So I’ve finally accepted the fact that the holidays are over and it’s time to get back to work. Here we go!
One of my first posts here related to some of the litigation pending against Uber in the N.D. of California (no, this is not an Uber blog, or a ride sharing blog, per se. Just so happens that a lot of the litigation action as of late has involved this company/segment of the Sharing Economy). Last year in O’Connor v. Uber Technologies, Judge Chen denied Uber’s motion for summary judgment in a case filed by current and former drivers claiming they’d been misclassified by Uber as independent contractors and were entitled, among other things, to converted tips and expense reimbursements. Judge Chen later certified a class to pursue the converted tips claim consisting of
All UberBlack, UberX, and UberSUV drivers who have driven for Uber in the state of California at any time since August 16, 2009, and who (1) signed up to drive directly with Uber or an Uber subsidiary under their individual name, and (2) are/were paid by Uber or an Uber subsidiary directly and in their individual name, and (3) did not electronically accept any contract with Uber or one of Uber’s subsidiaries which contain the notice and opt-out provisions previously ordered by this Court (including those contracts listed in the Appendix to this Order), unless the driver timely opted-out of that contract’s arbitration agreement. [“September 1, 2015 Class”]
Regarding prong (3) above, Uber drivers who accepted such contracts and did not opt-out were excluded from the class because the Court anticipated individualized inquiries on several issues in the course of considering whether the arbitration agreements were procedurally unconscionable, which would defeat FRCP 23’s predominance requirement.
Last month Judge Chen, ruling on a supplemental class motion and other briefs, certified a subclass of Uber drivers to pursue both the tips claim and an expense reimbursement claim for vehicle-related and phone expenses consisting of
All UberBlack, UberX, and UberSUV drivers who have driven for Uber in the state of California at any time since August 16, 2009, and meet all the following requirements: (1) who signed up to drive directly with Uber or an Uber subsidiary under their individual name, and (2) are/were paid by Uber or an Uber subsidiary directly and in their individual name, and (3) electronically accepted any contract with Uber or one of Uber’s subsidiaries which contain the notice and opt-out provisions previously ordered by this Court [e.g., the June 2014, November 2014, or April 2015 agreements], and did not timely opt out of that contract’s arbitration agreement. [“December 9, 2015 Subclass”]
The Court added that the September 1, 2015 Class could also pursue the aforementioned expense reimbursement claim.
So why can Uber drivers who accepted such contracts and did not timely opt out now pursue converted tips (and expense reimbursement) claims? Because the Court, mindful of a recent 9th Circuit arbitration agreement decision, avoided the procedural unconscionability analysis altogether, and instead considered whether components of Uber’s arbitration agreements violate public policy.
The Court examined several of Uber’s 2014 and 2015 driver contracts, specifically a waiver of claims under California’s Private Attorney General Act (“PAGA”), and other arbitration-related language. The Court determined that the PAGA waiver was unenforceable on public policy grounds, notwithstanding an opt-out provision.
Hoping to rescue the arbitration section as a whole, Uber argued the PAGA waiver was severable. Yet Judge Chen found it “impossible to grammatically or linguistically sever the PAGA claims waiver without completely undermining arbitration itself.” Slip Op. at 15. While Uber also pressed for severance under California Civil code section 1599, the Court determined “the arbitration agreement here is not divisible, with the illegal portion being easily separable from the legal portion. The blanket PAGA waiver is instead an integral part of Uber’s goal of requiring individual arbitration of all claims.” Slip Op. at 19.
Uber’s appeal to equity also fell short, given the Court’s determination that “[a]ny driver who reads the arbitration agreement will be misled into believing that they have no right to bring a PAGA claim, as the arbitration agreement not only outright prohibits representative actions, but requires that all disputes be arbitrated on an individual basis.” Slip Op. at 20-21.
This left the Court to conclude that because the “blanket PAGA waiver is unenforceable as a matter of public policy . . . [it] cannot be severed from the remainder of the arbitration agreement. . . . [and] Because the PAGA waiver cannot be severed, the arbitration agreement as a whole is unenforceable.” Slip Op. at 24 (emphasis added). In other words, while plaintiffs did not bring a PAGA suit here, the unenforceable PAGA waiver contained in the driver contract renders the entire arbitration agreement unenforceable, allowing the plaintiffs to pursue their claims here – as a class no less.
I found it interesting that the Court certified a subclass of drivers here who accepted (and did not opt-out of) an agreement that was in part “ordered” by the Court itself (the notice and opt-out provisions). I intend to devote future posts here to decisions involving arbitration clauses, including those that led up to Judge Chen’s certification order here.
In the meantime, as Samuel L. Jackson might put it to a Sharing Economy company that contracts with its service providers, what’s in YOUR arbitration agreement? Will it hold up to judicial scrutiny under applicable federal and state laws? Would it be vulnerable to the same arguments made by the plaintiffs here? Are you going to wait until you’ve been served with a class action complaint before you take a closer look?