A hallmark of arbitration law is that in order to compel parties to arbitration, there must be a valid agreement to arbitrate the disputed claims. That usually involves two separate questions: (1) is the arbitration agreement valid, i.e., did the parties agree to arbitration and are there any state-law defenses (such as fraud or unconscionability) that render the agreement invalid; and (2) if the agreement is valid, does it encompass the parties' dispute? The second question is sometimes neglected or ignored by parties who seek to compel arbitration.
In a recent Ninth Circuit opinion applying California's arbitration law, the question of scope took center stage. The case involves allegations by delivery drivers against Amazon that the company illegally wiretapped and monitored their communications through Facebook groups. Jackson v. Amazon.com, Inc., 2013 WL 2997031 (9th Cir. 2023). While Amazon had valid arbitration agreements with its drivers, the Ninth Circuit affirmed the district court's denial of Amazon's motion to compel arbitration because the claims were not within the scope of the agreement. Id. at *9-10.
The Jackson decision is a good reminder for litigants to also carefully consider the scope of the arbitration clauses in their agreement before moving to compel arbitration. But Jackson also raises several interesting questions about when a "broad" arbitration clause can and cannot force claims into arbitration under California law.
"Broad" v. "Narrow" Arbitration Clauses
California courts recognize that the State has a "strong public policy" favoring arbitration and that "any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration." Aanderud v. Superior Court, 13 Cal. App. 5th 880, 890 (2017). "There is no public policy, however, that favors the arbitration of disputes the parties did not agree to arbitrate." Id. Thus, to compel arbitration, the trial court must also consider whether the parties agreed to arbitrate the specific dispute at issue, which turns on whether the dispute is within the scope of the agreement.
California law provides that determining if a dispute is within the scope of the agreement can turn on whether the arbitration clause is "broad" or "narrow" in scope. A "broad" clause includes language such as "any claim arising from or related to this agreement" or any claims made "in connection with," the agreement. Such a broad clause is usually interpreted to apply to "extracontractual disputes between the parties so long as they have their roots in the relationship between the parties which was created by the contract." Howard v. Goldbloom, 30 Cal. App. 5th 659, 663 (2018).
In contrast, a "narrow" clause is one where the agreement provides that the parties must arbitrate claims "arising from" or "arising out of" the agreement, but lacking language such as "related to," or made "in connection with," the agreement. Narrow clauses generally will only require arbitration of claims relating to the interpretation and performance of the actual contract containing the arbitration clause. Id.
Jackson v. Amazon.com, Inc.
Jackson involved a dispute between Amazon, and individuals employed by Amazon as drivers for its delivery program, Amazon Flex. The Amazon Flex delivery drivers deliver food and grocery orders from Amazon marketplaces.
Drickey Jackson signed up to be a delivery driver for Amazon Flex in 2016, accepting the Terms of Service, which contain an arbitration clause. The arbitration clause covers: "any dispute or claim ... arising out of or relating in any way to this Agreement, including ... participation in the program or ... performance of services." Thus, under California law, the arbitration clause would be considered broad enough to reach beyond enforcement of the employment contract ("any claim ... relating in any way to this Agreement").
In 2021, Jackson filed a class action lawsuit against Amazon in district court, alleging the company illegally wiretapped the Amazon Flex drivers' communications and invaded their privacy by monitoring closed Facebook groups between the drivers and others. Jackson alleged that the Facebook groups were often forums where drivers would communicate their mutual interests on employment issues, such as "planned strikes or protests, pay, benefits, deliveries, driving and warehouse conditions, [and] unionizing efforts."
Jackson's complaint did not allege any violations of the employment contract or the Terms of Service, but instead asserted causes of action for violations of state and federal law, including California's Invasion of Privacy Act (Cal. Penal Code §§ 631, 635), invasion of privacy under California's Constitution, the Federal Wiretap Act (18 U.S.C. §§ 2510, et seq.) and the Stored Communications Act (18 U.S.C. §§ 2701, et seq.). Jackson's complaint sought to represent a class of Amazon Flex drivers in the United States who were members of closed Facebook groups who had their communications intercepted by Amazon without consent.
