Opinion
20-P-1408
11-05-2021
James CUNEO & another v. NATIONAL DELIVERY SYSTEMS, INC., & another.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
The issue in this appeal is whether the plaintiffs’ individual agreements with defendant Contractor Management Services, LLC (CMS) constitute "contracts of employment" within the meaning of the Federal Arbitration Act's (FAA) transportation worker exemption, 9 U.S.C. § 1, such that the agreements are exempt from the FAA and the Massachusetts Arbitration Act (MAA) applies. On CMS's motion to compel arbitration, a Superior Court judge concluded that the agreements were exempt from the FAA, and that, though the MAA would apply, the arbitration provisions here were unenforceable under Massachusetts law. He accordingly denied CMS's motion to compel arbitration. We reverse.
Background. We recite the undisputed facts in the record. The plaintiffs worked as delivery drivers for National Delivery Systems, Inc. (NDS), delivering various retail products to retail stores across several States in New England. The plaintiffs each executed a contract with NDS that identified them as independent contractors and contained an arbitration clause. The plaintiffs also each executed an agreement with CMS entitled "System Resource Subscription" (SRS agreement), which allowed them to be paid by CMS for work they performed for NDS. The SRS agreements permitted CMS to make certain deductions from the plaintiffs’ pay for liability insurance and administrative fees. The agreements also contained arbitration clauses which included class action waivers.
NDS's motion to compel arbitration was denied for failure to comply with Rule 9A of the Rules of the Superior Court (2018); NDS did not refile the motion and is not a party to this appeal.
The plaintiffs filed this class action, contending that they, as well as all other similarly situated individuals, were wrongly classified by NDS as independent contractors when they were in fact employees of NDS. They allege, inter alia, that NDS violated the Wage Act, G. L. c. 149, § 148, and that CMS engaged in unfair and deceptive practices, in violation of G. L. c. 93A, § 11, by requiring delivery drivers to pay fees that could not lawfully be charged to employees under Massachusetts law. CMS, in turn, moved to stay the proceedings and compel arbitration, arguing that the SRS agreements and their arbitration provisions were governed by the FAA. The plaintiffs opposed the motion asserting that the SRS agreements were exempt from the FAA's coverage under the transportation worker exemption, 9 U.S.C. § 1, and that Massachusetts law therefore governed. They further argued that, because Massachusetts law deems arbitration provisions that contain class action waivers unenforceable, see Waithaka v. Amazon.com, Inc., 966 F.3d 10, 32 (1st Cir. 2020), cert. denied, 141 S. Ct. 2794 (2021), CMS could not compel arbitration. Following a hearing, a Superior Court judge agreed with the plaintiffs and denied CMS's motion to compel arbitration, as well as its accompanying motion to dismiss. CMS appealed, addressing only the denial of its motion to compel arbitration, which is immediately appealable pursuant to G. L. c. 251, § 18 (a ). See Warfield v. Beth Israel Deaconess Med. Ctr., Inc., 454 Mass. 390, 395 (2009) ("Because procedures to compel arbitration under the FAA apply only in Federal courts, we apply the MAA's procedures").
CMS also alternatively moved to dismiss the case for failure to state a claim, pursuant to Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974). So much of the order as denied the motion to dismiss is not before us.
There appears to be no dispute that, if the MAA applies rather than the FAA, the arbitration provisions here are unenforceable because they contain class action waivers. Though this has not been explicitly held by the Supreme Judicial Court (SJC), the First Circuit in Waithaka, 966 F.3d at 29-33, analyzed relevant case law and predicted that the SJC would likely invalidate a class waiver in an employment contract not governed by the FAA as violative of fundamental public policy of the State. Given our conclusion that the FAA governs, we need not reach the issue.
Discussion. "Where there are no material factual disputes, ‘[w]e review the denial of a motion to compel arbitration de novo.’ " Boursiquot v. United Healthcare Servs. of Del., Inc., 98 Mass. App. Ct. 624, 627 (2020), quoting Landry v. Transworld Sys. Inc., 485 Mass. 334, 337 (2020). See Miller v. Cotter, 448 Mass. 671, 676 (2007) (motion to compel arbitration treated as motion for summary judgment).
The FAA, enacted in 1925, "compels judicial enforcement of a wide range of written arbitration agreements." Circuit City Stores v. Adams, 532 U.S. 105, 111 (2001). Section 2 of the FAA, its coverage provision, 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. Despite the broad scope of § 2, the FAA does not apply to all agreements to arbitrate. Section 1 of the FAA exempts from the act's coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" (emphasis added). 9 U.S.C. § 1. This provision is commonly referred to as the transportation worker exemption. See Waithaka, 966 F.3d at 17. Because the FAA was enacted to reflect "a liberal federal policy favoring arbitration agreements," Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), the United States Supreme Court has stated that the § 1 exemption should be narrowly construed, while § 2 coverage provision should be read expansively. See Circuit City Stores, 532 U.S. at 118-119.
