People v. Maplebear Inc.

• Decision Date: 28 July 2022
• Docket Number: D079209
• Citation: 81 Cal.App.5th 923,297 Cal.Rptr.3d 652
• Parties: The PEOPLE, Plaintiff and Respondent, v. MAPLEBEAR INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

81 Cal.App.5th 923

297 Cal.Rptr.3d 652

The PEOPLE, Plaintiff and Respondent,

v.MAPLEBEAR INC., Defendant and Appellant.

D079209

Court of Appeal, Fourth District, Division 1, California.

Filed July 28, 2022

Keker, Van Nest & Peters, Rachael E. Meny, San Francisco, Benjamin Berkowitz, Ryan K. Wong, Julia L. Allen, Taylor L. Reeves, and Erica S. Miranda, San Francisco, for Defendant and Appellant.

Mara W. Elliot, City Attorney, Mark Ankcorn, Chief Deputy City Attorney, and Kevin B. King, Deputy City Attorney, for Plaintiff and Respondent.

McCONNELL, P. J.

The San Diego City Attorney brought an enforcement action under the Unfair Competition Law, Business and Professions Code sections 17200, et seq. (UCL), on behalf of the People of the State of California against Maplebear Inc. DBA Instacart (Instacart). In their complaint, the People alleged that Instacart unlawfully misclassified its employees as independent contractors in order to deny workers employee protections, harming its alleged employees and the public at large through a loss of significant payroll tax revenue, and giving Instacart an unfair advantage against its competitors. In response to the complaint, Instacart brought a motion to compel arbitration of a portion of the City's action based on its agreements with the individuals it hires, called Shoppers. The trial court denied the motion, concluding Instacart failed to meet its burden to show a valid agreement to arbitrate between it and the People.

Instacart challenges the court's order, asserting that even though the People are not a party to its Shopper agreements, they are bound by its arbitration provision to the extent they seek injunctive relief and restitution because these remedies are "primarily for the benefit of" the Shoppers. As we shall explain, we reject this argument and affirm the trial court's order.

FACTUAL AND PROCEDURAL BACKGROUND

Instacart is a San Francisco-based company which operates a "communications platform" that "facilitates same-day, on-demand grocery shopping and delivery services in major metropolitan areas in California and throughout the United States." The platform consists of a website and a smart phone application, or app. Through the app, consumers are connected to Instacart's Shoppers, who gather groceries purchased by consumers on the app at various partner stores. Instacart engages two types of Shoppers, "In-Store Shoppers," who gather the groceries in the partner store for consumers to pick up, and "Full-Service Shoppers," who gather the groceries in the partner store, purchase them with a debit card issued by Instacart, and deliver the groceries to the consumer. This case concerns only Instacart's Full-Service Shoppers.

Before gaining access to Instacart's platform, Shoppers create a "registered profile through the Instacart app or website" and must sign its "Independent Contractor Agreement" as a condition of using Instacart's platform. The version of the Independent Contractor Agreement that has been in effect since 2017 includes an arbitration provision that states: "the Parties agree that to the fullest extent permitted by law, ANY AND ALL DISPUTES OR CLAIMS BETWEEN YOU AND INSTACART shall be exclusively resolved by final and binding arbitration by a neutral arbitrator, including without limitation any and all disputes or claims BETWEEN YOU AND INSTACART, whether in contract, tort, or otherwise, relating to the formation (including unconscionability and invalidity), existence, breach, termination, interpretation, enforcement, validity, scope, and applicability of the Agreement, or the Services agreed to herein, or any claim on any basis under federal, state, or local law, which could otherwise be heard before any court of competent jurisdiction."¹

In September 2019, the People brought the present lawsuit alleging Instacart violated the UCL by misclassifying its Shoppers as independent contractors, and not employees. The People's complaint asserts Instacart maintains an unfair competitive advantage by misclassifying its Shoppers and evades "long-established worker protections under California Law." The People allege that Instacart "avoids paying its Shoppers a lawful wage and unlawfully defers substantial expenses to its Shoppers, including the cost of equipment, car registration, insurance, gas, maintenance, parking fees, and cell phone data usage." Finally, the People assert that "Instacart also has an unfair advantage over its law-abiding competitors because, due to the misclassification, it contributes less to California's unemployment insurance, disability insurance and other state and federal taxes."

