Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Bekele v. Lyft, Inc.

United States District Court, D. Massachusetts

August 9, 2016

YILKAL BEKELE, on behalf of himself and all others similarly situated, Plaintiff,
v.
LYFT, INC., Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO COMPEL ARBITRATION AND DISMISS THE COMPLAINT

          SAYLOR, J.

         This is a putative class action arising out of a ride-sharing company’s alleged misclassification of its drivers as independent contractors. Jurisdiction is based on diversity of citizenship. Plaintiff Yilkal Bekele has brought suit individually and on behalf of other individuals working as drivers in Massachusetts for defendant Lyft, Inc. The complaint alleges that Lyft has wrongfully classified its drivers as independent contractors, rather than employees, in violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148B. Bekele seeks a declaratory judgment that Lyft drivers are employees under Massachusetts law, as well as damages for unpaid wages and other forms of restitution.

         Lyft has moved to compel arbitration and dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Lyft contends that when Bekele agreed to Lyft’s “clickwrap” Terms of Service Agreement, he agreed to a valid arbitration provision requiring him to submit “any legal disputes or claims arising out of or related to [Lyft’s Terms of Service Agreement]” to binding individual arbitration. Bekele contends that the agreement is invalid because he did not receive adequate notice of the arbitration provision, and did not assent to it. He also contends that the agreement is unenforceable under the FAA because it is unconscionable under Massachusetts law and illegal under the National Labor Relations Act.

         During oral argument, the parties agreed that Lyft’s motion to compel arbitration and dismiss the complaint should be converted into a motion for partial summary judgment concerning arbitrability. For the reasons set forth below, Lyft’s motion to compel arbitration will be granted and the action will be dismissed.

         I. Background

         A. Factual Background

         Unless otherwise noted, the following facts concerning arbitrability are undisputed.

         1. The Parties

         Defendant Lyft, Inc. is a California-based company that facilitates peer-to-peer ride-sharing through a mobile-phone application (“the App”). (Still Decl. ¶ 4). After downloading the App, passengers can request a ride through it and Lyft drivers can elect to pick them up. (Id.). Plaintiff Yilkal Bekele is a Massachusetts resident who has worked as a Lyft driver since August 2014. (Compl. ¶ 5).

         The complaint alleges that Lyft has misclassified its drivers as independent contractors in violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148B.[1] It alleges that as a result of that misclassification, drivers must pay for expenses that their employer Lyft should pay for, including costs of vehicle ownership and maintenance, gas, and insurance. (Id. ¶ 2).

         2. Lyft’s Registration Process

         In order to use Lyft as a passenger or a driver, a user must complete Lyft’s registration process. (Still Decl. ¶ 7). To begin the registration process, both prospective passengers and prospective drivers are required to download the App. (Id.). Once a user downloads and opens the App, he or she is prompted to enter either a mobile-phone number or Facebook-profile credentials and to follow further registration steps. (Id. ¶¶ 7-9). After those registration steps, a user must agree to Lyft’s Terms of Service Agreement (“TOS”) to complete the registration process. (Id. ¶ 10). The text of the TOS appears on the user’s screen; the user can scroll through the entire agreement on the screen. (Id. ¶ 12). At the bottom of the TOS, the App presents the following requirement: “Please agree to the Terms of Service to continue.” (Id.).

         All users must click the “I accept” button to accept the TOS and begin using the App. (Id.). A user, regardless of whether he or she is a passenger or driver, cannot complete the registration process or use the App without accepting the TOS. (Id.). After the user’s acceptance of the TOS, he or she can request a ride as a passenger or begin the application process to become a Lyft driver. (Id.).

         3. Lyft’s Terms of Service Agreement

         When a user electronically accepts Lyft’s TOS by clicking “I accept, ” the company is notified of the date and time of his acceptance. (Id. ¶ 13). Lyft stores and maintains the registration records of its users. (Id.). According to Lyft’s records, Bekele successfully registered for Lyft by electronically agreeing to the TOS on three occasions: May 19, 2014; September 24, 2014; and October 11, 2014. (Id. ¶ 14; Def. Exs. 1-3).[2]

         The TOS in effect on May 19 was dated May 8, and the TOS in effect on September 24 and October 11 was dated July 28. (Gallagher Decl. ¶¶ 5-6; id. Exs. 2, 3). Although the two versions of the TOS accepted by Bekele have slight differences, they contain identical arbitration provisions. (Id. ¶ 7; Compare Id. Ex. 2 at 13, with Ex. 3 at 21-22). For the purposes of this motion, the parties agree that the last version of the TOS agreed to by Bekele--the July 28 TOS accepted by Bekele on October 11--is the controlling agreement.

