Summary: To qualify as a transportation worker for purposes of the FAA, an employee’s relationship to the movement of goods must be sufficiently close enough to conclude that the employee’s work plays a tangible and meaningful role in the goods’ progress through the channels of interstate commerce. An employee is not categorically excluded from the transportation worker exemption simply because they perform their duties on a purely local basis.
Facts: Plaintiff Adan Ortiz was hired by a staffing company, Defendant Randstad Inhouse Services LLC, during three separate time periods. During the second time period, from August 2020 to February 2021, Plaintiff was hired to work as a “PIT/Equipment Operator” at a California warehouse facility operated by GXO Logistics Supply Chain Inc., which operated warehouse and distribution facilities to receive Adidas products from international suppliers, and then processed and prepared those products for further distribution across state lines. After his employment, Plaintiff filed a class action in California state court alleging a host of California labor law violations against Defendant Randstad Inhouse Services LLC and several entities affiliated with it (collectively, “Randstad”) and several entities affiliated with GXO Logistics Supply Chain, Inc. (collectively, “GXO”). Randstad removed the case to the United States District Court for the Central District of California and filed a motion to compel arbitration based on the arbitration agreement that Plaintiff signed with Randstad when he was hired to work for GXO. Randstad’s arbitration agreement expressly designated GXO as an intended third-party beneficiary of the agreement, applied to all claims relating to Plaintiff’s “recruitment, hire, employment, client assignments and/or termination,” and stated that the arbitration agreement “shall be governed by the Federal Arbitration Act” and “may be enforced . . . otherwise pursuant to the FAA.” The district court denied the motion, concluding that the Federal Arbitration Act (“FAA”) did not apply to the arbitration agreement because Plaintiff qualified as an exempt “transportation worker.” Randstad and GXO each filed separate interlocutory appeals of the district court’s order.
Court’s Decision: On consolidated interlocutory appeal, the Court of Appeals for the Ninth Circuit, relying on Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), held that “to qualify as a transportation worker, an employee’s relationship to the movement of goods must be sufficiently close enough to conclude that his work plays a tangible and meaningful role in their progress through the channels of interstate commerce.” To determine whether Plaintiff qualified as an exempt transportation worker, the court engaged in the two-step analysis introduced in Saxon. First, the court agreed with the district court’s conclusion that Plaintiff’s job duties included exclusively warehouse work and found that the district court properly defined Plaintiff’s class of workers by reference to his job description: transporting packages to and from storage racks, helping other employees obtain packages, and assisting in the preparation of packages for shipment. Second, the court agreed with the district court’s conclusion that Plaintiff’s class of workers played a direct and necessary role in the free flow of goods across borders and actively engaged in transportation of such goods. Accordingly, the court found that Plaintiff was actively engaged in the interstate commerce of goods because he played a necessary part in facilitating the Adidas products’ continued movement to their final destination across state lines, and adopted Saxon’s overarching principle: “that an employee is not categorically excluded from the transportation worker exemption simply because he performs his duties on a purely local basis.” As such, the court held that the district court was correct to conclude that Plaintiff qualified for the FAA’s transportation worker exemption and that the parties’ arbitration agreement was unenforceable under the FAA.
Practical Implications: As debates continue to rage in Congress, the statehouse, and the courts about the future of employment arbitration, the scope of the FAA’s transportation worker exemption has gained increasing attention. In fact, the Supreme Court revisited the issue today (after addressing it just two years ago in Saxon) in a case called Bissonnette v. LePage Bakeries Park St. LLC. In Bissonnette, the Court held that to be exempt under the FAA, a class of workers that is actively engaged in interstate transportation does not have to be employed by a company in the “transportation industry.” Employers outside the “transportation industry” who administer arbitration agreements should take notice and consider whether any of those agreements may be vulnerable based on their employees’ (even local employees) involvement in the interstate transportation of goods. See related article.
Gramajo v. Joe’s Pizza on Sunset Inc., Nos. B322697 & B323034, 2024 WL 1250214 (Cal. Ct. App. Mar. 25, 2024)
Summary: Labor Code section 1194(a) controls over Code of Civil Procedure section 1033(a), such that employees who prevail in actions to recover unpaid minimum and overtime wages are entitled to their reasonable attorneys’ fees and costs, irrespective of the amount recovered, but nothing more.
Facts: Plaintiff Elinton Gramajo worked as a delivery driver for Defendant Joe’s Pizza on Sunset Inc. from February 2014 to June 2015. In 2018, Plaintiff sued Defendant for failure to pay minimum and overtime wages, failure to provide rest and meal periods, failure to pay wages due at time of termination, failure to reimburse for business expenses, and unfair business practices. After nearly four years of ongoing litigation and extensive discovery, the trial court awarded Plaintiff an aggregate total of $7,659.63 in damages for all of his claims despite him seeking an aggregate total of $26,159.33, just above the jurisdictional threshold for an unlimited civil proceeding. Plaintiff then moved for attorneys’ fees totaling $296,920.00 and costs totaling $26,932.84. The trial court denied Plaintiff’s motion for attorneys’ fees and costs, awarding him nothing, and granted Defendant’s motion to tax costs filed in opposition. The trial court found that Plaintiff (1) acted in bad faith by artificially inflating his damages figure to meet the jurisdictional amount in controversy required for an unlimited civil case and (2) severely over-litigated the case: “Plaintiff’s case clearly should have been brought in limited jurisdiction, was extremely straightforward, and demanded very little skill. Despite this, Plaintiff’s counsel repeatedly engaged in conduct which evinced a prioritization of gamesmanship over professionalism and which bore no proportional relationship to the work actually required to litigate the underlying claims. . . .” Plaintiff separately appealed the trial court’s orders denying his fees and granting Defendant’s motion to tax costs.
