Southwest Airlines Co. v. Saxon

Issues

Are airline cargo loaders and their supervisors, who load and unload goods from planes that cross international or interstate borders but do not physically transport such goods themselves, “transportation workers” who are exempt from arbitration under Section 1 of the Federal Arbitration Act?

Oral argument:

March 28, 2022

Court below:

United States Court of Appeals for the Seventh Circuit

This case asks the Supreme Court whether an airline ramp supervisor is exempt from arbitration under the Federal Arbitration Act. The Federal Arbitration Act codifies the federal policy for disputes to go through arbitration, exempting workers that engage in interstate commerce. Southwest Airlines argues that Saxon must resolve her dispute through arbitration because Saxon is not an exempt employee under the Act. Saxon argues that her work as a ramp supervisor includes loading and unloading cargo that travels interstate, so she is exempt from mandatory arbitration. The outcome of this case has implications for defining the limits of the Federal Arbitration Act and how courts define a worker operating in interstate commerce.

Questions as Framed for the Court by the Parties

Whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate “transportation workers” exempt from the Federal Arbitration Act.

Facts

Latrice Saxon is a Southwest Airlines (“Southwest”) ramp supervisor that manages the loading and unloading of passenger luggage. Saxon v. Sw. Airlines Co. at 494. As a ramp supervisor, Saxon trains, supervises, and occasionally assists ramp agents with loading and unloading cargo. Id.

Saxon agreed in her employment contract annually that she will arbitrate wage disputes that arise from her employment contract. Id. However, Saxon, believing that Southwest did not adequately compensate ramp supervisors for overtime work, initiated a “putative collective action” under the Fair Labor Standards Act against Southwest. Id. After Saxon filed the lawsuit against her employer, Southwest invoked the Federal Arbitration Act (“FAA”) to compel Saxon to arbitrate the dispute. Id. The FAA shuttles certain disputes to arbitration but exempts disputes involving employees that engage in interstate commerce. Id. Southwest moved to dismiss the suit for improper venue, citing Saxon’s arbitration agreement. Id. at 495.

Saxon argued that, under Section 1 of the FAA, she is exempt from compelled arbitration, because she loads and unloads goods for a transportation company, and therefore she is a member of the “class of workers engaged in foreign or interstate commerce.” Id. at 495. In response, Southwest claimed that Saxon did not fit the requirements of the exemption because Saxon did not “personally” transport the goods across interstate commerce “or manage those who do.” Id. The district court found for Southwest and analogized ramp workers to longshoremen, a person that loads and unloads cargo from ships, who are not exempt from the FAA. Id.

Saxon appealed to the Seventh Circuit Court of Appeals, where she argued that ramp supervisors and cargo loaders fit under the definition of Section 1 because at the time that the FAA was enacted in 1925, cargo loaders who loaded goods for interstate commerce were understood to have engaged in commerce. Id. Saxon asserted that her work is analogous to that of railroad workers and seamen in 1925. Id. In response, Southwest stated that Saxon did not raise this argument in district court and has thus waived her right to raise them on appeal. Id. The Court of Appeals opined that even if Saxon waived her right to bring these arguments on appeal, the Court can forgive this error. Id.

The Court of Appeals first determined whether ramp supervisors “must themselves be engaged in interstate commerce” and did this by determining if Saxon’s work was a central part of her job description. Id. at 496. The Court of Appeals explained that within the FAA exists a residual category of workers that are not railroad workers or seamen. Id. at 495. The Court of Appeals found that “to be engaged in commerce” for the purposes of Section 1 meant to perform work that is like seamen and railroad workers, whose occupations require the transportation of goods in “interstate and foreign commerce.” Id. at 495–496. The Court found that ramp supervisors’ central duty is to load and unload cargo for domestic and international flights. Id. at 497. Because Saxon covers about three shifts a week as a ramp agent, in addition to her duties as a ramp supervisor, the Court of Appeals held that Saxon spends a significant amount of time engaged in interstate commerce and thus is exempt from compulsory arbitration. Id. at 496, 503.

Southwest appealed. The Supreme Court granted certiorari on December 10, 2021.

Analysis

DISTINGUISHING EMPLOYEES “ENGAGED IN FOREIGN OR INTERSTATE COMMERCE”

Petitioner Southwest Airlines (“Southwest”) argues that Section 1 of the Federal Arbitration Act (“FAA”), which exempts “seamen, railroad workers, or any other class of workers engaged in foreign or interstate commerce” from compulsory employment arbitration, applies only to a narrow category of workers. Brief for Petitioner, Southwest Airlines Co. at 15. Southwest contends that the phrase “engaged in foreign or interstate commerce” refers specifically to goods or people traveling across international or state borders. Id. Southwest asserts that this phrase only exempts employees who “participate directly” in the foreign or interstate transference of people or goods. Id. at 19. Southwest notes that the responsibilities of seamen and railroad employees, two classes of workers who are exempt from arbitration, involve the direct transportation of goods or people through foreign or interstate channels. Id. at 28. Southwest argues that airline ramp agents and their supervisors, in contrast, do not “transport” goods or people across state or international borders because they move objects across a short distance from the tarmac to the plane. Id. at 17.

