Spates v. Uber Technologies Inc.

Background

Sonia Spates filed a proposed class action against Uber Technologies, Inc. She alleged that Uber’s “Upfront Pricing” system showed customers a total fare before they purchased rides but that Uber routinely charged more than the quoted amount. Her claims alleged violations of New York General Business Law §§ 349 and 350 and unjust enrichment.

Uber moved to compel arbitration. The court considered whether Spates had entered a valid arbitration agreement and whether her claims were covered by that agreement.

Arbitration Agreement

Spates registered for an Uber rider account through Uber’s website on August 2, 2018. The court found that she was required to agree to Uber’s Terms of Use to create the account and that the applicable Terms of Use included an arbitration provision. Spates did not dispute that she had accepted the Terms of Use. The court therefore held that she was bound by the arbitration provision.

The provision stated that the Federal Arbitration Act governed its interpretation and enforcement. It also delegated “gateway” questions—threshold questions about whether a dispute must be arbitrated—to the arbitrator. The provision specifically assigned the arbitrator questions concerning the agreement’s interpretation, applicability, enforceability, formation, unconscionability, and defenses to arbitration.

Challenge to Delegation and the American Arbitration Association

Spates argued that requiring arbitration through the American Arbitration Association, or AAA, was unconscionable because Uber had previously litigated an unrelated dispute against the AAA concerning arbitration fees and administration. The court agreed that Spates was entitled to a neutral arbitrator but concluded that the prior lawsuit did not show that the AAA could not provide one. The court noted that a lawsuit against the organization did not necessarily taint its individual arbitrators, and that AAA rules required arbitrators to disclose circumstances that could raise doubts about their impartiality or independence.

The court found Spates’s concern that an AAA arbitrator might favor Uber to prove neutrality speculative. It held that the delegation clause was not unconscionable and could be enforced. The court also rejected Spates’s challenge to Uber’s evidence supporting the arbitration agreement, finding that the declaration and business records were admissible for purposes of deciding the motion.

Disposition

The court granted Uber’s motion to compel arbitration against Spates. It stayed the case pending resolution of the arbitration. The parties were ordered to submit a status report within 30 days after arbitration was completed or within six months of the order, whichever occurred sooner. The order did not decide whether Spates’s underlying overcharge claims were legally or factually valid.