New Prime Inc. v. Oliveira
139 S. Ct. 532
| SCOTUS | 2019Background
- New Prime (trucking company) and Dominic Oliveira contracted for trucking services; contract labeled Oliveira an independent contractor and contained a broad delegation-to-arbitrator clause.
- Oliveira sued in federal court alleging New Prime misclassified drivers and failed to pay minimum wages; New Prime moved to compel arbitration under the Federal Arbitration Act (FAA).
- Oliveira argued § 1 of the FAA exempts "contracts of employment" of workers engaged in interstate commerce from the Act, so the court lacked statutory authority to compel arbitration.
- New Prime argued (1) the delegation clause requires an arbitrator to decide arbitrability, and (2) "contracts of employment" in § 1 covers only employer-employee relationships, not independent contractors.
- The district court and First Circuit agreed with Oliveira: (a) courts must decide whether § 1 applies before compelling arbitration, and (b) § 1's "contracts of employment" includes contracts with independent contractors.
- The Supreme Court affirmed the First Circuit, holding courts must resolve § 1 coverage and that the 1925 meaning of "contracts of employment" covered agreements to perform work, including independent-contractor arrangements.
Issues
| Issue | Plaintiff's Argument (Oliveira) | Defendant's Argument (New Prime) | Held |
|---|---|---|---|
| Whether a court or an arbitrator decides if § 1's § 1 exception to the FAA applies when contract contains a delegation clause | Court must decide antecedent statutory question of FAA coverage before enforcing arbitration | Delegation clause and severability require arbitrator to decide arbitrability | Court: the court must decide whether § 1 applies before compelling arbitration under §§3–4 of the FAA |
| Whether "contracts of employment" in § 1 covers independent-contractor agreements | Broad historical meaning of "contracts of employment" includes any agreement to perform work, including independent contractors | Term should be read narrowly to mean employer-employee/master-servant relationships only | Court: "contracts of employment" in 1925 commonly meant agreements to perform work and thus covers independent-contractor contracts |
| Whether the FAA's severability and delegation doctrines allow courts to enforce delegation clauses absent statutory coverage | § 1 limits the FAA; delegation/severability apply only if the contract is within the Act's coverage | Delegation clause governs arbitrability regardless of § 1, so arbitrator should decide | Court: Delegation and severability doctrines operate only if the contract falls within §§1–2; they cannot bootstrap FAA enforcement where § 1 excludes the contract |
| Whether the Court should reach inherent judicial authority to compel arbitration outside the FAA | N/A (Oliveira did not press alternative channel) | New Prime argued courts have inherent power to stay litigation and refer to private ADR | Court declined to decide; limited to FAA question presented |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (delegation clauses can commit arbitrability questions to arbitrators; severability principle)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (severability principle; court should determine if contract falls within FAA before applying severability)
- Bernhardt v. Polygraphic Co. of America, 350 U.S. 198 (Sections 1, 2 define field; §§3–4 apply only to covered contracts)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (discussing §1 exemption for transportation worker contracts)
- Southland Corp. v. Keating, 465 U.S. 1 (enforceability under §§3–4 depends on §2 coverage and §1 exceptions)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (federal policy favoring arbitration)