Mohamed v. Uber Technologies, Inc.
2016 U.S. App. LEXIS 22898
9th Cir.2016Background
- Mohamed and Gillette, former Uber drivers, sued Uber (and Hirease in Mohamed) alleging violations of the FCRA and related state consumer-reporting statutes; Gillette also asserted a representative PAGA claim for misclassification.
- Both drivers had signed Uber’s arbitration agreements: Mohamed signed the 2014 Agreement (and a Rasier agreement) with an arbitration clause and class/PAGA waivers; Gillette signed the 2013 Agreement with a similar arbitration clause but with a carve-out requiring courts to decide challenges to class/collective/PAGA waivers.
- The district court denied Uber’s motions to compel arbitration, finding the delegation clauses unclear or unconscionable and the PAGA waiver unenforceable and unseverable.
- On appeal, Uber argued (1) the question of arbitrability was delegated to arbitrators, and (2) even if not, the arbitration agreements were enforceable.
- The Ninth Circuit held the delegation clauses clearly and unmistakably delegated arbitrability to arbitrators (except the 2013 PAGA-waiver carve-out); delegation clauses were not procedurally unconscionable; the PAGA waiver in the 2013 Agreement is invalid but severable; Hirease cannot compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability? | Plaintiffs: court should resolve arbitrability; delegation unclear or conflicted with venue/carve-outs | Uber: delegation clauses clearly and unmistakably assign arbitrability to arbitrators | Delegation clauses (2013 and 2014) clearly delegate arbitrability to arbitrators except the 2013 carve-out for PAGA waiver challenges; district court erred to decide arbitrability for those delegated issues |
| Were delegation clauses unconscionable? | Plaintiffs: clauses procedurally and substantively unconscionable (adhesive contract, burdensome opt-out, fee-splitting) | Uber: drivers had meaningful opt-out rights; delegation not unconscionable | Delegation provisions were not procedurally unconscionable; thus no need to resolve substantive unconscionability under California law; arbitration of arbitrability required |
| Do arbitration fees preclude effective vindication? | Plaintiffs: fee-splitting could make arbitration impracticable (effective vindication doctrine) | Uber: Uber committed to pay arbitration costs; no barrier to vindication | Because Uber committed to pay costs, court declined to decide whether the fee term as written would violate effective vindication; arbitration is viable if Uber honors the commitment |
| Is the PAGA waiver enforceable and does it void the arbitration agreement? | Plaintiffs: PAGA waiver invalid under Iskanian and unseverable, voiding arbitration | Uber: PAGA waiver enforceable or at least severable from arbitration clause | PAGA waiver in 2013 Agreement is invalid under California law but severable; PAGA representative claims may proceed in court while remaining arbitrable claims go to arbitration |
| Can non-signatory Hirease compel arbitration? | Hirease: agency, identity-of-interest, or intertwined-claims doctrines allow enforcement | Mohamed: Hirease is a separate background-check company; allegations are insufficient | Hirease cannot compel arbitration; complaint allegations did not establish agency, identity of interest, or that claims were intertwined with the arbitration-covered contract |
Key Cases Cited
- Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069 (9th Cir.) (standard for reviewing denial of motion to compel arbitration)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (Sup. Ct.) (procedural questions of arbitration are for arbitrator unless parties clearly agree otherwise)
- Momot v. Mastro, 652 F.3d 982 (9th Cir.) (language delegating validity/application of arbitration clause delegates arbitrability)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (Sup. Ct.) (parties may clearly delegate arbitrability to arbitrators)
- Italian Colors Rest. v. Am. Express Co., 133 S. Ct. 2304 (Sup. Ct.) (effective vindication doctrine may reach arbitration fees)
- Iskanian v. CLS Transp. L.A., LLC, 59 Cal.4th 348 (Cal.) (PAGA representative-waiver in employment agreement unenforceable)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir.) (FAA does not preempt Iskanian rule on PAGA waivers)
- Nagrampa v. MailCoups, Inc., 469 F.3d 1257 (9th Cir.) (adhesiveness and procedural unconscionability analysis)
- Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052 (9th Cir.) (opt-out opportunities affect adhesiveness)
- Murphy v. DirecTV, Inc., 724 F.3d 1218 (9th Cir.) (limits on compelling arbitration by non-signatories; agency/identity/intertwined-claims doctrines)