SAN FRANCISCO (CN) – A federal judge Monday accused food delivery service DoorDash of trying to "squirm" out of its obligation to arbitrate labor disputes with more than 2,000 workers after it was ordered to pay more than $11 million in arbitration fees.
"Your law firm and all your firms have tried for 20 years to keep plaintiffs out of court, and you've gotten a lot of success in the courts," U.S. District Judge William Alsup said. "Then someone says, 'OK. We'll take you to arbitration,' and suddenly it's not in your interest anymore. Now you're wiggling away, trying to find a way to squirm out of your agreement."
Alsup delivered his frank assessment of DoorDash's legal strategy during a 90-minute hearing on 2,236 drivers' motion for a temporary restraining order to stop DoorDash from forcing a new agreement on workers that would limit how many arbitration cases can move forward at once.
The 2,000-plus "dashers" filed a petition to compel arbitration against DoorDash on Nov. 15, claiming the San Francisco-based startup refused to pay fees for their cases to advance after an arbitrator found their claims were properly filed. The drivers say the company misclassified them as independent contractors and denied them employment benefits, such as minimum wage and overtime.
DoorDash attorney James Fogelman, of Gibson Dunn & Crutcher, said the company refused to pay those fees because the petitioners failed to state the total dollar amount they were seeking or verify that each one signed an arbitration agreement with DoorDash.
Alsup was skeptical of the company's claim that workers must provide proof they signed an agreement on a smartphone app, adding the company should have records of each driver who signed it.
"To me it's a screwed up system if you can't even tell if they have an agreement," Alsup said.
Alsup called the company's system "Draconian," noting it would be unreasonable to expect someone who wakes up at 5 a.m. and has to click through an agreement on their phone to start work to remember that five months later. He likened DoorDash's system to "beating up on poor Tiny Tim," referring to the impoverished, sick boy in Charles Dickens' classic, "A Christmas Carol."
Fogelman replied it is not a "Herculean effort" to produce a document stating approximately when a person signed an arbitration agreement and to state how much money one is seeking.
"We're not beating up on poor Tiny Tim," Fogelman said.
The petitioners accused DoorDash of introducing new arbitration terms on Nov. 9, which workers must sign before they can use the app and go to work. They claim the new terms were concocted in direct response to their arbitration demands.
The petitioners' attorney, Warren Postman of Keller Lenkner, said the company "worked behind the scenes" with a new arbitrator to "rewrite the rules" so only 10 arbitration cases can proceed at once when more than 30 cases are filed. The rules also mandate 90-day mediation sessions and other conditions, which the petitioners say could delay their cases for years.
"DoorDash is engaging in an unprecedented attempt to change the rules of arbitration," Postman said.
The company's new arbitration clause requires workers to file claims with the International Institute for Conflict Prevention & Resolution (CPR), which just established new rules limiting how many cases can advance at once. DoorDash's prior agreement required workers to file claims with the American Arbitration Association (AAA), which ordered DoorDash to pay $11 million in arbitration fees for the 2,236 claims in September.
"One you get a ruling you don't like, you can sabotage a process, force AAA to close it, force the client to sign a new agreement to submit to a gravely inferior process," Postman complained.
DoorDash stated in an opposition brief that arbitration organizations such as CPR are "recalibrating" their procedures in reaction to the mass arbitration "scheme.”
The petitioners paid $1.2 million in filing fees, or $300 per case. According to Postman, DoorDash agreed to pay a higher share of fees, or $1,900 per case, to ensure its arbitration contracts were not deemed legally "unconscionable" as high fees can prevent workers from filing claims.
After Fogelman assured Alsup that terms of the prior arbitration agreement will be restored for workers who opt out of the new agreement within 30 days, Postman agreed to withdraw his motion for a temporary restraining order to stop DoorDash from making drivers sign it.
Alsup's rejected Fogelman's request to stay the litigation pending a decision on a motion for preliminary approval of a proposed $40 million settlement in a related labor class action against DoorDash in San Francisco Superior Court. A hearing on that motion is scheduled for Dec. 17. Fogelman said that settlement could make the case moot.
The judge questioned how DoorDash could reach a class action settlement after it forced drivers to sign class action waivers forbidding them from participating in class actions.
"I think there should be discovery on this other lawsuit," Alsup said.
The judge said he would authorize the 2,236 petitioners to seek discovery from DoorDash on its access to signed arbitration contracts and whether the company worked with CPR in writing new arbitration rules to benefit itself.
Alsup said he wants to find out if DoorDash "ran to CPR and cooked up some custom made deals and you really wrote the terms yourself and now you're foisting that on people who can't opt out in 30 days."
"I'm not saying it's unconscionable yet, but I'm saying there's an issue here," Alsup said.
A hearing on the petitioners' motion to compel arbitration is expected to take place in January.
DoorDash is one of three companies that vowed to pour $30 million each into a 2020 ballot measure aimed at overturning a new California labor law, which takes effect Jan. 1 and will require most companies classify workers as employees rather than independent contractors.
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