         In print format, the TOS agreed to by Bekele on October 11, 2014, is 33 pages long and contains headings that separate sections. On page 2 of the TOS, the agreement provides as follows:

IF YOU DO NOT AGREE TO BE BOUND BY THE TERMS AND CONDITIONS OF THIS AGREEMENT, PLEASE DO NOT USE OR ACCESS LYFT OR REGISTER FOR THE SERVICES PROVIDED ON LYFT. We may amend this Agreement at any time by posting the amended terms on the Lyft Platform. If We post amended terms on the Lyft platform, You may not use the Services without accepting them. Except as stated below, all amended terms shall automatically be effective after they are posted on the Lyft Platform. This Agreement may not be otherwise amended except in writing signed by You and Lyft.

(Id. Ex. 3 at 2).

         Most critical to this dispute, the agreement contains the following arbitration provision, beginning on page 21:

         AGREEMENT TO ARBITRATE ALL DISPUTES AND LEGAL CLAIMS

You and We agree that any legal disputes or claims arising out of or related to the Agreement (including but not limited to the use of the Lyft Platform and/or the Services, or the interpretation, enforceability, revocability, or validity of the Agreement, or the arbitrability of any dispute), that cannot be resolved informally shall be submitted to binding arbitration in the state in which the Agreement was performed. The arbitration shall be conducted by the American Arbitration Association under its Commercial Arbitration Rules (a copy of which can be obtained here [hyperlink]), or as otherwise mutually agreed by you and we [sic]. Any judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Claims shall be brought within the time required by applicable law. You and we agree that any claim, action or proceeding arising out of or related to the Agreement must be brought in your individual capacity, and not as a plaintiff or class member in any purported class, collective, or representative proceeding. The arbitrator may not consolidate more than one person’s claims, and may not otherwise preside over any form of a representative, collective, or class proceeding. YOU ACKNOWLEDGE AND AGREE THAT YOU AND LYFT ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR TO PARTICIPATE AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS ACTION OR REPRESENTATIVE PROCEEDING.

(Id. at 21-22). Beginning on page 24, the agreement provides as follows:

         GENERAL

This Agreement shall be governed by the laws of the State of California without regard to choice of law principles. If any provision of this Agreement is held to be invalid or unenforceable, such provision shall be struck and the remaining provisions shall be enforced. . . . This Agreement sets forth the entire understanding and Agreement between the User and Lyft with respect to the subject matter hereof.

(Id. at 24-25).

         The image below shows how the Lyft TOS appears on a mobile-device screen, although not to scale:

         (Image Omitted)

         (Brannstrom Decl. ¶ 7). “The user has the opportunity to scroll all the way through the text” of the TOS, and the “I accept” button remains at the bottom of the screen while scrolling. (Id.).

         Bekele states that he “used [his] iPhone to get signed up on Lyft’s system.” (Bekele Aff. ¶ 3). He does not dispute that he accepted Lyft’s TOS by clicking the “I accept” button. He states, however, that he does not recall seeing the arbitration provision on any of the three dates that he accepted the TOS. (Id. ¶¶ 3, 7). He further contends that even if the arbitration provision was displayed, he doubts that he would have been able to read it easily on his phone’s small screen. (Id. ¶ 4).

         B. Procedural Background

         Bekele, proceeding on behalf of himself and all other Lyft drivers in Massachusetts, filed the class action complaint on March 17, 2015, in the Massachusetts Superior Court. On April 21, 2015, Lyft removed the proceeding to this Court. The complaint alleges that Lyft has misclassified its drivers in Massachusetts as independent contractors, in violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148B.

         On April 28, 2015, Lyft moved to compel arbitration and dismiss the complaint. On four separate occasions from June to December, the parties moved to continue the hearing on Lyft’s motion. In December 2015, the parties requested a stay pending the outcome of a related lawsuit against Lyft in California. In May 2016, the parties finally moved to lift the stay and filed supplemental briefs.

         Both parties have submitted various declarations and exhibits outside the pleadings. During the motion hearing, the parties agreed that the Court should convert Lyft’s motion into a motion for partial summary judgment as to arbitrability, and that no further evidentiary hearing or submission was necessary. See Fed. R. Civ. P. 12(d).

