liberal federal policy favoring
arbitration agreements," Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24 (1983), by declaring that an
arbitration agreement in "a contract evidencing a transaction
involving commerce . . . shall be valid, irrevocable, and
9 The district court noted that the parties did not dispute
that Oliveira, as a truck driver, was a transportation worker under
the § 1 exemption.
10 Although interlocutory orders are ordinarily not
immediately appealable, the FAA permits immediate appeal from an
order denying a motion to compel arbitration. See 9 U.S.C.
§ 16(a)(1)(B); Gove, 689 F.3d at 3-4 n.1. We review the denial of
a motion to compel arbitration de novo. Gove, 689 F.3d at 4.
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enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract," 9 U.S.C. § 2.
And the FAA does not simply talk the talk. Instead, two
separate provisions provide the bite to back up § 2's bark. See
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70 (2010). First,
under § 3, a party may obtain a stay of federal-court litigation
pending arbitration. See 9 U.S.C. § 3. Second, § 4 authorizes
district courts to grant motions to compel arbitration. See id.
§ 4.
The scope of the FAA, however, is not unbounded. Section
1 of the FAA provides that the Act shall not apply "to contracts
of employment of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce." Id. § 1. The
Supreme Court has interpreted this section to "exempt[] from the
FAA . . . contracts of employment of transportation workers."
Circuit City, 532 U.S. at 119.
This case presents us with two questions pertaining to
the § 1 exemption. We address each question in turn.
A. Who Decides Whether the § 1 Exemption Applies?
The question of whether the district court or the
arbitrator decides the applicability of the § 1 exemption is one
of first impression in this circuit. The parties champion dueling
out-of-circuit precedent in support of their respective positions
on this issue. Relying on the Eighth Circuit's decision in Green
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v. SuperShuttle International, Inc., 653 F.3d 766 (8th Cir. 2011),
Prime argues that the question of whether the § 1 exemption applies
is a question of arbitrability that must be decided by the
arbitrator where, as here, the parties have delegated such
questions to the arbitrator.
In Green, the plaintiffs, a class of shuttle-bus
drivers, alleged that the defendant, a shuttle-bus company,
misclassified the drivers as franchisees instead of classifying
them as employees. 653 F.3d at 767-68. When the defendant moved
under the FAA to compel arbitration pursuant to the arbitration
clause contained in the parties' contracts, the plaintiffs
countered that their contract was outside the scope of the FAA by
virtue of the § 1 exemption. Id. at 768. The Eighth Circuit
upheld the district court's grant of the defendant's motion,
concluding that "[a]pplication of the FAA's transportation worker
exemption is a threshold question of arbitrability" in the parties'
dispute. Id. at 769. Because the parties' agreements incorporated
the AAA rules, which provide that the arbitrator has the power to
determine his or her own jurisdiction, the court concluded that
the parties agreed to allow the arbitrator to determine threshold
questions of arbitrability, including the applicability of the § 1
exemption. Id.
With Green as its guide, Prime offers several reasons
why the question of § 1's applicability is one for the arbitrator
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to determine, but each of these arguments flows from the Green
court's characterization of this issue as a question of
arbitrability. The case on which Oliveira relies — the Ninth
Circuit's decision in In re Van Dusen, 654 F.3d 838 (9th Cir. 2011)
— considered this characterization to be a flawed starting premise.
Van Dusen arose on facts strikingly similar to those in
this case; the plaintiffs, interstate truck drivers, alleged that
one of the defendants, a trucking company, misclassified its truck
drivers as independent contractors to circumvent the requirements
of the FLSA and parallel state laws. See id. at 840; see also Van
Dusen v. Swift Transp. Co., 830 F.3d 893, 895 (9th Cir. 2016)
(later appeal in same case). The defendant moved to compel
arbitration under the FAA, and the plaintiffs opposed that motion,
asserting that the § 1 exemption applied to their contracts. Van
Dusen, 654 F.3d at 840. The district court ordered arbitration,
concluding that the question of whether the § 1 exemption applied
was one for the arbitrator to decide in the first instance. Id.
After the district court refused the plaintiffs' request for
certification of an interlocutory appeal, the plaintiffs sought
mandamus relief before the Ninth Circuit. Id.
The Ninth Circuit ultimately declined to issue the
extraordinary remedy of mandamus relief because the district
court's conclusion was not clearly erroneous in light of the dearth
of federal appellate authority addressing the issue and the general
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federal policy in favor of arbitration. Id. at 845-46. The court
nonetheless outlined why "the best reading of the law requires the
district court to assess whether [the §] 1 exemption applies before
ordering arbitration" under the FAA. Id. at 846. The court
explained that, because a district court's authority to compel
arbitration under the FAA exists only where the Act applies, "a
district court has no authority to compel arbitration under Section
4 [of the FAA] where Section 1 exempts the underlying contract
from the FAA's provisions." Id. at 843. The court elaborated:
In essence, [the d]efendants and the [d]istrict [c]ourt
have adopted the position that contracting parties may
invoke the authority of the FAA to decide the question
of whether the parties can invoke the authority of the
FAA. This position puts the cart before the horse:
Section 4 has simply no applicability where Section 1
exempts a contract from the FAA, and private contracting
parties cannot, through the insertion of a delegation
clause, confer authority upon a district court that
Congress chose to withhold.
Id. at 844. The court also concluded that the question of whether
the § 1 exemption applies "does not fit within th[e] definition"
of "questions of arbitrability." Id.
After careful consideration of these competing cases, we
are persuaded that the Ninth Circuit hit the nail on the head, and
we therefore hold that the issue of whether the § 1 exemption
applies presents a question of "whether the FAA confers authority
on the district court to compel arbitration" and not a question of
arbitrability. Id.
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"The Supreme Court defines 'questions of arbitrability'
as questions of 'whether the parties have submitted a particular
dispute to arbitration.'" Id. (quoting Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 83 (2002)); see also Rent-A-Ctr., 561
U.S. at 68-69 ("[P]arties can agree to arbitrate 'gateway'
questions of 'arbitrability,' such as whether the parties have
agreed to arbitrate or whether their agreement covers a particular
controversy."); Arbitrability, Black's Law Dictionary (10th ed.
