Filed: Jul. 17, 2020
Latest Update: Jul. 17, 2020
Summary: United States Court of Appeals For the First Circuit No. 19-1848 BERNARD WAITHAKA, on behalf of himself and all others similarly situated, Plaintiff, Appellee, v. AMAZON.COM, INC.; AMAZON LOGISTICS, INC., Defendants, Appellants. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Timothy S. Hillman, U.S. District Judge] Before Howard, Chief Judge, Lipez, and Thompson, Circuit Judges. David B. Salmons, with whom James P. Walsh, Jr., Noah J. Kaufman, Michael E. Ken
Summary: United States Court of Appeals For the First Circuit No. 19-1848 BERNARD WAITHAKA, on behalf of himself and all others similarly situated, Plaintiff, Appellee, v. AMAZON.COM, INC.; AMAZON LOGISTICS, INC., Defendants, Appellants. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Timothy S. Hillman, U.S. District Judge] Before Howard, Chief Judge, Lipez, and Thompson, Circuit Judges. David B. Salmons, with whom James P. Walsh, Jr., Noah J. Kaufman, Michael E. Kenn..
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United States Court of Appeals
For the First Circuit
No. 19-1848
BERNARD WAITHAKA, on behalf of himself and
all others similarly situated,
Plaintiff, Appellee,
v.
AMAZON.COM, INC.; AMAZON LOGISTICS, INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Howard, Chief Judge,
Lipez, and Thompson, Circuit Judges.
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.
July 17, 2020
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 (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
1 We refer collectively to appellants as "Amazon."
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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
2"Because [Amazon's] motion to compel arbitration was made
in connection with a motion to dismiss or stay, we draw the
relevant facts from the operative complaint and the documents
submitted to the district court in support of the motion to compel
arbitration." Cullinane v. Uber Techs., Inc., 893 F.3d 53, 55
(1st Cir. 2018).
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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:
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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."
3 For clarity, we refer to the provision of the dispute
resolution section that relates to the arbitration requirement
(subsection a) as the "arbitration provision" and those provisions
that relate to class claims (subsections b and g, as well as
several other provisions of Section 11 that reiterate that the
Agreement does not permit the parties to pursue claims or receive
relief on a class basis) as the "class waiver provisions."
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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
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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).
- 8 -
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 FAA
Congress passed the FAA in 1925 "to overcome judicial
hostility to arbitration agreements." Circuit City, 532 U.S. at
118 (quoting Allied-Bruce Terminix Cos., Inc. v. Dobson,
513 U.S.
4 The district court's decision to transfer the case is not
challenged in this appeal.
- 9 -
265, 272-73 (1995)). The Act reflects a "liberal federal policy
favoring arbitration agreements," Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983), and provides that
"[a] written provision in . . . a contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract . . . shall be valid,
irrevocable, and enforceable," 9 U.S.C. § 2 (emphasis added). The
Supreme Court has held that the phrase "involving commerce" in
Section 2 -- referred to as the "coverage" provision of the FAA,
Circuit
City, 532 U.S. at 115 -- reflects Congress's "intent to
exercise [its] commerce power to the full,"
Allied-Bruce, 513 U.S.
at 277.
Despite the broad scope of Section 2, the FAA does not
apply to all contracts that include arbitration provisions.
Section 1 of the Act exempts employment contracts of certain
categories of workers from the Act's coverage. See 9 U.S.C. § 1.
Specifically, the Act does not apply "to contracts of employment
of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce." Id. This case
concerns the scope of the residual clause of that exemption: "or
any other class of workers engaged in foreign or interstate
commerce."
In Circuit City the Supreme Court rejected the
contention that Section 1 exempts from the FAA's coverage all
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employment contracts. 532 U.S. at 119. Instead, it held that the
provision exempts "only contracts of employment of transportation
workers."
Id. In reaching this conclusion, the Court articulated
principles for interpreting the FAA, and Section 1 in particular.
First, phrases similar to the language of Section 1 --
"in commerce" and "engaged in commerce" -- are terms of art that
have not been interpreted as expansively as the phrase "involving
commerce," the terminology used in Section 2. Id. at 115-16. To
reach that conclusion, the Court examined how these respective
phrases had been interpreted in other statutory contexts.
Id. at
116-17 (citing Jones v. United States,
529 U.S. 848, 855 (2000)
(interpreting federal arson statute); United States v. Am. Bldg.
Maint. Indus.,
422 U.S. 271, 279-80 (1975) (interpreting Clayton
Act); Gulf Oil Corp. v. Copp Paving Co.,
419 U.S. 186, 199-202
(1974) (interpreting Robinson-Patman Act and Clayton Act); FTC v.
Bunte Bros., Inc.,
312 U.S. 349, 350-51 (1941) (interpreting
Federal Trade Commission Act)). Second, the residual clause must
be interpreted in light of the specifically enumerated categories
of workers that directly precede it, consistent with the ejusdem
generis canon of statutory construction.5
Id. at 114-15.
Third,
5 Pursuant to this canon of construction, "[w]here general
words follow specific words in a statutory enumeration, the general
words are construed to embrace only objects similar in nature to
those objects enumerated by the preceding specific words." Circuit
City, 532 U.S. at 114-15 (alteration in original) (quoting 2A
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the Act's pro-arbitration purpose counseled in favor of narrowly
construing the Section 1 exemption.
Id. at 118-19. Finally, while
there was "sparse" legislative history on the Section 1 exemption,
id. at 119, excluding transportation workers from the FAA's
coverage was consistent with "Congress'[s] demonstrated concern
with transportation workers and their necessary role in the free
flow of goods,"
id. at 121.
B. Scope of the Transportation Worker Exemption
Using the principles articulated in Circuit City as a
guide, we turn now to the interpretive question raised in this
case: does Waithaka belong to a "class of workers engaged in
foreign or interstate commerce," such that his contract with
appellants is exempt from the FAA's coverage?
In answering that question, we note that the Supreme
Court recently held that the Section 1 exemption does not apply
exclusively to contracts of "employees," but rather to "agreements
to perform work," including those of independent contractors. New
Prime Inc. v. Oliveira, 139 S. Ct. 532, 544 (2019). Accordingly,
there is no dispute that the independent contractor agreement at
issue here would fall within the Section 1 exemption if Waithaka
qualifies as a transportation worker.
Norman J. Singer, Sutherland on Statutes and Statutory
Construction § 47.17 (1991)).
- 12 -
Importantly, in New Prime, the Court supplemented the
interpretive guidance of Circuit City by instructing that we must
interpret the Section 1 exemption according to the "fundamental
canon of statutory construction that words generally should be
interpreted as taking their ordinary . . . meaning . . . at the
time Congress enacted the statute." 139 S. Ct. at 539 (alterations
in original) (internal quotation marks omitted) (quoting Wisc.
Cent. Ltd. v. United States,
138 S. Ct. 2067, 2074 (2018)). As a
threshold matter, the parties disagree about which words within
the exemption (the Act 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)) are important to our interpretive task. Amazon asserts
that the key to understanding the scope of the residual clause is
the meaning of the phrase "interstate commerce." Whether the
contracts of a group of workers fall within the ambit of the
clause, Amazon contends, turns on the activities the workers were
hired to perform. Only if the workers' activities themselves
qualify as "interstate commerce"6 can they qualify as
transportation workers whose employment contracts are exempt from
the FAA. Because Waithaka and his fellow local delivery drivers
6 Because the parties do not contend that Waithaka "engaged
in foreign . . . commerce," we focus only on the meaning of "engaged
in . . . interstate commerce." See 9 U.S.C. § 1.
- 13 -
do not personally carry goods across state lines and engage only
in intrastate activities, Amazon maintains that they are not
covered by the residual clause.