         II. Legal Standard

         The Federal Arbitration Act, 9 U.S.C. § 1 et seq., governs the enforcement of written arbitration agreements implicating interstate commerce. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001) (holding that the FAA extends to employment cases for employees other than those engaged in transportation of goods). “Congress enacted the FAA in response to widespread judicial hostility to arbitration.” American Express Co. v. Italian Colors Rest., ___ U.S. ___, 133 S.Ct. 2304, 2308-09 (2013) (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)). Section 2 is the “primary substantive provision of the Act.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). It provides, in relevant part, as follows:

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2.

         The Supreme Court has “described this provision as reflecting both a ‘liberal federal policy favoring arbitration, ’ and the ‘fundamental principle that arbitration is a matter of contract.’” Concepcion, 563 U.S. at 339 (quoting Moses H. Cone, 460 U.S. at 24; Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010)). In line with those principles, “courts must place arbitration agreements on an equal footing with other contracts.” Id. They must also “‘rigorously enforce’ arbitration agreements according to their terms.” Italian Colors Rest., 133 S.Ct. at 2309 (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985)).

         “The final phrase of § 2, however, permits arbitration agreements to be declared unenforceable ‘upon such grounds as exist at law or in equity for the revocation of any contract.’” Concepcion, 563 U.S. at 339 (quoting 9 U.S.C. § 2). That savings clause allows arbitration agreements to be invalidated by “‘generally applicable contract defenses, such as fraud, duress, or unconscionability, ’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” Id. (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). Furthermore, the FAA’s requirement that arbitration agreements be enforced according to their terms “holds true for claims that allege a violation of a federal statute, unless the FAA’s mandate has been ‘overridden by a contrary congressional command.’” Italian Colors Rest., 133 S.Ct. at 2309 (quoting CompuCredit Corp. v. Greenwood, ___ U.S. ___, 132 S.Ct. 665, 669 (2012)).

         In short, arbitration agreements that are validly formed under state contract law must be enforced according to their terms under Section 2 of the FAA, unless one of two exceptions applies. First, an arbitration agreement may be invalidated on any ground that would make a contract unenforceable, such as unconscionability or illegality. Concepcion, 563 U.S. at 339. Second, the application of the FAA may be precluded by another federal statute’s contrary command. CompuCredit, 132 S.Ct. at 669.

         “A party who is seeking to compel arbitration must demonstrate that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause’s scope.” Soto-Fonalledas v. Ritz-Carlton San Juan Hotel Spa & Casino, 640 F.3d 471, 474 (1st Cir. 2011). (citation and internal quotation marks omitted). “Whether or not a dispute is arbitrable is typically a question for judicial determination.” Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 638 F.3d 367, 375 (1st Cir. 2011). “Therefore, ‘except where the parties clearly and unmistakably provide otherwise, it is the court’s duty to interpret the agreement and to determine whether the parties intended to arbitrate grievances concerning a particular matter.’” Id. (quoting Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 299 (2010)).[3]

         When an enforceable arbitration agreement exists between the parties, a court may enforce that agreement by staying existing litigation pending arbitration, 9 U.S.C. § 3, or compelling the parties to arbitrate and dismissing the action, 9 U.S.C. § 4. See DeLuca v. Bear Stearns & Co., 175 F.Supp.2d 102, 106-07 (D. Mass. 2001).

         III. Analysis

         Lyft contends that its motion to compel arbitration should be granted because (1) Bekele received notice of and assented to a valid written agreement to arbitrate and (2) his claims under the Massachusetts Wage Act fall within the scope of the arbitration agreement’s broad language.

         Bekele contends that Lyft’s motion to compel arbitration should be denied for two reasons. First, he contests the validity of the agreement. He contends that Lyft has failed to meet its burden of demonstrating that he received reasonable notice of, and manifested his assent to, the arbitration provision. Second, he raises two affirmative defenses, unconscionability and illegality, under the FAA’s savings clause. He contends that even if the arbitration agreement is valid, it is unenforceable as procedurally and substantively unconscionable. He also contends that the agreement is unenforceable as illegal because its class-waiver provision violates the NLRA. The Court will address each issue in turn, beginning with the validity of the agreement before turning to its enforceability and scope.

