Baked good distributors aren’t transportation workers, must arbitrate claims
Independent distributors who distributed bakery products weren’t transportation workers or exempt from the Federal Arbitration Act (FAA), a divided panel of the U.S. 2nd Circuit Court of Appeals (which covers Connecticut) recently ruled. Therefore, they were bound by an arbitration clause in their agreements.
Facts
The litigants were independent distributors who “own[ed] distribution rights” to deliver baked goods in Connecticut. They contracted with subsidiaries of Flowers Foods Inc. for the rights. They would “pick up” baked goods from local warehouses and deliver them to stores and restaurants within their assigned territories. The independent distributors earned the difference between the price at which they acquired the products and the price paid by the stores and restaurants.
In their roles as independent distributors, they sought to:
- Maximize sales;
- Solicit new locations (to make sales);
- Stock shelves, rotate products, and remove stale items;
- Acquire delivery vehicles;
- Maintain equipment and insurance;
- Distribute Flowers’ advertising materials and develop their own (with prior approval by the food company);
- Retain legal and accounting services; and
- Hire help.
The litigants also could sell their distribution rights for a profit and carry other goods but didn’t carry any other goods.
Lower court ruling