Blocking Arbitation, Judge Puts Uber on a Spit

     MANHATTAN (CN) — Consumers who want to hail rides on Uber cannot do so without first agreeing to extensive terms of service, forfeiting their rights to a jury trial, but a federal judge denounced this practice and ruled this arbitration clause invalid Friday.
     U.S. District Judge Jed Rakoff’s scathing opinion means Uber must face class action over surge pricing, and it strikes a blow against an increasingly ubiquitous corporate playbook used to deny customers their day in court.
     “Since the late eighteenth century, the Constitution of the United States and the constitutions or laws of the several states have guaranteed U.S. citizens the right to a jury trial,” the introduction to Rakoff’s ruling begins.
     “This most precious and fundamental right can be waived only if the waiver is knowing and voluntary, with the courts ‘indulg[ing] every reasonable presumption against waiver,'” Rakoff continues. “But in the world of the internet, ordinary consumers are deemed to have regularly waived this right, and, indeed, to have given up their access to the courts altogether, because they supposedly agreed to lengthy ‘terms and conditions’ that they had no realistic power to negotiate or contest and often were not even aware of.”
     The lead plaintiff in the case at hand, Connecticut resident Spencer Meyer, said he did not even notice the hyperlink with the phrase “Terms of Service & Privacy Policy,” written in 6-point font, when he downloaded Uber to his Samsung Galaxy S5 phone.
     Rakoff said the key phrase, “By creating an Uber account, you agree to,” was “barely legible.”
     On the seventh page of Uber’s terms, the “Dispute Resolution” provision states: “You acknowledge and agree that you and company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding,” according to the ruling.
     Uber seized upon this clause to fend off Meyer’s federal antitrust lawsuit against the company and its CEO Travis Kalanick.
     Invoking a dystopic novel, Rakoff noted that Congress could never have imagined online terms of service when passing Federal Arbitration Act in 1925.
     “Nevertheless, in this brave new world, consumers are routinely forced to waive their constitutional right to a jury and their very access to courts, and to submit instead to arbitration, on the theory that they have voluntarily agreed to do so in response to endless, turgid, often impenetrable sets of terms and conditions, to which, by pressing a button, they have indicated their agreement,” he wrote.
     The New York Times exposed how credit card companies, Internet service providers, big banks and other businesses use such clauses in an investigation late last year titled “Arbitration Everywhere, Stacking the Deck of Justice.”
     In the wake of the series, the Consumer Financial Protection Bureau proposed banning such clauses in May.
     A year earlier, the bureau found that fewer than 7 percent of consumers realized that the clause prevented them from filing lawsuits.
     In Uber’s case, Rakoff noted dryly: “The reasonable user might be forgiven for assuming that ‘Terms of Service’ refers to a description of the types of services that Uber intends to provide, not to the user’s waiver of his constitutional right to a jury trial or his right to pursue legal redress in court should Uber violate the law.”
     Uber did not respond to an email seeking comment.
     The Friday ruling ended a rough week in court for the San Francisco-based ride-sharing giant, which Rakoff roasted only days earlier for hiring CIA-linked private detectives to dig up dirt on the lawsuit’s lead plaintiff.
     Rakoff said Uber’s hiring investigators at Ergo marked “a sad day” for justice.
     “It is sadder yet when these investigators flagrantly lie to friends and acquaintances of the plaintiff and his counsel in an (ultimately unsuccessful) attempt to obtain derogatory information about them,” the judge continued, blasting Ergo’s “blatantly fraudulent and arguably criminal conduct.”
     In rejecting Uber’s arbitration bid days later, Rakoff found: “At bottom, what is at stake is the ‘integrity and credibility’ of ‘electronic bargaining.'”
     “When contractual terms as significant as the relinquishment of one’s right to a jury trial or even of the right to sue in court are accessible only via a small and distant hyperlink titled ‘Terms of Service & Privacy Policy,’ with text about agreement thereto presented even more obscurely, there is a genuine risk that a fundamental principle of contract formation will be left in the dust: the requirement for ‘a manifestation of mutual assent,'” he wrote.
     Meyer’s attorney did not immediately respond to a phone call seeking comment.

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