IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN ... · KHALDOUN CHERDOUD, Civil Action No. 16-0573 similarly situated, PLAINTIFFS ALI RAZAK, KENAN SABANI AND KHALDOUN CHERDOUD’S

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Hon. Michael M. Baylson, U.S.D.J.

Civil Action No. 16-0573

PLAINTIFFS ALI RAZAK, KENAN SABANI AND KHALDOUN

CHERDOUD’S BRIEF IN OPPOSITION TO DEFENDANTS UBER

TECHNOLOGIES, INC. AND GEGEN LLC’S MOTION TO DISMISS

JOHN K. WESTON

PA Attorney No. 26314

JEREMY E. ABAY

PA Attorney No. 316730

SACKS WESTON DIAMOND, LLC

1845 Walnut Street, Suite 1600

Philadelphia, Pennsylvania 19103

Telephone: (215) 925-8200

Attorneys for Plaintiffs

Dated: April 29, 2016

ALI RAZAK, KENAN SABANI and

KHALDOUN CHERDOUD,

individually and on behalf of all others

similarly situated,

Plaintiffs,

v.

UBER TECHNOLOGIES, INC. and

GEGEN LLC,

Defendants.

Case 2:16-cv-00573-MMB Document 16 Filed 04/29/16 Page 1 of 17

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................................................................. ii

PROCEDURAL HISTORY ................................................................................... 1

SUMMARY OF FACTS ....................................................................................... 2

I. Background on the Contracts and Opt-Out Notices ................................... 2

II. Background on the California Litigation ................................................... 3

LEGAL ARGUMENT ........................................................................................... 5

I. Standard of Review ................................................................................... 5

II. The December 2015 Agreement continues to govern the parties’

relationship and, accordingly, there is no governing arbitration clause ...... 6

A. The December 23, 2015 Order Did Not Enjoin the Entire December

2015 Agreement, which Remains Controlling ...................................... 6

B. Even if the December 23, 2015 Order is Overturned, Plaintiffs Opted

Out of the December 2015 Agreement’s Arbitration Provision ............ 7

III. None of the Prior Driver Agreements Apply to this Action ....................... 8

B. The Temporal Scope of the Prior Agreements Is Limited and, as a

Result, Those Agreements Do Not Reach the Parties’ Current Dispute

............................................................................................................10

C. Defendants are Estopped from Arguing that the Prior Agreements are

Applicable ...........................................................................................11

IV. Even if a Severability Substitution were Possible, the Replacement Clause

would Need to Give Effect to Plaintiffs’ Opt-Out Notices ........................12

V. Since there is no Valid Class Action Waiver, this Case may Proceed as a

Class and Collective Action .....................................................................12

CONCLUSION ....................................................................................................13


ii

TABLE OF AUTHORITIES

Page

Cases

Alexander v. Angel,

37 Cal. 2d 856, 862 (Cal. 1951) .......................................................................8,9

Beckwith v. Sheldon,

165 Cal. 319, 323-24 (Cal. 1913) ....................................................................... 9

Castle Cheese, Inc. v. MS Produce, Inc.,

2008 U.S. Dist. LEXIS 71053, *60-61 (W.D. Pa. Sep. 19, 2008) ....................... 9

Elinich v. Discover Bank,

2013 U.S. Dist. LEXIS 12659 (E.D. Pa. Jan. 29, 2013) ...................................... 9

George Foreman Assocs., Ltd. v. Foreman,

389 F. Supp. 1308, 1315-16 (N.D. Cal. 1974) .................................................... 9

Greenleaf v. Garlock, Inc.,

174 F.3d 352 (3d Cir. 1999) ..............................................................................11

Guidotti v. Legal Helpers Debt Resolution, L.L.C.,

716 F.3d 764, 773 (3d Cir. 2013) .................................................................... 5, 7

Guidotti v. Legal Helpers Debt Resolution, L.L.C.,

74 F. Supp. 3d 699, 708 (D.N.J. 2014) ............................................................... 6

Herzfeld v. 1416 Chancellor, Inc.,

2015 U.S. Dist. LEXIS 95256, *7 (E.D. Pa. July 22, 2015)................................ 5

Karibjanian v. Chromalloy Pharm., Inc.,

1991 U.S. Dist. LEXIS 8890 (E.D. Pa. June 24, 1991) ......................................11

Kocjancic v. Bayview Asset Mgmt., LLC,

2014 U.S. Dist. LEXIS 157206 (E.D. Pa. Nov. 5, 2014) .................................... 5

Montana v. United States,

440 U.S. 147 (1979) ..........................................................................................11

O'Connor v. Uber Techs., Inc.,

No. 13-cv-03826-EMC (N.D. Cal. Dec. 9, 2015) .......................................... 4, 11

