Court Says Drivers Must Arbitrate Claims Against Uber

Thursday, September 8, 2016

Page 1

Court Says Drivers Must Arbitrate Claims Against Uber

From Staff and Wire Service Reports

The Ninth U.S. Circuit Court of Appeals yesterday largely upheld arbitration agreements between online ride-hailing giant Uber Technologies and its drivers.

Reversing U.S. District Judge Edward Chen’s ruling that the 2013 and 2014 versions of Uber’s standard agreement contained unconscionable and unenforceable arbitration clauses, the panel held that a valid delegation clause in the agreements generally gave an arbitrator the right to determine arbitrability.

The plaintiffs are former Uber drivers Abdul Kadir Mohamed and Ronald Gillette. They are suing on behalf of a class of drivers whom Uber allegedly kicked off its software application after running background checks without their knowledge.

Judge Richard Tallman said there was “clear and unmistakable” language in the contracts saying all disputes should be handled by a private arbitrator. He also rejected Chen’s finding of unconscionability, saying there was clear language allowing drivers to opt out of arbitration and that requiring drivers to do so by overnight delivery service rather than email was not unduly burdensome.

Tallman noted that although the drivers had argued that the opt-out agreement was too difficult to find and understand, “there were some drivers who did opt out and whose opt-outs Uber recognized. Thus, the promise was not illusory. The fact that the opt-out provision was ‘buried in the agreement’ does not change this analysis.”

‘Effective Vindication’

The panel also rejected Chen’s finding that a provision requiring drivers to pay half of arbitration costs rendered the agreements, to the extent they required the drivers to arbitrate statutory claims, unconscionable under the “effective vindication” doctrine. Uber’s commitment not to invoke its right to shift costs resolves the issue, Tallman said.

Also rejected was Chen’s conclusion that the 2013 agreement was unenforceable as a matter of public policy, since it contained a non-severable provision requiring drivers to waive their rights to pursue civil penalties in a representative action under California’s Private Attorney General Act.

Tallman explained that Chen had jurisdiction to rule on the PAGA waiver in the 2013 agreement, because it contained a carve-out that removed the issue from the delegation clause. He agreed with Chen that the waiver violated California law, but rejected the notion that this rendered the entire agreement unenforceable.

As for the 2014 agreement, Tallman said, it had no carve-out, so the enforceability of the PAGA waiver there must be determined in arbitration.

Agency Theory

Richard Clifton and Sandra Ikuta joined in Tallman’s opinion, which also held that Hirease, a company that Uber hired to do the background checks, had no right to compel arbitration as Uber’s agent.

The case is Mohamed v. Uber Technologies, Inc., 15-16178.

It was argued in the Ninth Circuit by Theodore Boutrous Jr. of Gibson, Dunn & Crutcher LLP for Uber, Pamela Devata of Seyfarth Shaw LLP for Hirease, and Laura Ho of Goldstein Borgen Dardarian & Ho for the plaintiffs.

Attorney Shannon Liss-Riordan, who represents a class of Uber drivers in another case, said she anticipated yesterday’s ruling, which was one reason she pushed hard for approval of a $100 million settlement with Uber earlier this year.

Chen rejected the proposed agreement in that case last month, saying the $100 million payout for a class of 380,000 current and former California and Massachusetts drivers was too low. The drivers claim they are employees — not independent contractors as they are currently classified — and that Uber should reimburse them for their expenses.

Yesterday’s ruling “is not good for the class,” Liss-Riordan said in an email sent to Courthouse News. “We were very aware that this decision was likely coming, which was the primary argument for why I was urging the district court to approve the settlement.”

Liss-Riordan did, however, say the PAGA ruling was a small victory.

“We do still have the possibility of the PAGA penalties and we have more than 1,500 Uber drivers signed up in California to pursue individual arbitrations if necessary,” she said.

Boutrous said in an emailed statement:

“Arbitration is a fair, speedy and less costly alternative to class action litigation. We’ve always believed our optional arbitration agreements should have applied in this case, and we’re pleased with the court’s decision today.”