Photo: Diego M. Radzinschi/ALM

In its attempt to settle wage claims affecting more than 1 million of its drivers, Uber just ran into a red light.

At a hearing on Friday, a Los Angeles judge tentatively rejected a $7.75 million settlement that would have resolved claims that its drivers have been misclassified under California law as independent contractors, rather than employees. At a hearing on Friday, lawyers for both Uber and the plaintiffs in the case vehemently fought back against Los Angeles Superior Court Judge Maren Nelson’s concerns that the deal might have been the result of collusion.

In court, Nelson focused on the fact that both sides failed to produce a range that estimated generally how much the claims, brought under California’s Private Attorneys General Act of 2004, were actually worth. PAGA allows private parties to pursue labor violations under California law.

“My concern in looking at the adequacy of the settlement is I didn’t see what the high side or the low side is,” she said.

“To suggest that somehow that’s the result of collusion leaves me nearly speechless,” said plaintiffs attorney Christopher Morosoff, a solo practitioner in the Los Angeles area. “There was absolutely no collusion here.”

Uber attorney Keith Jacoby agreed. He also suggested that Uber was being unfairly targeted by California regulators, who haven’t intervened in similar cases involving Lyft, Jacoby said.

“I really feel like Uber is not getting a level playing field here,” Jacoby said. “And I’m not sure why.”

Jacoby is co-chairman of the class action practice group at Littler Mendelson and a shareholder in Los Angeles.

Nelson, who tentatively rejected the settlement in March, appeared persuaded by an amicus brief filed by California Labor Commissioner Julie Su, whom she asked to weigh in on the proposed accord. In the June 16 brief, Su chose not to delve into the particulars of the deal but, at the same time, outlined a number of red flags that the judge should consider.

Unlike many of the other driver suits, which had tacked on class claims, the case before Nelson brought only alleged statutory violations under PAGA. The PAGA claims are critical in the driver suits, though, because the U.S. Court of Appeals for the Ninth Circuit ruled last year that class claims had to be arbitrated.

Lawyers in other driver suits, many of whom were in court on Friday, have opposed the settlement, which they claim could wipe out their PAGA claims at little expense to the ride-hailing company. One plaintiffs attorney, Shannon Liss-Riordan of Boston’s Lichten & Liss-Riordan, said in court that the lawyers in the Los Angeles case were “forum shopping” to get around a ruling in her case. Last year, an attorney from California’s Department of Industrial Relations, under which the commissioner works, wrote a letter to U.S. District Judge Edward Chen, who is overseeing her case in the Northern District of California, estimating PAGA claims against Uber could be worth more than $1 billion. The letter was a key factor in Chen’s decision to reject a proposed $84 million settlement, of which $1 million involved PAGA claims.

In court, Liss-Riordan said she planned to go to trial on whether Uber was misclassifying its drivers should Nelson reject the Los Angeles deal.

But it was the lawyers behind the settlement that spent most of the hearing’s two hours trying to convince Nelson to approve the deal.

Nelson also said the release provisions in the settlement were too broad, encompassing claims beyond what was alleged in the complaint, and that $54,000 in incentive payments to the two lead plaintiffs in the case appeared too high. Under PAGA, 25 percent of the civil penalties would go to all drivers, including the lead plaintiffs.

“I don’t mean to suggest that the court should second-guess every little number,” she said of the incentive payments. But she found the amounts “quite troubling” given the lack of evidence to support them.

Morosoff said the incentive payments were far from a “sweetheart deal.”

As for the release provisions, he noted that the commissioner doesn’t “have the authority to tell us how to litigate the case.”

Jacoby said Uber shouldn’t be forced to litigate PAGA claims one case at a time. In the end, he questioned the commissioner’s motives.

“$7.75 million is an awful lot of money,” he said. “More than the labor commissioner has ever received. I feel like she’s egging you on to try to get a little more.”

If the judge rejects the deal, it would cap a tough month for Uber.

Its chief executive, Travis Kalanick, resigned in the wake of an internal investigation led by Covington & Burling into allegations of sexual harassment and other forms of discrimination at the San Francisco-based ride-hailing firm.

Covington & Burling’s report came with numerous recommendations to heal Uber’s allegedly toxic workplace culture.

The developments in the Los Angeles case are another problem for its legal department, which already has a lot on its plate.