FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FLI
-LO FALCON, LLC; STEEL
CITY EAGLES CORP.; STELVIO
TRANSPORT, LLC,
Plaintiffs-Appellants,
v.
AMAZON.COM, INC.; AMAZON
LOGISTICS, INC.,
Defendants-Appellees.
No. 22-35818
D.C. No.
2:22-cv-00441-
RSM-MLP
OPINION
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Argued and Submitted August 24, 2023
Portland, Oregon
Filed April 10, 2024
Before: Mark J. Bennett, Lawrence VanDyke, and Holly
A. Thomas, Circuit Judges.
Opinion by Judge Bennett;
Concurrence by Judge H.A. Thomas
2 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
SUMMARY
*
Federal Arbitration Act
The panel affirmed the district court’s order granting
Amazon’s motion to compel arbitration and dismissing
without prejudice a case arising from a dispute between
Amazon and the delivery service partners (DSP) with whom
it contracts to provide local delivery services.
Plaintiffs are or were business entities who entered into
Delivery Service Program Agreements (“DSP Agreements”)
with Amazon that contained an arbitration provision
(“Arbitration Agreement”), providing that disputes arising
from DSP Agreements would be resolved by binding
arbitration conducted by the American Arbitration
Association (“AAA”) rather than in court.
The Federal Arbitration Act (“FAA”) governs arbitration
agreements in contracts evidencing a transaction involving
commerce. Section I of the FAA, the “transportation
worker exemption,” exempts from the FAA’s coverage
“contracts of employment of seamen, railroad employees, or
any other class of workers engaged in foreign or interstate
commerce.”
The panel held that Section I’s transportation worker
exemption did not extend to business entities or to
commercial contracts like the DSP Agreement. No
business entity is similar in nature to the actual human
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 3
workers enumerated by the text of the transportation worker
exemption, and Section I’s residual clause referring to “any
other class of workers” did not extend to business entities
like plaintiffs.
The panel rejected plaintiffs’ argument that even if they
were not eligible for Section I’s transportation worker
exemption, the Arbitration Agreement should not be
enforced against them because it is unconscionable. The
Arbitration Agreement contained a Delegation Provision,
which incorporated AAA rules delegating threshold issues
to the arbitrator. The panel assumed, without deciding, that
plaintiffs sufficiently challenged the Delegation Provision
itself as unconscionable, and that plaintiffs’ assertion that
they lacked business sophistication was relevant. The panel
nevertheless rejected plaintiffs’ unconscionability challenge
because plaintiffs failed to create a dispute of material fact
regarding their sophistication. The panel concluded that the
Delegation Provision was between sophisticated parties,
incorporated the AAA rules, and therefore must be
enforced. Thus, plaintiffs’ remaining unconscionability
arguments directed at the Arbitration Agreement as a whole
must be decided by the arbitrator.
Concurring in part and concurring in the judgment,
Judge H.A. Thomas agreed with the majority that
(1) plaintiffs are not eligible for the FAA’s transportation
worker exemption, and (2) plaintiffs’ challenge to their
arbitration agreements’ delegation clauses was foreclosed
because the record revealed no dispute of material fact
regarding whether plaintiffs were “sophisticated”
entities. She would not go as far as the majority in holding
that business entities can never be subject to the
transportation worker exemption because it is unnecessary
to reach the question whether there are any circumstances
4 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
under which a business entity could qualify for the
transportation worker exemption.
COUNSEL
Andrew M. McNeela (argued) and Daniel Hume, Kirby
McInerney LLP, New York, New York; Roger M.
Townsend, Breskin Johnson & Townsend PLLC, New York,
New York; for Plaintiffs-Appellants.
Brian D. Buckley (argued), Fenwick & West LLP, Seattle,
Washington; Sofia Ritala, Claire E. Mena, and Justin A.
Stacy, Fenwick & West LLP, San Francisco, California;
Janie Y. Miller, Fenwick & West LLP, Santa Monica,
California; for Defendants-Appellees.
OPINION
BENNETT, Circuit Judge:
This case arises from a dispute between Amazon and the
delivery service partners (“DSPs”) with whom it contracts to
provide local delivery services. Three DSPs filed a federal
class-action complaint on behalf of all current and former
DSPs seeking damages and declaratory and injunctive relief.
Each DSP must execute a DSP Program Agreement
(“DSP Agreement”) with Amazon. The DSP Agreement
contains an arbitration provision (“Arbitration Agreement”),
which, among other things, states that “ANY DISPUTE
ARISING OUT OF THIS AGREEMENT WILL BE
RESOLVED BY BINDING ARBITRATION, RATHER
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 5
THAN IN COURT.” Relying on the Arbitration
Agreement, Amazon moved to compel arbitration in
response to the class-action complaint. The district court
adopted the magistrate judge’s report and recommendation
(“R & R”) in full, granted Amazon’s motion to compel
arbitration, and dismissed the case without prejudice. We
have jurisdiction under 28 U.S.C. § 1291, and we AFFIRM.
