Completing the Interstate Journey in Cyberspace: Dark Kitchens, Meal Delivery Drivers, and the Federal Arbitration Act

Blog Post | 113 KY. L. J. ONLINE | November 19, 2024

Completing the Interstate Journey in Cyberspace: Dark Kitchens, Meal Delivery Drivers, and the Federal Arbitration Act

By: John Lambert, Staff Editor, Vol. 113 

A “dark kitchen” is a restaurant with no in-person ordering facilities.[1] Rather than going to the restaurant’s premises, customers of a dark kitchen must place an order online and wait for food to be delivered to them.[2] Some dark kitchens, known as virtual restaurants, operate out of the same premises as a traditional in-person restaurant but only interact with customers online.[3] Others, known as ghost kitchens, prepare food in a commercial kitchen space and lack a retail location entirely.[4] Dark kitchens often partner with third-party meal delivery platforms, such as Uber Eats, Grubhub, and DoorDash, to coordinate delivery of their food to customers.[5]

Major meal delivery platforms often require their drivers to sign an arbitration agreement when they begin working for the platform.[6] Such agreements protect the platform by requiring drivers to arbitrate their grievances rather than suing over them.[7] Many such agreements also prohibit class or mass arbitration, effectively shielding the platform from penalties for small harms inflicted over a broad class of victims.[8]

Meal delivery drivers have sometimes sued their platforms regardless, hoping the platform’s arbitration agreement will prove unenforceable.[9] Traditional meal delivery drivers, who convey meals from the restaurant at which they are cooked to local customers, have so far been unsuccessful at challenging their arbitration agreements.[10] Although there is a colorable argument to the contrary, it is likely that even drivers who deliver a substantial portion of their meals from dark kitchens will be subject to arbitration agreements in the same way.

The Federal Arbitration Act generally provides that arbitration agreements in any “transaction involving commerce” are “valid, irrevocable, and enforceable,” but § 1 carves out an exception for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”[11] The Supreme Court has clarified that the residuary “any other class of workers” language is not restricted to workers who themselves cross state or national borders, but will implicate “any class of workers directly involved in transporting goods across state or international borders.”[12] For example, the Court found that a “ramp supervisor” who transferred cargo onto and off of airplanes at a single airport qualified for the § 1 exemption.[13] On the other hand, “foreign or interstate commerce” under the FAA is defined more strictly than under the Commerce Clause; a worker may be engaged in interstate commerce for Commerce Clause purposes, thereby causing the FAA to apply, without also triggering the § 1 exemption.[14]

Immediato v. Postmates, Inc., a First Circuit case, illustrates the difference between Commerce Clause and FAA “engagement in commerce” in the meal delivery driver context. Postmates, which operates an on-demand meal delivery service, responded to a lawsuit from its drivers by moving to compel arbitration, citing a “mutual arbitration provision” in the “Fleet Agreement” signed by all drivers upon registering with the service.[15] The drivers argued that they were “workers engaged in foreign or interstate commerce” within the meaning of § 1 of the FAA, and therefore could not be compelled to arbitrate, because, although the drivers almost never made interstate deliveries, many of the components used to prepare the meals they delivered had arrived at the restaurants at which they were prepared from out of state, making the drivers the last link in a chain of interstate commerce stretching from ingredient producers through restaurants and ultimately to consumers.[16] The First Circuit rejected the drivers’ argument, clarifying that “interstate movement necessarily terminates when … goods arrive at the local manufacturer or retailer (as local manufacturing and retailing have not been understood to be "in" interstate commerce).”[17]

There is perhaps a distinction to be drawn for FAA purposes between traditional restaurants and dark kitchens. Under a traditional restaurant model, restaurants order ingredients, potentially from out of state, and then cook meals in response to orders directly from local customers. Under a dark kitchen model, on the other hand, restaurants order ingredients, again potentially from out of state, and then receive orders from customers through a national or international corporation, which also handles delivery of the food.[18] There is no way for customers to order directly from the dark kitchen.[19] Depending on the degree of its logistical dependency on the meal delivery platform, the dark kitchen might be more like a processing hub used by its controlling corporation as a link in a continuous chain of interstate commerce, rather than an independent manufacturer. One could imagine a scenario, for example, where a meal delivery platform agreed not only to handle all food delivery for a dark kitchen, but also to supply it with ingredients, leaving only management of the kitchen space, equipment, and personnel to the kitchen itself. Such a dark kitchen might well be found not to break the chain of interstate commerce coordinated by its meal delivery platform.