The complaint asserts one cause of action under the UCL alleging Instacart's misclassification of Shoppers is both unlawful under the Labor Code and an unfair business practice. In the complaint's prayer for relief, the People seek first, civil penalties authorized by the UCL in cases prosecuted by the government of "up to $2,500 for each violation of the UCL, as proven at trial;" second, injunctive relief requiring Instacart to properly classify its employees; and, finally, restitution to the misclassified employees, "according to proof, for unpaid wages, overtime, and rest breaks, missed meals, and reimbursement for expenses necessary to perform the work."

In response to the complaint, Instacart filed a motion to compel a portion of the People's case—the prayers for injunctive relief and restitution—to arbitration based on its agreements with Shoppers.² Before the motion was considered by the trial court, however, the People sought a temporary restraining order preventing Instacart from classifying its Shoppers in the City of San Diego as independent contractors. On February 18, 2020, the court issued an order granting the request for a preliminary injunction against Instacart.

The court concluded the prosecution had shown a probability of success on the merits of its claim that Instacart had improperly classified its Shoppers under the test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 and codified by the California Legislature's adoption of Assembly Bill No. 5 (2019–2020 Reg. Sess.), and that the balance of harms favored the People. The injunction issued by the court "enjoin[ed] and restrain[ed] Instacart from ‘failing to comply with California employment law with regard to its Full-Service Shopper employees within the City of San Diego.’ " ( California v. Maplebear, Inc. , 2021 WL 612567 (Feb. 17, 2021, No. D077380) [nonpub. opn.], rehg. denied Mar. 5, 2021 ( Maplebear I ).)

After the court issued the preliminary injunction, Instacart brought an ex parte application to stay enforcement of or dissolve the injunction. The trial court denied the application. The same day, Instacart filed its notice of appeal of the court's order imposing the injunction. Thereafter, and in advance of a previously scheduled hearing on Instacart's motion to compel arbitration, the court issued a tentative order staying the preliminary injunction under Code of Civil Procedure section 918 and stating the court lacked jurisdiction to determine the motion to compel arbitration in light of the appeal. At the hearing, the court confirmed the tentative ruling, pausing all proceedings in the trial court while this court considered Instacart's appeal.

While the appeal was pending, the electorate voted to enact Proposition 22, the "App-Based Drivers as Contractors and Labor Policies Initiative (2020)." (Prop. 22, as approved by voters, Gen. Elec. (Nov. 3, 2020).) The new law created an exception to Dynamex and Assembly Bill No. 5 for rideshare and grocery delivery companies like Instacart, calling into question the legality of the preliminary injunction. In February 2021, this court reversed the trial court's order, finding the injunction was unconstitutionally vague, "particularly in light of the changes to the law effectuated by Proposition 22." ( Maplebear I, supra , D077380. )

On remand, litigation of Instacart's motion to compel arbitration resumed. Instacart re-calendared the motion for hearing, and filed an ex parte application for a stay of additional proceedings pending the determination of its motion. After briefing on the ex parte application, the court granted the stay. Several days later, the court issued a tentative ruling on the motion to compel arbitration, almost two months before the scheduled hearing on the motion, indicating it would deny the motion. The People then filed an ex parte application to expedite the hearing on the motion. The court granted the application at the ex parte hearing, advancing argument on the motion to compel arbitration to that day.

After argument by counsel, the court took the matter under submission. Thereafter, the court confirmed its tentative ruling denying the motion. The court found that Instacart had not met its burden to show the existence of a valid arbitration agreement between the parties. The trial court rejected Instacart's assertion that the People were bound by the Shopper's agreements with Instacart because the Shoppers were the "real parties in interest." Rather, focusing on the relief sought by the People, including civil penalties, the court concluded that the lawsuit was brought primarily for the benefit of the public. The trial court's thorough order distinguished the cases Instacart relied on in its briefing, which all involved lawsuits under the UCL brought by private individuals.

DISCUSSION

On appeal, Instacart repeats the arguments it made in the trial court. It asserts that its agreements with Shoppers required the court to compel arbitration of the claims here because the City of San Diego's lawsuit is brought primarily to effectuate the rights of the Shoppers, whom Instacart characterizes as the real parties in interest.

ILegal Standards

"We review the trial court's interpretation of an arbitration agreement de novo when,...