Judge: Peter Wilson, Case: 2023-01300011, Date: 2023-08-03 Tentative Ruling

Defendant Jeronimo Logistics LLC’S Motion to Compel Arbitration and Stay the Action is GRANTED IN PART AND DENIED IN PART.

Plaintiff’s individual causes of action 1, 2, 3, and 8 are ordered to arbitration. The remaining claims are stayed pending the outcome of the arbitration. (CCP § 1281.4.)

“There is a public policy in favor of arbitration under federal and state law.” (McManus v. CIBC World Markets Corp. (2003) 109 Cal. App. 4th 76, 85.) In fact, “[d]oubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration.” (United Transportation Union v. S. Cal. Rapid Transit Dist. (1992) 7 Cal. App. 4th 804, 808.) Accordingly, “[t]he court should order the[] [parties] to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (Id.) “[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” (Green Tree Fin. Corp.-Alabama v. Randolph (2000) 531 U.S. 79, 91.)

Agreement to Arbitrate

On or about 09-27-21, Plaintiff signed a “Mutual Agreement to Individually Arbitrate Disputes” upon commencement of his employment with Defendant Jeronimo Logistics LLC (“JLL”). (Jacks Decl. [ROA 57] Ex. 1.)

It states in relevant part that Plaintiff and JLL “agree that any covered claim … shall be submitted to individual binding arbitration.”

“Covered Claims” are defined as “all past, current, and future grievances, disputes, claims, issues, or causes of action … under applicable federal, state or local laws, arising out of or relating to” Plaintiff’s “application, hiring, hours worked, services provided, and/or employment with [JLL] or the termination thereof,” including “issues regarding benefits, bonuses, [and] wages.” (Id.)

It further provides: “Employee and the Company each specifically acknowledges and agrees that all claims involving minimum wages, overtime, unpaid wages, expense reimbursement, wage statements, and claims involving meal and rest breaks shall be subject to arbitration under this Agreement. (Id.)

The Agreement further states, all such claims “brought by the Employee against any of the Covered Parties, whether brought jointly or severally with claims against the Company, shall be subject to arbitration under this Agreement.” (Id.)

“Covered Parties” is defined to include not only the Company, but “clients of the Company or a company entity, and the former and current officers, directors, managers, employees, owners, attorneys, agents, and vendors of the Company and/or a company entity and/or clients of the Company.” (Id.) 

The Agreement includes a class action waiver. (Id. at 2.) Plaintiff and JLL agreed, “class action, collective action, or consolidated action procedures are hereby waived and shall not be asserted in arbitration or in court, nor will they apply in any arbitration pursuant to this Agreement.” (Id.) The Parties “shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.” (Id.) “No arbitrator selected to arbitrate any claim covered by this Agreement is authorized to arbitrate any claim on a class, collective, consolidated, or representative basis.” (Id.) The Agreement also provides that “a court of law must resolve any dispute concerning the validity and enforceability of the Agreement, and the validity … of the provisions pertaining to class, collective, and representative action waivers.” (Id.)

As to governing law, “[t]he Federal Arbitration Act (‘FAA’) and federal common law applicable to arbitration shall govern the interpretation and enforcement of this Agreement.” (Id.)

Jeremiah Jacks, owner of Defendant Jeronimo Logistics LLC (“JLL”), describes the onboarding process, including the execution of the Agreement, in detail. (Jacks Decl. ¶¶ 1, 4-18.) Plaintiff does not dispute the existence of the Agreement or its validity. Accordingly, the Court finds Defendant has established that an arbitration agreement exists between the parties.

FAA

Plaintiff states “Defendant’s Motion fails to establish that its business sufficiently involves interstate commerce for the FAA to apply.” (Opp. at 3.) While Defendant does not explain the interstate commerce connection in detail, as a local delivery provider for Amazon’s business, the Court has no difficulty concluding the Agreement sufficiently involves or affects interstate commerce such that the FAA should otherwise apply. (Jacks Decl. Ex. 1; Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56.) Additionally, the Agreement expressly provides for the application of the FAA. (Jacks Dec. Ex. 1.) Furthermore, Plaintiff has impliedly conceded the interstate commerce issue by providing a declaration in which he states Amazon packages delivered by himself and others on behalf of Defendant Jeronimo included information that indicated the packages originated from “outside of California.” (Bruns Decl. ¶¶ 5-6.) The real dispute is whether Plaintiff is exempt from the FAA due to the nature of his work.

Section 1 of the FAA provides that the FAA does not 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.) Plaintiff contends that he qualifies for an exemption under the FAA as a “transportation” worker, which would mean he can pursue his class claims in court notwithstanding the class action waiver in the arbitration agreement. (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109; Betancourt v. Transportation Brokerage Specialists, Inc. (2021) 62 Cal. App. 5th 552.)

Plaintiff was employed by Defendant as a delivery driver, completing the “last leg” delivery of Amazon packages. (Bruns Decl. ¶ 6.) Plaintiff’s job involved picking up Amazon packages from a warehouse and making deliveries to customers. (Id.)  

