Courthouse Steps Preview: Bissonnette v. LePage Bakeries Park St., LLC

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Jack Capizzi:  Well, hello and welcome, everybody, to today’s Federalist Society FedSoc Forum. Today, February 13, 2024, we are excited to present a “Courthouse Steps” preview for the case of Bissonnette v. LePage Bakeries Park Street LLC. My name is Jack Capizzi, and I’m an Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the people on today’s call.

 

      Today, we are delighted to be joined by Professor Samuel Estreicher, who is the Dwight D. Opperman Professor of Law and the Director for the Center of Labor at the New York University School of Law. After Professor Estreicher has given his remarks, we will turn to you, the audience, for any questions you have. If you have a question now or at any point, please type it into the Q&A feature at the bottom of your screen, and we will handle those as we can towards the end of the program. With that, thank you all very much for being with us. Professor, the floor is yours.

 

Prof. Samuel Estreicher:  Thank you very much, Jack. I just want to say, in terms of my priors, I support employment arbitration if it’s properly designed in accord with the due process protocol that the American Bar Association, the American Arbitration Association, Plaintiff and Defense Groups have promulgated about 20 years ago because I think, in general, employment arbitration provides the employees/workers with a forum for dealing with their employment disputes and that it is a better alternative than exclusive reliance on litigation because litigation’s very expensive. And, in fact, lawyers are not available for people making, I would say, under $75,000 a year, unless they have a sexy case that attracts various clause lawyers or other lawyers interested in the particular issue in the case.

 

      This case is called -- the case that’s before the Supreme Court and that will be argued on August 20 -- I’m sorry, on February 20 is Bissonnette v. LePage. It involves people that drive a bakery truck for a bakery company. This company is called Flowers, but to many out there who may remember the brand, it carries Wonder Bread, which was a staple, I’m afraid, for much of my childhood. I’m glad that Wonder Bread is still around.

 

      The issue in the case is whether people who are engaged in providing transportation services in the way these plaintiffs are doing it -- in other words, they’re part of a company that’s actually selling flours and bread—people are buying bread products. The transportation they’re providing is incidental to the bread products that they are providing. People aren’t paying a special fee for the service—maybe some places they might—but they’re basically involved in selling bread. The company’s involved in selling bread, and these workers are involved in delivering bread to customers.

 

      They’re denominated as independent contractors in their agreement—it’s called a distribution agreement—but the Supreme Court has made clear in an earlier case called New Prime that at the time that the Federal Arbitration Act was enacted in the late 20s, worker/independent contractor were closely entwined in meaning and that when Congress said “workers,” it also means certain independent contractors. That is the New Prime agreement -- New Prime decision.

 

      The Federal Arbitration Act, in general, makes arbitration agreements enforceable, and there had been a time before the Federal Arbitration Agreement when the common law looked a bit askance of arbitration agreements because they saw arbitration agreements as ousting courts from their business. And the New York courts and other courts across the nation took the view that an arbitration agreement was not enforceable until, actually, an award was rendered, which pretty much made it very hard to rely on arbitration agreements because once an arbitration award is rendered, you have a winner and a loser, and you don’t necessarily have joint consent to go to arbitration at that point. 

 

      So Congress decided that they really wanted to liberalize arbitration because it is good for commerce. Many disputes are not well handled by litigation because of the expense involved, and sometimes there’s expertise you want in the arbitrator. And so, Congress thought it’d be important for federal policy to have a broad provision—this is 9 U.S.C. §1 et seq. -- broad provision enforcing arbitration agreements. The Supreme Court, in about 15 cases, maybe more, has made the arbitration agreements very, very strong and enforceable, even in the labor and consumer context. There’s been a lot of controversy about that among some worker groups and their attorneys and some consumer groups and their attorneys, yet it’s still very strong.

 

      Now, the Arbitration Act has an exception in it at 9 U.S.C. §1—and if I may just read it for you. It is an exception for employment contracts with seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce. That is the exception. The Supreme Court, in a case called Circuit City, which I was involved in -- I was cocounsel for Circuit City in that case. The Supreme Court held in that case that that exception was limited to what it termed “transportation workers.” It didn’t define the term “transportation workers.” At the time, I used a little bit of my old Yiddish, if I may, and I called it a schlepper exception. My view now is that it’s a schlepper industry exception, not just schleppers. Schleppers are people that do the hard work. They pull the -- haul the goods. That’s why I use that Yiddish phrase.