I. FACTUAL BACKGROUND
Plaintiffs are Fli-Lo Falcon, LLC (“Falcon”), Steel City
Eagles, Corp. (“Steel City”), and Stelvio Transport LLC
(“Stelvio”). Falcon is a North Carolina single-member
LLC operating in Wyoming. Steel City is a Pennsylvania
business corporation. Stelvio is wholly owned by STEO
Group Inc. Defendants are Amazon.com Inc. and Amazon
Logistics, Inc. (collectively, “Amazon”).
Plaintiffs are or were Amazon DSPs.
1
To join the DSP
program, an individual needs to first “[c]reate [a] business
entity.” The created business entity would then execute the
DSP Agreement with Amazon Logistics, Inc.,
2
which
requires the DSP to represent and confirm that it “is a legal
entity duly formed or incorporated, validly existing, and in
good standing in its jurisdiction of formation or
1
On March 31, 2021, Amazon’s DSP Agreement with Falcon expired,
and Amazon chose not to renew it. On April 12, 2022, Amazon
terminated its DSP Agreement with Steel City. Stelvio is still a DSP
for Amazon.
2
Plaintiffs explain that they cite the 2018 version of the agreement
“[b]ecause there are no material differences between the versions of the
DSP Agreement as they relate to the issues raised by this appeal.”
Because we agree, we also refer to the 2018 version.
6 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
incorporation.” Plaintiffs each hired multiple individuals
to deliver packages to Amazon’s customers.
The Arbitration Agreement, part of the DSP Agreement,
provides:
Governing Law; Submission to Arbitration.
This Agreement is governed by the United
States Federal Arbitration Act, applicable
United States federal law, and Washington
state law, without reference to any applicable
conflict of laws rules. ANY DISPUTE
ARISING OUT OF THIS AGREEMENT
WILL BE RESOLVED BY BINDING
ARBITRATION, RATHER THAN IN
COURT. . . . The arbitration will be
conducted by the American Arbitration
Association (the “AAA”) under its rules,
including the AAA’s Commercial
Arbitration Rules. The AAA’s rules are
available at www.adr.org or by calling 1-800-
778-7879. Payment of all filing,
administration, and arbitrator fees will be
governed by the AAA’s rules.
The Arbitration Agreement just quoted contains what courts
refer to as a Delegation Provision, which in turn incorporates
the “AAA rules”: “ANY DISPUTE ARISING OUT OF
THIS AGREEMENT WILL BE RESOLVED BY
BINDING ARBITRATION, RATHER THAN IN
COURT. . . . The arbitration will be conducted by the
American Arbitration Association (the “AAA”) under its
rules, including the AAA’s Commercial Arbitration Rules.”
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 7
II. PROCEDURAL HISTORY
The magistrate judge’s R & R first determined that the
parties entered into valid agreements to arbitrate under the
Federal Arbitration Act (“FAA”). The magistrate judge
then concluded that Section 1 of the FAA—which exempts
from its coverage “contracts of employment of seamen,
railroad employees, [and] any other class of workers
engaged in foreign or interstate commerce,” 9 U.S.C. § 1—
does not apply to “commercial agreement[s] between
business entities for the delivery of goods.” Finally, the
magistrate judge found that, by expressly incorporating the
AAA rules into the Arbitration Agreement, the parties had
clearly and unmistakably delegated all questions of
arbitrability to the arbitrator. Plaintiffs objected to the R &
R, but the district court adopted it in full, compelled
arbitration, and dismissed this case without prejudice.
3
This appeal followed. We have jurisdiction under 28
U.S.C. § 1291.
III. STANDARD OF REVIEW & LEGAL STANDARD
We review de novo a district court order compelling
arbitration. Unite Here Loc. 30 v. Sycuan Band of the
3
Plaintiffs objected to the magistrate judge’s recommendation that the
district court grant the motion to compel arbitration but did not contend
that the magistrate judge incorrectly recommended dismissal without
prejudice rather than a stay pending arbitration. On appeal, plaintiffs
have not challenged the district court’s decision to dismiss the case rather
than stay it. We note, however, that the Supreme Court recently
granted certiorari in Smith v. Spizzirri, No. 22-1218, 2024 WL 133822,
at *1 (U.S. Jan. 12, 2024), in which the question presented is: “Whether
Section 3 of the FAA requires district courts to stay a lawsuit pending
arbitration, or whether district courts have discretion to dismiss when all
claims are subject to arbitration.” Petition for a Writ of Certiorari,
Spizzirri, 2024 WL 133822 (No. 22-1218), 2023 WL 4108513, at *i.
8 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
Kumeyaay Nation, 35 F.4th 695, 700–01 (9th Cir. 2022).
We review for clear error any underlying factual findings.
Lim v. TForce Logistics, LLC, 8 F.4th 992, 999 (9th Cir.
