Uber drivers’ class action ‘gig’ litigation dealt critical blow

By Lisa Milam, J.D. — In a significant blow to bellwether litigation challenging the expanding “gig economy” business model—namely, multiple class actions brought by Uber drivers who contend they were misclassified as independent contractors, and thus deprived of proper wages (among other claims)—a Ninth Circuit panel ruled that its earlier decision, reversing a district court’s refusal to compel arbitration in one case, meant that the lower court’s orders denying Uber’s motion to compel and granting class certification in other cases must also be reversed, effectively abolishing a 160,000-member class against the rideshare giant in the process.

Throwing a bit more cold water on the consolidated cases before it, the appeals court reversed as moot an order controlling class communications in one case pursuant to Rule 23(d) (O’Connor v. Uber Technologies, Inc., September 25, 2018, Clifton, R.).

Pending before the Ninth Circuit were consolidated putative class and collective actions brought by Uber drivers asserting claims under the FLSA and various state statutes (among other causes of action) arising from Uber’s classification of the drivers as independent contractors rather than employees. Several district court decisions had issued in four different actions, prompting a dozen appeals, which were consolidated and addressed here.

Motions to compel arbitration. It all started with the O’Connor complaint, first filed in 2013 and alleging various California Labor Code violations arising from Uber’s classification of its drivers as independent contractors. The O’Connor drivers claimed that Uber failed to remit the entirety of the tips paid by customers to drivers, and also failed to reimburse their necessary business expenses, both violations of state wage law. The plaintiffs quickly followed up their complaint with a bid to declare Uber’s arbitration agreements unconscionable. The district court stopped short, though; it merely barred Uber from enforcing its arbitration agreement against drivers who had entered into the agreement but did not opt out. It also required Uber to revise the agreement to include enhanced notice provisions and directed Uber to extend the opt-out period for an additional 30 days once the revised agreements were distributed. Uber rolled out a revised arbitration agreement soon thereafter.

Then came Mohamed, filed in 2014 and asserting similar state-law claims. In 2015, the district court denied Uber’s motion to compel arbitration in that case, first finding that it had authority to determine whether the claims at issue were arbitrable (as the clause delegating that authority to the arbitrator was not clear and conspicuous); then it held the arbitration provisions were both procedurally and substantively unconscionable and thus unenforceable. Consequently, the court denied Uber’s motion to compel arbitration in several other cases pending before it, including O’Connor. However, a Ninth Circuit panel in 2016 reversed the district court’s order refusing to compel arbitration, finding that the arbitration provisions in question delegated the threshold question of arbitrability to an arbitrator and also that this provision was not procedurally unconscionable; moreover, the opt-out provision had afforded the drivers a meaningful opportunity to decline arbitration.

With the case before it again here, the appeals court rejected additional arguments put forth by the drivers in support of their contention that the arbitration agreements were not enforceable. The plaintiffs could not dispute that the Mohamed holding applied to the other consolidated cases, but they tried several other lines of attack to no avail. First, they argued that the O’Connor plaintiffs had constructively opted out of arbitration on behalf of the whole class. But the appeals court noted the plaintiffs were without authority to so bind the other drivers, and a Georgia supreme court decision in support of this notion was neither binding nor persuasive—and was irrelevant to the Federal Arbitration Act, which mattered here.

The plaintiffs also argued that the arbitration agreements were unenforceable because they contained class action waivers, in violation of the NLRA. But this argument had been foreclosed, of course, by the Supreme Court’s holding in Epic Systems Corp. v. Lewis. In short order, then, the appeals court reversed the district court’s orders denying Uber’s motions to compel arbitration in the cases consolidated before it here.

Class certification. The lower court in the O’Connor action certified a 160,000-member class of Uber drivers on their tip claims in 2015. Later, the court would certify an additional subclass of drivers, including those who accepted arbitration agreements in 2014 and 2015, and certify the class and subclass on the expense reimbursement claims. But the class certification order also had to be reversed in light of the Ninth Circuit’s previous Mohamed decision because the class had been defined, and class certification had been premised, on the district court’s erroneous conclusion that Uber’s arbitration agreements were unenforceable.

Remand in order. The O’Connor plaintiffs urged the appeals court to keep the existing class certification orders intact—that it should simply remand the cases so that they could redefine the class in accordance with some different class theory, and invite the district court to revisit class certification anew. The Ninth Circuit agreed remand was proper here, but deemed it inappropriate to leave the class certification orders in place in the meantime.