Southwest also contends that the “connection” of airline ramp agents to the transportation process does not justify their exemption from arbitration. Id. at 34. Southwest asserts that ramp agents are not employed to transfer luggage from one state or country to another. Id. at 33. Rather, Southwest explains, airline ramp agents move luggage to and from planes while other employees, such as pilots, transport people and goods across international or state lines. Id. Further, Southwest argues, the supervisors of airline ramp agents also do not participate directly in the transportation of people or goods across borders because their duties are supervisory in nature. Id. at 34. Additionally, Southwest stresses, supervisors cannot rely on the responsibilities of ramp agents to justify exemption because their position operates as an “aid” to the transportation process rather than a contribution to the transportation itself. Id.

Respondent Saxon counters that airline cargo loaders constitute a “class of workers” who, just like seamen and railroad workers, engage in the transportation of goods and people across international and state borders. Brief for Respondent, Latrice Saxon at 12. First, Saxon argues, Section 1 of the FAA emphasizes that railroad employees and seamen are “necessary to the free flow of goods” via rail or sea, respectively. Id. Airline employees, Saxon exclaims, are equally essential to the transportation of goods and people via plane. Id. Thus, Saxon asserts, just as the FAA considers rail and ship cargo loaders to be railroad employees and seamen, so too does it deem airline cargo loaders to be airline employees. Id. Saxon also contends that Southwest’s characterization of this class of workers as “cargo loaders” and “ramp agent supervisors” instead of “airline employees” is erroneous. Id. at 18. Saxon argues that because the classes of “railroad employees” and “seamen” are defined by their respective industries, such a comparison is also warranted for airline employees. Id. Furthermore, Saxon notes that classes of railroad employees and seamen also encompass workers with the job title “ramp-agent supervisor,” and that ramp agent supervisors who are employed by airlines are no different. Id.

Saxon also contends that even if the appropriate class is “cargo loaders” as opposed to “airline employees,” these workers still engage in foreign and interstate commerce. Id. at 18. Saxon argues that the statutory text surrounding the phrase “engaged in commerce” demonstrates that the FAA itself considers loading and unloading goods to be a “matter in foreign commerce.” Id. at 19. Saxon explains that the types of maritime activities that exempt seamen from arbitration under the FAA include “agreements relating to wharfage,” which is the money compensated to dock-owners for loading and unloading goods to and from a ship. Id. Accordingly, Saxon urges, airline cargo loaders are no different from seamen who regularly load and unload ships or railroad employees who routinely load and unload trains. Id. at 19–20.

INTERPRETING CONGRESSIONAL INTENT

Southwest asserts that Congress intended for courts to interpret the arbitration exemptions in Section 1 of the FAA more narrowly than other sections of the Act that contain broader coverage, such as Section 2. Brief for Petitioner at 15. In support, Southwest cites to the Supreme Court’s decision in Circuit City Stores, Inc. v. Adams, which characterizes Section 2 of the FAA as “expansive” because it uses the phrase “involving commerce . . . to regulate to the full extent [of Congress’] commerce power.” Id. Southwest urges the Court to construe Section 1 more narrowly, in contrast, as it requires that “specific categories of workers” must be “engaged in foreign or interstate commerce.” Id. at 16. Further, Southwest notes that Congress intentionally included the words “foreign or interstate” right before “commerce” in Section 1, even though Congress had already defined “commerce” as involving international or interstate travel. Id. Thus, Southwest argues that courts should assume that when Congress deliberately incorporates certain language in one section of a statute that it excludes in another section of the same act, such a choice in language is made intentionally. Id.

Southwest further contends that Congress drafted the FAA with the goal of promoting arbitration as a legitimate alternative to litigation. Id. at 16. Congressional intent, Southwest argues, reflects the premise that arbitration agreements should be honored in the same manner as any other contract. Id. at 31. Southwest notes that Circuit City describes the FAA’s purpose as combatting “judicial hostility” to the enforcement of arbitration agreements and avoiding unnecessary litigation. Id. Further, Southwest argues that congressional intent emphasizes the numerous benefits of arbitration including reduction of costs for all parties involved in a lawsuit, increased efficiency in dispute resolution, decreased court burdens, and ability of all parties to submit disagreements to expert adjudicators. Id. Southwest asserts that the Court’s decision in Circuit City demonstrates that these advantages of arbitration are especially relevant to employment agreements. Id. Accordingly, Southwest explains, Congress utilized its powers under the Commerce Clause to the fullest extent possible when drafting the FAA, while maintaining a very narrow exemption under Section 1 only for specific types of transportation workers. Id.

