By Linda Chiem
Law360, New York (February 27, 2017, 6:28 PM EST) — An Arizona federal judge agreed Friday to hit pause on a proposed class action alleging Swift Transportation Co. Inc. misclassified its drivers as independent contractors until the Ninth Circuit hears the trucking giant’s challenge to a recent ruling that its drivers’ contractor agreements were contracts of employment.
Senior U.S. District Judge John W. Sedwick granted Swift’s request to stay all proceedings in the long-running dispute, including a pending motion to certify the class, until the Ninth Circuit considers the judge’s Jan. 5 denial of the trucking company’s motion to compel arbitration.
Swift is challenging Judge Sedwick’s decision to weigh the terms of the contracts between the five truck driver plaintiffs and Swift, as well as the terms of the lease agreements between the plaintiffs and Interstate Equipment Leasing — Swift’s equipment and truck leasing affiliate — in concluding that Swift’s drivers’ contractor agreements were contracts of employment, making them exempt from the Federal Arbitration Act.
“Here, while the court believes its conclusion is correct, it recognizes that the appeal presents serious legal questions as to how a court should properly determine whether a contract of employment existed,” Judge Sedwick said. “Indeed, the Ninth Circuit stated that the issue was one of first impression.”
Judge Sedwick in January ruled that the plaintiffs had contracts of employment making them exempt from the Federal Arbitration Act and the Arizona Arbitration Act, and rejected Swift’s bid to force the fight into arbitration. The judge weighed factors such as the extent of Swift’s control over the drivers, the payment structure, opportunity for profit and loss, autonomy, duration of relationship, and type of work to be done by the drivers to determine an employment relationship existed.
In a separate order also issued Friday, Judge Sedwick denied the plaintiffs’ request for a temporary restraining order and preliminary injunction blocking Swift from requiring current contract drivers, known as lease operators, to sign a new independent contractor operating agreement before March 1. The plaintiffs had argued that some of the language in that new agreement was problematic, particularly two new provisions the company inserted that set forth payment and indemnification obligations in the event of a “reclassification decision” in this case.
They claimed that the two challenged provisions in the new agreement are misleading and confusing to current lease operators because they suggest that participating in the instant class action could mean that they’d end up having to pay damages and attorneys’ fees, according to the order. That kind of misunderstanding potentially undermines the plaintiffs’ prospects for getting putative class members to participate, the drivers claimed.
The judge agreed that the provisions were misleading and confusing, and required Swift to correct some of the language in a notice it was sending out to those contract drivers.
“Here, an employee who signs an agreement does not understand the legal subtleties that could affect how those provisions are applied after the resolution of this class action and may well believe that he now has to avoid participation in the case or risk financial harm,” the judge said in the order.
The judge said two paragraphs in the new agreement seemed to suggest that an improper method of damage calculation and fee shifting could lead to class members owing Swift money regardless of the outcome of this litigation. As such, the judge ordered Swift to send out a corrective notice explaining that the payment obligations and indemnification provisions will not apply to the calculation of remedies and attorneys’ fees that may be awarded in this case.
The judge declined to issue an injunction blocking Swift from engaging in future contact with putative class members regarding matters in this suit, as the plaintiffs had requested, saying it was “unnecessarily restrictive,” according to the order.
Swift is now hoping for the Ninth Circuit to back its push for the dispute, which dates back to 2009, to be heard in arbitration. Swift is the largest truckload motor carrier in North America with more than 45 terminals in the U.S. and Mexico. It has maintained that its drivers are properly classified as independent contractors, and their contractor agreements contained a clear provision that any disputes over the agreements would be taken up in arbitration.
The district court had previously granted the company’s arbitration request in 2010, prompting the drivers to appeal to the Ninth Circuit. That earlier appeal resulted in a split decision last year, with the panel sending the dispute back down to the district court to have it first figure out whether the drivers’ contractor agreements constituted contracts of employment before deciding whether the fight was even exempted from arbitration under the FAA.
Counsel or representatives for the parties were not immediately available for comment on Monday.
The plaintiffs are represented by Dan Getman of Getman & Sweeney PLLC, attorney Edward Tuddenham, and Susan Martin, Daniel Bonnett and Jennifer Kroll of Martin & Bonnett PLLC.
Swift Transportation and the other defendants are represented by Paul S. Cowie, Kevin M. Cloutier, Robert Mussig and Anna M. Stancu of Sheppard Mullin Richter & Hampton LLP.
The case is Virginia Van Dusen et al v. Swift Transportation Co., Inc. et al, case number 2:10-cv-00899, in the U.S. District Court of Arizona.