A Recent DoorDash Opinion Addresses Several Pivotal Arbitration Issues

From JDSupra, John Lewis discusses a recent case in which drivers were classified as independent contractors and signed arbitrations agreements. Despite several challenges, the court upheld the arbitration agreements and their class action waivers. John writes:

Two DoorDash delivery drivers filed a class action against the company and two of its employees alleging violations of federal and state wage and hour laws. After removal of the case to the Southern District of New York, the defendants filed motions to compel arbitration, to strike the complainants’ class action allegations and to stay the case pending resolution of the individual claims.

Judge Valerie E. Caproni of the Southern District of New York, a 2013 President Obama nominee, analyzed a number of the critical issues presented in the case before granting the defendants’ motion. Mullo v. DoorDash, Inc. No. 22-cv-2430 (S.D.N.Y. Jan. 17, 2023).

The Arbitral Background

The plaintiffs had agreed to the terms of DoorDash’s Independent Contractor Agreement (ICA), which was presented in a hyperlink when they applied for work. The ICA prominently advised that it contained an arbitration clause covering all disputes involving the ICA, including under federal and state labor laws, and that it included a waiver of the right to engage in a class action involving ICA-related disputes both in arbitration and in court. While delivery workers could opt out of the arbitration agreement, the plaintiffs had not done so. Finally, while the ICA originally provided that all arbitrations would be governed by the American Arbitration Association’s (AAA) Commercial Arbitration Rules, that was changed to the International Institute for Conflict Prevention & Resolution (CPR) Rules during the plaintiffs’ delivery work.

Arbitration and Class Allegations

The plaintiffs in Mullo did not dispute that the Federal Arbitration Act (FAA) was applicable to the ICA arbitration provisions, and because they worked in New York City and not across state lines, no exemptions to the FAA appeared relevant. Moreover, while the plaintiffs generally did object to the validity of the arbitration agreement, they did not specifically single out the clause delegating questions of arbitrability to the arbitrator. Hence, the validity of the arbitration agreement had to be addressed by the arbitrator and not the court. See Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 70-72 (2010).

With no avenue available under federal law, the plaintiffs took the position that the class action waiver was unenforceable under state contract law. In this case the court found it was New York state contract law under which the plaintiffs “regularly worked.” See Compl. ¶¶. But the “grab-bag of arguments” the plaintiffs raised didn’t persuade the court. (See Op. at 6.) The plaintiffs’ lack of English fluency didn’t negate their consent because the ICA was available in other languages. And the plaintiffs didn’t support their argument that language challenges kept them from understanding the ICA. The court reasoned that if it did have an impact, “an imperfect grasp of the English language” does not invalidate the consent to arbitrate disputes. Instead, the workers must seek help in comprehending the agreement before execution. See Ragone v. Atl. Video at Manhattan Ctr.,595 F.3d 115, 122 (2d Cir. 2010). The court also considered whether failure “to disclose financial links between defense counsel and the CPR” could nullify the plaintiffs’ consent to the class waiver. The court found it could not because defendants have no duty to disclose public information regarding CPR’s contributors. Indeed, this financial information could have been discovered based on “basic research” during the contract approval process. After all, CPR’s corporate and law firm members are actually available online from the arbitral entity itself. (See Op. at 7 n. 6.)

Last but not least, the plaintiffs argued that the “relationships” between DoorDash and CPR caused the class waiver to be “unconscionable” but provided no support for the allegation “other than rank speculation.” (Op. at 7.) While plaintiffs declared that DoorDash “colluded” with CPR in preparing its rules, they did not identify a single CPR rule that negatively impacted them.

Hence, Judge Caproni concluded:

Plaintiffs have failed to provide either facts or arguments that even remotely tend to show that, even if their claim about CPRs’ bias provided true, the applicable CPR rules would not guard against the bias. (Op. at 7 citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 30 (1991)).

In her concluding comments, Judge Caproni relied upon the protections of the FAA. If the plaintiffs were correct regarding alleged systemic bias in the CPR process, the FAA provides a remedy.

[T]he FAA already contemplates a process through which they can be protected; courts can “overturn arbitration decisions [w]here there was evident partiality or corruption in the arbitrators.” Gilmer, 500 U.S. at 31, citing 9 U.S.C. § 10(b).

But, according to the judge, one cannot reject arbitration based solely on anticipation that it will not be fair. Moreover, the decisions cited by the plaintiffs arose from instances where the arbitration rules “were obviously lopsided.” One example involved rules that controlled who was on the arbitral panel, creating “a sham system.” See Hooters of Am., Inc. v. Phillips,173 F. 3d 933, 940 (4th Cir. 1999). Plaintiffs did not argue that DoorDash could determine the individual arbitrators on a particular case or change the applicable CPR rules. (See Op. 8 n. 7.)

Despite the plaintiffs’ multifaceted legal arguments, the court granted DoorDash’s motion to compel arbitration and to strike the plaintiffs’ class claims. The action was stayed pending resolution of the individual arbitration of the plaintiffs’ claims.

The Bottom Line: Courts are increasingly likely to reject wholesale challenges to arbitration agreements.

Source: A Recent DoorDash Opinion Addresses Several Pivotal Arbitration Issues | BakerHostetler – JDSupra

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