Contract analysis

I. Executive Summary This memorandum analyzes the enforceability of the mandatory arbitration clause and class/collective action waiver contained in Version 3.0 of Stonefield Logistics Group Inc.'s Independent Contractor Operating Agreement ("ICOA v3.0"), a January 2023 revision executed by approximately 640 of the 1,187 drivers encompassed by the proposed collective action in Delano v. Stonefield Logistics Group Inc

II. Background and Factual Context A. The Independent Contractor Operating Agreement — Evolution Stonefield Logistics Group Inc. is a regional logistics and last-mile delivery company headquartered in Fort Worth, Texas, operating 14 distribution hubs across four states (Texas, Oklahoma, Louisiana, and Arkansas). SLG engages delivery drivers as independent contractors under its Independent Contractor Operating Agreeme

III. Legal Analysis A. Federal Arbitration Act — General Framework The Federal Arbitration Act, 9 U.S.C. §§ 1–16, enacted in 1925, establishes a strong federal policy favoring the enforcement of arbitration agreements. Section 2 of the FAA provides the statute's foundational command: "A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter

Section 1 of the FAA provides, in relevant part: "[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. If SLG's drivers are found to constitute a "class of workers engaged in foreign or interstate commerce" within the meaning of this provision, the FAA would not apply to the ICOA, and th

2. Supreme Court Guidance — New Prime Inc. v. Oliveira (2019) and Southwest Airlines Co. v. Saxon (2022) Two recent Supreme Court decisions provide the governing framework for analyzing the § 1 exemption. New Prime Inc. v. Oliveira, 586 U.S. 105 (2019). In New Prime, the Court addressed whether the § 1 exemption applies only to formal employment contracts or also to independent contractor agreements. The petitioner,

3. Application to SLG Drivers The question whether SLG's drivers fall within the § 1 exemption requires a factual analysis of the nature of the work they perform and its connection to interstate commerce. Nature of SLG's Operations. SLG provides three principal categories of delivery services: (a) last-mile delivery, in which drivers pick up packages from SLG distribution hubs and deliver them to end consumers at res

1. Procedural Unconscionability Procedural unconscionability concerns the circumstances surrounding the formation of the contract — specifically, whether the manner in which the agreement was presented deprived one party of a meaningful opportunity to understand and negotiate its terms. Factors relevant to procedural unconscionability include the relative bargaining power of the parties, whether the contract was pres

2. Substantive Unconscionability Substantive unconscionability concerns the terms of the contract themselves — specifically, whether the challenged terms are so one-sided, oppressive, or unreasonably favorable to one party as to be unconscionable. Potential Arguments by Plaintiff. Plaintiff's counsel may argue that the ICOA v3.0 arbitration clause is substantively unconscionable on the following grounds: (a) The coll

Section 216(b) of the FLSA provides that an action to recover unpaid overtime or minimum wages "may be maintained against any employer . . . by any one or more employees for and in behalf of himself or themselves and other employees similarly situated." 29 U.S.C. § 216(b). Plaintiff will undoubtedly argue that § 216(b) creates a substantive, non-waivable right to collective action that cannot be overridden by an arbi

IV. Applicability Analysis — Which Drivers Are Subject to Arbitration A motion to compel individual arbitration would apply only to the subset of drivers in the proposed collective who executed ICOA v3.0 and did not exercise the 30-day opt-out right. Based on the information available to date, the applicability analysis is as follows: ICOA v3.0 Signatories. Approximately 640 drivers signed ICOA v3.0 during the period

V. Risk Assessment Summary The following table summarizes the key legal risks to the enforceability of the ICOA v3.0 arbitration clause and collective action waiver: Overall Enforceability Assessment: The ICOA v3.0 arbitration clause and collective action waiver are likely enforceable for the approximately 640 ICOA v3.0 signatories. The FAA § 1 transportation worker exemption is the principal area of litigation risk,

VI. Recommendations A. Next Steps — Factual Development We recommend the following immediate steps to develop the factual record necessary to support a motion to compel individual arbitration:

1. Audit SLG records. Coordinate with Karen Lund (Director, Driver Relations) and Lisa Cheng (Director, Compliance) to conduct a comprehensive audit of SLG's driver contract records. The audit should confirm: (a) the precise number of drivers who executed ICOA v3.0 during the relevant period; (b) the date of execution for each v3.0 signatory; (c) the number of drivers who exercised the 30-day opt-out right; (d) any i

2. Identify cross-state-line drivers. Working with SLG's operations team, identify the subset of drivers who perform cross-state-line regional freight services (as opposed to purely intrastate last-mile deliveries). This subset is more vulnerable to the FAA § 1 exemption argument, and we may need to develop a differentiated strategy for these drivers. We should obtain RouteSync dispatch data, hub assignment records,

3. Obtain Pennfield & Daye files. Request from SLG copies of all files maintained by Pennfield & Daye LLP relating to the drafting and rollout of ICOA v3.0, including internal memoranda, email correspondence, and any analysis performed by Pennfield & Daye regarding the enforceability of the arbitration clause, the 30-day opt-out provision, and the consideration supporting the v3.0 revision. These materials may contai

4. Review rollout communications. Obtain copies of all communications sent to drivers in connection with the v3.0 rollout — including emails, text messages, written notices, and any materials distributed at hub-level meetings. These communications will be relevant to the procedural unconscionability analysis, as they will demonstrate whether drivers were given adequate notice and explanation of the new arbitration pr

1. Timing. We are preparing a separate memorandum (due June 10, 2025) addressing the optimal timing for filing a motion to compel. The principal strategic question is whether to file the motion before, concurrent with, or after the court's ruling on conditional certification of the FLSA collective. Filing before conditional certification may allow SLG to reduce the size of the proposed collective before opt-in notice

2. Residual collective action. It is important to recognize that even a fully successful motion to compel would not eliminate the collective action. Named plaintiff Marcus Delano and the approximately 547 non-v3.0 drive