O'Connor v. Uber Techs., Inc.,

2015 U.S. Dist. LEXIS 171570, *19 (N.D. Cal. Dec. 23, 2015) ...................... 4, 6

Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,

636 F.2d 51, 54 (3d Cir. 1980) ........................................................................... 7

Producers Fruit Co. v. Goddard,

75 Cal.App. 737, 755-56 (Cal. 1925) ................................................................. 9

Taub v. Merriam,

251 Pa. Super. 572, 380 A.2d 1245 (1977) ........................................................11


iii

Page

Rules

Fed. R. Civ. P. 12(b)(6) .......................................................................................... 5

Fed. R. Civ. P. 23 ..................................................................................................14

Fed. R. Civ. P. 56 ................................................................................................... 5


1

PROCEDURAL HISTORY

Plaintiffs commenced this class and collective action on behalf of themselves

and all other UberBLACK drivers operating in Philadelphia, Pennsylvania. (Notice

of Removal, Ex. A, ECF No. 1.) The complaint raises two general claims: (1)

Defendants violated, and continue to violate, the Fair Labor Standards Act and

similar state statutes by refusing to pay wages and expenses to the class members;

(2) Defendants breached their duties to the class members by implementing UberX,

a direct – and illegal – competitor in Philadelphia. (Id. at ¶¶ 121-178.) The

complaint seeks damages and injunctive relief. (Id.)

Defendants removed the action from the Philadelphia Court of Common Pleas

to this Court. (Notice of Removal, ECF No. 1.) Thereafter, Defendants responded

to the complaint by filing the instant motion to dismiss. (Mot. Dismiss, ECF No.

15.) Defendants argue that the Plaintiffs are subject to arbitration clauses requiring

dismissal of this action in favor of individual, binding arbitration. (Id.)

Alternatively, Defendants request a stay pending resolution of the individual

arbitrations. (Id. at 20)


2

SUMMARY OF FACTS

I. BACKGROUND ON THE CONTRACTS AND OPT-OUT NOTICES

Plaintiffs are UberBLACK drivers who operate in Philadelphia, Pennsylvania.

(Notice of Removal, Ex. A, ¶ 108, ECF No. 1.) In order to access Defendants’ driver

platform, Plaintiffs are required to download and continually update Defendants’

mobile phone application. (Def.s’ Br., 2-4). During the original download,

Defendants require Plaintiffs to electronically consent to a “Driver Agreement”

containing an arbitration clause. (Id.) Defendants frequently, and unilaterally,

promulgate superseding Driver Agreements. (Id.) New Driver Agreements are

packaged into mandatory software updates. (Id.) Moreover, Plaintiffs cannot access

Defendants’ driver platform – which they need to earn a living – until they

electronically consent to the new contract. (Id.)

With respect to the instant motion, there are four relevant contracts: the June

2014 Agreement; the November 2014 Agreement; the April 2015 Agreement; and

the December 2015 Agreement.1 All of these agreements contain an “Entire

Agreement” provision, stating:

This Agreement, including all Supplemental Terms, constitutes

the entire agreement and understanding of the parties with

respect to its subject matter and replaces and supersedes all prior

1 See June 2014 Agreement, Def.s’ Ex. F; Nov. 2014 Agreement, Def.s’ Ex. C.; Apr.

2015 Agreement, Def.s’ Ex. D; Dec. 2015 Agreement, Def.s’ Ex. I.


3

or contemporaneous agreements or undertakings regarding such

subject matter.2

Each named Plaintiff provided electronic consent to the December 2015 Agreement

– the latest one. (Def.s’ Br., 5.)