Amazon moved to compel arbitration under the California Arbitration Act and California law. The district court found the 2016 Terms of Service valid (i.e., enforceable). But the district court further found that the claims Jackson asserted against Amazon were unrelated to the parties' performance of their agreement and therefore fell outside of the scope of the arbitration clause.
The Ninth Circuit affirmed. The Court of Appeals agreed that the 2016 Terms of Service applied, and that Jackson's claims were outside the scope of the arbitration clause. Interestingly, the court acknowledged that the arbitration clause is "broad," but held that "Jackson's claims involve employer misconduct wholly unrelated to the parties' agreement." It reasoned that "the controversy in this case is ultimately not about any characteristics or conduct of class members [as Amazon Flex drivers], but whether Amazon is indeed liable for wiretapping and invasion of privacy ... This dispute therefore does not touch on any matters related to the contract that would fall within the arbitration clause."
To justify the holding despite the broad arbitration clause, the Ninth Circuit appeared to place significant weight on the allegations that the monitoring was conducted in private Facebook groups - thus, spouses and other people interested in the subject matter could have asserted the same claims against Amazon, despite the fact they had no employment or contractual relationship with it.
Judge Graber issued a concurring and dissenting opinion. Unlike the majority, she concluded the asserted claims fell within the scope of the agreement. Judge Graber pointed out that the majority conceded the clause is "broad," meaning it would apply to "all possible claims related to the contract." Amazon's alleged actions only occurred because of the employment contract it had with its Flex Drivers, and it "allegedly spied on Plaintiff solely because of [the drivers'] independent contractor relationship with Defendant in order to preempt, or combat work-related activities" by the drivers. Thus, the dissent concluded that the dispute between Amazon and its drivers "belongs in arbitration."
Jackson serves as a reminder that whatever the nature of a dispute, it must be grounded in the terms the parties agreed to in the arbitration agreement. As obvious as the premise may seem, those seeking to enforce an arbitration clause must examine whether the claims actually fall within the scope of the agreement. Jackson demonstrates that even in the case of a broad provision, not every claim will necessarily be covered by it.
One might conclude that the unusual facts of the case drove the majority's holding. Sure, the clause may be "broad," but the allegations involved spying and wiretapping of private conversations. And Amazon's alleged actions were not conducted across an Amazon-controlled medium, as in other privacy cases involving Amazon products (such as the lawsuits alleging their Alexa devices illegally record their customers' conversations). Instead, the alleged spying here was done through private Facebook groups. If arbitration had been compelled here, when would a "broad" arbitration clause ever fail to be enforced? Is there something about spying that by its nature, could not be said to be part of the parties' intent in entering into the arbitration agreement?
But which came first, the employment or the alleged spying? As the dissent points out, the monitoring was seeking to intercept work-related activities, such as conversations about union activities and strikes. Thus, even if done privately and across a non-Amazon medium, how can one conclude there is no relation to the drivers' employment? Wouldn't that issue at least "touch matters" of the employment contract? Wouldn't that mean this is an "extracontractual dispute" that has its "roots in the relationship between the parties which was created by the contract?" Howard, 30 Cal. App. 5th at 663.
Is Jackson an arbitrary arbitration decision or just an outlier due to its unusual facts? Does California law place an invisible line somewhere, such that extreme and unusual conduct trumps broad arbitration clauses? Did the majority make a policy-driven decision? Or did the court merely find that despite the breadth the parties agreed to in the provision, the Amazon drivers could not be expected to have manifested an intent to arbitrate these kinds of claims? If determining the scope of arbitration clauses is truly an issue of contract interpretation, did the majority or the dissent get it right? And finally, what happens when some of the claims fall well within the scope of the agreement, and some don't? Jackson raises many doctrinal questions. Jackson also shows that at least in extreme instances, determining whether a dispute is encompassed by a broad arbitration clause may require more than just looking for the magic words.
Arbitration Angle is a bi-monthly column presented by Hanson Bridgett's Appellate Group.