First Circuit Court of Appeals Rules on Two Questions of First Impression Regarding the Federal Arbitration Act

On May 12, 2017, in Oliveira v. New Prime, Inc., a panel of the First Circuit Court of Appeals ruled on two questions of first impression in the circuit regarding the Federal Arbitration Act (“FAA” or “Act”) First, when a federal district court is confronted with a motion to compel arbitration under the FAA, and the parties have delegated questions of arbitrability to the arbitrator, must the court first determine whether the FAA applies or must it grant the motion and let the arbitrator determine the applicability of the FAA? Second, does Section 1 of the FAA (which exempts contracts of employment of transportation workers from the Act’s coverage (the “§ 1 exemption”)) apply to a transportation-worker agreement that establishes or purports to establish an independent-contractor relationship?

As to the first question, the First Circuit panel held unanimously that the applicability of the FAA is a threshold question for the district court to determine before compelling arbitration under the Act. In so holding, the First Circuit joined the Ninth Circuit Court of Appeals, which previously had reached the same conclusion when faced with the same question. The Eighth Circuit Court of Appeals, however, has held that the arbitrator (and not a district court) has the power to determine his or her own jurisdiction where the parties agreed to allow the arbitrator to determine threshold questions of arbitrability. The Supreme Court of the United States will need to step in in order to resolve this circuit split.

With regard to the second question, two of the three judges on the panel held that Section 1 does apply and that the parties’ contract was exempt from the FAA. In so holding, the First Circuit panel reached the opposite conclusion from most district courts nationwide that have considered the issue.