Micheli & Shel, LLC v. Grubhub Inc.

Background

Micheli & Shel, LLC brought a proposed class action against Grubhub Inc., Postmates LLC, Uber Eats, and DoorDash Inc. It alleged that the defendants violated a New York City local law limiting the fees food-delivery services could charge restaurants during the COVID-19 pandemic. The opinion addressed only whether the claims could be brought in court, not whether the claims had merit.

Micheli & Shel entered contracts with each service. Its Grubhub contract incorporated terms requiring arbitration of disputes and included a class-action waiver. Its Uber Eats contract included an arbitration provision, a delegation clause assigning threshold questions about arbitrability to the arbitrator, and a class-action waiver. Its DoorDash contract similarly required binding arbitration, delegated arbitrability questions to the arbitrator, included a class-action waiver, and allowed the merchant to opt out within thirty days; the opinion states that Micheli & Shel did not opt out.

The original Postmates Merchant Agreement, signed by Micheli & Shel, did not include an arbitration provision. It stated that the agreement could be amended only by a written document executed by both parties. Postmates later sent an email announcing updated terms that added arbitration, a modification provision, and a class-action waiver. The updated terms were not signed by Micheli & Shel.

Legal Standard

Under the Federal Arbitration Act, courts generally enforce agreements to arbitrate, but arbitration depends on the parties’ consent. The court first determines whether the parties formed an agreement to arbitrate. If they did, the court enforces any valid provision assigning the arbitrator—rather than the court—authority to decide threshold questions such as whether a dispute falls within the arbitration agreement. A party seeking to compel arbitration bears the initial burden of showing that an agreement was made.

Rulings on Grubhub, Uber Eats, and DoorDash

Micheli & Shel did not dispute that it entered valid contracts with Grubhub, Uber Eats, and DoorDash containing arbitration provisions. Instead, it argued that its claims did not fall within those provisions. The court held that the contracts delegated the question of arbitrability to the arbitrator. For Grubhub, the court treated incorporation of the American Arbitration Association’s commercial arbitration rules—which authorize an arbitrator to decide jurisdiction and arbitrability—as clear evidence of delegation. The Uber Eats and DoorDash contracts contained express delegation clauses.

Because Micheli & Shel did not specifically challenge the validity of the delegation provisions, the court held that the arbitrators, rather than the court, must decide the threshold questions about whether the claims are covered by the arbitration agreements. The court therefore granted the motions of Grubhub, Uber Eats, and DoorDash to compel arbitration.

The court also held that the class-action waivers in those contracts were valid. It rejected Micheli & Shel’s argument that the waivers did not apply because the arbitration agreements did not apply, explaining that the waivers had to be analyzed separately. Micheli & Shel had not specifically challenged their validity. The court held that Micheli & Shel must proceed with individual arbitration.

Ruling on Postmates

The court denied Postmates’ motion to compel arbitration. It did not resolve whether the email gave Micheli & Shel sufficient notice of the revised terms or whether Micheli & Shel otherwise assented to them. Instead, the court relied on the original agreement’s requirement that any amendment be in a written document signed by both parties. Because Micheli & Shel did not sign the updated Postmates terms, the court held that they were ineffective as to Micheli & Shel. The original agreement, which contained no arbitration provision, therefore governed the parties’ relationship.

Disposition

The court granted Grubhub’s, Uber Eats’‍, and DoorDash’s requests to compel arbitration and granted their requests to stay the action while those arbitrations proceeded. It denied Postmates’ motions to compel arbitration and for a stay. Postmates was ordered to answer the complaint within twenty-one days, and the court stated that it would schedule an initial conference concerning Postmates. Judge Jesse M. Furman directed the Clerk of Court to terminate the specified docket entries.