Preserving Objections to Arbitration, and the Limited Scope of the FAA Exemption for “Workers Engaged in Foreign or Interstate Commerce”

Gordon v. Trucking Resources, Inc.

Dallas Court of Appeals, No 05-21-00746-CV (November 15, 2022)

Justices Myers (Opinion, linked here), Pedersen III, and Garcia 

Ken Carroll

Gordon and Trucking Resources compete in recruiting truck drivers for transportation companies. Two of Trucking Resources’ employees—each of whom had signed a non-compete that included an arbitration agreement—resigned and went to work for Gordon’s competing company. Trucking Resources sued the employees for breach of their agreements and sued their new employer, Gordon and his company, for tortious interference and conspiracy. It then moved to compel arbitration of that dispute. One of the former employees objected, but Gordon and his company did not. The trial court granted the motion to compel arbitration. After the arbitrator ruled for Trucking Resources, Gordon and his company asked the trial court to vacate the arbitration award, arguing (1) Section 1 of the FAA expressly exempted this dispute from arbitration and (2) Gordon and his company could not be compelled to arbitrate because they were not signatories to the arbitration agreement. But the Court of Appeals rejected both challenges.

The FAA states that it does not “apply to contracts of employment of … workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. Drawing from recent U.S. Supreme Court decisions, the appeals court explained that, for this exemption to apply, the workers in question “must at least play a direct and ‘necessary role in the free flow of goods’ across borders”—they “must be actively ‘engaged in transportation.’” While the truck drivers they recruited likely would fit that description, the recruiters themselves would not. And so the exemption did not apply here.

Beyond that, however, the Court stated that “an objection to arbitration under the 9 U.S.C. § 1 exemption from arbitration must be raised before the trial court rules on a motion to compel arbitration.” Here, Gordon and his company did not raise their objection until after the arbitration had concluded and the award had been confirmed. Because “they did not assert the exemption from arbitration before the arbitration took place, they [did] not preserve[] the argument for appellate review.”

Similarly, the Court explained, the “opportunity for the trial court to cure any error from requiring nonsignatories to arbitrate is before the court rules on the opposing party’s motion to compel arbitration, not after the arbitration proceeding.” Here, Gordon and his company didn’t raise this and other arbitrability arguments until after the arbitrator had rendered his award. Consequently, they failed to preserve error on those issues, and the Court of Appeals could not address them.