In arguing Plaintiff is not exempt from the FAA as a transportation worker engaged in interstate transport, Defendant’s owner declares: “[Plaintiff] provided delivery services for JLL and did so at JLL’s direction,

which included picking up packages from an Amazon warehouse in Newport Beach, California, and delivering them locally. Like the rest of JLL’s delivery employees, Plaintiff only picked up and delivered packages within the State of California; he never left California to make any deliveries.” (Jacks Decl. ¶ 3.)

Plaintiff contends even though he himself was not crossing state lines, he classifies as a transportation worker engaged in interstate commerce because his deliveries were the final portion of interstate deliveries.

Several courts have looked at the issue of what constitutes a transportation worker for purposes of the FAA exemption. The U.S. Supreme Court recently found that a Southwest Airlines cargo loader whose job required “her to load and unload baggage, airmail, and commercial cargo on and off airplanes that travel across the country,” belonged to a “class of workers engaged in foreign or interstate commerce” that is exempted from the FAA. (Southwest Airlines Co. v. Saxon (2022) 142 S. Ct. 1783, 1787.) The Supreme Court stated that a transportation worker “must at least play a direct and ‘necessary role in the free flow of goods’ across borders,” or “[p]ut another way. . . must be actively ‘engaged in transportation’ of those goods across borders via the channels of foreign or interstate commerce.” (Id. at 1790.) The court concluded that “any class of workers directly involved in transporting goods across state or international borders falls within [9 U.S.C.] § 1’s exemption.” (Id. at 1789.)

Other courts have specifically found that local delivery drivers such as Plaintiff that only drive within state lines may still be within the exemption if they are the final part of the distribution line of goods that have been transported across state lines. (Rittmann v. Amazon.com, Inc. (9^th Cir. 2020) 971 F.3d 904, 915 [“AmFlex delivery providers are a class of workers that transport packages through to the conclusion of their journeys in interstate and foreign commerce.”].) However, the employee must still be involved in the “transportation” aspect of the work, and not simply have a job that is related to goods that at some point have crossed state lines. (See, e.g., Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal. App. 5th 1056, 1069 [truck driver fits under exemption because “over 99 percent — of the goods Muller transported originated across state lines,” so “even though Muller was not personally transporting goods from state to state, he played an integral role in transporting those goods through interstate commerce” and because he was subject to federal regulations].)

Another court found that GrubHub drivers are not within the exemption as they are local drivers that don’t cross state lines even if the goods they transport may have ingredients or items that were at one time transported across state lines. “To determine whether a class of workers meets that definition, we consider whether the interstate movement of goods is a central part of the class members' job description.” (Wallace v. Grubhub Holdings, Inc. (7^th Cir. 2020) 970 F.3d 798, 801.) “[T]o fall within the exemption, the workers must be connected not simply to the goods [that may have crossed state lines], but to the act of moving those goods across state or national borders.” (Id. at 802.) “Put differently, a class of workers must themselves be ‘engaged in the channels of foreign or interstate commerce.’” (Id. [emphasis in original].)

Here, as a delivery driver directly involved in the chain of interstate transport of goods, Plaintiff has shown the exemption to the FAA applies. In these circumstances, it does not matter that Plaintiff never himself crossed state lines. (Betancourt v. Transportation Brokerage Specialists, Inc. (2021) 62 Cal. App. 5th 552 [no matter if deliveries were purely intrastate as delivery to customers was the final portion of the packages’ interstate journeys]; Nieto v. Fresno Beverage Co. (2019) 33 Cal. App. 5th 274, 284 [deliveries were last phase of a “journey of the interstate commerce” for the out-of-state beverages to reach customers]; Rittmann v. Amazon.com, Inc., (9th Cir. 2020) 971 F.3d 904, 907 [drivers delivering packages from California Amazon warehouses to California Amazon customers are exempt from the FAA, even if they do not cross state lines]; Romero v. Watkins & Shepard Trucking, Inc. (9th Cir. 2021) 9 F.4th 1097 [delivery driver who did not personally cross state lines, but delivered furniture and carpet that originated from out of state to retail stores in California was exempt from the FAA].)

Defendant attempts to distinguish Rittmann by arguing the inquiry should be focused on what the employer does, i.e., since the drivers there directly contracted with Amazon, the exemption applied. Plaintiff reasons this means the inquiry here must focus on JLL, an entity exclusively involved in local, intrastate transport. (Reply at 7.) This argument is unconvincing.

Saxon instructs the exemption applies if there is active engagement in transport, which is not difficult to find here. (Southwest Airlines Co. v. Saxon (2022) 142 S. Ct. 1783, 1790 [the critical question is whether the workers are actively “engaged in transportation” of goods in interstate commerce and play a “direct and necessary role in the free flow of goods across borders”].) Arguably, the plaintiff’s connection to interstate commerce in Saxon was more attenuated that Plaintiff’s here. Defendant also cites a case from the Fifth Circuit, an Oklahoma Court of Appeal case, and a San Bernadino trial court order which, relying on Saxon, rejected the last-leg delivery argument and denied FAA exemption. However, none of these authorities are controlling, Defendant does not explain why this Court should agree with the reasoning therein, and the Court does not find the reasoning persuasive. (Reply at 5-6.) Relatedly, the Court declines to rule on Defendant’s request for judicial notice (ROA 73) of the (1) Oklahoma appellate decision and the (2) San Bernadino trial court order as they are immaterial to this ruling. 

