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The latest Case Note from Partners Braden Core and Prasad Sharma focuses on the rise in popularity of arbitration agreements that prohibit class actions: One emerging tactic the plaintiff-side bar has been using is the so-called “mass arbitration” strategy, wherein the plaintiff’s attorney enrolls a larger number of “clients” and then brings a series of individual arbitration cases against the same defendant. The goal is to drive up the arbitration-related fees and gain leverage over the defendant in that way, a maneuver made possible by the fact that many arbitration agreements are drafted to require the business to shoulder most (if not all) of the expenses of the arbitration. Samsung was recently targeted by this tactic. One plaintiff-side law firm filed 50,000 individual arbitrations against Samsung with the American Arbitration Association (AAA). Samsung’s share of the initial filing fees alone was $4,125,000. Samsung balked and refused to pay the fees. The plaintiffs then filed a motion to compel arbitration in court, attempting to force Samsung to arbitrate over 14,000 claims individually. In 𝑊𝑎𝑙𝑙𝑟𝑖𝑐ℎ 𝑣. 𝑆𝑎𝑚𝑠𝑢𝑛𝑔 𝐸𝑙𝑒𝑐𝑡𝑟𝑜𝑛𝑖𝑐𝑠 𝐴𝑚𝑒𝑟𝑖𝑐𝑎, 𝐼𝑛𝑐., the Seventh Circuit rejected this effort because the plaintiffs’ attorneys failed to meet their burden of proving that each of their “clients” actually entered into an arbitration agreement with Samsung. For transportation providers that use arbitration, the impact of 𝑆𝑎𝑚𝑠𝑢𝑛𝑔 may be limited. The case was decided on the basis of the pleading standards under the Federal Arbitration Act, and many drivers and other transportation workers engaged in interstate commerce are exempt from that law. The pleading standard to compel arbitration under state arbitration acts may vary. However, the Court’s insistence that the plaintiff prove the existence of an agreement to arbitrate should generally apply under state arbitration law. In addition, the holding only applies in the Seventh Circuit (which includes Indiana, Illinois, and Wisconsin). In cases within the Seventh Circuit where the parties have agreed to have AAA serve as the arbitration administrator, 𝑆𝑎𝑚𝑠𝑢𝑛𝑔 makes the “mass arbitration” tactic less attractive to plaintiff-side attorneys, as they will be required to obtain evidence from each “client” confirming that they, in fact, had an arbitration agreement with the defendant. And it makes it more likely that defendants facing effective “mass arbitration” maneuvers will simply refuse to pay AAA’s fees and force the plaintiffs to court, where the procedural protections attending class and collective actions make the defense of such claims preferable to the prospect of thousands of individual arbitration hearings. More details on 𝑆𝑎𝑚𝑠𝑢𝑛𝑔 and its potential impact: https://lnkd.in/gKwCHQcv

Earlier today, the U.S. District Court for the Northern District of Texas granted a motion for a preliminary injunction of the Federal Trade Commission’s new rule prohibiting noncompete clauses in the employment context (the “FTC Ban”) with respect to the Plaintiff and Plaintiff-Intervenors in that case only. It declined to expand the injunction nationwide. The Court additionally committed to ruling on the ultimate merits of the case on or before August 30, 2024. This ruling means the anticipated September 4, 2024, implementation date of the FTC Ban will stand for all other entities. In other words, the following restrictions will apply starting on September 4, 2024: -- Noncompete agreements entered into on or after the effective date – all such agreements will be unenforceable, regardless of the position held or the salary earned by the worker. -- All existing noncompete agreements – i.e. those entered into prior to the Final Rule’s effective date – all such agreements will be unenforceable with the exception of noncompete agreements entered into with “senior executives”. The rule defines this term to refer to workers earning more than $151,164 annually who are in a “policy-making position.” There is still a possibility that another court will entertain a different motion for preliminary injunction before September 4 or that this court will enter a final, nationwide injunction against enforcement by August 30. At the very least, we anticipate significant, continuing legal battles over the Federal Trade Commission’s statutory authority to promulgate this rule, as well as the very broad scope of the FTC Ban itself. Although the FTC does not have authority over certain common carriers engaged in common carrier activities, with the sunset of the ICC and the elimination of the distinction between common carrier and contract carrier authorities issued by the U.S. Department of Transportation, the extent to which the FTC Ban applies to motor carriers is unclear. The Firm is continuing to monitor these developments closely. We encourage clients to reach out for further guidance. For more information, please contact David Robinson, A. Jack Finklea, Don Vogel, or Alaina Hawley. https://lnkd.in/gWtaWFSj

