Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Or.: Federal court denies arbitration but strikes class claims in Flowers Foods driver case, (Feb 14, 2025)

By George Basharis, J.D.

An Oregon federal court denied Flowers Foods’ bid to compel arbitration of a delivery driver’s misclassification claims while still enforcing a class action waiver.

The federal court in Eugene has ruled that a delivery driver for Flowers Foods can pursue his misclassification claims in court rather than arbitration, while still being barred from bringing those claims as a class action. The U.S. District Court for the District of Oregon held that the plaintiff, as a “last-mile” delivery driver, falls within the transportation worker exception to the Federal Arbitration Act (FAA), making his arbitration agreement unenforceable. However, the court found that a separate class action waiver in his contract remained valid and enforceable, requiring him to pursue his claims individually (Porteous v. Flowers Foods, Inc., No. 6:23-cv-01840-AA (D. Or. Feb. 12, 2025)).

The court’s analysis centered on whether the plaintiff, who delivered baked goods for Flowers Foods as an independent contractor, qualifies for the transportation worker exception to the FAA. This exemption covers “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from the FAA’s coverage.

The court found that despite making only intrastate deliveries, the driver was part of an unbroken stream of interstate commerce as a last-mile delivery driver. The court relied heavily on a recent Tenth Circuit decision, which involved nearly identical facts and similarly concluded the transportation worker exception applied. The court emphasized that while the driver made only local deliveries within Oregon, he was picking up goods that had been manufactured out-of-state and shipped to a warehouse in Bend specifically for distribution to retail customers. The court noted that the majority of products plaintiff delivered were produced outside Oregon in response to specific orders.

Flowers Foods attempted to characterize the plaintiff’s role as analogous to rideshare and food-delivery drivers, whom the Ninth Circuit has found to be “unaffiliated, independent participants” rather than integral parts of interstate commerce. The court rejected this comparison, pointing to the significant control Flowers exercised over the driver’s operations through the distributor agreement. This control included requirements for handling and delivering goods, obligations to use “best efforts” to maximize sales, and various other operational restrictions.

The court found particularly telling that Flowers maintained extensive control over the plaintiff’s relationship with retail stores, including negotiating prices and controlling product placement. This degree of control, combined with evidence that the retail stores rather than the plaintiff were Flowers’ true customers, demonstrated that the plaintiff functioned as a last-mile delivery driver in an integrated interstate distribution chain rather than an independent local merchant.

Personal guaranty creates employment contract. Flowers Foods also raised a defense based on the corporate structure of the relationship, arguing that because the driver contracted through his company CPORT Distributing, Inc., the distributor agreement was a commercial contract rather than an employment agreement covered by the FAA’s transportation worker exception. The court rejected this argument, finding that despite the corporate form, the agreement still constituted a “contract of employment” under the FAA.

Critical to this finding was the driver’s personal guaranty, which made him individually bound to ensure CPORT’s performance of all terms and obligations under the distributor agreement, including the arbitration provisions. The court found that this personal obligation distinguished the case from a recent Ninth Circuit decision involving Amazon delivery contractors. While the Ninth Circuit in that case held that business entities contracting to provide delivery services cannot qualify for the transportation worker exception, the court here emphasized that the driver in the case, unlike the corporate plaintiffs in that case, brought claims in his individual capacity and was personally bound through the guaranty to perform the delivery work. The court found particularly significant that the distributor agreement gave Flowers Foods substantial control over business operations that, through the personal guaranty, directly bound the plaintiff as an individual.

State law cannot save arbitration agreement. The court also rejected Flowers Foods’ fallback argument that Oregon state arbitration law could still compel arbitration even if the FAA exception applied. Looking to the arbitration agreement's plain language, which specified it would be governed by the FAA and Oregon law only “to the extent Oregon law is not inconsistent with the FAA,” the court found the absence of a transportation worker exception in Oregon law created an inconsistency barring its application.

Class claims still barred. Despite declining to compel arbitration, the court granted Flowers Foods’ motion to strike the class and collective action allegations from the complaint. The court found the class action waiver was conceptually distinct from and severable from the arbitration provision.

Following precedent holding that bringing FLSA collective actions is a procedural rather than substantive right, the court concluded the explicit waiver of class proceedings “in court or arbitration” remained enforceable even though arbitration could not be compelled. The plaintiff must now proceed with his misclassification claims on an individual basis.

U.S. Supreme court recently rejected industry-based analysis. The district court’s ruling comes after the U.S. Supreme Court last spring unanimously held that delivery drivers for bakery companies can qualify for the FAA’s transportation worker exception regardless of whether they work in the transportation industry (Bissonnette v. LePage Bakeries Park St., LLC, April 12, 2024, Roberts, J.). Writing for the Court, Chief Justice Roberts rejected attempts to limit the exception based on employer industry, focusing instead on whether workers play a direct and necessary role in the free flow of goods across borders. The Oregon court’s analysis aligns with this worker-focused rather than industry-focused approach to the transportation worker exception.

The Case is No. 6:23-cv-01840-AA.

Judge: Aiken, A.

Attorneys: Alan J. Leiman (Leiman Law, P.C.) for Clint Porteous. Elizabeth A. Falcone (Ogletree Deakins) for Flowers Foods, Inc.

Companies: Flowers Foods, Inc.

Cases: FranchisingDistribution OregonNews GCNNews