“Because [Plaintiff] was employed in California, we look to California contract law to 26 determine whether the agreement is valid.”
How later courts described this case
- “Because [Plaintiff] was employed in California, we look to California contract law to 26 determine whether the agreement is valid.”
Written by the judges who cited it.
The opinion
1
2
3
4 UNITED STATES DISTRICT COURT
5 NORTHERN DISTRICT OF CALIFORNIA
6
7 TODD JOHNSTON, Case No. 16-cv-03134-EMC
8 Plaintiff,
ORDER GRANTING DEFENDANT’S
9 v. MOTION TO COMPEL INDIVIDUAL
ARBITRATION
10 UBER TECHNOLOGIES, INC.,
Docket No. 110
11 Defendant.
12
13 I. INTRODUCTION
14 Plaintiff Todd Johnston (“Plaintiff”) filed a class action lawsuit against Defendant Uber
15 Technologies, Inc. (“Defendant”). Mr. Johnston asserts one cause of action: a violation of the
16 WARN Act, 29 U.S.C. § 2102 et seq. He contends that Uber Technologies violated the WARN
17 Act when it ceased operations in Austin, Texas without providing WARN Act notice to drivers at
18 least 60 days in advance. Uber argues that this matter is not properly before the Court because Mr.
19 Johnston agreed to bring this dispute in arbitration.
20 In April 2017, Defendant filed a Motion to Compel Arbitration. On June 22, 2017, the
21 Court stayed this matter because of pending appeals at the Ninth Circuit regarding the validity of
22 Defendant’s arbitration agreements (O’Connor et al. v. Uber Technologies, Inc., Ninth Circuit
23 Case No. 15-17475). In March 2018, the Court administratively denied without prejudice
24 Defendant’s Motion to Compel Arbitration because of the length of the pendency of the O’Connor
25 appeal. In September 2018, the Ninth Circuit reversed this Court’s Order denying Uber’s Motion
26 to Compel Arbitration in O’Connor. On July 11, 2019, Defendant refiled a Motion to Compel
27 Arbitration (“Motion”). Defendant asks that the Court “order Plaintiff to individually arbitrate his
1 Uber’s class action waiver unenforceable and void and deny Uber’s Renewed Motion to Compel
2 Arbitration.”
3 II. FACTUAL AND PROCEDURAL BACKGROUND
4 A. Complaint
5 According to the Class Action Complaint, Mr. Johnston “is a citizen of Texas, domiciled in
6 Austin, Texas.” Class Action Complaint (“Complaint”) ¶ 1; Docket No. 1. Uber “is a San
7 Francisco, California-based car service promoting itself as a transportation networking company.”
8 Id. ¶ 6. Uber “began operating in Austin, Texas on or about June 3, 2014.” Id. ¶ 8. Mr. Johnston
9 “began working as an Uber driver starting in May 2015,” and he continued to drive “for Uber as
10 his primary source of income until May 9, 2016.” Id. ¶ 1. On May 9, 2016, after losing a public
11 referendum to repeal an ordinance requiring transportation network companies—including Uber—
12 to beef up their background check procedures, Uber decided to immediately terminate operations
13 in Austin. Id. ¶¶ 10–13.
14 The complaint alleges that “thousands of Austin Uber Drivers . . . lost their jobs and
15 incomes” as a result. Id. ¶ 14. At the time Uber stopped its Austin-based operations, “Uber
16 officials asserted that Uber had over 10,000 Drivers in Austin.” Id. ¶ 9. Mr. Johnston contends
17 that he and other class members are “employees” of Uber, and that they were “entitled to WARN
18 Act notice” as “affected employees.” Id. ¶¶ 15–17. Under the WARN Act, affected employees
19 are entitled to “sixty (60) days notice prior to effectuating either a ‘plant closing’ or ‘mass
20 layoff.’” Id. ¶ 21; 29 U.S.C § 2102. A violation of the Act “occurs when an employer does not
21 provide the proper notice within the proper timeframe.” Complaint ¶ 22.
