A split Second Circuit panel recently ruled that independent distributors who distribute baked goods are not transportation workers and therefore not exempt from the Federal Arbitration Act (FAA). The Second Circuit therefore concluded that the transport workers were bound by an arbitration clause in their agreements.
The plaintiffs were “independent distributors” who “owned[ed] Distribution Rights” to distribute baked goods in Connecticut. Plaintiffs have contracted with affiliates of Flowers Foods Inc. for these rights. They would “pick up” “baked goods from local Connecticut warehouses and deliver the products to stores and restaurants in their assigned territories.” Plaintiffs “win[ed] the difference between the price at which “they” acquire[d] baked goods” “and the price paid by shops and restaurants. “In their roles as independent distributors, plaintiffs” sought to “maximize sales; apply for new locations [to make sales]; stock shelves and rotate products; withdraw expired products; acquire delivery vehicles; maintain equipment and insurance; distribute Flowers’ publicity material and develop its own (with Flowers’ prior approval); retain legal and accounting services; and hire help. Plaintiffs could also sell their distribution rights for a profit and transport other goods, but did not transport any other goods.
The plaintiffs filed a putative class action lawsuit alleging violations of the Fair Labor Standards Act and Connecticut wage laws. The defendants requested arbitration under an arbitration clause in the distribution agreements. Plaintiffs sought to avoid arbitration by arguing that they were transportation workers and therefore exempt from arbitration under the FAA exclusion for “marine, railroad iron, [and] any other category of workers engaged in foreign or interstate commerce” (i.e. transport workers). The district court found that the plaintiffs were not “transportation workers” and therefore imposed arbitration.
A Second Circuit panel affirmed with one judge agreeing and one judge dissenting. The second circuit defined “transportation workers” “by affinity” (i.e. by looking at the examples of transport workers in the FAA exemption: mariners and railroad employees). Seafarers and railway 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 sets its burdens primarily on the movement of goods or passengers, and the industry’s predominant source of commercial income is generated by this movement”.
Applying this standard to the facts before it, the Second Circuit found that the plaintiffs worked “in the baking industry,” not the transportation industry. Although the plaintiffs spent “a significant portion of their working days moving goods”, “stores and restaurants [were] don’t buy the baked goods movement, as long as they arrive. ” The accusations [were] for the baked goods themselves, and the movement of those goods [was] at most a component of the total price. Trade [was] in breads, rolls, buns and cupcakes – not carrier services. »
The Second Circuit also noted that the distribution agreements identified the industry in which the distributors worked as the “baking industry”, not the transportation industry.
Because the plaintiffs worked in the baking industry, not the transportation industry, they were not FAA exempt, and so the district court properly imposed arbitration.
Bissonnette c. LePage Park St. Bakeries, LLCno. 20-1681 (2nd Cir. May 5, 2022).