In re Van Dusen: District Court Must Analyze FAA Exemption Claim Before Ordering Arbitration

In In re Van Dusen, --- F.3d ----, 2011 WL 3134584 (9th Cir. 7/27/11), the plaintiffs were two interstate truck drivers who entered independent contractor operating agreements (ICOAs) with a putative employer. The plaintiffs filed a putative collective and class action alleging violation of the Fair Labor Standards Act (FLSA) and state labor laws. The company moved to compel arbitration. The plaintiffs opposed the motion, alleging that the the ICOAs were exempt from arbitration under Section 1 of the Federal Arbitration Act (FAA), which exempts “contracts of employment of seaman, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from the FAA's provisions. 9 U.S.C. § 1.

The District Court (D. Ariz) declined to rule on the applicability of the exemption, holding that the question of whether an employer/employee relationship existed between the parties was a question for the arbitrator to decide in the first instance. Finding that the ICOAs contained valid arbitration clauses, the District Court ordered arbitration. The plaintiffs moved for certification of an interlocutory appeal, which the District Court denied. The plaintiffs then sought mandamus relief before the Ninth Circuit.

The Ninth Circuit held that the district court erred in failing to analyze the FAA exemption issue. however, because there was no case law directly on point, the Court held that the district court's error was not "clear error" sufficient to justify a writ of mandate:

We agree that [the plaintiffs] make a strong argument that the District Court erred, but we nonetheless hold that this case does not warrant the extraordinary remedy of mandamus. We therefore deny the petition.

Slip op. at 1. The opinion is available here.