January 2019 Newsletter
Independent Contractors Who Work in Transportation May Not Be Forced Into Mandatory Arbitration
New Prime, Inc. v. Oliveira, 2019 WL 189342 (U.S. January 15, 2019) involved a dispute between New Prime Inc., an interstate trucking company and one of its drivers, Dominic Oliveira. Mr. Oliveira worked under an operating agreement that classified him as an independent contractor and contained a mandatory arbitration provision. In 2015, Oliveira filed a class-action lawsuit on behalf of himself and tens of thousands of other “contractors.” He alleged that New Prime had misclassified him as a contractor to underpay him, a violation of federal labor law. But Oliveira’s contract with the company declared that all disputes must be resolved through individual arbitration.
New Prime asserted that, under the Federal Arbitration Act, courts must enforce this “agreement” and dismiss Oliveira’s claims. Mr. Oliveira argued that the court lacked authority because Section 1 of the Act excludes from coverage disputes involving “contracts of employment” of certain transportation workers. New Prime argued that questions regarding Section 1’s applicability were to be resolved by the arbitrator. New Prime also argued that “contracts of employment” referred only to contracts that establish an employer-employee relationship and not to contracts with independent contractors.
The U.S. Supreme Court focused on whether a court should determine whether a Section 1 exclusion to the FAA applies before ordering arbitration where the parties’ contract contains a delegation clause and whether the transportation worker exclusion applied to independent contractors as well as employees.
On the question of arbitrability, the Court held that courts do not have unlimited power to compel arbitration of all private contracts. Rather, Section 2 of the FAA states that such power is limited to arbitration agreements involving commerce or maritime transactions. Therefore, in order to properly assert its power to compel arbitration, a court must first determine whether the FAA applies to the contract at issue. The Court rejected the argument that courts are barred from making this determination when the parties’ contract contains a delegation clause. The Court noted that the delegation clause is “merely a specialized type of arbitration agreement,” enforceable only to the extent that the “involving commerce” requirement under Section 2 of the FAA is satisfied and the exclusion under Section 1 is inapplicable.
Regarding whether the transportation worker exclusion applies to independent contractors, the Court held that the term “contracts of employment” is broad enough to encompass independent-contractor relationships.
Professional Liability Law
Insurance Claim is Not Exempt from New Jersey Consumer Fraud Act
In Alpizar-Fallas v. Favero, 908 F.3d 910 (3d Cir. (N.J.) Nov. 15 2018), Ana Lidia Alpizar-Fallas brought a class action claim against Progressive Garden State Insurance Company (“Progressive”) and one of its agents, Bryan Barbosa, alleging that Progressive and Barbosa’s deceptive business practices violated New Jersey’s Consumer Fraud Act (“CFA”).
Progressive insured, under two separate policies, both Alpizar-Fallas and Frank Favero who were involved in a motor vehicle accident. After the accident, Progressive adjuster Barbosa visited Alpizar-Fallas and asked her to sign documents that the adjuster allegedly claimed would “expedite” the processing of her property damage claim. Barbosa also allegedly told the plaintiff that it was “necessary” for her to sign the documents for Progressive to issue payments on her claim.
Alpizar-Fallas filed a personal injury lawsuit against Favero, and later amended her complaint to include class action claims against Progressive and its adjuster for violations of the New Jersey Unfair Claims Settlement Practices Regulations (UCSPR) and the CFA. Alpizar-Fallas claimed that the documents she signed contained a broad release of any claims arising from the accident, including any personal injury claims against the other driver. She alleged that the adjuster “falsely represented the nature of the documents” and claimed that because she “reasonably relied on the materially false representations” of the adjuster she was deprived of her rights to pursue claims against the other driver.
Progressive and Barbosa (“Appellees”) moved to dismiss Alpizar-Fallas’s class action claim for failure to state a claim. They argued: the UCSPR does not provide a private right of action, the UCSPR precludes application of the CFA, the CFA does not apply to schemes to defraud policyholders of their benefits and personal injury claims, and Alpizar-Fallas failed to properly plead a claim for relief under the CFA.
Specifically, with respect to their final argument, Appellees contended that Alpizar-Fallas did not meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b), did not plead an “ascertainable loss” as required by the CFA, and did not allege a violation of the CFA because Appellees were acting pursuant to Favero’s insurance policy, not her policy, when Barbosa visited Alpizar-Fallas’s residence.
The district court dismissed Alpizar-Fallas’s class action claim to the extent it alleged a violation of the UCSPR because those regulations do not provide a private right of action, then dismissed Alpizar-Fallas’s CFA claim, as a claim for denial of insurance benefits, holding that the CFA only applies to the “sale or marketing” of insurance policies. Relying on the Court’s holding in Weiss v. First Unum Life Insurance Co., 482 F.3d 254 (3d Cir. 2007) that the CFA applies to fraud in the performance of an insurance policy, the Court vacated the ruling of the district court and found that Alpizar-Fallas’s allegations of deception would be covered by the CFA.