2014) (defining arbitrability as "[t]he status, under applicable
law, of a dispute's being or not being resolvable by arbitrators
because of the subject matter"). In this case, determining whether
the § 1 exemption applies to the contract does not entail any
consideration of whether Prime and Oliveira have agreed to submit
a dispute to arbitration; instead, it raises the "distinct inquiry"
of whether the district court has the authority to act under the
FAA — specifically, the authority under § 4 to compel the parties
to engage in arbitration. Van Dusen, 654 F.3d at 844.
Therefore, as the Ninth Circuit explained in Van Dusen,
the question of the court's authority to act under the FAA is an
"antecedent determination" for the district court to make before
it can compel arbitration under the Act. Id. at 843. Prime's
argument to the contrary "puts the cart before the horse" and makes
no sense. Id. at 844. The following scenario readily demonstrates
why this is so: First, assume that two parties enter into a
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contract containing an arbitration clause with language identical
to that contained in the contract in this case, including a
provision delegating questions of arbitrability to the arbitrator.
Second, assume that, unlike in this case, the parties are in
agreement that the contract involved is clearly a contract of
employment of a transportation worker. Third, assume that, as in
this case, one of the parties, relying solely on the FAA, moves to
compel arbitration. Taking Prime's position to its logical
conclusion, the district court would be obligated to grant the
motion because the parties have agreed to allow the arbitrator to
decide questions of arbitrability, including whether the § 1
exemption applies. See Green, 653 F.3d at 769. This would be so
even though the § 1 exemption indisputably applies to the contract,
such that the district court had no authority to act under the FAA
in the first place. See Van Dusen, 654 F.3d at 843 ("[A] district
court has no authority to compel arbitration under Section 4 where
Section 1 exempts the underlying contract from the FAA's
provisions.").11
11 When confronted with the logical extreme of its position
at oral argument, Prime sought to qualify it to some degree. Prime
insisted that, so long as the party seeking to compel arbitration
had a good-faith basis for asserting that the § 1 exemption did
not apply, the question of the applicability of the § 1 exemption
would need to be arbitrated under the delegation clause of the
arbitration agreement. But, even with this minor qualification,
Prime's position still boils down to the conclusion that the
district court can compel arbitration under the FAA before
determining whether it has authority to act under the FAA, even in
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This position cannot be correct. When the only basis
for seeking arbitration in federal court is the FAA, the district
court can grant the requested relief only if it has authority to
act under the FAA. See id. at 843. If the FAA does not apply,
"private contracting parties cannot, through the insertion of a
delegation clause, confer authority upon a district court [i.e.,
to compel arbitration under the FAA] that Congress chose to
withhold." Id. at 844. Therefore, "the district court must make
an antecedent determination that a contract is arbitrable under
Section 1 of the FAA before ordering arbitration pursuant to
Section 4." Id. at 843.
Because we reject Green's starting premise — that the
issue of § 1's applicability is a question of arbitrability — we
are unpersuaded by Green's reliance on a contract's incorporation
of the AAA rules, which allow an arbitrator to determine his or
her own jurisdiction. Where, as here, the parties dispute whether
the district court has the authority to compel arbitration under
the FAA, the extent of the arbitrator's jurisdiction is of no
concern. Instead, we are concerned only with the question of
whether the district court has authority to act under a federal
statute. Nothing in the AAA rules — including the power to
determine the arbitrator's jurisdiction — purports to allow the
a case where it might not have such authority. We do not accept
this position.
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arbitrator to decide whether a federal district court has the
authority to act under a federal statute.12
For all these reasons, we join our colleagues on the
Ninth Circuit and hold that the question of whether the § 1
exemption applies is an antecedent determination that must be made
by the district court before arbitration can be compelled under
the FAA. But we can't stop there.
12 We are likewise unmoved by each of Prime's subsidiary
arguments, all of which are grounded on the question-of-
arbitrability premise that we reject. For example, Prime's
invocation of the liberal federal policy in favor of arbitration
and its corollary, the principle that any doubts about the scope
of arbitrable issues should be resolved in favor of arbitration,
goes nowhere because we are not confronted with a scope question.
See Paul Revere Variable Annuity Ins. Co. v. Kirschhofer, 226 F.3d
15, 25-26 (1st Cir. 2000). Similarly, Prime's argument that, so
long as the court is "satisfied that the making of the agreement
for arbitration or the failure to comply therewith is not in
issue," 9 U.S.C. § 4, the court must compel arbitration overlooks
that one does not even approach the § 4 inquiry until one first
determines that the § 1 exemption does not apply. See Van Dusen,
654 F.3d at 843-44. Finally, Prime's effort to compare the
question of the applicability of the § 1 exemption to questions
concerning the validity of an agreement or whether it can be
enforced by the party seeking to compel arbitration — questions
that can be referred to the arbitrator — is unavailing. Issues
concerning alleged flaws with an agreement's validity or
enforceability are fundamentally different than the issue of the
district court's authority to act under the FAA in the first place.
See id. at 844 ("[P]rivate contracting parties cannot, through the
insertion of a delegation clause, confer authority upon a district
court that Congress chose to withhold."). Additionally, it is not
unusual for a court to first decide a specific challenge to the
validity or enforceability of the arbitration clause that a party
is seeking to enforce. See Rent-A-Ctr., 561 U.S. at 71; Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04
(1967).
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B. Independent Contractors and the § 1 Exemption
After concluding that it must decide for itself whether
the § 1 exemption applies, the district court in this case ordered
the parties to conduct factual discovery to determine whether
Oliveira was truly an independent contractor or instead was in
reality a Prime employee during the time that the contract was in
place. Discovery on that issue was necessary, in the court's view,
because "courts generally agree that the § 1 exemption does not
extend to independent contractors."
On appeal, both parties challenge this aspect of the
district court's order. Prime agrees that § 1 does not extend to
independent contractors, but it argues that discovery on the
relationship between the parties is inappropriate because
Oliveira's status as a Prime employee or independent contractor
should be decided by the arbitrator. See AT&T Techs., Inc. v.
Comm'cns Workers of Am., 475 U.S. 643, 649 (1986) ("[I]n deciding
whether the parties have agreed to submit a particular grievance
to arbitration, a court is not to rule on the potential merits of
the underlying claims."). Alternatively, Prime argues that if the
district court must determine whether the § 1 exemption applies,
it should consider only whether the face of the contract
demonstrates an intent to make Oliveira an independent contractor.
Oliveira, on the other hand, argues that the § 1 exemption covers
the employment contracts of "all transportation workers, including
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independent contractors." If we agree with Oliveira, discovery is
not needed.
