Uber, Lyft, state accuse each other and judge in heated hearing

Passions abounded Tuesday when a three-justice panel heard oral argument in a high stakes case state entities filed against Uber and Lyft, with each side accusing the other of fabricating information, and Uber's attorney suggesting a trial judge was guilty of a "quintessential abuse of discretion" when he didn't distinguish between the two companies.

The hearing, held in the 1st District Court of Appeal, concerned a preliminary injunction San Francisco Superior Court Judge Ethan P. Schulman issued against Uber and Lyft in August. The injunction required the companies to comply with Assembly Bill 5 and reclassify their drivers as employees instead of independent contractors, but was stayed by the appellate court later that month. People v. Uber, A160706 (Cal. App. 1st Dist., filed Aug. 17, 2020).

"They have some, I think, self-serving survey data indicating that people want to be contractors," San Francisco Deputy City Attorney Matthew D. Goldberg said during the hearing, referencing information on drivers' preferences Uber and Lyft have used to support their case. "I candidly believe that that's a function of a lot of misinformation out in the public ... provided to drivers about the nature of what it means to be a contractor or an employee."

"Mr. Goldberg is living in a dream world," Theodore J. Boutrous, Uber's attorney and a partner at Gibson, Dunn & Crutcher LLP, said later in the proceedings. If Uber starts classifying its drivers as employees instead of independent contractors, "All these people, they're not going to just suddenly be employees," he added. "Mr. Goldberg is speculating. He's making things up. They don't have any evidence. We have expert evidence. ... People are not going to magically become employees and make money. The company will have to make hard decisions about how to adjust to this system."

Tuesday's panel consisted of Presiding Justice Stuart R. Pollak, Justices Jon B. Streeter and Tracie L. Brown.

Less than a minute into Boutrous' argument, Brown interrupted the attorney and asked him whether he believed there was a provision in AB 5 that inherently requires Uber to "schedule drivers in shifts." The idea that the statute mandates a shift model has been widely suggested by proponents of Proposition 22, the Uber, Lyft, and DoorDash-funded ballot initiative to exempt ride-share drivers from AB 5.

Noting the idea was also "the linchpin of the defendants' argument that it will devastate the ability of hundreds of thousands of drivers to work," Brown added, "Do you disagree with [the states'] contention that that's on you, that's your choice, and there's nothing in AB 5 to prevent you from allowing people to work flexibly but be an employee?"

Boutrous said reclassifying its drivers would require Uber to turn into a different company. "We're at the preliminary injunction stage, your honor," he said. "That is a drastic thing. No injunction in California history has ever done that at the preliminary stage."

Nearly an hour later, while talking about his dismissal of Uber's and Lyft's arguments that they would suffer irreparable harm if they comply with the trial court's preliminary injunction order, Goldberg addressed the issue as well. "There was some talk about, you're going to have set fixed schedules; there's enormous costs associated with managing that," Goldberg said. Uber and Lyft are "absolutely not under any obligation to do that. And if they're not obligated to do it ... to comply with the law or with the injunction ... it should not count in the totality of their harms."

Earlier, Boutrous said that Schulman, the trial court judge, had abused his discretion when he issued the preliminary injunction without considering how Uber had tried to adapt to AB 5 by making changes like allowing drivers to set their own prices, while Lyft had not.

"Are you suggesting that the injunction could conceivably be improper as to Uber but sustainable as to Lyft?" Pollak asked. Boutrous responded Uber was in a very different position than Lyft.

Rohit K. Singla, Lyft's attorney and a litigation partner at Munger, Tolles & Olson LLP, said both Uber and Lyft have made a jury demand.