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Uber Eats Arbitration Decision (New York)

Updated: Feb 21

Heckman Law, PC represents several small businesses in the capacity of outside general counsel. This means we're often in the position of telling clients “no” and “you can’t do that” (though, being outside rather than in-house, this is usually more along the lines of “please, please don’t do that”).


I suspect that Uber decided not to listen to their attorneys here.


Background


In June 2020, following the death of George Floyd, Uber (specifically, Uber Eats) decided to waive delivery fees for customers who purchased from certain minority-owned businesses between June 2020 and December 2020. Around that time, a law firm called Convosoy McCarthy PLLC ("CMP") searched for, and found, approximately 31,500 Uber customers who did not purchase from those qualifying minority-owned businesses, and thus did not have their delivery fees waived. The claim was that the waivers constituted unlawful race-based discrimination.


CMP filed arbitration claims for those 31,500 Ubers customers.


So what's the problem?


Uber requires arbitration of disputes, and Uber does not allow consolidation, class actions, etc. of the disputes. Uber made this business decision despite the massive number of customers they reach. This decision was made, I hope, over the protest of their attorneys.


Uber's arrangement is with the American Arbitration Association ("AAA"). This arrangement is, for each mediation, that Uber must pay (1) a $500 filing fee, (2) a $1,400 case management fee, and (3) a $1,500 arbitrator fee. That means $3,400 per demand filed. And that means Uber owed the AAA over $107 million.


What happened?


Ultimately, Uber sued the AAA for a preliminary injunction. Uber lost, but appealed the decision. Then, on April 14, 2022, the First Judicial Department of New York's Appellate Court held that Uber is liable to the AAA for the fees.


Conclusion


As the court said, Uber "made the business decision to preclude class, collective, or representative claims in its arbitration agreement with its consumers, and AAA's fees are directly attributable to that decision."


In drafting contracts, you are often dealing with more than just the contract at hand. Especially if your business depends on volume of customers, you may be drafting a contract for thousands of people. But more importantly, please listen to your attorney.

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