Arbitration Case Note from Scopelitis Partners Braden Core and Prasad Sharma: Courts throughout the country have been grappling with the scope of the “transportation worker” exemption under the Federal Arbitration Act (FAA). The FAA embodies a pro-arbitration policy and can promote the speedy and efficient resolution of disputes on an individual basis. Therefore, arbitration agreements often include provisions stating that the agreement is governed by the FAA. For arbitration agreements with transportation workers, however, this may be insufficient to ensure a given dispute actually ends up in arbitration. 𝑅𝑜𝑑𝑔𝑒𝑟𝑠-𝑅𝑜𝑢𝑧𝑖𝑒𝑟 𝑣. 𝐴𝑚𝑒𝑟. 𝑄𝑢𝑒𝑒𝑛 𝑆𝑡𝑒𝑎𝑚𝑏𝑜𝑎𝑡 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑜., 𝐿𝐿𝐶, No. 23-1812 (7th Cir. Jun. 18, 2024), a case recently decided by the United States Court of Appeals for the Seventh Circuit, highlights the importance of the Scopelitis Law Firm’s long-standing guidance that clients designate a state arbitration law as a “fallback” in the event the FAA is found not to apply. The plaintiff worked as a bartender on a steamboat. She was deemed a “seaman” and thus exempt from the FAA as a “transportation worker.” The arbitration agreement she signed provided that it was governed by the FAA. Oftentimes, when a court determines an arbitration agreement falls outside the scope of the FAA, it will look to see if arbitration is nonetheless available under a state’s arbitration laws. Instead, the Seventh Circuit in Rodgers-Rouzier viewed the parties’ selection of the FAA as a “choice of law” provision and held that under Indiana’s “choice of law” principles, only the FAA (and not state arbitration law) could apply. Because the FAA did not apply, as the plaintiff was exempt, her dispute must be litigated in court, not arbitration. The Seventh Circuit’s decision in 𝑅𝑜𝑑𝑔𝑒𝑟𝑠-𝑅𝑜𝑢𝑧𝑖𝑒𝑟 is a useful reminder of the importance of carefully drafting arbitration agreements for those in the transportation industry. While there are a number of considerations depending on the state, it would be prudent to consider designating a state arbitration statute to govern the agreement in the event the FAA does not apply. https://lnkd.in/g2d5DYsi

Join Scopelitis Partners Greg Feary, Kelli Block, Prasad Sharma, and Shannon Cohen at ATA's upcoming #ATALegalForum24 as they discuss IC developments including the new Department of Labor Independent Contractor rule and what the latest California developments might mean for the rest of the country.

State and local jurisdictions continue to enact sweeping pay transparency statutes – usually focused on equality in wages and detailed informational requirements for job postings. Failure to comply with these requirements can lead to substantial financial penalties. Most notably, there has been a recent increase in class action cases filed against logistics companies based on Washington’s Equal Pay and Opportunities Act. Under that Act, Washington employers must make certain disclosures in job postings. Specifically, each job posting for each job opening must disclose the wage scale or salary range for the position, along with a general description of all of the benefits and compensation that will be offered to the applicant. The Act also provides statutory penalties of up to $5,000 for violations of the Act (per applicant). Other jurisdictions, such as California, Illinois, and New York, have or intend to institute similar wage transparency laws. Employers are urged to immediately review their compliance efforts in this area. If you have questions about Washington’s law or need assistance reviewing or revising your postings to make sure you are complying with the Washington Equal Pay and Opportunities Act and other wage transparency acts, you can contact Partners Adam Smedstad, David Robinson, Kelli Block, and Charles Andrewscavage. https://lnkd.in/gjBanMru

Scopelitis is honored to be recognized in Chambers and Partners 2024 USA Guide, in which law firms and individual lawyers are researched, assessed, and ranked on qualities including technical legal ability, professional conduct, client service, commercial astuteness, diligence, and commitment. Scopelitis Partners Greg Feary and Prasad Sharma were recognized for their work in Transportation, with guide reviews including, “Greg Feary is renowned for his long-established regulatory transportation practice. He provides advice to trucking and logistics providers on a range of matters, including insurance audits, legislative issues and sector-specific employment law,” and “Prasad Sharma's former experience as general counsel for [the American Trucking Associations] means that he is well placed to assist clients on transportation and logistics matters.” https://lnkd.in/gf8ZQscy . . . . . #chambersandpartners #lawfirms #lawyers #legalrankings #chambersusa

