Douglas O'Connor v. Uber Technologies, Inc. , 904 F.3d 1087 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DOUGLAS O’CONNOR; THOMAS No. 14-16078
COLOPY; DAVID KHAN;
MATTHEW MANAHAN; WILSON D.C. No.
ROLLE, JR.; WILLIAM 3:13-cv-03826-EMC
ANDERSON, individually and on
behalf of all others similarly
situated,
Plaintiffs-Appellees,
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellant.
DOUGLAS O’CONNOR; THOMAS Nos. 15-17420
COLOPY; MATTHEW MANAHAN; 15-17532
ELIE GURFINKEL, individually
and on behalf of all others D.C. No.
similarly situated, 3:13-cv-03826-EMC
Plaintiffs-Appellees,
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellant.
2 O’CONNOR V. UBER
HAKAN YUCESOY, on behalf of Nos. 15-17422
himself and all others similarly 15-17534
situated,
Plaintiff-Appellee, D.C. No.
3:15-cv-00262-EMC
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellant.
RICARDO DEL RIO; TONY No. 15-17475
MEHRDAD SAGHEBIAN,
individually and on behalf of all D.C. No.
others similarly situated, 3:15-cv-03667-EMC
Plaintiffs-Appellees,
v.
UBER TECHNOLOGIES, INC.;
RASIER-CA, LLC, a Delaware
Limited Liability Company,
Defendants-Appellants.
O’CONNOR V. UBER 3
ABDUL KADIR MOHAMED, No. 15-17533
individually and on behalf of all
others similarly situated, D.C. Nos.
Plaintiff-Appellee, 3:14-cv-05200-EMC
3:14-cv-05241-EMC
v. 3:15-cv-03009-EMC
UBER TECHNOLOGIES, INC.,
Defendant-Appellant,
and
RASIER, LLC; HIREASE, LLC,
Defendants.
DOUGLAS O’CONNOR; THOMAS No. 16-15000
COLOPY; MATTHEW MANAHAN;
ELIE GURFINKEL, individually D.C. No.
and on behalf of all others 3:13-cv-03826-EMC
similarly situated,
Plaintiffs-Appellants,
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellee.
4 O’CONNOR V. UBER
HAKAN YUCESOY, on behalf of No. 16-15001
himself and others similarly
situated, D.C. No.
Plaintiff-Appellant, 3:15-cv-00262-EMC
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellee.
ABDUL KADIR MOHAMED, No. 16-15035
individually and on behalf of all
others similarly situated; D.C. No.
RONALD GILLETTE; SHANNON 3:14-cv-05200-EMC
WISE; BRANDON FARMER;
MEGHAN CHRISTENSON,
Plaintiffs-Appellants,
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellee.
O’CONNOR V. UBER 5
DOUGLAS O’CONNOR; THOMAS No. 16-15595
COLOPY; MATTHEW MANAHAN;
ELIE GURFINKEL, individually D.C. No.
and on behalf of all others 3:13-cv-03826-EMC
similarly situated,
Plaintiffs-Appellees,
OPINION
v.
UBER TECHNOLOGIES, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of California
Edward M. Chen, District Judge, Presiding
Argued and Submitted September 20, 2017
Submission Withdrawn September 22, 2017
Re-Submitted September 25, 2018
San Francisco, California
Filed September 25, 2018
Before: Richard C. Tallman, Richard R. Clifton,
and Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Clifton
6 O’CONNOR V. UBER
SUMMARY*
Class Action / Arbitration
The panel reversed the district court’s denial of Uber
Technologies, Inc.’s motions to compel arbitration, reversed
the district court’s class certification orders, and reversed as
moot and without foundation the district court’s Fed. R. Civ.
P. 23(d) orders in several putative class actions brought by
current and former Uber drivers alleging violations of various
federal and state statutes arising from Uber’s classification of
drivers as independent contractors rather than employees.
In Mohamed v. Uber Technologies, Inc., 848 F.3d 1201,
1206 (9th Cir. 2016), the panel previously considered and
reversed the district court’s orders denying Uber’s motion to
compel arbitration.
The panel rejected plaintiffs’ additional arguments in this
current appeal alleging that the arbitration agreements were
unenforceable. First, the plaintiffs argued that the lead
plaintiffs in the O’Connor case constructively opted out of
arbitration on behalf of the entire class. The panel held this
was unpersuasive because nothing gave the O’Connor lead
plaintiffs the authority to take that action on behalf of and
binding other drivers, and the decision in Bickerstaff v.
