Abdul Mohamed, et al. v. Uber Technologies, Inc., et al.
F.3d (2016)
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Rule of Law:
An arbitration agreement's delegation clause, which grants an arbitrator the authority to determine the agreement's enforceability, is valid and must be enforced unless a party proves that the delegation clause itself is procedurally and substantively unconscionable. The existence of a meaningful opportunity to opt out of an arbitration agreement precludes a finding of procedural unconscionability.
Facts:
- Abdul Mohamed and Ronald Gillette worked as drivers for Uber.
- To use the Uber app, drivers were required to agree to contracts, including a 2013 Agreement and a 2014 Agreement.
- Both agreements contained mandatory arbitration provisions stating that disputes, including questions of the arbitration provision's own enforceability, must be decided by an arbitrator (a 'delegation clause').
- The 2013 Agreement (signed by Gillette) required drivers to opt out of arbitration by delivering notice in person at Uber's San Francisco offices or via overnight delivery service within 30 days.
- The 2014 Agreement (signed by Mohamed) allowed drivers to opt out of arbitration via email in addition to the other methods.
- The 2013 Agreement contained a specific 'carve-out' provision stating a court, not an arbitrator, could determine the enforceability of the waiver of representative Private Attorney General Act (PAGA) claims.
- Neither Mohamed nor Gillette opted out of the arbitration provisions.
- Uber later terminated both drivers' access to the app based on negative information in their consumer credit reports, which prompted their lawsuits.
Procedural Posture:
- Abdul Mohamed filed a class action lawsuit against Uber, Rasier, and Hirease in the U.S. District Court for the Northern District of California.
- Ronald Gillette filed a separate lawsuit against Uber in the same federal district court.
- In both cases, Uber filed a motion to compel arbitration based on the agreements the drivers had signed.
- The district court denied Uber's motions to compel arbitration in a consolidated order.
- Uber, as the defendant-appellant, appealed the district court's denial to the U.S. Court of Appeals for the Ninth Circuit, with Mohamed and Gillette as the plaintiff-appellees.
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Issue:
Does a clear and unmistakable delegation clause in an arbitration agreement, which grants an arbitrator the authority to determine the enforceability and validity of the arbitration provision, require a court to compel arbitration on the question of arbitrability?
Opinions:
Majority - Clifton, Circuit Judge
Yes, a court must enforce a clear and unmistakable delegation clause and compel arbitration to determine arbitrability. The language delegating disputes about the 'enforceability, revocability or validity of the Arbitration Provision' to the arbitrator was clear and unmistakable. The district court erred by deciding the enforceability of the arbitration agreement as a whole, when its only task was to determine the validity of the delegation clause itself. The delegation clauses were not procedurally unconscionable because both agreements provided drivers an opportunity to opt out. Under Ninth Circuit precedent, an agreement is not adhesive, and thus not procedurally unconscionable, if a party has a meaningful chance to opt out, even if the method is burdensome. As there was no procedural unconscionability, the court did not need to analyze substantive unconscionability. The only issue properly before the court was Gillette's challenge to the PAGA waiver in the 2013 agreement, due to a specific carve-out in that contract. That PAGA waiver is unenforceable under California law, but the agreement's severability clause dictates that the PAGA claim proceeds in court while all other claims are sent to arbitration.
Analysis:
This decision significantly strengthens the power of delegation clauses within arbitration agreements, reinforcing the Supreme Court's holding in Rent-A-Center v. Jackson. It establishes that courts must treat delegation clauses as separate, mini-arbitration agreements and may only invalidate them based on defenses specific to the clause itself, not the entire contract. The ruling also solidifies the Ninth Circuit's precedent that providing any opt-out mechanism, even a difficult one, is sufficient to defeat a claim of procedural unconscionability. This makes it substantially more difficult for employees and consumers to challenge the validity of arbitration agreements in court, forcing most challenges into the arbitral forum itself.
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