Here, it is undisputed that the plaintiffs, who delivered various retail products across State lines, were "workers engaged in ... interstate commerce," such that they qualified as transportation workers under the exemption. 9 U.S.C. § 1. See Waithaka, 966 F.3d at 13 (exemption covers contracts of transportation workers who "transport goods or people within the flow of interstate commerce" as well as those "who physically cross [S]tate lines in the course of their work"). Thus, the primary issue is whether their contracts with CMS constituted "contracts of employment" such that the agreements are exempt from the FAA's scope. 9 U.S.C. § 1.
In New Prime, Inc. v. Oliveira, 139 S. Ct. 532, 543-544 (2019) (New Prime ), the United States Supreme Court held that, when enacting the FAA, Congress intended the term "contracts of employment" to refer to "agreements to perform work." The question in that case was whether the term "contracts of employment" included only contracts between employer and employee, or whether the term also extended to contracts with independent contractors. Id. at 536. The Court, following the " ‘fundamental canon of statutory construction’ that words generally should be ‘interpreted as taking their ordinary ... meaning ... at the time Congress enacted the statute,’ " id. at 539, quoting Wisconsin Cent. Ltd. v. United States, 138 S. Ct. 2067, 2074 (2018), looked to the meaning of the term "employment" as it existed in 1925. Because contemporaneous understandings of the term did not distinguish the type of worker but referred generally to "work," the Court concluded that an agreement to perform work, whether by an employee or independent contractor, constituted a contract of employment for purposes of the § 1 exemption. New Prime, supra at 539-541, 544.
CMS argues that the SRS agreements are not "contracts of employment" under § 1 because they are not agreements to perform work. Indeed, the plaintiffs do not suggest that the SRS agreements are agreements to perform work. Rather, the plaintiffs argue that, because they were required to sign the SRS agreements with CMS as a condition of their employment with NDS and the agreements permitted them to be paid by CMS for work they performed for NDS, they fall within the meaning of the term "contracts of employment" as understood by the § 1 exemption.
To begin, there is nothing in the record, aside from bare allegations in the plaintiffs’ unverified complaint, to support the plaintiffs’ contention that they were required to sign the SRS agreements with CMS as a condition of their employment with NDS. "Allegations in an unverified pleading are not accorded any evidentiary weight in determining whether there exists a genuine issue of material fact." Godbout v. Cousens, 396 Mass. 254, 263 (1985). Accordingly, the plaintiffs cannot rely on such allegations to overcome a motion to compel arbitration.
Further, the plaintiffs have not pointed to any cases that interpret the term "contracts of employment" in § 1 of the FAA so broadly. Instead, they point to other areas of the law to support their argument. They first contend that, because the Wage Act, G. L. c. 149, § 148, requires an employer to pay an "employee the wages earned by him," CMS is serving a function traditionally reserved for the employer and the SRS agreements are necessarily contracts of employment. They also draw our attention to cases addressing different circumstances where third-party payroll companies, like CMS, have been referred to in the employment context. See, e.g., Subcontracting Concepts, Inc. v. Commissioner of the Div. of Unemployment Assistance, 86 Mass. App. Ct. 644, 646-647 (2014) (company providing certain payroll services to its delivery drivers considered "employing unit" subject to requirements of unemployment compensation statute). The Supreme Court, however, has specifically cautioned against expanding the § 1 exemption "beyond the meaning of the words Congress used." Circuit City Stores, 532 U.S. at 119. And the Court has held that the meaning Congress intended to give the words "contracts of employment" was "agreements to perform work." New Prime, 139 S. Ct. at 543-544. Where the Supreme Court has provided an interpretation for the term, we decline to look to other areas of law to go beyond that interpretation and expand the breadth of an exemption that Congress intended to be narrowly applied. See Circuit City Stores, supra.
Conclusion. Because the agreements here are not to perform work, they are not "contracts of employment" under the transportation worker exemption. 9 U.S.C. § 1. The FAA accordingly governs the SRS agreements and CMS's motion to compel arbitration should have been allowed. So much of the order as denied CMS's motion to compel arbitration is reversed. The case is remanded for the entry of an order allowing the motion to compel arbitration and staying proceedings on the plaintiffs’ claim against CMS.
So ordered.
Reversed and remanded