Uber Arbitration Clauses Blocked for Class Action

(CN) - The maker of a taxi-service smartphone app cannot force drivers - prospective or current - to drop their rights to sue the company for allegedly pinching their tips, a federal judge ruled.

The decision came Friday in class action that taxi drivers Douglas O'Connor and Thomas Colopy filed in August 2013, alleging that Uber Technologies discourages riders from tipping by falsely advertising that the fare includes gratuity.

The San Francisco startup's "on demand" smartphone application allows customers to request rides from the driver nearest them, but drivers never get their tips, the class claims.

Since a similar suit was already playing out in Massachusetts, the California plaintiffs sought to represent Uber drivers in all states but that commonwealth.

Both the Massachusetts suit and another in Illinois were pending when Uber told drivers on July 22, 2013, that they had to approve new licensing agreements to keep using the phone app.

Users were given 30 days to opt out of one agreement's arbitration provision, by sending a letter via hand delivery or overnight mail to Uber's counsel.

Within a week of filing suit, the California drivers moved for an emergency protective order to strike arbitration clauses or provide notice of suit and more opt-out time.

In December, U.S. District Judge Edward Chen in San Francisco held that Uber likely hoped its new arbitration provision would block the pending class actions. After all, "many, if not the majority of Uber drivers are smaller outfits run by immigrants for whom English is not their native language," that decision said.

Chen also blocked Uber from issuing current or prospective drivers any new licensing agreement with class action waivers until the court sends out revised notices and procedures.

Uber sought reconsideration of the December order after Mediation proved unsuccessful. Chen denied the motion Friday, again noting that "the timing of the promulgation of the licensing agreement by Uber and the inexplicably onerous nature of the opt-out option strongly suggest the agreement was motivated as a response to the class action suit filed in Mass."

The judge tossed aside the claim that he lacks authority to regulate Uber's contact with prospective drivers who have downloaded the app.

"The court has authority to regulate communications which jeopardize the fairness of the litigation even if those communications are made to future and potential putative class members," Chen wrote.

The ruling compares Uber's alleged wrongdoing with an accused employer requiring job applicants to sign a waiver agreeing to arbitration and prohibiting participation in a class action.

"Under Uber's proposed rule, defendants could unilaterally limit the size and scope of the class to be certified without being subject to court supervision," Chen wrote.

The court also rejected Uber's proposed corrective notice, which allows no opt out.

"Conditioning use of its app on accepting the arbitration provision is clearly an attempt to discourage participation in the class action," Chen wrote. "It imposes on drivers a stark choice: participate in the suit or forego working for or with Uber. This is an improper communication."

The plaintiffs' proposed corrective notice similarly failed to satisfy, however, as it "tends more to urge participation rather than provide impartial information," according to the ruling.

The parties have seven days to decide and agree on a compliant corrective notice, or else submit their own separate notices within two weeks, the ruling states.

In an earlier ruling, Chen also dismissed Uber's president and vice president as defendants, but refused to dismiss the non-Californian plaintiffs.

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