Judge rejects Uber $3 million settlement with New York drivers

(Reuters) - A federal judge refused to grant preliminary approval for Uber Technologies Inc’s [UBER.UL] proposed $3 million class-action settlement with 2,421 New York drivers who accused the ride-sharing company of retaining excessive fees from their fares.

In a decision on Friday, U.S. District Judge Nicholas Garaufis in Brooklyn objected to a provision allowing the revival of breach of contract claims he had dismissed, so long as the settlement won final approval.

Garaufis said such a “conditional stipulation” appeared to leave “in limbo” whether the settling drivers’ claims had enough in common for him to approve the proposed settlement.

The judge also objected to a $2,500 payment to a driver whose claims had been deemed subject to arbitration. Garaufis said the drivers could submit a revised settlement for approval.

“We anticipate refiling our motion early this week,” Jonathan Greenbaum, a lawyer for the drivers, said on Monday.

Uber did not immediately respond to a request for comment.

Drivers had accused Uber of accounting improperly for sales taxes and a “Black Car Fund” fee, which relates to workers’ compensation, in fares when calculating service fees, thereby increasing the amounts owed.

They also accused the San Francisco-based company Uber of falsely advertising guaranteed compensation for drivers without disclosing the conditions.

Uber has denied all allegations.

The settlement covered drivers who used the Uber app to arrange rides in New York since Dec. 29, 2009, and whose claims were not subject to arbitration.

It was reached after Uber paid more than $80 million to roughly 96,000 drivers in New York, following its admission that it had inadvertently underpaid drivers for two-and-a-half years, court papers show.

The case is Ortega et al v Uber Technologies Inc et al, U.S. District Court, Eastern District of New York, No. 15-07387.

Reporting by Jonathan Stempel in New York; Editing by Andrew Hay