Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Mass.: Arbitration compelled in hidden fee action against Uber, (Jul 11, 2016)

By Michael Menzhuber, J.D., LL.M.

A motion to compel arbitration and to dismiss a purported class action, which alleged that Uber Technologies, Inc. violated the Massachusetts Consumer Protection Act (MCPA) by hiding fictitious fees in its charges for legitimate tolls, was granted by the federal district court in Boston (Cullinane v. Uber Technologies, Inc., July 8, 2016, Woodlock, D.).

Rachel Cullinane and three other consumers downloaded Uber’s smartphone application—which allows riders and drivers to connect based on their location—and created an account to use the application to call for transportation. During the account creation process, they were presented with a screen for entering payment information. They were also notified on this screen that, by creating an Uber account, they were agreeing to the "Terms of Service & Privacy Policy." The agreement was prominently displayed and could be accessed by clicking a button. After entering their payment information, the consumers were required to click a "done" button.

The agreement contained several prominently displayed headings, under which were certain terms of use for users. One of the headings, "Dispute Resolution," contained an arbitration requirement. Also contained under this heading were statements that arbitration would be administered by the American Arbitration Association (AAA) and that Uber would pay any arbitration-related fees if the claim was for an amount under $75,000.

After using the service, the consumers filed a class action lawsuit which alleged that Uber imposed fictitious fees hidden in charges for legitimate local tolls and that the hidden charges constituted unfair and deceptive actions in violation of the MCPA. Uber responded by filing a motion to compel arbitration and stay or, in the alternative, to dismiss.

As an initial matter, the court considered whether the agreement, which fell into the category of a "sign-in wrap" online adhesion agreement, was valid. The court determined that it was valid because: (1) the process by which the plaintiffs established their accounts put them on reasonable notice that their affirmative act of signing up also bound them to Uber’s agreement; and (2) by clicking the "done" button, which was unambiguously surrounded by language alerting them that creating an account would bind them to the agreement, they manifested their agreement to the terms of the agreement.

Turning to the enforcement of the agreement’s arbitration clause, the court found that it also was valid. The clause was broad enough to encompass the issues in dispute and the parties agreed to have the contract governed by AAA rules. The court noted that an otherwise valid arbitration clause could be unenforceable if, under the circumstances, it was an "illusory remedy". However, this exception did not apply because: (1) "excessive arbitration" costs for the plaintiffs was not an issue, in light of Uber’s agreement to pay all arbitration-related fees for claims up to $75,000; and (2) the waiver of the right to bring a class action did not render the arbitration clause illusory.

Finally, having determined that all further issues should be decided by arbitrator, the court dismissed the case.

The case is No. 14-14750-DPW.

Attorneys: Elizabeth A. Ryan (Bailey & Glasser LLP) for Rachel Cullinane. S. Elaine McChesney (Morgan, Lewis & Bockius LLP) for Uber Technologies, Inc.

Companies: Uber Technologies, Inc.

Cases: StateUnfairTradePractices MassachusettsNews