Ultimately, though, courts will likely find most dark kitchens to be more like a “local manufacturer” of the kind that, under Immediato, functions as an endpoint for interstate commerce.[20] That means the FAA will continue to apply to prevent lawsuits or class arbitration proceedings by delivery drivers. It also means that the interstate journey of dark kitchens’ ingredients will terminate in a changing of hands somewhere in the bowels of a commercial kitchen space—or, from the perspective of the customers ordering food on third-party meal delivery platforms, somewhere in the unknown reaches of cyberspace.

[1]    What Is a Virtual Restaurant? (+ How to Start One), Uber Eats, https://merchants.ubereats.com/us/en/resources/articles/what-is-a-virtual-restaurant/ (last visited Nov. 11, 2024).

[2]    Id.

[3]    Id.

[4]    Id.

[5]    Nancy Luna, Restaurants on DoorDash, Grubhub, and UberEats Aren't Always What They Seem. Here's How to Spot a 'Ghost' Menu, Business Insider (Dec. 22, 2022, 5:00 AM), https://www.businessinsider.com/virtual-restaurant-ghost-kitchen-doordash-grubhub-uber-eats-2022-12.

[6]    See, e.g., U.S. Terms of Use, Uber, https://www.uber.com/legal/en/document/?name=general-terms-of-use&country=united-states&lang=en (last visited Nov. 11, 2024) (requiring both Uber Eats and Postmates drivers to arbitrate any claim against their parent company Uber); Independent Contractor Agreement, DoorDash, https://www.doordash.com/dasher/us/ica-text?irgwc=1&pid=2003851 (last visited Nov. 11, 2024) (allowing drivers to opt out of the arbitration agreement within 14 days of registering with the platform). Grubhub once required its drivers to submit to an arbitration agreement, but no longer does so. Contrast Grubhub Delivery Partner Terms of Use, Grubhub, https://driver.grubhub.com/terms-of-use/ (last updated Jun. 13, 2024) with Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 799 (7th Cir. 2020).

[7]    See Robert Fojo, 12 Reasons Businesses Should Use Arbitration Agreements, Legal.io, https://www.legal.io/articles/5170762/12-Reasons-Businesses-Should-Use-Arbitration-Agreements (Apr. 1, 2015) (listing ways in which arbitration favors businesses more than traditional civil litigation).

[8]    U.S. Terms of Use, supra note 6; Independent Contractor Agreement, supra note 6; Alejandro Moreno & J. Cameron Gates, Class Actions: Arbitration Agreements and Class Action Waivers (Federal, CA), Lexis+, https://plus.lexis.com/api/permalink/5390f9dc-5cc2-4a11-8353-ecbfc5f2be00/?context=1530671 (last updated Oct. 1, 2024).

[9]    See, e.g., Immediato v. Postmates, Inc., 54 F.4th 67, 71 (1st Cir. 2022); Archer v. Grubhub, Inc., 190 N.E.3d 1024, 1027 (Mass. 2022); Wallace, 970 F.3d at 799.

[10]  Immediato, 54 F.4th at 71; Archer, 190 N.E.3d at 1027; Wallace, 970 F.3d at 799.

[11]  9 U.S.C. §§ 1–2.

[12]  Southwest Airlines Co. v. Saxon, 596 U.S. 450, 457, 461 (2022).

[13]  Id. at 453.

[14]  Circuit City Stores v. Adams, 532 U.S. 105, 114–16 (2001).

[15]  Immediato, 54 F.4th at 72.

[16]  Id. at 72, 78.

[17]  Id. at 77.

[18]  What Is a Virtual Restaurant? (+ How to Start One), supra note 1.

[19]  Id.

[20]  Immediato, 54 F.4th at 77.