Uber drivers can still obtain appropriate relief through arbitration

THE NEUTRAL CORNER

In O'Connor v. Uber, 2018 DJDAR 9663 (Sept. 25, 2018), the 9th U.S. Circuit Court of Appeals issued its opinion in an appeal consolidating four related actions pending before the same district court. The appellate court reversed the district court's orders denying Uber's motions to compel arbitration, orders granting class certification and orders controlling class communications.

Two Uber drivers filed the original putative class action complaint in August 2013. The following week the plaintiffs filed a motion under FRCP 23(d) requesting the district to declare Uber's arbitration agreement unconscionable or requiring Uber to provide enhanced notice and opt-out provisions. The district court granted this motion. In a later proceeding, the district court held the arbitration agreement unconscionable. In April 2015, plaintiffs moved for class certification. The district court granted class certification in part in September 2015 and certified an additional subclass that December. In the same order, the district court certified the original class and the new subclass to pursue recovery of expense reimbursements in addition to the tips and damages for misclassification as independent contractors.

The 9th Circuit had already reversed the district court's orders denying Uber's motion to compel arbitration in Mohamed v. Uber Technologies, Inc. (9th Cir. 2016). In Mohamed, the driver plaintiffs filed a putative class action alleging Uber violated the Fair Credit Reporting Act and various state statutes. One of the plaintiffs also brought a representative claim under California's Private Attorneys General Act alleging he was misclassified as an independent contractor rather than an employee. The district court denied Uber's motion to compel arbitration.

The 9th Circuit concluded that the district court improperly assumed the authority to decide whether the arbitration agreements were enforceable. The question of arbitrability as to all the claims, except the PAGA claim, were delegated to the arbitrator. The appellate court held those claims may proceed in court on a representative basis, but that the remaining arguments, including plaintiff Mohamed's challenge to a PAGA waiver in the agreement he signed and the challenge by both plaintiffs to the validity of the arbitration agreement itself, must be resolved in arbitration.

At issue in this case are two agreements signed in 2013 and 2014 respectively by both plaintiffs. Both agreements contain language providing that disputes would be resolved by arbitration and that any dispute as to arbitrability (with one relevant exception) would be resolved by the arbitrator. Both agreements contained provisions requiring drivers to waive the right to bring class, collective and representative actions (like the PAGA claim). The 2013 agreement (but not the 2014 agreement) carved out challenges to these waivers from the general provision delegating resolution to an arbitrator.

The Mohamed court rejected plaintiffs' arguments that the delegation clauses should not be enforced because they were not "clear and unmistakable." Or, even if these provision were "clear and unmistakable," they should not be enforced because they are "unconscionable."

In reversing the district court, the 9th Circuit noted the presumption that courts decide arbitrability is an issue for judicial determination unless the parties "clearly and unmistakably provide otherwise." The appellate court concluded the district court's determination that the delegation language was ambiguous was based on an "artificial" conflict with the agreement's venue provisions relied on by the district court.

The 9th Circuit also rejected the district court's conclusion that the delegation provisions are procedurally unconscionable. In so doing, the appellate court cited recent California Supreme Court language requiring a "substantial degree of unfairness" that is "so one-sided as to 'shock' the conscience" in order to find an agreement unconscionable. In a rare direct rebuke, the Court of Appeals pointed out that the district court's conclusion that the opt-out provisions in the Uber agreement rendered them procedurally unconscionable, simply ignored circuit court precedent, which the court had no authority to do. Significantly, the 9th Circuit held Uber's opt-out procedure in the 2013 Agreement, requiring drivers to opt out in person or via overnight delivery service, was not so burdensome as to be deemed illusory.

Although these agreements impose fees on drivers who pursue claims in arbitration, Uber committed to paying the full costs of arbitration so the appellate court declined to reach the question of whether the fee term would render the agreements unenforceable under the "effective vindication doctrine" if enforced as written. This doctrine holds that fees that are so high as to make access to the forum impracticable may invalidate an agreement on public policy grounds.

In O'Connor, the court rejected plaintiffs' argument that the lead plaintiffs had opted out of the arbitration agreements on behalf of the class. The plaintiffs' argument relied on a Georgia case arising under state law. The 9th Circuit applied the Federal Arbitration Act and noted "an arbitration-specific rule ... would be preempted." The court also rejected the argument that the arbitration agreements are unenforceable because the class action waivers violate the National Labor Relations Act. That issue was disposed of by the Supreme Court in Epic Systems Corp. v. Lewis (2018). There, the high court, by a vote of 5-4 with Judge Neil Gorsuch writing for the majority, held that employers can include a clause in their employment contracts that requires employees to arbitrate their disputes individually, and to waive the right to resolve those disputes through joint legal proceedings without running afoul of the NLRA. This ruling is yet another pro-employer ruling where the Supreme Court continues to reject virtually any challenge to arbitration and erect more barriers to class actions.

The reversal of the class certification orders follows directly from the reversal of the motions to compel arbitration. The 9th Circuit pointed out that the question of arbitrability is delegated to the arbitrator, not the district court. Plaintiffs essentially conceded this point, but argued the orders should be left in place and the action remanded to the district court for consideration of some other class that could be certified. The appellate court remanded the case for such consideration, but held that leaving the existing class certification orders in place was inappropriate. Finally, the 9th Circuit reversed the Rule 23(d) orders pursuant to which the District Court purported to control how Uber communicated with drivers. Obviously, the 23(d) orders had to be reversed once the once the class certification orders were reversed as certification is the only basis on which those 23(d) orders could be made in the first place.

Most of the heavy lifting in this case occurred in the Mohamed case. The additional two years of litigation did not really result in any new law. Even the plaintiffs' lead counsel was quoted as saying "we have, unfortunately, been long expecting this." According to one article: "A lawyer for drivers suing Uber said that since the ability to sue en masse has been removed, her firm is prepared to bring thousands of drivers into individual arbitration with Uber."

Claims like those of individual drivers are exactly the types of claims that should be disposed through a process less formal than civil litigation. The issues and amounts involved do not warrant years of discovery, complicated briefs or dozens of witnesses. These drivers could bring these claims without an attorney. Small claims courts routinely deal with much more complicated cases involving higher amounts at issue than any individual drivers' claim. Additionally new arbitration platforms, like Fair Claims, are making arbitration even more accessible to consumers.

In short, this significant decision allows individual Uber drivers to obtain relief if warranted far more directly and more expeditiously than continuing to the fight to litigate these claims on a class-wide basis.