 

      So the question is whether this exception applies to all transportation workers that work in interstate commerce or foreign commerce, or does it only apply to workers in industries that are involved in selling transportation services? This goes back to my point about Flowers Bakery selling primarily baked goods. That’s how they make their money. They’re not selling transportation services—it’s incidental. The fact that they’re moving bread to various locations is incidental to their principal business.

 

      So that’s the issue in this Bissonnette case. The district court held that the exception in the Federal Arbitration Act applied only to people in the transportation industry—hence my phrase “schlepper industry.” That’s not a technical phrase; that’s simply my little attempt at a joke—and after granting rehearing en banc, the U.S. Court of Appeals for the Second Circuit agreed with the district court. This is where we are today.

 

      In general, you’re going to find worker advocates—lawyers that represent employees and organizations that purportedly represent employees—taking the view that they do not like arbitration. This is not entirely true. I work with many employment lawyers on the employee’s side, and they favor arbitration but, in general, the public advocates for employee groups take the view that arbitration is bad for workers. I don’t agree with that, or I wouldn’t be taking the views I take. I think, in general, it’s good for workers because it provides them with a hearing when the litigation system outprices them. They cannot afford to bring suits in courts, and hence, they don’t really have any recourse. And arbitration is, even though provided by employers -- is, in fact, a very good alternative for them.

 

      There’ve been some recent studies, which I could give to your members, about how employment arbitration is employee friendly—user friendly. The outcomes are much better in arbitration than they are in litigation, but that’s not precisely the issue here, although we discuss it in our amicus brief.

 

      We did an amicus brief, I believe, for myself and my colleague at Cornell, David Sherwyn. We take the view that the exception in 9 U.S.C. §1 is an industry-based exception for workers engaged in transportation industries. That picks up with the earlier phrase, “seaman or railroad employees.” They were engaged in an industry and not specific workers. Some of them might be working for Kodak up in New York State, and they might run a little railroad to bring the products of the manufacturing. I’ve been up there to a little railroad that would take them across the country. They would not be in the transportation industry, and therefore, arbitration agreements would be enforced by the Federal Arbitration Act.

 

      The petitioners in this case would argue they’re not. They’re excluded from the Federal Arbitration Act because they are transportation workers. This goes back to the point, is it a schlepper worker exception, or is it a schlepper industry exception? Is it a transportation worker exception, or is it a transportation industry exception? In our brief, we make the argument, which I think the Supreme Court also made in Circuit City—a case I was a co-counsel in—that Congress was, in part, concerned about existing schemes that it had enacted for certain industries, where it had provided for arbitration. One such industry would be the railroad industry, for sure. And another such industry would be seamen—the merchant marine—where there was special dispute resolution processes for those workers and that one way to think about the exception is that they were making an exception to accommodate dispute resolution systems that they already had in place.

 

      Now it’s unclear -- the legislative history’s not perfectly crystal clear, so I should say that. And of course, Circuit City muddled the waters by using the phrase, “transportation workers,” but we think that’s the best reading of the exception, which reads, again, “Contracts of employment with seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce.”

 

      One problem with the position that the petitioners are taking is we might end up with the -- one or two bakery drivers not being covered by arbitration that the employer set in place but everyone else covered by arbitration. That seems a little counterintuitive, that we would set up such a situation because, presumably, the transportation drivers are no differently situated from the other workers in the bakery. So that’s an anomaly we highlight in our brief as well, and the brief is available on scotusblog.com if anyone wants to read it. I think that’s all I need to say at this point, although I have to say I’d be glad to take questions.

 

Jack Capizzi:  Well, thank you, professor, for that, and I’ll just repeat for our audience, if you do have any questions, please enter them now. Please type them into the Q&A feature on your screen, and we will handle them as they come in. I guess, one first question, off the top, for me is just do you have any, I guess, broader thoughts about a potential outcome or decision in the case?

 

Prof. Samuel Estreicher:  I should tell you that I do not make short-term predictions. I will give you long-term predictions. I’ll tell you what’s going to happen 30/35 years out; I’m very confident of that. But I don’t like making short-term predictions. The justices also very independent-minded and sometimes do unexpected things. In general, the Court has been very supportive of arbitration, and this has been true in Circuit City and further on. I think I mentioned the New Prime case where they said even though the phrase is independent contractor, as here in Bissonnette, it includes workers. So there have been a number of cases supportive of arbitration.

