No. 22-1268

MARGARITO V. CANALES; BENJAMIN J. BARDZIK,

Plaintiffs, Appellees,

v.

CK SALES CO., LLC; LEPAGE BAKERIES; FLOWERS FOODS, INC.,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Allison D. Burroughs, U.S. District Judge]

Before

Kayatta, Lynch, and Thompson, Circuit Judges.

Amanda K. Rice, with whom Traci L. Lovitt, Matthew W. Lampe, Jack L. Millman, Jones Day, Peter Bennett, Frederick B. Finberg, Pawel Z. Binczyk, and The Bennett Law Firm, P.A., were on brief, for appellants. Archis A. Parasharami, Mayer Brown LLP, Jennifer B. Dickey, Jonathan D. Urick, and U.S. Chamber Litigation Center, Inc., on brief for Chamber of Commerce of the United States of America, amicus curiae. Benjamin C. Rudolf, with whom Sarah H. Varney and Murphy & Rudolf, LLP, were on brief, for appellees. May 5, 2023 KAYATTA, Circuit Judge. This is the latest in a line of cases calling for interpretation of section 1 of the Federal Arbitration Act ("FAA"). Section 1 exempts from the FAA's purview "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. Considering the arguments and evidence before it, the district court denied defendants' motion to dismiss or, in the alternative, to compel arbitration under the FAA. In so doing, the district court found that plaintiffs, who distribute baked goods along routes in Massachusetts, fit within the section 1 exemption. Defendants, whose baked goods plaintiffs distribute, request reversal on several grounds, some of which they presented to the district court and others of which they did not. Addressing only those arguments raised below, we affirm. Our reasoning follows.

I.

Defendant Flowers Foods, Inc. ("Flowers"), is a Georgia- based holding company of various subsidiary bakeries, including defendant Lepage Bakeries Park Street, LLC ("Lepage"), which operates out of Auburn, Maine. Lepage uses a "direct-store- delivery" system to get its products on the shelves of grocery stores and other businesses that sell baked goods to consumers. Through its wholly owned subsidiary, defendant CK Sales Co., LLC ("CK Sales"), Lepage sells distribution rights to so-called

- 3 - "independent distributors." These distributors purchase rights to distribute Lepage's baked goods along particular routes. They buy the baked goods from defendants and then resell and deliver the goods to stores along their routes. Defendants classify these distributors as independent contractors.

Prior to April 2018, plaintiffs Margarito Canales and Benjamin Bardzik worked as employees delivering defendants' baked goods through a temporary staffing agency. In late 2017, defendants told plaintiffs that their delivery route would be purchased soon, which plaintiffs took to mean that they would be terminated unless they purchased the route themselves. Plaintiffs created a distribution company, T & B Dough Boys Inc. ("T&B"), of which Canales owns fifty-one percent and Bardzik owns forty-nine percent. Through T&B, plaintiffs purchased distribution rights for three Massachusetts routes in June 2018. They purchased a fourth route in July 2019, which they later sold back to buy a different route in October 2020. Each time T&B purchased a route, it entered a "Distributor Agreement" with CK Sales.

Each of plaintiffs' routes is entirely within Massachusetts. To get the baked goods to Ma