Supreme Court of Canada Refuses to Enforce Uber Contract Requiring Arbitration in Holland

A Canadian Uber driver, Heller, brought a class action against Uber, actually several Uber entities, alleging violations of Canada’s Employment Standards Act. According to the motion judge in the Ontario Superior Court of Justice, Uber “[d]rivers in Ontario do not enter into contracts with Uber Technologies Inc. [incorporated in Delaware] or Uber Canada Inc. The Drivers rather create an internet account and a contractual relationship with Uber B.V. and with Rasier Operations B.V. and, or Uber Portier B.V.” Each of those Uber entities is incorporated under the laws of the Netherlands. Uber’s form contract for drivers says it shall be governed by the laws of the Netherlands, and that any dispute not resolved in mediation:

“shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”) …. The Place of the arbitration shall be Amsterdam, The Netherlands.” 

The motion judge granted Uber’s motion to stay the class proceedings in favor of arbitration in the Netherlands, relying on Canada’s International Commercial Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  

The Court of Appeal of Ontario set aside the lower court’s order, and allowed Heller to litigate, rather than arbitrate, the class action. The Court of Appeal emphasized that the ICC’s “up-front administrative/filing-related costs for a driver to participate in the mediation-arbitration process in the Netherlands prescribed in the Arbitration Clause is US$14,500. As an UberEATS driver, the appellant earns about $20,800-$31,200 per year, before taxes and expenses.” The Court of Appeal held that the arbitration agreement “constitutes a contracting out of the Employment Standards Act “ which permits a driver to make a complaint the Ministry of Labour regarding the actions of Uber and their possible violation of the requirements of the ESA.” The arbitration agreement “deprives [the driver] of the right to have an ESO investigate his complaint.” The Court of Appeal noted that the driver “has not, in fact, chosen to make a complaint under the ESA but rather has commenced this proposed class action”, but held that this did not under the court’s conclusion that the arbitration agreement impermissibly contracted out of the ESA.

As an independent ground for denying enforcement to the arbitration clause, the Court of Appeal held the clause unconscionable.

The Supreme Court of Canada agreed with the Court of Appeal that the arbitration clause is unenforceable: “This is an arbitration agreement that makes it impossible for one party to arbitrate. It is a classic case of unconscionability.” The Supreme Court’s opinion contains a lengthy discussion of the unconscionability doctrine, featuring some differences of opinion among the justices.

Earlier Canadian cases include Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, and Seidel v. TELUS Communications Inc., [2011] 1 S.C.R. 531. 

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Did Arbitration Save Uber $80 Million?

Did Uber's payout to its drivers fall by $80 million due to an enforceable arbitration clause? That's the impression given by Johana Bhuiyan in the LA Times:

"Uber agreed to pay $20 million to settle lawsuits challenging the classification of drivers as independent contractors, rather than employees owed the benefits of traditional employment.

The payout is a far cry from the $100 million Uber had agreed to pay to settle the suit in 2016, after a San Francisco judge granted 385,000 drivers in California and Massachusetts class-action status. Eventually, a judge determined $100 million was not sufficient given the original class size.

But an appeals court ruling found Uber’s mandatory arbitration agreements — which obligate workers to settle their claims with the company one-on-one — were largely valid and enforceable.

That ruling, and Uber’s decision in May to maintain its policy of upholding its arbitration clause in cases unrelated to sexual misconduct, ultimately reduced the class to about 13,600 drivers, who had either opted not to agree to mandatory arbitration or drove for Uber before the company implemented such a policy."

Shannon Liss-Riordan, the plaintiffs' lawyer representing drivers, is running for U.S. Senate in a primary challenge to Massachusetts Democrat Ed Markey.

Uber Drivers--12,500 of Them--Demand Individual Arbitrations, Each Paid for by Uber

Uber's arbitration agreements with its drivers precludes class actions and thus requires individual arbitration. "Amazingly," Allison Frankel writes, "thousands of Uber drivers did just that. Between August and November of this year, about 12,500 drivers, many of whom had been class members in cases in which Uber successfully moved to compel arbitration, served individual arbitration demands on Uber ... These thousands of drivers filed their arbitration demands at JAMS, as mandated in Uber’s contracts."

The drivers argue Uber is required to pay for their arbitration because the terms of service say "In all cases where required by law, the Company will pay the Arbitrator's and arbitration fees."

The drivers allege “As of November 13, 2018, 12,501 demands have been filed with JAMS,” the arbitration organization. : “Of those 12,501 demands, in only 296 has Uber paid the initiating filing fees necessary for an arbitration to commence [...] only 47 have appointed arbitrators, and [...] in only six instances has Uber paid the retainer fee of the arbitrator to allow the arbitration to move forward.”

Uber Class-Waiver Arbitration Agreement Unenforceable

The First Circuit recently held that an arbitration clause contained in the online contract of the ride sharing app, Uber Technologies, Inc., is unenforceable under Massachusetts law. Cullinane v. Uber Technologies, Inc., No. 16-2023 (1st Cir. June 25, 2018).

In this case, plaintiffs, Uber riders, filed a class action in Massachusetts state court, challenging certain fees Uber charged as violations of state consumer protection laws. Uber removed the case to federal court and moved to compel arbitration based on an arbitration clause in Uber’s Terms of Service. In order to use the Uber app, the customers had to register for an Uber account and to agree to the company’s Terms of Service & Privacy Policy. The Terms of Service included an arbitration clause which required customers to resolve any disputes with Uber through binding arbitration and also contained a class action waiver. The district court granted Uber’s motion to compel arbitration and dismissed the lawsuit. The plaintiffs appealled to the First Circuit.

As Jeanne Kohler of Carlton Fields writes, the First Circuit found that Uber had not reasonably communicated its Terms of Service, including the mandatory arbitration clause, to its customers because the link to the Terms was not sufficiently conspicuous. The Court noted that Uber did not use a common method of conspicuously informing online app users of its terms by requiring users to click a box stating that they agree to the terms before continuing to the next screen. Instead, Uber displayed, on an enrollment screen, a rectangular box with the language “Terms of Service,” which customers were not required to click in order to review the contract. The Court noted that Uber’s terms were not conspicuously disclosed to its users because the link was not designed in a way that most users associate with hyperlinks and thus did not have the appearance of a hyperlink. Further, the hyperlink box was not sufficiently distinct from the rest of the screen, which had other links in bold with similarly sized font that were “more noticeable.”

Uber Arbitration Agreement Held Unconscionable

Uber was sued by its drivers and sought to compel arbitration of that suit. A California federal court refused to enforce the delegation clause (which said questions concerning the enforce-ability of the arbitration clause would be resolved by the arbitrator) and then held the arbitration clause substantively unconscionable because: it eliminates plaintiffs’ right to bring certain claims in any forum; has an impermissible fee-shifting clause; and “permits Uber to litigate the claims most valuable to it in court . . . while requiring its drivers to arbitrate those claims. . .they are most likely to bring against Uber,”