Hamilton v. Uber Technologies, Inc.

Background

Demezz Hamilton sued Uber Technologies, Inc., claiming that he was denied transportation because of his race and asserting a state-law claim for intentional infliction of emotional distress. He alleged that, on July 26, 2022, an Uber driver refused to transport him, used a racial slur, and drove away while Hamilton was trying to reach the vehicle. Hamilton said the incident caused him to be late to a dialysis appointment and shortened his treatment.

Hamilton was using a ride requested through the Uber account of Idowu Daramola, whom Hamilton described as his car service provider. Hamilton had previously used his own Uber account, but he said Uber permanently suspended that account in October 2021. He continued using Uber as a guest rider.

Uber moved to compel arbitration and dismiss the case. The court treated the request to dismiss as a request to stay the litigation pending arbitration, explaining that courts in the circuit generally stay—not dismiss—cases subject to arbitration.

Arbitration agreement

The Federal Arbitration Act generally requires courts to enforce written arbitration agreements. Under the agreement in Uber’s December 2021 Terms of Use, users agreed to resolve covered claims individually through arbitration. The agreement also stated that it applied to claims brought by or against third parties, including third-party beneficiaries, when those claims arose out of or related to the user’s use of Uber’s services.

Uber’s records showed that Daramola had checked an “I agree” box and clicked “Confirm” after being shown the updated terms in the Uber application. The court concluded that this process clearly notified Daramola of the terms and showed his assent. It therefore found that Daramola had entered into a valid and binding arbitration agreement with Uber.

Hamilton’s status as a third-party beneficiary

Hamilton argued that he could not be bound because he had not agreed to the arbitration terms and was a nonsignatory. The court explained that, under ordinary contract principles, a nonsignatory can sometimes be bound by an arbitration agreement. One such theory is third-party-beneficiary status, which applies when a contract’s parties intended to provide a benefit to the third party.

The court found that Hamilton was a third-party beneficiary of Daramola’s agreement with Uber. It reasoned that Daramola used the Uber application to obtain transportation for Hamilton, that Hamilton benefited from the service, and that Hamilton acknowledged he was a third-party beneficiary as a guest rider. The court also noted Hamilton’s prior relationship with Uber through his own account and his continued use of Uber services after that account was suspended.

The court rejected Hamilton’s argument that he was not bound because he did not read or understand the terms. It concluded that the agreement applied even though the terms were hyperlinked, lengthy, and difficult to read, and even if Hamilton did not actually read or understand them. The court further found that the agreement broadly covered the claims asserted in the complaint.

Disposition

The court found that Hamilton’s claims arose out of and related to Daramola’s use of Uber’s services and were covered by the arbitration agreement. Uber’s motion to compel Hamilton’s claims to arbitration was GRANTED. The case was STAYED in its entirety pending the outcome of arbitration. The court did not decide the merits of Hamilton’s discrimination or emotional-distress claims.