A panel of the Court of Appeals for the Ninth Circuit unanimously decided last week that a properly-drafted arbitration clause that waives class actions and reserves to the arbitrator the determination of whether a dispute is properly arbitrable, will defeat class action certification and require the granting of an order compelling arbitration, even in California, which is historically hostile to class waivers and mandatory arbitration. The case was closely-watched both because of the size of the class and to understand the impact in California of the U.S. Supreme Court decision last term in Epic Systems.
O'Connor v. Uber Technologies disposed of consolidated appeals in multiple actions brought by Uber drivers on behalf of crisscrossing putative classes. In that opinion the appellate panel reversed orders of Judge Edward Chen of the Northern District of California, who had denied Uber's motion to compel arbitration, certified a class of 160,000 drivers and restricted Uber's use of arbitration agreements for new drivers. Despite its facially striking disposition of the issues presented, the panel broke no new ground in enforcing Uber's arbitration agreement, relying principally on its own 2016 decision in Mohamed v. Uber Technologies, 848 F.3d 1201, and on the U.S. Supreme Court's recent opinion in Epic Systems, which the panel awaited before it published its decision.
The class that Judge Chen certified included drivers who had entered into agreements with Uber to arbitrate their claims, and who had waived their right to participate in a class action with respect to those claims. The appellate panel observed that Judge Chen's conclusion that the drivers satisfied Federal Rule 23's class certification requirements was premised on his finding that Uber's arbitration agreements were unconscionable and, therefore, unenforceable. However, that conclusion ignored the holding in Mohamed v. Uber – binding precedent authored two years ago by the same panel. That panel held that the enforceability of Uber's arbitration agreements in question was not properly for the court to answer, because the agreements specifically, and properly, reserved the question of arbitrability for the arbitrator to determine. The Ninth Circuit earlier had held in Momot v. Mastro, 652 F.3d 982 (2011) that language "delegating to the arbitrators the authority to determine the validity or application of any of the provisions of the arbitration clause[]constitutes an agreement to arbitrate threshold issues concerning the arbitration agreement."
In addition to arguing that the arbitration clause was unconscionable, the drivers also contended that the class waiver provision contravened Section 7 of the National Labor Relations Act – an argument that the Supreme Court's Epic Systems decision resolved against them.
The question raised by the result in O'Connor is "what now?" The Massachusetts lawyer who represented the largest class and argued the case on behalf of the various classes reportedly says she already is prepared to present "thousands" of individual claims to arbitrators and is urging drivers to contact her for representation. Whether this will prove true and how Uber will respond are left for the next chapter in this saga.
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