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Travel Law: Uber and Lyft battle grounds – California

Travel Law: Uber and Lyft battle grounds – California

In this week’s article, we examine recent developments in California in the ongoing battle between local taxi interests and others against ride sharing companies Uber and Lyft.

The California Cases   

Specifically, we will examine the cases of (1) Nokchan v. Lyft, Inc., 2016 WL 5815287 (N.D. Cal. 2016), a purported class action brought by Lyft drivers alleging “a failure to tell drivers it was performing background and credit checks on them” [Hancock, Lyft Fends Off Background Check Suit, law.com (10/6/2016)], (2) Mohamed v. Uber Technologies, Inc., 2016 WL 4651409 (9th Cir. 2016), two purported class actions brought by Uber drivers asserting violations of the Fair Credit Reporting Act and violations of California’s Private Attorneys General Act based upon being misclassified as independent contractors as opposed to employees and (3) O’Connor v. Uber Technologies, Inc.,  2016 WL 4400737 (N.D. Cal. 2016), a purported class action brought by Uber drivers alleging that Uber misclassified drivers as independent contractors rather than employees.

Terror Targets Update

Berlin, Germany

In Eddy & Smale, Berlin Crash Is Suspected to Be a Terror Attack, Police Say, nytimes.com (12/19/2016) it was noted that “The Berlin police said early Tuesday that the killing of at least 12 people and the wounding of dozens more when a truck plowed through a Christmas market on Monday night was ‘a suspected terrorist attack’…There was no claim of responsibility, but the episode immediately evoked the attack in July in Nice, France, when a truck driver ran over and killed more than 80 people during Bastille Day celebrations”.


Ankara, Turkey

In Arango & Gladstone, Russian Ambassador to Turkey Is Assassinated in Ankara, nytimes.com (12/19/2016) it was noted that “Russia’s ambassador to Turkey was assassinated at an Ankara art exhibit on Monday evening by a lone Turkish gunman shouting ‘God is great’ and ‘don’t forget Aleppo, don’t forget Syria’ in what the leaders of Turkey and Russia called a provocative terrorist attack”.

Zika, Zika, Zika

In Bad News, Conde Nast Traveler, 11/2016 it was noted that “Hotels in the Caribbean are still reeling from the Zika outbreak in Puerto Rico, occupancy was down in the first half of the year compared with 2015, according to STR which tracks the hotel industry. However, now properties on the island-where more than 10,000 Zika cases have been reported-are offering discounts to stoke demand”.

Watch What You Drink In Russia

In Nechepurenko, In Russia, Dozens Die After Drinking Alcohol Substitute, nytimes.com (12/19/2016) it was noted that “Dozens of people in the Siberian city of Irkutsk died after drinking cheap surrogate alcohol over the weekend, evoking memories of the poverty and social depression that came after the collapse of the Soviet Union.

Airbnb Ends Fight With New York City

In Dickerson, Airbnb Sues New York State, eturbonews.com (10/26/2016) we discussed Airbnb’s challenge to recent New York State and New York City legislation imposing stiff fines not only on Airbnb hosts for renting illegal apartments but also on Airbnb itself for advertising such purportedly illegal apartments. See also Dickerson & Hinds-Radix, Ramping Up the Penalties for Apartment Sharing in New York City, New York Law Journal, November 22, 2016. As noted in Benner, Airbnb Ends Fight With New York City Over Fines, nytimes.com (12/3/2016) that “Airbnb has capitulated to the demands of lawmakers over its operations in New York City, the company’s largest market in the United States, agreeing to drop a lawsuit in which it was pushing back against a newly passed state law that it said could hurt its business”.

Airbnb Escapes Liability

The Settlement Agreement in Airbnb, Inc. v. City of New York, Case. No. 16-cv-8239 (KBF) dated December 5, 2016 provides, in part, “WHEREAS, Airbnb and the City will continue to work cooperatively on ways to address New York City’s permanent housing shortage, including through host compliance with Airbnb’s ‘One Host, One Home’ policy…THEREFORE, IT IS HEREBY STIPULATED AND AGREED…that 1. The City…will permanently refrain from taking any action to enforce the Act, including retroactively and/or under any theories of direct or secondary liability, as against Airbnb”.

