SAN FRANCISCO (CN) – Reversing his prior ruling, a federal judge Thursday said he was wrong to let out-of-state Uber drivers pursue labor claims under California law.
“The court now concludes that its earlier holding was in error, and that the California statutes involved in this action do not apply extra-territorially,” U.S. District Judge Edward Chen wrote.
In explaining his change of opinion, Chen conceded that his 2013 ruling “rested on a fundamental mis-reading” of Gravquick A/S v. Trimble Nav. Int’l Ltd., a 9th Circuit case that Chen had said outweighed the presumption against extraterritorial application of a law where there is a choice of law clause in a contractual relationship.
“The court in Gravquick did not hold that a California choice of law provision can overcome the presumption against extraterritorial application of California law,” Chen wrote. “Instead, the court recognized that parties’ agreement to apply California law must yield in those circumstances where the law in question contains ‘geographical limitations.’ “
Chen cited a recent ruling by his colleague in the Northern District, Judge Vincent Chhabria, who found California law does not apply to people working exclusively out-of-state. “Even if the choice of law provision were intended to confer upon out-of-state drivers a cause of action for violation of California’s wage and hour laws, it could not do so,” Chhabria wrote. “An employee cannot create by contract a cause of action that California law does not provide.”
Chhabria went on to say, as quoted Thursday by Chen: “The court concludes that the Labor Code violations upon which plaintiffs rely do not apply extraterritorially and, therefore, cannot apply to those plaintiffs or unnamed class members who worked in states other than California.”
California drivers sued Uber in 2013, accusing the taxi-service app maker of falsely stating that gratuity is included in the fare, then failing to pass along the full share of tips to which the drivers claim they are entitled. The California plaintiffs, led by Douglas O’Connor and Thomas Colopy, sought to represent Uber drivers in all states but Massachusetts and Illinois, where similar claims were brought in 2012.
In his latest ruling, Chen allowed the in-state drivers’ California labor code and Unfair Competition Law claims to proceed, but nixed the class’s breach of implied-in-fact contract and tortious interference claims.
Because the claimed misrepresentation about the tips being included in the fare happened before formation of the customer’s business relationship with the driver, “the withholding of the alleged ‘gratuities’ would not have been wrongful,” Chen said.
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