22 B. The Arbitration Agreement
23 At issue in this case is whether the parties’ Arbitration Agreement requires this dispute to
24 be settled before an arbitrator on an individual basis. Defendant alleges that “Plaintiff signed up to
25 use the Uber App to generate leads for potential riders . . . in Austin, Texas, and his account was
26 activated on May 22, 2015.” Motion at 4. He could not use the app without “accept[ing] the
27 applicable [Software License & Online Services] agreement with Rasier [a wholly-owned
1 was the November 2014 Rasier Agreement.” Id. To accept the agreement, Plaintiff had to sign
2 into the app and click “YES, I AGREE” when prompted to confirm his acceptance of the
3 agreement two times. Id. Defendant contends that the agreement “was available for review by
4 clicking a hyperlink presented on the screen. . . . [And] Plaintiff was free to spend as much time as
5 he wished reviewing the November 2014 Rasier Agreement.” Id. Plaintiff accepted the
6 November 2014 Agreement on the same day he activated his account. Id. That agreement
7 contained an arbitration provision, and Plaintiff did not opt out of that provision. Id. at 4–5.
8 “In December 2015, Uber rolled out a revised agreement.” Id. at 5. Prior to the rollout,
9 “drivers were sent an e-mail notifying them of the new agreement and Arbitration Provision
10 contained therein.” Id. Defendant alleges that Plaintiff “accepted the December 2015
11 [Agreement] through the Uber App on December 15, 2015, using the same process [as for the
12 November 2014 Agreement].” Id. Defendant contends that the December 2015 Agreement “is the
13 operative agreement in this matter.” Id. Uber further contends that Plaintiff “could have opted out
14 [of the Arbitration Provision] using a variety of methods, including by simply sending an email to
15 optout@uber.com.” Id. at 6. But Plaintiff “did not opt out of arbitration,” although “thousands of
16 drivers have opted out of one or more of the arbitration provisions contained in the various
17 agreements in place between Uber and the drivers who use the Uber App.” Id. at 7.
18 The relevant text of the Arbitration Provision is as follows:
19 This Arbitration Provision is governed by the Federal Arbitration
Act, 9 U.S.C. § 1 et seq. (the “FAA”) and evidences a transaction
20 involving interstate commerce. This Arbitration Provision applies to
any dispute arising out of or related to this Agreement or termination
21 of the Agreement and survives after the Agreement terminates...
22 Except as it otherwise provides, this Arbitration Provision is
intended to apply to the resolution of disputes that otherwise
23 would be resolved in a court of law or before any forum other
than arbitration, with the exception of proceedings that must be
24 exhausted under applicable law before pursuing a claim in a
court of law or in any forum other than arbitration. Except as it
25 otherwise provides, this Arbitration Provision requires all such
disputes to be resolved only by an arbitrator through final and
26 binding arbitration on an individual basis only and not by way
of court or jury trial, or by way of class, collective, or
27 representative (non-PAGA) action.
Action Waiver, such disputes include without limitation disputes
1 arising out of or relating to interpretation or application of this
Arbitration Provision, including the enforceability, revocability or
2 validity of the Arbitration Provision or any portion of the Arbitration
Provision....
3
Notwithstanding any other provision of this Agreement . . . disputes
4 regarding the enforceability, revocability or validity of the Class
Action Waiver may be resolved only by a civil court of competent
5 jurisdiction and not by an arbitrator.
6 Except as it otherwise provides, this Arbitration Provision also
applies, without limitation, to all disputes between You and Uber[
7 ]... including but not limited to any disputes arising out of or related
to this Agreement and disputes arising out of or related to Your
8 relationship with Uber, including termination of the relationship.
This Arbitration Provision also applies, without limitation, to
9 disputes regarding any city, county, state or federal wage-hour law,
... termination, ... and state statutes, if any, addressing the same or
10 similar subject matters, and all other similar federal and state
statutory and common law claims.
