Smythe v. Uber Technologies, 24 Cal. App. 5th 327 (2018)
Ryan Smythe drove for both Uber and Lyft. As an Uber driver he signed contracts that included broad arbitration clauses and a delegation of the authority to determine arbitrability to the arbitrator, rather than a court. As a Lyft driver, Smythe sued Uber claiming that Uber encouraged its drivers to set up fake Lyft accounts and solicit fake rides on the Lyft platform in an effort to keep Lyft drivers busy chasing after non-existent customers. Smythe alleged that he and other Lyft drivers lost income because of the Uber inspired wild goose chases.
Uber moved to compel arbitration of Smythe’s claims under the arbitration provisions of his agreements with Uber. The trial court refused. Uber appealed arguing that the trial court should have deferred the arbitrability question to the arbitrator under the delegation provisions of the Uber contracts, or alternatively, that the trial court should be reversed, and the matter sent to arbitration for determination on the merits. The Court of appeal affirmed.
Under long-standing precedents, when the parties have entered into an arbitration agreement with a delegation clause, the court undertakes a two-step analysis. First, it must determine if “the parties clearly and unmistakably intend to delegate arbitrability decisions to an arbitrator.” If no, then the court makes the arbitrability decision. If yes, then the court makes a second determination. It must determine if the claim of arbitrability of the particular dispute is “wholly groundless.” That’s a tough standard, but in the present case it was met.
Both the trial court and the Court of Appeal held that Smythe’s dispute did not in any way relate to or arise out of his contracts with Uber. Rather, his claims were completely related to his position as a Lyft driver and could have been brought by any Lyft driver, whether or not the claimant also drove for Uber.
This raises the question of whether Uber could have drafted its arbitration broadly enough to encompass the present claim. What if Uber’s arbitration clause provided that in return for the benefits provided to the driver under the contract, any dispute of any nature whatsoever between the driver and Uber must be arbitrated? Perhaps such a clause might be struck down as unconscionable, but it probably would have withstood the “wholly groundless” analysis.