Airbnb In New Orleans

In Hardy, Daily Report: In New Orleans, at Least, Airbnb Makes Peace, nytimes.com (12/8/2016) it was noted that “New Orleans, nicknamed The Big Easy, has achieved something very hard-it managed to nail down a few rules for the sharing economy. As Katie Benner reports, the Crescent City has worked out a deal to legalize short-term rentals by Airbnb, in exchange for the host’s registering with the city, as well as data from Airbnb on what it is doing. On the surface, this is no meager feat: Cities like San Francisco, New York and Barcelona, Spain, have all battled the online home-rental company, without wining every concession New Orleans did…Airbnb is giving the city the names and addresses of the hosts offering their properties for rent in New Orleans, but the city isn’t allowed to share them with others. There is a permitting process, and a fee, but Airbnb is controlling that process. Airbnb also agreed to collect hotel taxes and to ban most listings in the tourist-heavy French Quarter, but that’s a small part of the city, easily reached on foot from nearby districts. Most of the big hotels are outside the French Quarter”.

The Downside Of Tourism In Cuba

In Ahmed, Cuba’s Surge in Tourism Keeps Food Off Resident’s Plates, nytimes.com (12/8/2016) it was noted that “For Lisset Felipe, privation is a standard facet of Cuban life, a struggle shared by nearly all, whether they’re enduring blackouts or hunting for toilet paper. But this year has been different, in an even more fundamental way, she said. She has not bought a single onion this year, nor a green pepper, both staples of the Cuban diet. Garlic, she said, is a rarity, while avocado, a treat she enjoyed once in a while, is all but absent from her table. ‘It’s a disaster’…But the record arrival of nearly $3.5 million visitors to Cuba last year has caused a surging demand for food, causing ripple effects that are upsetting the very promise of Fidel Castro’s Cuba. Tourists are quite literally eating Cuba’s lunch. Thanks in part to the United States embargo, but also to poor planning by the island’s government, goods that Cubans have long relied on are going to well-heeled tourists and the hundreds of private restaurants that cater to them, leading to soaring prices and empty shelves”.

Adventures In Saudi Arabia

In Unbelievable News, Conde Nast Traveler (11/2016) it was noted that “Mountain Travel Sobek, better known for rafting adventures, is running its first scheduled trip to rarely visited Saudi Arabia this December. The nine-day tour includes the capital of Riyadh, the spectacular canyons near Al Ula and the stark Empty Quarter desert”.

Accident In The Bahamas

In Serov v. Kerzner International Resorts, Inc., 162184/ 2015, N.Y. Sup. Decided July 26, 2016, a personal injury action arising out of an accident in the Bahamas at defendant’s Atlantis Paradise Island resort, the Court found jurisdiction over two of the defendants, but dismissed the action on the grounds of forum non conveniens. “Ultimately, dismissal on the ground of forum non conveniens is appropriate when ‘plaintiffs chosen forum imposes a heavy burden on the defendant or the court and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice’…The overall issue is whether there is a ‘substantial nexus’ between the plaintiff’s action and the state of New York…Plaintiffs’ only connection to New York appears to be that they departed on a Norwegian Cruise Line cruise from New York and that Mikhail has been treated by medical providers in Hewlett, NY and Bronx, NY…Indeed, the plaintiffs admit that they are both Russian citizens residing in New Jersey…Here, out-of-state residents have brought an action against out-of-state residents for an out-of-state accident…this factor militates in favor of dismissal”.

Airline Marketing Travel Insurance

In Joseph, Class Action Alleges Misleading Marketing by American Airlines, dailyreview.com (10/4/2016) it was noted that “A multimillion-dollar class action in Miami federal court [Zamber v. American Airlines, Inc., Case No._____ (S.D. Fla. 9/12/2016)] accuses American Airlines of misleading travelers about its vested interest in ‘aggressively’ marketed travel insurance sold on its website. The suit by named plaintiff Kristin Zamber alleges the airline markets the travel insurance as a pass-through charge paid to a third party but doesn’t disclose its profits. The suit argues for class certification, a jury trial and injunctive and equitable relief for alleged unjust enrichment and violations of Florida’s consumer protection statutes prohibiting companies from posing as revenue conduits…. Zamber paid about $24 to purchase travel insurance in April for a domestic flight from Tampa to Pennsylvania. His complaint claims American stated the policy had no affiliation with the airline, but instead came from Allianz Global Assistance, with plans underwritten by Jefferson Insurance Co., or BCS Insurance Co. But in reality, the policy sales contributed to a ‘hidden profit center’ for the Fort Worth, Texas-based airline, according to the lawsuit…American Airlines denied any wrongdoing. ‘This case is without merit’, corporate spokesman Matt Miller said, ‘American will vigorously defend itself against these baseless charges”. Stay tuned.

