James v. Uber Technologies Inc.

Background

Christopher James and Spencer Verhines filed a proposed class action on behalf of people who worked as Uber drivers in California and had not released their claims against Uber. Their claims include alleged failures to reimburse business expenses, pay minimum wage and overtime, and provide properly itemized wage statements. They also seek damages, declaratory relief, and an order requiring Uber to classify its drivers as employees.

Uber filed its answer on July 28, 2020. Proposition 22 passed on November 3, 2020, and took effect on December 16, 2020. The measure declares app-based drivers to be independent contractors—not employees—if the network company provides specified protections. The court had certified a class covering Uber drivers who drove in California between February 28, 2019, and December 16, 2020, and who opted out of Uber’s arbitration agreement. The court later clarified that whether Proposition 22 applies retroactively is a merits question to be addressed later, rather than at the class-certification stage.

Five days after that clarification, Uber asked for permission to amend its answer to add two defenses: that Proposition 22 applies retroactively and that Proposition 22 abated the lawsuit. An affirmative defense is a legal basis a defendant raises to avoid liability even if the plaintiff proves the allegations.

Legal standard

Under Federal Rule of Civil Procedure 15(a), a party generally needs the court’s permission to amend a pleading after the period for amending as a matter of course. Permission should generally be freely given, but the court may consider factors such as delay, bad faith, repeated failure to correct problems, unfair prejudice, and whether the amendment would be futile. The court explained that prejudice to the opposing party is the most important factor, although an amendment may be denied as futile even without prejudice.

Analysis

The court found that Uber’s five-month delay was unwarranted because Uber should have raised Proposition 22 defenses when the measure was enacted. But the court concluded that allowing the amendment would not unfairly prejudice the plaintiffs. The additional discovery and litigation would be needed to determine whether Uber satisfies Proposition 22’s conditions, including limits on controlling drivers’ schedules and ride acceptance, limits on restricting work for other companies or in other occupations, and the required net earnings floor. The court found there was no additional prejudice caused by the delay because no trial date was approaching, the plaintiffs still had time to seek summary judgment, and the plaintiffs already knew Uber contended that Proposition 22 barred the action.

The court also found neither proposed amendment futile. The retroactivity defense could present a valid issue because the court had already recognized that retroactive application of Proposition 22 could dispose of the plaintiffs’ claims. The abatement defense was also not futile because, if Proposition 22 applied retroactively, it could arguably end the lawsuit. The court stated that it could not decide at this stage whether that defense would succeed because it was closely connected to the retroactivity question, which would be addressed on the merits later.

Disposition

Judge Edward M. Chen GRANTED Uber’s motion for leave to amend its answer to add defenses based on Proposition 22. Uber was ordered to file its amended answer within 30 days of the order. The order decided Docket No. 165; it did not decide whether Uber’s Proposition 22 defenses ultimately bar or abate the action.