Thus, the question presented is whether the § 1 exemption
extends to transportation-worker agreements that establish or
purport to establish independent-contractor relationships, and we
review this issue of statutory interpretation de novo.13 See United
States v. Maldonado-Burgos, 844 F.3d 339, 340 (1st Cir. 2016). As
13 We have considered the possibility, proposed by our
dissenting colleague, of remanding without deciding this question
of statutory interpretation. The benefit of this approach,
according to the dissent, would be avoiding this difficult legal
question now on the chance that the discovery contemplated by the
district court might lead to a conclusion that Oliveira is not an
independent contractor — a conclusion that would moot, for this
case, the question whether independent contractors are within the
exemption. But we do not view this approach as a viable option
because the district court ordered discovery based on its legal
conclusion that "the § 1 exemption does not extend to independent
contractors." If that legal conclusion is incorrect — an issue
that Oliveira sufficiently raised below and both parties have
briefed on appeal — there is no need for discovery in the first
place. Therefore, we will not adopt an approach that assumes away
one of the live issues on appeal simply because the issue is a
difficult one. Cf. Citizens United v. Fed. Election Comm'n, 558
U.S. 310, 375 (2010) (Roberts, C.J., concurring) ("It should go
without saying . . . that we cannot embrace a narrow ground of
decision simply because it is narrow; it must also be right. Thus
while it is true that '[i]f it is not necessary to decide more, it
is necessary not to decide more,' . . . sometimes it is necessary
to decide more. There is a difference between judicial restraint
and judicial abdication."). Finally, we note that we are not
convinced that the dissent's approach in fact provides a narrower
ground of decision; such an approach would require us to address
Prime's contention (which the dissent implicitly rejects) that
discovery on the parties' relationship would render the
contractual right to arbitration a nullity. Addressing that
contention would present its own set of challenges, but, given the
manner in which we decide the statutory-interpretation question,
that issue is the one that need not be decided in this appeal.
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always, the statutory text is our starting point. See id. The
§ 1 exemption provides that nothing contained in the FAA "shall
apply to contracts of employment of seamen, railroad employees, or
any other class of workers engaged in foreign or interstate
commerce." 9 U.S.C. § 1 (emphasis added). The Supreme Court has
declared that "[§] 1 exempts from the FAA only contracts of
employment of transportation workers." Circuit City, 532 U.S. at
119.
Before embarking on our analysis, we first identify two
issues that we need not decide. First, Prime does not dispute
that Oliveira, whose work for Prime included driving a truck across
state lines, is a "transportation worker" within the meaning of
the § 1 exemption, as interpreted by Circuit City.14 Thus, we have
14
The district court's decision indicated that the parties
did not dispute this issue. Similarly, Prime did not argue in its
opening brief that Oliveira is not a transportation worker. In a
single sentence in its reply brief, Prime asserts that this court
"has never extended the [§] 1 [e]xemption to truck drivers, as
opposed to rail workers and seamen (the core workers of concern
when Congress enacted the exemption)." To the extent that Prime
intended this lone sentence to resurrect the transportation-worker
issue in this case, we will not allow it. Any such "argument" is
wholly undeveloped, see United States v. Sevilla-Oyola, 770 F.3d
1, 13 (1st Cir. 2014) ("Arguments raised in only a perfunctory and
undeveloped manner are deemed waived on appeal."), and, moreover,
an argument that makes its debut in a reply brief will not receive
a warm ovation from us, see United States v. Arroyo-Blas, 783 F.3d
361, 366 n.5 (1st Cir. 2015) ("[A] legal argument made for the
first time in an appellant's reply brief comes too late and need
not be addressed." (quoting United States v. Brennan, 994 F.2d
918, 922 n.7 (1st Cir. 1993))). Finally, we note in passing that
Prime's position has not been accepted elsewhere. See, e.g., Lenz
v. Yellow Transp., Inc., 431 F.3d 348, 351 (8th Cir. 2005)
- 21 -
no need to definitively decide that issue. Second, we note that,
although the parties to the contract are Prime and Hallmark, Prime
has, both below and on appeal, treated the contract as one between
Oliveira and Prime.15 We do the same. Therefore, because the
parties do not dispute that Oliveira is a transportation worker
under § 1, we need not address whether an LLC or other corporate
entity can itself qualify as a transportation worker. We also
need not address the scope of the word "worker" in the residual
clause of the § 1 exemption. Accordingly, we limit our focus to
the issue of whether an agreement between a trucking company and
an individual transportation worker cannot be a "contract of
("Indisputably, if Lenz were a truck driver, he would be considered
a transportation worker under § 1 of the FAA."); Harden v. Roadway
Package Sys., Inc., 249 F.3d 1137, 1140 (9th Cir. 2001) ("As a
delivery driver for RPS, Harden contracted to deliver packages
'throughout the United States, with connecting international
service.' Thus, he engaged in interstate commerce that is exempt
from the FAA.").
15 Before the district court, Prime opposed Oliveira's
argument that he could not be personally bound by the terms of the
contract between Prime and Hallmark by arguing that "Oliveira and
Hallmark Trucking are factually one and the same." Along similar
lines, Prime stated in its opening brief that "Oliveira entered
into an Independent Contractor Operating Agreement . . . with
Prime" (emphasis added), and its brief proceeded on the assumption
that Oliveira and Hallmark were interchangeable. In its reply
brief, for the first time in this case, Prime relies on the fact
that the contract was between Prime and Hallmark in arguing that
the contract established an independent-contractor relationship.
We need not decide whether Prime is judicially estopped from taking
this position at this late juncture; it suffices that a reply brief
is not the appropriate place to switch gears and offer new
arguments. See Arroyo-Blas, 783 F.3d at 366 n.5.
- 22 -
employment" within the meaning of § 1 if the agreement establishes
or purports to establish an independent-contractor relationship.
