The Ninth Circuit denied rehearing en banc of its September order holding that the district court erred in deciding whether two drivers who sued Uber Technologies, Inc. (“Uber”) on behalf of themselves and a putative class over the use of background checks must arbitrate their claims individually. The consolidated cases concerned both 2013 and 2014 versions of agreements Uber drivers were required to sign. The agreements included mandatory arbitration clauses, and class action, collective action, and Private Attorney General Act (PAGA) claim waivers. In addition, the agreements contained delegation clauses providing that disputes regarding arbitrability, would be resolved by an arbitrator. Importantly, the 2013 agreements, unlike the 2014 agreements, required the district court, not the arbitrator, to consider certain challenges to the arbitration provision, including challenges to the enforceability of the PAGA waivers.

The plaintiffs, Gillette and Mohamed, entered agreements in 2013 and 2014, respectively, and began driving for Uber. Uber subsequently terminated both plaintiffs’ access to the Uber application due to negative information on their consumer credit reports. The plaintiffs filed separate suits in California, alleging, among other claims, violations of the Fair Credit Reporting Act, and bringing PAGA claims. Uber moved to compel arbitration in both suits, and the district court denied both motions, concluding that, although the agreements contained arbitration clauses and collective action waivers, the issue of arbitrability was not “clear and unmistakable.” Further, the district court reasoned that, even if the arbitration clauses were “clear and unmistakable,” they were unenforceable because they were unconscionable. Regarding both plaintiffs’ PAGA claims, the district court concluded that the PAGA waivers were substantively unconscionable and that plaintiffs were permitted to proceed in litigating those claims.

In September, the Ninth Circuit reversed the district court’s holdings on the majority of the arbitration issues. The Ninth Circuit held that neither the 2013 nor the 2014 agreements’ delegations of arbitrability were unconscionable. Regarding whether the delegation clauses were “clear and unmistakable,” the Ninth Circuit disagreed with the district court and held that the agreements clearly delegated the question of arbitrability to the arbitrator. As to unconscionability, the Ninth Circuit reasoned that the opt out option was not illusory because there were some drivers who did opt out and whose opt-outs Uber recognized. Regarding the PAGA claims, the Ninth Circuit affirmed the district court’s holding on the PAGA waivers contained in the 2013 agreements signed by Gillette. The Ninth Circuit disagreed with the district court as to the unconscionability, but held the 2013 PAGA waivers were severable from the arbitration clauses because they explicitly stated that PAGA claims were subject to litigation in court. Thus, in December, the Ninth Circuit denied plaintiffs’ petition for rehearing en banc, allowing Uber to avoid class actions in favor of individual arbitration, with the exception that Gillette’s PAGA claim could be litigated in court.

Mohamed v. Uber Technologies Inc., No. 15-16178 (9th Cir. Dec. 21, 2016).