Just two days after Labor Day, the Ninth Circuit has ruled against Uber drivers in a decision that could seriously limit their ability to pursue class actions against the company. On Wednesday, the Ninth Circuit ruled that Uber's driver contracts, which include causes requiring individual arbitration of disputes, were not unconscionable and could be enforced against the drivers.
The ruling comes in response to a driver class action over background checks, not the massive employee misclassification class action the company also faces, but the Ninth's decision could have significant implications for those plaintiffs as well.
Arbitration Clause Not Unclear, Not Unenforceable
The case, Mohamed v. Uber Technologies, revolves around Uber's background check practices, which drivers claimed violated the Fair Credit Reporting Act when it terminated drivers based on their credit reports. But Uber claimed that the drivers' class action was barred by the arbitration clause in their contracts -- which the drivers could have, but did not, opt out of.
That clause requires all disputes to be resolved individually and in arbitration, effectively denying drivers' ability to bring class actions. Further, the arbitration clause said that it covered disputes "arising out of or relating to interpretation or application of this Arbitration Provision."
In district court, Judge Edward Chen ruled that the agreement's delegation of the question of arbitrability to the arbiter was ineffective because it was not clear and unmistakable, given the contract's contradictory venue provisions. And even if it was clear, Judge Chen reasoned, that delegation would be unenforceable as unconscionable. "We disagree," Judge Richard R. Clifton wrote for the unanimous three-judge panel.
"Not Good" for Drivers
Generally, the question of arbitrability is "an issue for judicial determination," according to the 2002 Supreme Court case of Howsam v. Dean Witter Reynolds, Inc., "unless the parties clearly and unmistakably provide otherwise." Uber's language was even clearer and more unmistakable than other arbitrability delegation clauses the Ninth Circuit had found valid before, the Ninth noted. And any conflict between the clause and the contract's venue provisions "are artificial," the Ninth found.
The ruling allows Uber to compel arbitration on almost all of the class action's claims.
The ruling has no immediate effect on the separate employment classification lawsuit, but the decision "is not good," according to Shannon Liss-Riordan, the attorney in that case. Uber and the drivers had proposed settling that litigation for as much as $100 million -- a settlement which Judge Chen rejected last month, finding that it too steeply discounted the potential value of drivers' claims.
Related Resources:
- Appeals Court Deals Blow To Uber Class Actions, Holding Arbitration Pacts Enforceable (Forbes)
- Uber Lawsuit: Chen's Class Certification to Be Reviewed by 9th Cir. (FindLaw's U.S. Ninth Circuit Blog)
- Uber Drivers Score Another Win in the 9th Cir. (FindLaw's U.S. Ninth Circuit Blog)
- New Car Owners Not Bound by Sirius XM Arbitration Clause: 9th Cir. (FindLaw's U.S. Ninth Circuit Blog)
