Jones v. UPS Supply Chain Solutions, Inc.

• Decision Date: 01 July 2021
• Docket Number: A160726
• Court: California Court of Appeals Court of Appeals
• Parties: SUE JONES et al., Plaintiffs and Respondents, v. UPS SUPPLY CHAIN SOLUTIONS, INC. et al., Defendants and Respondents.

SUE JONES et al., Plaintiffs and Respondents, v. UPS SUPPLY CHAIN SOLUTIONS, INC. et al., Defendants and Respondents.

A160726

California Court of Appeals, First District, Third Division

July 1, 2021

NOT TO BE PUBLISHED

City & County of San Francisco Super. Ct. No. CGC19578596

Wiseman, J. ^[*]

Defendants UPS Supply Chain Solutions, Inc. and United Parcel Service Inc. (jointly SCS) appeal from the trial court's denial of their motion to compel plaintiffs Sue and Robert Jones to arbitrate their various wage and hour violation claims. The trial court found the Joneses' putative class action fell within a statutory exemption from the Federal Arbitration Act (FAA) for transportation workers engaged in interstate commerce. Its order is supported by substantial evidence and legally sound, so we affirm.

BACKGROUND

SCS, an affiliated entity of United Parcel Service, Inc., maintains a supply logistics network that includes some 300 warehouses throughout the United States and Canada. As described by SCS transportation division manager Jakline Seguerra, it offers a “service parts logistics solution” that allows its customers to store critical high tech and other products and replacement parts in strategically located warehouses where they can be quickly sourced. When a customer needs an item, SCS arranges for customer pick-up or delivery from the warehouse by overnight carrier or local courier service. For example, Seguerra explained, “a computer manufacturer might use SCS to manage the distribution of replacement service parts to its end-users. If a customer of a computer manufacturer needs a replacement part, SCS locates the part in a warehouse and facilitates delivery from the nearest local SCS warehouse.”

Arizona residents Sue and Robert Jones worked as delivery drivers for SCS individually, as a team, and through Sue's company Efficient Delivery and Freight, LLC.^[1] SCS provided several vendor identification numbers that they used to assign the Joneses work and issue payments.^[2]

In 2014 Sue executed an arbitration agreement that extended to all claims or controversies between the parties “includ[ing] contract claims, tort claims, and claims for violation of any federal, state, or other governmental law, statute (including anti-discrimination statues) regulation, or ordinance, except for any claims that are not arbitrable as a matter of law.” The agreement waived “any right to bring on behalf of persons other than myself, or to otherwise participate with other persons in, any class, collective, or representative action with respect to any claim covered by this arbitration provision.”

In 2019 the Joneses filed a putative class action against SCS. As later amended, the complaint alleged violations of California wage and hour laws, breach of contract, breach of the covenant of good faith and fair dealing, and unfair business practices on behalf of themselves and current and former SCS drivers “including but not limited to those misclassified as independent contractors.”

SCS responded by moving to compel arbitration. It acknowledged that the FAA exempts from arbitration employment contracts “ ‘any... class of workers engaged in foreign or interstate commerce' ” (9 U.S.C. § 1 (hereafter section 1)), but asserted the Joneses did not qualify for the exemption because “there is no evidence establishing that they crossed into California to make deliveries on behalf of SCS, as they allege in the first amended complaint. Any argument that their intrastate operations qualify as ‘engaged in interstate commerce,' will fail....”

Based on Seguerra's declaration and supporting records, SCS asserted it had no records indicating the Joneses made any pickups or deliveries outside of Arizona during the relevant period and that the absence of documentation established they made none. It further argued the Joneses were not “engaged in interstate commerce” for purposes of the section 1 exemption because (1) they were contracted to provide only same-day local courier service; and (2) SCS customers stored goods for potential sale in SCS warehouses, which removed them from the flow of interstate commerce. SCS submitted the Joneses' electronic records showing only deliveries within Arizona, albeit including numerous pickups from and deliveries to the Phoenix Sky Harbor Airport. Seguerra attested that these records established that all deliveries associated with Sue's vendor numbers were solely within Arizona. In a subsequent declaration Seguerra added that SCS couriers made only 17 deliveries from Arizona to California during the relevant period, and that none of those deliveries were undertaken by the Joneses.

