Welcome

DoorDash Got Its Arbitration Wish, Costing Millions Upfront (2)

Feb. 12, 2020, 11:00 AM; Updated: Feb. 12, 2020, 8:47 PM

A California judge’s decision to order DoorDash into individual arbitration with more than 5,000 couriers provides the latest validation of legal tactics used to pressure companies to live up to the agreements they drafted to keep disputes out of court.

The company must pay roughly $1,900 in filing fees per claim, Judge William Alsup of the U.S. District Court for the Northern District of California ruled on Monday. That would add up to nearly $10 million just to kick off the process. Alsup accused the online delivery company of “hypocrisy” in his firm order to require arbitration of the workers’ pay disputes. The company asked to halt the proceedings because of a separate pending $39 million settlement with another group of DoorDash couriers.

“DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause,” Alsup said. “No doubt, DoorDash never expected that so many would actually seek arbitration. Instead, in irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed, at least by this order.”

Workers’ attorneys have filed thousands of individual claims, at once, calling the bluff of companies that say they prefer arbitration to resolve employment disputes. The initial fees are just the start. The cost of arbitration includes fees for attorneys on both sides and the arbitrators, even before a decision is reached.

The strategy is picking up steam as states pass worker-friendly legislation and as more gig workers fight for fair wages. Besides DoorDash, businesses like Uber Technologies Inc., Postmates, and Chipotle Mexican Grill Inc. have been targeted by mass arbitration filings.

It’s becoming clear that judges aren’t sympathetic to a company that would draft what seems to be insincere arbitration clauses, said David Horton, a law professor at University of California, Davis School of Law. But it remains to be seen if the strategy will pay off in the long run and inspire more copy-cat cases.

“When the rubber meets the road, the companies say it’s too expensive to arbitrate,” Horton said. “The courts find it ironic that these companies are trying to wiggle out of the agreements they created. These firms are putting pressure on the corporations to call their bluff.”

Growth in Arbitration

Companies use arbitration agreements to keep worker disputes out of court, a practice that has been bolstered by U.S. Supreme Court decisions. Nearly 54% of nonunion private-sector employers have mandatory arbitration procedures, according to an Economic Policy Institute study. Among companies with 1,000 or more employees, 65% have mandatory arbitration policies.

Plaintiff-side firm Keller Lenkner has driven the individual arbitration demands in the recent cases against DoorDash and Postmates. Partner Travis Lenkner said the companies have fought against paying the initial fees in court, even after they’re compelled to arbitrate. The goal, he said, is to “get relief for the clients, in whatever form that comes.”

The workers say say they are owed unpaid wages for being classified as contractors, rather than employees entitled to benefits such as overtime and minimum wage.

“We are happy to arbitrate the claims and that is what they want to do,” Lenkner said. “Step one is getting in the door, and that’s where we’ve been for a year. We see an under-served population of people who have meritorious claims and otherwise are not able to access a forum. We will keep fighting for them in these situations.”

DoorDash provided an email statement that said it “believes that arbitration is an efficient and fair way to resolve disputes.”

“We stand ready and willing to defend legitimate arbitration demands,” it said. “As the court recognized, however, the company should only be responsible for arbitrating legitimate claims.”

Mass Arbitration Leads to Settlements

Another California federal judge similarly compelled arbitration in a case with thousands of claims against Postmates, asking the attorneys to explain how the company’s refusal to pay the arbitration fees didn’t amount to contempt. A ruling is pending on that issue. The same Gibson, Dunn & Crutcher attorneys represent Postmates and DoorDash. They declined to comment for this story.

In a case against CoreLogic in the Southern District of California that settled earlier this year, 160 real estate appraisers suing the company for violations of wage laws were forced into arbitration. They pressed those claims out of court, and said the company wouldn’t cooperate. A judge ordered the company to pay $86,000 in sanctions for failing to start the arbitration process.

Meanwhile, Uber agreed to pay between $146 million and $170 million to settle “a large majority” of 60,000 arbitration claims filed against the company, according to a U.S. Securities and Exchange Commission filing. The drivers said they were misclassified as independent contractors and should be employees. Each individual arbitration would have run tens of thousands of dollars.

The strategy also was used against Chipotle in a series of lawsuits dating back to 2013. Lyft Inc. and Buffalo Wild Wings each were hit with hundreds of thousands of arbitration requests. Many of these examples stemmed from class or collective actions that already were in progress, and then workers were compelled arbitration at the company’s request.

Employers have been using arbitration agreements more and more in the last decade, said Bryan Schwartz, a Bay-area attorney who has filed many arbitration cases on behalf of workers.

“It has given companies license to use arbitration to stop themselves from being accountable,” Schwartz said. “It’s a ‘get out of jail free’ card. Employers are not off the hook; it’s inefficient and expensive for them to go through the process where they are fighting dozens or hundreds of individual claims.”

Strategy Amounts to ‘Shakedown’

Gibson Dunn attorneys told the court that the serial arbitration strategy amounted to a “shakedown,” arguing that many of the more than 6,000 initial claims filed by workers may not have been valid. Nearly 1,000 claims were struck during the process. The attorneys argued it wouldn’t be fair or efficient if they had been forced to pay fees for invalid claims.

The pending $39 million settlement between DoorDash and another group of drivers hasn’t yet been finalized, but it would represent 350,000 couriers. The company and workers’ attorney Shannon Liss-Riordan agreed to the terms and are waiting to face the judge.

Liss-Riordan said pursuing thousands of claims at once is a “farce” and for years she’s used the mass arbitration strategy as leverage to reach settlements for clients. “How does anyone think we got that $39 million settlement?’ she said.

Alsup wasn’t swayed by the argument that the case should be halted to give workers a chance to decide to join that separate settlement or pursue arbitration.

Liss-Riordan said there are limitations to the mass arbitration strategy. It’s a question of who happens to hear about it or happens to see a solicitation from a plaintiffs’ lawyer, she said. The most affected employees will never know there is something they can do, or that their rights have even been violated and they may be owed money, she said. This is the problem with prohibiting class actions, she said.

“I do find it interesting that defendants push so hard to have workers compelled to individual arbitration, then try to throw up all types of hurdles they actually pursue arbitration,” Liss-Riordan said. “As a practical matter, 5,000 individuals are not going to arbitrate individually. Bringing mass arbitration is a way to put pressure to try to settle cases. You aren’t actually going through all those arbitrations.”

“This is all further game playing,” she said.

(Updated with additional attorney comments. A previous correction updated a quote from plaintiffs' attorney Shannon Liss-Riordan in the 22nd paragraph, and clarified the number of drivers covered by an Uber settlement in the 16th paragraph.)

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.