On The Case

Uber tells its side of the story in mass arbitration fight with 12,500 drivers

(Reuters) - Someday, legal historians may look back at litigation between Uber and thousands of Uber drivers who have demanded the company arbitrate their wage-and-hour claims as an inflection point in employment law. The era of wage-and-hour class actions arguably ended with the U.S. Supreme Court’s 2018 ruling in Epic Systems v. Lewis, which locked in employers’ power to force workers to agree to arbitrate their disputes individually. The only way that power could backfire for employers would be if workers suddenly began filing arbitration demands en masse, forcing companies to bear the cost of arbitrating their individual cases.

That is just what Uber drivers did, as I told you last month. More than 12,500 drivers served individual arbitration demands on the ride-sharing service. And when Uber balked at paying the $1,500-per-case fee to initiate individual arbitrations at JAMS, the drivers filed a petition in federal court in San Francisco to compel Uber to pay the fees – more than $18 million in all – to launch the arbitrations specified in drivers’ contracts.

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Uber told its side of the story this week in a filing before U.S. District Judge Edward Chen of San Francisco that accuses the drivers of “deliberately manufacturing” a dispute over arbitration fees. Some of Uber’s arguments, as I’ll explain, are tied to the specific facts of the case and the actions of the plaintiffs’ firm orchestrating the mass arbitration strategy, Keller Lenkner. Others are more broadly applicable for any company facing a mass arbitration onslaught. If nothing else, Uber’s filing proves that developing a new paradigm for workers’ claims is not going to be easy.

Much of Uber’s brief centers on Keller Lenkner, a startup plaintiffs’ firm founded by highly-credentialed lawyers who sold their $500 million litigation finance shop to Burford in 2016. After Uber defeated a class action and prevailed in compelling most of its drivers to arbitration, Keller Lenkner sensed an opportunity to test the idea of mass arbitration. Using some of the lead generation tactics its lawyers learned from funding mass torts dockets, Keller Lenkner signed up thousands of Uber (and Lyft) drivers in states with favorable wage-and-hour laws. Last August, the firm began filing arbitration demands against Uber.

Uber smelled a rat: Keller Lenkner partner Warren Postman previously worked at the U.S. Chamber of Commerce, where he worked closely with Uber lawyers to oppose a Seattle ordinance that would have allowed drivers for ride-hailing companies to negotiate collectively. Uber moved to disqualify Keller Lenkner from a class action the firm filed on behalf of limo companies alleging that Uber engages in unfair business practices by classifying drivers as independent contractors. Last week, Judge Chen granted Uber’s motion, holding that Postman was privy to confidential Uber strategy and documents.

In its new filing opposing drivers’ motion to compel arbitration, Uber contends that Keller Lenkner must also be disqualified from representing drivers in individual arbitrations. But that’s not all. Uber also said Keller Lenkner can’t represent drivers in California arbitrations because its lawyers aren’t yet admitted in the state and should not be allowed pro hac vice admissions. The company raised doubts about Keller Lenkner’s recruitment of clients, citing a Boston federal court complaint in which one Uber driver accused the firm of baiting drivers to sign up with an ad that said they might be entitled to a share of a $20 million Federal Trade Commission fund. (The suit has apparently not been prosecuted beyond the complaint.)

In addition, Uber said that Keller Lenkner can’t even handle the 296 arbitrations for which Uber has paid initial filing fees, let alone another 12,000 cases. The plaintiffs’ firm was slow to complete the initial screening of arbitrators, Uber asserted, and in the first arbitration to determine whether Keller Lenkner must be disqualified, declined the arbitrator’s proposed date for oral argument in February, agreeing instead to a date in April. That delay on the gateway issue of Keller Lenkner’s ability to represent its clients will ripple across the rest of the cases, according to Uber.

Uber expanded its skepticism even to Larson O’Brien, the firm Keller Lenkner brought in to handle the drivers’ motion to compel Uber to arbitration. Uber said it needs to investigate whether the Larson firm, which is headed by former federal district judge Stephen Larson, has been too ethically tainted by its association with Keller Lenkner to represent the drivers.

Keller Lenkner’s Travis Lenkner declined to provide a statement in response to Uber’s filing. Larson said in an email that Uber’s demand for discovery from his firm is “meritless and just another Uber delay tactic,” adding, “as we already disclosed to Uber’s counsel, we have, out of an abundance of caution, carefully walled off any communication with Mr. Postman since our engagement in this matter.”

Uber’s message in its sharp criticism of Keller Lenkner seems to be that it shouldn’t have to pay arbitration fees until JAMS clarifies whether the firm can continue to represent its thousands of driver clients. But while the particulars of Keller Lenkner’s relationship with Uber are unique, Uber’s strategy for dealing with the firm could be a blueprint in future mass arbitrations.

Already, according to Uber, the company has persuaded JAMS to stay all of the more than 8,500 driver arbitrations in California until the arbitration service determines whether to admit Keller Lenkner lawyers unlicensed in California to arbitrate pro hac vice. Uber said that a single hearing officer has been appointed to make recommendations to a nationwide JAMS committee on those pro hac admissions. (California, unlike many other states, required lawyers from other states to be admitted to handle private arbitrations.) Uber said the stay of California arbitrations includes a stay on initiation fees for individual cases; Keller Lenkner disputes that.

Uber also suggested in this week’s filing that JAMS can resolve Keller Lenkner’s disqualification in a consolidated proceeding, like the pro hac vice hearing, even though the drivers’ contracts require individual arbitrations. Uber said it anticipates that the drivers’ lawyers will oppose the use of a coordinated “mechanism that can be used to address threshold issues prior to arbitration,” but that JAMS’ willingness to take up the pro hac vice issue in a single proceeding suggests the arbitration service is open to the idea.

In fact – and this is why the Uber case ought to be closely watched by anyone who cares about the future of mass arbitration – Uber seems to be hinting that JAMS could resolve the big question of whether it must pay individual filing fees for all of the drivers’ arbitrations in a consolidated proceeding.

Its central argument for dismissing the drivers’ federal-court motion to compel arbitration is that its contracts with drivers require payment disputes to be resolved by arbitrators, not federal judges. Drivers don’t disagree, but according to Uber, it proposed a solution that comports with those contract terms to the drivers in December, after Larson O’Brien filed the motion to force Uber to pay drivers’ arbitration fees. The company suggested that the drivers drop the motion to compel and “allow an arbitrator decide the issue of whether Uber is required to bear the initial filing fee claimants must typically pay to initiate arbitration with JAMS.”

Uber said Larson O’Brien rejected the proposal. (Part of the dispute centers on whether Uber must bear the full cost of initiating arbitration, $1,500, or whether drivers must pay about $400 of that amount; lawyers for the drivers contend Uber’s contract requires the company to front the whole $1,500, particularly for drivers whose fees may be waived by JAMS.)

The irony will be almost unbearably rich if Uber somehow manages to persuade Judge Chen and JAMS to allow a consolidated arbitration proceeding to determine the fees it must pay for individual drivers to pursue the claims. Corporations like Uber fought for years to win a near-absolute right to force workers to arbitrate individually. And as soon as enterprising lawyers devised a strategy to turn companies’ own restrictive contracts against them, using the leverage of the cost of initiating thousands of arbitrations, Uber falls back on the idea of mass resolution of common issues.

Talk about having your cake and eating it too.

The drivers’ reply to Uber is due next week.