Suntrust Bank, 788 S.E.2d 787 (Ga. 2016), was not
instructive where it relied exclusively on state law grounds
and did not discuss the Federal Arbitration Act. Second, the
plaintiffs argued that the arbitration agreements were
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
O’CONNOR V. UBER 7
unenforceable because they contained class action waivers
that violated the National Labor Relations Act of 1935. The
panel held that this argument was rejected by the Supreme
Court in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).
The panel held that it had jurisdiction to review both the
original class certification order and the December 9, 2015
certification order. The panel held that in the wake of the
decision in Mohamed, the class certification orders must be
reversed because they were premised upon the district court’s
conclusion that the arbitration agreements were not
enforceable. The question whether those agreements were
enforceable was not properly for the district court to answer
because the question of arbitrability was designated to the
arbitrator. The panel held that remand for further proceedings
was appropriate, and leaving the existing class certification
orders in place in the meantime was not appropriate.
The panel held that the district court’s Fed. R. Civ. P.
23(d) orders must be reversed as moot and without
foundation in light of the panel’s reversal of the district
court’s orders denying the motions to compel arbitration and
certifying the class.
8 O’CONNOR V. UBER
COUNSEL
Theodore J. Boutrous Jr. (argued), Theane D. Evangelis, and
Kevin J. Ring-Dowell, Gibson Dunn & Crutcher LLP, Los
Angeles, California; Joshua S. Lipshutz, Gibson Dunn &
Crutcher LLP, San Francisco, California; for Defendants-
Appellants.
Shannon Liss-Riordan (argued) and Adelaide H. Pagano,
Lichten & Liss-Riordan P.C., Boston, Massachusetts, for
Plaintiffs-Appellees.
Jeffery Burritt (argued), Attorney; Kira Dellinger Vol,
Supervisory Attorney; Linda Dreeben, Deputy Associate
General Counsel; John H. Ferguson, Associate General
Counsel; Jennifer Abruzzo, Deputy General Counsel; Richard
F. Griffin Jr., General Counsel; National Labor Relations
Board, Washington, D.C.; for Amicus Curiae National Labor
Relations Board.
Andrew J. Pincus, Evan M. Tager, and Archis A.
Parasharami, Mayer Brown LLP, Washington, D.C.; Jed
Glickstein, Mayer Brown LLP, Chicago, Illinois; Kate
Comerford Todd and Warren Postman, U.S. Chamber
Litigation Center Inc., Washington, D.C.; for Amicus Curiae
Chamber of Commerce of the United States of America.
O’CONNOR V. UBER 9
OPINION
CLIFTON, Circuit Judge:
Current and former Uber drivers filed several putative
class actions alleging on behalf of themselves and other
drivers that Uber Technologies, Inc. and related defendants
(collectively referred to as “Uber”), violated various federal
and state statutes by, among other things, misclassifying
drivers as independent contractors rather than employees.
Multiple cases were consolidated for appeal to this court.1
Uber appeals the district court’s orders denying Uber’s
motions to compel arbitration, orders granting class
certification in O’Connor, and orders controlling class
communications pursuant to Federal Rule of Civil Procedure
23(d).
We previously considered and reversed the district court’s
orders denying Uber’s motions to compel arbitration in
Mohamed v. Uber Technologies, Inc., 848 F.3d 1201, 1206
(9th Cir. 2016). Plaintiffs offer additional arguments in the
current appeal why the arbitration agreements are
unenforceable, but those arguments are unpersuasive. As the
class certification by the district court was premised on the
district court’s determination that the arbitration agreements
were unenforceable, the class certification must also be
reversed. The Rule 23(d) orders were based on the district
court’s denial of the motions to compel arbitration and its
1
The appeals were from four related actions pending before the same
district court: (1) O’Connor v. Uber Technologies, Inc., 3:13-cv-03826-
EMC; (2) Yucesoy v. Uber Technologies, Inc., 3:15-cv-00262-EMC;
(3) Mohamed v. Uber Technologies, Inc., 3:14-cv-05200-EMC; and (4)
Del Rio v. Uber Technologies, Inc., 3:15-cv-03667-EMC.
10 O’CONNOR V. UBER
granting of class certification. As both of those decisions
must be reversed, there is no longer a basis for the district
court’s restrictions on Uber’s communication with class and
putative class members, so these orders are moot and must be
reversed as well.