Prime points out that the weight of district-court
authority to consider the issue has concluded that the § 1
exemption does not extend to contracts that establish or purport
to establish an independent-contractor relationship.16 Several of
these decisions simply assume, explicitly or implicitly, that
independent-contractor agreements are not contracts of employment
under § 1. See, e.g., Aviles, 2015 WL 5601824, at *6; Doe, 2015
WL 274092, at *3; Villalpando, 17 F. Supp. 3d at 982; Bell, 2009
16 See, e.g., Aviles v. Quik Pick Express, LLC, No. CV-15-
5214-MWF (AGR), 2015 WL 5601824, at *6 (C.D. Cal. Sept. 23, 2015);
Morning Star Assocs., Inc. v. Unishippers Glob. Logistics, LLC,
No. CV-115-033, 2015 WL 2408477, at *5-7 (S.D. Ga. May 20, 2015);
Doe v. Swift Transp. Co., No. 2:10-cv-00899 JWS, 2015 WL 274092,
at *3 (D. Ariz. Jan. 22, 2015); Alvarado v. Pac. Motor Trucking
Co., No. EDCV 14-0504-DOC(DTBx), 2014 WL 3888184, at *4-5 (C.D.
Cal. Aug. 7, 2014); Villalpando v. Transguard Ins. Co. of Am., 17
F. Supp. 3d 969, 982 (N.D. Cal. 2014); Carney v. JNJ Express,
Inc., 10 F. Supp. 3d 848, 852 (W.D. Tenn. 2014); Port Drivers Fed'n
18, Inc. v. All Saints, 757 F. Supp. 2d 463, 472 (D.N.J. 2011);
Davis v. Larson Moving & Storage Co., Civ. No. 08-1408 (JNE/JJG),
2008 WL 4755835, at *4 (D. Minn. Oct. 27, 2008); Owner-Operator
Indep. Drivers Ass'n v. United Van Lines, LLC, No. 4:06CV219 JCH,
2006 WL 5003366, at *3 (E.D. Mo. Nov. 15, 2006); Owner-Operator
Indep. Drivers Ass'n v. Swift Transp. Co., 288 F. Supp. 2d 1033,
1035-36 (D. Ariz. 2003); Roadway Package Sys., Inc. v. Kayser, No.
CIV. A. 99-MC-111, 1999 WL 817724, at *4 n.4 (E.D. Pa. Oct. 13,
1999); see also Performance Team Freight Sys., Inc. v. Aleman, 194
Cal. Rptr. 3d 530, 536-37 (Cal. Ct. App. 2015); Johnson v. Noble,
608 N.E.2d 537, 540 (Ill. App. Ct. 1992); cf. Bell v. Atl. Trucking
Co., No. 3:09-cv-406-J-32MCR, 2009 WL 4730564, at *4-6 (M.D. Fla.
Dec. 7, 2009) (conducting analysis on applicability of § 1
exemption on assumption it does not apply to independent
contractors).
- 23 -
WL 4730564, at *4-6; Davis, 2008 WL 4755835, at *4; Kayser, 1999
WL 817724, at *4 n.4; see also Johnson, 608 N.E.2d at 540.17 Other
courts have "simply go[ne] along with the developing group
consensus," In re Atlas IT Exp. Corp., 761 F.3d 177, 183 (1st Cir.
2014), without adding any independent analysis. See, e.g.,
Alvarado, 2014 WL 3888184, at *4-5; Carney, 10 F. Supp. 3d at 853;
All Saints, 757 F. Supp. 2d at 472; see also Aleman, 194 Cal. Rptr.
3d at 536-37. The few district-court decisions that offer
independent analysis to support the conclusion that the § 1
exemption does not cover independent-contractor agreements have,
17This assumption was implicit in Judge Ikuta's dissenting
opinion in In re Swift Transportation Co., 830 F.3d 913 (9th Cir.
2016). The majority in Swift determined that mandamus relief was
not warranted because the district court's proposed course of
action — "resolv[ing] the § 1 question through discovery and a
trial" — was not clearly erroneous; the district court's decision
was not contrary to any Supreme Court or Ninth Circuit precedent,
and "there [did] not appear to be any decisions from [the other]
circuits on the question of whether the FAA compels a certain
procedural choice in a district court's § 1 determination." Id.
at 917. Judge Ikuta dissented, expressing her belief that the § 1
determination should be made solely from an examination of the
contract's terms. Id. at 920-21 (Ikuta, J., dissenting). Implicit
in Judge Ikuta's dissent is the assumption that independent-
contractor agreements are not contracts of employment under the
FAA. But there was good reason for that assumption in the
circumstances of that case: Unlike in this case, none of the
litigants argued that independent-contractor agreements of
transportation workers are contracts of employment. And the
district court in that case simply assumed — with no analysis or
citation to authority — that the § 1 exemption covered only
contracts between employers and employees. See Doe, 2015 WL
274092, at *3 ("Whether the parties formed an employment contract
— that is whether plaintiffs were hired as employees — necessarily
involves a factual inquiry apart from the contract itself.").
- 24 -
viewed collectively, offered two reasons for that conclusion:
first, that this interpretation is consistent with the "strong and
liberal federal policy favoring arbitral dispute resolution,"
Swift Transp., 288 F. Supp. 2d at 1035-36; see also Morning Star,
2015 WL 2408477, at *5; United Van Lines, 2006 WL 5003366, at *3;
and, second, that such a rule is justified by the narrow
construction that the Supreme Court has instructed courts to give
the § 1 exemption, see United Van Lines, 2006 WL 5003366, at *3.
Prime urges us to add our voice to this "judicial
chorus," but we are unwilling to do so. Interpreting a federal
statute is not simply a numbers game. See In re Atlas IT Exp.
Corp., 761 F.3d at 182-83 ("The numbers favoring a rule do not
necessarily mean that the rule is the best one. Indeed, there is
an observable phenomenon in our courts of appeal and elsewhere —
sometimes called 'herding' or 'cascading' — where decisionmakers
who first encounter a particular issue (i.e., the first court to
consider a question) are more likely to rely on the record
presented to them and their own reasoning, while later courts are
increasingly more likely to simply go along with the developing
group consensus."). Instead of simply tallying the score, "it is
always incumbent on us to decide afresh any issue of first
impression in our circuit." Id. at 183. After conducting that
fresh look in this case, we are distinctly unpersuaded by the
district courts' treatment of this issue.
- 25 -
The fatal flaw in the district-court authority on which
Prime relies is a failure to closely examine the statutory text —
the critical first step in any statutory-interpretation inquiry.
See Maldonado-Burgos, 844 F.3d at 340. Because Congress did not
provide a definition for the phrase "contracts of employment" in
the FAA, we "give it its ordinary meaning." United States v.
Stefanik, 674 F.3d 71, 77 (1st Cir. 2012) (quoting United States
v. Santos, 553 U.S. 507, 511 (2008)). And we discern the ordinary
meaning of the phrase at the time Congress enacted the FAA in 1925.
