Labor & Employment Law Daily DoorDash ordered to arbitrate independent contractor claims—5,010 times
Thursday, February 13, 2020

DoorDash ordered to arbitrate independent contractor claims—5,010 times

By Lisa Milam, J.D.

A federal judge did not take kindly to the gig company’s attempt to skirt arbitration after imposing a mandatory arbitration agreement on its couriers.

DoorDash delivery couriers—5,010 of them—who filed suit contending they missed out on overtime pay due because they were misclassified as independent contractors were granted their motion to compel the gig company to arbitrate their wage claims. In harsh words, a federal judge in California refused to let DoorDash dodge individual arbitration after the company had imposed mandatory individual arbitration on the couriers. The court also denied a motion to stay the proceedings pending approval of a settlement in a related state court action (Abernathy v. DoorDash, Inc., February 10, 2020, Alsup, W.).

Tactical maneuvers. Flipping the usual script, it was the plaintiffs seeking to compel arbitration here, an increasingly common “be careful what you wish for” scenario. As employers look to fend off class actions by imposing mandatory arbitration with class waivers, the plaintiff’s bar has begun to respond by “stressing the system”—filing an onslaught of arbitration demands. In calling the employer’s bluff, plaintiffs hope to pressure employers into waiving arbitration altogether. But defendants have cried foul, contending the practice is an abuse of process.

Judicial pushback. As Judge William Alsup explained it, “For decades, the employer-side bar and their employer clients have forced arbitration clauses upon workers, thus taking away their right to go to court, and forced class-action waivers upon them too, thus taking away their ability to join collectively to vindicate common rights. The employer-side bar has succeeded in the United States Supreme Court to sustain such provisions.”

“The irony, in this case, is that the workers wish to enforce the very provisions forced on them by seeking, even if by the thousands, individual arbitrations, the remnant of procedural rights left to them. The employer here, DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause. No doubt, DoorDash never expected that so many would actually seek arbitration. Instead, in irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed, at least by this order.”

Arbitration agreement. DoorDash attempted to avoid arbitrating the claims under the arbitration agreement that the couriers had to sign (electronically) as a condition of working for the gig company. The mutual agreement provided that the parties waived their right to have any dispute brought or “heard as” a class, collective, or representative action. Pursuant to that contract, the attorney representing couriers on their FLSA and California Labor Code claims filed individual demands for arbitration with the AAA on behalf of 2,250 claimants; a month later, counsel filed demands on behalf of additional 4,000 claimants.

DoorDash balks at fees. Under AAA rules, individuals must pay a filing fee of $300 to arbitrate, and responding companies must pay fees of $1,900. The petitioners paid more than $1.2 million in filing fees, but DoorDash balked at paying its nearly $12 million share of the fees (arising from two different litigations). Counsel for DoorDash notified AAA and plaintiffs’ counsel that the company was “under no obligation” to pay the administrative fees, having concluded there were “significant deficiencies with the claimants’ filings.” Consequently, AAA administratively closed the 6,250 pending individual disputes. The drivers then filed a motion to compel arbitration, now on behalf of 5,879 claimants.

A separate suit. Meanwhile, DoorDash was facing a separate misclassification class action in a California state court, and had reached a tentative settlement. (It was not lost on Judge Alsup that DoorDash’s initial response in that case was to move for dismissal on the grounds that the state-law petitioners had a duty to arbitrate.).

Some of the unnamed class members in that case are petitioners here and, while the legal issues at stake were different, any petitioner who accepts the settlement in that action will release the claims that would be arbitrated here. Counsel for the petitioners in this case have filed objections to the settlement on behalf of proposed intervenors, and the state court vacated a scheduled hearing on the pending motion for preliminary approval, designating the action as a complex case. Still, DoorDash moved to stay the couriers’ motion to compel arbitration pending final approval of the settlement in the state court action. The court denied the stay.

No double-dipping. If the couriers want individual arbitrations in this case, the court noted that it expects they will opt out of the state-law settlement, once approved. DoorDash pointed out that the couriers might actually prefer to take part in the state-court settlement. This was a distinct possibility, the court acknowledged, and cautioned plaintiffs’ counsel that “it would be a serious problem to assert that the firm has attorney-client privilege with a DoorDash courier who has not authorized [the firm] to represent him or her, or to initiate arbitration on behalf of a petitioner without his or her informed consent.”

On the other hand, the court was also concerned that the proposed state-court settlement apparently aims to prevent opt-outs via petitioners’ counsel and, to that end, has imposed a requirement that an “original ink signature by each individual” is required to effectuate an opt-out. “This provision is an obvious attempt to make it as hard as possible for petitioners to opt out, thus binding them to the [state-court] settlement,” the court observed, but left it to the judge in that case to scrutinize the settlement accordingly.

Arbitration compelled (as to some couriers). The court granted the motion to compel as to 5,010 petitioners, ordering DoorDash “to immediately commence AAA arbitration.” However, the court denied the motion as to 869 petitioners who merely submitted witness statements asserting that they did not remember opting out of arbitration, but do not have a valid arbitration agreement with DoorDash.

Arbitrator should impose fees, if. DoorDash raised concerns as to whether plaintiffs’ counsel was authorized to represent certain other petitioners. The court deferred any such dispute to the arbitrator. However, if the firm is found to have overstated its authority, or the couriers had not perfected their right to arbitrate, then the arbitrator was instructed to order the firm to fully reimburse DoorDash for all arbitration fees and attorney’s fees incurred by the company in defending arbitration. Likewise, if any petitioner does attempt to double-dip and participate in both proceedings, the court recommended that the arbitrator impose an order requiring plaintiffs’ counsel to reimburse DoorDash for all arbitration and attorney’s fees incurred in defending the matter twice.

S.B. 707 does not apply. The couriers asked that DoorDash be required to pay all fees and costs related to the arbitration pursuant to California Senate Bill 707, which requires a party that drafted an arbitration agreement to pay fees and costs before an arbitration can proceed, “if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.” However, this provision only took effect January 1, 2020, and it did not apply retroactively. Because the events in this case occurred prior to enactment, the motion was denied.

Motion to seal denied. Lastly, the court denied a motion by DoorDash to seal portions of its reply brief in this case, and certain other documents. DoorDash wanted to seal communications with the International Institute for Conflict Prevention & Resolution (CPR) about the case and the drafting of a “mass arbitration protocol,” and further drafts and revisions to the protocol that went back and forth between them, which were marked confidential.

“Just because such information has been designated as confidential does not mean that it deserves to be kept from the public once filed in the federal district court,” Alsup wrote. “The district court should not be a party to concealing this information from the public, especially as it concerns an arbitration organization that holds itself out to the public as impartial. These documents would be useful to the public in evaluating the true extent to which the organization is impartial.”

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