2021).
The FAA governs arbitration agreements in “contract[s]
evidencing a transaction involving commerce.” 9 U.S.C.
§ 2. The Act provides that “an agreement in writing to
submit to arbitration an existing controversy arising out of
such a contract, transaction, or refusal shall be valid,
irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.”
Id.; see also AT&T Mobility LLC v. Concepcion, 563 U.S.
333, 339 (2011). If an agreement exists, the FAA “leaves
no place for the exercise of discretion by a district court, but
instead mandates that [it] shall direct the parties to proceed
to arbitration.” Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 218 (1985).
If a party ignores its agreement to arbitrate, the other
party may ask a court to issue “an order directing that such
arbitration proceed in the manner provided for in such
agreement.” 9 U.S.C. § 4. The FAA “requires the court
to enforce the arbitration agreement in accordance with its
terms” and limits the court’s role to deciding whether: (1) “a
valid agreement to arbitrate exists” between the parties and
(2) the scope of the agreement encompasses the claims.
Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126,
1130 (9th Cir. 2000).
“The presence of a delegation clause further limits the
issues that a court may decide.” Caremark, LLC v.
Chickasaw Nation, 43 F.4th 1021, 1029 (9th Cir. 2022).
When the parties have “clearly and unmistakably” delegated
questions regarding arbitrability to the arbitrator, the court
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 9
need not conduct further inquiries beyond the existence of
the arbitration agreement. See Rent-A-Ctr., W., Inc. v.
Jackson, 561 U.S. 63, 68–70 (2010); Brennan v. Opus Bank,
796 F.3d 1125, 1130 (9th Cir. 2015). “Under Rent-A-
Center, . . . a valid—i.e., enforceable—delegation clause
commits to the arbitrator nearly all challenges to an
arbitration provision.” Caremark, 43 F.4th at 1029
(footnote omitted). These challenges include the threshold
inquiries: “whether the agreement covers a particular
controversy” and “whether the arbitration provision is
enforceable at all.” Id.
IV. DISCUSSION
A. Section 1 of the FAA does not extend to corporate
entities or to commercial contracts.
Enacted by Congress in 1925, the FAA was a response
to American courts’ refusals to enforce arbitration
agreements. See Allied-Bruce Terminix Cos., Inc. v.
Dobson, 513 U.S. 265, 270 (1995). “To give effect to this
purpose, the FAA compels judicial enforcement of a wide
range of written arbitration agreements.” Circuit City
Stores, Inc. v. Adams, 532 U.S. 105, 111 (2001). Section 2
of the FAA, which we note above uses the “involving
commerce” language, “was enacted pursuant to Congress’
substantive power to regulate interstate commerce and
admiralty.” Id. at 112.
While § 2 concerns the FAA’s “basic coverage
authorization,” § 1 concerns the “exemption from [the
FAA’s] coverage.” Id. Section 1 of the FAA, sometimes
known as the “transportation worker exemption,” see, e.g.,
Rittmann v. Amazon.com, Inc., 971 F.3d 904, 907 (9th Cir.
2020), exempts from the FAA’s coverage “contracts of
employment of seamen, railroad employees, or any other
10 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
class of workers engaged in foreign or interstate commerce,”
9 U.S.C. § 1. As the party opposing arbitration, plaintiffs
bear the burden of establishing that the exemption applies.
Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148,
1151 (9th Cir. 2008).
In Circuit City, the Supreme Court explained that “the
wording of [the transportation worker exemption] calls for
the application of the maxim ejusdem generis,” which is “the
statutory canon that ‘where general words follow specific
words in a statutory enumeration, the general words are
construed to embrace only objects similar in nature to those
objects enumerated by the preceding specific words.’” 532
U.S. at 114–15 (brackets omitted) (quoting 2A N. Singer,
Sutherland on Statutes and Statutory Construction § 47.17
(1991)). Therefore, “the residual clause [‘any other class
of workers’ in § 1] should be read to give effect to the terms
‘seamen’ and ‘railroad employees,’ and should itself be
controlled and defined by reference to the enumerated
categories of workers which are recited just before it.” Id.
at 115. Following this canon, the Court held that the
transportation worker exemption is to “be afforded a narrow
construction.” Id. at 118.
In New Prime Inc. v. Oliveira, 139 S. Ct. 532 (2019), the
Court also analyzed the FAA by examining the meanings of
statutory terms and the historical context in 1925 when the
FAA was enacted. See id. at 539–40. This led the New
Prime Court to conclude that the residual category of “any
other class of workers” encompassed independent
contractors, id. at 541, because in 1925, all work was treated
as employment “whether or not the common law criteria for
a master-servant relationship happened to be satisfied,” id.
at 540. The Court also relied on the fact that Congress did
not use words like “employees” or “servants,” which would
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 11
have been more “natural choices” if the transportation
worker exemption were meant to exclude independent
contractors. Id. at 541.
