District Court Applies Gulf Oil To Restrict Issuance Of Arbitration Agreements To Prospective Class Members


Drivers brought a putative class action suit against Uber Technologies (“Uber”), the licensor of a software application used to connect drivers for hire with passengers, alleging that Uber failed to remit to drivers the full amount of gratuities paid by passengers.  The court’s recent decision involved a licensing agreement that, in the wake of pending class actions, was given to prospective drivers who downloaded the app and required that all disputes be resolved through arbitration.  Upon motion by plaintiffs, the court prohibited Uber from distributing any agreements containing an arbitration clause to current or prospective drivers until the court approved revised procedures.

Uber sought reconsideration of the order, claiming the court had exceeded its authority under Rule 23 by regulating communications with potential drivers who were not yet putative class members.  The court denied the motion for reconsideration, citing the Supreme Court’s decision in Gulf Oil Co. v. Bernard in finding that courts have the power to prevent parties from communicating with prospective class members and noting that the broad power given to courts to conduct class actions under Rule 23(d) “is not only to protect class members in particular but to safeguard generally the administering of justice and the integrity of the class certification process.”  In particular, limiting a court’s authority by only allowing the regulation of communications with current or putative class members, rather than with potential future class members, would “jeopardize the fairness of the litigation” and enable parties to unilaterally affect the size of the class.  Because such communication had the potential to preclude potential class members from joining the litigation or mislead them about their rights, the court found that it was within its power to regulate the arbitration agreements.

The court also rejected corrective notices proposed by both Uber and plaintiffs.  The court rejected Uber’s notice as it precluded opting-out of arbitration:  “While this class action remains pending, Uber must allow a reasonable means for opting out of the arbitration provision.”  The court rejected plaintiffs’ notice, finding it “tends more to urge participation in the lawsuit” rather than provide “impartial information.”  By regulating communications beyond those to putative class members, the Northern District indicated its willingness to exercise broad powers in conducting and overseeing class actions.

O’Connor v. Uber Techs., Inc., No. C–13–3826, slip op. (N.D. Cal. May 2, 2014).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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