Summary
The Ninth Circuit granted Rebecca Orr’s petition for a writ of mandamus and directed the district court to determine the statutory basis for compelling arbitration of her individual claims against United Parcel Service, Inc. The court held that the district court clearly erred by compelling arbitration without deciding whether the Federal Arbitration Act or state arbitration law governed the employment agreement, thereby improperly delegating the FAA § 1 exclusion question to the arbitrator. The concurrence agreed with the result under Ninth Circuit precedent but expressed concern that those precedents disregard congressional limits on interlocutory review of arbitration orders.
Topics
Practice areas
Questions Presented
- Whether the district court committed clear legal error by compelling arbitration without determining the statutory basis for its authority, including whether the FAA's contracts-of-employment exclusion under 9 U.S.C. § 1 applied.
- Whether mandamus was available because Orr lacked an adequate contemporaneous ordinary appeal and would suffer prejudice not correctable on appeal.
- Whether the district court clearly erred in its treatment of the delegation clause or class-action waiver.
Holdings
- A district court may not compel arbitration without first identifying the legal basis for its authority to compel arbitration when the applicability of the FAA or state law could affect the parties' rights and the agreement's terms require the issue to be resolved before arbitration. The district court clearly erred by refusing to determine whether the FAA or state law governed and thereby improperly delegating the FAA § 1 exclusion question to the arbitrator.
- Orr satisfied the first three Bauman factors because she lacked an adequate contemporaneous ordinary appeal, faced prejudice not correctable on appeal, and established clear legal error. Those factors were sufficient to warrant mandamus relief even though the fourth factor was not resolved and the fifth factor was not satisfied.
- The district court did not clearly err by compelling arbitration of arbitrability issues under the delegation clause; its later clarification order established that it had not itself decided the arbitrability issues.
Key quotations
“Ordinarily, if the issue is raised, a district court must “decide for itself whether § 1’s ‘contracts of employment’ exclusion applies before ordering arbitration” under the FAA.” (13)
“The district court committed clear error by refusing to determine the basis for its authority to compel arbitration and improperly delegating the contractual question as to the FAA’s applicability to the arbitrator.” (13)
“Our mandamus order is not meant to indicate that arbitration must be ordered, but that the basis for the arbitration must be decided first” (24-25)
Factual background
Rebecca Orr worked as a temporary Seasonal Support Driver for United Parcel Service in late 2023 after signing an arbitration agreement through UPS's online application portal. The agreement contained a delegation clause, a class-action waiver, and a provision stating that the FAA would govern unless it did not apply to the dispute or parties. Orr alleged that UPS repeatedly shortened or canceled her scheduled routes and brought individual and putative class employment claims, including claims for reporting-time pay. The district court compelled arbitration of her individual claims without determining whether the FAA or state arbitration law applied.
Procedural history
Orr filed state-law employment claims, including putative class claims and a California Private Attorneys General Act claim, in California superior court. UPS removed the action to the Central District of California and moved to compel arbitration and stay the litigation. The district court ordered arbitration of Orr's individual claims, stayed the class claims, and declined to decide whether the FAA or state law governed the arbitration agreement. After the district court denied Orr's motion for clarification, Orr sought mandamus relief in the Ninth Circuit, which granted the petition and directed the district court to determine the statutory basis for its authority to compel arbitration.
Remand instructions
The district court must determine the appropriate statutory basis for its authority to compel arbitration before proceeding further. The Ninth Circuit did not direct that arbitration must be ordered and left other arbitrability issues to the district court consistent with its opinion.