Saxon counters that the responsibilities of all transportation workers play an integral role in international and interstate commerce. Brief of Respondent at 21. Further, Saxon argues that this principle was long established prior to Congress’s enactment of the FAA. Id. Saxon notes that when Congress enacted the Federal Employers’ Liability Act (“FELA”) seventeen years earlier, it implemented nearly the exact same language adopted in the FAA. Id. Saxon explains that the FELA compelled railroads to compensate employees who were wounded while “engaging in commerce” if both the railroad employer and the employee were engaging in commerce at the time of the employee’s injury. Id. Saxon asserts that when deciphering the FELA, the Supreme Court consistently found railroad employees were “engaged in commerce” if their duties were so closely intertwined with interstate transportation so as to essentially become a part of it. Id. at 22. Therefore, Saxon contends, this precedent should likewise apply to cargo loaders who perform tasks. Id.

Saxon further argues that decades of Supreme Court precedent inform congressional intent relating to the FAA. Id. In particular, Saxon asserts, the Court has found that loading and unloading is “commerce” in several cases including Gloucester Ferry Co. v. Commonwealth of Pennsylvania and Crutcher v. Commonwealth of Kentucky. Id. at 22–23. Saxon explains that when a congressional statute adopts particular language that has previously been defined by the Supreme Court, Congress clearly intended that the phrase adopt this established meaning. Id. at 23. Therefore, Saxon asserts that Congress intended for Section 1’s arbitration exemption to extend to all airline employees, including cargo loaders and their supervisors, who perform tasks involved in commerce, such as loading and unloading. Id.

Discussion

IMPACT ON OTHER TRANSPORTATION WORKERS IN INTERSTATE COMMERCE

The Chamber of Commerce and the National Association of Manufacturers (“CoC”), in support of Southwest Airlines, state that if intrastate workers were considered in the same class of seamen and longshoremen, issues would arise for employees, like rideshare drivers and local workers. Brief of Amici Curiae the Chamber Of Commerce of the United States of America and the National Association Of Manufacturers, in Support of Petitioners at 14. CoC argues that including a broad class of intrastate workers would force businesses and individuals to involve themselves in costly and time-consuming litigation. Id. at 22–23. CoC contends that ruling for Saxon would create issues over what class of workers airline lounge attendants, airline baggage handlers, mechanics, and other airport workers belong to. Id. at 24. Further, the Airlines for America (“AA”), in support of Southwest Airlines, argues that if the Court were to find for Saxon, a “regulatory gap” would emerge which would create differential treatment based on an employee’s job title. Brief of Amicus Curiae Airlines for America, in Support of Petitioner at 14.

Public Justice, in support of Saxon, argues that if the Court were to find for Southwest, then many workers meaningfully engaged in foreign commerce would be forced to arbitrate their disputes. Brief of Amicus Curiae Public Justice, in Support of Respondent at 18. In addition, Public Justice claims that a domestic worker’s ability to litigate, rather than arbitrate, would depend on the route they took to transport goods, leading to “absurd and arbitrary results.” Id. at 18–19. Public Justice offers the example of a delivery driver assigned to ship goods flown from Los Angeles, California, that landed at an airport in Blountville, Tennessee. Id. Public Justice claims that Southwest’s test would look at the roads the delivery driver used and whether they were all in Tennessee, or whether the delivery driver “cross[ed] State Street in downtown Bristol to the Virginia side of town,” to determine whether the delivery driver was engaged in interstate commerce. Id. Moreover, Public Justice points to the numerous U.S. cities that straddle two states. Id. at 19. Public Justice asserts that Southwest’s analysis would disregard the fact that the goods had flown roughly 2,300 miles for delivery, crossing seven state lines in the air. Id. at 18.

EXPANDING THE DEFINITION OF INTERSTATE WORKERS

Amazon, an e-commerce company, in support of Southwest Airlines, explains that if a broad exception to the FAA were created, then courts would have to make decisions on whether a person is more of an intrastate or interstate driver, thus affecting local and national workers and companies that favor arbitration. Brief of Amici Curiae Amazon, in Support of Petitioner at 12–13. In addition, Amazon contends that courts would have to spend considerable time determining whether venue is proper to consider the suit, rather than the merits of the case. Id. at 13. Similarly, Lyft, a rideshare company, argues that interstate workers should be limited to the FAA’s definition of seamen and railroad workers, because seamen and railroad workers necessarily cross state and international borders to transport goods, whereas other transportation workers—such as rideshare drivers—may not. Brief of Amici Curiae Lyft, in Support of Petitioner at 5–6, 8–10.

By contrast, the American Association for Justice (“AAJ”), in support of Saxon, explains that this Court should embrace a broader view of which classes of transportation workers are exempt from arbitration by looking at the “federal interpretation” of the definition of seamen and railroad employees to. Brief of Amici Curiae American Association for Justice, in Support of Respondent at 20. AAJ contends that this approach is consistent with the predominant and broad understanding of the term “railroad employees” when the FAA was passed. Id. AAJ points to the Erdman Act, passed in 1898, where Congress defined railroad employees as “all persons actually engaged in any capacity in train operation or train service of any description.” Id. at 20–21.