Source: http://www.impactlitigation.com/2016/10/
Timestamp: 2019-04-19 16:14:10+00:00

Document:
Uber drivers suing the ride-hailing company have urged an en banc review of the Ninth Circuit panel’s recent decision that drivers must arbitrate their claims, including any challenges to that they might have to the arbitration agreements themselves. Plaintiffs-Appellees’ Petition for Rehearing En Banc, Mohamed v. Uber Technologies, Inc., et al., 15-16178, Gillette v. Uber Technologies, Inc., 15-16181, and Mohamed v. Hirease, LLC, 15-16250 (9th Cir. Sept. 7, 2016) (available here). The request to re-examine the decision stems from appeals by Uber in three proposed class actions in which drivers alleged that Uber misclassified them as independent contractors, rather than as employees, and violated the Fair Credit Reporting Act and analogous state statutes by running criminal background and credit checks on drivers without proper authorization and then improperly utilizing their consumer credit reports. The at-issue arbitration agreements were contained in two driver agreements, a 2013 agreement and a 2014 agreement, both of which contained opt-out clauses that none of the plaintiffs had utilized.
On September 7, 2016, a three-judge panel partly reversed U.S. District Judge Edward M. Chen’s June 2015 ruling that Uber’s arbitration agreements were unenforceable, and clarified that the 2013 and 2014 contracts clearly delegated the question of arbitrability to the arbitrator. Mohamed, at 6-7 (slip op. available here). The panel found that “[t]he 2013 agreement clearly and unmistakably delegated the question of arbitrability to the arbitrator except as pertained to the arbitrability of class action, collective action, and representative claims.” Id. at 14. Furthermore, “the 2014 agreement clearly and unmistakably delegated the question of arbitrability to the arbitrator under all circumstances.” Id. at 11. The panel also held that neither delegation provision was unconscionable, because the ability to opt-out of both agreements within 30 days essentially rendered both agreements procedurally conscionable, per se. Id. at 18. Indeed, although the panel acknowledged that it was likely more burdensome to opt out of the arbitration provision by overnight delivery service or in person (as required by the 2013 agreement) than it would have been by email (as allowed by the 2014 agreement), “there were some drivers who did opt out and whose opt-outs Uber recognized. Thus, the promise was not illusory.” Id. at 17. Accordingly, the court rejected Judge Chen’s finding that Uber’s arbitration provision was procedurally and substantively unconscionable on these grounds. Id. at 17-18.
In their petition for rehearing, the drivers first argue the panel’s ruling unlawfully permits otherwise unconscionable arbitration agreements to be upheld, so long as the agreement contains a “meaningful” opt-out clause, even where the terms of the clause are difficult to comply with or are purposely buried in the fine print to prevent an individual from opting out. Petition for Rehearing, at 4-7 (internal citations omitted). Second, they contend that the panel’s finding that questions of arbitrability be decided by an arbitrator conflicts with the U.S. Supreme Court’s requirement that valid delegations of arbitrability be “clear and unmistakable,” insofar as the at-issue delegation provisions contained exceptions, conflicted with other arbitration terms, and were generally ambiguous. Id. at 7-10 (internal citations omitted). Third, the drivers argue that the panel’s holding that the presence of opt-out clauses renders the agreements’ class action waivers lawful under federal labor laws is incorrect and conflicts with contrary holdings of the Seventh Circuit. Id. at 10-12. Specifically, in Morris v. Ernst & Young, No. 13-16599, 2016 WL 4433080 (9th Cir. Aug. 22, 2016), the Ninth Circuit recently held that class action waivers violate employees’ right to engage in “concerted action” under the National Labor Relations Act (NLRA). However, this panel (in Mohamed) held that the availability of limited and burdensome opt-out provisions rendered the class action waivers non-mandatory, and thus lawful. Mohamed, slip op. at 18 n.6. The plaintiffs point out that this conclusion conflicts with the Seventh Circuit’s ruling in Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1155 (7th Cir. 2016), where the court held that an employee cannot prospectively waive the right to engage in protected concerted action under the NLRA, notwithstanding an opt-out provision. Finally, the drivers argue that the panel’s determination that a cost-sharing provision that would require drivers to pay substantial fees was negated by Uber’s mid-litigation offer to pay such costs, runs contrary to Sixth Circuit precedent which held such a provision unenforceable if it “deter[s] potential litigants, regardless of whether . . . the employer agrees to pay a particular litigant’s share of the fees and costs to avoid such a holding.” Petition for Rehearing, at 12-15 (citing Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 676-77 (6th Cir. 2003) (en banc)).
It remains to be seen whether the Ninth Circuit will accept this petition for rehearing en banc.
