Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Uber pricing claims not subject to arbitration, (Aug 1, 2016)

By Jeffrey May, J.D.

A consumer who registered for Uber via the Uber smartphone application did not agree to arbitrate antitrust claims against the ride-sharing service, the federal district court in New York City has ruled. Uber’s motion to compel arbitration based on a provision in the ride-sharing service’s user agreement was denied (Meyer v. Kalanick, July 29, 2016, Rakoff, J.).

The plaintiff alleged that Uber’s scheme for setting prices, as well as the terms of its contracts with drivers, violated antitrust laws. The action was initially brought only against Uber CEO/co-founder Travis Kalanick, the alleged "mastermind of the Uber pricing conspiracy." Uber was later joined after the court found the company to be a necessary party to the litigation. Uber had suggested that the plaintiff, who claimed to have paid surge pricing to drivers using the uberX car service, might not have named Uber in the original complaint to avoid arbitration. When the court joined Uber, it did not consider the merits of pending motions to compel arbitration.

Now, the court, applying California law, has rejected the arbitration argument. The complaining customer successfully contended that an agreement to arbitrate was never formed, because, when he registered to use Uber, he did not have adequate notice of the existence of an arbitration agreement.

The plaintiff did not have "[r]easonably conspicuous notice" of Uber's user agreement, including its arbitration clause, the court ruled. Nor was there an "unambiguous manifestation of assent to those terms." According to the court, the Uber registration screen did not adequately call users’ attention to the existence of "Terms of Service," let alone to the fact that, by registering to use Uber, a user was agreeing to them.

Electronic contract formation. The court explained the various types of agreements that arise in the context of electronic contract formation. It noted that "clickwrap" (or "click-through") agreements and "browsewrap" agreements were treated differently under the law. Under a clickwrap agreement, users are required to click on an "I agree" box after being presented with a list of terms and conditions of use. "Clickwrap" agreements are more readily enforceable, according to the court, and the Uber agreement was not such an agreement. The plaintiff did not need to affirmatively click any box saying that he agreed to Uber’s terms of service.

In browsewrap agreements, a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen. The court explained that browsewrap agreements were usually not enforced against consumers as opposed to knowledgeable accessors. Generally only consumers who had actual or constructive knowledge of the terms and conditions and manifested assent to them were bound by them.

The court suggested that the Uber agreement could be characterized as a "sign-in wrap." Pursuant to this type of agreement, when proceeding through the website’s sign-in or login process, a user is allegedly notified of the existence and applicability of the site’s terms of use. However, in this instance, the notification was in a font that was barely legible on the smartphone device that a would-be Uber registrant could be expected to use.

Whatever the characterization, the court noted that the issue of whether the plaintiff agreed to arbitrate his claims "turn[ed] more on customary and established principles of contract law." Examining a number of decisions considering issues of electronic contract formation, the court concluded that "Uber’s interface here shares certain characteristics in common with instances in which courts have declined to hold that an electronic agreement was formed." Among other things, the court pointed to the obscure presentation of the relevant contractual terms.

Because the plaintiff did not form an agreement to arbitrate, the court did not consider whether Kalanick was permitted to enforce the alleged arbitration agreement to which he was not a signatory and whether Kalanick and/or Uber waived any right to compel arbitration through their prior statements and participation in the litigation.

The case is No. 1:15-cv-09796-JSR.

Attorneys: Brian Marc Feldman (Harter Secrest & Emery LLP) for Spencer Meyer. Peter M. Skinner (Boies, Schiller & Flexner LLP) for Travis Kalanick. Reed Michael Brodsky (Gibson, Dunn & Crutcher LLP) for Uber Technologies, Inc.

Companies: Uber Technologies, Inc.

Cases: Antitrust NewYorkNews