Appellate Court Accepted Delegation Of Arbitrability Gateway Determination To Arbitrator, But Found Uber’s Arbitrability Assertion Was “Wholly Groundless” Because Dispute Was Patently Beyond The Scope of Parties’ Arbitration Agreement.
Smythe v. Uber Technologies, Inc., Case No. A149891 (1st Dist., Div. 3 June 8, 2018) (published) (Siggins, J., concurred in by McGuiness, Acting P.J. (retired justice sitting by assignment) and Pollak, J.) was an interesting case involving whether a controversy raised by a driver for both Uber and Lyft fell within the scope of an arbitration clause between driver and Uber. Both the lower and appellate courts decided it did not.
Plaintiff driver, on both of himself and a putative class of Lyft drivers, sued Uber for a practice of directing its drivers and others to create/use fake Lyft accounts to request rides such that Lyft drivers were sent on wild good chases to pick up nonexistent passengers—all designed to discourage drivers from driving Lyft and causing Lyft customers to divert their patronage to Uber. In response, Uber moved to compel arbitration and stay the class actions based on two agreements plaintiff signed with Uber having arbitration clauses. Those provisions required arbitration with respect “to any dispute arising out of or related to this Agreement or termination of the Agreement,” expressly mentioning wage/hour, trade secrets, unfair competition, compensation, expense reimbursement, termination, harassment and claims arising under various trade secret/discrimination/wage hour statutes. The agreements also included a delegation clause specifying that disputes over arbitrability were to be decided by the arbitrator and not a court/judge.
The lower court found driver’s complaint allegations were beyond the scope of the arbitration agreement and that the delegation provision was unenforceable in the context of driver’s advanced claims.
The 1/3 DCA agreed.
It accepted Uber’s premise that the arbitrator decided the gateway arbitrability issue, but decided an important exception applied. Relying upon Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) which was found consistent with California law on the particular issue, the trial court did not have to defer to the arbitrator where the assertion of arbitrability is “wholly groundless,” but could deny the motion to compel arbitration and the request to stay the action. That exception carried the day in Smythe.
Like the lower court, the appellate panel determined that driver Smythe brought his action in his capacity as a driver for Lyft, not Uber, and that the complaint allegations fell outside the ambit of the arbitration clause between Smythe and Uber. “Indeed, the same allegations could just as well be pursued by a Lyft driver who does not drive for Uber.” (Slip Op., at p.5.)
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