Waithaka counters that "engaged in" is the crucial
phrase for understanding the exemption. When the FAA was enacted
in 1925, Waithaka insists, there was an understanding that workers
could be "engaged in . . . interstate commerce" without crossing
state lines; rather, this phrase included workers who
"transport[ed] goods or passengers (or facilitat[ed] the
transportation of goods and passengers) within a single state that
[were] ultimately going to or coming from another state."
We agree with Waithaka that understanding the scope of
the residual clause turns not only on the definition of "interstate
commerce," but also on the words that precede that phrase: "engaged
in." The Court in Circuit City did not look solely to the phrase
"interstate commerce" to interpret the scope of the Section 1
exemption. Rather, it emphasized the significance of the words
modifying that phrase. 532 U.S. at 115-17. Therefore, to
determine what it meant to be "engaged in" interstate commerce in
1925, and thus whether Waithaka and his fellow AmFlex workers fall
within the scope of the transportation worker exemption, we
consider the interpretation of statutes contemporaneous with the
FAA, the sequence of the text of the exemption, the FAA's
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structure, and the purpose of the exemption and the FAA itself.
Cf. id. at 111-21.
1. Contemporaneous Statutes
In considering the scope of the phrase "engaged in"
interstate commerce, the Court in Circuit City first rejected an
argument that it should give the phrase "a broader construction
than justified by its evident language" simply because the FAA was
enacted at a time when Congress's power to regulate pursuant to
the Commerce Clause was circumscribed. 532 U.S. at 116-18. The
petitioner in Circuit City asserted that, because the phrase
"engaged in . . . interstate commerce," as it was understood in
1925, "came close to expressing the outer limits of Congress['s
Commerce Clause] power as then understood," the Court should
interpret the Section 1 exemption to be co-extensive now with the
more expansive modern understanding of the Commerce Clause.
Id.
at 116. According to the logic of the petitioner's argument,
Congress likely thought in 1925 that it was excluding all
employment contracts within the scope of its Commerce Clause
authority, and, hence, the Court should interpret Section 1 as
exempting the broader range of contracts that are now understood
to be within Congress's Commerce Clause authority. See
id.
The Court rejected that argument, concluding that it
would lead to a constantly shifting understanding of the meaning
of the statutory language.
Id. at 117. Rather, the Court affirmed
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that its task in interpreting Section 1 was to assess the meaning
of the words in the exemption when written. See id. at 117-19.
Thus, it looked to the interpretation of similar phrases in
statutes contemporaneous to the FAA.
Id. at 117-18. Relying on
its interpretation of the phrase "engaged in commerce" in the
Clayton Act, enacted in 1914, the Court noted that this
jurisdictional phrase "appears to denote only persons or
activities within the flow of interstate commerce."
Id. at 118
(quoting Gulf Oil
Corp., 419 U.S. at 195). That definition
reflected "[t]he plain meaning of the words 'engaged in commerce,'"
which "is narrower than the more open-ended formulations
'affecting commerce' and 'involving commerce'" -- phrases that
have been interpreted as expressing Congress's intent to exercise
its Commerce Clause power to its fullest extent.7
Id.
Consistent with the approach used in Circuit City,
Waithaka urges us to consider the Court's interpretation of a
similar jurisdictional phrase in the Federal Employers' Liability
7 In Circuit City, the Court acknowledged that common
jurisdictional phrases like "engaged in interstate commerce" do
not "necessarily have a uniform meaning whenever used by Congress."
532 U.S. at 118 (quoting Am. Bldg. Maint.
Indus., 422 U.S. at 277).
Although Amazon seizes on this language, asserting that this
admonition means we would be remiss to rely on the meaning given
to these jurisdictional phrases in contemporaneously passed
statutes, Amazon overstates the Court's qualification. By using
as one of our interpretive tools the Court's interpretation of
statutes contemporaneous with the FAA, we simply follow the Court's
lead.
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Act (the "FELA"), which he contends is particularly helpful for
understanding what it meant for a transportation worker to be
"engaged in interstate commerce" at the time of the FAA's enactment
in 1925. Passed in 1908, the FELA contains language nearly
identical to that of Section 1 of the FAA. 45 U.S.C. § 51 (1908);
see Tenney Eng'g, Inc. v. United Elec. Radio & Mach. Workers of
Am., (U.E.) Local 437, 207 F.2d 450, 453 (3d Cir. 1953) (noting
that Congress "must have had [the FELA] in mind" when drafting the
residual clause in Section 1 of the FAA, given that Congress
"incorporat[ed] almost exactly the same phraseology" into the
FAA).
In relevant part, that statute provided that "[e]very
common carrier by railroad while engaging in commerce between any
of the several States . . . shall be liable in damages to any
person suffering injury while he is employed by such carrier in
such commerce." 45 U.S.C. § 51 (1908). Congress passed this
version of the FELA after the Supreme Court held that an earlier
version -- which had provided coverage to all employees of a
carrier engaged in interstate commerce -- went beyond Congress's
Commerce Clause power, as it was then understood, and was therefore
unconstitutional. See The Employers' Liability Cases, 207 U.S.
463, 498-99, 504 (1908). Unlike the earlier version, the amended
statute provided coverage only when both the railroad and the
employee were "engaged in interstate commerce" at the time of the
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injury.8 Second Employers' Liability Cases, 223 U.S. 1, 51-52
(1912).
In numerous cases, the Supreme Court considered when a
railroad employee was "engaged in interstate commerce," such that
the FELA provided coverage for injuries sustained on the job.
Whether a worker had moved across state lines was not dispositive.
Rather, the Court concluded that workers "engaged in interstate
commerce" did not refer only to those workers who themselves
carried goods across state lines, but also included at least two
other categories of people: (1) those who transported goods or
passengers that were moving interstate, see, e.g., Phila. & Reading
Ry. Co. v. Hancock, 253 U.S. 284, 285-86 (1920), and (2) those who
were not involved in transport themselves but were in positions
"so closely related" to interstate transportation "as to be
practically a part of it," see Shanks v. Del., Lackwanna, & W.R.R.
Co.,
239 U.S. 556, 558-59 (1916) (collecting cases).
Although Waithaka contends that both categories supply
helpful guidance for assessing whether workers with activities
similar to his would have been "engaged in . . . interstate
8Although the text of the FELA refers to workers "employed"
in interstate commerce, the cases interpreting the statute say
that the words "employed" and "engaged" are interchangeable. See,
e.g., Phila., B. & W.R.R. Co. v. Smith, 250 U.S. 101, 102, 104
(1919) (considering whether employee was "engaged in interstate
commerce within the meaning of the statute" and concluding that
"he was employed . . . in interstate commerce").
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commerce" in 1925, we limit our focus to the first group -- those
who transported goods themselves. Because there is no dispute
that Waithaka and other AmFlex workers are involved in such
transport, the FELA precedents pertaining to the narrower category
of workers who were themselves transporting goods that were moving
between states are most relevant for our purpose. Accordingly, we
do not determine whether the second category of workers considered
to be "engaged in interstate commerce" for purposes of the FELA --
those who were "engaged in interstate commerce" by virtue of the
close relationship between their work and interstate
transportation -- are also transportation workers "engaged in
. . . interstate commerce" for purposes of the FAA.9
We therefore focus on the FELA precedents pertaining to
workers who were transporting goods that were moving interstate
9
In declining to consider the applicability of this second
line of cases from the FELA context to the FAA, we do not imply
that the contracts of workers "practically a part" of interstate
transportation -- such as workers sorting goods in warehouses
during their interstate journeys or servicing cars or trucks used
to make deliveries -- necessarily fall outside the scope of the
Section 1 exemption. Some of our sister circuits have described
Section 1 as covering workers "who are actually engaged in the
movement of interstate or foreign commerce or in work so closely
related thereto as to be in practical effect part of it." See,
e.g., Tenney, 207 F.2d at 452. And in 1925 the preceding
categories of "seamen" and "railroad employees" were understood to
include workers who were not themselves engaged in transportation
activities. See New
Prime, 139 S. Ct. at 542-43 (noting that "[a]t
the time of the [FAA]'s passage, shipboard surgeons who tended
injured sailors were considered 'seamen'"). Nevertheless, we
choose to decide this case narrowly, leaving for another day the
resolution of the "closely related to" question.