Court’s Decision: The California Court of Appeal reversed. On appeal, Plaintiff argued that the trial court erred by failing to award him reasonable litigation costs under Labor Code section 1194(a), and abused its discretion by applying Code of Civil Procedure section 1033(a) to deny such costs in their entirety. The court of appeal agreed. In its analysis, the court found that where Code of Civil Procedure section 1033(a) gives the trial court discretion to deny litigation costs based on the amount recovered, and Labor Code section 1194(a) provides for a mandatory cost award regardless of the amount recovered, the statutes presented an “irreconcilable conflict” that prevented their concurrent operation in the circumstances brought before the court on appeal. As a result, the court held that “Labor Code section 1194, subdivision (a), controls given the legislative intent behind Labor Code section 1194, subdivision (a), and because that statute is more recently enacted and more specific relative to Code of Civil Procedure section 1033.” While the court did not express any opinion on the reasonableness of Plaintiff’s requests or whether the case should have been filed in limited jurisdiction, it admonished that its “holding should not be read as a license for attorneys litigating minimum and overtime wage cases to over-file their cases or request unreasonable and excessive cost awards free of consequence.” In so stating, the court noted that, “there are still sufficient consequences for attorneys who make unreasonable and excessive requests to recover fees and costs even in the face of a mandatory fee statute like Labor Code section 1194, subdivision (a).”
Practical Implications: This case is a bit of a mixed bag. While the court did hold that a prevailing plaintiff in an action to recover unpaid minimum and overtime wages is entitled to attorneys’ fees regardless of the amount recovered, it also emphasized (rather emphatically) that this entitlement is only to reasonable attorneys’ fees and that trial courts should not countenance overlitigation and excessive requests. In other words, defendants are not without relief when the other side is churning up fees on a low-value case.
Jones v. Riot Hospitality Group LLC, 95 F.4th 730 (9th Cir. 2024)
Summary: To dismiss a case under Federal Rule of Civil Procedure 37(e)(2), a district court need only find that the Rule 37(e) prerequisites are met, the spoliating party acted with the intent required under Rule 37(e)(2), and lesser sanctions are insufficient to address the loss of the electronically stored information.
Facts: Plaintiff Alyssa Jones worked as a waitress at a Scottsdale bar owned and operated by Defendant Ryan Hibbert. Plaintiff later sued Hibbert and his company, Defendant Riot Hospitality Group LLC (collectively, “Defendants”) in the United States District Court for the District of Arizona alleging Title VII violations and common law tort claims. During discovery, Defendants obtained text messages between Plaintiff and her coworkers over a nearly three-year period. Defendants later identified instances where Plaintiff appeared to have abruptly stopped communicating with a number of people she had been messaging with on an almost daily basis. Plaintiff’s third-party imaging vendor, in compliance with a subpoena, produced a document showing that messages between Plaintiff and her coworkers had in fact been deleted from Plaintiff’s phone, and subsequent depositions of Plaintiff’s coworkers confirmed this. After Plaintiff failed to comply with a prior court order to produce the text messages, the district court ordered the parties to jointly retain a third-party forensic search specialist to review Plaintiff’s phone and allowed Defendants to subpoena three prospective witnesses to submit their phones for the same review. Plaintiff and two of the prospective witnesses complied. Upon receiving the deleted text messages that were extracted by the third-party forensic search specialist, Plaintiff’s counsel never sent them to Defendants, despite receiving several deadline extensions and being ordered to do so multiple times by the district court. The district court assessed $69,576 in fees and costs against Plaintiff and her counsel and ordered the forensic search specialist to send all non-privileged messages directly to Defendants. Defendants later moved for terminating sanctions under Federal Rule of Civil Procedure 37(e)(2) and submitted an expert spoliation report from the forensic search specialist finding that “an orchestrated effort to delete and/or hide evidence subject to the Court’s order has occurred.” The district court dismissed the case with prejudice on these grounds. Plaintiff and her counsel appealed.
Court’s Decision: The Court of Appeals for the Ninth Circuit affirmed. Instead of analyzing the district court’s reliance on the five-factor test articulated in Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d 337 (9th Cir. 1995), regarding the imposition of terminating sanctions, the court focused on Federal Rule of Civil Procedure 37(e)(2), noting that to “dismiss a case under Rule 37(e)(2), a district court need only find that the Rule 37(e) prerequisites are met, the spoliating party acted with the intent required under Rule 37(e)(2), and lesser sanctions are insufficient to address the loss of the [electronically stored information].” Plaintiff did not dispute that she had a duty to preserve the deleted messages, that the messages were deleted, or that the messages could not be restored or replaced through additional discovery. Instead, Plaintiff argued that her conduct was neither willful nor prejudicial to Defendants and on such basis, the district court abused its discretion by dismissing her case. The court of appeals disagreed, affirming the district court’s dismissal of Plaintiff’s employment discrimination action under Rule 37(e)(2) based on the finding that “there was ample circumstantial evidence that [Plaintiff] intentionally destroyed a significant number of text messages and collaborated with others to do so.” The court explained that “Rule 37(e)(2) does not mention prejudice as a prerequisite to sanctions, including dismissal” and that while the district court expressly considered the less drastic sanctions available under Rules 37(e)(1) and 37(e)(2), it did not abuse its discretion by reasonably concluding that none would likely be effective.
Practical Implications: This case carries simple, but important, lessons: Take your discovery obligations seriously; do not spoliate evidence; and do not violate a court order.
Huerta v. CSI Elec. Contractors, No. S275431, 2024 WL 1245291 (Cal. Mar. 25, 2024)
See our in-depth analysis HERE.
Ortiz v. Randstad Inhouse Services LLC, 95 F.4th 1152 (9th Cir. 2024)
