12 F.4th 287
3rd Cir.2021Background
- Robert Harper, an Amazon Flex driver, clicked to accept Amazon’s Terms of Service (TOS) that include an arbitration clause stating disputes "will be governed by the Federal Arbitration Act (FAA) and applicable federal law," with other terms governed by Washington law.
- Harper sued in New Jersey state court as a putative class action alleging state wage, overtime, and tip claims; Amazon removed and moved to compel arbitration under the FAA.
- Harper argued § 1 of the FAA (exempting "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce") applies to Amazon Flex drivers; the District Court ordered limited discovery under Singh to determine whether the § 1 exemption covers the class and declined to decide state-law arbitrability.
- The Third Circuit vacated and remanded, holding that federal courts in diversity must decide state-law arbitrability (i.e., whether state law independently compels arbitration) before authorizing discovery into § 1 when the contract expresses a clear intent to arbitrate.
- The Court set a sequencing framework (informed by Guidotti and Singh): (1) decide as a matter of law whether the plaintiff’s class is excluded by § 1 when possible; (2) if § 1’s scope is unclear, assume § 1 applies and first determine whether any applicable state law still enforces arbitration; (3) only if arbitration is unenforceable under state law should the court permit limited discovery into whether § 1 applies.
- Opinions: majority (Matey) issues the mandate and emphasizes federalism and remand; Matey concurrence urges narrower textual reading of § 1 and reconsideration of Tenney; Shwartz dissent argues the District Court correctly prioritized determining whether the FAA governs per the contract and binding precedent (New Prime, Singh, Palcko).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sequencing: whether courts must decide state-law arbitrability before § 1 discovery | Harper: District Court properly ordered discovery into § 1 to see if FAA exemption applies | Amazon: Court should resolve arbitrability under applicable state law (contract intent to arbitrate) before costly § 1 fact discovery | The Third Circuit: courts must first consider state-law grounds to enforce arbitration before ordering § 1 discovery; remand for district court to decide under state law |
| Scope of § 1 (FAA residual exemption) — class v. individual inquiry | Harper: Amazon Flex drivers are a class engaged in interstate commerce; § 1 exemption applies | Amazon: Last-mile Flex drivers are not the kind of transportation class § 1 was meant to cover; FAA governs | Court: Whether § 1 applies is ordinarily a question of law focused on the class and can often be resolved without discovery, but the § 1 question remains open pending state-law arbitrability analysis on remand |
| Choice-of-law / severability when FAA is inapplicable | Harper: Contract’s FAA selection means if FAA falls out arbitration cannot be enforced; no fallback law agreed for arbitration | Amazon: FAA selection and severability clause do not prevent state law from supplying an alternative basis to enforce arbitration; forum choice‑of‑law rules apply | Court: If FAA is inapplicable, courts must use forum choice‑of‑law rules to determine whether state law compels arbitration; the contract does not automatically preclude state‑law enforcement |
Key Cases Cited
- New Prime, Inc. v. Oliveira, 139 S. Ct. 532 (2019) (courts must decide whether § 1 exclusion applies before ordering arbitration)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (§ 1’s "engaged in commerce" language is to be narrowly construed and informed by ejusdem generis)
- Tenney Eng’g, Inc. v. United Elec. Radio & Mach. Workers, 207 F.2d 450 (3d Cir. 1953) (en banc) (articulated broad "work so closely related" test for § 1 residual clause)
- Singh v. Uber Techs., Inc., 939 F.3d 210 (3d Cir. 2019) (applies class-based § 1 inquiry and allows limited discovery when class scope is unclear)
- Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) (motions to compel arbitration should be decided under Rule 12(b)(6) without discovery when possible)
- Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir. 2004) (if FAA is inapplicable, state arbitration statutes may still govern enforcement)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preemption applies only where state law conflicts with FAA)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (state law can govern questions about arbitration when not in conflict with FAA)
- Volt Info. Scis., Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (state arbitration law does not necessarily conflict with FAA)