Harper v. Amazon.com Servs., Inc.

• Decision Date: 08 September 2021
• Docket Number: No. 20-2614,20-2614
• Citation: 12 F.4th 287
• Parties: Robert HARPER v. AMAZON.COM SERVICES, INC.; John Does 1-5 and 6-10 Amazon.com Services, Inc., Appellant
• Court: U.S. Court of Appeals — Third Circuit

12 F.4th 287

Robert HARPER

v.AMAZON.COM SERVICES, INC.; John Does 1-5 and 6-10

Amazon.com Services, Inc., Appellant

No. 20-2614

United States Court of Appeals, Third Circuit.

Argued March 16, 2021

Filed: September 8, 2021

Gabrielle Levin, Gibson, Dunn & Crutcher LLP, 200 Park Avenue, 47^th Floor, New York, NY 10166, Jason C. Schwartz (Argued), Lucas C. Townsend, Joshua M. Wesneski, Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, N.W., Washington, DC 20036, Counsel for Appellant

Steven P. Lehotsky, Jonathan D. Urick, U.S. Chamber Litigation Center, 1615 H Street, N.W., Washington, DC 20062, Archis A. Parasharami, Daniel E. Jones, Mayer Brown LLP, 1999 K Street, N.W., Washington, DC 20006-1101, Counsel for Amicus Curiae in Support of Appellant, The Chamber of Commerce of the United States of America

Deborah L. Mains (Argued), Costello & Mains, LLC, 18000 Horizon Way, Suite 800, Mount Laurel, NJ 08054, Counsel for Appellee

Before: SHWARTZ, PORTER, MATEY, Circuit Judges.

OPINION OF THE COURT

MATEY, Circuit Judge.

Robert Harper spends part of his time making deliveries for Amazon as a "flexible" driver, one of those once unknown, now ubiquitous, jobs of the twenty-first century.¹ Harper alleges Amazon owes him wages and tips. Perhaps they do. But before answering that question, the District Court must first ask another: whether Harper's claims belong in arbitration. This inquiry, as we hold today, respects the balance of authority between the several States and the United States and requires federal courts sitting in diversity to decide state law claims, including state arbitrability, even where the Federal Arbitration Act ("FAA") may apply. Doing so promotes both the competitive and cooperative aspects of Our Federalism, with appropriate "sensitivity to the legitimate interests of both State and National Governments." Younger v. Harris , 401 U.S. 37, 44, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). That is a threshold inquiry, ensuring prompt review of state law claims, particularly before turning to discovery to sort through a comparatively complex federal question. For that reason, we will vacate the District Court's judgment and remand to determine the arbitrability of Harper's claim against Amazon under applicable state law.

I. BACKGROUND

Robert Harper runs deliveries for Amazon under the "Amazon Flex" program. (App. at 44.) Amazon Flex supplements Amazon's traditional delivery services. Interested drivers use an app to sign up to drive packages from Amazon warehouses, affiliated grocers, and participating restaurants to home shoppers.

Harper signed up as a driver through the Amazon Flex phone app, where he clicked on a brightly colored button stating, "I AGREE AND ACCEPT" (in all caps) following the Terms of Service. (Opening Br. at 7.) The Terms noted, with still more capitalization, that the Amazon Flex driver who accepts:

AGREE[S] 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.²

(App. at 62.) The Terms of Service also included language specifying that the parties "agree[d] that the Federal Arbitration Act and applicable federal law will govern any dispute that may arise between the parties." (App. at 67.) And a choice-of-law provision provided that Washington law controls the rest of the Terms of Service. Harper admits that he agreed, clicking first to accept the full Terms and clicking again to confirm the arbitration clause. Still, he filed a complaint in the Superior Court of New Jersey, alleging violations of New Jersey law. Amazon removed to federal court, claiming complete diversity. Pressing on, Harper filed a putative class action on behalf of similarly situated New Jersey Amazon Flex drivers, alleging that Amazon misclassified them as independent contractors when they really are employees, and that Amazon failed to pay overtime, minimum wage, and customer tips, in violation of New Jersey labor laws.