 

      I’d be surprised -- I mean, it’s possible -- but the language of the statute says, “any other class of workers engaged in foreign or interstate commerce.” That doesn’t sound like an individual worker—by individual worker. So even for folks that take the text of the statute literally -- but who knows? I just don’t know. Again, the Supreme Court in Circuit City did use the phrase “transportation workers,” who is not really the precise issue. The scope of the Section 1 exclusion was not the precise issue, but the Court had to account for Section 1 because the argument was being made by the other side that the exception included all workers in interstate commerce. So they said, “No. It only includes transportation workers.” And they didn’t deal with the issue whether you can be a transportation worker in another industry—in a non-transportation industry.

 

      We haven’t had the argument yet. Even oral argument wouldn’t give me a firm basis for prediction, but it would give me more of a basis than I have now. I’m basing this on 15 decisions of the Supreme Court across political administrations that I think they’re going to accept -- I shouldn’t say this to you, but I think many people think they’re going to accept the position of the respondents. I’m sorry -- yeah, of the respondents.

 

Jack Capizzi:  Well, thank you. I appreciate that answer and for going into that much depth on that. It looks like we do have some questions from the audience, so I’ll start with one from John Sheller (sp), who asks, “What is the nature of the circuit split that provoked the Supreme to take this case?”

 

Prof. Samuel Estreicher:  Well, basically, what I said, “Is the exception limited to workers in the transportation industries” -- I’m sorry -- “to transportation workers in the transportation industries, or does it also include people who provide transportation services in a non-transportation industry?” That is the split.

 

Jack Capizzi:  How would this case impact labor union organizing?

 

Prof. Samuel Estreicher:  I don’t think it would. I’ve always felt that labor unions should get more involved in representing non-union workers in these arbitration systems, but they have not done so. They left it as a province for the employment lawyers on the plaintiff side. I don’t think it will. Not this case.

 

Jack Capizzi: We have a question about the FAA exemption. Would the FAA exemption have been somehow related to the Railway Labor Act adopted shortly thereafter?

 

Prof. Samuel Estreicher:  Yeah. I think the congressmen were aware—it actually references in some of the legislative history -- they were aware of the Railway Labor Act and prior acts. By the way, the Railway Labor Act didn’t come out of the blue. There were prior transportation acts, and they all dealt with dispute resolution because the big problem on the railroads is a strike by one group of railroad workers can actually impinge the entire transportation system of the United States. So this was a big concern.

 

      There were earlier statutes as well. During World War I, the railroad industry was nationalized, and then it was denationalized after the end of World War I. So actually, this was a big example in the minds—if I may say so—of Congress that they had to deal with that. And this, I believe, is the best reading of the legislative history—they did deal with it that way. 

 

      I should tell you that Justice Stevens, who I admired greatly, dissented in Circuit City, and he said -- he had a different view, and he said, “The whole FAA—the whole Federal Arbitration Act—is about commercial contracts, not about labor—personal service contracts.” That was his dissenting view, but remember now, that was a dissent—an evocative dissent, but a dissent.

 

Jack Capizzi:  Another question here asks, “Why not mediation rather than arbitration? Arbitration seems somewhat arbitrary, given the disparity of resources between employers and employees.”

 

Prof. Samuel Estreicher:  I think most employers would be well-advised to include mediation as a step. When I draft arbitration programs for employers, I try to put that in. You have to make sure that there is -- that the time periods are stalled -- for filing a lawsuit are stalled during the mediation and arbitration process. But I think most plaintiff lawyers would welcome a mediation step because they actually favor arbitration because it’s lower cost for them as well. But mediation, I think, you can make that mandatory in your employment program, and that goes a long way towards putting in place an arbitration program because the suits that have any real merit are going to be screened out during the mediation process. And most plaintiff lawyers will be satisfied with that resolution. So I agree with—even as a mandatory step—what most employers -- mediation is a mandatory step before there’s arbitration.

 

Jack Capizzi: Thank you. It looks like we have a couple more here. If the arbitrator chooses to ignore the text of the statute, the legislative history, and the case law and applies his or her own idea, what remedy, if any, is available?

