Loewen v. Lyft, Inc., 129 F. Supp. 3d 945

Plaintiffs Loewen and Wright filed a putative class action against Lyft alleging breach of contract, fraud, and negligent misrepresentation based on Lyft’s failure to pay $1,000 driver referral/sign-on bonuses for a time-limited promotion.
Drivers must agree to Lyft’s Terms of Service (TOS) via the Lyft app or website to use the platform; the 2014 TOS (applied to both plaintiffs) contains a broad arbitration clause, an express delegation clause (delegating arbitrability and enforceability), and a class-action waiver.
The 2014 TOS incorporates the AAA Commercial Arbitration Rules and contains a unilateral modification clause permitting Lyft to amend terms by posting them on the platform.
Plaintiffs challenge enforceability of the delegation and arbitration provisions as procedurally and substantively unconscionable, citing costs, notice, adhesion, and Lyft’s unilateral modification power.
The court treated the dispute as consumer/common-law in character (not resolving employee/contractor status), found only minimal procedural unconscionability, minimal substantive unconscionability as to the delegation clause, and concluded the delegation clause is enforceable.
Court held Lyft’s demand for arbitration was not “wholly groundless,” compelled arbitration, and dismissed the action.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a valid delegation clause exists	Delegation is procedurally and substantively unconscionable and therefore unenforceable	TOS contains a clear, express delegation clause and incorporation of AAA rules; FAA preempts any special notice requirement	Delegation clause enforceable; clear and unmistakable delegation present
Degree of procedural unconscionability	Clickwrap adhesion, lack of recall, buried terms, and necessity to accept TOS to earn income create oppression/surprise	Adhesive nature creates only low procedural unconscionability; terms were displayed and users could scroll and click to assent	Procedural unconscionability minimal (adhesive contract only)
Substantive unconscionability (fees & unilateral modification)	AAA Commercial Rules impose prohibitive fees; unilateral modification renders clause one-sided/illusory	AAA has fee-waiver/hardship mechanisms; Commercial Rules likely inapplicable given consumer nature; unilateral-modification constrained by covenant of good faith	Substantive unconscionability minimal: fee concerns mitigated by AAA protections; unilateral-modification not dispositive
Whether claims fall within arbitration scope	Plaintiffs’ promotion claims are outside arbitration clause	Arbitration clause covers disputes “arising out of or related to” the Agreement and platform use	Broad clause covers these claims; arbitration not wholly groundless

AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preemption and enforcement of arbitration agreements)
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (U.S. 1985) (courts must compel arbitration when a valid arbitration agreement covers the dispute)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (delegation of gateway arbitrability questions must be clear and unmistakable)
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (validity of delegation clause is a separable antecedent agreement subject to arbitration defenses)
Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (Cal. 2015) (California unconscionability framework; case-by-case assessment of arbitration fee provisions)
Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (limits on imposing arbitration costs in mandatory employment arbitration)
Simula Inc. v. Autoliv, Inc., 175 F.3d 716 (9th Cir. 1999) (broad arbitration clauses construed to cover disputes that "touch matters" in the contract)
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (U.S. 1985) (pro-arbitration policy; broad interpretation of arbitration clauses)