New York Federal Court Refuses to Enforce Uber's Passenger Terms

UberRecently, a New York federal court refused to enforce some of the terms that Uber sought to impose on its passengers.

In the case of Meyer v. Kalanick, a group of Uber passengers sought to bring a class action lawsuit against the ride-sharing service.

As reported by Fortune, Spencer Meyer, a Connecticut Uber passenger, originally sued only Uber CEO Travis Kalanick on behalf of himself and other passengers.

The lawsuit claimed that Kalanick and Uber engaged in a price-fixing scheme with Uber drivers, who could impose "surge pricing" when demand was heavy.

The User Agreement

Uber's online Terms and Conditions include an arbitration clause. The current version reads in part:

You agree that any dispute, claim or controversy arising out of or relating to these Terms or the breach, termination, enforcement, interpretation or validity thereof or the use of the Services (collectively, "Disputes") will be settled by binding arbitration between you and Uber...

Uber requested arbitration after it was added as a defendant to the litigation. The arbitration clause also includes the following terms:

You acknowledge and agree that you and Uber are each waiving the right to a trial by jury or to participate as a plaintiff or class in any purported class action or representative proceeding.

The Right to a Jury Trial

In his recent decision refusing to enforce the arbitration clause, federal judge Jed Rakoff noted that:

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."

In the world of the Internet, however, he wrote,

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.

He also blasted the way those terms are often written as "endless, turgid, [and] often impenetrable." The judge concluded that Meyer never actually agreed to waive his right to a jury trial or submit to mandatory arbitration.

Adequate Notice?

Meyer claimed that when he registered to use Uber, he didn't have adequate notice of the existence of the arbitration agreement.

The judge noted the following undisputed facts:

  • When Meyer registered for Uber using a smartphone app, the phone screen included a small button with the tiny, barely-legible words "By creating an Uber account, you agree to the Terms of Service & Privacy Policy."
  • The words included a hyperlink to the actual terms.
  • Users can complete the registration process without clicking on the link or seeing the terms.
  • The terms "consist of nine pages of highly legalistic language that no ordinary consumer could be expected to understand."
  • The arbitration clause appeared on the bottom of the 7th page.

Meyer said that he didn't recall noticing the hyperlink when he registered and didn't believe that he clicked it.

The judge found that Uber had no basis for a claim that Meyer had "actual notice" of the agreement.

The judge noted that:

an individual may still be said to have assented to an electronic agreement if "a reasonably prudent user" would have been put "on inquiry notice of the terms of the contract."

However, the judge concluded that:

the design and content of Uber's registration screen did not make the 'terms of use' (i.e., the contract details) readily and obviously available to the user.

Takeaway

Businesses that interact with their clients using smartphone apps need to be extra careful about creating terms of use that are clear and obvious to users. A good practice is to make users expressly agree to those terms before proceeding with registration for a service.

If you're a consumer who "agreed" to terms that you now find objectionable, you should be aware that a court won't necessarily enforce those terms.

comments powered by Disqus

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential

Call us today for a free consultation (855) 466-5776