62 Cal.App.5th 552
Cal. Ct. App.2021Background
- Betancourt worked as a last‑mile delivery driver for Transportation Brokerage Specialists (TBS) (Feb 2017–May 2018), picking up packages at Amazon warehouses and delivering them to customers.
- At hire he signed an At‑Will Employment Agreement containing an arbitration clause, a separate class action waiver, and a severability/opt‑out provision.
- Betancourt sued TBS on behalf of a putative class for various wage-and-hour and UCL claims; he also asserted two individual claims (unlawful retaliation and wrongful termination).
- TBS moved to compel arbitration of Betancourt’s individual claims and to dismiss/strike class claims under the class waiver; the trial court found the FAA inapplicable (transportation worker), held the class waiver unenforceable under Gentry, and denied arbitration in whole.
- The Court of Appeal affirmed FAA inapplicability and the Gentry‑based invalidation of the class waiver, but held the trial court erred by refusing to sever the unenforceable class waiver and reversed in part to permit the trial court to decide arbitration of the individual claims after severance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FAA §1 exemption (transportation worker engaged in interstate commerce) | Betancourt: last‑mile deliveries for Amazon are part of continuous interstate movement of goods, so FAA §1 exempts agreement | TBS: deliveries were intrastate; FAA applies only if driver crosses state lines; Nieto flow test too broad | Court: FAA exemption applies—driver engaged in interstate commerce by participating in the flow of interstate goods; affirmed trial court |
| Enforceability of class action waiver under Gentry | Betancourt: Gentry four factors satisfied (small individual recovery, fear of retaliation, uninformed workforce, real‑world obstacles), so waiver unenforceable | TBS: Gentry preempted or factors not met; waiver enforceable | Court: Gentry applies (FAA inapplicable) and substantial evidence supports invalidating the waiver; affirmed denial to strike class claims |
| Severability of unenforceable class waiver and arbitration of individual claims | Betancourt: unenforceable waiver renders arbitration unenforceable as a whole | TBS: court should sever the waiver and compel arbitration of individual claims | Court: general rule is to sever unenforceable class waiver and enforce remaining arbitration clause; trial court erred by invalidating entire agreement—reversed in part and remanded to sever and decide arbitrability of individual claims |
| Unconscionability and other defenses (including Cal. Lab. Code §229) | Betancourt: arbitration agreement procedurally and substantively unconscionable; §229 may exempt wage claims from arbitration | TBS: agreement is mutual and Armendariz factors met; §229 does not apply to the two individual claims at issue | Court: trial court found adhesion/procedural unconscionability and a problematic judicial‑review term (severed); overall agreement not permeated by unconscionability; §229 not argued as to the two individual claims, so not resolved here |
Key Cases Cited
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (interprets FAA §1 catchall as limited to transportation workers)
- Gentry v. Superior Court, 42 Cal.4th 443 (2007) (sets four‑factor test for when class arbitration waivers are unenforceable)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) (standards for unconscionability and required protections in employment arbitration)
- Nieto v. Fresno Beverage Co., Inc., 33 Cal.App.5th 274 (2019) (applies "flow of interstate commerce" analysis to find an intrastate delivery driver exempt from FAA)
- Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020) (Amazon last‑mile drivers engaged in continuous interstate transportation)
- Waithaka v. Amazon.com, Inc., 966 F.3d 10 (1st Cir. 2020) (similar conclusion that last‑mile drivers participate in interstate flow)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) (addresses FAA preemption of some state rules but does not abolish Gentry under state law)