Uber Technologies Inc. will not be allowed to force a customer to arbitrate his proposed class action alleging the company and its CEO fixed ride prices. U.S. District Judge Jed Rakoff issued a very tough order, calling consumer consent to arbitration agreements online a “legal fiction.” Judge Rakoff, a well-respected judge, denied Uber’s bid to force rider Spencer Meyer’s suit, accusing the company’s CEO, Travis Kalanick, of colluding with drivers to hike prices, into arbitration. Judge Rankoff also took aim at the way courts view assent to arbitration agreements in general.
In the world of the internet, Judge Rakoff wrote, consumers are deemed to have waived their right to a jury trial and given up access to the courts altogether by clicking a button or sometimes just continuing to use a service if the company providing that service has given them some form of notice of its terms and conditions. Judge Rakoff said that consumers have no realistic power to negotiate arbitration terms and generally are not even aware of them. Judge Rakoff, quoting from the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, wrote in his order:
This legal fiction is sometimes justified, at least where mandatory arbitration is concerned, by reference to the liberal federal policy favoring arbitration. Application of this policy to the internet is said to inhere in the Federal Arbitration Act, as if the Congress that enacted that act in 1925 remotely contemplated the vicissitudes of the World Wide Web.
Judge Rakoff analyzed a number of other online consumer arbitration cases, including ones in other districts to which his decision isn’t bound, to arrive at his conclusion that the contract to which Meyer had allegedly agreed couldn’t be enforced.
When Meyer signed up to use Uber, reaching the company’s arbitration clause would have taken several large leaps of attention, Judge Rakoff noted in his order. To get to it, Meyer would have had to scroll past the button authorizing his registration for the service to click on a small hyperlink that would have directed him to a company webpage. From there, Judge Rakoff said Meyer would have had to click on a button guiding him to the terms, and then gotten all the way to Page 7 of those terms before seeing some bolded text about arbitration. In his order, Judge Rakoff wrote:
Meyer filed the proposed class action in December against Kalanick. Uber later asked to be added as a co-Defendant, and Judge Rakoff granted that request. The suit alleges a scheme in which drivers were agreeing to rig prices for rides and in which Kalanick was working with each driver to fix prices. Meyers alleges that the fixed prices kill competition that would benefit riders. In March, Judge Rakoff found that Meyer had sufficiently alleged that the drivers were all agreeing to work in a market where they know they won’t be undercut on price by other drivers, and that because Kalanick sometimes drives for the service, he is a part of the scheme.
In May, Uber requested arbitration in the suit, saying Meyer had initially accused Kalanick specifically of price-fixing to try to get around his waiver of a right to a jury trial. Uber also argued that Meyer and other app users agreed to terms and conditions that contain a “clear and conspicuous” arbitration provision. As a side note, the parties have also done battle over alleged shady tactics by a firm called Ergo, hired by Uber to investigate Meyer and his lawyer. Judge Rakoff earlier blasted the ride-hailing service and its investigator for relying on unlicensed investigators who lied to Meyer’s friends to get personal information. Meyer will ask the court to allow him to add a few more Plaintiffs to the suit. This could possibly lead to a bid for class certification.
Meyer is represented by Matthew L. Cantor and David A. Scupp of Constantine Cannon LLP; Bryan L. Clobes and Ellen Meriwether of Cafferty Clobes Meriwether & Sprengel LLP; Andrew Arthur Schmidt of Andrew Schmidt Law PLLC; John C. Briody, James H. Smith and Lewis T. LeClair of McKool Smith PC; and Brian M. Feldman, Jeffrey A. Wadsworth, Edwin M. Larkin and A. Paul Britton of Harter Secrest & Emery LLP. The case is Spencer Meyer v. Travis Kalanick in the U.S. District Court for the Southern District of New York.
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