SAN FRANCISCO (CN) — Judge Richard Clifton invoked Victorian England contracts Thursday while the Ninth Circuit focused on the clash between ride-share giant Uber and its drivers over arbitration provisions.
"I sort of feel like I'm in a Dickens novel here," Clifton said, as the parties argued over the enforceability of 2013 and 2014 contracts requiring drivers to arbitrate their claims with Uber, rather than take them to court.
The arbitration dispute arose from two class actions: one brought by Douglas O'Connor over for withheld tips and misclassification of drivers as independent contractors, the other by former Uber drivers Abdul Kadir Mohamed and Ronald Gillette, claiming Uber kicked them off the app after running background checks without their knowledge.
Settlements of the suits await approval from U.S. District Judge Edward Chen, who ruled in both cases that Uber could not force its drivers to arbitrate under "unconscionable" agreements.
Labor attorney Shannon Liss-Riordan said Uber's appeal was one of the main reasons why she negotiated an $84 million settlement for the O'Connor class.
But Uber still wants the Ninth Circuit to decide whether Chen was correct. The panel heard arguments only on the Mohamed case Thursday, having taken the O'Connor arguments under submission.
As the three-judge panel pored over the contracts, one provision in particular stood out.
Chen had ruled the contracts unenforceable in part as a matter of public policy because they contained nonseverable provisions barring employees from acting as state representatives in labor lawsuits under California's Private Attorney General Act.
The Private Attorney General's Act (PAGA) allows private citizens, such as Uber drivers, to pursue civil penalties against an employer that violates labor laws. Proceeds from the penalties are split, with 75 percent going to the state and 25 percent to plaintiffs.
Chen had cited precedent from Sakkab v. Luxottica Retail NA, in which the Ninth Circuit held that the plaintiff did not have to waive his rights under PAGA because PAGA waivers are unenforceable under the California Supreme Court's rule from Iskanian v. CLS Transportation Los Angeles LLC.
"Uber cannot run away from the arbitration agreements it drafted itself," Mohamed class attorney Laura Ho told the Ninth Circuit panel Thursday. "It has a very clear PAGA waiver which we know is illegal. What it says in both 2013 and 2014 agreements is if the PAGA waiver is found to be unlawful, it is not severable."
Uber's attorney, Theodore Boutrous with Gibson, Dunn & Crutcher, argued differently.
"The provision that bars representative claims altogether is severable," Boutrous said.
Clifton seemed to agree with Boutrous' reading.
"I've got to say, I have a really hard time following it — particularly the 2013 agreement," he said. "But at the end of the day, I wind up reading them to say those claims can't go to arbitration they have to go to court even if everything else goes to arbitration."
"You've put your finger on it," Boutrous said.
"This provision was not a blanket waiver that violates Sakkab and Iskanian," he added. "It only says PAGA representative claims should not be arbitrated."