Arbitrator, not court, to decide whether Uber drivers must arbitrate FCRA claims
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Friday, September 9, 2016

Arbitrator, not court, to decide whether Uber drivers must arbitrate FCRA claims

By Dave Strausfeld, J.D. In a decision with stark implications for several other, bigger ongoing Uber cases, the Ninth Circuit held an arbitrator must determine in the first instance whether two Uber drivers must arbitrate their claims that the company violated the Fair Credit Reporting Act when it blocked them and similarly situated drivers from continuing to drive for Uber based on information in their consumer credit reports. Instead of resolving the issue of arbitrability itself, the district court should have abided by the delegation clause in the parties’ arbitration agreement and allowed an arbitrator to decide whether their claims were arbitrable, the appeals court ruled, reversing in relevant part and remanding with instructions to grant Uber’s motion to compel arbitration (Mohamed v. Uber Technologies, Inc., September 7, 2016, Clifton, R.). The two drivers alleged that their access to the Uber app was cut off due to negative information in their consumer credit reports, effectively terminating their ability to drive for Uber. Uber moved to compel arbitration of their putative FCRA class action based on the nearly identical agreements that each of the drivers had signed. What delegation clause said. The drivers’ arbitration agreements required all "disputes" to be resolved through final and binding arbitration. Its delegation clause provided that such "disputes" included those "arising out of or relating to interpretation or application of this Arbitration Provision, including the enforceability, revocability or validity of the Arbitration Provision or any portion of the Arbitration Provision"—and delegated to an arbitrator the authority to decide threshold issues of arbitrability. Clear and unmistakable. The district court determined that the delegation provision was not clear and unmistakable because it conflicted with a provision elsewhere in the agreement that specified venue for court actions. But the Ninth Circuit dismissed the purported conflict between these two provisions as "artificial," noting that the venue provision simply addressed the locale for court actions such as those to compel arbitration or enforce an arbitration award. In accordance with Supreme Court precedent, the appeals court wrote, "we are required to enforce these agreements ‘according to their terms’ and, in the absence of some other generally applicable contract defense"—such as unconscionability—"let an arbitrator determine arbitrability." Not unconscionable. The appeals court went on to hold that the arbitration agreement was not an unconscionable contract of adhesion. Under the Ninth Circuit’s decision in Circuit City Stores, Inc. v. Ahmed, an arbitration agreement is not adhesive if there is an opportunity to opt out of it. Here, the drivers had the chance to do so. And, because the agreement was not procedurally unconscionable, there was no need to reach the question whether it was also substantively unconscionable, since both forms of unconscionability must be present in order for an agreement to be unenforceable under California law. The drivers also raised an argument under the so-called "effective vindication" doctrine. Specifically, they asserted that the delegation clause was invalid because drivers would be required to split the costs of arbitration equally with Uber—costs that allegedly might exceed $7,000 per day—and thus would be precluded from effectively vindicating their federal statutory rights. But Uber undercut this argument by committing to paying the full costs of arbitration. PAGA claim severable. One of the drivers brought a California Private Attorneys General Act claim that did not belong in arbitration, however. His arbitration agreement specifically required the district court, and not the arbitrator, to consider challenges to the enforceability of the PAGA waiver. Because of that carve-out, the appeals court considered on the merits whether the PAGA waiver was enforceable, and found that it was not, based on the Ninth Circuit’s decision in Iskanian v. CLS Transp. L.A., LLC. The PAGA waiver was severable, however, so it did not invalidate the remainder of the arbitration agreement. Background check company. Finally, one of the drivers named an independent background check company as a defendant alongside Uber. This company moved to join Uber’s motion to compel the driver into arbitration, even though it was not a signatory to the agreement between Uber and the driver. The company argued it should be covered by the arbitration agreement because: (1) the driver had alleged an agency relationship between the company and Uber; (2) the company and Uber shared an "identity of interest"; and (3) the cause of action alleged against the company was "intimately founded in and intertwined with" underlying contract obligations. But the appeals court, like the district court, was not persuaded by the argument that the drivers should have to arbitrate their claims against the background check company.

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