         A. Validity of Agreement

         The first step in determining whether Bekele’s claims should be resolved by arbitration is deciding “whether . . . there exists a written agreement to arbitrate.” Lenfest v. Verizon Enter. Sols., LLC, 52 F.Supp.3d 259, 262-63 (D. Mass. 2014). “This is the first step of the analysis because, if the contract containing the arbitration agreement was never binding on the plaintiff[], the arbitration clause cannot be enforced against [him].” Cullinane v. Uber Techs., Inc., 2016 WL 3751652, at *4 (D. Mass. July 11, 2016).

         To determine whether a valid agreement to arbitrate exists, federal courts generally “apply ordinary state-law principles that govern the formation of contracts.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995); see also Campbell v. General Dynamics Gov’t Sys. Corp., 407 F.3d 546, 552 (1st Cir. 2005) (explaining that “principles of state contract law control the determination of whether a valid agreement to arbitrate exists”). Under Massachusetts law, the formation of a contract requires a definite offer, acceptance, and consideration. Vadnais v. NSK Steering Sys. Am., Inc., 675 F.Supp.2d 205, 207 (D. Mass. 2009). Formation of a contract is judged by the objective conduct of the parties, rather than their subjective intent. Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass.App.Ct. 582, 596 n.35 (2007). A contract may be binding on an employee in the context of an at-will employment relationship even if the agreement is not express and in writing. See, e.g., Ellerbee v. Gamestop, Inc., 604 F.Supp.2d 349, 354 (D. Mass. 2009) (citing O’Brien v. New England Tel. Co., 422 Mass. 686, 691 (1996)). An employee’s “continued employment [may] constitute[ ] adequate consideration for the contract.” Id. (citing O’Brien, 442 Mass. at 691).[4]

         Under Massachusetts law, the issue of whether the parties validly entered into an arbitration agreement depends on whether “[d]efendant gave ‘some minimal level of notice to the employee that statutory claims are subject to arbitration.’” Id. (quoting Campbell, 407 F.3d at 554). “This is an objective test: ‘the sufficiency of the notice turns on whether, under the totality of the circumstances, the employer’s communication would have provided a reasonably prudent employee notice of the waiver [of the right to proceed in a judicial forum].’” Id. (quoting Campbell, 407 F.3d at 555).

         “When it comes to specific clauses in [online] adhesion contracts, ” as is the case here, “under Massachusetts law, courts ‘have held that such clauses will be enforced provided they have been reasonably communicated and accepted, and if, considering all the circumstances, it is reasonable to enforce the provision at issue.’” Cullinane, 2016 WL 3751652, at *5 (emphasis added) (quoting Ajemian v. Yahoo!, Inc., 83 Mass.App.Ct. 565, 573-74 (2013)). As the Massachusetts Court of Appeals has explained in the context of forum-selection clauses in online “clickwrap” contracts:

Although forum-selection clauses contained in online contracts have been enforced, courts have done so only where the record established that the terms of the agreement were displayed, at least in part, on the user’s computer screen and the user was required to signify his or her assent by “clicking” “I accept.”

Ajemian, 83 Mass.App.Ct. at 576 (emphasis added).

         Accordingly, the burden falls on Lyft to demonstrate (1) that the arbitration provision was reasonably communicated to Bekele, and (2) that Bekele manifested assent to its terms. See Acher v. Fujitsu Network Commc’ns, Inc., 354 F.Supp.2d 26, 36 (D. Mass. 2005) (“The party seeking to compel arbitration . . . has the burden of proving . . . the existence of a valid and binding agreement to arbitrate.”).[5]

         1. Reasonable Notice

         Bekele contends that the arbitration provision was not reasonably communicated to him because “Lyft has failed to disclose whether the terms of its agreement were ever displayed to its drivers, including Mr. Bekele, and has not shown how prominently the hyperlink was displayed (or whether Mr. Bekele actually clicked on it).” (Pl. Mem. 7). That argument, however, misconstrues the nature of the TOS. The TOS is undoubtedly a “clickwrap” agreement, a contract “in which . . . users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use.” Cullinane, 2016 WL 3751652, at *6 (internal quotation marks omitted). It is not, however, a “browsewrap” agreement, “where the [hyper]link to a website’s terms of use is buried at the bottom of the page or tucked away in obscure corners of the website where users are unlikely to see it.” Id. at *5 (internal quotation marks omitted).

