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Kauders v. Uber Technologies, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

January 2, 2019

Christopher KAUDERS et al.
v.
UBER TECHNOLOGIES, INC. et al.

          January 3, 2019

          MEMORANDUM OF DECISION AND ORDER ON (1) PLAINTIFF’S MOTION FOR RECONSIDERATION OF THE COURT’S ORDER REMANDING CLAIMS TO ARBITRATION and (2) DEFENDANTS UBER TECHNOLOGIES, INC. and EASIER, LLC’s MOTION TO CONFIRM ARBITRATION AWARD

          Douglas H. Wilkins, Associate Justice, Superior Court

          This court confesses its substantial difficulty in understanding what, if any, limits the federal courts have placed upon the expansion of federal power into traditionally state-law areas concerning contract formation when arbitration is at issue. This court’s difficulty arises largely from sweeping federal decisions regarding Federal Arbitration Act (FAA)[1] preemption that, to a state court, are "untenable." See Feeney v. Dell, Inc., 466 Mass. 1001, 1003 (2013), applying American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2312 (2013). This court again addresses FAA preemption and state contract law in response to the Plaintiff’s Motion for Reconsideration of this Court’s Order Remanding Claims to Arbitration, dated November 28, 2018 (Third Reconsideration Motion, referred to as "the Motion"), which the Defendants have opposed. After hearing on July 25, 2017, the Motion is ALLOWED IN PART AND DENIED IN PART .

          PROCEDURAL BACKGROUND

          Plaintiffs, Christopher P. Kauders ("Mr. Kauders"), Lee C.S. Kauders ("Ms. Kauders") and Hannah Kauders ("Hannah") (collectively, "Plaintiffs" or "The Kauders") have brought this discrimination, c. 93A and intentional tort action against Uber Technologies, Inc. ("Uber"), Rasier, LLC ("Rasier") and Jorge Munera ("Mr. Munera") for alleged refusal to serve Mr. Kauders because he uses a service dog. The complaint was filed on July 12, 2016, removed to federal court and ultimately remanded to this Court on May 3, 2017, for jurisdictional reasons arising out of the lack of complete diversity of citizenship between one defendant, Mr. Munera and the plaintiffs, all four of whom are all Massachusetts citizens. On June 26, 2017, Uber and Rasier filed "Defendants’ Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay Proceedings" ("Motion"), which the Plaintiffs opposed.

          Last year, in light of, among other things, its own prior experience with the Feeney saga, this court applied federal preemption reluctantly in favor of an order compelling arbitration, because:

The Supreme Judicial Court has held that claims arising under G.L.c. 151B are subject to arbitration only if the arbitration clause applies to such claims with "clear intent." Warfield v. Beth Israel Deaconess Medical Center, Inc., 454 Mass. 390, 401-02 (2009). Grounded in public policy concerns, Warfield predated significant developments in the United States Supreme Court. See, e.g., Feeney v. Dell, Inc., 466 Mass. 1001 (2013) (Feeney III), overruling Feeney v. Dell, Inc., 454 Mass. 192, 193 (2009) (Feeney I) and reconsidering Feeney v. Dell, Inc., 465 Mass. 192 (2013) (Feeney II), on the basis of American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2312 (2013). The Supreme Judicial Court later expressed doubt that an "express reference" requirement for arbitration of specific statutory rights survives FAA preemption. Machado, 471 Mass. at 218, fn.19.[2]
If there was any room for argument after Feeney III, and Machado, the Supreme Court recently invalidated the type of clear statement rules articulated in Warfield, which are specifically applicable to arbitration agreements but not to contracts generally. Kindred at __ (Part IIA) ("The Kentucky Supreme Court’s clear-statement rule, in just that way, fails to put arbitration agreements on an equal plane with other contracts").

          Memorandum of Decision and Order on Defendants’ Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay Proceedings, dated August 1, 2017 (2017 Arbitration Order) at 4. This rationale addressed the plaintiffs’ principal argument, which focused upon Warfield . Plaintiffs’ Opposition to Defendants’ Motion to Compel Arbitration and Dismiss or, In The Alternative, Stay Proceedings (June 15, 2017) at 4-6 (Pl. First Opp.). The Court did strike the offending portions of the Limitation of Liability Clause, along with the cross-reference in the "Arbitrator’s Decision" paragraph and ordered arbitration of the disputes raised by Mr. and Ms. Kauders. See Machado v. Svstem 4, LLC, 471 Mass. 204, 220 (2015) (Ordering arbitration, but applying a contractual severability clause to sever an invalid confidentiality provision in the parties’ contract).

