Arbitrator’s Joke Not Sufficient to Vacate Award in Putative Antitrust Class Action

BakerHostetler
Contact

BakerHostetlerA poor joke and unsubstantiated hero worship were insufficient to overturn an arbitrator’s award in favor of Travis Kalanick and Uber Technologies Inc., according to U.S. District Judge Jed S. Rakoff. In an Aug. 3 memorandum and order, Rakoff denied the plaintiff’s motion to vacate an arbitration award in the defendants’ favor arising from a putative class action alleging that Uber’s surge pricing model was illegal price-fixing. Meyer v. Kalanick, Case No. 1:15-cv-09796 (S.D. N.Y. Aug. 3, 2020).

The Arbitration Runup

In December 2015, Spencer Meyer filed a putative class action against Uber co-founder Travis Kalanick, claiming that Uber’s pricing model was horizontal price-fixing violative of antitrust law. Once Uber was joined as a necessary party, Kalanick and Uber moved to compel arbitration.

Initially, in 2016, Rakoff held that Meyer was not bound by the mandatory arbitration provision in Uber’s terms of service. But that order was vacated by the Second Circuit and the case remanded to the district court in August 2017. See Meyer v. Uber Technologies, Inc., 868 F. 3d 66 (2d Cir. 2017). Thereafter, on March 5, 2018, the district court reaffirmed an earlier order sending the case to arbitration. Finally, in a 12-page award issued on Feb. 22, 2020, arbitrator Les J. Weinstein ruled that “Meyer shall take nothing from the arbitration.”

The award prompted the plaintiff to file a motion to vacate the award, maintaining that the arbitrator demonstrated “evident partiality” toward Uber, contrary to the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a)(2).

The Motion to Vacate

Two arguments were offered in support of the motion to vacate. First, the arbitrator was concerned about a backlash that would result from invalidating the pricing algorithm. Near the conclusion of the third day of the hearing, the arbitrator remarked, “I must say I act out of fear. My fear is if I ruled Uber illegal, I would need security. I wouldn’t be able to walk the streets at night. People would be after me.” Second, the arbitrator was “starstruck” by the involvement of Kalanick. In support, the plaintiff claimed that the arbitrator used his smartphone to photograph Kalanick, after his testimony.

The defendants fired back in two ways – that the plaintiff waived his right to seek vacatur by waiting until the award was issued to assert them and that the underlying conduct of the arbitrator did not warrant vacatur.

The court agreed with both of the defendants’ arguments. As to the first argument, which the court termed “forfeiture” – the failure to timely assert a right – the plaintiff failed to take any action until the negative award was issued.

The “partiality” argument fared no better. Evident partiality under Second Circuit authority “may be found only where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration,”  citing Scandinavian Reinsurance Co. Ltd. v. Saint Paul Fire and Marine Ins. Co., 668 F. 3d 60, 64 (2d Cir. 2012). Solely “speculation” is insufficient. Id. at 72.

Based on a review of the entire record, Judge Rakoff decided:

. . . the arbitrator’s concluding remarks, rather than a sincere confession of fear, were simply an attempt at humor – one of many made by the arbitrator throughout the hearing. Indeed, if the arbitrator had in fact been making his decision out of fear, the last thing he would have done is placed that on the record. While perhaps inappropriate (or, worse yet, not as humorous as some of the arbitrator’s better jokes), the remarks are not inconsistent with impartiality once their patently jestful intent is recognized. (Slip Op. at 8, record citation eliminated.)

The photography-related allegation did not convince the court either. As a threshold matter, there was reason to question that it even happened. But even if it were assumed to be true, “it would not ‘rise to the level of bias . . . necessary to vacate an arbitration award under [FAA] § 10(a(2)’” Kolel Beth Yechiel Michel of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F. 3d 99, 106 (2d Cir. 2013). And “[g]iven the history of dubious conduct by Mr. Kalanick’s subordinates when Mr. Kalanick was the only defendant in this case . . . such alleged hero-worship seems doubtful on its face; but, in any case, plaintiff’s speculation is just that, speculation. . . .” Slip Op. at 9. Speculation does not warrant vacatur. Scandinavian Reinsurance Co., 668 F. 3d at 72.

Premised on this analysis, the plaintiff’s motion was denied.

Bottom Line

Under the circumstances, neither the arbitrator’s alleged hero worship nor fear of public backlash justified vacating the arbitral award.

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.

© BakerHostetler | Attorney Advertising

Written by:

BakerHostetler
Contact
more
less

BakerHostetler on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.