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October 28, 2016

Federal Court of Appeals Rules in Favor of Enforcing Arbitration Agreements

The Ninth Circuit Court of Appeals, which handles appeals from all California federal courts, recently delivered a blow to Uber drivers seeking to maintain a class action lawsuit against the ride-sharing company. In Mohamed v. Uber Technologies, Inc., the Court held that the arbitration agreements signed by drivers at the outset of their relationship with Uber were largely enforceable.  The Court reversed an earlier ruling by the district court judge that found the agreements to be unconscionable. The Court found that the issues highlighted by the district court judge were “artificial.” The Court also found that the agreements’ opt-out provision provided drivers with an appropriate method to choose not to be subject to arbitration if they desired to maintain their right to bring class-action claims.

Although the ruling is largely a win for companies seeking to enforce arbitration agreements, the court also affirmed, consistent with California law, that the drivers’ claims brought under the California Private Attorneys General Act (PAGA) were not subject to arbitration. PAGA allows employees to sue employers, on behalf of the state, to receive civil penalties for violations of labor and safety laws.  This means that Uber and other employers are still vulnerable to PAGA claims in state and federal courts, notwithstanding otherwise enforceable arbitration agreements.  However, the overall effect of this ruling is that the majority of the drivers’ claims must be determined on an individual basis in front of an arbitrator, which is generally a speedy and less costly alternative to class-action litigation.

Please contact Mike Chase if you have any questions regarding this article.

Legal disclaimer: The information in this article (i) is provided for general informational purposes only, (ii) is not provided in the course of and does not create or constitute an attorney-client relationship, (iii) is not intended as a solicitation, (iv) is not intended to convey or constitute legal advice, and (v) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any of the information in this article without first seeking qualified professional counsel on your specific matter.