Class Action Waiver Cannot be Invoked by Uber Technologies CEO Travis Kalanick | Practical Law

Class Action Waiver Cannot be Invoked by Uber Technologies CEO Travis Kalanick | Practical Law

In Meyer v. Kalanick, the US District Court for the Southern District of New York held that a class action waiver cannot be enforced other than in connection with a motion to compel arbitration.

Class Action Waiver Cannot be Invoked by Uber Technologies CEO Travis Kalanick

Practical Law Legal Update w-002-4558 (Approx. 4 pages)

Class Action Waiver Cannot be Invoked by Uber Technologies CEO Travis Kalanick

by Practical Law Litigation
Law stated as of 24 May 2016 • USA (National/Federal)
In Meyer v. Kalanick, the US District Court for the Southern District of New York held that a class action waiver cannot be enforced other than in connection with a motion to compel arbitration.
On May 9, 2016, in Meyer v. Kalanick, US District Judge Jed Rakoff adhered to an earlier decision refusing to enforce a class action waiver contained in an agreement an Uber driver signed ( (S.D.N.Y. May 9, 2016)). In the earlier decision, the court held that the plaintiff sufficiently alleged that the drivers were assenting to work in a market where they know they would not be undercut on price by other drivers in violation of US antitrust laws. Because Kalanick sometimes drives for Uber Technologies, the plaintiffs allege, he is part of the scheme.
The agreement in question contains a dispute resolution clause providing that
  • All disputes will be settled by binding arbitration.
  • The arbitrator may not consolidate more than one person's claims and may not otherwise preside over any form of any class or representative proceeding.
  • The Uber driver waives the right to participate in any type of class action.
Kalanick's motion to enforce the class action waiver failed because:
  • The class action waiver appears in a section of the user agreement titled "Dispute Resolution" and therefore must be read as part of the agreement to arbitrate.
  • Assuming the class action waiver was meant to prohibit a class action outside of the arbitration context, the waiver would be unenforceable under applicable state law.
Regarding the interpretation of the agreement, the court held that the language waiving the right to participate in a class action is plausibly read as an explanation of the rights that the parties are giving up in agreeing to arbitrate disputes and not as an independently effective waiver of the right to pursue a class action. Kalanick never filed a motion to compel arbitration and therefore the driver has not waived any right to bring class action claims.
Even assuming, for the sake of argument, that the agreement could be read to contain a stand-alone class action waiver, the court held that the waiver is unconscionable, and therefore unenforceable, under the applicable state law (California) (Discover Bank v. Superior Court, 113 P.3d 1100, 1110 (Cal. 2005)). As the Supreme Court explained in AT&T Mobility LLC v. Concepcion, state law prohibiting class action waivers and class arbitration waivers are preempted by the Federal Arbitration Act when the defendant invokes the arbitration agreement (131 S. Ct. 1740, 1753 (2011)). Here, with neither side seeking to arbitrate, there is no federal law preempting the state law ban on class action waivers.
This decision is a reminder to practitioners that class waivers are generally only enforceable in the arbitration context. For a sample class arbitration waiver clause with integrated drafting notes, see Standard Clause Class Arbitration Waiver (US). To keep track of recent decisions on the enforceability of class arbitration waivers, see Class Arbitration Waivers in the US: Case Tracker.