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9th Circuit Finds Uber’s Arbitration Clauses Valid

SAN FRANCISCO (CN) — In a major blow to thousands of Uber drivers suing to be treated like employees, the Ninth Circuit on Wednesday largely upheld the ride-hailing giant's 2013 and 2014 arbitration agreements.

The three-judge panel's ruling will force drivers to arbitrate their disputes individually with Uber outside of a court, which class attorney Shannon Liss-Riordan said was one reason she pushed hard for approval of a $100 million settlement with Uber earlier this year.

U.S. District Judge Edward Chen rejected the proposed agreement last month, saying the $100 million payout for a class of 380,000 current and former California and Massachusetts drivers was too low. In that case, drivers claimed they are employees — not independent contractors as they are currently classified — and that Uber should reimburse them for their expenses.

"This decision is not good for the class," Liss-Riordan said in an email sent to Courthouse News. "We were very aware that this decision was likely coming, which was the primary argument for why I was urging the district court to approve the settlement."

In its ruling Wednesday, the Ninth Circuit panel reversed Chen's ruling that the 2013 and 2014 arbitration agreements signed by drivers are invalid and unenforceable in another class action led by former Uber drivers Abdul Kadir Mohamed and Ronald Gillette. The drivers in that case claimed Uber kicked them off the app after running background checks without their knowledge.

In June, Circuit Judges Richard Tallman, Richard Clifton and Sandra Ikuta heard Uber's appeal of Chen's ruling.

Writing for the panel in Wednesday ruling, Tallman said the contracts clearly stated that all disputes should be handled by a private arbitrator and that these provisions were not unconscionable. Tallman said the panel's decision hinged on the requirement that the arbitration provision be binding, and it's not binding if there's an opportunity to opt out.

"Taken together, these two principles compel us to find that the 2014 agreement, at least, is not adhesive, which supports our holding that the delegation provision is not unconscionable," Tallman wrote.

Turning to the 2013 agreement, he added, "The district court's conclusion that the right to opt out of the 2013 agreement was illusory fares no better."

Tallman noted that although the drivers had argued that the opt-out agreement was too difficult to find and understand, "there were some drivers who did opt out and whose opt-outs Uber recognized. Thus, the promise was not illusory. The fact that the opt-out provision was 'buried in the agreement' does not change this analysis."

Chen had also found the 2013 agreement unenforceable as a matter of public policy, since it contained a non-severable provision requiring drivers to waive their rights to pursue civil penalties under California's Private Attorney General Act.

Tallman called that holding erroneous, and said that part of the agreement can be severed and litigated in court.

"Thus, while plaintiffs' PAGA claim must be litigated in court, the PAGA waiver does not invalidate the remainder of the arbitration provision in the 2013 agreement, and it should be enforced according to its terms," he wrote.

Liss-Riordan took this as a small victory.

"We do still have the possibility of the PAGA penalties (which are mostly for the state of California), and we have more than 1,500 Uber drivers signed up in California to pursue individual arbitrations if necessary," she said.

Uber attorney Ted Boutrous said in an emailed statement on Wednesday, "Arbitration is a fair, speedy and less costly alternative to class action litigation. We've always believed our optional arbitration agreements should have applied in this case, and we're pleased with the court's decision today."

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