See Perrin v. United States, 444 U.S. 37, 42 (1979) ("A fundamental
canon of statutory construction is that, unless otherwise defined,
words will be interpreted as taking their ordinary, contemporary,
common meaning. Therefore, we look to the ordinary meaning of the
term . . . at the time Congress enacted the statute . . . ."
(citation omitted)); see also Sandifer v. U.S. Steel Corp., 134 S.
Ct. 870, 876 (2014) (consulting "[d]ictionaries from the era of
[statutory provision's] enactment" to espy ordinary meaning of
undefined term); Carcieri v. Salazar, 555 U.S. 379, 388 (2009)
("We begin with the ordinary meaning of the word 'now,' as
understood when the [statute] was enacted.").18 We now turn to
that task.
18
At oral argument, Prime insisted that the Supreme Court in
Circuit City rejected this approach for discerning the plain
meaning of the FAA's text. But the Court did no such thing. In
that case, the Court was confronted with an argument that, "because
- 26 -
1. Ordinary Meaning of Statutory Text
Oliveira argues that the phrase "contracts of
employment" contained in § 1 means simply "agreements to do work."
We agree. This interpretation is consistent with the ordinary
meaning of the phrase at the time Congress enacted the FAA.
Dictionaries from the era of the FAA's enactment confirm
that the ordinary meaning of "contracts of employment" in 1925 was
agreements to perform work. See Webster's New International
Dictionary of the English Language 488 (W.T. Harris & F. Sturges
Allen eds., 1923) (defining "contract" when used as noun as "[a]n
the FAA was enacted when congressional authority to regulate under
the commerce power was to a large extent confined by [Supreme
Court] decisions," the phrase "engaged in commerce" in § 1 should
be interpreted as "expressing the outer limits of Congress'[s]
power as then understood." Circuit City, 532 U.S. at 116. The
Court rejected this argument, which it characterized as "[a]
variable standard" depending on "shifts in the Court's Commerce
Clause cases" that would require courts to "take into account the
scope of the Commerce Clause, as then elaborated by the Court, at
the date of the FAA's enactment in order to interpret what the
statute means now." Id. at 116-17. The Court reasoned that "[i]t
would be unwieldy for Congress, for the Court, and for litigants
to be required to deconstruct statutory Commerce Clause phrases
depending upon the year of a particular statutory enactment." Id.
at 118. In this case, by contrast, our attempt to discern the
ordinary meaning of the phrase "contracts of employment" does not
require us to sort through paradigm shifts in Supreme Court
precedent but simply to apply the "fundamental canon of statutory
construction" that undefined statutory terms should be given their
ordinary meaning at the time of the statute's enactment, Sandifer,
134 S. Ct. at 876 (quoting Perrin, 444 U.S. at 42) — a canon that
has been applied in FAA cases since Circuit City. See, e.g.,
Conrad v. Phone Directories Co., 585 F.3d 1376, 1381-82 & n.1 (10th
Cir. 2009) (in interpreting undefined term in § 16 of FAA,
consulting dictionary from era of § 16's enactment).
- 27 -
agreement between two or more persons to do or forbear something");
id. at 718 (defining "employment" as "[a]ct of employing, or state
of being employed" and listing "work" as synonym for "employment");
id. (defining "employ" as "[t]o make use of the services of; to
have or keep at work; to give employment to"); see also Webster's
Collegiate Dictionary 329 (3d ed. 1925) (providing similar
definition of "employment" and similarly listing "work" as synonym
for "employment"); id. (defining "employ" as "[t]o make use of;
use" and "[t]o give employment or work to" and explaining "[e]mploy
is specifically used to emphasize the idea of service to be
rendered"). In other words, these contemporary dictionaries do
not suggest that "contracts of employment" distinguishes employees
from independent contractors.19
19 Although not referenced by either party, we note that the
current edition of Black's Law Dictionary indicates that the
earliest known use of the phrase "employment contract" was 1927 —
two years after the FAA's enactment. See Employment Contract,
Black's Law Dictionary (10th ed. 2014); id. at xxxi (explaining
that "[t]he parenthetical dates preceding many of the definitions
show the earliest known use of the word or phrase in English").
The current edition also indicates that "contract of employment"
is a synonym for "employment contract," and it defines "employment
contract" in a manner that arguably excludes independent
contractors: "[a] contract between an employer and employee in
which the terms and conditions of employment are stated."
Employment Contract, Black's Law Dictionary (10th ed. 2014). It
is unclear whether the unknown source from 1927 provided the basis
for the current definition of "employment contract" or, instead,
whether that source has merely been identified as the first known
use of the phrase. We need not, however, dwell on this point
because, as explained below, several sources from the era of the
FAA's enactment use the phrase "contract of employment" to refer
to independent contractors. Additionally, we note that the two
- 28 -
Additionally, this ordinary meaning of "contracts of
employment" is further supported by other authorities from the era
of the FAA's enactment, which suggest that the phrase can encompass
agreements of independent contractors to perform work. See, e.g.,
Annotation, Teamster as Independent Contractor Under Workmen's
Compensation Acts, 42 A.L.R. 607, 617 (1926) ("When the contract
of employment is such that the teamster is bound to discharge the
work himself, the employment is usually one of service, whereas,
if, under the contract, the teamster is not obligated to discharge
the work personally, but may employ others to that end and respond
to the employer only for the faithful performance of the contract,
the employment is generally an independent one." (emphasis
added)); Theophilus J. Moll, A Treatise on the Law of Independent
Contractors & Employers' Liability 47-48 (1910) ("It has been laid
down that the relation of master and servant will not be inferred
in a case where it appears that the power of discharge was not an
incident of the contract of employment." (emphasis added)); id. at
334 ("The [independent] contractor . . . is especially liable for
his own acts when he assumes this liability in his contract of
employment." (emphasis added)).20
editions of Black's Law Dictionary that bookend the FAA's
enactment, see Black's Law Dictionary (3d ed. 1933); Black's Law
Dictionary (2d ed. 1910), provide no definition for the phrases
"contract of employment" or "employment contract."
20
See also Luckie v. Diamond Coal Co., 183 P. 178, 182 (Cal.
Dist. Ct. App. 1919) ("We think that the nature of Foulk's relation
- 29 -
to defendant at the time of the accident, whether that of an
independent contractor or servant, must be determined not alone
from the terms of the written contract of employment, but from the
subsequent conduct of each, known to and acquiesced in by the
other." (emphasis added)); Hamill v. Territilli, 195 Ill. App.