I. Background
Two Uber drivers filed a putative class action complaint
against Uber on August 16, 2013, initiating the O’Connor
action. It alleged claims for failure to remit the entire gratuity
paid by customers to drivers in violation of California Labor
Code § 351 (“Tips Claim”), and for misclassifying the drivers
as independent contractors and failing to pay their business
expenses (including vehicles, gas, and maintenance) in
violation of California Labor Code § 2802 (“Expense
Reimbursement Claim”).
Within a week of filing suit, the O’Connor Plaintiffs filed
a motion under Rule 23(d) requesting that the district court
declare the 2013 arbitration agreement unconscionable, or, in
the alternative, requiring Uber to provide enhanced notice and
opportunities for the drivers to opt out of arbitration. On
December 6, 2013, the district court granted the O’Connor
Plaintiffs’ alternative request, enjoined Uber from enforcing
its arbitration agreement against those drivers who entered
into the agreement but did not opt out, required Uber to revise
the agreement to include enhanced notice provisions, and
directed Uber to extend the opt out period for an additional
thirty days once the revised agreements were distributed.
Uber’s updated licensing agreement was issued on June 21,
2014. Uber also sent licensing agreements in November 2014
and April 2015 that were materially identical to the June 2014
agreement (collectively “2014 arbitration agreement”).
O’CONNOR V. UBER 11
Plaintiff Mohamed filed a putative class action complaint
against Uber and Hirease, LLC, an independent company that
conducts background checks, on November 24, 2014,
asserting various federal and California state law claims. We
have already provided background on that case in our
decision in Mohamed, 848 F.3d at 1206–07. Here it is
sufficient to note that the district court denied Uber’s motion
to compel arbitration pursuant to its 2013 and 2014
arbitration agreements, holding, among other things, that the
arbitration provisions were unenforceable because they were
unconscionable. Based on the same reasoning, the district
court also denied Uber’s motions to compel arbitration in
Yucesoy, Del Rio, and O’Connor.
In April 2015, the O’Connor Plaintiffs moved for
certification of a class of approximately 160,000 individuals
who had driven for Uber in the state of California at any time
since August 16, 2009. The district court granted class
certification in part in an order filed on September 1, 2015,
certifying the following class for the Plaintiffs’ Tips Claim:
All UberBlack, UberX, and UberSUV drivers
who have driven for Uber in the state of
California at any time since August 16, 2009,
and who (1) signed up to drive directly with
Uber or an Uber subsidiary under their
individual name, and (2) are/were paid by
Uber or an Uber subsidiary directly and in
their individual name, and (3) did not
electronically accept any contract with Uber
or one of Uber’s subsidiaries which contain
the notice and opt-out provisions previously
ordered by this Court (including those
contracts listed in the Appendix to this Order),
12 O’CONNOR V. UBER
unless the driver timely opted-out of that
contract’s arbitration agreement.
The district court excluded drivers who worked for a distinct
third-party transportation company, or who contracted or
were paid under corporate or fictitious names, out of concern
that individualized issues would predominate if they were
included. The district court, in addition, excluded any drivers
who signed the Uber contracts that included enhanced notice
and opt-out provisions previously ordered by the district
court, unless the driver timely opted-out of the arbitration
agreement. The district court declined to certify the
O’Connor Plaintiffs’ Expense Reimbursement Claim at that
time because it was uncertain whether the O’Connor
Plaintiffs could determine whether a particular expense was
“necessary” on a classwide basis.
In response to a supplemental motion for class
certification by the O’Connor Plaintiffs, the district court, on
December 9, 2015, certified an additional subclass of Uber
drivers including those who accepted arbitration agreements
in 2014 and 2015:
All UberBlack, UberX, and UberSUV drivers
who have driven for Uber in the state of
California at any time since August 16, 2009,
and meet all the following requirements:
(1) who signed up to drive directly with Uber
or an Uber subsidiary under their individual
name, and (2) are/were paid by Uber or an
Uber subsidiary directly and in their
individual name, and (3) electronically
accepted any contract with Uber or one of
Uber’s subsidiaries which contain the notice
O’CONNOR V. UBER 13
and opt-out provisions previously ordered by
this Court, and did not timely opt out of that
contract’s arbitration agreement.
In the same order the district court also certified the original
class and subclass to pursue the Expense Reimbursement
Claim based on the O’Connor Plaintiffs’ proposal to rely on
the Internal Revenue Service’s mileage reimbursement rate,
which approximates a driver’s necessary business expenses.