Amazon moved to enforce the arbitration clause in the Terms and compel arbitration under the FAA. Harper objected, arguing that New Jersey Amazon Flex drivers fall within the exemption for a "class of workers engaged in foreign or interstate commerce" provided in 9 U.S.C. § 1 because they make some deliveries across state lines. Amazon disagreed with that construction of federal law. But no matter, the company added, because the claim is also arbitrable under state law. Interpreting our prior decisions, the District Court denied Amazon's motion to compel arbitration. Construing the issue as one of fact, the District Court ordered discovery to determine whether Harper falls within the § 1 exception to the FAA by, among other acts, making deliveries from New Jersey to New York. The District Court declined to reach Amazon's alternative argument about state law, and Amazon timely appealed.³

II. DISCUSSION

Congress limited the scope of the FAA by exempting the employment contracts of certain classes of workers engaged in foreign or interstate commerce. Whether that exemption applies is a question of law that, ordinarily, does not require fact-finding through discovery. Nor does the FAA require courts to ignore state law grounds for enforcing an agreement to arbitrate. Both issues require more consideration by the District Court on remand.

A. Section 1 of the FAA

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. It is a "very particular qualification" attributed to pre-existing "alternative employment dispute resolution regimes for many transportation workers." New Prime, Inc. v. Oliveira , ––– U.S. ––––, 139 S. Ct. 532, 537, 202 L.Ed.2d 536 (2019). Adding to § 1 ’s language, we have applied the exception to cover employees in any transportation industry who "engage[ ] in the movement of interstate or foreign commerce or in work so closely related thereto as to be in practical effect part of it." Tenney Eng'g, Inc. v. United Elec. Radio & Mach. Workers of Am., (U.E.) Local 437 , 207 F.2d 450, 452 (3d Cir. 1953) (en banc). Since then, the Supreme Court has cautioned courts to "construe the ‘engaged in commerce’ language in the FAA with reference to the statutory context in which it is found and in a manner consistent with the FAA's purpose." Circuit City Stores, Inc. v. Adams , 532 U.S. 105, 118, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Applying this framework, the Court has held "that the § 1 exclusion provision [should] be afforded a narrow construction." Id. ; see also Wallace v. Grubhub Holdings, Inc. , 970 F.3d 798, 800–02 (7th Cir. 2020).

Equally important, the "inquiry regarding § 1 ’s residual clause asks a court to look to classes of workers rather than particular workers." Singh v. Uber Techs., Inc ., 939 F.3d 210, 227 (3d Cir. 2019) ; see also Wallace , 970 F.3d at 800 ( Section 1 asks "not whether the individual worker actually engaged in interstate commerce, but whether the class of workers to which the complaining worker belonged engaged in interstate commerce." (quotation marks and emphasis omitted)). That limitation flows from the ordinary meaning of § 1, which includes the "other class of workers engaged in ... commerce" as a "residual phrase, following, in the same sentence, explicit reference to ‘seamen’ and ‘railroad employees.’ " Circuit City , 532 U.S. at 114, 121 S.Ct. 1302.

Determining whether § 1 ’s exclusion applies is a threshold inquiry because "a court must first know whether the contract itself falls within or beyond the boundaries of §§ 1 and 2." New Prime , 139 S. Ct. at 537. Doing so requires construing the ordinary meaning of § 1, as interpreted by our decisions,⁴ a question of law that typically can be resolved without facts outside the well-pleaded complaint. Singh , 939 F.3d at 219 (discussing Guidotti v. Legal Helpers Debt Resolution, L.L.C. , 716 F.3d 764 (3d Cir. 2013) ). That inquiry turns on multiple factors informing the sort of "work so closely related" to interstate or foreign transportation, such as the parties’ agreement, and the "industry in which the class of workers is engaged." Id. at 227–28. And "when it is apparent, based on the face of a complaint, and documents relied upon in the complaint, that certain of a party's claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery's delay." Guidotti , 716 F.3d at 776 (internal quotation marks omitted). But in some cases, where the scope of the class of workers at issue cannot be determined by examining the nature of the work performed by the class, and by comparison to the rail and sea industries specified by Congress, "limited discovery" "restricted" to facts about the class of workers may be ordered. Singh , 939 F.3d at 218–19. Here, the District Court held Harper met the Singh standard for discovery. Following that path is understandable, and discovery may indeed show whether Harper belongs to a class of workers engaged in foreign or interstate commerce in the same way as seamen and railroad workers. But when state law grounds exist that would enforce arbitration even if the FAA does not apply, courts must turn to that threshold question under Guidotti before ordering discovery. Doing so honors the principles of federalism and the expectations of the parties. We turn next to those concepts.

B. The Co-Equal Role of Arbitration Under State Law

Assume, Amazon argues, that the § 1 exemption applies. If so, the parties might still have an enforceable agreement to arbitrate under state law. And if that is so, then why not answer that question of law before turning to discovery, mindful that fact-finding can always come later if necessary? We agree and hold this question must be resolved before turning to discovery.

1. The Scope of FAA Preemption

Begin with...