The Court of Appeals for the Ninth Circuit holds that Uber Technologies Inc. drivers are not engaged in interstate commerce under a nationwide standard and must arbitrate their claims.

Capriole. v. Uber Technologies Inc., No. 20-16030 (9th Cir. Feb. 2, 2021), involves the issue of whether Uber Technologies Inc. (“Uber”) drivers are engaged in foreign or interstate commerce and thus are exempt from mandatory arbitration under the Federal Arbitration Act (“FAA”) section 1.

Uber Technologies Inc. and the Arbitration Agreement

John Capriole, Martin El Koussa, and Vladimir Leonidas (“Plaintiffs”) each signed Uber’s 2015 Technology Services Agreement (the “2015 Agreement”) when they signed up to become Uber drivers. The 2015 Agreement contained a mandatory predispute arbitration agreement (“PDAA”) and specified that the provision was governed by the FAA. Under the arbitration provision, all disputes between Uber and Uber drivers were to be resolved via binding and final arbitration. The 2015 Agreement also contained a class action waiver limiting disputes in arbitration to individuals while preventing a class action. Plaintiffs each signed the 2015 Agreement and did not opt out of the arbitration provision within the permissible 30 days under the agreement.

In January 2020, Uber implemented a new agreement (the “Platform Access Agreement”), which contained a similar arbitration provision. John Capriole was the only Plaintiff who chose to opt out of the Platform Access Agreement; however, the District Court found that he was still bound by the PDAA in the 2015 Agreement. The Ninth Circuit upholds the District Court’s decision because “any opt-out would not affect pre-existing agreements to arbitrate, including the 2015 Agreement.”

Procedural History

In September 2019, Plaintiffs filed a putative class action in the District Court for the District of Massachusetts and requested a preliminary injunction to prevent Uber from classifying Uber drivers in Massachusetts as independent contractors. The Plaintiffs also sought an order directing “Uber to classify its drivers as employees and comply with Massachusetts wage laws.” Plaintiffs claimed that Uber drivers in Massachusetts were employees under the state’s “ABC” test. Plaintiffs also claimed that Uber’s classification of its drivers as independent contractors violated state wage and hour law. As a result of the COVID-19 pandemic, Plaintiffs added claims for sick leave under Massachusetts Earned Sick Time Law.

Uber moved to “compel arbitration, stay proceedings pending arbitration, and transfer the case to the District Court for the Northern District of California pursuant to a forum selection clause in the Uber driver’s agreements.” The Massachusetts District Court denied Plaintiffs’ request for a preliminary injunction and granted Uber’s motion to transfer the action to California district court. Plaintiffs also filed an Emergency Motion for a Preliminary Injunction, which was also transferred to the California district court. The California district court denied Plaintiffs’ request for a preliminary injunction and granted Uber’s motion to compel arbitration.

The Scope of FAA Section 1

FAA section 1 exempts from the Act “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” In determining whether the workers are engaged in interstate commerce, the Ninth Circuit acknowledges that the inquiry is whether “the class of workers to which the complaining worker belonged engaged in interstate commerce.” The court refused to limit its assessment to Uber drivers in Massachusetts. Instead, Judge Kim McLane Wardlaw states that the court “must assess the relevant ‘class of workers’ here, Uber drivers, at the nationwide level, rather than confine it to any limited geographic region” (emphasis added). The Ninth Circuit agreed with the District Court in Osvatics v. Lyft, Inc., No. 20-cv-1426 (KBJ), 2021 WL 1601114 (D.D.C. Apr. 22, 2021), and noted that it is unlikely that Congress wanted the section 1 exemption to vary by geographical region. The court also noted that using a narrow geographical approach instead of a nationwide approach would create uncertainty and doubt in employment contracts. Additionally, focusing on a nationwide class of workers conforms with previous cases because courts “have been confronted only with a putative nationwide class of workers.”

Uber Drivers Are Not Nationally Engaged in Interstate Commerce

The Ninth Circuit rejects Plaintiffs’ argument that Uber drivers are workers engaged in interstate commerce. Plaintiffs’ argument focused on “the fact that Uber drivers sometimes cross state lines or pick up and drop off passengers at airports.” However, the Ninth Circuit notes that in In re Grice974 F.3d 950 (9th Cir. 2020), it held that rideshare drivers who pick up and drop off passengers at airports are not engaged in interstate commerce. Additionally, the court states that Uber drivers are less like the taxicabs in United States v. Yellowcab Co., 332 U.S. 218 (1947), which provided exclusive transportation between rail stations and more like the local taxicabs. Furthermore, the Ninth Circuit acknowledges that its decision is consistent with the Third Circuit’s decision in Singh v. Uber Technologies Inc.939 F.3d 210 (3d Cir. 2019) because Singh did not hold that Uber drivers “categorically fall within the exception” and instead stands “for the proposition that any interstate commerce exemption inquiry must focus on the district court’s factual findings regarding the extent of interstate work.” Here, the District Court found that “[o]nly 2.5% of all trips fulfilled using the Uber Rides marketplace in the United States between 2015 and 2019 . . . started and ended in different states” and that “only 10.1% of all trips taken in the United States in 2019 began or ended at an airport.” Thus, the Ninth Circuit holds that Uber drivers are not engaged in foreign or interstate commerce and do not fall withing the section 1 exemption.

(ed: *This Squib was authored by Ruben Huertero, J.D. He is a recent graduate of St. John’s University School of Law. **The Court also notes that the District Court did not err in refusing to resolve Plaintiffs’ request for injunctive relief before deciding the motion to compel because the injunction would not preserve the status quo. ***The Ninth Circuit agreed with the district court that Plaintiffs’ requested injunctive relief did not constitute a public injunctive relief, which is non-waivable under Massachusetts law.)

This post first appeared on the Securities Arbitration Alert blog.  The blog’s editor-in-chief is George H. Friedman, Chairman of the Board of Directors for Arbitartion Resolution Services, Inc.