Judge Not Happy With Uber Class-Action Settlement

SAN FRANCISCO (CN) — A federal judge Thursday seemed wary of approving only $7.5 million to Uber drivers who were kicked off the app based on background checks the company ran without their knowledge.

At a hearing on a motion for preliminary approval, U.S. District Judge Edward Chen criticized the settlement as small, and said attorneys for the class should have known there were “main risk factors that were apparent from day one.”

Chen said class members will probably see only $4.9 million of the total settlement after administrative costs are paid.

“If you look at the potential recovery, maximum verdict value can be between $100 million to a billion in a class like this. So that’s the question. This is a relatively very small recovery,” the judge said.

Class attorney Tina Wolfson said serious risks were not evident until discovery began: for instance, that electronic records showed that lead plaintiffs Ronald Gillette and Abdul Kadir Mohamed actually did receive notices about the background checks from Uber.

Former Uber contractors Mohamed and Gillette sued Uber in November 2014, claiming they were suddenly denied access to the Uber system without reason. Mohamed claimed Uber told him he could no longer drive after two years with the company because it found new information in his background check, which it never showed him.

Gillette accused Uber of failing to pay employees promptly upon termination and misclassifying drivers as independent contractors.

While Chen had ruled that arbitration agreements the drivers signed are invalid and unenforceable, the Ninth Circuit reversed that ruling in September last year.

On Thursday, Chen said that while the arbitration question was always a major risk to the case, he wanted to know what other information the parties learned through the course of litigation.

“What did you learn that you didn't know at the outset?” he asked. “This case was filed presumably with the expectation that this would be a substantial case, but the main risk factors were apparent from day one.”

Uber attorney Rod Fliegel said that through discovery it became clear that Uber did not have a systematic policy of running surreptitious background checks on drivers and then firing them based on unsavory results.

“Between the discovery showing that the notice process was in place and the exhibits that corroborated the process, that illuminated how that claim was weak,” Fliegel said, adding that Uber had an “adverse notice practice in place.”

The agreement covers all plaintiffs who worked or applied to work for Uber and claimed they were fired or denied employment based on background check information obtained without their knowledge or consent.

Chen asked for more briefing on the settlement, particularly on the claims process that would require class members to submit a claim form to get their share, and an email notice that he’s concerned might get deleted by spam filters.

He also seemed disinclined to approve a $2.5 million attorneys’ fee award, which constitutes a third of the settlement.

“I frankly don't see how one can say there were extraordinary results obtained, because as you can see this is a small settlement based on risk factors that were evident early and even weaker as the case went on,” Chen said.

“So to be blunt, I have trouble seeing an award of 33 percent in this case.”

The settlement could be hailed as a victory for a company fending off a variety other legal challenges in federal courts.

Uber is steeped in patent infringement litigation with Waymo, a former Google company that has accused Uber of swiping its driverless car technology. Waymo says ex-engineer Anthony Levandowski downloaded thousands of confidential files before he quit in 2016 to launch his own competing company called Otto, which Uber later bought for $680 million.

Uber has also come under fire from the Department of Justice, which launched a criminal investigation into its use of a software tool called “Greyball” that helps its drivers evade local authorities trying to clamp down on the popular ride service.

Follow @MariaDinzeo

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