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-- consistent with Circuit City's own focus on "the flow of
interstate commerce." Examining these cases reveals that the Court
consistently has held that a worker transporting goods that had
come from out of state or that were destined for out-of-state
locations was "engaged in interstate commerce," even if the
worker's role in transporting the goods occurred entirely within
a single state. In Seaboard Air Line Railway v. Moore, 228 U.S.
433 (1913), the Court held that a railroad worker thrown from a
train was "engaged in interstate commerce" at the time of his
injury because the train was hauling two freight cars of lumber in
Florida that were destined for New Jersey.
Id. at 434-35. And,
in Philadelphia & Reading Railway Co. v. Hancock,
253 U.S. 284
(1920), the Court concluded that an injured railroad worker who
was operating a train loaded with coal to be shipped out of state
was engaged in interstate commerce, even though he was operating
the train exclusively in Pennsylvania as it carried coal two miles
from a coal mine to a railroad storage yard.
Id. at 285-86. The
Court noted that
[t]he coal was in the course of transportation
to another state when the cars left the mine.
There was no interruption of the movement; it
always continued towards points as originally
intended. The determining circumstance is
that the shipment was but a step in the
transportation of the coal to real and
ultimate destinations in another state.
- 20 -
Id. at 286. Ultimately, the Court concluded that a "trainman" was
employed in interstate commerce "if any of the cars in his train
contained interstate freight."
Id. at 285.
However, when a railroad worker was working on a railroad
car that was not carrying goods destined for or coming from another
state, the Court drew the line and concluded that the worker was
not, at that point, "engaged in interstate commerce." See Ill.
Cent. R.R. Co. v. Behrens, 233 U.S. 473, 477-78 (1914) (holding
that a worker moving several freight cars "all loaded with
intrastate freight" within the city of New Orleans when he was
fatally injured was not engaged in interstate commerce).
Amazon marshals several reasons why these FELA
precedents do not shed light on the meaning of "engaged in . . .
interstate commerce" within Section 1 of the FAA. First, Amazon
contends that Circuit City dismisses the FELA specifically as
irrelevant to interpreting the FAA. This contention misconstrues
Circuit City. There, the Court referenced two cases interpreting
the FELA in recognizing that, in the early twentieth century,
"engaged in interstate commerce" "came close to expressing the
outer limits of Congress'[s] power as then understood." 532 U.S.
at 116 (citing The Employers' Liability
Cases, 207 U.S. at 498,
and Second Employers' Liability
Cases, 223 U.S. at 48-49).
However, by discussing these cases and, as we have already noted,
refusing to interpret the phrase "engaged in interstate commerce"
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based on the modern understanding of the Commerce Clause power,
the Court did not, as Amazon contends, dismiss the FELA as
irrelevant for interpreting the meaning of those words in the FAA.
Hence, by looking to these FELA precedents to understand the
original meaning of the phrase in 1925, we are not engaging in a
method of interpretation that Circuit City forbids.
Amazon also asserts that these FELA cases are inapt
because the focuses of the FELA and the FAA differ. Whether a
class of workers' employment contracts are exempt from the FAA
turns on whether the workers are "engaged in . . . interstate
commerce," whereas the FELA's coverage, according to Amazon,
turned on whether a railroad carrier for whom an injured employee
worked was engaged in interstate commerce. But this argument
overlooks Congress's amendments to the FELA in 1908 and the holding
of the Second Employers' Liability Cases described above: the FELA
applied only when both the carrier and the injured employee had
been engaged in interstate commerce. 223 U.S. at 51-52. That is,
the FELA was concerned with the activities of employees, just as
the FAA is. Indeed, in Moore, Hancock, and Behrens -- the FELA
precedents that we have discussed, the question before the Court
was the same as it is here: whether certain transportation workers
engaged in interstate commerce.
Amazon also contends that, because the FELA is a remedial
statute that has been construed liberally, see Atchison, Topeka &
- 22 -
Santa Fe Ry. Co. v. Buell, 480 U.S. 557, 561-62 (1987), it is a
poor guide for interpreting the FAA exemption, which must be given
"a narrow construction" in light of the FAA's purpose, see Circuit
City, 532 U.S. at 118-19. Specifically, Amazon emphasizes that
the remedial purpose of the FELA may have, in certain
circumstances, influenced the Court's interpretation of the scope
of the FELA's coverage. See
Shanks, 239 U.S. at 558 (noting that,
given "the nature and usual course of the business to which the
[FELA] relates and the evident purpose of Congress in adopting"
it, the phrase "engaged in interstate commerce" should not be
interpreted in a "technical legal sense" and thus should include
those workers "so closely related" to interstate transportation
"as to be practically a part of it"). However, there is no
indication that the remedial purpose of the FELA affected the
Supreme Court's conclusion that injured railroad workers who were
transporting within one state goods destined for or coming from
other states -- activities comparable to those performed by
Waithaka -- were engaged in interstate commerce. See, e.g.,
Hancock, 253 U.S. at 285-86 (concluding, without reference to the
purpose or liberal construction of the FELA, that a worker engaged
- 23 -
exclusively in local transport of goods destined for another state
was "engaged in interstate commerce").10
Thus, contrary to Amazon's contentions, the FELA cases
concerning workers directly involved in transport advance our
understanding of the Section 1 exemption. Consistent with the
Supreme Court's focus on "the flow of interstate commerce" in
Circuit City, these cases show that workers moving goods or people
destined for, or coming from, other states -- even if the workers
were responsible only for an intrastate leg of that interstate
journey -- were understood to be "engaged in interstate commerce"
in 1925.
To test this conclusion about the original meaning of
the residual clause, based on the FELA precedents, we look to the
other interpretive principles identified in Circuit City, which
Amazon insists support its reading of Section 1.
2. Sequence of the Words in Section 1
Amazon contends that a textual feature of the residual
clause supports its position that the Section 1 exemption covers
only workers who themselves cross state lines. Specifically,
Amazon notes that the phrase "engaged in . . . interstate commerce"
10Again, we do not imply that the contracts of workers "so
closely related" to interstate transportation "as to be
practically a part of it" fall outside (or inside) the scope of
the Section 1 exemption. See Shanks, 239 U.S. at 558. We are
simply maintaining our focus on those workers who themselves
transport goods.
- 24 -
follows "any class of workers" in the residual clause, without
reference to the business of the engaging company. Because of
this sequence, Amazon contends that the activities of the workers
themselves are the crux of the exemption, without consideration of
the geographic footprint and nature of the business for which they
work.
Although our ultimate inquiry is whether a class of
workers is "engaged in . . . interstate commerce," the question
remains how we make that determination. The nature of the business
for which a class of workers perform their activities must inform
that assessment. After all, workers' activities are not pursued
for their own sake. Rather, they carry out the objectives of a
business, which may or may not involve the movement of "persons or
activities within the flow of interstate commerce," Circuit City,
532 U.S. at 118 (quoting Gulf Oil
Corp., 419 U.S. at 195) -- the
crucial concept reflected in the FELA precedents. See Singh v.
Uber Techs. Inc.,
939 F.3d 210, 227-28 (3d Cir. 2019) (noting that,
on remand, the district court might consider "information
regarding the industry in which the class of workers is engaged"
and "information regarding the work performed by those workers,"
among other factors, to determine whether a group of workers is
"engaged in interstate commerce" and thus exempt from the FAA).
Moreover, the language of the residual clause does not foreclose
taking into account the company's business when considering how to
- 25 -
classify the nature and activities of the workers at issue.
