How Will This Ultimately Play Out?
In Mohamed v. Uber Technologies and Gillette v. Uber Technologies, Nos. 15-16178 and 16181 (9th Cir. 9/7/16), cases in which district court judge Edward M. Chen found arbitration clauses between Uber and its drivers to be unenforceable, the 9th Circuit panel has affirmed in part and reversed in part.
Uber drivers Mohamed and Gillette alleged that use of consumer credit reporting information violated the Fair Credit Reporting Act and other credit reporting statutes, and Gillette alleged Uber misclassified him and other employees as independent contractors.
The 9th Circuit, in an opinion penned by Judge Clifton, holds that the issue of arbitrability was effectively delegated to the arbitrator by “clear and unmistakable” language. Similarly, the issue of arbitrability of the PAGA claims was clearly and unmistakably delegated to the arbitrator in Mohamed’s case, but Gillette’s PAGA claim could proceed in court on a representative basis under the holding of Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129 (Cal. 2014).
Furthermore, the delegation provisions were not unconscionable. Here, an opportunity to opt-out of arbitration altogether appeared to be decisive.
Finally, arbitration against another defendant, Hirease, LLC, was held unenforceable. Hirease had allegedly violated credit reporting statutes by providing credit information about Uber drivers that Uber used to terminate Uber drivers. However, Hirease was not a signatory to the contracts with the arbitration provisions, nor was it an agent of Uber.
I note that the press has scored this as a big win for Uber. See for example Joel Rosenblatt and Linda Hurtado’s September 7 article in Bloomberg, entitled “Uber Gains Leverage Against Drivers With Arbitration Ruling.”
For one thing, this will not make settlement easier in another case involving Uber, because, as I posted on August 18, 2016, Judge Chen rejected a class settlement of Uber and Uber drivers precisely at a time when the enforceability of the arbitration clause was pending before the 9th Circuit.
However, there are still some likely twists in the road ahead.
First, the Uber drivers still have the ability to pursue PAGA claims in court in the Gillette lawsuit. The arbitrator must still make some decisions about the arbitrability of the PAGA claims in the Mohamed lawsuit. The existing PAGA claims are likely to be a source of some leverage for the Uber drivers.
Second, the fact that the arbitrator now gets to rule on the enforceability of the arbitration clauses does not necessarily mean that the Uber drivers have lost the right to proceed as a class. The Ninth Circuit ruled on August 22, 2016 in Morris v. Ernst & Young (see my August 23, 2016 post), that an employee class action waiver violates the National Labor Relations Act, because such a waiver prohibits employees from exercising their right to “concerted activity.” So Uber gets a “second bite of the apple”, but if the arbitrator follows Morris, the arbitrator could hold the class action waiver unenforceable.
Morris v. Ernst & Young included a strong dissent by Judge Ikuta who thought the majority opinion deviated from precedent.
Because a mistake of law is generally no reason for vacating the award of an arbitrator, an arbitrator could follow the reasoning of the panel opinion in Morris v. Ernst & Young, and blow out any class action waivers, or follow the dissenting opinion – and in either case, it would not provide a basis for vacating an arbitrator’s award.
So the road ahead for Uber and its drivers could be bumpy, winding, uncertain – and long.