But neither Circuit City nor New Prime answered the
questions presented here. First, can business entities like
plaintiffs qualify as a “class of worker” engaged in foreign
or interstate commerce?
4
And second, can a commercial
contract between two business entities qualify as a “contract
of employment”? Circuit City answered affirmatively
whether “Section 1 exempts from the FAA only contracts of
employment of transportation workers.” 532 U.S. at 119
(emphasis added). And New Prime, while asking whether
“‘contracts of employment’ refer[s] only to contracts
between employers and employees,” limited the inquiry to
whether the term also extends to “contracts with independent
contractors.” Id. at 536.
5
Although the Supreme Court has not addressed the exact
questions here, it has provided us with significant guidance.
“Statutory interpretation, as we always say, begins with the
text . . . .” Ross v. Blake, 578 U.S. 632, 638 (2016). The
text of the transportation worker exemption makes clear—
and we hold—that the residual clause does not extend to
4
Plaintiffs argue that several decades-old, out-of-circuit cases have held
that the transportation worker exemption covers contracts involving
labor unions, which as plaintiffs correctly note, “are not natural persons.”
We are not called on to decide any issues involving labor unions as a
contracting party, and we do not do so in this opinion.
5
Indeed, as the First Circuit noted before the Court’s grant of certiorari,
“because the parties do not dispute that [plaintiff] is a transportation
worker under § 1, [it] need not address whether an LLC or other
corporate entity can itself qualify as a transportation worker.” Oliveira
v. New Prime, Inc., 857 F.3d 7, 17 (1st Cir. 2017), aff’d, 139 S. Ct. 532
(2019).
12 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
business entities like plaintiffs. The phrase “any other
class of workers” follows “seamen” and “railroad
employees.” 9 U.S.C. § 1. And the word “seamen” and
the phrase “railroad employees” describe natural persons
who are individual workers. As a residual category, “any
other class of workers”—which is to “be afforded a narrow
construction,” Circuit City, 532 U.S. at 118 (emphasis
added)—cannot do the heavy lifting of expanding the
transportation worker exemption to cover non-natural
persons like the business entities that are the plaintiffs.
After all, the ejusdem generis maxim dictates that “[w]here
general words follow specific words in a statutory
enumeration, the general words are construed to embrace
only objects similar in nature to those objects enumerated
by the preceding specific words.” Id. at 114–15 (emphasis
added) (citations omitted). We agree with the Fourth
Circuit’s decision in an almost identical case also involving
Amazon DSPs that “[s]izable corporate entities are not
‘similar in nature’ to the actual human workers enumerated
by the text of the ‘transportation worker’ exemption.”
Amos v. Amazon Logistics, Inc., 74 F.4th 591, 596–97 (4th
Cir. 2023) (emphasis added); see also Tillman Transp., LLC
v. MI Bus. Inc., No. 23-1777, 2024 WL 1153970, at *4–6
(6th Cir. Mar. 18, 2024) (citing Amos with approval and
holding that “[§] 1’s exemption did not apply to limited
liability companies like Tillman Transportation,” id. at *6).
Following that clear, and in our view clearly required, logic,
we hold that no business entity is similar in nature to the
actual human workers enumerated by the text of the
transportation worker exemption. While a natural person
such as an independent contractor may be a transportation
worker, a nonnatural person such as a business entity that
employs or contracts with transportation workers, is not and
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 13
cannot be a transportation worker. Nor is such a nonnatural
person “similar in nature” to a transportation worker.
Our interpretation also aligns with the Supreme Court’s
view of the reasons for Congress’s adoption of the
transportation worker exemption, as discussed by the
Supreme Court in Circuit City. Before 1925, Congress had
provided for the arbitration of disputes between seamen and
their employers under the Shipping Commissioners Act of
1872. Circuit City, 532 U.S. at 121. And when Congress
passed the FAA, “the passage of a more comprehensive
statute providing for the mediation and arbitration of railroad
labor disputes was imminent.” Id. (citing the Railway
Labor Act of 1926, 44 Stat. 577, 46 U.S.C. § 651
(repealed)). Thus, the Court found that “[i]t [wa]s
reasonable to assume that Congress excluded ‘seamen’ and
‘railroad employees’ from the FAA for the simple reason that
it did not wish to unsettle established or developing statutory
dispute resolution schemes covering specific workers.” Id.
(emphasis added). This supports that Congress’s
transportation workers exemption was targeted at
employment contracts of workers (whether employees or
independent contractors), not contracts of business entities.
Indeed, in Southwest Airlines Co. v. Saxon, the Court,
discussing and applying Circuit City, stated that:
[C]anons [of statutory construction] showed
that § 1 exempted only contracts with
transportation workers, rather than all
employees, from the FAA. And, while we
did not provide a complete definition of
“transportation worker,” we indicated that
any such worker must at least play a direct
14 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
and “necessary role in the free flow of goods”
across borders.
