Case Note: The Importance of Designating “Fallback” State Arbitration Law in Arbitration Agreements with Transportation Workers
Courts throughout the country have been grappling with the scope of the “transportation worker” exemption under the Federal Arbitration Act (FAA). The FAA embodies a pro-arbitration policy and can promote the speedy and efficient resolution of disputes on an individual basis. Therefore, arbitration agreements often include provisions stating that the agreement is governed by the FAA. For arbitration agreements with transportation workers, however, this may be insufficient to ensure a given dispute actually ends up in arbitration.
Rodgers-Rouzier v. Amer. Queen Steamboat Operating Co., LLC, No. 23-1812 (7th Cir. Jun. 18, 2024), a case recently decided by the United States Court of Appeals for the Seventh Circuit, highlights the importance of the Scopelitis Law Firm’s long-standing guidance that clients designate a state arbitration law as a “fallback” in the event the FAA is found not to apply. The plaintiff worked as a bartender on a steamboat. She was deemed a “seaman” and thus exempt from the FAA as a “transportation worker.” The arbitration agreement she signed provided that it was governed by the FAA. Oftentimes, when a court determines an arbitration agreement falls outside the scope of the FAA, it will look to see if arbitration is nonetheless available under a state’s arbitration laws. Instead, the Seventh Circuit in Rodgers-Rouzier viewed the parties’ selection of the FAA as a “choice of law” provision and held that under Indiana’s “choice of law” principles, only the FAA (and not state arbitration law) could apply. Because the FAA did not apply, as the plaintiff was exempt, her dispute must be litigated in court, not arbitration.
The Seventh Circuit’s decision in Rodgers-Rouzier is a useful reminder of the importance of carefully drafting arbitration agreements for those in the transportation industry. While there are a number of considerations depending on the state, it would be prudent to consider designating a state arbitration statute to govern the agreement in the event the FAA does not apply.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
Case Note: The Importance of Designating “Fallback” State Arbitration Law in Arbitration Agreements with Transportation Workers
Courts throughout the country have been grappling with the scope of the “transportation worker” exemption under the Federal Arbitration Act (FAA). The FAA embodies a pro-arbitration policy and can promote the speedy and efficient resolution of disputes on an individual basis. Therefore, arbitration agreements often include provisions stating that the agreement is governed by the FAA. For arbitration agreements with transportation workers, however, this may be insufficient to ensure a given dispute actually ends up in arbitration.
Rodgers-Rouzier v. Amer. Queen Steamboat Operating Co., LLC, No. 23-1812 (7th Cir. Jun. 18, 2024), a case recently decided by the United States Court of Appeals for the Seventh Circuit, highlights the importance of the Scopelitis Law Firm’s long-standing guidance that clients designate a state arbitration law as a “fallback” in the event the FAA is found not to apply. The plaintiff worked as a bartender on a steamboat. She was deemed a “seaman” and thus exempt from the FAA as a “transportation worker.” The arbitration agreement she signed provided that it was governed by the FAA. Oftentimes, when a court determines an arbitration agreement falls outside the scope of the FAA, it will look to see if arbitration is nonetheless available under a state’s arbitration laws. Instead, the Seventh Circuit in Rodgers-Rouzier viewed the parties’ selection of the FAA as a “choice of law” provision and held that under Indiana’s “choice of law” principles, only the FAA (and not state arbitration law) could apply. Because the FAA did not apply, as the plaintiff was exempt, her dispute must be litigated in court, not arbitration.
The Seventh Circuit’s decision in Rodgers-Rouzier is a useful reminder of the importance of carefully drafting arbitration agreements for those in the transportation industry. While there are a number of considerations depending on the state, it would be prudent to consider designating a state arbitration statute to govern the agreement in the event the FAA does not apply.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.