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FAA Exemption Extends to ‘Last Mile’ Delivery Drivers and MA State Law Prevents Enforcement of Class Action Waiver

From Massachusetts Lawyers Weekly, Kris Olson discusses the court’s decision that the class action waiver was not enforceable under Massachusetts state law. Kris writes:

Even though it concluded that the FAA exemption for transportation workers applied, the 1st Circuit noted that state law might also compel the case to be sent to arbitration.

While the employment contract says that it should be interpreted under the law of Washington, that choice of law was unenforceable because Massachusetts would treat the contract provision waiving the right to pursue class claims as contrary to the state’s fundamental public policy, the 1st Circuit found.

The court noted that Massachusetts law not only specifically provides for class claims being brought under the three relevant state statutes, but two of them also contain specific provisions precluding the contractual waiver of certain rights. That indicated that protecting a substantive right to bring class actions was a fundamental public policy of the state, the plaintiff argued.

The 1st Circuit ultimately agreed, but not before taking a close look at the somewhat tortured path Massachusetts case law had taken on the issue.

In its 2009 decision in Feeney v. Dell, Inc., the Supreme Judicial Court initially determined that the FAA was no impediment to invalidating a class waiver on public policy grounds.

But the court had to revisit that decision in light of the Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion, in which the Supreme Court ruled that the FAA limits a state’s ability to invalidate class waiver provisions in arbitration clauses based on the state’s public policy.

Yet, in Feeney II, the SJC held that a plaintiff could still succeed in invalidating a class waiver if she “effectively cannot pursue a claim against the defendant in individual arbitration according to the terms of the agreement, thus rendering … her claim nonremediable.”

With its concurrent decision in Machado v. System4 LLC, the SJC extended the Feeney II holding to class action waivers in the employment context as well.

The plaintiffs in Machado ultimately lost, because they were seeking damages of approximately $10,000, a potential award that would not exceed the cost of arbitration, the SJC concluded. Amazon argued that Waithaka should suffer the same fate.

But the 1st Circuit concluded that the SJC had never abandoned the idea that public policy concerns can invalidate a class waiver.

In Machado, the SJC had “highlighted another significant rationale unique to the employment context”: the state’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,” the 1st Circuit noted.

A key difference was that, in Machado, the FAA had preempted Massachusetts law. But Waithaka was a different story, given that the transportation worker exemption had taken the FAA out of the picture.

“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,” Lipez wrote.

Read the full story at FAA exemption extends to ‘last mile’ delivery drivers – Massachusetts Lawyers Weekly

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