SAN FRANCISCO (CN) - The federal judge overseeing a massive employment class action against Uber said he has serious concerns about whether 385,000 California and Massachusetts drivers are getting a raw deal from a proposed $100 million settlement.
Both class actions accused Uber of withholding tips and misclassifying drivers as independent contractors while controlling them like employees.
U.S. District Judge Edward Chen on Thursday opened the four-hour preliminary settlement approval hearing by addressing what he called the "elephant in the room:" the argument that the settlement steps all over wage and hour claims brought by other classes, some of which are being litigated.
In exchange for settling with Uber, drivers in California and Massachusetts must waive their right to sue the ride-hailing company for labor law violations. This applies only to misclassification-related claims regarding overtime and minimum wages, meal and rest breaks, worker's compensation policy, and the misclassification claim itself.
"Some have called it collusion. Others have called it unfair. But it is, to say the least, unusual to have this situation," Chen said in court.
"One could say is there something wrong when claims from another case are essentially hijacked, taken or stolen from other litigation, folded into this case as part of a settlement, and on top of that given virtually no value. Isn't that troubling?"
Lead class attorney Shannon Liss-Riordan acknowledged that the settlement is far from perfect, but said it was the only way Uber would agree to settle what could be risky and prolonged litigation.
"Defendants in high-stakes, high-publicity ligation will only come to the table if they can get global peace. It's the reality of this type of litigation," Liss-Riordan said.
She said that due to the publicity garnered by her case, other class actions asserting all sorts of labor claims followed.
"The situation we have here is probably one of the most striking examples of a situation where there is a focused complaint filed in a high-publicity case and other follow on cases proliferate," the attorney said.
She said the claims raised by those "pile-on" cases were not worth pursing, as they would add only marginal value for the class.
"My practice has been to not pursue kitchen-sink type complaints, but focus time and energy on claims that are most likely to advance interests of our clients," Liss-Riordan said.
For example, her firm estimated that overtime claims were worth only $2.4 million, to which Chen replied: "I have no way of knowing whether that's a reasonable estimate or not."
Drivers will receive $84 million under the settlement's current terms, but that amount could grow to $100 million if Uber goes public. Other provisions allow drivers to ask for tips, and prohibit Uber from deactivating drivers without "sufficient cause."
Uber must also give drivers at least two warnings, a written explanation with reasons for any deactivation, and an appeals process involving a panel of top-rated drivers for certain types of deactivation.
Drivers unsatisfied with the appeals process can arbitrate with Uber at the company's expense. Uber will also be required to form a drivers association, through which drivers can bring their concerns to management.
Chen seemed unpersuaded that the grievance process was a significant win for drivers, as low-star ratings were excluded from appeal. Liss-Riordan said she would have liked to see low ratings included in the process, but called the provision a stronger protection for drivers. She said most complaints she's received from drivers were that they were deactivated for no reason at all.
But for the first time in three years of legal wrangling, Liss-Riordan and Uber attorney Theodore Boutrous appeared to be on the same side.
"This is really good for drivers," Boutrous told Chen. "It's significant monetary relief. If Ms. Riordan had taken this to trial and obtained a $100 million verdict it would be considered a significant victory. It's fair."
Boutrous said that without the global peace provision, Uber would have no incentive to settle. "I can tell you this mediation has been the opposite of collusive," he told the judge. "It was adversarial, it was contentious."
Chen laughed. "I think the argument would be: 'Everything was extremely contested,' but when you get to the argument of, 'Do we fold in other people's cases?', who is in the room to protect those interests? It's easy to sell out those interests."
Los Angeles attorney Mark Geragos, who represents disgruntled lead plaintiff Douglas O'Connor, said attorneys for other classes were not even invited to the negotiating table.
Calling Uber's actions "one of the greatest wage thefts of all time," Geragos said it was a question of due process.
"It's obvious what happened here: Ms. Riordan decided she was going to go into mediation with Uber; she was going to give global peace to Uber, and she was going to do it by hijacking another case in this very courtroom. And that is what on its face shows collusion," Geragos said. "I would say it's a fundamental fairness and a due process violation."
He added: "There's also an ethical issue as to whether you can start settling out someone else's case for causes of action you haven't pursued."
Boutrous said that any drivers dissatisfied with the settlement could opt out and pursue claims on their own.
But any driver who failed to opt out of Uber's 2015 arbitration agreement would be subject to arbitration. The Ninth Circuit still hasn't reviewed Chen's 2015 ruling, in which he found Uber's 2013 and 2014 arbitration agreements unenforceable, a fact that Chen noted at Thursday's contentious hearing.
Chen also took issue with a proposed $1 million for the class's Private Attorneys General Act claim, a law that allows a private citizen to pursue civil penalties on behalf of the State of California for labor violations.
Of that $1 million, $750,000, would go to the state.
But Chen said a trial could net $1 billion in penalties on that claim alone.
"It's harder to swallow this pill of a 99.9 percent discount," he said.
Chen declined to approve the settlement, but said he would take the arguments under submission.
Follow @MariaDinzeo
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