Smythe v. Uber Techs., Inc.

• Decision Date: 08 June 2018
• Docket Number: A149891
• Citation: 24 Cal.App.5th 327,233 Cal.Rptr.3d 895
• Court: California Court of Appeals Court of Appeals
• Parties: Ryan SMYTHE, Plaintiff and Respondent, v. UBER TECHNOLOGIES, INC., Defendant and Appellant.

24 Cal.App.5th 327

233 Cal.Rptr.3d 895

Ryan SMYTHE, Plaintiff and Respondent,

v.UBER TECHNOLOGIES, INC., Defendant and Appellant.

A149891

Court of Appeal, First District, Division 3, California.

Filed June 8, 2018

William L. Stern, Claudia M. Vetesi, San Francisco, Morrison & Foerster LLP, for Defendant and Appellant

R. Parker White, William L. Brelsford, Sacramento, Poswall, White, & Brelsford, Jeffrey D. Fulton, Law Office of Jeffrey D. Fulton, Sacramento, for Plaintiff and Respondent

Siggins, J.Uber Technologies, Inc. (Uber) appeals from an order denying its motion to compel arbitration of an action brought by Ryan Smythe in his capacity as a driver for Lyft, Inc. (Lyft). Smythe also drives for Uber. The court correctly found the action is beyond the scope of Smythe's arbitration agreement with Uber, so we affirm.

BACKGROUND

During the relevant period Smythe worked as a driver for both Uber and Lyft, Inc., Uber's direct competitor. His complaint alleges that Uber engaged in a practice of directing its drivers and others to create and use fake Lyft accounts to request rides, thereby sending Lyft drivers on wild goose chases to pick up nonexistent passengers. According to the complaint, Uber did this to discourage drivers from driving for Lyft and cause Lyft customers to steer their patronage to Uber. The complaint asserted causes of action for unfair business practices and intentional interference with prospective economic damage on behalf of a putative class of Lyft drivers affected by the alleged scheme.

Uber moved to compel arbitration and stay the class claims. According to Uber, when Smythe became a driver on the Uber platform he signed two agreements containing arbitration provisions with Uber-related entities (the Rasier Agreements). The more recent and operative agreement, dated November 2014, states, "[t]his Arbitration Provision applies to any dispute arising out of or related to this Agreement or termination of the Agreement." The agreement goes on to specify that it applies "without limitation, to disputes arising out of or related to this Agreement and disputes arising out of or related to your relationship with the Company, including termination of the relationship. This Arbitration Provision also applies, without limitation, to disputes regarding any city, county, state or federal wage-hour law, trade secrets, unfair competition, compensation, breaks and rest periods, expense reimbursement, termination, harassment and claims arising under the Uniform Trade Secrets Act, Civil Rights Act of 1964, Americans With Disabilities Act, Age Discrimination in Employment Act, Family Medical Leave Act, Fair Labor Standards Act, Employee Retirement Income Security Act (except for claims for employee benefits under any benefit plan sponsored by the Company and covered by the Employee Retirement Income Security Act of 1974 or funded by insurance), Genetic Information Non-Discrimination Act, and state statutes, if any, addressing the same or similar subject matters, and all other similar federal and state statutory and common law claims. [¶] This Agreement is intended to require arbitration of every claim or dispute that lawfully can be arbitrated, except for those claims and disputes which by the terms of this Agreement are expressly excluded from the Arbitration Provision."

The agreement includes a delegation clause specifying that the disputes subject to arbitration "include without limitation disputes arising out of or relating to interpretation or application of this Arbitration Provision, including the enforceability, revocability or validity of the Arbitration Provision or any portion of the Arbitration Provision. All such matters shall be decided by an arbitrator and not by a court or judge."

The trial court found Smythe's allegations were beyond the scope of the arbitration agreement and that the delegation provision was unenforceable in the context of the claims advanced in Smythe's complaint. "[P]laintiff's claims are independent of the rights and responsibilities conferred upon him under the Rasier agreements. Therefore, no part of the Rasier Agreements, including the delegation clause, can be enforced against plaintiff in this case."

Uber filed this timely appeal from the court's order.

DISCUSSION

Uber asserts the court erred by adjudicating the threshold question of whether the arbitration provision covers Smythe's complaint. In Uber's view, "Because the Arbitration Provision delegates the issues of arbitrability to an arbitrator, this Court should direct the trial court to leave all of Mr. Smythe's arbitrability questions for the arbitrator to decide in the first instance." Alternatively, Uber urges us to reverse the trial court's decision and remand with an instruction to compel arbitration because, it asserts, Smythe's claims fall within the scope of the arbitration provision. We disagree.