In opposition, the Joneses asserted they qualified for the section 1 exemption because they made deliveries for SCS across state lines. Supporting declarations from Sue and Robert stated: “[w]hile working for Defendants my spouse and I made deliveries to locations in California on a regular basis, doing so at the specified direction of the Defendants. Specifically, we made deliveries to Defendants' own warehouses in San Francisco California and Downtown Los Angeles, California. Some of these deliveries in California were also directly to the Defendants' customers, for instance the hospital in Redlands, California. These deliveries like all the work... my spouse and I completed for Defendants were on demand, same day deliveries, not part of a route. We also made deliveries to several other states including, but not limited to New Mexico and Texas.” The Joneses also relied on Nieto v. Fresno Beverage Co., Inc. (2019) 33 Cal.App.5th 274 (Nieto) and similar cases to assert the exemption applied whether or not they crossed state lines because the goods they delivered in Arizona were within the flow of interstate commerce.^[3]

Following a contested hearing, the trial court denied SCS's motion. Its written order explains: “The arbitration agreement... expressly provides that the parties' agreement is subject to the FAA. [Citation.] Section 1 of the FAA provides that ‘nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.' (9 U.S.C. §1; see New Prime, Inc. v. Oliveira, 139 S.Ct. 532, 538-539 (2019) [truck driver engaged in interstate commerce and was exempt from arbitration under the FAA].) Courts generally recognize two ways workers can establish that they engaged in interstate commerce: (1) showing they actually crossed state lines to deliver goods; or (2) that they were directly involved in the practical continuity of movement of goods in interstate commerce. (Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal.App.5th 1056, 1068-1069; Nieto v. Fresno Beverage Co., Inc. (2019) 33 Cal.App.5th 274, 279-284 [even though delivery truck driver's deliveries were exclusively to destinations within California, he was engaged in interstate commerce through his participation in the continuation of the movement of interstate goods to their destination].) ‘If a truck driver physically transports goods across state lines, he or she undoubtedly qualifies as a transportation worker under section 1.' (Id. at 1065.) In this case, plaintiffs made deliveries from Arizona to multiple states including California, Texas, and New Mexico. (Sue Jones Decl. 7; Robert Allen Jones Decl. 7). This evidence establishes that the transportation worker exemption applies and plaintiffs are not obliged to arbitrate. Defendants do not convincingly demonstrate that these declarations are perjurious and unworthy of credence. In any event, ‘a transportation worker does not necessarily have to physically cross state lines in order to engage in the movement of goods in interstate commerce.' (Nieto, 33 Cal.App.5th at 282.)”

SCS filed a motion for reconsideration, but when it then appealed the underlying order before the motion was heard the court ordered it off calendar because it no longer had jurisdiction over the matter. The court's order, which was captioned as a denial, further observed that “there is a substantial body of authority holding that delivery workers who transport packages through to the conclusion of their journeys in interstate and foreign commerce are exempt from the FAA as transportation workers engaged in interstate commerce, even if the drivers transport goods wholly within the boundaries of a single state.”

This appeal is timely.

DISCUSSION

I. Legal Framework

The issue here is whether the Joneses fall within the section 1 exemption for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (section 1, italics added.) “[A]ny other class of workers, ” as used in section 1, refers exclusively to “workers ‘ “actually engaged in the movement of goods in interstate commerce.”' ” (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 112, 119.)

A party moving to compel arbitration “bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.]” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla).) Accordingly, a party claiming the section 1 exemption bears the burden of proving it applies. (Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1241 (Performance Team Freight Systems).) Any doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration. (Ibid.)

On review, an order denying a petition to compel arbitration is presumed to be correct “and all intendments and presumptions are indulged to...