Defendant also appears to offer new argument in Reply that because the arbitration agreement was technically not part of an “employment contract”, the exemption does not apply. (Reply at 3 [citing Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 106].) However, even if this new argument is entertained, Defendant has already argued the Agreement is a binding contract to arbitrate disputes between the parties. Furthermore, the Agreement expressly covers claims “arising out of or relating to [Plaintiff’s] application, hiring, hours worked, services provided, and/or employment with [JLL] or the termination thereof…” (Jacks Decl. Ex. 1 at 1.) The Agreement also provides, “I further agree and acknowledge that my acceptance of or continuing employment with the Company provides further evidence of my agreement to accept and be bound by the terms of this [arbitration] Agreement.” (Id. at 3.) Thus, the argument the arbitration agreement must be integrated into a formal “employment contract” fails.

California Law

Plaintiff argues that because Defendant relied solely upon the FAA, it cannot compel arbitration on any other grounds. (Opp. at 6-7.) Even if this was supported by authority (it is not), the opening memorandum expressly contradicts this assertion. (Mem at 4 n.1 [“If for any reason this Court concludes that the FAA does not apply, Plaintiff still must arbitrate his claims on an individual basis under California law. (citation omitted)].)

Since the FAA does not apply, California’s state law determines whether the Arbitration Agreement is enforceable. California law favors enforcement of arbitration agreements, save upon grounds that exist at law or in equity for the revocation of any contract, such as unconscionability. (CCP § 1281; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113–114.) Plaintiff makes no argument the Agreement is unconscionable.

Labor Code § 229

The parties do not discuss this provision, but under Labor Code § 229, “[a]ctions to enforce the provisions of this article [i.e., §§ 200-244] for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” Here, Section 229’s bar on arbitration applies to causes of action 4-7. Accordingly, Plaintiff’s individual causes of action numbers 1-3 and 8 are ordered to arbitration.

Class Waiver

The Agreement contains a class waiver. Under Gentry v. Superior Court (2007) 42 Cal.4th 443, a court may refuse “to enforce [a class] waiver [in an arbitration agreement] on grounds of public policy or unconscionability.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360.) Under subsequent decisions of the United States Supreme Court, Gentry’s rule is preempted in cases where the FAA applies. (See id., at pp. 362-366.) Here, the FAA is inapplicable, so Gentry governs.

Gentry identifies four factors that inform whether courts should decline to enforce a class waiver as contrary to public policy. They are: “the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration.” (Gentry, supra, 42 Cal.4th at 463.)

As to the first factor, “individual awards in wage-and-hour cases tend to be modest.” (Id. at 457.) The first factor favors declining enforcement.

As to the second factor, the operative FAC alleges that Plaintiffs are current or former employees of Defendant. (FAC ¶¶ 4, 132.) “A current employee who individually sues his or her employer is at greater risk of retaliation.” (Gentry, supra, 42 Cal.4th at 459.) The second factor favors declining enforcement.

As to the third factor, “it may often be the case that the illegal employer conduct escapes the attention of employees. Some workers, particularly immigrants with limited English language skills, may be unfamiliar with the overtime laws. [Citation.] Even English-speaking or better educated employees may not be aware of the nuances of overtime laws with their sometimes complex classifications of exempt and nonexempt employees. [Citation.]” (Id. at 461.) This case, of course, concerns Defendant’s alleged violation of wage and hour laws. The third factor favors declining enforcement.

As to the fourth factor, requiring class members to individually arbitrate their wage and hour claims would present real world obstacles to vindication of their rights. For example, to the extent the policies in Defendant’s employee handbook are at issue, which Defendant argues (Reply at 8-9), individual employees would have to prove those policies repeatedly in separate arbitrations that have no precedential or preclusive effect, even though the policies could not be meaningfully disputed by Defendants. This is a waste of resources that presents an obstacle to vindication of class members’ rights. The fourth factor therefore favors declining enforcement.

Taking the foregoing into account, the Court finds the class waiver is unenforceable.

PAGA Waiver

Because the FAA is inapplicable, Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 has no application here. Instead, the Court applies the holding of Iskanian that pre-dispute PAGA waivers are unenforceable. (Iskanian, supra, 59 Cal.4th at 387.) Nor may PAGA claims be compelled to arbitration based on a pre-dispute agreement when the FAA is inapplicable. (See Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439, 446 [“Therefore, while a PAGA action might be subject to arbitration, relying on a predispute agreement with a private party will not suffice to compel arbitration of a PAGA claim.”].) As a result, the PAGA waiver is unenforceable and Plaintiff’s PAGA claims cannot be ordered to arbitration.

The August 18, 2023 status conference is hereby taken off calendar, and the Court sets an arbitration review hearing on February 2, 2024 at 9 AM. The parties are ordered to file a joint status report not later than January 26, 2024.

Plaintiff is ordered to give notice.