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July 21, 2022

Evenskaas v. California Transit (July 15, 2022, B308354)

The Federal Arbitration Act (FAA) requires courts to enforce arbitration agreements according to their terms.  However, under section 2 of the FAA, that federal law applies only to contracts evidencing a transaction involving interstate commerce.  The Court of Appeal has now held that section 2 of the FAA applies to an arbitration agreement with a driver who allegedly worked for defendants providing paratransit services in parts of Los Angeles County because the contract involved interstate commerce.

In response to the driver’s wage-and-hour class action, the defendants moved to compel individual arbitration and dismiss the driver’s class claims pursuant to an arbitration agreement with a class action waiver.  The trial court denied the motion, concluding that the FAA did not apply because the contract involved solely intrastate activities since the defendants had not shown that they provided services outside California.

The Court of Appeal disagreed and reversed.   The appellate court concluded the arbitration agreement involved interstate commerce for several reasons. First, the defendants provided paratransit services that were subject to federal control and did so for a public entity required to provide such services pursuant to a federal anti-discrimination law that included congressional findings about the impact of discrimination in transportation—a law enacted based on Congress’  authority to regulate interstate commerce.  Second, drivers working for the defendants almost certainly used highways, which were instrumentalities of interstate commerce, and used vehicles that at some stage in their history had traveled across state lines.

In arriving at this conclusion, the appellate court noted that it was not addressing whether the driver fell outside the FAA’s scope pursuant to an exemption, codified in section 1 of the FAA, for transportation workers engaged in interstate commerce, since the driver never argued that the exemption applied to him.  The court explained that, under United States Supreme Court precedent, the section 1 exemption governed a narrower range of activities than the contracts to which the FAA applied under section 2.  In doing so, the court emphasized that other cases had held that “local rideshare drivers and delivery drivers” were “not ‘engaged in interstate commerce’ for purposes of section 1, even though their activities more broadly involved and affected interstate commerce” for purposes of section 2.