Employment Law Daily Too many unanswered questions still for court to approve $100M Uber settlement
Wednesday, July 6, 2016

Too many unanswered questions still for court to approve $100M Uber settlement

By Lisa Milam-Perez, J.D. Still not ready to grant preliminary approval to a $100 million settlement that would resolve two class actions brought by Uber drivers claiming they were misclassified as independent contractors, the federal judge overseeing the lawsuits said the parties failed to provide sufficient information from which he could assess whether the proposed deal was "fair, reasonable, and adequate." Acknowledging that the agreement came after "long, contentious litigation between the parties," and that there were "significant risks to both sides," the court said it was obliged nonetheless to ensure the interests of class members were safeguarded, "particularly where new uncertified claims" were added at the eleventh hour. Accordingly, further scrutiny was warranted, although the court noted it was prepared to find the proposed deal, once clarified or modified, passed muster. The court ordered supplemental briefing by July 15 (O’Connor v. Uber Technologies, Inc., June 30, 2016, Chen, E.). The settlement in this bellwether "gig economy" litigation has drawn fire from other Uber drivers, in part because of the fact that, under the deal, the plaintiffs concede the core issue: the drivers are to remain "independent contractors." Plaintiff’s counsel had dropped her fee request by $10 million in light of pushback from the original named plaintiff in one of the cases and other objectors, and the court had rejected the parties’ bid to file certain information in the proposed settlement under seal. In its latest ruling, the court ordered supplemental briefing on numerous issues. Newly added claims. While the lawsuits had been whittled to claims based on expense reimbursement and the payment of tips, the settlement agreement would have plaintiffs file amended complaints expanding the causes of action to include any claims based on or reasonably related to their misclassification as independent contractors—such as overtime, minimum wage, meal and rest breaks, and workers’ compensation—and release them. The agreement would also settle civil penalties due under the Private Attorney General Act (PAGA). These claims would cover claims brought in at least 15 other suits pending in federal and California state courts. Yet the plaintiffs had not yet shown that they could satisfy Rule 23 requirements, particularly as to whether they could properly represent the class on these newly added claims. Nor did the parties provide enough information on what the full verdict value might be of those new claims—the wage and hour claims, in particular—which were being released. For example, they valued the overtime claims at $2.4 million, but they didn’t show their work. The rationale for this figure was unclear, as there was apparently no discovery as to the factual basis for this amount. "In addition to the lack of information on how the parties calculated the full verdict value of the overtime and expense claims, the parties assign no value to the vast majority of the claims that are being added to the case," the court added. As such, they had brushed aside objectors’ contentions that these claims had measurable value. For example, the settlement assigned no value to California meal and rest break claims, saying they were meritless because the drivers could just log off the Uber app and take a meal whenever they wanted. But the objectors had pointed out that under California law, employers must "affirmatively authorize all breaks required by law," and could not avoid liability merely by arguing that the employer didn’t stop them from taking a break. Likewise, waiting-time compensation due under California law, and workers’ compensation insurance claims were given short shrift. Uber’s arbitration agreement. The court also wanted the parties to address the status of Uber’s December 2015 arbitration agreement, unveiled by Uber after the court invalidated earlier agreements. The status of the arbitration agreement was in flux. (Weeks ago, the Ninth Circuit had heard oral argument on whether the court’s earlier orders as to the enforceability of the company’s 2013 and 2014 arbitration agreements; plaintiffs’ counsel indicated the appeals court was poised to overturn the district court’s holding, judging from the line of questioning at the hearing.) Under the proposed settlement, the parties stipulated that the December 2015 agreement was enforceable, but only "for purposes of this litigation," ostensibly leaving future litigants free to attack it. However, objectors argued that the plain language of the agreement barred future challenges to the agreement in any other case—"even if the claim is unrelated to misclassification and is not otherwise covered in this language." All said, it was unclear what effect the settlement would have on settlement class members, including claims outside the scope of the settlement agreement. How might it impact the due process rights of those drivers who had not opted out of the arbitration agreement, in reliance on the court’s previous orders? What of the PAGA claims? Noting that the parties’ calculation of the PAGA civil penalties at stake—PAGA penalties were estimated at over $1 billion—did not appear to rest on an accurate foundation, the court requested "a more accurate assessment" of its potential verdict value. Also, noting that the parties suggested that a $1 million valuation was "a reasonable real-world full verdict value" of these claims, the court wanted "more substantial legal authority for why a 99.9 percent discount in potential PAGA recovery was warranted," particularly where PAGA claims cannot be compelled to arbitration. In a separate order, the court invited comments from the California Labor and Workforce Development Agency on the proposed PAGA settlement. Other unanswered questions. Some $16 million of the settlement amount was contingent upon an Initial Public Offering (IPO) of Uber yielding an average valuation of at least 1.5 times Uber’s most recent valuation within 365 days from the closing of the IPO. But there was no information as to how likely it was that this payment would be triggered. And, as for those nonmonetary provisions, it was unclear how long they would last (a problem for the court, in trying to ascertain the value of this relief). According to the written agreement, the provisions would stay in effect "for a bare minimum of two years," but it was unclear, as currently written, when they would take effect and when they would end. Further muddying the waters: Counsel for Uber said the provisions could stay in effect for just a year and a half.

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