Mejia v. RXO Last Mile, Inc.

CourtDistrict Court, N.D. California
DecidedAugust 10, 2023
Docket3:22-cv-08976
StatusUnknown

This text of Mejia v. RXO Last Mile, Inc. (Mejia v. RXO Last Mile, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mejia v. RXO Last Mile, Inc., (N.D. Cal. 2023).

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MAYNOR MEJIA, Case No. 22-cv-08976-SI

8 Plaintiff, ORDER DENYING MOTION TO 9 v. COMPEL ARBITRATION

10 RXO LAST MILE, INC., Re: Dkt. No. 20 11 Defendant.

12 13 Before the Court is defendant RXO Last Mile, Inc.’s motion to compel arbitration. Dkt. 14 No. 20. For the reasons discussed below, the motion is DENIED. 15 16 BACKGROUND 17 Defendant RXO Last Mile, Inc.1 is in the business of “arrang[ing] freight deliveries for its 18 customers.” Motion to Compel Arbitration (“Motion”), Dkt. No. 20, at 1. Plaintiff Maynor Mejia 19 brings this proposed class action against RXO Last Mile, Inc., alleging that RXO denied plaintiff 20 and other delivery drivers the benefits and protections required under the California Labor Code and 21 other state laws. Dkt. No. 1-1, Complaint at ¶ 1. Plaintiff filed suit in the Superior Court for the 22 State of California for the County of Alameda, Case No. 22-CV-020443. The case was removed to 23 this court. Dkt. No. 1. 24 Per plaintiff’s allegations, RXO “provides logistics and delivery services to its retail 25 merchants like Samsung, Peloton, Macy’s, and others, to deliver product[s] and services to [RXO’s] 26 customers.” Compl. ¶ 7. RXO’s delivery drivers engage in “last mile” delivery, meaning that they 27 1 “pick up the merchandise at the merchants’ stores or warehouses and . . . deliver and install them at 2 the customers’ homes or businesses.” Id. Plaintiff alleges RXO “exercises pervasive control over 3 the work these Delivery Drivers perform” and “has established an elaborate system and scheme . . . 4 to conceal its true status as the employer of its Delivery Drivers.” Id. ¶¶ 14, 16. RXO hires drivers 5 under the guise of contractors but controls the manner in which drivers perform the work through 6 the Delivery Service Agreement (“DSA”) it requires the drivers to sign. Id. ¶ 17–18. RXO refers 7 each driver it hires “to a company that processes the paperwork to create a purported corporate or 8 limited liability company entity” and requires each driver to do so in order to work for RXO. Id. 9 ¶ 18. Plaintiff alleges that RXO engages in this and other processes to deprive the drivers of wages 10 and other benefits due to employees under California law. See id. ¶ 2. 11 Plaintiff owns an LLC, ABC Logistics LLC, and signed a DSA on behalf of ABC Logistics 12 on June 6, 2018. Declaration of Benjamin J. Schnayerson, Dkt. No. 21, ¶ 4, Ex. 1 (“DSA”). The 13 DSA includes an Arbitration Agreement that requires arbitration of “any demand, assertion, or claim 14 or cause of action for money, property, enforcement of a right, or equitable relief, including but not 15 limited to allegations of misclassification or wage and hour violations (except as carved out below) 16 arising out of or relating to the Agreement, or the breach thereof . . . .” DSA ¶ 21.1. The Arbitration 17 Agreement includes a class action waiver. Id. ¶ 21.6. It delegates resolution of disputes “relating 18 to the formation, enforceability, applicability, or interpretation of this Arbitration Agreement” to the 19 arbitrator, with an exception for the validity of the class action waiver. Id. ¶ 21.5. The Arbitration 20 Agreement provides that any questions as to the validity and scope of the class action waiver “shall 21 be decided by a court of competent jurisdiction and not the arbitrator.” Id. ¶ 21.6. 