The arbitration provision, section 15.3, of the December 2015 Agreement is

different from the preceding contracts. Subsection viii instructs:

Arbitration is not a mandatory condition of your contractual relationship

with Uber. If you do not want to be subject to this Arbitration Provision,

You may opt out of this Arbitration Provision by notifying Uber…

(Dec. 15 Agreement, Def.s’ Ex. I, ¶ 15.3.viii.) Defendants concede that they

received opt-out notices from the named Plaintiffs – and some 240 other drivers –

within the time frame proscribed by subsection viii.3

II. BACKGROUND ON THE CALIFORNIA LITIGATION

As the result of similar – and in some respects, identical – class actions filed

prior to this one, the Northern District of California has already interpreted all of the

agreements at issue here.4 As noted by Defendants, Judge Chen enjoined

2 See ¶ 13.3 for the June 2014 Agreement and ¶ 14.5 for the latter agreements.

3 Defendants argue, half-heartedly, that the opt-out notices were ineffective because

they were mailed to Defendants by their class counsel, rather than personally by each

individual class member. (Def.s’ Br., n.3.) Defendants offer no authority to support

this unusual proposition – that an attorney cannot send mail on behalf of his client.

4 For the captions of the California class actions see Def.s’ Br., n.4.


4

enforcement of the December 2015 arbitration clause on December 23, 2015,

ordering: “The arbitration provision of the 2015 Agreement may not be

enforced…”5 O'Connor v. Uber Techs., Inc., No. 13-cv-03826-EMC, 2015 U.S.

Dist. LEXIS 171570, *19 (N.D. Cal. Dec. 23, 2015) (emphasis added). Defendants

fail to note that the remaining terms of the December 2015 contract, however, remain

in effect: “The Court does not rule on the enforceability of the terms of the December

2015 Agreement, nor will it prohibit Uber from sending out any arbitration

agreements in the future.” Id. at *18.

Defendants’ motion contains an even more egregious omission – it shrewdly

avoids explaining why Defendants drafted the December 2015 Agreement. On

December 9, 2015, Judge Chen declared the June 2014, November 2014 and April

2015 Agreements (all of the prior agreements) to be unenforceable.6 O'Connor v.

Uber Techs., Inc., No. 13-cv-03826-EMC (N.D. Cal. Dec. 9, 2015). Having just lost

all of their Driver Agreements, Defendants promulgated the December 2015

Agreement just two days later.

5 See Abay Decl., Ex. A. for a copy of the Dec. 23, 2015 Order.

6 See Abay Decl., Ex. B. for a copy of the Dec. 9, 2015 Order. (pages 9-24 analyze

the Nov. 2014, June 2014 and Apr. 2015 arbitration clauses, concluding on page 24

with: “Because the arbitration agreements are unenforceable as a matter of public

policy, a procedural unconscionability analysis is no longer required”).


5

Taking Judge Chen’s December 9, 2015 Order into consideration, Defendants

are now asking this Court to revert back to agreements that were previously voided

– indeed, that is why Defendants’ motion does not reference the December 9th Order.

LEGAL ARGUMENT

I. STANDARD OF REVIEW

“Before a party to a lawsuit can be ordered to arbitrate and thus be deprived

of a day in court, there should be an express, unequivocal agreement to that effect.”

Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773 (3d Cir. 2013)

(internal quotation omitted). If arbitrability is apparent on the face of the complaint

– i.e., the complaint references an arbitration agreement or directly contests an

arbitration agreement – then Fed. R. Civ. P. 12(b)(6) governs the motion to dismiss.

Id. at 774. If arbitrability is not apparent, then the court should apply the summary

judgment standard under Fed. R. Civ. P. 56.7 Id. at 776.

Here, arbitrability is not apparent, as the complaint does not reference an

arbitration agreement.8 In accordance with Fed. R. Civ. P. 56, the Court must

conduct “a restricted inquiry into factual issues” to determine whether the parties

7 See, e.g., Herzfeld v. 1416 Chancellor, Inc., 2015 U.S. Dist. LEXIS 95256, *7 (E.D.

Pa. July 22, 2015); Kocjancic v. Bayview Asset Mgmt., LLC, 2014 U.S. Dist. LEXIS

157206 (E.D. Pa. Nov. 5, 2014).