Accordingly, Amazon's contention about the textual focus of the
exemption does not alter our conclusion that we may consider the
nature of the business to assess whether workers' activities
include the transportation of goods or people in the flow of
interstate commerce.
This conclusion faithfully adheres to the ejusdem
generis canon, invoked by the Court in Circuit City. Consideration
of the nature of the hiring company's business carries out the
Supreme Court's instruction that we must construe the residual
clause of Section 1 consistently with the specific preceding
categories of workers -- "seamen" and "railroad employees" -- whose
employment contracts are exempt from the FAA. See Circuit City,
532 U.S. at 114-15. Plainly, these groups, defined by the nature
of the business for which they work, demonstrate that the
activities of a company are relevant in determining the
applicability of the FAA exemption to other classes of workers.
By considering the nature of the business to help
determine whether its workers are transporting goods or people
moving in interstate commerce, we do not ignore the importance of
the workers' own connection to interstate commerce as Amazon
contends. And, to be clear, we do not hold that a class of workers
must be employed by an interstate transportation business or a
business of a certain geographic scope to fall within the Section
- 26 -
1 exemption. We simply point out, as is evident here, that the
nature of the business for which the workers perform their
activities is important in determining whether the contracts of a
class of workers are covered by Section 1.
3. Structure of the Residual Clause and the FAA
In another effort to bolster its limited interpretation
of the exemption, Amazon points to the broader structure of the
FAA. In Circuit City, the Supreme Court noted that "engaged in
. . . interstate commerce" in Section 1 must be interpreted more
narrowly than "involving commerce" in Section 2 of the FAA.
Id.
at 115-16. Amazon argues that interpreting the residual clause to
encompass workers who are transporting goods within the flow of
interstate commerce eliminates the distinction between Sections 1
and 2 and conflates the phrase "engaged in . . . interstate
commerce" with "involving commerce," contrary to the Supreme
Court's directive in Circuit City.
This argument plainly fails. In Circuit City, the
Supreme Court rejected the view that Section 1 encompasses all
employment contracts with a connection to interstate commerce --
a construction that would treat the words "engaged in . . .
interstate commerce" as reflecting "congressional intent to
regulate to the full extent of [Congress's] commerce power," i.e.,
to have the same reach as the Court previously had given to the
phrase "involving commerce" in Section 2.
Id. at 114-15. In
- 27 -
dismissing that construction of Section 1, the Court stated that
the operative jurisdictional words in Section 2 -- "involving
commerce" -- connote a broader reach than the words "engaged in
. . . interstate commerce," and similar terms of art, which refer
only to "persons or activities within the flow of interstate
commerce."
Id. at 118 (quoting Gulf Oil
Corp., 419 U.S. at 195);
see also
Allied-Bruce, 513 U.S. at 273 (noting that operative
jurisdictional words in Section 2 of the FAA -- "involving
commerce" -- were broader than the "often-found words of art 'in
commerce,'" which referred only to "'persons or activities within
the flow of interstate commerce'") (emphasis in original) (citing
Am. Bldg. Maint.
Indus., 422 U.S. at 276)).
Thus, Circuit City itself preserves a distinction
between the different phrases in Sections 1 and 2. We are not
negating that distinction, as Amazon contends, by reading Section
1's exemption to cover certain transportation workers who do not
personally cross state lines, based on their particular tasks and
the nature of the business of their employers. To the contrary,
our conclusion that the residual clause exempts the contracts of
workers transporting goods or people within the flow of interstate
commerce adopts the meaning of the phrase "engaged in . . .
interstate commerce" that the Court itself said preserved the
distinction between the two phrases used in Sections 1 and 2.
Hence, nothing in the structure of the FAA alters our understanding
- 28 -
of the original meaning of the "engaged in . . . interstate
commerce" language of the residual clause.
4. Purpose of the FAA
In a further effort to convince us that the residual
clause applies only when a worker transports goods across state
lines, Amazon argues that the contracts of Waithaka and his fellow
local delivery workers cannot be covered by the residual clause
for two additional reasons: (1) exempting the employment
agreements of such local workers would be inconsistent with the
pro-arbitration purpose of the FAA and the Supreme Court's
instruction, in light of the Act's purpose, that we narrowly
construe Section 1; and (2) adopting Waithaka's view of the
exemption would make it difficult to administer and, thus,
frustrate the Act's goal of reducing litigation on the
enforceability of arbitration agreements.
We recognize that the FAA was enacted to counter
hostility toward arbitration and that, accordingly, we must
narrowly construe the statutory exemption from the Act. See
Circuit City, 532 U.S. at 111, 118-19. However, the FAA's pro-
arbitration purpose cannot override the original meaning of the
statute's text. See New
Prime, 139 S. Ct. at 543 (rejecting a
narrower construction of the FAA's exemption provision, even
though that construction advanced the Act's pro-arbitration
policy). Moreover, construing the exemption to include workers
- 29 -
transporting goods within the flow of interstate commerce
advances, rather than undermines, "Congress'[s] demonstrated
concern with transportation workers and their necessary role in
the free flow of goods." See Circuit City, 532 U.S. at 121.
Amazon also offers a more tailored argument about the
statute's purpose and legislative history. In Circuit City, the
Supreme Court observed that Congress may have carved out the
contracts of seamen and railroad employees from the FAA because of
existing alternative dispute resolution schemes for those groups
of workers. Id. at 120-21. By that logic, Amazon contends,
Congress could not have intended to exempt local delivery drivers
like Waithaka because no such alternative exists for them.
Amazon's argument is unavailing for several reasons.
First, the Supreme Court in Circuit City specifically disclaimed
reliance on this legislative history as the basis for its holding.
Id. at 119. Rather, the text of Section 1 determined the outcome
of that case.
Id. at 119-21. Indeed, the Court stated that the
legislative history of Section 1 was "quite sparse."
Id. at 119.
Second, the Court addressed congressional intent only in
response to an argument that construing the residual clause to
exempt only transportation workers would "attribute[] an
irrational intent to Congress." Id. at 121. The Court explained
that "[i]t is reasonable to assume that Congress excluded 'seamen'
and 'railroad employees' from the FAA for the simple reason that
- 30 -
it did not wish to unsettle established or developing statutory
dispute resolution schemes covering specific workers," and that
"[i]t would be rational for Congress to ensure that workers in
general would be covered by the provisions of the FAA, while
reserving for itself more specific legislation for those engaged
in transportation." Id. However, in offering this explanation
for Congress's exemption of certain transportation workers, the
Court did not say that Section 1 applied exclusively to
transportation workers for whom an alternative dispute resolution
system existed. We see no basis for treating the Court's inference
about Congress's rationale for excluding specific industries as a
principle limiting the application of the transportation worker
exemption going forward. See
Singh, 939 F.3d at 224-26. Indeed,
the residual clause means that Congress contemplated the future
exclusion of workers other than railroad employees and seamen, and
it did not limit that exclusion to those with available alternative
dispute resolution systems. Purpose cannot override text. See
New
Prime, 139 S. Ct. at 543. If Congress had wished, it could
have exempted only "seamen" and "railroad employees," but, as
enacted, Section 1's exemption also includes a residual clause.
Amazon's argument about the Act's purpose to reduce
litigation over arbitration agreements fares no better. Amazon
contends that a decision in Waithaka's favor would introduce
uncertainty about the FAA's coverage and spawn extensive
- 31 -
litigation about the scope of the residual clause. This scenario,
Amazon maintains, would "undermin[e] the FAA's pro[-]arbitration
purposes and 'breed[] litigation from a statute that seeks to avoid
it.'" Circuit City, 532 U.S. at 123 (quoting
Allied-Bruce, 513
U.S. at 275). But, as Waithaka points out, the notion that
Amazon's proposed standard would create an easily administrable,
bright-line rule is illusory. If crossing state lines were the
touchstone of the exemption's test, the parties would still engage
in discovery to determine how often a class of workers moved
interstate and would litigate what portion of a given group of
workers must cross state lines and with what frequency to qualify
as a class of workers "engaged in . . . interstate commerce."
