While debate continues over the proposed settlement in O’Connor v. Uber, three other federal cases (summarized below) were recently dismissed by federal district judges who enforced Uber’s mandatory arbitration clauses. According to the judges in these cases, because Uber’s arbitration clauses delegate questions of arbitrability to an arbitrator and contain satisfactory opt-out and class action waiver provisions, and because it is difficult to prove that individual arbitrations are cost-prohibitive, Uber’s arbitration clause withstood this judicial scrutiny.
Importantly, none of these cases concern California law or California’s Private Attorney General Act, the bases on which Judge Chen found the arbitration clauses unenforceable in O’Connor. Their significance to the particular settlement in O’Connor is thus unclear. These cases do speak, however, to the difficulty of overcoming arbitration clauses generally and to the Uber clauses’ viability under the laws of other states. They are thus in line with concerns that plaintiffs’ attorney Shannon Liss-Riordan’s stressed in discussing her settlement of the O’Connor litigation.
Sena v. Uber (District of Arizona)
On April 7th, Judge Douglas L. Rayes of the District of Arizona granted Uber’s motions to dismiss, compel arbitration and strike class allegations in a seven count class action filed by an Uber driver on behalf of former and current drivers. Judge Rayes found that drivers agreeing to the arbitration clause demonstrated clear and unmistakable intent to arbitrate claims of arbitrability, and that the arbitration clauses were not unenforceable.
First examining the delegation of authority, Judge Rayes found the language of the agreement clear and unambiguous, and cited case law that demonstrated how both the Supreme Court and Ninth Circuit “repeatedly have concluded that similar delegation language is sufficiently clear and unmistakable language that the parties intended to arbitrate questions of arbitrability.”
Judge Rayes then turned to the consionability of the arbitration clause. Applying Arizona law, he found the clause neither substantively nor procedurally unconscionable. With respect to procedural unconscionability, Judge Rayes concluded the arbitration clause did not constitute a contract of adhesion since it contained a “conspicuous” opt-out provision and a challenge to the entire driver agreement was beyond the Court’s scope of review. He also found unpersuasive the claim that the delegation of arbitrability was unconscionable, because of the opt-out provision and the delegation being on the second page of the agreement with a clear heading. Judge Rayes concluded that drivers could clearly opt out of the arbitration clause and were not pressured not to do so.
With respect to substantive unconscionability, Judge Rayes noted that the driver failed to meet his burden of producing evidence to show the cost of individually arbitration the question of arbitrability was prohibitively expensive in light of the clause’s fee-splitting provision. Judge Rayes also noted case law upholding the consionability of class-action waivers.
Varon v. Uber (District of Maryland)
On May 3rd, Judge Marvin J. Garbis of the District of Maryland also granted Uber’s motions to dismiss the suit, compel arbitration and strike class allegations in a suit by an Uber driver challenging her classification as an independent contractor. Judge Garbis rejected the driver’s claim that Uber’s arbitration clause were unenforceable, noting his agreement with Sena.
In finding the arbitration clause enforceable, Judge Garbis applied Maryland law and found it was neither procedurally nor substantively unconscionable. With respect to procedural unconscionability, Judge Garbis found the arbitration clause was not a contract of adhesion since it contained what he found to be a clearly stated opt-out procedure with notice in large font, bold, and uppercase.
With respect to substantive unconscionability, Judge Garbis found the arbitration clause was not “so one-sided as to be overly oppressive or unduly harsh to one of the parties” since it contained two fee-splitting clauses and the driver failed to demonstrate she would bear prohibitively expensive costs in bringing the arbitration. He also noted widespread legal agreement on the consionability of class-action waivers. Finally, Judge Garbis found the plain language of the arbitration clause clearly and unmistakably delegated decisional authority with respect to arbitrability to an arbitrator.
Suarez et al v. Uber (Middle District of Florida)
Most recently, on May 4th, Judge James S. Moody, Jr. of the Middle District of Florida granted Uber’s motion to compel arbitration and strike a class action in a suit by four drivers alleging Uber misclassified them as independent contractors. Like the others, Judge Moody found the arbitration clause was not unconscionable and that the parties clearly and unmistakably demonstrated intent to arbitrate questions of arbitrability.
Citing Sena, Judge Moody quoted the clear and unambiguous delegation language and found that since the drivers don’t question its validity, the clear and unmistakable agreement to arbitrate arbitrability meant the driver challenges to the arbitration clause should be left to an arbitrator.
Judge Moody further examined agreement nonetheless and found it was neither procedurally nor substantively unconscionable, applying Florida law. Procedurally, the agreement contained an opt-out provision “conspicuously highlighted in the contract” which drivers could have taken advantage of without retaliation. Substantively, the drivers failed to establish the fee-splitting provision “renders the cost of arbitration prohibitively or unfairly expensive.” Finally, Judge Moody noted “the law is clear that the waiver of class/collective claims cannot render the Arbitration Provision unconscionable.”
Taken together, these cases demonstrate some agreement on the strength and enforceability of Uber’s driver arbitration clauses. Under Florida, Maryland, or Arizona law it is unlikely that Uber drivers will be able to overcome mandatory arbitration clauses in bringing suit to challenge their classification as independent contractors. The cases are also suggestive of how other federal courts would rule with respect to arbitrability, assuming they are called on to apply state laws similar to those in Florida, Maryland and Arizona.
O’Connor, of course, concerns California law. As we’ve discussed, in O’Connor Judge Chen relied on California law to find that the Uber arbitration clause, in use before June 2014, was procedurally and substantively unconscionable (and thus unenforceable). He also relied on California’s Private Attorney General Act (PAGA) to find the Uber arbitration clause in use after June 2014 unenforceable, on the ground that it contained a non-severable waiver of non-waivable PAGA claims.
OnLabor will keep tabs on these developments, as they occur.