Judge Asked to Reject $27M Lyft Settlement

SAN FRANCISCO (CN) — An attorney for Lyft drivers on Thursday urged a federal judge to reject a $27 million settlement because it doesn't compensate drivers for fees taken from prime-time ride surcharges.

Representing two drivers who filed a class action against Lyft last month, attorney Jahan Sagafi asked U.S. District Judge Vince Chhabria to scrap a $27 million deal reached in a separate suit, Cotter v. Lyft.

The 2013 Cotter suit claims Lyft drivers in California should be classified as employees rather than independent contractors, and that the misclassification allows Lyft to avoid paying employment benefits and reimbursement for gas and vehicle maintenance.

The settlement would release Lyft from liability over prime-time fees, which it charges riders during high-demand ride times, but pays zero dollars toward that claim, Sagafi argued.

"About a month or two ago, our clients became concerned about another fraud — that Lyft was telling riders the prime-time fees went to drivers, causing riders to give lower tips," Sagafi said.

Sagafi's client, lead plaintiff Alex Zamora, sued Lyft on May 11.

Lyft attorneys asked the judge to deny Zamora's motion to intervene in the settlement, arguing his claims lack merit, are of insignificant value and were not raised until the 11th hour.

Sagafi argued back and forth with Lyft attorneys Rachael Meny and Robert Slaughter over the true value of the claim, based on a proposed nationwide class of Lyft drivers. Sagafi estimated the damages at $60 million, while Slaughter countered the true value is more likely a fraction of that figure.

Attorney Shannon Liss-Reardon, representing the Cotter plaintiffs, joined Lyft in opposing Zamora's motion to intervene, saying his claims face "serious legal and factual hurdles" that could risk "scuttling this agreement to the detriment of the class."

Still, Chhabria indicated that if the Cotter plaintiffs failed to consider a significant claim while negotiating the $27-million deal, that could make the settlement unreasonable.

"If the plaintiffs forgot to negotiate an extremely valuable claim, that's a problem," Chhabria said.

However, the judge also added that allowing Zamora to dismantle the agreement on the eve of the settlement's approval could set a bad precedent in the future.

The judge noted that even with the settlement's approval, Lyft would only be free from liability for prime-time fees among drivers that choose not to opt out of the class. Riders could still bring a consumer lawsuit over Lyft allegedly misrepresenting that prime-time fee dollars went solely to drivers.

After about an hour of debate, Chhabria ended the hearing, saying it may take him some time to rule on the settlement's preliminary approval and motion to intervene.

In March, Chhabria rejected a proposed $12.5 million settlement in the Cotter case, finding the award too low compared to the estimated $64 million that drivers could seek in expense reimbursement.

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