174, 175 (1915) ("[T]he only question in the case was whether or
not, under the contract of employment, the relationship existing
between Territilli and Scully and the appellant was that of
independent contractor or that of master and servant . . . ."
(emphasis added)); Eckert's Case, 124 N.E. 421, 421 (Mass. 1919)
("It was provided by his contract of employment that he should
furnish the team, feed, take care of and drive the horses for a
fixed daily remuneration. The entire management and mode of
transportation were under his control . . . . It is plain as matter
of law . . . that when injured he was not an employé of the town
but an independent contractor." (emphasis added) (citations
omitted)); Lindsay v. McCaslin, 122 A. 412, 413 (Me. 1923) ("When
the contract of employment has been reduced to writing, the
question whether the person employed was an independent contractor
or merely a servant is determined by the court as a matter of law."
(emphasis added)); Allen v. Bear Creek Coal Co., 115 P. 673, 679
(Mont. 1911) ("The relation of the parties under a contract of
employment is determined by an answer to the question, Does the
employé in doing the work submit himself to the direction of the
employer, both as to the details of it and the means by which it
is accomplished? If he does, he is a servant, and not an
independent contractor. If, on the other hand, the employé has
contracted to do a piece of work, furnishing his own means and
executing it according to his own ideas, in pursuance of a plan
previously given him by the employer, without being subject to the
orders of the latter as to detail, he is an independent
contractor." (emphasis added)); Tankersley v. Webster, 243 P. 745,
747 (Okla. 1925) ("[T]he contract of employment between Tankersley
and Casey was admitted in evidence without objections, and we think
conclusively shows that Casey was an independent contractor."
(emphasis added)); Kelley v. Del., L. & W. R. Co., 113 A. 419, 419
(Pa. 1921) ("The question for determination is whether deceased
was an employee of defendant or an independent contractor . . . .
To decide, it is necessary to construe the written contract of
employment . . . ." (emphasis added)); U.S. Fid. & Guar. Co. of
Baltimore, Md. v. Lowry, 231 S.W. 818, 822 (Tex. Civ. App. 1921)
(stating that, in determining whether person "was an employé and
not an independent contractor," "'[n]o single fact is more
conclusive as to the effect of the contract of employment, perhaps,
than the unrestricted right of the employer to end the particular
service whenever he chooses, without regard to the final result of
- 30 -
Prime seeks to downplay the significance of these other
authorities, noting that they do not deal with the FAA. True
enough, but the phrase "contracts of employment" must have some
meaning, and Prime does not attempt to explain how its proposed
interpretation is consistent with the ordinary meaning of the words
used in the statute. And the lack of a textual anchor is not the
only flaw in Prime's interpretation. In Circuit City, the Supreme
Court noted "Congress'[s] demonstrated concern with transportation
workers and their necessary role in the free flow of goods" at the
time when it enacted the FAA. 532 U.S. at 121. Given that concern,
the distinction that Prime advocates based on the precise
employment status of the transportation worker would have been a
strange one for Congress to draw: Both individuals who are
independent contractors performing transportation work and
the work itself'" (emphasis added) (quoting Cockran v. Rice, 128
N.W. 583, 585 (S.D. 1910))); Annotation, General Discussion of the
Nature of the Relationship of Employer and Independent Contractor,
19 A.L.R. 226, 250 (1922) (discussing "the question whether a
contract of employment is one of an independent quality").
Along similar lines, legal dictionaries from the era of the
FAA's enactment used the term "employment" as part of the
definition of "independent contractor." See, e.g., Independent
Contractor, Ballentine's Law Dictionary (1930) (defining
independent contractor as "[o]ne who, exercising an independent
employment, contracts to do a piece of work according to his own
methods and without being subject to the control of his employer
except as to the result of the work"); Independent Contractor,
Black's Law Dictionary (3d ed. 1933) (same); Independent
Contractor, Black's Law Dictionary (2d ed. 1910) (same); 2 Francis
Rawle, Bouvier's Law Dictionary & Concise Encyclopedia 1533 (3d
rev. 1914) (same).
- 31 -
employees performing that same work play the same necessary role
in the free flow of goods.
In sum, the combination of the ordinary meaning of the
phrase "contracts of employment" and Prime's concession that
Oliveira is a transportation worker compels the conclusion that
the contract in this case is excluded from the FAA's reach.
Because the contract is an agreement to perform work of a
transportation worker, it is exempt from the FAA. We therefore
decline to follow the lead of those courts that have simply assumed
that contracts that establish or purport to establish independent-
contractor relationships are not "contracts of employment" within
the meaning of § 1.
2. Narrow Construction and Policy Favoring Arbitration
We also are unpersuaded by the two justifications that
some district-court decisions put forward to support the
conclusion that the § 1 exemption does not apply to contracts that
establish or purport to establish independent-contractor
relationships — that such an interpretation is consistent with the
need to narrowly construe § 1 and the liberal federal policy
favoring arbitration. In our view, neither consideration warrants
retreat from the ordinary meaning of the statutory text.
To be sure, the Supreme Court has cautioned that the § 1
exemption must "be afforded a narrow construction." Circuit City,
532 U.S. at 118. Prime seizes on this pronouncement and insists
- 32 -
that it forecloses our conclusion that the § 1 exemption applies
to transportation-worker agreements that establish or purport to
establish independent-contractor relationships. We disagree.
In Circuit City, the contract at issue was between
Circuit City, a national retailer of consumer electronics, and
Adams, a store sales counselor. 532 U.S. at 109-10. The Ninth
Circuit had interpreted the § 1 exemption to exclude all contracts
of employment from the FAA's reach. Id. at 112. In defense of
this interpretation, Adams argued that the phrase "engaged in
. . . commerce" in § 1 exempted from the FAA all employment
contracts falling within Congress's commerce power. Id. at 114.
The Supreme Court rejected this broad interpretation in favor of
a narrower one that was compelled by the text and structure of
§ 1: "Section 1 exempts from the FAA only contracts of employment
of transportation workers." Id. at 119; see id. at 114-15.
Because the phrase "any other class of workers engaged in
. . . commerce" appeared in the residual clause of § 1, id. at
114, the Court reasoned that "the residual clause should be read
to give effect to the terms 'seamen' and 'railroad employees,' and
should itself be controlled and defined by reference to the
enumerated categories of workers which are recited just before
it," id. at 115.
