United States: O'Connor V. Uber: The Ninth Circuit Unravels The Class Certification Orders In Appeals From Four Related Actions

In O'Connor v. Uber Technologies, Inc., a Ninth Circuit panel, in four related appeals from District Judge Edward Chen's rulings, reversed the denial of Uber Technologies Inc.'s motions to compel arbitration, also reversed the district court's class certification orders and found the Rule 23(d) orders entered by the district court were moot. The opinion impacts claims of hundreds of thousands of present and former Uber drivers who attempted to proceed as classes in these actions.

Writing for the majority, Judge Richard R. Clifton began the Sept. 25, 2018, opinion by acknowledging that in Mohamed v. Uber, 848 F.3d 1201, 1206 (9th Cir. 2016), the same panel (judges Richard Tallman, Clifton and Sandra Ikuta) reversed the district court's orders denying Uber's motion to compel arbitration. Then, in the O'Connor appeals, the plaintiffs made additional arguments supporting their position that the arbitration agreements were unenforceable, but they were again rejected as "unpersuasive" in the new opinion. And because class certification was based on the unenforceability of the arbitration agreements, those orders and related Rule 23(d) rulings had to be reversed as well.

The four consolidated appeals included (1) O'Connor v. Uber Technologies, Inc.; (2) Yucesoy v. Uber Technologies, Inc.; (3) Mohamed v. Uber Technologies, Inc.; and (4) Del Rio v. Uber Technologies, Inc. Collectively, the high-profile litigation involving Uber's business model has garnered much attention over the past five years, with many significant district court and Ninth Circuit decisions along the way.

The Winding Road to Resolution

The cases began when two Uber drivers filed a class action against the company in August 2013 (the O'Connor action) alleging claims for failure to give the entire gratuity paid by customers to drivers in violation of the California Labor Code (tip claim) and for misclassifying the drivers as independent contractors and not paying their business expenses (for vehicles, gas and maintenance), also in violation of the California Labor Code (expense reimbursement claim).

Shortly after the filing, the O'Connor plaintiffs sought to foreclose or limit Uber's use of its arbitration agreement. The district court granted the plaintiffs' request in part, enjoining Uber from enforcing its arbitration agreement and requiring enhanced notice of opt-out provisions and extension of the opt-out periods.

Plaintiff Abdul Mohamed filed a putative class action against Uber and an independent background check company on Nov. 24, 2014, raising a variety of federal and California state claims, including under the Fair Credit Reporting Act. The district court denied Uber's motion to compel arbitration based on its 2013 and 2014 arbitration agreements, finding in part that the arbitration provisions were unconscionable.

Ultimately, in Mohamed, the Ninth Circuit panel reversed the district court's refusal to grant Uber's motion to compel arbitration. See 848 F.3d at 1210-12. The Mohamed panel held that the arbitration agreement delegated the question of arbitrability to the arbitrator, that the delegation provisions were not adhesive under California law and thus not procedurally unconscionable, and that the opt-out provisions of the agreement were not illusory and instead gave drivers an appropriate opportunity to opt out. 848 F.3d at 1207-12.

After the 2016 Mohamed opinion, the district court in O'Connor made certain prospective adjustments to its orders but refused to vacate its order retroactively, leaving it effective as to drivers who did not opt out of the agreement during the period from Dec. 10, 2015, to Aug. 18, 2016. The present appeals resulted.

New Responses to the Motions to Compel

Even after Mohamed, the plaintiffs argued that the arbitration agreements in the O'Connor appeals were unenforceable for two additional reasons. First, the plaintiffs argued that even if enforceable, the arbitration agreements were "irrelevant" because the lead plaintiffs in O'Connor "constructively opted out of arbitration on behalf of the entire class." The sole authority for this astonishingly incorrect proposition was a Georgia Supreme Court decision, Bickenstaff v. Suntrust Bank, 788 S.E.2d 787 (Ga. 2016). The Ninth Circuit panel quickly dispensed with that argument, finding it was lacking in factual and legal support. The O'Connor lead plaintiffs had no authority to opt out on behalf of other drivers. Bickerstaff didn't give the lead plaintiffs the authority the plaintiffs claimed and had no federal law support. Indeed, the panel found that an arbitration-targeted rule, as in Bickenstaff, would be pre-empted by the Federal Arbitration Act, citing AT&T Mobility LLC v. Concepcion 563 U.S. 333, 341-43 (2011).

The second "new" argument raised by plaintiffs was that the agreement's class action waiver violated the National Labor Relations Act. But Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), destroyed that argument, and the plaintiffs ultimately acknowledged it.

The Demise of Class Certification

The panel then moved to the class certification orders in O'Connor, finding that in light of Mohamed, the class certification orders had to be reversed. The lower court's ruling was entirely based upon the finding that the arbitration agreements were not enforceable. But as noted in Mohamed, the enforceability of the agreements was a question the arbitrator, not the district court, was designated to answer.

Despite the intervening decisions, the plaintiffs still maintained that the cases should be remanded to the district court "so that it could consider certification of a class that might be defined differently based on some new analysis." The panel properly refused to leave the class certification orders standing and reversed them. Finally, the panel also set aside the Rule 23(d) orders, directed at limiting the impact of new arbitration agreements on class or putative class members, as moot and lacking in foundation.

While not unexpected after Epic Systems, the O'Connor opinion eliminated a number of roadblocks to individual arbitration thrown up in the four related actions. The next question will be how the plaintiffs' counsel will react. A motion for rehearing en banc is possible. And some sources already report that thousands of drivers are willing to agree to individual arbitration. Time will tell.

Bottom Line:

The Ninth Circuit has removed a number of impediments to individual arbitration in the O'Connor appeals. What happens next in the case remains uncertain, but the tactics used by the plaintiffs' counsel are also likely to be instructive as to claim management after class certification is denied.

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