Antitrust Law Daily Uber app user agreed to arbitrate antitrust claims, but waiver issue unresolved
Thursday, August 17, 2017

Uber app user agreed to arbitrate antitrust claims, but waiver issue unresolved

By Jeffrey May, J.D.

A customer of ride-hailing service Uber agreed to arbitrate claims against the company and its former chief executive for engaging in price fixing. The customer agreed to a mandatory arbitration provision in the company’s terms of service when he registered for an account using the Uber smartphone application. The Uber app provided reasonably conspicuous notice of the terms of service, which included the arbitration agreement. The U.S. Court of Appeals in New York City vacated a lower court’s denial of the defendants’ motions to compel arbitration. The case, however, was remanded to determine in the first instance whether the defendants waived their right to arbitrate by actively litigating the underlying lawsuit (Meyer v. Uber Technologies, Inc., August 17, 2017, Chin, D.).

In December 2015, Spencer Meyer filed a complaint in the federal district court in New York City, against Travis Kalanick—the founder and then-CEO of Uber. Among other things, Meyer alleged that the Uber App allowed drivers to fix prices amongst themselves. Uber was later joined as a defendant.

Before filing suit, Meyer had downloaded the Uber app, registered for an Uber account, and used the service approximately 10 tens. To complete the account registration process, users had to click the button on their display screen marked "REGISTER." Below the input fields and buttons on the Payment Screen was black text advising users that "[b]y creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY." The terms of service contained a mandatory arbitration clause. Meyer contended that he did not read the terms.

The federal district court in New York City denied a motion to compel arbitration. Applying California law, the court ruled that the notice of the terms of service was not reasonably conspicuous and that the user did not unambiguously manifest assent to the arbitration provision by registering for an account. The court did not reach other defenses to arbitration, including whether defendants waived their right to arbitrate by actively participating in the litigation and whether Kalanick was also entitled to enforce an arbitration agreement to which he was not a signatory. The lower court stayed proceedings pending appeal, noting the benefits that would flow from appellate court clarification of what constitutes adequate consent to so-called "clickwrap," "browsewrap," and other such website agreements.

Reasonable notice of arbitration agreement. An agreement to arbitrate exists where the notice of the arbitration provision is reasonably conspicuous and manifestation of assent unambiguous as a matter of law, the appellate court explained. Although Meyer contended that he was not on actual notice of the hyperlink to the terms of service or the arbitration provision itself, the appellate court concluded that the design of the screen and language used rendered the notice provided reasonable as a matter of California law. That the terms of service were available only by hyperlink did not preclude a determination of reasonable notice, the court also noted.

Manifestation of assent. Meyer was not required to assent explicitly to the contract terms. He clicked a button marked "Register," underneath which the screen stated "By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY." Even though Meyer's assent to arbitration was not express, it was unambiguous in light of the objectively reasonable notice of the terms, the appellate court held. A reasonable user would know that by clicking the registration button, he was agreeing to the terms and conditions accessible via the hyperlink, whether he clicked on the hyperlink or not, the court added.

Waiver. The district court never reached the issue of whether the defendants waived their right to arbitrate by actively litigating the underlying lawsuit. This was an issue for the district court to consider in the first instance. Thus, while the decision denying the defendants' motions to compel arbitration was vacated, the case was remanded to the district court to consider whether the defendants have waived their rights to arbitration and for any further proceedings.

The case is Docket Nos. 16-2750-cv, 16-2752-cv.

Attorneys: Jeffrey A. Wadsworth, Brian Marc Feldman, Edwin Michael Larkin, III, and Gregory M. Dickinson (Harter Secrest & Emery LLP), Bryan L. Clobes and Ellen Meriwether (Cafferty Clobes Meriwether & Sprengel LLP), and Matthew L. Cantor and Ankur Kapoor (Constantine Cannon LLP) for Spencer Meyer. Theodore J. Boutrous, Jr., Daniel G. Swanson, Cynthia E. Richman, Joshua S. Lipshutz, and Reed Brodsky (Gibson, Dunn & Crutcher LLP) for Uber Technologies, Inc. Karen L. Dunn, William A. Isaacson, Ryan Y. Park, and Peter M. Skinner (Boies Schiller Flexner LLP) for Travis Kalanick.

Companies: Uber Technologies, Inc.

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