A. Legal Principles

We recognize the strong public policy in favor of arbitration and that we resolve any doubts in favor of arbitration. ( Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 890, 221 Cal.Rptr.3d 225 ( Aanderud ); Bono v. David (2007) 147 Cal.App.4th 1055, 1062-1063, 54 Cal.Rptr.3d 837.) Moreover, the party opposing arbitration bears the burden to show the arbitration provision cannot be interpreted to cover the claims asserted in the complaint. But, " ‘[t]here is no public policy ... that favors the arbitration of disputes which the parties did not agree to arbitrate.’ " ( Bono v. David, supra , at p. 1063, 54 Cal.Rptr.3d 837 )

Qualcomm Inc. v. Nokia Corp. (Fed. Cir. 2006) 466 F.3d 1366 ( Qualcomm ) provides the analytic framework where, as here, the parties' agreement delegates the power to decide arbitrability of a dispute to an arbitrator. "[I]n order to be ‘satisfied’ of the arbitrability of an issue pursuant to section 3 of the FAA [Federal Arbitration Act],¹ the district court should first inquire as to who has the primary power to decide arbitrability under the parties' agreement. If the court concludes that the parties did not clearly and unmistakably intend to delegate arbitrability decisions to an arbitrator, the general rule that the ‘question of arbitrability ... is ... for judicial determination’ applies and the court should undertake a full arbitrability inquiry in order to be ‘satisfied’ that the issue involved is referable to arbitration. [Citation.]" ( Id . at p. 1371.)

But if, on the other hand, "the court concludes that the parties to the agreement did clearly and unmistakably intend to delegate the power to decide arbitrability to an arbitrator, then the court should perform a second, more limited inquiry to determine whether the assertion of arbitrability is ‘wholly groundless.’ [Citation.] If the court finds that the assertion of arbitrability is not ‘wholly groundless,’ then it should stay the trial of the action pending a ruling on arbitrability by an arbitrator. If the district court finds that the assertion of arbitrability is ‘wholly groundless,’ then it may conclude that it is not ‘satisfied’ under [FAA] section 3, and deny the moving party's request for a stay." ( Qualcomm, supra , 466 F.3d at p. 1371 ; Zenelaj v. Handybook Inc. (N.D. Cal. 2015) 82 F.Supp.3d 968, 975.) A delegation clause will be given effect when there is a plausible argument that the arbitration agreement requires the merits of the claim to be arbitrated, and cases where an assertion of arbitrability is "wholly groundless" are exceptional. ( Kubala v. Supreme Production Services, Inc. (5th Cir. 2016) 830 F.3d 199, 202 & fn. 1 ( Kubala ).) California law is consistent with federal law on this question. ( Qualcomm, supra, 466 F.3d at 1372, citing Dream Theater, supra , at p. 553, 21 Cal.Rptr.3d 322 ; see McCarroll v. Los Angeles County District Council of Carpenters (1957) 49 Cal.2d 45, 65, 315 P.2d 322.)

The evidence in the trial court was not conflicting, so our review of the trial court's ruling on arbitrability is de novo. ( Aanderud, supra, 13 Cal.App.5th at p. 890, 221 Cal.Rptr.3d 225 ; Qualcomm, supra, 466 F.3d at p. 1371.)

B. Analysis

There is no dispute that parties to arbitration agreements are generally free to delegate to an arbitrator, instead of a court, questions regarding the enforceability of their agreement. (See, e.g., Aanderud, supra , 13 Cal.App.5th at pp. 891–892, 221 Cal.Rptr.3d 225.) Nor is it subject to dispute that the agreement at issue here includes a delegation provision that commits threshold questions regarding the application and enforceability of the arbitration provision to the arbitrator. For that reason, we need not dwell on Uber's extensive arguments on these issues, and instead accept the point. The question, rather, is whether Uber's assertion of arbitrability here is "wholly groundless" because the issues raised in Smythe's complaint are patently beyond the scope of the parties' agreement to arbitrate. (See Qualcomm, supra , 466 F.3d at 1371 ; see Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 252, 205 Cal.Rptr.3d 359, 376 P.3d 506 [" ‘ "a party cannot be required to submit to an arbitration any dispute which he had not agreed so to submit" ’ "].)

We readily conclude the arbitration agreement cannot apply to this action. By its terms, Uber's arbitration provision applies to disputes "arising out of or related to" the Rasier agreements and "disputes arising out of or related to [the driver's] relationship" with Uber. But Smythe's action against Uber has nothing to do with the Rasier agreements or his rights and responsibilities as an Uber driver. To the contrary, Smythe brought his action in his capacity as a driver for Lyft, not Uber, and alleges only that he and other Lyft drivers incurred expenses and lost income when they responded to fraudulent ride requests generated at Uber's instigation. There is no "plausible argument" ( Kubala, supra, 830 F.3d at p. 202 ) that those claims are related to or arise out of the agreements Smythe entered into with Uber...