Arbitration
Ninth Circuit: Courts Must Decide the FAA’s Reach Before Compelling Arbitration
Updated
In Orr v. United States District Court, the Ninth Circuit granted a petition for a writ of mandamus and directed the district court to vacate its order compelling arbitration of Rebecca Orr’s individual claims against United Parcel Service, Inc. The court held that a district court must decide whether the Federal Arbitration Act or state law supplies its authority to compel arbitration before it may do so—and may not leave that question for the arbitrator.
Background
Rebecca Orr worked briefly as a Seasonal Support Driver for UPS in late 2023, picking up packages from other drivers and delivering them to their final destinations. When she applied, she signed an arbitration agreement stating that the FAA would govern unless the FAA “does not apply to a particular dispute or to one or both parties.”
Orr sued UPS in Riverside County Superior Court, raising several California wage claims on behalf of three putative classes and, in an amended complaint, a PAGA claim. UPS removed the case to the Central District of California and moved to compel arbitration of Orr’s individual claims.
The district court granted the motion and stayed the class claims. It expressly declined to decide whether the FAA or the California Arbitration Act governed, reasoning that the “result is the same” under either law. Orr petitioned the Ninth Circuit for a writ of mandamus, arguing that the court had to decide the FAA’s applicability itself.
What the Court Held on Deciding the FAA's Applicability
The Ninth Circuit weighed the five Bauman factors that govern mandamus relief, starting with the necessary factor: whether the district court committed clear legal error. The court held it had.
Under New Prime Inc. v. Oliveira, a district court—not an arbitrator—must decide whether the contracts-of-employment exclusion in 9 U.S.C. section 1 applies before ordering arbitration under the FAA. By compelling arbitration without specifying the source of its authority, the district court sidestepped that question and improperly delegated the section 1 issue to the arbitrator.
The court emphasized that the choice this case presented was not merely technical. The agreement’s own terms made the FAA the default unless it did not apply, and federal and state arbitration law differ in ways that could change the outcome. For example, Labor Code section 229 permits certain wage actions to proceed in court despite an arbitration agreement, but the FAA preempts that statute where it applies—so whether several of Orr’s claims could be litigated in court turned on the section 1 question.
A district court may not compel arbitration without first identifying the legal basis for its authority to do so. Where the FAA’s applicability is contested and could affect arbitrability, the court—not the arbitrator—must decide whether the section 1 exclusion applies before ordering arbitration.
Why Mandamus Was the Right Vehicle
The court found the remaining necessary Bauman factors satisfied. No contemporaneous, ordinary appeal of an order compelling arbitration was available to Orr under either the FAA or the California Arbitration Act, meeting the first factor.
On the second factor, the court found uncorrectable prejudice for two cumulative reasons: the district court’s refusal to specify the source of its authority distorted the judiciary’s role, and the outcome in arbitration could turn on whether federal or state law governed. The court granted the writ and directed the district court to determine the statutory basis for its authority, without deciding that arbitration must ultimately be ordered.
Judge Miller joined the opinion in full but wrote separately, expressing his view that the circuit’s precedents permitting mandamus review of orders compelling arbitration disregard Congress’s limits on interlocutory review, and suggesting those cases be reconsidered in an appropriate case.
What This Means for You
This decision establishes that a federal district court must decide whether the FAA or state law supplies its authority before compelling arbitration, and that the section 1 contracts-of-employment exclusion is a question for the court rather than the arbitrator. It touches disputes over orders compelling arbitration of employment claims where the FAA’s applicability is contested.
I write these summaries as general information about developments in California employment law. They are not legal advice and don’t create a mediator–client relationship. For guidance on a specific matter, consult a qualified attorney.