Bekele v. Lyft, Inc.
918 F.3d 181
1st Cir.2019Background
- Bekele drove for Lyft and accepted Lyft’s online Terms of Service (TOS) via an "I accept" button on his iPhone in 2014; the arbitration clause was buried within the multi-page TOS and included a class/collective-action waiver and reference to AAA Commercial Rules.
- Bekele sued in Massachusetts state court on behalf of a class of drivers alleging misclassification under the Massachusetts Wage Act; Lyft removed and moved to compel individual arbitration under the TOS.
- The district court compelled individual arbitration and dismissed the class action, finding a valid and enforceable arbitration agreement.
- On appeal Bekele argued (1) no contract formation under Massachusetts law, (2) the class-waiver violates the NLRA, and (3) the arbitration clause is procedurally and substantively unconscionable (primarily because AAA rules required cost‑splitting).
- The First Circuit held Bekele waived the contract-formation argument by not raising it in his opening brief, rejected the NLRA argument after Epic Systems, and ruled the arbitration clause is not substantively unconscionable because Lyft offered to pay arbitration costs (so fees would not preclude access to arbitration).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation of arbitration contract | TOS presentation (scrollable, lengthy, buried clause) did not reasonably communicate terms, so no meeting of minds | Bekele accepted the TOS multiple times by tapping "I accept" | Waived on appeal (not raised in opening brief); district court had applied the usual "reasonably communicated and accepted" test |
| Validity of class/collective-action waiver under NLRA | Waiver unlawful because it conflicts with NLRA-protected concerted activity | Waiver enforceable; FAA governs arbitration agreements | After Epic Systems (Supreme Court), waiver does not violate NLRA; enforceable under FAA |
| Substantive unconscionability — fee-splitting (AAA rules) | AAA cost-splitting would make arbitration prohibitively expensive for drivers and thus be substantively unconscionable | Lyft offered to pay all arbitration costs for Bekele; under Massachusetts precedent fee burden is evaluated in light of potential recovery and litigation facts | Not unconscionable: Lyft’s offer to pay yields $0 fees for Bekele, less than his potential recovery; under McInnes/Machado framework fee-splitting did not render clause unenforceable |
| Substantive unconscionability — modification clause | Lyft’s ability to amend TOS on notice and require acceptance is oppressive | TOS requires notice and user acceptance; not a unilateral post-hoc modification power | Not unconscionable: clause requires notice and acceptance and is materially different from cases finding unilateral modification unconscionable |
Key Cases Cited
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (class/collective-action waivers do not conflict with the NLRA)
- Cullinane v. Uber Technologies, Inc., 893 F.3d 53 (1st Cir. 2018) (reasonably communicated-and-accepted standard for online contracts)
- McInnes v. LPL Financial, LLC, 994 N.E.2d 790 (Mass. 2013) (high arbitration fees can make an arbitration clause unenforceable; compare fees to potential recovery)
- Machado v. System4 LLC, 989 N.E.2d 464 (Mass. 2013) (same; fee-splitting evaluated case-by-case)
- Machado v. System4 LLC, 28 N.E.3d 401 (Mass. 2015) (reaffirming case-specific analysis of arbitration-fee provisions)
- Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996) (state contract law principles govern enforceability defenses under the FAA)
- Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000) (excessive arbitration costs can preclude vindication of statutory rights and render an arbitration agreement unenforceable)