         Massachusetts courts have routinely concluded that clickwrap agreements--whether they contain arbitration provisions or other contractual terms--provide users with reasonable communication of an agreement’s terms. See, e.g., Ajemian, 83 Mass.App.Ct. at 576 (noting that “forum-selection clauses have almost uniformly been enforced in clickwrap agreements”).[6] One court in this district recently concluded that the arbitration provision in the TOS of Uber, a Lyft competitor, was reasonably communicated to plaintiffs even though (1) the TOS could be viewed only through a hyperlink (the terms did not automatically appear on the screen as Lyft’s do), and (2) the arbitration provision appeared on the penultimate page of the TOS. See Cullinane, 2016 WL 3751652, at *7. The court explained:

Whether or not plaintiffs had actual notice of the terms of the Agreement, all that matters is that plaintiffs had reasonable notice of the terms. “In Massachusetts courts, it has long been the rule that ‘[t]ypically, one who signs a written agreement is bound by its terms whether he reads and understands them or not.’” Awuah v. Coverall N. Am., Inc., 703 F.3d 36, 44 (1st Cir. 2012) (“Awuah II”) (quoting St. Fleur v. WPI Cable Sys./Mutron, 450 Mass. 345, 355 (2008)). The placement of the phrase “By creating an Uber account, you agree to the Terms of Service & Privacy Policy” on the final screen of the account registration process is prominent enough to put a reasonable user on notice of the terms of the Agreement. Although the paragraph under the heading of “Dispute Resolution” does not appear until the 8th or 9th page (depending on when a user accessed it), the heading is in bold and much larger than the non-heading text in the rest of the Agreement. A reasonable user who cared to pursue the issue would have inquiry notice of the terms of the Agreement challenged by the plaintiffs.

Id. In short, “[t]he test to be applied in Massachusetts is reasonable notice.” Id.[7]

         Contrary to Bekele’s arguments, Lyft’s arbitration agreement was not “buried” on another screen or hidden by a hyperlink. (Pl. Supp. Mem. 15). Rather, the entire TOS, including the arbitration provision, was displayed on a user’s screen, with prominent bold headings. Moreover, the App allowed users to scroll all the way through the TOS. On the second page, the TOS stated, in all capital letters: “IF YOU DO NOT AGREE TO BE BOUND BY THE TERMS AND CONDITIONS OF THIS AGREEMENT, PLEASE DO NOT USE OR ACCESS LYFT OR REGISTER FOR THE SERVICES PROVIDED BY LYFT.” Furthermore, the arbitration provision itself was set off by a large bold heading stating “AGREEMENT TO ARBITRATE ALL DISPUTES AND LEGAL CLAIMS.” It concluded, again in all capital letters: “YOU ACKNOWLEDGE AND AGREE THAT YOU AND LYFT ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR TO PARTICIPATE AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS ACTION . . . .” Lyft’s arbitration provision was communicated in a more prominent manner than Uber’s arbitration provision in Cullinane. Furthermore, whereas the Ajemian court noted that an agreement is reasonably communicated if the terms are displayed “at least in part” on a user’s screen, Lyft’s TOS was displayed in its entirety on the screen. Under the circumstances-and particularly in light of the weight of Massachusetts authority holding that clickwrap agreements such as Lyft’s provide reasonable notice to users-Lyft has satisfied its burden of demonstrating that the TOS provided Bekele with reasonable notice of its arbitration provision.

         2. Manifestation of Assent

         Bekele next contends that “it is not even clear that [he] actually agreed to the arbitration agreement at issue, as he has no recollection of agreeing to it, and Lyft has not definitely shown a valid acceptance.” (Pl. Mem. 4).

         In the context of clickwrap agreements, “[c]ourts view the clicking of an ‘I agree’ or ‘I accept’ box (or similar mechanism) as a requirement that the user manifest assent to the terms and conditions expressly before she uses the website or services covered by the agreement.” Cullinane, 2016 WL 3751652, at *6 (emphasis added) (internal quotation marks omitted). “Clickwrap agreements permit courts to infer that the user . . . has outwardly manifested consent by clicking a box.” Id. (internal quotation marks omitted). “As a result, because the user has ‘signed’ the contract by clicking ‘I agree, ’ every court to consider the issue has held clickwrap licenses enforceable.” Id. (internal quotation marks omitted). In Cullinane, the court concluded that the Uber users manifested assent to the TOS even though the button on their screen simply stated “Done.” Id. at *8. The court explained:

The language surrounding the button leading up to the Agreement is unambiguous in alerting the user that creating an account will bind her to the Agreement. And the word “Done, ” although perhaps slightly less precise than “I accept, ” or “I agree, ” makes clear that by clicking the button the user has consummated account ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.