11
Arbitration is not a mandatory condition of your contractual
12 relationship with the Company. If you do not want to be subject
to this Arbitration Provision, you may opt out of this
13 Arbitration Provision by notifying the Company in writing of
your desire to opt out of this Arbitration Provision, either by (1)
14 sending, within 30 days of the date this Agreement is executed
by you, electronic mail to optout@uber.com, stating your name
15 and intent to opt out of the Arbitration Provision or (2) by
sending a letter by U.S. Mail, or by any nationally recognized
16 delivery service (e.g, UPS, Federal Express, etc.), or by hand
delivery to:
17
Legal Rasier, LLC
18 1455 Market St., Ste. 400
San Francisco CA 94103
19
In order to be effective, the letter under option (2) must clearly
20 indicate your intent to opt out of this Arbitration Provision, and
must be dated and signed. The envelope containing the signed
21 letter must be received (if delivered by hand) or post-marked
within 30 days of the date this Agreement is executed by you.
22 Your writing opting out of this Arbitration Provision, whether
sent by (1) or (2), will be filed with a copy of this Agreement and
23 maintained by the Company. Should you not opt out of this
Arbitration Provision within the 30-day period, you and the
24 Company shall be bound by the terms of this Arbitration
Provision. You have the right to consult with counsel of your
25 choice concerning this Arbitration Provision. You understand
that you will not be subject to retaliation if you exercise your
26 right to assert claims or opt-out of coverage under this
Arbitration Provision.
27
1 Defendant further alleges that the following notice appears immediately prior to the December
2 2015 Arbitration Provision:
3 IMPORTANT: This Arbitration Provision will require you to
resolve any claim that you may have against the Company or Uber
4 on an individual basis, except as provided below, pursuant to the
terms of the Agreement unless you choose to opt out of the
5 Arbitration Provision. Except as provided below, this provision will
preclude you from bringing any class, collective, or representative
6 action (other than actions under the Private Attorneys General Act
of 2004 (“PAGA”), California Labor Code § 2698 et seq.
7 (“PAGA”)) against the Company or Uber, and also precludes you
from participating in or recovering relief under any current or future
8 class, collective, or representative (non-PAGA) action brought
against the Company or Uber by someone else.
9
Cases have been filed against Company or Uber and may be filed
10 in the future involving claims by users of the Service, including by
drivers. You should assume that there are now, and may be in the
11 future, lawsuits against Company or Uber alleging class,
collective, and/or representative (non-PAGA) claims on your
12 behalf, including but not limited to claims for tips, reimbursement
of expenses, and employment status. Such claims, if successful,
13 could result in some monetary recovery to you. ...
14 The mere existence of such class, collective, and/or
representative lawsuits, however, does not mean that such
15 lawsuits will ultimately succeed. But if you do agree to
arbitration with the Company, you are agreeing in advance,
16 except as otherwise provided, that you will not participate in
and, therefore, will not seek to recover monetary or other relief
17 under any such class, collective, and/or representative (non-
PAGA) lawsuit....
18
WHETHER TO AGREE TO ARBITRATION IS AN
19 IMPORTANT BUSINESS DECISION. IT IS YOUR
DECISION TO MAKE.... YOU SHOULD TAKE
20 REASONABLE STEPS TO CONDUCT FURTHER
RESEARCH AND TO CONSULT WITH OTHERS –
21 INCLUDING BUT NOT LIMITED TO AN ATTORNEY –
REGARDING THE CONSEQUENCES OF YOUR DECISION,
22 JUST AS YOU WOULD WHEN MAKING ANY OTHER
IMPORTANT BUSINESS OR LIFE DECISION.
23
24 Id. (bold, underlining, and italics in the original).
25 C. Procedural Background
26 As stated above, Uber has filed a Motion to Compel Arbitration. Docket No. 110. This is
27 Defendant’s second Motion to Compel Arbitration; in April 2017, Defendant filed its first Motion
1 pending appeals at the Ninth Circuit dealing with the validity of Uber’s arbitration agreements.
2 Docket No. 77. In March 2018, the Court administratively denied without prejudice Defendant’s
3 Motion to Compel Arbitration because of the “uncertainty of the length of [the O’Connor]
4 appeals.” Docket No. 89. In September 2018, the Ninth Circuit reversed this Court’s Order
5 denying Uber’s Motion to Compel Arbitration in O’Connor. In or around September 2018, the
6 parties met and conferred “regarding the impact of the Ninth Circuit’s O’Connor decision on this
7 case,” Docket No. 98, but they did “not reach[] an agreement” on that issue, Docket No. 107.