Moreover, the line-drawing conundrum that Amazon
identifies would not stem from our decision. Rather, it is a
product of Circuit City itself. In concluding that the residual
clause does not encompass all employment contracts, but only those
of transportation workers, the Court left it to the lower courts
to assess which workers fall within that category. Doing so
unavoidably requires the line-drawing that courts often do.
5. Conclusion
In sum, we reject Amazon's cramped construction of
Section 1's exemption for transportation workers. The original
meaning of the phrase "engaged in . . . interstate commerce,"
revealed by the FELA precedents, and the text, structure, and
- 32 -
purpose of the FAA, all point to the same conclusion: Waithaka and
other last-mile delivery workers who haul goods on the final legs
of interstate journeys are transportation workers "engaged in
. . . interstate commerce," regardless of whether the workers
themselves physically cross state lines.11 By virtue of their work
transporting goods or people "within the flow of interstate
commerce," see Circuit City, 532 U.S. at 118, Waithaka and other
AmFlex workers are "a class of workers engaged in . . . interstate
commerce." Accordingly, the FAA does not govern this dispute,
and it provides no basis for compelling the individual arbitration
required by the dispute resolution section of the Agreement at
issue here.
III.
Having concluded that the FAA does not govern the
enforceability of the dispute resolution section of the Agreement,
with its requirement of individual arbitration, we must now decide
whether such arbitration may still be compelled pursuant to state
law. Because the parties dispute which state's law -- that of
Washington or Massachusetts -- governs that enforceability
question, our analysis proceeds in two parts. First, we analyze
11
Although Amazon has relied heavily on the fact that Waithaka
has not crossed state lines in the course of performing his AmFlex
work, Amazon has never contested that products he and other AmFlex
workers deliver cross state lines to reach their final
destinations.
- 33 -
the contract's choice-of-law and severability language to
determine the governing law. We conclude that the contract selects
the law of Washington. Then, we consider whether conflict-of-law
principles permit the enforceability of that contractual choice of
Washington law. Because we conclude that Massachusetts would treat
the class waiver provisions in the Agreement as contrary to the
Commonwealth's fundamental public policy and that, based on
conflict-of-laws principles, the contractual choice of Washington
law would be unenforceable if it would permit such waivers, we
decide that individual arbitration cannot be compelled pursuant to
state law here. We proceed with an explanation of these
conclusions.
A. Contractual Governing Law
To demonstrate that Washington law applies, Amazon
points to two aspects of the Agreement: the governing law section
and the severability provision. To reiterate, the governing law
section states that "[t]he interpretation of this Agreement is
governed by the law of the state of Washington without regard to
its conflict of laws principles, except for [the dispute resolution
section], which is governed by the [FAA] and applicable federal
law." The severability provision 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
- 34 -
enforceable provisions be enforced to the fullest extent
permissible under applicable law."
Amazon asserts that, read in combination, these two
aspects of the Agreement require that Washington law governs the
enforceability of the class waiver and arbitration provisions in
the Agreement. Anticipating the possibility that the FAA might
not apply to Waithaka's claims, Amazon advocates striking the
provision in the governing law section stating that the "FAA and
applicable federal law" govern the dispute resolution section of
the Agreement, which includes the class waiver and arbitration
provisions.12 Likewise, the portion of the dispute resolution
section stating that "the Federal Arbitration Act and applicable
federal law [will] govern any dispute that may arise between the
parties" must be severed. What remains is an express choice of
Washington law to govern the "interpretation of the Agreement,"
regardless of Washington's conflict-of-laws principles.
Waithaka asserts a different reading of the Agreement.
Given that the governing law section states that Washington law
will apply to the interpretation of the entire Agreement except
12 Waithaka argues that Amazon forfeited this argument by
failing to explain in its briefing to the district court how the
severability provision affected the choice-of-law analysis.
However, the severability argument was raised below and the
district court addressed it in a footnote in its decision. See
Waithaka, 404 F. Supp. 3d at 344 n.4. We conclude that Amazon
sufficiently preserved this argument and developed it on appeal.
- 35 -
the dispute resolution section, Waithaka argues that Amazon cannot
now claim that Washington law applies to that section in lieu of
the FAA. Since Amazon did not specify in the Agreement what law
applies to the dispute resolution section in the event a court
concludes that the FAA is inapplicable, as we have here, Waithaka
contends that there is no applicable contractual choice of law.
In that absence, Massachusetts law applies to the enforceability
of the arbitration provision in the dispute resolution section and
its waiver of any class action proceedings. Waithaka urges that
Amazon should bear the burden of failing to anticipate the present
scenario and, like the district court, we should hold Amazon to
its own "inartful drafting." Waithaka, 404 F. Supp. 3d at 344
n.5.
We agree with Waithaka and the district court that Amazon
could have specified more clearly what law applies to the dispute
resolution section when the FAA is inapplicable.13 See, e.g.,
13
We note another puzzling aspect of the governing law
section: its intended scope. While the section's directive that
"[t]his agreement is governed by the law of the state of Washington
without regard to its conflict of laws principles" makes abundantly
clear Amazon's strong preference for that state's law, which might
be ousted by the application of Washington's own conflict-of-law
principles, we wonder why Amazon limited that choice of Washington
law to the "interpretation of the Agreement." Ultimately, however,
we disagree with Waithaka's position that this limitation means
that Washington law does not apply to the dispute resolution
section of the Agreement. As Amazon points out, the governing law
section describes the FAA as, in effect, governing "[t]he
interpretation of . . . [the dispute resolution section]." Thus,
- 36 -
Palcko v. Airborne Express, Inc., 372 F.3d 588, 590 (3d Cir. 2004)
(interpreting a choice-of-law provision that stated explicitly
that "[t]o the extent that the [FAA] is inapplicable, Washington
law pertaining to agreements to arbitrate shall apply"). But
Amazon's shortcomings in drafting the Agreement do not alter our
ultimate conclusion: the severability argument put forward by
Amazon -- to which Waithaka fails to provide any rebuttal --
prevails. Because the FAA is inapplicable, the portions of the
governing law and dispute resolution sections selecting the FAA
must be stricken from the Agreement, leaving Washington law as the
default choice of law for assessing the enforceability of the
arbitration and class waiver provisions of the parties' contract.
B. Conflict-of-Law Analysis
Despite the contractual choice of Washington law,
Waithaka contends that arbitration nevertheless cannot be
compelled pursuant to state law. He offers two arguments to
support that conclusion. First, relying on Scott v. Cingular
Wireless, 161 P.3d 1000 (Wash. 2007) (en banc), he contends that
arbitration cannot be compelled even under Washington law. But to
the extent Washington law would permit the arbitration provision
to be enforced, he asserts that the contractual choice of
if the FAA is inapplicable and Washington law applies as a
fallback, Washington law must apply to the interpretation of the
dispute resolution section just as the FAA would.
- 37 -
Washington law is itself unenforceable under a conflict-of-law
analysis. As he puts it, a contractual choice of law cannot
deprive him of "unwaivable statutory rights under Massachusetts
law," including the right to bring his claims as a class action.
According to Waithaka's conflict-of-law argument, the dispute
resolution section of the Agreement does not simply require an
arbitral forum. It also includes the class waiver provisions that
apply to both judicial and arbitral forums. Including such class
waiver provisions in employment contracts, Waithaka contends,
violates fundamental Massachusetts public policy. He therefore
insists that, based on conflict-of-law principles, the contractual
choice of Washington law is unenforceable if it would permit the
class waiver provisions. We proceed to analyze Waithaka's second
argument, assuming for purposes of deciding whether arbitration
can be compelled here that Washington law would permit the class
waiver provisions in the Agreement.14
Before we assess this conflict-of-law argument, we must
pose a question. Even if the class waiver provisions are
unenforceable, as Waithaka argues, could he still be forced to
bring his claims in an arbitral forum, albeit as a class action?
