24 Cal. App. 5th 327
Cal. Ct. App. 5th2018Background
- Smythe, who drove for both Lyft and Uber, sued Uber on behalf of Lyft drivers alleging Uber generated fake Lyft ride requests to waste Lyft drivers’ time and divert customers to Uber (claims for unfair business practices and interference with prospective economic advantage).
- Smythe had signed Rasier agreements with Uber containing a broad arbitration clause covering disputes "arising out of or related to" the agreement or the driver’s relationship with Uber, plus a delegation clause assigning arbitrability issues to an arbitrator.
- Uber moved to compel arbitration and stay the class action under those Rasier arbitration provisions.
- The trial court held Smythe’s claims were beyond the scope of the Rasier agreements and that the delegation clause could not be enforced in this context, so it denied Uber’s motion to compel arbitration.
- Uber appealed, arguing the delegation clause required the court to leave arbitrability questions to the arbitrator or, alternatively, that the claims fell within the arbitration scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the delegation clause requires arbitrator to decide arbitrability | Delegation clause need not be enforced because claims are unrelated to the Rasier agreements | Delegation clause clearly and unmistakably delegates arbitrability to arbitrator | Court accepted delegation clause generally but proceeded to test whether assertion of arbitrability is "wholly groundless" and concluded it was wholly groundless here |
| Whether Smythe’s claims fall within scope of arbitration clause | Claims arise from Smythe’s work for Lyft, not from his agreement with Uber; therefore outside scope | Claims are "related to" the driver relationship and Rasier agreement and thus arbitrable | Court held claims are beyond the scope of the Rasier agreements and not arbitrable |
| Whether delegation clause is unenforceable (e.g., unconscionable/ambiguous) | Delegation clause should not be enforced in these circumstances | Delegation clause is valid and enforceable | Court found no unconscionability/ambiguity issue but declined to enforce delegation because the arbitration assertion was wholly groundless |
| Whether contractual marketing clause (§4.7) brings misconduct within arbitration scope | §4.7 concerns passenger marketing and does not encompass alleged scheme against Lyft drivers | Uber: §4.7 shows intent to cover disputes tied to marketing or increasing ridership | Court held §4.7 addresses passenger advertising, not the alleged misconduct, so it does not bring claims into arbitration scope |
Key Cases Cited
- Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed. Cir. 2006) (framework for courts to decide whether a delegation clause vests arbitrability decisions in arbitrators and when a claim is "wholly groundless")
- Douglas v. Regions Bank, 757 F.3d 460 (5th Cir. 2014) (arbitrability delegation does not require gateway arbitration where dispute is plainly unrelated to the arbitration agreement)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (U.S. 1986) (arbitration clause must be susceptible to interpretation covering the dispute before court compels arbitration)
- Kubala v. Supreme Production Services, Inc., 830 F.3d 199 (5th Cir. 2016) (strong presumption that delegation clauses are enforceable; "wholly groundless" exception is narrow)
- Mohammed v. Uber Technologies, Inc., 848 F.3d 1201 (9th Cir. 2016) (upholding Uber arbitration and delegation clauses where claims were clearly tied to driver relationship)
- Aanderud v. Superior Court, 13 Cal.App.5th 880 (Cal. Ct. App. 2017) (resolving ambiguities and unconscionability challenges to delegation clauses under California law)