596 U.S. 450, 458 (2022) (emphasis added) (citations
omitted).
To repeat, no plaintiff is a transportation worker.
Plaintiffs claim that “the DSPs—including all their
personnel—performed transportation work covered by the
[transportation worker exemption].” But plaintiffs’ own
description—“including all their personnel”—belies their
argument. A Falcon employee may be a transportation
worker playing a direct and necessary role in the free flow
of goods across borders. But that cannot turn Falcon into
such a transportation worker.
We also relatedly hold that “contracts of employment”
in the transportation worker exemption do not extend to
commercial contracts like the DSP Agreements. Recall
that § 1 of the FAA exempts “contracts of employment of
. . . any other class of workers engaged in foreign or
interstate commerce.” 9 U.S.C. § 1 (emphasis added). In
other words, for a contract to be a contract of employment
covered by § 1, it must have a qualifying worker as one of
the parties. The Supreme Court instructed similarly in New
Prime, when it stated that the transportation worker
exemption’s use of the phrase “contracts of employment” is
intended to “capture any contract for the performance of
work by workers.” 139 S. Ct. at 541. In contrast, the DSP
Agreement between DSPs and Amazon calls for the
“transportation, delivery, and related services . . . performed
by the business entity that [plaintiffs] represent.” The DSP
Agreement even states that DSPs have “exclusive
responsibility for [their] Personnel, including exclusive
control over compensation, hours, and working conditions.”
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 15
Like at the district court, plaintiffs have provided no
authority that the transportation worker exemption can apply
to a commercial contract between two business entities.
And several district courts, with which we agree, have held
that it does not. See, e.g., R&C Oilfield Servs., LLC v. Am.
Wind Transp. Grp., LLC, 447 F. Supp. 3d 339, 347 (W.D.
Pa. 2020) (“The Agreement here is a commercial contract
between two business entities. It cannot reasonably be
construed as a contract of employment governing ‘work by
workers.’”); ShaZor Logistics v. Amazon.com, LLC, 628 F.
Supp. 3d 708, 712 (E.D. Mich. 2022) (“Section 1 is
inapplicable to contracts between businesses, because
businesses do not sign employment contracts with one
another. Moreover, the contract here [between another
DSP and Amazon] only contemplated a business-to-business
relationship.” (citations omitted)); D.V.C. Trucking, Inc. v.
RMX Glob. Logistics, Inc., No. Civ. A. 05-cv-00705, 2005
WL 2044848, at *3 (D. Colo. Aug. 24, 2005) (declining to
apply the transportation worker exemption because plaintiff
was not “an employed ‘transportation worker’ engaged in
interstate commerce, but rather . . . a business corporation”).
Plaintiffs seek to avoid this conclusion. But their
reliance, for example, on Rittmann v. Amazon.com, Inc., 971
F.3d 904 (9th Cir. 2020), and Romero v. Watkins & Shepard
Trucking, Inc., 9 F.4th 1097 (9th Cir. 2021), is misplaced.
In Rittmann, the question presented was whether contracts
between individual drivers, who contracted directly with
Amazon to provide local package delivery through
Amazon’s Flex (“AMFlex”) program, were exempted from
the FAA by the transportation worker exemption. 971 F.3d
at 907. The court simply held that AmFlex drivers were
“engaged in interstate commerce for § 1’s purposes,” even
when transporting goods “wholly within a state,” because
16 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
that last-mile delivery was still a “part of a continuous
interstate transportation.” Id. at 916. Rittmann says
nothing about whether a business entity can be a “worker”
subject to a “contract of employment” under the
transportation worker exemption.
Plaintiffs claim that Amazon is circumventing Rittman’s
holding by requiring them to become business entities to
become DSPs. In Rittman, we did reject Amazon’s
argument that parties could “contract around the FAA’s
transportation worker exemption.” Id. at 919. But we did
so in the context of addressing Amazon’s argument that even
if “AmFlex workers are exempt from the FAA’s coverage
provisions,” the court could “nevertheless enforce the
arbitration provision” under federal and state law. Id.
We distinguished the cases Amazon cited there, because we
found those cases “involve[d] arbitration agreements to
which the FAA applies.” Id. As relevant here, Amazon
chose to contract only with business entities. Nothing in
any law cited to us barred Amazon from doing so. And
those contracts are not subject to the transportation worker
exemption. Rittman is not to the contrary.
Plaintiffs also claim Romero somehow bars Amazon’s
invocation of arbitration. In Romero, plaintiff Alejandro
Romero agreed, on an online portal, to the “Arbitration
Policy” at issue, which contained a clause “waiv[ing] the
application or enforcement of any provision of the FAA
which would otherwise exclude [the Arbitration Policy]
from its coverage.” 9 F.4th at 1100. The Romero panel
held that the Arbitration Policy’s attempted waiver of § 1
was unenforceable because “the FAA affords courts the
power to enforce arbitration agreements, but not when they
involve transportation workers engaged in interstate
commerce pursuant to § 1. Section 1 acts as a limit on the
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 17
court’s power and, thus, cannot be waived.” Id. (emphasis
added).
