(The opinions expressed here are those of the author, a columnist for Reuters.)
By Alison Frankel
April 22 (Reuters) - In a pair of new petitions to the U.S. Supreme Court, rideshare companies Uber and Lyft are asking the justices to bar state officials from using their enforcement power to seek money for workers or consumers who have signed arbitration agreements.
The petitions, docketed on April 18, could have huge implications if the Supreme Court agrees to hear the case.
Technically, the companies want the justices to review a 2023 California state court appellate ruling that allowed California’s attorney general and labor commissioner to continue litigating claims that Uber and Lyft owe money to drivers who were misclassified as independent contractors. They contend that the California Court of Appeal – like state appellate courts in five other states – misread a key 2002 Supreme Court decision when it concluded that state officials are not bound by workers’ arbitration agreements.
But make no mistake: The theory espoused by Uber and Lyft would preclude all kinds of litigation by states attorneys general, from consumer protection and unfair competition litigation to antidiscrimination suits. If Uber and Lyft are right, state AGs and other officials simply would not be permitted to bring lawsuits seeking monetary relief for anyone who signed an arbitration agreement.
The companies said as much in their petitions, arguing that in response to Supreme Court decisions allowing companies to impose mandatory arbitration on workers and consumers, states have become increasingly likely to adopt “creative devices,” in the words of Lyft’s lawyers from Munger, Tolles & Olson, to undermine arbitration. And unless the Supreme Court steps in, Uber and Lyft said, state officials will continue to expand such loopholes until the Federal Arbitration Act is effectively nullified.
Without the justices' intervention, nothing will stop defiant state legislatures “from deputizing just about anyone to litigate on behalf of just about anybody who agreed to arbitrate just about any dispute,” said Uber counsel from Gibson, Dunn & Crutcher. “The FAA should not remain subject to such easy evasion.”
The California Attorney General’s office said via email that it is reviewing the petitions "and will respond appropriately."
Lyft and its Supreme Court counsel, Elaine Goldenberg of Munger Tolles, did not respond to a query. Uber sent an email statement on behalf of its counsel, Theane Evangelis of Gibson Dunn: “We are asking the Supreme Court to weigh in and hold once again that the FAA preempts state efforts to undermine arbitration agreements.”
In the cases that Uber and Lyft are protesting, state officials sued the companies in San Francisco state court in 2020, seeking (among other relief) unpaid wages and benefits for allegedly misclassified drivers. The companies moved to compel arbitration of monetary claims on behalf of drivers, arguing that drivers signed agreements that required those claims to be resolved in individual arbitrations -- not in a group proceeding brought by state officials.
The California Court of Appeal rejected the companies' arguments, citing the Supreme Court’s 2002 decision in Equal Employment Opportunity Commission v. Waffle House, Inc. (The intermediate appellate court’s decision is the last word in the Uber and Lyft cases because the state supreme court declined to review the Court of Appeal ruling.)
The U.S. Supreme Court held in the Waffle House case that the Federal Arbitration Act did not preclude the antidiscrimination agency from suing Waffle House on behalf of an employee who alleged violations of the Americans with Disabilities Act. The employee had signed a mandatory arbitration agreement, but the justices said the federal agency was not a party to that agreement and had its own statutory authority to bring "victim-specific" claims for alleged ADA violations.
In its Uber and Lyft misclassification opinion, the California Court of Appeal said that under Waffle House precedent, the state attorney general and labor commissioner were not bound by arbitration agreements they did not sign. The Waffle House ruling, according to the California appellate court, establishes “that a government body exercising express statutory authority to seek judicial relief (including ‘victim-specific’ relief) cannot be barred from doing so on the ground the agency is supposedly a mere ‘proxy’ of an individual employee who entered an arbitration agreement.”
Five other state appellate or supreme courts have reached the same conclusion about Waffle House’s application to suits by state officials. Those cases, from New York, Iowa, Massachusetts, Minnesota and Virginia, run a gamut of claims, from alleged bid-rigging that harmed New York life insurance policy holders to alleged discrimination against pregnant employees in Boston. In each case, state courts of last resort ruled that state officials could not be compelled to arbitration by arbitration agreements they did not sign.
Uber and Lyft said all of the state courts have misapplied Waffle House precedent. The Supreme Court ruling, they said, was intended to resolve tension between two federal laws and was premised on the recognition that Congress gave the EEOC statutory authority to pursue victim-specific claims for ADA violations. But the constitution’s Supremacy Clause, they argued, means the Federal Arbitration Act supersedes any state law that interferes with arbitration, as the Supreme Court has repeatedly held.
The companies also said that California and the other states have split with the 3rd and 9th U.S. Circuit Courts of Appeal, which have both ruled that state officials cannot litigate claims on behalf of people who have agreed to arbitrate disputes.
The federal appellate opinions cited by Uber and Lyft, I should note, predate the Supreme Court’s Waffle House decision. But the Supreme Court, as we saw a couple of years ago when the justices agreed to hear an arbitration-related challenge to California’s Private Attorney General Act, has been known to grant review of state attempts to circumvent the Federal Arbitration Act even when there’s no split.
If Uber and Lyft persuade the Supreme Court to take this case, I’m guessing there will be a big uproar from state AGs. They are, after all, elected politicians whose voters have come to expect them to police corporate conduct on behalf of consumers and workers.
I suspect they will not be happy about a case that could gut their enforcement power.
(Reporting By Alison Frankel)
((alison.frankel@thomsonreuters.com))
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