Douglas O'Connor v. Uber Technologies, Inc.
904 F.3d 1087 (2018)
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Rule of Law:
When an arbitration agreement contains a clear and unmistakable delegation clause giving the arbitrator authority to decide the threshold question of arbitrability, a court must enforce that clause and compel arbitration, unless the delegation clause itself is challenged and found to be unconscionable.
Facts:
- Douglas O’Connor and other plaintiffs worked as drivers for Uber Technologies, Inc. ('Uber').
- The drivers alleged that Uber misclassified them as independent contractors rather than employees.
- As a result of this alleged misclassification, the drivers claimed Uber failed to remit entire gratuities and did not reimburse them for necessary business expenses like gas and vehicle maintenance.
- To become Uber drivers, individuals had to agree to contracts that contained mandatory arbitration provisions.
- These provisions stipulated that disputes arising from the contract must be resolved through individual arbitration.
- The agreements contained a delegation clause, which stated that an arbitrator, not a court, would have the authority to resolve disputes about the arbitration provision's enforceability or applicability.
- The agreements also included a provision allowing drivers to opt out of the arbitration clause within 30 days of signing.
Procedural Posture:
- Uber drivers, including Douglas O'Connor, filed several putative class action lawsuits against Uber in the U.S. District Court for the Northern District of California.
- The district court granted the drivers' motion to require Uber to provide enhanced notice and an extended opt-out period for its arbitration agreement.
- Uber filed motions to compel arbitration in the various lawsuits based on the arbitration clauses in its driver agreements.
- The district court denied Uber's motions to compel arbitration, finding the arbitration provisions to be unconscionable and unenforceable.
- The district court subsequently granted the plaintiffs' motion for class certification, creating a class of Uber drivers for claims related to tips and expense reimbursements, and later expanded this class.
- The district court also issued orders under Federal Rule of Civil Procedure 23(d) restricting Uber's ability to communicate with class members regarding new arbitration agreements.
- Uber, the defendant-appellant, appealed the district court's denial of its motions to compel arbitration and its class certification orders to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does a court have the authority to decide the enforceability of an arbitration agreement when the agreement contains a clause that clearly and unmistakably delegates the question of arbitrability to an arbitrator?
Opinions:
Majority - Judge Clifton
No. When an arbitration agreement clearly and unmistakably delegates the threshold question of arbitrability to an arbitrator, a court must enforce that delegation. The court's reasoning relied on its binding precedent in Mohamed v. Uber Technologies, Inc., which held that because Uber's agreements contained such a delegation clause, the district court erred by deciding the enforceability of the arbitration agreement itself. That question was reserved for the arbitrator. The court rejected the plaintiffs' two new arguments: first, that lead plaintiffs constructively opted out for the class, holding such a state-law-based rule would be preempted by the Federal Arbitration Act (FAA); and second, that the class action waiver violated the National Labor Relations Act (NLRA), an argument foreclosed by the Supreme Court's decision in Epic Systems Corp. v. Lewis. Because the district court's denial of arbitration was improper, its subsequent class certification orders, which were premised on the unenforceability of those agreements, must also be reversed.
Analysis:
This decision solidifies the power of delegation clauses in arbitration agreements, particularly in the gig economy context. It confirms that challenges to the validity of an entire arbitration agreement (such as claims of unconscionability) must be heard by an arbitrator if the agreement contains a valid delegation clause. By applying the Supreme Court's holding in Epic Systems, the court also reinforces the enforceability of class action waivers, making it significantly more difficult for workers classified as independent contractors to pursue collective legal action. This ruling channels disputes away from public courts and into individual, private arbitration, strengthening the position of companies that utilize such clauses in their contracts.
