Because arbitration

If you’ve ever felt that Uber costs more than it should, you can forget about fixing that in court. Under a new ruling by the Second Circuit, no matter how good your claim and regardless of how much money it involves, Uber can beat you every time.

Every. Single. Time.

Price-fixing case

Spencer Meyer lives in Connecticut. He’s used the Uber app on his Samsung smartphone many times. He took Ubers not only in the Nutmeg State but also in New York City.

But something bothered him. In December 2015, he filed a complaint against Uber co-founder Travis Kalanick in the U.S. District Court for the Southern District of New York. He alleged that Kalanick violated federal and state antitrust law by orchestrating a conspiracy among Uber drivers to charge the (higher) fares computed by the Uber algorithm.

Through random assignment, U.S. District Judge Jed Rakoff got the case.

Kalanick moved to dismiss the price-fixing claim. He urged that it was implausible that Uber drivers conspired among themselves and with Uber.

Judge Rakoff denied the motion. He ruled that Meyer plausibly alleged a price-fixing agreement among Kalanick, Uber, and Uber drivers to charge supra-competitive prices. He wrote:

In this case, plaintiff has alleged that drivers agree with Uber to charge certain fares with the clear understanding that all other Uber drivers are agreeing to charge the same fares. See Amended Complaint ¶¶ 70-71. These agreements are organized and facilitated by defendant Kalanick, who as at least an occasional Uber driver, is also a member of the horizontal conspiracy. See id. ¶¶ 76, 84.

Meyer v. Kalanick, No. 15-cv-9796, slip op. at *12 (S.D.N.Y. Mar. 31, 2016).

Motion to compel

Kalanick next asked Judge Rakoff to let Uber in as a defendant. Uber also moved to intervene. It attached to its intervention papers a motion to compel Meyer to arbitrate. The motion to compel cited Uber’s online Terms of Service. The Terms of Service included a section on Dispute Resolution. The section provided:

You acknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding. Further, unless both you and Company otherwise agree in writing, the arbitrator may not consolidate more than one personʹs claims, and may not otherwise preside over any form of any class or representative proceeding.

Judge Rakoff allowed Uber into the case and took up its motion to compel arbitration. He wrote:

Since the late eighteenth century, the Constitution of the United States and the constitutions or laws of the several states have guaranteed U.S. citizens the right to a jury trial. This most precious and fundamental right can be waived only if the waiver is knowing and voluntary, with the courts “indulg[ing] every reasonable presumption against waiver.” Aetna Ins. Co. v. Kennedy to Use of Bogash, 301 U.S. 389, 393 (1937); Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007). But in the world of the Internet, ordinary consumers are deemed to have regularly waived this right, and, indeed, to have given up their access to the courts altogether, because they supposedly agreed to lengthy “terms and conditions” that they had no realistic power to negotiate or contest and often were not even aware of.

Meyer v. Kalanick, No. 15-cv-9796, slip op. at *1 (S.D.N.Y. July 29, 2016). Concluding that Meyer did not have enough notice of the arbitration clause, Judge Rakoff denied the motion to compel.

On to the Second Circuit

Kalanick and Uber appealed.

Last week, the Second Circuit vacated Judge Rakoff’s ruling. The panel held that, as a matter of law, Meyer had bound himself to arbitrate any disputes with Uber and Kalanick. Applying California law, the court concluded that “Meyer was on inquiry notice of the arbitration provision by virtue of the hyperlink to the Terms of Service on the Payment Screen and, thus, manifested his assent to the agreement by clicking ‘Register.'” Meyer v. Uber Technologies, Inc., No. 16-1750-cv, slip op. at *21 (2d Cir. Aug. 17, 2017).

Did you get that? Because the screen on Meyer’s Samsung Galaxy S5 showed a hyperlink to the Terms of Service, because he could have clicked on the hyperlink and viewed the online Terms of Service, and because he could have scrolled through the Terms of Service to the Dispute Resolution section and read the arbitration agreement in it, he “was on inquiry notice” and therefore, as a matter of contract law and the federal Arbitration Act, he had therefore waived his right to a jury trial and the right to put himself forward as a representative of a class of Uber users seeking compensation for alleged price-fixing.

What it means

The Second Circuit’s decision in Meyer v. Uber Technologies, Inc. dispenses with any sense that the Arbitration Act entitles consumers to more than a trivial chance to reject a waiver of constitutional and procedural rights. Faithfully applying the letter and logic of two decades of increasingly business-friendly Supreme Court rulings, the panel held that having a hypothetical momentary chance to notice and click on a hyperlink forfeits your right to seek a collective remedy before a jury.

As I’ve noted more than once,* the forfeiture has has startling real-world consequences. A case that I had against AT&T involved an arbitration agreement that covered customers in every state except California. AT&T successfully moved to compel arbitration as to all class members who lives outside of the Golden State. Although the jury found that Ma Bell had overcharged all its U.S. customers a total of $160 million, AT&T paid only 10 percent of that amount (the proportion attributable to California customers). Because the arbitration clause also banned class arbitration, getting an effective remedy for the non-Californians in arbitration was not possible. The Arbitration Act thus saved AT&T $146 million (plus interest) that the jury found it owed! See In re Universal Service Fund Telephone Billing Practices Litig., 619 F.3d 1188 (10th Cir. 2010).

Last chance

But Meyer still has a chance. Kalanick, he urged, had waived his right to compel arbitration by, among other things, moving to dismiss his complaint and pursuing discovery. As the panel noted:

Because Meyerʹs waiver argument is based on defendantsʹ defense of this litigation in the district court, we conclude that is a question for the district court rather than an arbitrator. Accordingly, we remand the case to the district court to consider in the first instance whether defendants have waived their right to arbitrate.

Id. at *32.

For reasons of hubris, then, Kalanick may get his day in court after all. And you may get that refund, thanks to his class action.

But don’t try it yourself. Even Kalanick will probably learn from the experience.

____________________

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

TRIAL COUNSEL
Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

COMPLETE PACKAGE
A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

HARD GRADERS
Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

CIVIC ENGAGEMENT
Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

KEEPING PERSPECTIVE
Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

PERSONAL
Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.