8 See, generally, Notice of Removal, Ex. A, ECF No. 1.)


6

engaged in a meeting of the minds on the agreement to arbitrate. Id. The Court

should not grant Defendants’ motion unless there is no “genuine factual dispute as

to the validity of the agreement.” Guidotti v. Legal Helpers Debt Resolution, L.L.C.,

74 F. Supp. 3d 699, 708 (D.N.J. 2014). “In so considering, the Court must view the

evidence in the light most favorable to [Plaintiffs], and must provide [Plaintiffs] with

the benefit of all reasonable inferences.” Id.

II. THE DECEMBER 2015 AGREEMENT CONTINUES TO GOVERN THE PARTIES’

RELATIONSHIP AND, ACCORDINGLY, THERE IS NO GOVERNING ARBITRATION

CLAUSE

A. The December 23, 2015 Order Did Not Enjoin the Entire December 2015

Agreement, which Remains Controlling

Defendants over-read the Northern District of California’s December 23,

2015 Order. Judge Chen did not enjoin enforcement of the entire contract between

Plaintiffs and Defendants. Instead, Judge Chen narrowly enjoined enforcement of

one portion of that contract – the arbitration clause. O'Connor, 2015 U.S. Dist.

LEXIS 171570, *19. The remainder of the December 2015 Agreement continues in

full force and effect, as Judge Chen plainly ruled: “The Court does not rule on the

enforceability of the terms of the December 2015 Agreement, nor will it prohibit

Uber from sending out any arbitration agreements in the future…” Id. at *18.

Furthermore, the December 2015 Agreement expressly superseded all prior

contracts between Plaintiffs and Defendants:


7

Entire agreement. This Agreement, including all Supplemental

Terms, constitutes the entire agreement and understanding of the parties

with respect to its subject matter and replaces and supersedes all prior

or contemporaneous agreements or undertakings regarding such subject

matter. In this Agreement, the words “including” and “include” mean

“including, but not limited to.” The recitals form a part of this

Agreement.

(See Def.s’ Ex. I, ¶ 14.5.) Consequently, there is only one contract between Plaintiffs

and Defendants, and that is the December 2015 Agreement. That contract – per

Judge Chen’s Order – lacks an enforceable arbitration clause. Without an “express,

unequivocal [arbitration] agreement,” disputes between the parties are governed in

the ordinary fashion.9 Defendants’ motion, therefore, must fail.

B. Even if the December 23, 2015 Order is Overturned, Plaintiffs Opted Out

of the December 2015 Agreement’s Arbitration Provision

Defendants’ motion is duplicative in nature. Defendants contend that, as a

result of Judge Chen’s December 23, 2015 Order, Plaintiffs are subject to their prior

Driver Agreements. The December 23, 2015 Order is, in essence, the cornerstone

of Defendants’ instant motion.

Defendants have nevertheless appealed the December 23, 2015 Order. (Def.s’

Br., n.16) Indeed, Defendants have requested that the Ninth Circuit overturn the

very ruling they rely on here. Defendants’ position in California directly conflicts

with their position in Pennsylvania.

9 Guidotti, 716 F.3d at 773 (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,

636 F.2d 51, 54 (3d Cir. 1980)).


8

In any event, Plaintiffs opted-out of the December 2015 Agreement. If Judge

Chen’s December 23, 2015 Order is overruled, then Defendants’ instant motion is

moot. Defendants are in a no-win situation.

III. NONE OF THE PRIOR DRIVER AGREEMENTS APPLY TO THIS ACTION

A. Even if the Entire December 2015 Agreement were invalid, Defendants

Cannot Resuscitate the Prior Agreements

As set forth above, the December 2015 Agreement expressly supersedes any

and all earlier agreements. Those prior agreements cannot be automatically,

involuntarily resuscitated. The December, 2015 contract took the place of the earlier

agreements. “[I]t necessarily follows that the old agreement has been entirely

abrogated or extinguished.” Alexander v. Angel, 37 Cal. 2d 856, 862 (Cal. 1951).