Travel Law Article: Uber & Lyft Cases

The Nokchan Case

In Nokchan v. Lyft, Inc., 2016 WL 5815287 (N.D. Cal. 2016) the Court stated “Nokchan alleges that he was employed by Lyft as an hourly, non-exempt employee working in the State of California. According to Nokchan, when he applied for employment with Lyft, he was required to ‘fill out and sign a document requiring background check’. He alleges that the disclosures required under the FCRA (Fair Credit Reporting Act) were embedded in the document, which contained ‘extraneous information’, and therefore Lyft failed to comply with the FRCA and other State laws. He further alleges that Lyft failed to inform him at the time of the disclosures that he had a right to request a summary of his rights under the FCRA. Nokchan alleges that Lyft procured his credit and background reports based on these inadequate disclosure and that in doing so, it injured him by violating his privacy and statutory rights under the FCRA and state law”.

The Four Claims

“Nokchan asserts four claims in his Complaint: 1) violation of 1681bb)(2) of the FCRA based on alleged failure to provide clear and unambiguous disclosures in a stand-alone document; 2) violation of Sections 1691d(a)(1) and 1681g© of the FCRA based on alleged failure to provide a proper summary of rights notice; 3) violation of Section 1786.16(a)(2)(B) of California’s Investigative Consumer Reporting Agencies Act (ICRAA) based on failure to provide clear and unambiguous disclosures in a stand-alone document; and 4) violation of section 1785.20.5(a) of California’s Consumer Credit Reporting Agencies Act (CRAA) based on the allegation that the authorization form failed to ‘identify the source of any credit report’ and ‘the specific basis’ for use of that report”.

The Motion To Dismiss

“Lyft contends Plaintiff has alleged only bare statutory violations and no injury in fact and there under (Spokeo, Inc. V. Robins, 36 S. Ct. 1540 (2016)) he lacks standing under Article III of the U.S. Constitution to proceed on his claims in federal court. To demonstrate injury in fact, Lyft asserts, Nokchan must alleged facts showing that his injury was not only particularized but also ‘concrete and real, and not abstract’. According to Lyft, Nokchan has failed to meet this requirement as to all of his claims”.

Discussion

“Under Spokeo, a plaintiff who seeks to assert a claim under the FRCA is required to allege facts showing a concrete injury. While procedural violations that have resulted in real harm=or even a risk of real harm-may be sufficient to meet this requirement, Plaintiff in this case alleged no such injury. He has not alleged that he suffered any real harm as a result of the fact that he did not receive required disclosures in a separate document or that he did not receive a summary of s rights under the FRCA. In particular, he does not allege that as a result of Lyft’s failure to provide the disclosures in a separate document or to notify him of his right to receive a summary of his legal rights he was confused about his rights or that he would not have consented to the background checks had he understood his rights. Nor does he allege that he was harmed by the background check IN ANY WAY. Rather, based on the allegations…Nokchan was hired by Lyft after he successfully completed its background investigation and he continues to work for Lyft…The Court can find no real harm or a threat of such harm…The Complaint is dismissed without prejudice to refiling this action is state court”.

The Mohamed Case

In Mohamed v. Uber Technologies, Inc., 2016 WL 4651409 (9th Cir. 2016) the Court noted that “Plaintiff-Appellees Abdul Mohamed and Ronald Gillette, former Uber drivers…(alleged) that defendants…violated the Fair Credit Reporting Act (FCRA) and various state statutes. Gillette has also brought a representative claim against Uber under California’s Private Attorneys General Act (PAGA) alleging that he was misclassified as an independent contractor rather than an employee. The district court denied Uber’s motion to compel arbitration of the claims (Mohamed v. Uber Technologies, 109 F. Supp. 3d 1185 (N.D. Cal. 2015). Uber argues on appeal (1) that the district court erroneously considered whether the arbitration provisions were enforceable when that question was clearly delegated to an arbitrator and (2) that even if the district court properly considered arbitrability, it erred in concluding that the arbitration provisions were invalid ad in declining to compel arbitration.

The Decision

“We conclude that the district court erred at the first step and improperly assumed the authority to decide whether the arbitration agreements were enforceable. The question of arbitrability as to all but Gillette’s PAGA claims was delegated to the arbitrator. Under the terms of the agreement Gillette signed, the PAGA waiver should be severed from the arbitration agreement and Gillett’s PAGA claims may proceed in court on a representative basis. All of Plaintiffs’ remaining arguments, including both Mohamed’s challenge to the PAGA waiver in the agreement he signed and the challenge by both Plaintiffs to the validity of the arbitration agreement itself, are subject to resolution via arbitration”.

A Major Victory For Uber

In Hancock, Appeals Courts Sends Uber Drivers Into Arbitration, law.com (9/7/2016) it was noted that “a FEDERAL APPEALS COURT ON Wednesday handed Uber Technologies Inc., a major victory, ruling that drivers suing the company may be bound by arbitration agreements. The. U.S. Court of Appeals for the Ninth Circuit ruled that an arbitrator, not a federal judge, must decide whether the agreements used by Uber in 2013 and 2014 are enforceable”.