          On September 1, 2017, this court declined to reconsider the 2017 Arbitration Order. See Memorandum on Plaintiff’s Motion for Reconsideration of Ruling on Defendants’ Motion to Compel Arbitration (First Reconsideration Order). The court did, however, modify the 2017 Arbitration Order so that it applies to all plaintiffs, including Megan Kauders. The court again denied reconsideration on November 28, 2017 (Second Reconsideration Order).

         After these rulings, the parties proceeded to arbitration, where Uber prevailed on the ground that, although the drivers did violate state law, Uber lacked sufficient connection with the drivers’ actions to be liable in its own right. In the meantime, however, the First Circuit Court of Appeals rejected Uber’s interpretation to the same agreements at issue here. Cullinane v. Uber Techs., Inc., 893 F.3d 53 (1st Cir. 2018). Cullinane reversed a District Order— cited by the parties and the court in the 2017 proceedings in this case— which had rejected an argument that, among other things, challenged whether, under state law of contract formation, Uber had obtained an enforceable agreement to arbitrate on virtually the same facts as those present here. The First Circuit’s decision suggested that, perhaps, there is a limit upon FAA preemption which this court should have applied in the 2017 Arbitration Order. It is highly persuasive that, in fact, Massachusetts may apply its usual rules of contract formation to these facts.

          Because the court has serious concerns about the correctness of the 2017 Arbitration Order in light of the First Circuit’s decision in Cullinane, the court grants the Motion for Reconsideration and vacates the 2017 Arbitration Order to the extent that it enforced the putative contract to arbitrate.

          FACTUAL BACKGROUND

         The Complaint alleges the following: Christopher Kauders is a legally blind Massachusetts resident and guide dog user. On three separate occasions in 2015 and 2016, Uber and Rasier allegedly refused to allow Mr. Kauders into their transportation service vehicles because he uses a guide dog. His wife and daughter were with him on at least one occasion. Uber and Rasier had notice of each incident before the next one occurred. Mr. Kauders alleges that these refusals violated the prohibition on discrimination against dog guide users. See G.L.c. 272, § 98A, which is incorporated into G.L.c. 151B, § 5.

          The parties do not context the following: Mr. and Ms. Kauders registered with Uber at different times (on June 27, 2014 and May 13, 2015, respectively). In or around October 2015, Hannah Kauders signed up for an Uber account and presumably entered into a version of the Agreement substantially similar to the ones affecting her parents.

          The additional material facts— apparent primarily from the screen shots submitted by Uber— are as follows: Before riders can request transportation services through the Uber App, they must register, which requires creating an Uber account and accepting Uber’s terms and conditions. Registration includes clicking on a button deemed to create a contract, known as a Service Agreement ("Agreement").

          The registration process involves three basic steps. Each step appears as a single screen on the user’s smartphone, with no scrolling required. Step One is "Create an Account." A legend appears stating: "We use your email and mobile number to send you ride confirmations and receipts." At that stage, prospective riders enter their email address, mobile phone number and a chosen password. They then hit the "Next" button at the top right of the screen to move to the next step.

          Step Two is "Create a Profile." On this screen, the following words appear: "Your name and photo helps your driver identify you at pickup." Prospective Riders enter their first and last names and hit the "Next" button to move to the final step.

          Step Three is "Link Payment." Here, prospective riders either scan or enter their credit card information. The following message appears at the bottom of the screen: "By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy." The words "Terms & Conditions and Privacy Policy" are a hyperlink which directs the rider to a screen with two links: one to Uber’s Terms and Conditions and a second to Uber’s Privacy Policy. However, the version of the "Link Payment" screen attached to Uber’s papers show that the words "Terms & Conditions and Privacy Policy" are enclosed within a rectangular box and are as bold as the words "scan your card" and "enter promo code," but do not have the customary appearance of a hyperlink, namely set forth in blue and underlined. The rider must click on the appropriate link to view either document. Otherwise, the "Terms & Conditions & Privacy Policy" do not appear on the rider’s screen during any of the three steps of the registration process. Upon entering their payment information, riders create their Uber account by ...


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