14
If Waithaka prevails on his conflict-of-law argument but
our assumption about Washington law is incorrect, the outcome in
this case would be the same. That is, if the class waiver
provisions are in fact unenforceable under Washington law,
arbitration could not be compelled pursuant to state law, albeit
based on Washington rather than Massachusetts law.
- 38 -
The Agreement itself answers that question. It "does not provide
for, and the parties do not consent to, arbitration on a class,
collective or representative basis." The Agreement states
explicitly that it "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." In other words, the class waiver provisions cannot be
severed from the rest of the dispute resolution section. If they
are unenforceable, the arbitration provision is also
unenforceable.15 Thus, our assessment of Waithaka's conflict-of-
law argument -- that the class waiver provisions are unenforceable
-- will be dispositive of the final question presented here: can
arbitration be compelled at all pursuant to state law?
We therefore turn to Waithaka's conflict-of-law
argument. We begin by reviewing the statutory claims he asserts
and Massachusetts's treatment of class waivers in the context of
such claims. We then undertake a conflict-of-law analysis,
15
Our conclusion that we cannot order class arbitration based
on the terms of the Agreement is consistent with the Supreme
Court's conclusion that class arbitration may not be compelled
unless the arbitration agreement specifically contemplates that
form of arbitration. As the Supreme Court put it, the "changes
brought about by the shift from bilateral arbitration to class-
action arbitration" are "fundamental." See Stolt-Nielsen S.A. v.
AnimalFeeds Int'l Corp., 559 U.S. 662, 686 (2010).
- 39 -
considering the contractual governing law and Massachusetts public
policy.
1. Statutory Claims and Massachusetts Public Policy
Waithaka asserts three claims on behalf of himself and
others similarly situated under the Massachusetts Wage Act, the
Independent Contractor Misclassification Law, and the Minimum Wage
Law. Mass. Gen. Laws ch. 149, §§ 148, 148B & ch. 151, § 1.16 For
each of these statutory provisions, Massachusetts law creates a
private right of action by which a person "may institute and
prosecute in his own name and on his own behalf, or for himself
and for others similarly situated, a civil action for injunctive
relief, for any damages," and other relevant relief.
Id. ch. 149,
§ 150 & ch. 151, § 20 (emphasis added). The right to pursue
classwide relief for Wage Act and Independent Contractor
Misclassification Law claims is further protected by a provision
that precludes the contractual waiver of certain rights under those
statutes.
Id. ch. 149,
§ 148. This anti-waiver provision states
that "[n]o person shall by a special contract with an employee or
by any other means exempt himself from" Section 150, which, in
turn, provides the statutory right to pursue Wage Act and
16
In his claim concerning the Minimum Wage Law, Waithaka also
cites Mass. Gen. Laws ch. 151, § 7, which delineates the
commissioner's duties in establishing minimum fair wages.
- 40 -
Independent Contractor Misclassification Law claims on a class
basis.
Id. ch. 149,
§§ 148, 150.
Waithaka contends that these statutory provisions create
a substantive right to bring class actions and that, in
Massachusetts, the protection of that right reflects a fundamental
public policy of the state. To support that claim, Waithaka relies
on Feeney v. Dell, Inc., 908 N.E.2d 753 (Mass. 2009) ("Feeney I"),
and Machado v. System4 LLC, 989 N.E.2d 464 (Mass. 2013). As we
will explain, Feeney I considered a question similar to that raised
by Waithaka's argument: whether the right to bring a consumer class
action pursuant to another Massachusetts statute represented the
fundamental public policy of the Commonwealth, and thereby
precluded the contractual waiver of the right to bring such an
action. 908 N.E.2d at 761-765. Although the Massachusetts Supreme
Judicial Court ("SJC") concluded that the Commonwealth's public
policy did preclude such a waiver, id., the Supreme Court,
interpreting the FAA in AT&T Mobility LLC v. Concepcion,
563 U.S.
333 (2001), forced a modification of that holding in a later
Massachusetts case, see Feeney v. Dell, Inc.,
989 N.E.2d 439, 440-
41 (Mass. 2013) ("Feeney II"). Both Feeney I and Feeney II, the
intervening Supreme Court decision in Concepcion, and Machado are
all essential precedent on the conflict-of-law question presented
here, and we therefore describe the reasoning of each case.
- 41 -
In Feeney I, the SJC concluded that the statutory right
to pursue claims as a class provided by the Massachusetts consumer
protection act represented the fundamental public policy of
Massachusetts. 908 N.E.2d at 762. The SJC cited several reasons
for that conclusion. First, the Massachusetts legislature
"expressly provided for such [class action] mechanisms" in Section
9(2) of Chapter 93A.
Id. The legislative history of that
provision demonstrated a particular concern for the "aggregation
of small consumer protection claims," which a consumer might
otherwise be unwilling or unable to pursue as an individual claim.
Id. at 762-63. Moreover, prohibiting class actions would
"undermine[] the public interest in deterring wrongdoing" and
would "negatively affect[] the rights of those unnamed class
members on whose behalf the class action would proceed."
Id. at
764.
Having concluded that Massachusetts public policy
strongly favors class actions in the consumer context, the SJC
considered whether it could invalidate a class waiver -- which was
embedded within a mandatory arbitration clause governed by the FAA
-- on those state public policy grounds without risking preemption
by the FAA in this period prior to Concepcion. Id. at 768-69.
Finding that the FAA presented no such barrier, see
id. at 769,
the SJC declined to enforce the class waiver,
id. at 765. To rule
otherwise, the SJC noted, "would in effect sanction a waiver of
- 42 -
the right" granted by Massachusetts consumer protection law to
bring a class action in an arbitral or judicial forum. Id.
Soon thereafter, however, the Supreme Court decided
Concepcion. Reviewing California's treatment of class action
waivers in consumer contracts, the Court explained that the FAA
limits a state's ability to invalidate class waiver provisions in
arbitration clauses based on the state's public
policy. 563 U.S.
at 344-52.17 Based on the reasoning and holding of Concepcion, the
SJC concluded that it had misunderstood the FAA's preemptive effect
on the Commonwealth's public policy. Accordingly, following
Concepcion, the SJC revisited its Feeney I holding in Feeney II.
See Feeney
II, 989 N.E.2d at 441.
There, the SJC explained that it now understood that the
FAA, as interpreted by Concepcion, "precludes the invalidation of
class waiver provisions in arbitration clauses in consumer
contracts . . . where the reason for invalidation is that such
waivers are contrary to the fundamental public policy of the
17
Specifically, the Supreme Court decided in Concepcion
whether the FAA "prohibits States from conditioning the
enforceability of certain arbitration agreements on the
availability of classwide arbitration procedures." 563 U.S. at
336. It identified two scenarios in which state law would be
preempted by the FAA: (1) where a state law "prohibits outright
the arbitration of a particular type of claim," and (2) where a
state law "doctrine normally thought to be generally
applicable . . . is alleged to have been applied in a fashion that
disfavors arbitration," and such an application "stand[s] as an
obstacle to the accomplishment of the FAA's objectives."
Id. at
341-43.
- 43 -
Commonwealth." Id. Moreover, "[b]ecause that was [the SJC's]
primary reason in Feeney I for invalidating the class waiver
provision in the arbitration agreement, Concepcion undoes the
principal rationale for [its] decision in Feeney I."
Id. In other
words, the fact that a class waiver in a consumer contract violated
a consumer's statutory right to bring class claims under Chapter
93A was no longer relevant in determining whether the waiver could
be enforced if the waiver appeared in an arbitration clause
governed by the FAA.
