A divided panel of the Second Circuit recently held that independent distributors who distribute bakery products were not transportation workers and therefore were not exempt from the Federal Arbitration Act (FAA). The Second Circuit therefore concluded that the transportation workers were bound by an arbitration clause in their agreements.
The plaintiffs were “independent distributors” who “own[ed] distribution rights” to distribute baked goods in Connecticut. The plaintiffs contracted with subsidiaries of Flowers Foods Inc. for those rights. They would “pick up” “baked goods from local Connecticut warehouses and deliver the goods to stores and restaurants within their assigned territories.” The plaintiffs “earn[ed] the difference between the price at which” they “acquire[d] the bakery products” “and the price paid by the stores and restaurants.” “In their roles as independent distributors, the plaintiffs” sought to “maximize sales; solicit new locations [to make sales]; stock shelves and rotate products; remove stale products; acquire delivery vehicles; maintain equipment and insurance; distribute Flowers’ advertising materials and develop their own (with prior approval by Flowers); retain legal and accounting services; and hire help.” The plaintiffs could also sell their distribution rights for a profit and carry other goods but did not carry any other goods.
The plaintiffs filed a putative class action alleging violations of the Fair Labor Standards Act and Connecticut wage laws. The defendants moved to compel arbitration pursuant to an arbitration clause in the distribution agreements. The plaintiffs sought to avoid arbitration by arguing that they were transportation workers and were therefore exempt from arbitration under the FAA’s exclusion for “seamen, railroad employees, [and] any other class of workers engaged in foreign or interstate commerce” (i.e., transportation workers). The district court concluded that the plaintiffs were not “transportation workers” and therefore compelled arbitration.
A Second Circuit panel affirmed with one judge concurring and one judge dissenting. The Second Circuit defined “transportation workers” “by affinity” (i.e., by looking to the examples of transportation workers in the FAA’s exemption: Seamen and railroad employees). Both seamen and railroad employees, the court noted, work in the transportation industry. The Second Circuit concluded that “an individual works in a transportation industry if the industry in which the individual works pegs its charges chiefly to the movement of goods or passengers, and the industry’s predominant source of commercial revenue is generated by that movement.”
Applying that standard to the facts before it, the Second Circuit concluded that the plaintiffs were “in the baking industry,” not the transportation industry. Although the plaintiffs spent “appreciable parts of their working days moving goods,” “the stores and restaurants [were] not buying the movement of the baked goods, so long as they arrive.” “The charges [were] for the baked goods themselves, and the movement of those goods [was] at most a component of total price. The commerce [was] in breads, buns, rolls, and snack cakes — not transportation services.”
The Second Circuit also noted that the distributor agreements identified the industry that the distributors worked in as the “baking industry,” not the transportation industry.
Because the plaintiffs worked in the baking industry, not the transportation industry, they were not exempt from the FAA, and the district court therefore properly compelled arbitration.
Bissonnette v. LePage Bakeries Park St., LLC, No. 20-1681 (2d Cir. May 5, 2022).