On The Case

Forced into arbitration, 12,500 drivers claim Uber won’t pay fees to launch cases

(Reuters) - Uber fought as hard as any company in America in the past few years to assure the enforceability of its contractual arbitration provisions. When drivers who had signed contracts with Uber attempted to sue the company for wage and hour violations, Uber and its lawyers at Gibson Dunn & Crutcher won key rulings from the 9th U.S. Circuit Court of Appeals that effectively ended the drivers’ quest to litigate their claims in court – or even to arbitrate their claims as a class. For Uber drivers, the only way to go after the company for alleged state and federal employment law violations was to file an independent arbitration claim.

Amazingly, thousands of Uber drivers did just that. Between August and November of this year, about 12,500 drivers, many of whom had been class members in cases in which Uber successfully moved to compel arbitration, served individual arbitration demands on Uber, claiming the company failed to pay them the federally-mandated minimum wage and failed to pay overtime wages. These thousands of drivers filed their arbitration demands at JAMS, as mandated in Uber’s contracts.

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But nothing has happened in almost all of the drivers’ cases. Of the 12,500 arbitration demands filed by Uber drivers, the company has paid the requisite JAMS initial filing fee in just 296 cases, according to a newly filed petition by drivers seeking to compel Uber to pay the fees JAMS requires to launch arbitration. So far, arbitrators have been appointed in only 47 of the cases drivers have brought against Uber – and Uber has paid the arbitrator’s nonrefundable $1,500 retainer fee in a mere six cases. (Under Uber’s arbitration provisions, it’s up to the company to pay initial arbitration fees.)

So, according to the drivers’ lawyers at Larson O’Brien, a grand total of six arbitrations against Uber are primed to move forward. More than 12,000 other arbitration demands – many of them filed more than three months ago -- are stalled at the very first step of the process that Uber has long touted as an efficient and cost-effective alternative to litigation.

What are we to make of these statistics? The drivers’ lawyers claim the disheartening numbers are evidence of Uber’s bad faith. When the company was in federal court litigating to enforce its arbitration provisions, the drivers’ filings said, Uber assured the 9th Circuit that it would pay the necessary fees to allow drivers to arbitrate their claims individually. But now that drivers have actually filed demands, their lawyers said, Uber has repudiated those representations.

“At this point, it is fair to ask whether Uber’s previous statements to the 9th Circuit about its desire to facilitate arbitration with its drivers were nothing more than empty promises to avoid litigating a class action,” the drivers’ lawyers said in a motion to compel arbitration that accompanied the drivers’ petition for an order to compel. “Uber’s actions make clear it does not actually support arbitration; rather, it supports avoiding any method of dispute resolution, no matter the venue.”

The drivers’ lawyers said in their filings that they proposed an alternative to arbitrating thousands of individual cases at a cost of no less than $1,500 apiece. After filing an initial batch of 400 arbitration demands in August, the drivers’ lawyers suggested a bellwether process in which the two sides would select nine cases to be arbitrated, with mediation to follow. According to the drivers, Uber rejected that proposal and instead suggested four representative arbitrations and no mediation. Larson O’Brien said that plan was unworkable and proceeded to file more than 12,000 additional arbitration demands at JAMS.

“At bottom, our clients are entitled to a resolution of their disputes,” said drivers’ lawyer Stephen Larson in an email. “By robbing its drivers of a forum to resolve their disputes, I believe Uber is charting a dangerous course, and if its strategy is successful, it would have significant repercussions for all workers in the gig economy.” In addition to an order compelling Uber to pay the arbitration fees, the drivers are seeking a sanction against the company under the court’s equitable powers.

Uber declined to comment on the drivers’ filings, which are before U.S. Magistrate Judge Kandis Westmore of Oakland. (The drivers have asked for the case to be deemed related to previous litigation before U.S. District Judge Edward Chen of San Francisco.)

The accusations against Uber are the latest and most striking example of what seems to be a developing trend of plaintiffs calling out companies for failing to abide by the very arbitration provisions they unilaterally imposed. Last June, for instance, I wrote about a Fitbit lawyer’s all-too-candid admission that no rational litigant would pay a $750 filing fee to arbitrate a claim over a product that costs $162 – a concession that plaintiffs' lawyers called the “ugly truth” about mandatory arbitration clauses. I also told you in August about a Florida paving company pleading for mercy from the 11th Circuit after arbitration by three individual workers racked up fees of more than $100,000.

“The idea is that employers prefer arbitration because it promises ‘quicker, more informal, and often cheaper resolutions for everyone involved,’” the 11th Circuit wrote, quoting the U.S. Supreme Court’s 2018 ruling in Epic Systems v. Lewis. “But as this case shows, arbitration does not always live up to this promise.”

The cost of arbitration is turning out to be real leverage for plaintiffs' lawyers who are smart enough to adapt to the privatization of litigation. It may not be long before companies like Uber start wishing for the good old days of class actions.