Nevertheless, the SJC identified in Feeney II one ground
for invalidating a class waiver that survived Concepcion's ruling
on the preemptive scope of the FAA: when a consumer demonstrates
that she "effectively cannot pursue a claim against the defendant
in individual arbitration according to the terms of the agreement,
thus rendering . . . her claim nonremediable." Id. The SJC
reasoned that Congress's intent in enacting the FAA
was to preserve the availability of an
arbitral forum and remedy for the resolution
of disputes between parties to a commercial
contract, and that it would be contrary to
Congressional intent to interpret the FAA to
permit arbitration clauses that effectively
deny consumers any remedy for wrongs committed
in violation of other Federal and State laws
intended to protect them.
Id.
Under this new standard, a Massachusetts court had to
determine whether a plaintiff had proven "as a matter of fact"
- 44 -
that the particular class waiver, in combination with the other
terms of an arbitration agreement, made her claim nonremediable,
effectively allowing an arbitration agreement to "confer[ on a
defendant] . . . de facto immunity from private civil liability
for violations of State law." Id. at 462-63. To assess whether
a particular class waiver rendered claims nonremediable, a court
could consider, among other things, the complexity of the claims
asserted, the amount of damages sought, and the presence of fee-
shifting provisions. See id.18
On the same day the SJC issued Feeney II, the SJC issued
Machado, which considered whether the reasoning articulated in
Feeney I, applicable to class waivers in consumer contracts, as
now modified by Feeney II, also applied to class action waivers in
18 This proposition had a brief life. Just eight days after
the SJC issued Feeney II, the Supreme Court decided American
Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013).
Although the Court was not directly reviewing Feeney II, the
Court's ruling made clear that the ground on which the SJC believed
it could still invalidate a class waiver without risking preemption
by the FAA did not, in fact, survive Concepcion. See Italian
Colors, 570 U.S. at 238 (holding that a class waiver in an
arbitration agreement is enforceable under the FAA even when a
plaintiff shows that the waiver will prevent her from vindicating
her statutory rights). Thus, the SJC issued Feeney v. Dell, Inc.,
993 N.E.2d 329 (Mass. 2013) ("Feeney III"), concluding that,
"following [Italian Colors], our analysis in Feeney II no longer
comports with the Supreme Court's interpretation of the FAA." Id.
at 330. Nonetheless, both Feeney I and II remain important for
understanding Machado. The FAA is inapplicable to Waithaka's
claims; thus, the SJC's abrogation of its holding in Feeney II
based on FAA preemption does not alter the relevance of Feeney II
to our understanding of Machado.
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arbitration clauses of employment contracts, like the one in the
Agreement here. See Machado, 989 N.E.2d at 467. The SJC noted
that "many of the same public policy arguments [applicable to
consumer claims under Chapter 93A] apply equally well to claims by
employees under the Wage Act."
Id. at 470. However, for the same
reasons described in Feeney II, the SJC concluded that the FAA
precluded a court from invalidating a class waiver in an employment
contract based on such state public policy grounds.
Id. at 471.
Despite the "legitimate policy rationales" that led the
Massachusetts legislature to create a statutory right to bring a
class proceeding, codified in Section 150 of the Wage Act, the SJC
concluded that those public policy concerns were "of no avail"
after Concepcion.
Id. at 470. As in the consumer claims context,
when the FAA applied, the SJC could invalidate a class waiver in
an employment contract only when the plaintiff could demonstrate
that
she lacks the practical means to pursue a
claim in individual arbitration or, put
differently, that the class waiver, when
combined with the other terms of the
arbitration agreement, "effectively denies
[the plaintiff] a remedy and insulates the
defendant from private civil liability for
violations of State law."
- 46 -
Id. (alteration in original) (quoting Feeney
II, 989 N.E.2d at
440).19
Ultimately, the SJC concluded that the plaintiffs in
Machado were unable to make that factual showing. Because they
were seeking damages of approximately $10,000, the SJC rejected
their "contention that their claims were nonremediable in
individual arbitration because the costs of arbitration would more
than surpass any potential recovery that they might be entitled
to." Id. at 472 (internal quotation marks omitted). In other
words, the plaintiffs had not shown that their class waiver was
invalid based on the narrow ground that the SJC thought survived
Concepcion. Thus, the Machado plaintiffs were left to pursue their
Massachusetts Wage Act claims in individual arbitration.
Id.
Despite this outcome, Waithaka urges that the reasoning
of Machado and Feeney I demonstrates that class waivers in
employment contracts, like those in consumer contracts, are
contrary to Massachusetts's fundamental public policy, as
reflected in the three employment statutes under which Waithaka
asserts his claims. Although that state policy cannot serve as a
basis to invalidate a class waiver in an arbitration provision
governed by the FAA, Waithaka asserts that the policy retains force
when state law governs.
19
Of course, after Feeney III, this exception recognized by
the SJC was no longer available.
- 47 -
Amazon sees the Massachusetts precedent differently. It
argues that Machado shows that "Massachusetts now confines
workers' substantive right to class litigation to situations in
which the plaintiff 'effectively cannot pursue [his or her] claim
. . . in individual arbitration.'" Because Waithaka seeks damages
greater than those at issue in Machado, Amazon argues, the class
waiver provisions do not leave Waithaka without a viable means of
pursuing relief and, therefore, even under Massachusetts law,
these provisions are not unenforceable as contrary to the
Commonwealth's public policy.
Amazon's reading of Machado disregards the way that
Concepcion impacted the SJC's treatment of the class waiver at
issue there. Amazon's proposed test for determining the
enforceability of a class waiver -- whether a plaintiff can
effectively pursue her claim in individual arbitration based on
the amount of damages sought -- comes directly from Feeney II, see
989 N.E.2d at 441, in which the SJC identified an alternative basis
for invalidating a class waiver in the context of a consumer claim
after Concepcion held that state public policy cannot provide that
basis when the FAA applies.
The SJC did not say in Feeney II or Machado that it had
changed its view, expressed in Feeney I, that public policy
concerns can invalidate a class waiver. Moreover, there is
significant evidence in Machado that the SJC would conclude that
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the right to pursue class relief in the employment context
represents the fundamental public policy of the Commonwealth, such
that this right cannot be contractually waived in an agreement not
covered by the FAA. In addition to the policy rationales
articulated for consumer claims in Feeney I, such as "the deterrent
effect of class action lawsuits," the SJC highlighted another
significant rationale unique to the employment context that
supports this non-waiver conclusion. Machado, 989 N.E.2d at 470
n.12. As the SJC put it, the statutory right to pursue class
relief reflects the Commonwealth's "desire to allow one or more
courageous employees the ability to bring claims on behalf of other
employees who are too intimidated by the threat of retaliation and
termination to exercise their rights." See
id.
Indeed, Massachusetts provides even greater statutory
protection for the right to bring class claims in the employment
context than in the consumer claims context. Massachusetts law
specifically precludes the waiver of the right to bring class
claims arising under the Wage Act and Independent Contractor
Misclassification Law. Mass. Gen. Laws. Ch. 149, § 148.20 Such
"[a]nti[-]waiver provisions are characteristic of laws that
20
The fact that this anti-waiver provision does not extend
to the Minimum Wage Law is not significant to our analysis. For
the other reasons stated, the Minimum Wage Law's own allowance for
class claims reflects the fundamental public policy of the
Commonwealth.
- 49 -
protect fundamental public policy." Melia v. Zenhire, Inc., 967
N.E.2d 580, 588 (Mass. 2012).