Uber issued a new arbitration agreement to all of its
drivers on December 11, 2015. Plaintiffs in O’Connor,
Mohamed, and Yucesoy filed separate motions to enjoin Uber
from distributing and enforcing this new agreement and to
enjoin any further communications by Uber to class and
putative class members. The district court granted the motion
in part on December 23, 2015, citing its authority under
Federal Rule of Civil Procedure 23(d) to control
communications by Uber to the class members and putative
class members. Although the district court did not prohibit
Uber from sending out arbitration agreements in the future
(except to members of the O’Connor certified class), it ruled
that: (1) the December 11, 2015 agreement shall have no
effect on the rights of certified class members to pursue the
claims certified in O’Connor; (2) its arbitration provision was
not enforceable against non-class member drivers who had
already agreed to it; (3) Uber had to issue a new version of
the agreement with enhanced notice and opt out provisions
and provide drivers with 30-days to decide to opt out or not;
and (4) during the pendency of the Uber cases, all cover
letters, notices and arbitration provisions given to new or
prospective drivers had to be approved by the district court.
14 O’CONNOR V. UBER
In Mohamed, 848 F.3d at 1210–12, we reversed the
district court’s denial of Uber’s motion to compel arbitration.2
We held that the relevant provisions in the respective
agreements delegated the threshold question of arbitrability
to the arbitrator, that the delegation provisions were not
adhesive pursuant to California law and were therefore not
procedurally unconscionable, and that the provisions
permitting drivers to opt-out of arbitration were not illusory
but provided the drivers with a meaningful opportunity to opt
out. Id. at 1207–12.
In response to Mohamed, the district court terminated its
December 23, 2015 Rule 23(d) order, and stated that “Uber
is permitted to issue the December 2015 Agreement to new
drivers without satisfying the enhanced notice provisions
required by the Court” and current drivers as well. The
district court refused to vacate the order retroactively,
however, explaining that “it will not deem the December
2015 Agreement effective as to drivers who did not timely
opt out of the arbitration agreement during the pendency of
the Rule 23(d) orders,” from December 10, 2015 to August
18, 2016.
Approximately a dozen appeals arising from these cases
were filed with this court. They were consolidated for appeal,
and supplemental consolidated briefing was ordered and
received.
2
In addition, we affirmed the district court’s order as to the 2013
agreement’s delegation of California’s Private Attorneys General Act
(“PAGA”) claims to the arbitrator but noted that it was severable from the
rest of the agreement and did not invalidate the rest of the arbitration
provision. Mohamed, 848 F.3d at 1212–14.
O’CONNOR V. UBER 15
II. Motions to Compel Arbitration
An order denying a motion to compel arbitration is
reviewed de novo. See Kilgore v. KeyBank, Nat’l Ass’n,
718 F.3d 1052, 1057 (9th Cir. 2013) (en banc). Underlying
factual findings are reviewed for clear error. See Cape
Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914, 917 (9th Cir.
2011). “[Q]uestions of arbitrability must be addressed with
a healthy regard for the federal policy favoring arbitration.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24 (1983).
Based on our decision in Mohamed, the district court’s
orders denying Uber’s motions to compel arbitration must be
reversed. Plaintiffs do not dispute the application of
Mohamed regarding the issues our previous decision
discussed to the other cases consolidated in the current
appeal, but they argue that the arbitration agreements are
unenforceable for two other reasons.
The first reason is that even if the arbitration agreements
would otherwise be enforceable, Plaintiffs argue they are
irrelevant here because the lead plaintiffs in O’Connor
constructively opted out of arbitration on behalf of the entire
class. The sole authority offered by Plaintiffs for this
proposition is a Georgia Supreme Court decision, Bickerstaff
v. Suntrust Bank, 788 S.E.2d 787 (Ga. 2016). The argument
is unpersuasive for multiple reasons. Nothing gave the
O’Connor lead plaintiffs the authority to take that action on
behalf of and binding other drivers. Nor did Bickerstaff hold
that individuals in the lead plaintiffs’ position had the
authority to make such an election for others. Perhaps more
importantly, Plaintiffs provide no federal case law that has
relied on Bickerstaff, nor could they. That decision rested
16 O’CONNOR V. UBER
exclusively on state law grounds and did not discuss the
Federal Arbitration Act (“FAA”), 9 U.S.C. § 2.
Section 2 of the FAA “requires courts to enforce
agreements to arbitrate according to their terms,”
CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012),
in order “to place an arbitration agreement upon the same
footing as other contracts . . . and to overrule the judiciary’s
longstanding refusal to enforce agreements to arbitrate,”
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219–20
(1985) (internal quotation marks and citation omitted). To
that end, section 2 declares that “a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. An arbitration-
specific rule, such as the one set forth in Bickerstaff, would be
preempted by the FAA. See AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 341–43 (2011). Plaintiffs’ new
argument provides no support for the district court’s orders
denying the motions to compel arbitration.