8 Currently before the Court is Defendant’s renewed Motion to Compel Arbitration.
9 III. DISCUSSION
10 A. Legal Standard
11 “Congress [has] directed courts to abandon their hostility and instead treat arbitration
12 agreements as ‘valid, irrevocable, and enforceable.’ . . . The [Federal Arbitration] Act, [the U.S.
13 Supreme] Court has said, establishes ‘a liberal federal policy favoring arbitration agreements.’”
14 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018) (citing 9 U.S.C. § 2). Under the Federal
15 Arbitration Act (“FAA”), “[a] written provision in . . . a contract evidencing a transaction
16 involving commerce to settle by arbitration a controversy thereafter arising out of such contract . .
17 . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity
18 for the revocation of any contract.” 9 U.S.C. § 2; see also Blair v. Rent-A-Ctr., Inc., 928 F.3d 819,
19 825 (9th Cir. 2019) (quoting 9 U.S.C. § 2). Thus, courts “must place arbitration agreements on an
20 equal footing with other contracts . . . and enforce them according to their terms.” AT&T Mobility
21 LLC v. Concepcion, 563 U.S. 333, 339 (2011) (internal citations omitted).
22 To determine “the validity of an arbitration agreement, federal courts apply state law
23 contract principles.” Lau v. Mercedes-Benz USA, LLC, No. CV 11-1940 MEJ, 2012 WL 370557,
24 at *2 (N.D. Cal. Jan. 31, 2012) (citing Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th
25 Cir. 2002) (“Because [Plaintiff] was employed in California, we look to California contract law to
26 determine whether the agreement is valid.”)). Thus, arbitration agreements may “be invalidated
27 by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by
1 to arbitrate is at issue.” Concepcion, 563 U.S. at 339.
2 Typically, “the question whether an issue is arbitrable . . . is ‘an issue for judicial
3 determination . . . .’” Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1208 (9th Cir. 2016) (citing
4 Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069, 1072 (9th Cir. 2013)). In other words,
5 “there is a presumption that courts will decide which issues are arbitrable; the federal policy in
6 favor of arbitration does not extend to deciding questions of arbitrability.” Oracle Am., Inc., 724
7 F.3d at 1072. However, where “the parties clearly and unmistakably provide otherwise, the
8 question of whether the parties agreed to arbitrate” may be decided by an arbitrator. AT&T Techs.,
9 Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 (1986). “Such clear and unmistakable
10 evidence of agreement to arbitrate arbitrability might include . . . a course of conduct
11 demonstrating assent . . . or . . . an express agreement to do so.” Momot v. Mastro, 652 F.3d 982,
12 988 (9th Cir. 2011).
13 Arbitration agreements may also contain waivers of class action procedures that require
14 parties to pursue their claims individually. “In the Federal Arbitration Act, Congress has
15 instructed federal courts to enforce arbitration agreements according to their terms—including
16 terms providing for individualized proceedings.” Epic Sys., 138 S. Ct. at 1619. Furthermore, the
17 Supreme Court has stated that “an argument that a contract is unenforceable just because it
18 requires bilateral arbitration . . . is one that impermissibly disfavors arbitration . . . .” Id. at 1623.
19 However, a class action waiver may be obviated—as Plaintiff’s ask the Court to find here—where
20 an applicable statute overrides the FAA or triggers its savings clause. In the first instance, the
21 Court must find that “the FAA’s mandate has been ‘overridden by a contrary congressional
22 command,’” Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013). To make such a
23 showing, a party “must demonstrate that Congress intended to make an exception to the
24 Arbitration Act for claims arising under [the act in question], an intention discernible from the
25 text, history, or purposes of the statute.” Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220, 227
26 (1987). In the latter instance, the FAA’s savings clause (which states that agreements to arbitrate
27 shall be valid, irrevocable, and enforceable, “save upon such grounds as exist at law or in equity
1 e.g., invalid for reasons that apply to contract enforcement generally (such as when a contract term
2 is unconscionable).
3 B. Analysis
4 The parties in this case do not disagree about whether the FAA is implicated in their
5 controversy. The parties agree that Plaintiff signed Uber’s Arbitration Agreement and did not
6 subsequently opt out. See Motion at 4–8. Furthermore, Plaintiff does not allege that fraud, duress,
7 or unconscionability create a basis for invalidating the entire Arbitration Agreement.