The DOJ issued an NPRM that proposed the reclassification of marijuana from a Schedule I to a Schedule III controlled substance under the Controlled Substances Act. The Notice is silent on what impact, if any, the reclassification of marijuana as a Schedule III drug will have on federally mandated drug testing for transportation workers. The DOJ’s notice follows from the recommendation of HHS in August 2023 to reclassify marijuana as a Schedule III controlled substance, given its medical benefits. Schedule I controlled substances include drugs with no currently accepted medical use and a high potential for abuse. Schedule III controlled substances, on the other hand, include drugs having a moderate to low potential for physical and psychological dependence and can be prescribed. Marijuana has been classified as a Schedule I drug since 1970. Drivers who operate commercial motor vehicles that require a commercial driver’s license are subject to the U.S. Department of Transportation’s Drug and Alcohol Regulations in 49 C.F.R. Parts 40 and 382. The HHS’s Mandatory Guidelines for Federal Workplace Drug Testing Programs govern the DOT’s drug and alcohol testing requirements. Currently, the Guidelines state that a “Federal agency… [m]ust ensure that each [urine] specimen is tested for marijuana.” 88 Fed. Reg. 70,768, 70,780 (Oct. 12, 2023). However, it is unclear whether the HHS will amend the Guidelines, which otherwise state that regulated employers may only test for Schedule I or II drugs. The DOJ’s notice comes against the backdrop of multiple states enacting laws that prohibit employers from taking adverse action against employees for off-duty use, even for safety-sensitive workers. For example, in California, employers may only terminate or discipline employees who test positive for having psychoactive cannabis metabolites in their system while on the job. In these states, employees terminated for off-duty marijuana use can bring wrongful termination claims and recover damages. Courts have not decided whether the DOT Drug and Alcohol Regulations preempt these types of state laws, especially considering the regulations allow carriers to send drivers to a substance abuse professional program instead of terminating the driver’s employment. Reclassifying marijuana as a Schedule III drug could create further uncertainty. With respect to DOT-required drug testing, the DOJ’s notice raises more questions than it answers. If the DOJ eventually reclassifies marijuana to a Schedule III drug, the DOT and the Federal Motor Carrier Safety Administration will need to provide guidance about the impact of the reclassification on motor carriers. Comments to the NPRM are due July 22. Contact Timothy Wiseman or Chris Eckhart, who wrote this article for Truckload Carriers Association (TCA)'s Legal Comment series, to discuss. https://lnkd.in/gkXcD2iT

The Corporate Transparency Act (“CTA”) requires certain companies not otherwise exempt from the CTA (“Reporting Companies”) to submit Beneficial Ownership Information (“BOI”) reports to FinCEN. FinCEN published a final rule in December 2023 that allows only certain categories of recipients (“Recipients”) to access BOI reports submitted by Reporting Companies (the “Access Rule”). These Recipients include: » U.S. Department of Treasury » U.S. federal agencies engaged in national security, intelligence, or law enforcement activity » State, local, and Tribal law enforcement agencies » Foreign authorities » Financial institutions subject to customer due diligence requirements » Federal functional regulators and other appropriate agencies Importantly, under the Access Rule, these Recipients can only access BOI reports for an authorized purpose. For example, U.S. federal agencies engaged in national security, intelligence, or law enforcement may only access BOI reports if it is in furtherance of a civil or criminal investigation or enforcement activity. Similarly, a state law enforcement agency may only access BOI reports in furtherance of a civil or criminal investigation. The Access Rule imposes civil or criminal penalties for unauthorized disclosures of BOI reports. Scopelitis attorneys are available to assist businesses in complying with CTA requirements. Contact Scopelitis’ Corporate Practice Group, including Katie Feary-Gardner, Jay D. Robinson, and Jordan Jacob, with questions. https://lnkd.in/grqW2JjA . . . . . #trucking #transportation #logistics #supplychain #independentcontractors #truckingindustry #CorporateTransparencyAct #BusinessLaw #CorporateLaw

The April 2024 issue of 60 Seconds with Scopelitis Transportation Consulting looks at what’s to come in 2025 when FMCSA’s National Registry of Certified Medical Examiners is fully implemented, a refresher on FMCSA’s improved program outreach capabilities, including “All Our Roads, Our Safety Campaigns” materials and how to use them, STC’s perspective on a Federal Railroad Administration final rule regarding crew size on trains, transportation fast facts, and more. Read the full issue from STC’s P. Sean Garney, Steve Keppler, and David O'Neal: https://lnkd.in/g5f54pAA . . . . . #trucking #transportation #supplychain #logistics #trucks #truckingindustry #safety #FMCSA