The O’Connor Case

There was a time when the O’Connor case was threatening to disrupt the ride sharing model used by Uber and Lyft. That threat may have passed for two reasons. First, as noted above in Mohamed v. Uber Technologies, Inc., 2016 WL 4651409 (9th Cir. 2016) the 9th Circuit Court of Appeals may be inclined to enforce mandatory arbitration clause, at least, to the extent of requiring an arbitrator to decide the issue of arbitrability. Second, the settlement proposed in O’Connor was rejected, at least, preliminarily, as inadequate.

Background

As noted by the Court in O’Connor v. Uber Technologies, Inc., 2016 WL 4400737 (N.D. Cal. 2016) “The Settlement Agreement at issue covers two lawsuits…O’Connor…was brought on behalf of all individuals who worked as Uber drivers in California (and) alleged that Uber misclassified its drivers as independent contractors rather than employees (who) would be entitled to the protections of the California Labor Code, including section 2802, which requires that employees be reimbursed for expenses such as gas and use of their vehicle. Plaintiffs also contend that although Uber advertised to customers that gratuity was intended in the fare and that there was no need to tip drivers, drivers did not receive the total proceeds of any such gratuity…Uber has argued that because it exercises minimal control over how drivers set their own hours and work schedule, its drivers cannot be considered employees. Plaintiffs, on the other hand, contend that Uber in fact exercised control and supervision over the methods and means of its drivers’ provision of transportation services, making drivers employees. Over the course of contentious litigation, the Court has adjudicated a motion to dismiss, for judgment on the pleadings, and for summary judgment, as well as numerous motions regarding class certification, arbitration and stays”.

The Settlement Agreement

“Under this (proposed) Agreement Uber has agreed to pay $84 million plus an additional $16 million contingent on an initial public offering (IPO) reaching one-and=half times Uber’s most recent valuation…Of the $84 million, $300,000 will be used for class administration, a maximum of $73,000 will be allocated for enhancement payments to the named Plaintiffs and other Settlement Class members who contribute to the litigation, and $8.7 million will be treated as wages reported on IRS Form W-2. Plaintiffs’ counsel is also permitted to seek a fee and expense award of up to 25% of the Settlement Fund ($21 to $25 million) although Plaintiffs’ counsel has since informed the Court that she will reduce her fee request by $10 million…thus resulting in an additional $10 million for distribution to the class. The remaining Settlement Fund will be separated into two funds: approximately $5.5 to 6 million for the Massachusetts drivers and $56 to 66.9 million for the California drivers…Assuming a 100% claim rate, Plaintiffs’ counsel estimates that California certified class members will receive an average distribution of $24 to $1,950, California non-certified drivers will receive an average distribution of $12 to $979…The parties expect a 40% claim rate, which would increase the monetary amount to each claimant. In addition to the monetary payment, Uber has agreed to implement various forms of non-monetary relief”.

The Non-PAGA Claims

“After considering the information provided to the Court…the Court concludes that the parties’ assessment of the value of all the non-PAGA claims is reasonably accurate. Thurs, looking at the monetary value of the non-PAGA claims-i.e. a 90% discount off the verdict value of the non-PAGA claims”.

The PAGA Claims

“Here, the Court cannot find that the PAGA settlement is fair and adequate in view of the purposes and policies of the statute. Plaintiffs propose settling PAGA for only 0.1% of the potential verdict amount, a reduction that the LWDA has found has no rational basis. This 99.9% reduction does not adequately reflect the parties’ respective risks, particularly when the PAGA claim would not be subject to the same arbitration risk that this Court has found justifies in part the 90% discount in the verdict value of the non-PAGA claims. Instead, the risks at issue rest primarily on the merits of drivers’ labor codes claims and the discretionary reduction of statutory penalties, not on the risk of compelled arbitration…Plaintiffs appear to treat the PAGA claim simply as a bargaining chip in obtaining a global settlement for Uber’s benefit, even though the PAGA claim alone is worth more than half of the full verdict value of all claims being released”.


Conclusion

“Even if the PAGA claim were separately scrutinized, viewing all the claims combined (PAGA and non-PAGA), the Settlement Agreement yields less than 5% of the total verdict value of all claims being released. Although the litigation risks to the plaintiffs are substantial, absent the sweeping releases conferred by the Settlement Agreement, Uber faces significant risks and costs…The settlement as a whole as currently structured is not fair, adequate or reasonable”.

Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see IFTTA.org.

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