Several statements in Machado confirm that the SJC would
conclude that the Commonwealth's fundamental public policy
protects the right to bring class actions in the employment
context, and, furthermore, that it would have reached a contrary
conclusion in that case if the FAA had not preempted Massachusetts
law. The SJC stated forthrightly that it was not "blind to the
fact that the Legislature may find its purposes [in creating a
statutory right to bring class claims] frustrated by [the] outcome"
in Machado. 989 N.E.2d at 470-71. After invalidating and severing
another portion of the employment contract that directly
contradicted a different right provided by the Wage Act,21 the SJC
stated that it likely would have done the same with the class
waiver if the FAA did not preclude it from doing so. See
id. at
21
The contract included a waiver of multiple damages.
Machado, 989 N.E.2d at 472. However, "because the award of treble
damages is mandatory under [the Wage Act], and cannot be waived,"
the SJC invalidated and severed that portion of the contract.
Id.
at 472-73. The Court explained that it was able to enforce the
Wage Act's mandatory award of treble damages and anti-waiver
provision that protected that entitlement because doing so "does
not impinge on any fundamental characteristic of arbitration, nor
does it frustrate the purpose of the arbitral forum."
Id. at 473.
Therefore, the FAA did not preempt the SJC's decision to invalidate
and sever that portion of the arbitration agreement as contrary to
the Commonwealth's fundamental public policy.
Id. However,
because invalidating the class waiver provision would
fundamentally alter the nature of the arbitration proceedings, the
SJC could not similarly invalidate and sever the class waiver
provision without running afoul of the FAA.
Id.
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472-73. Specifically, the SJC said that "[p]rior to Concepcion,
the provision for class proceedings in § 150 [of the Wage Act] and
the [provision that prevents contractual waiver of that right]
likely would have compelled [the SJC] to invalidate and sever the
class waiver."
Id. at 473.
Thus, based on the SJC's reasoning in Machado, we are
confident that the SJC would conclude that, like the statutory
right to proceed as a class in the context of Massachusetts Chapter
93A consumer claims, the statutory rights to proceed as a class
articulated in the Massachusetts Wage Act, Independent Contractor
Misclassification Law, and Minimum Wage Law -- as well as the
statutory provision that precludes contractual waiver of these
rights -- represent the fundamental public policy of
Massachusetts, and that the SJC would therefore invalidate a class
waiver in an employment contract, like that of Waithaka, not
covered by the FAA. See Mass. Gen. Laws ch. 149, §§ 148, 150 &
ch. 151, § 20. Notwithstanding the Supreme Court's view that such
state policies must give way when the FAA governs a dispute, the
policies remain intact where, as here, the FAA does not preempt
state law. See Machado, 989 N.E.2d at 470-71, 473.22
22 Amazon argues that Massachusetts interprets its own
Arbitration Act, Mass. Gen. Laws ch. 251, § 1, identically to the
FAA, and so, in light of Concepcion and Italian Colors, even if
Massachusetts law applied, any public policy against class waivers
would give way to Massachusetts's own pro-arbitration policy. See
- 51 -
2. The Competing Laws
Because the Agreement's class waiver provisions would be
invalid under Massachusetts law, we must assess whether
Massachusetts law would oust the contractual choice of Washington
law, see supra Section III.A, -- based on our assumption for
purposes of this case that Washington law would permit the class
waiver provisions to be enforced -- and thereby preclude
arbitration from being compelled pursuant to state law. See Feeney
I, 908 N.E.2d at 766 (engaging in conflict-of-law analysis to
determine whether consumer contract's choice of Texas law was
unenforceable as contrary to Massachusetts's fundamental public
policy). Massachusetts has embraced the conflict-of-law
principles in the Restatement (Second) of Conflict of Laws.23 See
Miller v. Cotter,
863 N.E.2d 537, 543 (Mass. 2007) (commenting
that the FAA's "language is remarkably similar to" the
Massachusetts Arbitration Act); Walker v. Collyer,
9 N.E.3d 854,
859 (Mass. App. Ct. 2014) (explaining that, in deciphering the
Massachusetts Arbitration Act, courts "give strong weight to . . .
decisions applying the Federal Arbitration Act"). But even if
Massachusetts follows the lead of the FAA in interpreting its own
Arbitration Act, that does not help us determine how it balances
competing policy rationales in the absence of federal preemption.
Neither Miller nor Walker has anything to say on that balancing,
and Amazon does not point us to any other cases that do. We
therefore reject the argument that Massachusetts's public policy
favoring the ability to bring classwide claims gives way to its
own pro-arbitration policy.
23Federal courts sitting in diversity look to the conflict-
of-law principles of the forum state to determine the applicable
substantive law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313
U.S. 487, 496 (1941). Neither party has contested that
Massachusetts remains the "forum state" for purposes of the
- 52 -
Hodas v. Morin, 814 N.E.2d 320, 324 (Mass. 2004). The Restatement
establishes a two-part inquiry: first, we must assess whether the
state chosen by the parties in their contract has a "substantial
relationship" to the contract and, second, whether applying the
law of that state -- here, Washington -- "'would be contrary to a
fundamental policy of a state which has a materially greater
interest than the chosen state' and is the state whose law would
apply . . . 'in the absence of an effective choice of law by the
parties.'"
Id. at 325 (quoting Restatement (Second) of Conflict
of Laws § 187(2) (Am. Law Inst. 1971)).
Washington, where both Amazon.com and Amazon Logistics
are headquartered, has a "substantial relationship" to the
contract. See Restatement (Second) of Conflict of Laws § 187(2)
cmt. f (Am. Law Inst. 1971) (noting that a state has a "substantial
relationship" to the contract if it is "where performance by one
of the parties is to take place or where one of the parties is
domiciled or has his principal place of business"). Yet Amazon
does not dispute that, in the absence of an effective contractual
choice of law, the law of Massachusetts would apply. Nor does
Amazon contest that Massachusetts, where Waithaka has indisputably
conflict-of-law analysis despite the transfer under the "first-
to-file" doctrine to the Western District of Washington. Cf.
Ferens v. John Deere Co., 494 U.S. 516, 523-27 (1990) (explaining
that, when the transfer of a diversity case occurs under 28 U.S.C.
§ 1404(a), the state law of the transferor jurisdiction applies
even after the transfer).
- 53 -
performed all of his work pursuant to the contract, has "a
materially greater interest" in the enforceability of the class
waiver and arbitration provisions than Washington. Moreover,
engaging in a conflict-of-law analysis in Feeney I, the SJC had
little trouble finding that, in a dispute where the Commonwealth's
fundamental interest in avoiding class waivers was at stake, the
Commonwealth had a "materially greater interest" than the state
whose law would otherwise apply. See Feeney I, 908 N.E.2d at 766-
67 & n.32 (noting that the question of whether Massachusetts has
a "materially greater interest" in a contractual relationship "is
subsumed with [the plaintiffs'] argument that the fundamental
public policy favoring class actions" would result in the
application of Massachusetts law) (internal quotation marks
omitted). Ultimately, Amazon contests only whether the
fundamental public policy of Massachusetts barring class waivers
in employment contracts applies when a worker seeks damages of a
sufficiently high dollar value. But we have already explained why
Amazon's contention fails.
Hence, assuming that Washington law would permit the
class waiver provisions, Massachusetts law would oust the
contractual choice of Washington law as contrary to the
Commonwealth's fundamental public policy and would govern the
enforceability of the dispute resolution section of the Agreement.
Under Massachusetts law, the class waiver provisions would be
- 54 -
invalid. Because, as noted, see supra Section III.B, the Agreement
stipulates that the class waiver provisions cannot be severed from
the rest of the dispute resolution section, the arbitration
provision would be similarly unenforceable.24
Thus, the district court rightly refused to compel
arbitration pursuant to state law.
IV.
For the foregoing reasons, we affirm the district
court's denial of Amazon's motion to compel arbitration.
So ordered.
24
As we stated already, if our assumption for purposes of our
conflict-of-law analysis that Washington would permit class action
waivers in employment contracts is incorrect, and thus there is no
actual conflict between the law of Washington and Massachusetts,
Waithaka would simply prevail under the contractual choice of
Washington law.
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