At first glance, Defendants’ resuscitation argument appears to be

unprecedented. Plaintiffs, however, discovered one other instance in which a

defendant, whose superseding contract was declared invalid, asked a court to revert

back to a prior agreement. That defendant (who should have known better than to

take on George Foreman) failed:

Finally, Associates argues that if the 1972 Agreement is invalidated,

the court must reinstate the 1971 Agreement which preceded it.

However, paragraph 17 of the 1972 Agreement provides that all prior

agreements are merged in the 1972 Agreement and shall not survive its

execution; furthermore, various documents executed at the time of the

1972 Agreement (including the Releases and the Settlement

Agreement) clearly indicate the intention of the parties to relinquish all

rights and obligations under the 1971 Agreement. Against that


9

background, California law provides no basis for reviving the 1971

Agreement upon a holding that the 1972 Agreement is invalid.

George Foreman Assocs., Ltd. v. Foreman, 389 F. Supp. 1308, 1315-16 (N.D. Cal.

1974) (citing Alexander, 37 Cal.2d at 862; Beckwith v. Sheldon, 165 Cal. 319, 323-

24 (Cal. 1913); Producers Fruit Co. v. Goddard, 75 Cal.App. 737, 755-56 (Cal.

1925)).

Pennsylvania law requires the same result. “Under Pennsylvania law, a

substituted contract, or ‘novation,’ effectively extinguishes all rights and duties

flowing from the earlier contract.” Castle Cheese, Inc. v. MS Produce, Inc., Civil

Action No. 04-878, 2008 U.S. Dist. LEXIS 71053, *60-61 (W.D. Pa. Sep. 19, 2008)

(citing Pennsylvania authorities).

Elinich v. Discover Bank, No. 12-1227, 2013 U.S. Dist. LEXIS 12659 (E.D.

Pa. Jan. 29, 2013), cited by Defendants, is not contrary to this rule. In Elinich, the

original agreement, which contained the arbitration clause, was modified by a series

of subsequent amendments.10 Id. at *4. The court held that the arbitration clause

applied to those subsequent amendments. By contrast, the December 2015

Agreement here did not amend the prior agreements, it expressly replaced them in

10 “Defendants made a number of amendments to [p]laintiff's account, to which she

did not object, and which she accepted through use of the account.” Elinich, 2013

U.S. Dist. LEXIS 12659, *4.


10

their entireties. The December 2015 Agreement, regardless of its validity, is

controlling. Defendants’ motion thus fails.

B. The Temporal Scope of the Prior Agreements is Limited and, as a Result,

Those Agreements Do Not Reach the Parties’ Current Dispute

By their own terms, the arbitration clauses in the prior agreements govern

disputes arising under those earlier contracts. This limitation is expressly stated in

each of arbitration clauses:

Enforcement of this Agreement.

This Arbitration Provision is the full and complete agreement relating

to the formal resolution of disputes arising out of this Agreement.11

This action arises under the December 2015 Agreement, so the earlier contracts, and

their arbitration clauses, have no bearing on this matter.

Defendants implicitly concede this point by referencing the survival clauses

in the earlier agreements:

This Arbitration Provision is governed by the Federal Arbitration Act,

9 U.S.C. § 1 et seq. (the “FAA”) and evidences a transaction involving

commerce. This Arbitration Provision applies to any dispute arising

out of or related to this Agreement or termination of the Agreement and

survives after the Agreement terminates.12

11 See Nov. 2014 Agreement, Def.s’ Ex. C, ¶ 15.3(ix); Apr. 2015 Agreement, Def.s’

Ex. D, ¶ 14.3(ix); June 2014 Agreement, Def.s’ Ex. F, ¶(ix). Emphasis added.

12 See Nov. 2014 Agreement, Def.s’ Ex. C, ¶ 15.3(i); Apr. 2015 Agreement, Def.s’

Ex. D, ¶ 14.3(i); June 2014 Agreement, Def.s’ Ex. F, ¶(i).