 

Prof. Samuel Estreicher:  Well, that is -- first of all, the best remedy is that the parties are likely to be repeat players in the following sense: The employers are repeat players. I’ve been on the employer’s side, as well as the employee union side in my practice. Everyone maintains logs of their -- records of their experience with various arbitrators, and they share them with other firms. That’s plainly on the employer’s side, and it’s increasingly on the employee side as well. The employees who organize now are organizations that are affiliates of the National Employment Law Association, they also share this information, and it’s a project that our Center for Labor and Employment Law at NYU, which I direct, is engaged in. But we’re trying to put together a dossier for -- not a dossier -- a booklet for claimants that have to represent themselves because they can’t find a lawyer to learn more about these various arbitrators, so they can make an informed selection decision.

 

      So that’s the principal recourse. There’s very limited recourse in terms of judicial review, and it’d have to be a play -- a very clear rejection of legal arguments that were made to the arbitrator and the arbitrator then ignored for no good reason. Most arbitrators know today that they can’t do that, but there are some places -- for example, securities arbitration. Arbitration in the securities industry, which has been around for a long time, it’s mandated as a condition of becoming a securities industry representative. There’s an earlier case called Gilmer, which dealt with this issue. There, I think the arbitrators are used to a looser application of the law, taking into account so-called equity concerns, and you’ll find it there. But I think, in terms of the arbitration that’s administered by the two leading organizations—the American Arbitration Association and JAMS—if the legal arguments are presented, I don’t think arbitrators will ignore them.

 

      The big problem here, as well as in litigation, is that most litigants making under $75,000 who do not have—I call it—a sexy claim, will not find a lawyer. They’re better off in arbitration because they get a hearing. That’s the point. It’s not done on the papers entirely. They get a hearing. If people are interested in the study that Dave Sherwyn of Cornell and others have produced, I’d be glad to send them a copy of it. Arbitration done right -- most arbitration -- most employment arbitration is an employee and claimant friendly -- more employee and claimant friendly than litigation. 

 

Jack Capizzi:  So following on the end of that, what bearing do you expect this ruling to have on employers’ attempts to compel arbitration under state law?

 

Prof. Samuel Estreicher:  Well, it’s funny. The Second Circuit decided not to -- first of all, I think they’re -- I told you, I don’t make predictions, but the tea leaves seem to be going in a certain direction. I think, in general, if you’re representing employers, you should consider state arbitration law as well. It is pleaded in this case, in the Bissonnette case, because typically, the state arbitration laws do not have these exceptions—this Section 1 exception. So if they were to go the other way -- if the Supreme Court were to go the other way and hold that as long as you’re providing any transportation services—it doesn’t matter if you’re in a transportation industry or not—you are exempt from the Arbitration Act, then I think employers would be very well-advised to include state arbitration law.

 

      If the Supreme Court were to rule that way in Bissonnette, that is the basis, I think, for the employer to go to state law because it’s been preserved, as far as I can tell. I don’t know if the Supreme Court is going to decide on that basis. I don’t think they will. Here, I’m making two short-term predictions against my well-honed instincts, but I’m doing that for you and for The Federalist Society.

 

Jack Capizzi:  Well, we appreciate those, for sure. It looks like we’ve got one final question, so we’ll wrap up with this one. Since the FAA itself depends upon interstate commerce to give the Congress power to regulate the whole issue, how can the exemption be read to be just as broad as the underlying congressional power without the exemption entirely swallowing the rule?

 

Prof. Samuel Estreicher:  I’m not sure I fully understand that question. It’s all within interstate commerce, as the Court has historically construed it, but they can have exceptions within interstate commerce. I don’t think Congress has to exercise the full extent of its power. That’s historically been the case. So it’s a power it has, but it doesn’t necessarily have to regulate every instance of interstate or foreign commerce. That’s how I answer that if I understood the question correctly. If I didn’t, I apologize to the person who asked it.

 

Jack Capizzi:  Certainly. Well, thank you very much. Unless you have anything else you’d like to add, I think that we’re at a good place to wrap up.

 

Prof. Samuel Estreicher:  I just want to thank you and The Federalist Society for all the good work you do.

 

Jack Capizzi:  All right. Well, likewise, we want to thank you, Professor Estreicher, for being so generous with your time today. As always, if anyone in our audience would like to watch a recording of today’s program, it will be available on our YouTube channel and will be posted on our website in the coming days. We do welcome listener feedback at [email protected]. And with that, thank you all very much for being with us today. We are adjourned.