Grubhub antitrust case belongs in court, Second Circuit rules; Postmates, Uber Eats win arbitration

MANHATTAN (CN) — Arbitration is not on the menu for Grubhub, a Second Circuit panel ruled Thursday, shutting down the food delivery platform’s bid to handle its active antitrust case outside of federal court.

In a 2020 class action diners sued Grubhub, Postmates and Uber Eats for requiring restaurants to agree not to offer lower prices to customers who go to them directly. The customers claim the practice artificially inflated the price of food delivery outside of the three apps.

The delivery app trio told the Second Circuit that they’re shielded from lawsuits like this because all their diners agreed to arbitration in the apps’ terms and conditions.

That was true for Postmates and Uber Eats, the panel ruled, but not Grubhub; the court affirmed a lower court’s ruling that the latter company’s case belongs in federal court.

Grubhub argued that the diners’ claims are related to their “access and use of Grubhub,” which falls within the scope of its arbitration provision — but the panel disagreed, finding that the diners’ claims that the delivery platforms violated antitrust laws have nothing to do with their use of the platform’s app or website.

“Rather, their claims concern their access and use of other platforms and restaurants,” U.S. Circuit Judge José A. Cabranes, a Bill Clinton appointee, wrote in the panel’s decision. “They allege that they pay higher prices when ordering from these entities because of Grubhub’s anticompetitive practices.”

In the case of Postmates and Uber Eats, the circuit panel reversed the lower court and sided with the apps because their agreements delegate arbitrability to the arbitrator.

According to the panel, the diners failed to argue that the delegation provision in particular is “unconscionable.”

“In any event, plaintiffs fail to challenge the clause with sufficient specificity,” Cabranes wrote.

In a concurring opinion, U.S. Circuit Judge Myrna Pérez, a Joe Biden appointee, emphasized the importance of legal limits on merchants’ ability to force consumers into arbitration.

“In my view, Grubhub barely threaded the needle through our precedents that have examined reasonable notice of arbitration agreements in the context of online interfaces,” Perez said.

U.S. Circuit Judge Richard Sullivan, a Donald Trump appointee, concurred in part and dissented in part. In a written dissent, he took issue with the majority’s conclusion that the plaintiffs’ antitrust claims are unrelated to their use of Grubhub’s platform.

Neither party responded to a request for comment.

Follow @NikaSchoonover