22 The Arbitration Agreement allows for the contract carrier to opt out within 30 days of the 23 date the DSA was signed. Id. ¶ 21.10. The DSA does not appear to contain a choice of law 24 provision except that it requires the Arbitrator to apply Georgia law in the case of an arbitration. Id. 25 ⁋ 21.8. 26 The DSA may be terminated unilaterally by either party upon 15-day notice to the other 27 party. Id. ⁋ 18.2. 1 the DSA and the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. Motion to Compel, Dkt. No. 2 20. In the alternative, defendant requests that the Court stay proceedings until the Ninth Circuit 3 decision on remand in another FAA case, Carmona v. Domino’s Pizza, LLC, 21 F.4th 627 (9th Cir. 4 2021). Id. Plaintiff opposes, arguing that he is exempted from the FAA due to the “transportation 5 worker” exemption to the FAA, 9 U.S.C. § 1, and that the Arbitration Agreement is procedurally 6 and substantively unconscionable. Opposition to Motion to Compel, Dkt. No. 25. 7 The Court heard oral argument on the motion on May 3, 2023, and requested additional 8 briefing on the whether arbitration should be compelled by the California Arbitration Act (“CAA”) 9 if the FAA does not apply. Dkt. No. 30. The parties submitted supplemental briefing on this issue. 10 Dkt. Nos. 33–35. 11 12 LEGAL STANDARD 13 The FAA “places arbitration agreements on an equal footing with other contracts.” In re 14 Grice, 974 F.3d 950, 953 (9th Cir. 2020). But Section 1 of the FAA excludes from the FAA 15 “contracts of employment of seamen, railroad employees, or any other class of workers engaged in 16 foreign or interstate commerce.” 9 U.S.C. § 1. The question of whether an arbitration agreement is 17 exempted under Section 1 is a question for the courts. New Prime v. Oliveira, 139 S.Ct. 532, 537 18 (2019). This is true even where the arbitration agreement contains a delegation clause. Id. at 538. 19 The CAA provides that arbitration agreements are “valid, enforceable, and irrevocable, save 20 upon such grounds as exist for the revocation of any contract.” Cal. Code Civ. P. § 1281. However, 21 because the CAA is a state statute, it “obviously does not prevent [the California State] Legislature 22 from selectively prohibiting arbitration in certain areas.” Armendariz v. Found. Health Psychcare 23 Servs., Inc., 24 Cal. 4th 83, 98, 6 P.3d 669, 679 (2000). 24 Under California Law, the trial court may resolve a motion to compel arbitration “in 25 summary proceedings, in which [t]he petitioner bears the burden of proving the existence of a valid 26 Arbitration Agreement by the preponderance of the evidence, and a party opposing the petition bears 27 the burden of proving by a preponderance of the evidence any fact necessary to its defense.” Lane 1 Medical Group, Inc., 15 Cal. 4th 951, 972 (1997). 2 3 DISCUSSION 4 I. The Federal Arbitration Act Does Not Apply. 5 The Court must first determine whether Section 1 exempts this contract from the FAA. 9 6 U.S.C. § 1. The issue is whether Mejia belongs to a “class of workers engaged in foreign or interstate 7 commerce.” 9 U.S.C. § 1; see Sw. Airlines Co. v. Saxon, 142 S. Ct. 1783, 1787 (2022). Mejia is a 8 member of a “class of workers” based on what Mejia does, not what RXO Last Mile does generally. 9 See id. at 1788 (accepting argument that Section 1 “exempts classes of workers based on their 10 conduct, not their employer’s”). Mejia conducted “last mile” deliveries for RXO Last Mile’s retail 11 clients, in which Mejia would drive the purchased item from a warehouse to a customer’s address. 12 Mejia Decl., Dkt. No. 25-2, at ⁋ 6. Mejia drove mostly within California, although one delivery 13 took him out-of-state to Nevada. Id. ⁋ 8. 14 The Court must determine whether the class of “last mile” delivery drivers like Mejia are 15 “engaged in foreign or interstate commerce” under Section 1. Saxon, 142 S. Ct.

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