6
Id. Romero essentially held that the FAA’s text
trumped the private contract at issue. Nothing in the case
suggests (much less holds) that the transportation worker
exemption applies to contracts in which a natural person
“transportation worker” (like Mr. Romero) is not a party.
Nor do any cases hold that contracting parties are forbidden
by the FAA to structure their contracts to avoid the
transportation worker exemption by taking those contracts
out of the coverage of the exemption. If there is a problem
here, it is for Congress to fix, such as by extending the
exemption to apply to contracts between business entities.
But we lack the authority to remedy such a problem, if it
indeed even is one.
Finally, plaintiffs argue that the DSP Agreements are not
commercial agreements between business entities because
plaintiffs are “not ‘independent’ business[es], but are utterly
dominated by Amazon, and all the DSPs’ personnel are
functionally Amazon employees.” This argument is better
viewed as one about whether plaintiffs—even though
business entities—are still a qualifying “class of worker”
under the transportation worker exemption because of the
services they provide Amazon. But they are not, as the
transportation worker exemption does not extend to business
entities like plaintiffs. Whether independent or not,
plaintiffs are still business entities and not natural persons.
6
The Romero panel also relied on New Prime, as do we: “The Supreme
Court noted that § 1 says that nothing herein—meaning nothing in the
FAA—may be used to compel arbitration in disputes involving the
contracts of employment of certain transportation workers . . . .”
Romero, 9 F.4th at 1100 (emphasis added) (internal quotation marks
omitted) (quoting New Prime, 139 S. Ct. at 536).
18 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
B. Plaintiffs’ unconscionability challenges to the
Arbitration Agreement fall within the scope of the
enforceable Delegation Clause.
Plaintiffs next argue that even if they are not eligible for
the transportation worker exemption, the Arbitration
Agreement should not be enforced against them because it is
unconscionable.
As mentioned above, the Arbitration Agreement
contains a Delegation Provision, which incorporates the
“AAA rules”:
The arbitration will be conducted by the
American Arbitration Association (the
“AAA”) under its rules, including the AAA’s
Commercial Arbitration Rules. The AAA’s
rules are available at www.adr.org or by
calling 1-800-778-7879.
Rule 7(a) of the AAA Commercial Arbitration Rules
provides that “[t]he arbitrator shall have the power to rule on
his or her own jurisdiction, including any objections with
respect to the existence, scope, or validity of the arbitration
agreement or to the arbitrability of any claim or
counterclaim, without any need to refer such matters first to
a court.” American Arbitration Association, Commercial
Arbitration Rules and Mediation Procedures R-7(a) (Sept. 1,
2022).
Arbitration clauses may delegate to the arbitrator, for
determination in the arbitration, certain threshold issues
about the agreement. These delegation provisions are
simply “agreement[s] to arbitrate threshold issues
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 19
concerning the arbitration agreement.” Rent-A-Ctr., 561
U.S. at 68. Such arbitrable threshold issues may include
“whether the parties have agreed to arbitrate,” or “whether
[the arbitration] agreement covers a particular controversy,”
id. at 69, including the controversy of “whether the
[arbitration] [a]greement is unconscionable,” id. at 68.
When the parties’ agreement to delegate threshold
arbitrability questions to the arbitrator is “clear and
unmistakable,” then a court “may not decide the arbitrability
issue.” Henry Schein, Inc. v. Archer & White Sales, Inc.,
139 S. Ct. 524, 530 (2019).
In Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015),
we held that “incorporation of the AAA rules constitutes
clear and unmistakable evidence that contracting parties
agreed to arbitrate arbitrability.” Id. at 1130. And, when
that is the case, “the only remaining question is whether the
particular agreement to delegate arbitrability—the
[d]elegation [p]rovision—is itself unconscionable.” Id. at
1132. Relying on Rent-A-Center, 561 U.S. at 73–75, we
held that, because “[plaintiff] failed to make any arguments
specific to the delegation provision and instead argued that
the [a]rbitration [c]lause as a whole is unconscionable under
state law,” we may not “consider that claim because it is for
the arbitrator to decide in light of the parties’ clear and
unmistakable delegation of that question.” Brennan, 796
F.3d at 1133 (cleaned up).
Thus, we must first decide the threshold issue of whether
plaintiffs here have “ma[d]e any arguments specific to” the
Delegation Provision, id., and if so, whether the Delegation
Provision is enforceable. The magistrate judge’s R & R
answered no to the first threshold issue. The R & R noted
that, “[f]or this [c]ourt to hear [p]laintiffs’ challenges,
[p]laintiffs’ arguments would need to have explicitly
20 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
challenged the [D]elegation [P]rovision in the Agreement
itself—that is, the power to the arbitrator to determine the
validity of the [A]rbitration [Agreement] as unconscionable
or its provision of the AAA rules—and not various aspects
of the [A]rbitration [Agreement] or [DSP] Agreement.”
