109 F. Supp. 3d 1185
N.D. Cal.2015Background
- Plaintiffs Ronald Gillette (SF Bay Area) and Abdul Mohamed (Boston) drove for Uber and had their access to the Uber app deactivated after background-check information was used; each sued asserting FCRA and related claims; Gillette also asserted PAGA-based labor claims.
- Uber presented electronic 2013 and 2014 online agreements (including arbitration provisions with class/representative waivers, delegation clauses, and opt-out procedures); plaintiffs had not received paper copies and reviewed the agreements on smartphones.
- Uber moved to compel individual arbitration under the relevant driver agreements; Hirease (non-signatory) joined to compel arbitration of claims against it via Mohamed’s Uber contracts.
- The agreements contained (1) delegation clauses purporting to send arbitrability issues to arbitrators, (2) class/collective/PAGA waivers, (3) fee‑splitting (arbitration cost) provisions, (4) confidentiality and IP carve‑outs, and (5) non‑severability language for PAGA waivers.
- The court found plaintiffs had objectively assented by clicking “Yes, I agree,” but proceeded to decide arbitrability and enforceability questions itself because delegation clauses were not "clear and unmistakable" and, alternatively, were unconscionable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there mutual assent to the online agreements? | Plaintiffs: no valid assent (no signed paper, limited notice). | Uber: drivers clicked through and used the app; clickwrap-like assent is binding. | Held: Plaintiffs validly assented by clicking the acceptance screens. |
| Are the delegation clauses (who decides arbitrability) enforceable? | Plaintiffs: delegation not "clear and unmistakable" and is unconscionable. | Uber: delegation language is clear; forum-selection and severability clauses do not defeat delegation. | Held: Delegation clauses are not "clear and unmistakable" (conflicts with other clauses) and are alternatively unconscionable; court decides arbitrability. |
| Are the arbitration provisions unconscionable (procedural/substantive)? | Plaintiffs: arbitration provisions are adhesive, opt-out illusory (2013), surprise, and contain substantively oppressive terms (fee-splitting, confidentiality, IP carve-out, unilateral modification, PAGA waiver). | Uber: opt-out (2014) is meaningful; fee concerns speculative; will pay fees; federal FAA favors enforcement. | Held: 2013 arbitration provision is procedurally and substantively unconscionable; 2014 provisions also unenforceable because of PAGA waiver + non‑severability (and unconscionable features). |
| Are PAGA (representative) waivers enforceable? | Plaintiffs: PAGA waivers violate California public policy and Iskanian; thus unenforceable and (in these agreements) non‑severable. | Uber: Iskanian inapplicable or distinguishable; opt-out or FAA preemption arguments. | Held: PAGA waivers are void as against public policy under Iskanian and not preempted by the FAA; waivers are non‑severable, invalidating the arbitration provisions. |
| Can Uber enforce fee‑splitting to arbitrate arbitrability? | Plaintiffs: upfront JAMS retainer/hearing fees would block access, making delegation substantively unconscionable. | Uber: Armendariz inapplicable (drivers independent contractors); Uber may offer to pay fees. | Held: Fee‑splitting and advance fees create substantive unconscionability; offer to pay after suit cannot cure defect. |
| Can non‑signatory Hirease compel arbitration based on Mohamed’s Uber contracts? | Hirease: may join and compel arbitration through Mohamed’s agreements. | Mohamed: Uber contracts are unenforceable; Hirease is non‑signatory. | Held: Hirease cannot compel arbitration because underlying Uber arbitration provisions are unenforceable. |
Key Cases Cited
- Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010) (parties may delegate arbitrability to arbitrator but delegation clause must be valid and not vitiated by contract defenses)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (courts decide arbitrability unless parties clearly and unmistakably provide otherwise)
- AT&T Techs., Inc. v. Communications Workers, 475 U.S. 643 (1986) (default rule: courts decide arbitrability absent clear delegation)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts certain state-law rules that interfere with arbitration’s fundamental attributes)
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000) (high arbitration costs can preclude effective vindication of statutory rights)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) (employment arbitration cannot require employees to bear costs that would not be required in court; unconscionability framework)
- Gentry v. Superior Court, 42 Cal.4th 443 (2007) (opt-out provisions do not automatically cure procedural unconscionability; employers must disclose disadvantageous arbitration terms)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) (pre-dispute waivers of representative PAGA claims violate California public policy and are not preempted by the FAA)
- Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003) (broad confidentiality provisions in arbitration agreements may be substantively unconscionable)