11

The survival clauses thus survive only to govern disputes arising out of the earlier

agreements. For example, the arbitration clause would apply to a claim that the June

2014 agreement was wrongfully terminated. There is no language suggesting that

the clauses would apply to disputes arising out of contracts negotiated in the future.

Indeed, if these clauses were meant to survive forever, there would be no need for

Defendants to include them in subsequent agreements, or to revise them, as was done

with the December 2015 Agreement.

C. Defendants are Estopped from Arguing that the Prior Agreements are

Applicable, as Each One was Previously Declared Unenforceable

Even if the arbitration clauses from the earlier Driver Agreements had been

intended to survive, the Northern District of California has already declared those

clauses to be void as against public policy.13 O'Connor v. Uber Techs., Inc., No. 13-

cv-03826-EMC (N.D. Cal. Dec. 9, 2015). “Because the arbitration agreements are

unenforceable as a matter of public policy, a procedural unconscionability analysis

is no longer required.” Id. (emphasis added). That holding applies to this case

through principles of issue preclusion, or collateral estoppel.14 Moreover, no

13 See Abay Decl., Ex. B. for a copy of the Dec. 9, 2015 Order, pages 9 -24.

14 The district court’s order is a “final order” for purposes of issue preclusion. See

Greenleaf v. Garlock, Inc., 174 F.3d 352 (3d Cir. 1999); Karibjanian v. Chromalloy

Pharm., Inc., Civil Action No. 90-4641, 1991 U.S. Dist. LEXIS 8890 (E.D. Pa. June

24, 1991); and Taub v. Merriam, 251 Pa. Super. 572, 380 A.2d 1245 (1977).

Montana v. United States, 440 U.S. 147 (1979) is often cited for the Supreme Court’s

general guidance on issue preclusion.


12

arbitration clause applies here for the simple reason that all of Defendants’

arbitration clauses have been previously declared unenforceable by the Northern

District of California. See infra.

IV. EVEN IF A SEVERABILITY SUBSTITUTION WERE POSSIBLE, THE

REPLACEMENT ARBITRATION CLAUSE WOULD HAVE TO INCLUDE AN OPT-

OUT PROVISION

The December, 2015 agreement contained a severability clause stating:

Severability. If any provision of this Agreement is or becomes invalid

or non-binding, the parties shall remain bound by all other provisions

hereof. In that event, the parties shall replace the invalid or non-binding

provision with provisions that are valid and binding and that have, to

the greatest extent possible, a similar effect as the invalid or non-

binding provision, given the contents and purpose of this

Agreement.15

Under this term, if the December 2015 Agreement’s arbitration clause was replaced,

its replacement would also have to include an opt-out provision. Accordingly,

Plaintiffs’ out-opt notices would also apply to the replacement provision.

V. SINCE THERE IS NO VALID CLASS ACTION WAIVER, THIS CASE MAY

PROCEED AS A CLASS AND COLLECTIVE ACTION

Clearly, if there is no valid arbitration clause, there is no valid class action

waiver. For the reasons set forth above, none of Defendants’ arbitration clauses

apply to this action. Accordingly, this case should proceed under Fed. R. Civ. 23.

15 See Dec. Agreement, Def.s’ Ex. I, ¶ 14.3. Emphasis added


13

CONCLUSION

The bottom line is this: there is no enforceable arbitration clause that requires

this case to be arbitrated. The Northern District of California declared that all of the

arbitration agreements named by Defendants in their motion are either void or

unenforceable. Even in the absence of such a conclusive judicial ruling, the

December 2015 Agreement clearly superseded all prior agreements, and the

Plaintiffs here opted out of its arbitration provision. The motion to dismiss should

be denied, Defendants should be directed to file an answer, and the case should

proceed to discovery.

Respectfully submitted,

SACKS WESTON DIAMOND, LLC

s/ John K. Weston

JOHN K. WESTON

s/ Jeremy E. Abay

JEREMY E. ABAY

Attorneys for Plaintiffs

Dated: April 29, 2016


Documents

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN ... · KHALDOUN CHERDOUD, Civil Action No. 16-0573 similarly situated, PLAINTIFFS ALI RAZAK, KENAN SABANI AND KHALDOUN CHERDOUD’S