Instead, “[p]laintiffs’ unconscionability challenges raise
issues as to the whole of the [A]rbitration [Agreement] in the
[DSP] Agreement, and at times, to the entirety of the parties’
[DSP] Agreement itself.”
Recently (and more than one year after the district court
compelled arbitration), we considered in Bielski v. Coinbase,
Inc., 87 F.4th 1003, 1008 (9th Cir. 2023), “what a party must
do to specifically challenge a delegation provision to ensure
that a court can review its challenge.” We held that, “to
sufficiently challenge a delegation provision, the party
resisting arbitration must specifically reference the
delegation provision and make arguments challenging it.”
Id. at 1011. We rejected the notion that “a court need . . .
first evaluate the substance of the challenge.” Id. Instead,
“a party may use the same arguments to challenge both the
delegation provision and arbitration agreement, so long as
the party articulates why the argument invalidates each
specific provision.” Id.
The district court did not have the benefit of Bielski’s
guidance. We find that considering Bielski, the threshold
issue of whether plaintiffs sufficiently challenged the
Delegation Provision is a close question. On the one hand,
plaintiffs did “specifically reference the [D]elegation
[P]rovision and make arguments challenging it.” Id. For
example, in plaintiffs’ opposition to the R & R, they argued
that “[p]utting aside the wisdom of the Ninth Circuit’s
determination that the mere incorporation of AAA rules,
depending on the circumstances, can constitute ‘clear and
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 21
unmistakable evidence that the contracting parties agreed to
arbitrate arbitrability,’ that rule does not apply where, as
here, the party opposing arbitration is not sophisticated.”
(citation omitted) (emphasis added). In plaintiffs’ opening
brief, they further developed their arguments challenging the
Delegation Provision. They referred to Amazon’s DSP
program marketing materials and the fact that “Amazon . . .
negotiated numerous ancillary agreements on the DSPs’
behalf” to show plaintiffs’ lack of business sophistication.
On the other hand, plaintiffs made no such
sophistication-based challenge to the Delegation Provision
in their opposition to Amazon’s motion to compel.
Compare id. at 1009 (“[A] party resisting arbitration must
mention that it is challenging the delegation provision and
make specific arguments attacking the provision in its
opposition to a motion to compel arbitration.”), with id. at
1010 (citing out-of-circuit cases with approval, which held
that “if a party’s challenge mentions and specifically relates
to the validity of the delegation provision in its opposition to
the motion to compel arbitration or other pleading, the
federal court has a green light to consider those arguments”
(emphasis added)). Even when we take all of plaintiffs’
pleadings into consideration, plaintiffs have not stated
explicitly that they believe that the Delegation Provision
itself (as opposed to the Arbitration Agreement or the DSP
Agreement as a whole) is unconscionable.
Today, we assume, without deciding, that plaintiffs
sufficiently challenged that the Delegation Provision itself is
unconscionable. We also assume, without deciding, that
plaintiffs’ “sophistication” is relevant to our
unconscionability inquiry. Even so assuming, we reject
plaintiffs’ unconscionability challenge to the Delegation
Provision because their arguments are solely based on their
22 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
supposed lack of sophistication and they have pointed to
nothing in the record creating a dispute of material fact
regarding their “sophistication.” See Hansen v. LMB
Mortg. Servs., Inc., 1 F.4th 667, 670 (9th Cir. 2021) (holding
that motions to compel arbitration are subject to the
summary judgment standard).
Some courts that have looked at sophistication in this or
a related context have focused on factors such as whether the
plaintiff is a consumer as opposed to a corporation, see, e.g.,
Ingalls v. Spotify USA, Inc., No. C 16-03533 WHA, 2016
WL 6679561, at *3–4 (N.D. Cal. Nov. 14, 2016), whether
the plaintiff “had legal training or experience dealing with
complicated contracts,” Meadows v. Dickey’s Barbecue
Rests. Inc., 144 F. Supp. 3d 1069, 1079 (N.D. Cal. 2015),
and the length and complexity of the agreement, see, e.g., id.