This context is critical. The Court announced the need
for a narrow construction of the § 1 exemption in the course of
- 33 -
"rejecting the contention that the meaning of the phrase 'engaged
in commerce' in § 1 of the FAA should be given a broader
construction than justified by its evident language." Id. at 118
(emphasis added). As the Court explained, this broader
construction was doomed by the text itself; "the text of the FAA
foreclose[d] the [broader] construction of § 1," id. at 119, and
"undermine[d] any attempt to give the provision a sweeping, open-
ended construction," id. at 118. The Court's narrower
interpretation, by contrast, was based on "the precise reading" of
that provision. Id. at 119.
It is one thing to say that statutory text compels
adoption of a narrow construction over "an expansive construction
. . . that goes beyond the meaning of the words Congress used."
Id. Prime's argument is very different: It snatches up Circuit
City's narrow-construction pronouncement, wholly ignores the
context in which that pronouncement was made, and attempts to use
it as an escape hatch to avoid the plain meaning of the § 1
exemption's text. But nothing in Circuit City suggests that the
need for a narrow construction can override the plain meaning of
the statutory language in this fashion, and we reject Prime's
attempt to artificially restrict the plain meaning of the text.
Moreover, Oliveira is nothing like the sales counselor
in Circuit City. Instead, the truck-driving work that he performs
directly impacts "the free flow of goods." Id. at 121. Therefore,
- 34 -
Circuit City's adoption of a narrow construction to cover only
transportation workers and not sales counselors is no basis for
this court to accept a constricted interpretation of the phrase
"contracts of employment" that is inconsistent with both the
ordinary meaning of the language used in § 1 and "Congress's
demonstrated concern with transportation workers and their
necessary role in the free flow of goods." Id. For these reasons,
we do not view Circuit City or the narrow-construction principle
as supporting Prime's interpretation that the § 1 exemption does
not extend to independent contractors.
We are similarly unpersuaded by invocation of the
federal policy in favor of arbitration. That policy cannot
override the plain text of a statute. See EEOC v. Waffle House,
Inc., 534 U.S. 279, 295 (2002) (rejecting notion that "the federal
policy favoring arbitration trumps the plain language of Title VII
and the contract"); cf. id. at 294 (explaining that, "[w]hile
ambiguities in the language of the agreement should be resolved in
favor of arbitration, we do not override the clear intent of the
parties, or reach a result inconsistent with the plain text of the
contract, simply because the policy favoring arbitration is
implicated" and concluding that "the proarbitration policy goals
of the FAA do not require the [EEOC] to relinquish its statutory
authority if it has not agreed to do so" (citation omitted)); Paul
Revere, 226 F.3d at 25 (rejecting "attempts to invoke the federal
- 35 -
policy favoring arbitration" because "[t]hat policy simply cannot
be used to paper over a deficiency in Article III standing");
Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 116 n.13 (1996)
(Souter, J., dissenting) ("[P]lain text is the Man of Steel in a
confrontation with background principle[s] and postulates which
limit and control." (internal citation and quotation marks
omitted)). As we have explained, a careful examination of the
ordinary meaning of the phrase "contracts of employment" — an
effort eschewed by the district-court authority cited by Prime —
supports our conclusion that the phrase means agreements to perform
work and includes independent-contractor agreements. The federal
policy favoring arbitration cannot erase this plain meaning.
3. Final Words
For these reasons, we hold that a transportation-worker
agreement that establishes or purports to establish an
independent-contractor relationship is a contract of employment
under § 1. We emphasize that our holding is limited: It applies
only when arbitration is sought under the FAA, and it has no impact
on other avenues (such as state law) by which a party may compel
arbitration.21
21
Prime insists that, even if the district court is powerless
to compel arbitration under the FAA because the § 1 exemption
applies, it still can request the district court to "compel
arbitration on other grounds, such as state law, or use other tools
at its disposal to enforce the parties' explicit agreement to
arbitrate — such as dismissing or staying the case." For his part,
- 36 -
Conclusion
To recap, we hold that, when confronted with a motion to
compel arbitration under § 4 of the FAA, the district court, and
not the arbitrator, must decide whether the § 1 exemption applies.
Additionally, we hold that transportation-worker agreements that
establish or purport to establish independent-contractor
relationships are "contracts of employment" within the meaning of
the § 1 exemption.22 Because the contract in this case is within
the § 1 exemption, the FAA does not apply, and we consequently
lack jurisdiction under 9 U.S.C. § 16(a)(1)(B) — the only
conceivable basis for our jurisdiction over this interlocutory
Oliveira appears to suggest that this ship has sailed because
Prime's motion to compel was based solely on the FAA. Prime
counters that, to the extent Oliveira is under the impression that
Prime has waived the right to compel arbitration on grounds other
than the FAA, he is mistaken because no prejudice has been shown.
We do not wade into this dispute. The fleeting references in both
parties' briefs are hardly the stuff of developed argumentation,
and this waiver issue was not addressed by the district court. If
the parties desire to continue this fight in the district court,
they are free to do so.
Along similar lines, although Prime argues in its opening
brief that the arbitration provision covers disputes between the
parties that arose before and after the time period in which the
contract was in effect, it takes a different tack in its reply
brief, imploring us to refrain from deciding this issue because
the district court did not definitively rule on it below. We
accept Prime's invitation and leave the issue for the district
court to address in the first instance.
22
In light of this conclusion, we need not address the
parties' arguments about the necessity and permissibility of
discovery in the event that the § 1 exemption does not apply to
independent-contractor agreements.
- 37 -
appeal. See Int'l Bhd. of Teamsters Local Union No. 50 v. Kienstra
Precast, LLC, 702 F.3d 954, 957-58 (7th Cir. 2012). Accordingly,
we affirm the district court's denial of Prime's motion to compel
arbitration, and dismiss the appeal for lack of appellate
jurisdiction.
-Concurring and Dissenting Opinion Follows-
- 38 -
BARBADORO, District Judge, concurring in part and
dissenting in part. I agree with the majority that the
applicability of the § 1 exemption is a threshold matter for the
district court to decide. Where we part company is at the point
where the majority decides to take on the difficult issue as to
whether transportation-worker agreements that purport to create
independent-contractor relationships are exempt from the Federal
Arbitration Act. That, in my view, is an issue we need not decide
now. Instead, if it ultimately proves necessary to determine
whether the § 1 exemption covers all such independent-contractor
agreements, the district court should do so in the first instance
with the benefit of more in-depth briefing and a fully developed
factual record.