8 Instead, the key disagreement pertains to whether the Court should enforce the Arbitration
9 Agreement and order Plaintiff to individually arbitrate his claims or find the class action in the
10 Arbitration Agreement unenforceable because it conflicts with the WARN Act. Whether the
11 WARN Act applies hinges on whether Plaintiff and other drivers are properly classified as
12 employees or independent contractors, because only employees are covered by the WARN Act;
13 independent contractors are not.
14 Whether the case may be litigated in the district court or should proceed instead to
15 arbitration turns first on the order of the issues to be decided. Uber argues that the question of
16 employee versus independent status of Mr. Johnston should be decided in arbitration. Since that is
17 a dispute regarding the relationship between Mr. Johnston and Uber, Uber contends that question
18 falls within the purview of the Arbitration Agreement. Thus, Uber seeks to “enforce the parties’
19 agreement as written, compel the threshold [employment] status question to arbitration, and stay
20 the remainder of the case.” Motion at 17. Plaintiff, on the other hand, urges the Court first to
21 address the validity of the Class Action Waiver, a matter for the Court, not the arbitrator, to decide
22 under the Agreement. See Plaintiff’s Opposition Brief (“Opposition”) at 18; Docket No. 112. In
23 particular, Plaintiff asks the Court to decide the substantive law question whether the WARN Act
24 supersedes or displaces the FAA’s mandate on enforcing arbitration and invalidate the Class
25 Action Waiver.
26 Although employee status is a threshold question upon which application (and hence
27 enforcement) of the WARN Act is predicated, both parties agreed at the hearing that it would not
1 the Arbitration Agreement herein. The “Arbitration Provision clearly and unmistakably provides
2 that . . . the arbitrator must decide all disputes . . . including the enforceability, revocability or
3 validity of the Arbitration Provision.” Motion at 10. Moreover, to the extent arbitrability of the
4 WARN Act claim turns in part upon whether Plaintiff is an employee (and thus has standing to
5 assert a claim under the WARN Act), Plaintiff’s status informs arbitrability. Under the Delegation
6 Clause, issues “arising out of or relating to” the enforceability of the Arbitration Agreement are to
7 be decided by the arbitrator. The Ninth Circuit has already found the question of arbitrability
8 under the Uber agreements is for the arbitrator and that the Delegation Clause is not
9 unconscionable. O’Connor v. Uber Techs., Inc., 904 F.3d 1087, 1094-95 (9th Cir. 2008).
10 Although under the Uber agreement, the question of the validity of class waivers is to be
11 decided by “a civil court of competent jurisdiction,” the Court cannot properly reach that legal
12 question regarding the relationship between the WARN Act and the FAA until the threshold
13 finding is made that Plaintiff is an employee (who is subject to the WARN Act’s protection).
14 Since, as the parties agree, that threshold question is a matter for the arbitrator, the status question
15 is properly referred to arbitration. If the arbitrator determines that Plaintiff is properly classified as
16 an Uber employee—such that Plaintiff would qualify for the protections of the WARN Act—the
17 arbitrator must send the case back to this Court for a determination whether the Class Action
18 Waiver is valid in light of the WARN Act. If the arbitrator determines that Plaintiff is properly
19 classified as an independent contractor, the arbitrator may retain jurisdiction over the rest of the
20 case since the WARN Act would not impede arbitration under that circumstance.
21 ///
22 ///
23 ///
24 ///
25 ///
26 ///
27 ///
1 IV. CONCLUSION
2 For the foregoing reasons, the Court GRANTS Defendant’s Motion to Compel Arbitration
3 as to the question of whether Plaintiff is an employee or independent contractor. If the arbitrator
4 finds Plaintiff is/was an employee, the matter shall be referred back to this Court to determine the
5 validity of the Class Action Waiver.
6 This order disposes of Docket No. 110.
7
8 IT IS SO ORDERED.
9
10 Dated: September 16, 2019
ll
12 — f__—_—
ED . CHEN
13 United States District Judge
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