United States: The Next Chapter – Uber Responds To District Court Order With A New Arbitration Agreement

Last Updated: December 22 2015
Article by John B. Lewis

Not only did Uber respond to the district court's December 9, 2015, ruling (discussed in our December 11 blog) with an immediate notice of appeal, but on December 11 it rolled out a new arbitration agreement for its drivers. This maneuver has garnered considerable media attention and prompted the plaintiffs to file an emergency motion to enjoin Uber's communications with class members on the same day.

The New Arbitration Agreement

The new arbitration agreement, titled "Technology Service Agreement," runs 21 pages; contains revised provisions that advise drivers of pending litigation against the company, including the O'Connor action; and contains an opt-out provision as well as a class, collective, and representation action waiver. And the new agreement specifically addresses PAGA claims in three significant provisions. First, it states:

Except as provided below, this provision will preclude you from bringing any class, collective, or representative action (other than actions under the Private Attorneys General Act of 2004 ("PAGA"), California Labor Code § 2698 et seq. ("PAGA")) against the Company or Uber, and also precludes you from participating in or recovering relief under any current or future class, collective, or representative (non-PAGA) action brought against the Company or Uber by someone else.

Second, in the "Limitations on How This Agreement Applies" section, it declares:

The disputes and claims set forth below shall not be subject to arbitration and the requirement to arbitrate set forth in this Arbitration Provision shall not apply:

A representative action brought on behalf of others under the Private Attorneys General Act of 2004 ("PAGA"), California Labor Code § 2698 et seq., to the extent waiver of such a claim is deemed unenforceable by a court of competent jurisdiction; (Section 15.3 (ii)).

Finally, section V of the new agreement, dealing with how arbitration proceedings should be conducted, contains a PAGA waiver but also addresses the potential invalidity of that waiver. It provides, in part:

If any provision of the PAGA Waiver is found to be unenforceable or unlawful for any reason, (1) the unenforceable provision shall be severed from this Agreement; (2) severance of the unenforceable provision shall have no impact whatsoever on the Arbitration Provision or the Parties' attempt to arbitrate any remaining claims on an individual basis pursuant to the Arbitration Provision; and (3) any representative action brought under PAGA on behalf of others must be litigated in a civil court of competent jurisdiction and not in arbitration. To the extent that there are any claims to be litigated in a civil court of competent jurisdiction because a civil court of competent jurisdiction determines that the PAGA Waiver is unenforceable with respect to those claims, the Parties agree that litigation of those claims shall be stayed pending the outcome of any individual claims in arbitration.

These provisions appear to be an attempt to remedy deficiencies that Judge Edward Chen's December 9 order found in the predecessor arbitration agreement. These provisions also establish a procedure for when PAGA claims must be resolved in court and the remaining individual claims are arbitrated.

Plaintiffs' Response to the New Agreement

Not unexpectedly, the plaintiffs responded quite negatively to the new Uber arbitration agreement. In their Emergency Motion to Enjoin Uber's Communications, filed on December 11, the plaintiffs maintained that "without any warning to or communication with Plaintiff's counsel – Uber sent new arbitration agreements to its drivers in an apparent attempt to deceive unwitting class members into giving up their right to participate in litigation."

Proceeding on the theme of "misleading communications," the plaintiffs argued that ". . . by distributing a new arbitration agreement within days of this Court's ruling on class certification, Uber has potentially tricked thousands of class members into being required to arbitrate their claims and effectively opting out of the class action . . . "

On the premise of these arguments, the plaintiffs asked the district court to refuse to enforce the new arbitration agreement, to enjoin future Uber communications with class members that could discourage their participation in the case, and to warn Uber against future attempts to discourage participation in the case.

On December 12, the court shortened the time for filing Uber's Opposition to the Emergency Motion and set a hearing on the plaintiffs' motion for December 17.

Unfortunately, the issues surrounding PAGA and its enforcement and required procedures will not be resolved soon. On December 14, the U.S. Supreme Court denied certiorari in Carmax Auto Superstores California LLC v. Aresco, No. 15-236, a case that could have decided whether PAGA claims were preempted by the Federal Arbitration Act. Further, the proper procedures for resolving PAGA claims in court are still being established by California state courts. Indeed, the California Supreme Court now has before it a case that could determine the proper sequencing of discovery in a PAGA action. See Williams v. Superior Court, No. S227228. So PAGA-related questions will occupy not only the Uber court but many others for the foreseeable future.

BOTTOM LINE:

The Uber litigation promises to develop new law on the interpretation of arbitration agreements, PAGA waivers, and the scope of permissible communications with class or putative class members.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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