The scope of the § 1 exemption comes before us on what
amounts to an interlocutory appeal. See Omni Tech Corp. v. MPC
Sols. Sales, LLC, 432 F.3d 797, 800 (7th Cir. 2005). The district
court did not reach any final judgment as to the exemption, instead
dismissing New Prime's motion to compel arbitration without
prejudice and allowing for discovery on Oliveira's employment
status. Oliveira v. New Prime, Inc., 141 F. Supp. 3d 125, 135 (D.
Mass. 2015). As there has been no final judgment in the district
court, I hesitate to resolve an issue that is not necessary to the
disposition of this appeal. See Doe v. Cape Elizabeth Sch. Dist.,
832 F.3d 69, 86 (1st Cir. 2016) (declining to address unnecessary
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issue and deeming it prudent to allow district court to make
determination in the first instance). And it is indeed unnecessary
to determine the scope of the exemption at this time. If the case
were remanded to the district court for discovery, the court might
well rule that the nominally independent-contractor agreements
between Oliveira and New Prime actually created an employer-
employee relationship. In that circumstance, neither we nor the
district court would have any occasion to categorically decide
whether all transportation-worker agreements purporting to create
independent-contractor relationships qualify for the § 1
exemption.
I am particularly reluctant to unnecessarily resolve an
issue on an interlocutory appeal when, as is the case here, a
number of factors counsel against doing so. Most fundamentally,
deciding whether "contracts of employment" includes all
transportation-worker agreements presents a challenging question
of statutory interpretation. The statute itself provides little
guidance. Further, as the majority notes, most courts that have
considered independent-contractor agreements in the § 1 context
have concluded that the exemption does not apply, and no other
court has engaged in the kind of detailed analysis of ordinary
meaning that characterizes the majority's opinion. We therefore
have neither an example to guide and corroborate our analysis nor
a contrary opinion to provide counterbalance.
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Moreover, applying § 1 in this case requires venturing
into the fact-bound, and notoriously precarious, field of
employment-status determinations. Although the majority's
categorical rule would eliminate the need for fact-finding on
status, it could also lead to the over- and under-inclusiveness
concerns typical of such rules. As Justice Rutledge observed in
NLRB v. Hearst Publications, 322 U.S. 111 (1944): "Few problems
in the law have given greater variety of application and conflict
in results than the cases arising in the borderland between what
is clearly an employer-employee relationship and what is clearly
one of independent entrepreneurial dealing." Id. at 121
(subsequent history omitted). The doctrinal line separating
employee from independent contractor is difficult to discern in
the context of vicarious liability. See id. "It becomes more
[difficult] when the field is expanded to include all of the
possible applications of the distinction." Id. We find ourselves
confronted by one of those "possible applications," making the
issue before us all the more challenging. See Mandel v. Boston
Phoenix, Inc., 456 F.3d 198, 206–07 (1st Cir. 2006) (vacating and
remanding summary judgment order where, inter alia, there was
little on-point federal or state case law and pertinent
determination was fact-intensive).
Not only do we face a hard question — given that the
contemporary meaning of § 1's language may differ from its meaning
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when adopted — but we do so without the aid of a well-developed
district court record. Before the district court, the parties
provided little briefing on the ordinary meaning of "contracts of
employment" as of 1925. Oliveira initially argued that he was an
employee of New Prime. He first briefed an ordinary-meaning
argument in a short supplemental surreply submitted to the district
court after a hearing on the motion to compel arbitration.
Oliveira cited just two sources from the time of adoption. In a
subsequent supplemental surreply, New Prime declined to address
the ordinary-meaning issue head-on, instead only reiterating that
the matter was for the arbitrator. The district court's order
reflects this dearth of briefing. Rather than directly addressing
the less-than-robust argument Oliveira raised in his supplemental
brief, the court noted the extensive contrary case law and
permitted discovery to resolve the case. See Oliveira, 141 F.
Supp. 3d at 130–31, 135. When the ordinary-meaning issue reached
this court, the record accordingly provided little guidance. See
United States v. Clark, 445 U.S. 23, 38 (1980) (Rehnquist, J.,
dissenting) (recognizing usefulness of lower court opinions); Cape
Elizabeth Sch. Dist., 832 F.3d at 84–85 (choosing not to decide
unnecessary question where parties gave "scant attention" to issue
in lower court).
The briefing before this court was also less than ideal.
Although Oliveira devoted significant effort to arguing that the
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ordinary meaning of "contracts of employment" in 1925 included
contracts with independent contractors, New Prime barely addressed
the matter. It did not mention the ordinary-meaning argument in
its opening brief, and spent only a page on the topic in its reply
brief. At oral argument, New Prime merely insisted that ordinary-
meaning analysis is inappropriate in the § 1 context. Where a
court has the discretion to decide an issue, it should be wary of
acting without the benefit of fully developed arguments on both
sides. That is especially the case when we rule against the party
with the less-developed argument.
Just as we have been presented with a one-sided view of
the ordinary meaning of "contracts of employment," we have received
a one-sided view of the facts. This appeal was taken early in the
litigation between the parties, prior to any discovery that would
have shed greater light on the facts underlying the dispute. The
current factual record contains only Oliveira's unanswered
complaint and some documents attached to the parties' motions.
While the court is entitled to base its analysis on allegations in
the complaint, Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 2 (1st
Cir. 2012), we should exercise added caution in denying affirmative
relief to a defendant when our view of the facts is informed
largely by the plaintiff's untested allegations.
Under these circumstances, our best option is to remand
the § 1 exemption question to the district court so that discovery
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may proceed and the court may reach a final decision. If either
party were to appeal any subsequent final decision of the district
court, we would have the benefit of a better-developed factual
record, more-focused briefing from both parties, and additional
district court analysis. See Denmark v. Liberty Life Assur. Co.
of Boston, 566 F.3d 1, 12 (1st Cir. 2009) (Lipez, J., concurring)
(expressing concern over dicta in majority opinion "fashioned
without the benefit of district court analysis or briefing by the
parties").
The majority has done an impressive job of marshalling
the arguments in support of its interpretation of § 1. I dissent
not to take issue with the court's reasoning but merely to express
my view that we would be better served in following a more cautious
path.
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