Authored By: Rob Mohr
Public Justice is representing Charles and Grant Adler in New Jersey on appeal in Third Circuit court after filing a suit against Gruma Corporation. The Adlers and their company, CM Adler, LLC, were last-mile distributors for Gruma, a major tortilla producer in New Jersey. After meeting with an attorney alongside several other distributors to discuss their dissatisfaction with Gruma’s pay and working conditions, their distribution agreement was terminated. The suit, filed in November of 2022, challenges CM Adler’s designation as an independent contractor and seeks to recoup unpaid wages and other payments, according to federal and New Jersey law.
Gruma motioned to compel arbitration, which the court granted despite the Adlers’ argument that their contract was not under the governance of the Federal Arbitration Act (FAA) because the FAA exempts transportation workers from participating in interstate commerce. In their March 2024 appeal, Public Justice further argues that the district court erred in several ways in handling the case.
First, they questioned the above transportation exemption and whether the court correctly confirmed their jurisdiction to compel arbitration. In Public Justice’s view, the court should not have passed the arbitrability of CM Adler LLC’s contract with Gruma on to an arbitrator to decide because the court has the first say on arbitrability. Had the court decided on the arbitrability, Public Justice feels the court would have rejected arbitration under the FAA exemption. The appeal later argues that the delegation was further incorrect because Gruma did not invoke the delegation clause in the contract and, therefore, waived the right to use an arbitrator to determine the arbitrability of the dispute.
The legal advocacy group also argued that applying Texas contract law because Gruma is headquartered in Texas was incorrect. To Public Justice, the case was introduced by New Jersey citizens in New Jersey court and focused on activities occurring in New Jersey, and therefore, should use that state’s laws, disagreeing with the assertion that New Jersey and Texas have an equal material interest in the application of their respective state laws. Furthermore, they state that New Jersey’s contract laws fundamentally conflict with Texas contract laws about arbitration.
Public Justice calls the court’s conclusion that the Adlers are bound to their contract and its arbitration agreement, despite not signing it individually, an error. They criticize the decision to place the Adlers’ claims under the scope of the arbitration agreement, arguing they are statutory and unrelated to the specifics of the contract with Gruma.
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