(involving a 60-page complex document with a “myriad of
legal terms”). Without adopting those factors, or even
finding them relevant, nothing in plaintiffs’ declarations
suggest, for example, that they are first-time business owners
or otherwise unfamiliar with commercial contracts, such as
the short, six-page DSP Agreement here that contains the
one-paragraph Delegation Provision. To the contrary, the
plaintiffs’ declarations submitted with their oppositions to
Amazon’s motion to compel arbitration show that plaintiffs
are sophisticated businesses entities. The record also
shows that plaintiffs exercised independence in structuring
and conducting their businesses. Some have complex
corporate structures. Some view themselves as “a
transportation and logistics company, which entered into a
contract to deliver packages for [Amazon].” Each plaintiff
was sophisticated enough to hire multiple individuals and
asserted significant control over those individuals. And
while plaintiffs “received weekly routes from” Amazon to
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 23
deliver packages to Amazon’s customers, they also
“recruit[ed], interview[ed], train[ed], supervis[ed], and
monitor[ed] drivers to ensure that the deliveries were timely
made.” This is not a case with unsophisticated consumers
entering into extensive agreements where their lack of
sophistication impacts their ability to discern their
contractual obligations. Rather, this is a case involving
business entities, which were sophisticated enough to
navigate state laws around incorporation and company
formation, hire many individuals, and perform complex
duties to ensure timely delivery of large numbers of
packages. In short, because plaintiffs rest their Delegation
Provision unconscionability argument solely on their
supposed lack of sophistication, and because the undisputed
evidence does not support their sophistication claim, we
reject their challenge to the Delegation Provision.
Because we have rejected plaintiffs’ only challenge to
the Delegation Provision, and in doing so have found that
plaintiffs are sophisticated, we must enforce the Delegation
Provision under Brennan. Brennan, 796 F.3d at 1130–31
(holding that “incorporation of the AAA rules constitutes
clear and unmistakable evidence that contracting parties
agreed to arbitrate arbitrability” between sophisticated
parties). Thus, plaintiffs’ remaining unconscionability
challenges to the Arbitration Agreement fall within the scope
of the enforceable Delegation Provision, and we leave them
to the arbitrator in the first instance.
V. CONCLUSION
Section 1 of the FAA—the transportation worker
exemption—does not extend to business entities or to
commercial contracts. Even assuming without deciding
that plaintiffs sufficiently challenged the Delegation
24 FLI-LO FALCON, LLC V. AMAZON.COM, INC.
Provision and that their sophistication is relevant, their
challenge fails because they have failed to create a dispute
of material fact regarding their sophistication. And
because the Delegation Provision is between sophisticated
parties and incorporates the AAA rules, we must enforce it.
Thus, plaintiffs’ remaining unconscionability arguments
directed at the Arbitration Agreement as a whole must be
decided by the arbitrator.
AFFIRMED.
H.A. THOMAS, Circuit Judge, concurring in part and
concurring in the judgment:
I agree with the majority that plaintiffs are not eligible
for the Federal Arbitration Act’s (FAA) transportation
worker exemption. I also agree that, because the record
reveals no dispute of material fact regarding whether
plaintiffs are “sophisticated” entities, our decision in
Brennan v. Opus Bank, 796 F.3d 1125, 1130–31 (9th Cir.
2015), forecloses plaintiffs’ challenge to their arbitration
agreements’ delegation clauses. I write separately, however,
because I would not go as far as the majority in holding that
business entities can never be subject to the transportation
worker exemption.
The majority opinion breaks plaintiffs’ argument down
into two questions: first, whether a business entity can
“qualify as a ‘class of worker’ engaged in foreign or
interstate commerce;” and second, whether “a commercial
contract between two business entities” can “qualify as a
‘contract of employment.’” Majority Op. at 11. I agree with
the majority that the answer to the second question is “no.”
FLI-LO FALCON, LLC V. AMAZON.COM, INC. 25
The Supreme Court has held that the FAA uses the term
“contracts of employment” to refer to “contract[s] for the
performance of work by workers.” New Prime Inc. v.
Oliveira, 139 S. Ct. 532, 541 (2019). As the majority
explains, the contracts at issue here do not match this
description. Majority Op. at 14. They are not employment
contracts, but commercial contracts for delivery and
transportation services, provided by companies that
themselves employ and manage multiple workers.
This finding is sufficient to reject plaintiffs’ argument. It
is therefore unnecessary to reach the question whether there
are any circumstances under which a business entity could
qualify for the transportation worker exemption. Plaintiffs
express concern that answering this question in the negative
would allow companies to contract around the FAA’s
exemption by forcing their transportation workers to create
sham corporations, then contracting with those corporations
rather than employing the workers directly. The majority
rejects plaintiffs’ concern, leaving the issue for Congress to
resolve. Majority Op. at 17. But our sister circuits have not
gone so far. See, e.g., Amos v. Amazon Logistics, Inc., 74
F.4th 591, 597 (4th Cir. 2023) (finding that the plaintiff
corporation did not qualify for the transportation worker
exemption in part because it was “not some legal fiction
existing only to shield Amazon from unwanted liabilities”);
Tillman Transp., LLC v. MI Bus. Inc., --- F.4th ---, 2024 WL
1153970, at *5 (6th Cir. Mar. 18, 2024) (quoting this same
language). Nor would I. It is enough to say that plaintiffs’
hypothetical is not this case: Plaintiffs are not sham
corporations, but bona fide business entities, and their
relationship with Amazon is not an employment
relationship, but a commercial one.