The second alternative argument offered by Plaintiffs is
that the arbitration agreements are unenforceable because
they contain class action waivers that violate the National
Labor Relations Act of 1935 (“NLRA”), 29 U.S.C.
§§ 151–169. After oral argument, we withdrew submission
of this consolidated appeal pending resolution by the
Supreme Court of another case that posed a similar question.
The Court answered that question and rejected Plaintiffs’
O’CONNOR V. UBER 17
argument in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612
(2018).3
In sum, the district court’s orders denying Uber’s motions
to compel arbitration in O’Connor, Yucesoy, and Del Rio
must be reversed.
III. Class Certification
We have jurisdiction under 28 U.S.C. § 1292(e) and
Federal Rule of Civil Procedure 23(f) to review the district
court’s class certification orders in O’Connor. Uber timely
petitioned for and received permission to appeal both orders.
As a preliminary matter, Plaintiffs contend that our
review should be limited to the December 9, 2015
certification order, arguing that the motions panel which
granted permission to appeal in Appeal No. 15-80220 did not
grant review of the original class certification order. We can
and will review both certification orders. See Rivera v.
NIBCO, Inc., 364 F.3d 1057, 1063 (9th Cir. 2004) (the “court
may address any issue fairly included within” an interlocutory
order). The December 9, 2015 order incorporated the Rule 23
analysis that the district court previously conducted in its
September 1, 2015 order and expanded the class as a result of
supplemental briefing related to issues raised in the earlier
certification order.
3
Following the Supreme Court’s decision in Epic Systems, we
obtained supplemental briefing from the parties. Plaintiffs acknowledged
that the Court’s decision extinguished their argument that the arbitration
agreements were not enforceable under the NLRA.
18 O’CONNOR V. UBER
“[W]e first review a class certification determination for
legal error under a de novo standard, and if no legal error
occurred, we will proceed to review the decision for abuse of
discretion.” Sali v. Corona Reg’l Med. Ctr., 889 F.3d 623,
629 (9th Cir. 2018) (alteration incorporated and internal
quotation marks omitted). A district court that applies “the
correct legal standard abuses its discretion only if it (1) relies
on an improper factor, (2) omits a substantial factor, or
(3) commits a clear error of judgment in weighing the correct
mix of factors.” Id. (internal quotation marks omitted). The
district court’s findings of fact are reviewed for clear error,
and will be reversed “only if they are (1) illogical,
(2) implausible, or (3) without support in inferences that may
be drawn from the record.” Id. (internal quotation marks
omitted).
In the wake of our decision in Mohamed, the class
certification orders must be reversed. Certification of the
class by the district court, notably the court’s determinations
that the requirements of Rule 23 were satisfied, was premised
upon the district court’s conclusion that the arbitration
agreements were not enforceable. The class as certified
includes drivers who entered into agreements to arbitrate their
claims and to waive their right to participate in a class action
with regard to those claims. As we held in Mohamed, the
question whether those agreements were enforceable was not
properly for the district court to answer. The question of
arbitrability was designated to the arbitrator. Mohamed,
848 F.3d at 1208–12.
In their most recent supplemental brief, Plaintiffs do not
dispute that the basis for the class certification orders
previously entered by the district court has been undermined
by Mohamed and Epic Systems, among other decisions.
O’CONNOR V. UBER 19
Plaintiffs argue that we should not disturb the existing class
certification orders and should instead simply remand these
cases to the district court for further consideration, so that it
could consider certification of a class that might be defined
differently based on some new analysis. Remand for further
proceedings is appropriate, but leaving the existing class
certification orders in place in the meantime is not. Those
orders are reversed.
IV. Rule 23(d) Orders
Reversing the class certification orders also leads us to set
aside the Rule 23(d) orders. They were based on the district
court’s conclusion that a class could be certified and its desire
to limit the effect of any new arbitration agreement on class
or putative class members. As we have concluded that the
district court’s orders denying the motions to compel
arbitration and certifying the class must both be reversed, the
Rule 23(d) orders are moot and without foundation. They
must be reversed as well.
V. Conclusion
The district court’s denial of Uber’s motions to compel
arbitration in O’Connor, Yucesoy, and Del Rio must be
reversed, based on Mohamed. Because the arbitration
agreements are enforceable, the district court’s class
certification orders in O’Connor must also be reversed. The
orders entered by the district court under Rule 23(d) orders
are moot and are thus reversed as well.
REVERSED AND REMANDED.