Uber Technologies Inc. could face unintended consequences of successfully keeping a class action out of court: 12,500 individual cases in arbitration that could put the company on the hook for nearly $19 million in fees.
At least that’s the hope of plaintiffs attorneys who just hit the ride-hailing giant en masse, asking a San Francisco federal judge to compel Uber to answer to thousands of arbitration claims filed in recent months—and to pay all the associated costs, as required by employment agreements.
Uber has successfully fought class action claims in trial and appellate courts from drivers who allege they were misclassified as independent contractors, and a recent U.S. Supreme Court decision, Epic Systems v. Lewis, said companies lawfully could force employees to waive class action rights.
Companies often tout the benefits of arbitration, saying the process provides employees a fast, cheaper way to make claims than going to court. Many employers even agree to pay associated fees to start and resolve cases. But the new petition in California contends Uber is slow-walking paying fees, or not paying any at all.
“For employers, this might say be careful what you ask for and you might get it,” said plaintiffs lawyer Joseph Sellers of Cohen Milstein Sellers & Toll. “This could force Uber to reckon with the consequences of the arbitration clause, which means very substantial costs, that would have been avoided had it been pursued together.”
Gibson, Dunn & Crutcher partner Theodore Boutrous, a lead attorney for Uber who has argued labor and employment cases for the company, did not respond to a request for comment. Uber also did not immediately respond to a request for comment.
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The complaint seeking to compel arbitration was filed Wednesday by the plaintiffs firm Larson O’Brien in Los Angeles. Uber had paid filing fees in only 296 arbitration claims of some 12,500 demands filed with JAMS, the mediation and arbitration powerhouse, according to the petition.
Out of those matters, only 47 drivers have been appointed an arbitrator, and out of those 47, in only six instances has Uber paid the retainer fee of the arbitrator to allow the arbitration to move forward, according to the petition. The petition identifies thousands of drivers from California, New York, New Jersey, Texas, Georgia, Massachusetts and Illinois.
“We are calling Uber on their bluff. We are calling them on their stall tactics,” said Stephen Larson, a partner at Larson O’Brien who represents the Uber drivers. “They are stalling and cutting off the rights of their drivers. We are calling them out on that. We don’t think they are serious about arbitration. We are saying, ‘You won. Let’s move forward.’”
In the wake of the Supreme Court’s Epic Systems decision in May, courts across the country have upheld employment contracts that require mandatory arbitration agreements. Yet, there are signs that suggest the plaintiffs bar won’t walk away.
“The bigger issue here is that large companies are using these clauses as a shield against litigation,” Larson said. “There are good reasons why many of these cases should be dealt with in the civil court system.”
David Horton, a law professor at University of California, Davis School of Law, co-wrote a study in October that found plaintiffs successfully have used mandatory arbitration as a tool. Horton said plaintiffs sometimes file many individual arbitration actions like “ghosts of class actions.” The study found evidence of more than 1,000 individual arbitration cases filed by the same firm against the same company on the same day.
“The Supreme Court has made it really hard for class actions to survive. Plaintiffs attorneys are trying to find ways to deal with suing companies for widely dispersed claims,” Horton said. “They’re engaged in guerrilla warfare.”
Kent Williams of the Williams Law Firm in Minnesota is taking a similar approach in a pending case against Chipotle. Williams and his fellow plaintiffs attorneys are filing individual arbitration claims against Chipotle in groups of 50 workers each. They have filed 200 arbitration claims and will continue methodically, Williams said.
Williams said social media has made it easier for plaintiffs lawyers to find clients, allowing this trend of fighting against arbitration to continue en masse.
Cohen Milstein’s Sellers called the Uber case an outlier, but said these cases highlight the inefficiency of arbitration. Plaintiffs attorneys sometimes don’t have the ability to find all the members of class if it is decertified, he said.
“In most instances we don’t know who else is in the class. We don’t have the time,” Sellers said. “This strategy, a clever strategy, is not readily available.”