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Uber Arbitration Clauses Shot Down in Pennsylvania State Court

Oct. 13, 2022, 7:54 PM

Mandatory arbitration clauses for customers who sued Uber Technologies Inc. in Pennsylvania aren’t enforceable because the online registration webpage didn’t clearly inform them they were waiving their constitutional right to a jury trial, a state appeals court found.

The court’s 2-1 decision proposes a new legal standard in Pennsylvania for arbitration clauses imposed via online forms—that those forms must explicitly state the user is waiving their right to a jury trial and that the waiver must be in bold, capitalized text on the top of page one of the “terms and conditions” document.

The case springs from Pennsylvania couple Shannon and Keith Chilutti’s lawsuit against Uber that sought damages for Shannon Chilutti’s injuries after she fell out of her wheelchair and hit her head during a ride with an Uber driver.

In its decision Wednesday, the Superior Court of Pennsylvania—an intermediate appeals court—reversed a state trial court order granting Uber’s request to send the case to arbitration.

The “need for greater scrutiny regarding a party’s waiver of their constitutional right to a jury trial in terms of these arbitration agreement matters is imperative,” Judge Daniel D. McCaffery wrote for the majority.

The Pennsylvania decision is the latest in the wide-ranging legal battles over companies’ frequent use of mandatory arbitration agreements, both for their customers and their workers.

McCaffery noted the US Court of Appeals for the Ninth Circuit also raised concerns this year in an April opinion about mandatory arbitration clauses that are commonly buried within online registration forms.

The federal court found in Berman v. Freedom Financial Network that browsewrap agreements—in which a hyperlink leads to terms that users purportedly accept by continuing use of the website—are typically enforceable only if users are given reasonably conspicuous notice and take clear action showing their consent.

Stronger Protections

The Uber arbitration agreements in this case would be enforceable by the Ninth Circuit standards set in Berman, McCaffery wrote. But he said Pennsylvania’s constitution requires even stronger protections for the right to a jury trial.

“A stricter burden of proof is necessary to demonstrate a party’s unambiguous manifestation of assent to arbitration,” he wrote.

Joseph L. Messa Jr. of Messa & Associates P.C., who represented the Chiluttis, said the decision has broad implications for businesses’ use of arbitration agreements via internet forms.

“I can’t think of any other constitutional right you give up on your smart phone or computer by clicking an agreement to purchase a service,” Messa said by phone Thursday.

Judge Alice Beck Dubow concurred with McCaffery’s opinion.

Judge Victor P. Stabile dissented, writing that he would reject the appeal on procedural grounds—finding the trial court’s order isn’t a final judgment and doesn’t satisfy alternative legal standards for being appealable.

Madeline Sophia Baio of Vaughan Baio & Partners and Michael Lee Kichline and Matthew Daniel Klayman of Morgan Lewis & Bockius LLP represented Uber in the case. Baio, Kichline, and Klayman didn’t immediately respond to a request for comment.

Megan Marie Kwak of Messa & Associates P.C. also represented the Chiluttis.

The case is Chilutti v. Uber Technologies Inc., Pa. Super. Ct., No. 1023 EDA 2021, 10/12/22.

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Genevieve Douglas at gdouglas@bloomberglaw.com; Laura D. Francis at lfrancis@bloomberglaw.com