Good morning. I hope you had a good – and safe – Labor Day weekend. The usual “back to the work and school“ routine is very different this year. May yours – and your kids’ – be smooth.
Uber saga, the FAA “interstate commerce” exception
The seemingly endless fight over the scope and enforceability of the arbitration clause in Uber’s agreement with its drivers continued last week. In Grice v. United States District Court, 2020 U.S. App. LEXIS 28207 (9th Cir.) (Sept. 4, 2020), the court, Callahan, J., writing for herself and Judges O’Scannlain and Watson, considered the exception to the Federal Arbitration Act, 9 U.S.C. Sec 1, for “workers engaged in interstate and foreign commerce”, the so called “residual clause”. Grice, an Uber driver, asserted that his class action, claiming that Uber had failed to safeguard drivers’ personal information, was exempt from the arbitration clause in the Uber driver agreement, because he and other drivers ferried passengers, such as riders to the airport, who were in interstate commerce, although he, himself, did not cross state lines. In an opinion worth reading because of its analysis of cases from multiple jurisdictions regarding the residual clause, the Court held that Grice did not fall within the exception and ordered arbitration. The test, Judge Callahan holds, is the basic nature of the driver’s business. Since Uber drivers primarily drive persons who are just moving around cities and not moving interstate, they, unlike truck drivers who regularly move products proceeding in interstate commerce, do not fall within the exemption. An interesting issue about the precedential value of the case arises from its procedural posture. Grice came to the Ninth Circuit on a mandamus petition. Thus, the standard of review is whether the “district court’s decision [constituted] ‘clear error as a matter of law.’” Since there was a “lack of controlling precedent forbidding the [District Court’s] result, [the Ninth Circuit judges] are not firmly convinced that the district court erred. . . Because Grice has not met his burden of showing a clear and indisputable right to issuance of the writ, his petition is DENIED.” (Emphasis added). One wonders how a court deciding the matter on the normal standard of appellate review might resolve the issue.
Uber continued – Failure to pay arbitration fees
While last week was a good one for Uber in the Ninth Circuit, it fared less well in the District Court. Greco v. Uber Techs., Inc. 2020 U.S. Dist. LEXIS 161510 (N.D. Cal.) (Sept. 3, 2020) addresses the the effect failing to pay arbitration fees in an unusual context. Ms. Greco, who is visually impaired, claims that Uber drivers would cancel her rides when they learned that she uses a guide dog. Pursuant to the rider agreement, she commenced a Consumer Arbitration with the AAA. Since Uber had failed to pay its fees to the Association in other cases, the AAA had, before the filing of the demand, advised Uber that it would decline to administer any new consumer docket cases and administratively closed the Greco file. After Uber settled its unpaid fees, it asked Ms. Greco’s consent to reinstitute arbitration, but, seeing an opening to get into court, she refused. The court declined to compel arbitration, holding that Ms. Greco’s first attempt to arbitrate constituted compliance with the terms of her contract and, therefore, there was not a “refusal to arbitrate”, as required by the FAA as a prerequisite to a court order to compel. Summary – pay your arbitration fees or suffer the consequences. For those drafting arbitration clauses, the case also provides guidance on how to describe the administrating body. Uber only designated the AAA in its agreement; therefore, the court declined to order arbitration before another entity. So, note to drafters – always allow an opening for a substitute administrator in case your first choice folds or is not otherwise available.
Addition of an arbitration clause after the relationship begins
Two cases this week deal with the effectiveness of adding an arbitration clause after the parties have already begun their relationship. In Cleary v. Cisco Sys., 2020 U.S. Dist. LEXIS 162914 (E.D. Mich.) (Sept. 8, 2020), the court held that an employee’s willingness to continue working after learning that she would be compelled to arbitrate any employment dispute indicated agreement with the arbitration provision. Cleary has the added touch that the employee had previously invoked the arbitration clause, although it was never physically signed, thus indicating its understanding that there was such a provision. Childers v. Menard, Inc., 2020 U.S. Dist. LEXIS 162283 (W.D. Wisc.) (Sept. 4, 2020), addresses an arbitration clause inserted in a rebate request which the consumer sends in only after he or she has received and, presumably, paid for the actual product. Plaintiff, in this class action, sought to avoid arbitration, arguing that the court should focus on the status of the agreement at the time of she obtained the product, at which point there was no arbitration provision conveyed to her. The court rejected the argument, finding a contract existed only when the rebate form (which had an arbitration provision} was returned, noting that the plaintiffs could have returned the goods before sending in the rebate form and, therefore, the purchase “wasn’t completed until plaintiffs completed the rebate form, which contained the arbitration clause.” I am not sure that this result stands up to standard contract analysis. As they used to say in law school, “Query.” Why wasn’t the contract for the rebate in fact formed when the product was purchased with the expectation of a rebate and the filing of the form was merely an administrative act to claim the rebate voucher? What about the consumer who does not choose to seek a rebate? Has he or she never entered into a contract to purchase the Menard’s product?
Podcasts – I plan to do a future summary of some of the podcasts and twitter feeds that are out there, as a lot of them are really excellent. But, one of the best is about to relaunch after its summer break and I want to bring it to your attention, so you do not miss any of the episodes. “Arbitration Station” is a regular update on happenings in the world of international arbitration. Even for those doing only domestic arbitration, it has great tips and highlights. Season five, to quote the site’s twitter feed, is “in the pipeline.” Catch it.
That’s it for today. Some new case law on waiver and the proper choice of law for interpreting the arbitration clause – plus any new cases of interest – on Friday. Be safe.