In Laffitte v. Robert Half International Inc., No. S222996 (Cal. Aug. 11, 2016) (slip op. available here), the California Supreme Court joined “the overwhelming majority” of the nation’s courts in holding that judges may award fees in class actions as a percentage of a common fund created for the class’ benefit (the “percentage of the recovery method”). Slip op. at 27. Prior to Laffitte, some litigants—often class settlement objectors—had argued that the high court’s earlier ruling in Serrano v. Priest required judges to use only the “lodestar method” for calculating fees: “The starting point of every fee award . . . must be a calculation of the attorney’s services [measured by] the time he has expended on the case.” Serrano v. Priest, 20 Cal.3d 25, 26 (1977) (“Serrano III”). However, the California Supreme Court had not directly addressed on the issue before Laffitte.
Laffitte involved a $19 million common fund that was established to settle the claims of a class of staffing professionals who had been misclassified by their staffing agency, Robert Half, as exempt under the Labor Code, and thereby were disentitled to overtime, meal breaks, rest breaks, and other benefits guaranteed to non-exempt employees. As part of the settlement, plaintiffs’ counsel requested one-third of the common fund ($6,333,333) as a contingency fee. One class member, David Brennan, filed several objections to the settlement, including an objection to the requested fee. Brennan claimed that the fee request was unreasonable because it exceeded the contingency fee plaintiffs’ counsel would be entitled to under the lodestar method (counsel’s lodestar was $2,968,620).
The trial court overruled Brennan’s objections to the settlement. With respect to fees, the court found that the requested contingency fee was reasonable under both the percentage of the recovery and lodestar methods. On appeal, Brennan claimed that the trial court had erred by using the percentage of the recovery method to calculate the fee, and made mistakes in its application of the lodestar method, such as relying only on summaries of counsel’s billing records (rather than the actual billing records) and by awarding more than double counsel’s lodestar. The California Court of Appeal rejected these arguments, finding that the trial court had not abused its discretion by awarding a percentage of the common fund in attorneys’ fees, nor by performing a lodestar calculation based on the declarations of counsel to confirm the reasonableness of the fee as a percentage of the recovery.
The quoted text [from Serrano III] . . . concern[s] calculation of a fee awarded under the private attorney general theory. In Serrano III, this court simply did not address the question of what methods of calculating a fee award may or should be used when the fee is to be drawn from a common fund created or preserved by the litigation. For this reason, the passages quoted cannot fairly be taken as prohibiting the percentage method’s use in a common fund case . . . . Since Serrano III, we have several times, in fee shifting cases, endorsed the lodestar . . . method of calculating an attorney fee award; none of our decisions involved a case where the fee was to be awarded from a common fund created or preserved by the litigation.
Id. at 20-22 (internal citations omitted; emphasis in original).
The California Supreme Court ultimately found that “whatever doubts may have been created by Serrano III,” use of the percentage method to calculate a fee in a common fund case, where the award serves to spread the attorney fee among all the beneficiaries of the fund, does not in itself constitute an abuse of discretion. “The recognized advantages of the percentage method . . . convince us [that it] is a valuable tool that should not be denied our trial courts.” Id. at 27 (internal citations omitted). Turning to the facts of the case, the California Supreme Court held that the trial court had not abused its discretion by awarding one-third of the common fund as a contingency fee, nor by double-checking the reasonableness of the percentage fee through a lodestar/multiplier calculation based on billing summaries, stating, “[a] lodestar cross-check  provides a mechanism for bringing an objective measure of the work performed into the calculation of a reasonable attorney fee. If a comparison between the percentage and lodestar calculations produces an imputed multiplier far outside the normal range, . . . the trial court will have reason to reexamine its choice of a percentage.” Id. at 28-29 (internal citations omitted).
Of particular interest for practitioners is the California Supreme Court’s ruling that the lodestar cross-check “does not override the trial court’s primary determination of the fee as a percentage of the common fund and thus does not impose an absolute maximum or minimum on the potential fee award.” Id. at 30. Rather, “[i]f the multiplier calculated by means of a lodestar cross-check is extraordinarily high or low, the trial court should consider whether the percentage used should be adjusted so as to bring the imputed multiplier within a justifiable range, but the court is not necessarily required to make such an adjustment.” Id. In so holding, Laffitte ensures that the application of the lodestar method to cross-check the percentage fee will not undercut the reasons for applying the percentage of the recovery method in the first instance; namely, the “alignment of incentives between counsel and the class, a better approximation of market conditions in a contingency case, and the encouragement it provides counsel to seek an early settlement and avoid unnecessarily prolonging the litigation.” Id. at 27.

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