On The Case

After Postmates again balks at arbitration fees, workers seek contempt order

(Reuters) - Lawyers representing more than 5,200 Postmates couriers who have filed individual demands for arbitration of their wage-and-hour claims against the food and grocery delivery company filed a contempt motion last week in Oakland federal court, arguing that Postmates is defying an Oct. 22 order compelling the company to arbitrate workers' claims.

I told you last month about Postmates’ showdown with the couriers’ lawyers at Keller Lenkner, the plaintiffs’ firm that is pioneering the tactic of obtaining leverage for workers by filing arbitration demands en masse. Here’s how the strategy works: Under the current rules of the American Arbitration Association, it costs companies $1,900 to begin arbitrating with a single worker, so when thousands of workers demand arbitration, fees quickly escalate into millions of dollars – and that’s before any actual adjudication on the merits of workers’ claims. Mass arbitration turns class action waivers into a weapon for workers.

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Postmates has fought wildly against its couriers’ mass arbitration demands. At first, its arguments were at AAA, where the company insisted that Keller Lenkner’s arbitration demands were inadequate and asserted in bad faith. When the arbitration service nevertheless determined that the couriers’ demands were sufficient and assessed Postmates about $11 million in fees, the company refused to pay and continued to insist the demands were improper.

Last June, Keller Lenkner went to federal court to compel arbitration. In October, U.S. District Judge Saundra Brown Armstrong ordered Postmates to arbitrate the demands of nearly 5,300 couriers. She stopped short, however, of ordering the company to pay the fees to launch the cases, holding that it’s up to the AAA to determine whether fees are due.

While that motion was being litigated, Postmates came up with a tactic to short-circuit the mass arbitration campaign: Its counsel at Gibson Dunn & Crutcher negotiated an $11.5 million class action settlement in California state court that purports to resolve the claims of all of its California couriers. In late November, Judge Anne-Christine Massullo of San Francisco Superior Court called for significant changes in the proposed settlement but prospective class counsel Shannon Liss-Riordan of Lichten & Liss-Riordan told me that she and the company can revise the deal to address the judge’s concerns.

Postmates, meanwhile, told AAA that its couriers’ arbitration demands must be held in abeyance until workers decide whether to participate in the class action. The company’s counsel at Gibson Dunn said in an Oct. 25 letter to the arbitration service that it would be a waste of time and resources to commence arbitration before couriers have had the opportunity to evaluate the class action settlement. (Technically, that letter was filed in response to a demand for arbitration by an additional 1,250 Postmates couriers.) Unpersuaded, AAA said Postmates owed fees for both the 1,250 new cases and the 5,200 or so cases in which Judge Armstrong compelled arbitration.

Postmates proposed arbitrating 50 randomly selected test cases. Keller Lenkner refused, arguing that the bellwether proposal departs from the contract conditions that Postmates imposed on its workers – and from Judge Armstrong’s order compelling arbitration.

“Asking more than 99% of petitioners to abandon their hard-won rights under the court’s order was an attempt by Postmates to avoid complying with the order, not a good-faith attempt to comply with it,” wrote Ashley Keller of Keller Lenkner in the contempt motion.

I emailed Gibson Dunn partners Theane Evangelis, Joshua Lipshutz and James Fogelman for comment on the Postmates contempt motion but did not immediately hear back. Postmates has appealed Judge Armstrong’s order compelling arbitration to the 9th U.S. Circuit Court of Appeals, so it will presumably seek a stay of the contempt motion while it tries to vacate the underlying order. And by then, the company may have won approval of the class settlement – though Keller Lenkner has said it will object to the proposed deal and will advise its clients to opt out.

It’s not easy to keep track of all of the moving parts in the Postmates mass arbitration story (and I haven’t even told you, for instance, about separate litigation to compel arbitration for a couple hundred Illinois couriers). But what happens in this litigation is going to shape the future of mass arbitration – which is, in my mind, the future of workers’ ability to hold employers accountable when employees have been forced to surrender the right to sue or arbitrate as a group.

A hearing last week in a different mass arbitration case shows what I mean. The delivery service DoorDash, as I’ve reported, is facing arbitration demands by more than 6,000 workers, known as Dashers. Those workers, like the Postmates couriers, are represented by Keller Lenkner, as well as co-counsel at Quinn Emanuel Urquhart & Sullivan. DoorDash, like Postmates, is represented by Gibson Dunn. And like Postmates, DoorDash refused to pay millions of dollars in fees that AAA said it owed.

The Dashers moved to compel arbitration and to enjoin DoorDash from abruptly changing couriers’ contracts to switch from mandatory arbitration at AAA to arbitration at a far smaller service, the International Institute for Conflict Prevention & Resolution, that recently adopted rules to stretch out the process of arbitrating masses of employee claims.

U.S. District Judge William Alsup of San Francisco heard arguments last week on Keller Lenkner’s motion for a temporary restraining order to block DoorDash from requiring its clients to agree to the new terms.

Keller Lenkner withdrew the TRO request when DoorDash’s Gibson Dunn lawyers said drivers could continue to arbitrate at AAA if they opted out of the new arbitration provision. Judge Alsup ordered expedited discovery on DoorDash’s deal with CPR, the smaller arbitration service, and on the timing of CPR’s adoption of mass arbitration rules that call for 10 test cases to be arbitrated to completion before other cases can move ahead. The judge called for a hearing next month on the Dashers’ motion to compel arbitration, signaling that he is likely to grant the motion for Keller Lenkner clients who have opted out of the new contract.

But the most dramatic moments of the hearing came when DoorDash counsel Fogelman told Judge Alsup that the company had just reached a class action settlement of Dashers’ claims. Like Postmates, DoorDash wants to use a state-court class action to short-circuit mass arbitration demands by its workers. (Also like Postmates, DoorDash is using the vehicle of a class action filed by plaintiffs’ lawyer Liss-Riordan.) Fogelman told Judge Alsup that there may be no need to compel arbitration if Dashers end up participating in the class action settlement.

Judge Alsup was perplexed. DoorDash, he pointed out, imposed contracts requiring its workers to waive their right to sue or arbitrate as a class, yet the company was purporting to use a class action to settle the workers’ claims. “How can you get around your own agreement that says there won’t be any class actions?” he asked Fogelman.

Fogelman said that question would be answered by the state-court judge presiding over the proposed class action settlement. But Warren Postman of Keller Lenkner took the opportunity to highlight what his firm believes to be the larger truth behind the efforts by DoorDash and other companies that have balked at paying fees when their workers demand arbitration en masse. Those companies, he said, never expected their workers actually to bring arbitration claims in substantial numbers. The companies, Postman said, believed that when they insisted that workers surrender their right to sue or arbitrate as a group, they’d effectively squelched workers’ claims.

Those class action waivers, Postman said, were intended to “become a liability waiver.”

Judge Alsup signaled his agreement, calling it “poetic justice” that after pushing for years to force workers into arbitration, companies like DoorDash are now “wiggling around trying to figure some way to squirm out of your own agreement.”

If Keller Lenkner and Judge Alsup are right – if companies imposed arbitration not as a good-faith way to expedite individual workers’ claims but as a way to assure that workers wouldn’t assert their rights – then mass arbitration calls their bluff. Companies made the rules that Keller Lenkner and some other firms are exploiting on workers’ behalf. The Postmates and DoorDash cases will determine whether courts intend to hold employers to the contracts they imposed on their employees.