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June 28, 2018

Lit Alerts—June 2018, Vol. 2

A Publication of the Litigation Practice Group

Arbitration: California Court of Appeal Affirms Denial of Uber's Motion to Compel Arbitration

This month, a three-justice panel of the California Court of Appeal affirmed a trial court's order denying Uber's motion to arbitrate claims brought by a Lyft driver who also drove for Uber.

In Smythe v. Uber Technologies, Inc. (Case No. A149891), the plaintiff, on behalf of a putative class of Lyft drivers who were allegedly sent on "wild goose chases to pick up nonexistent passengers," alleged that Uber engaged in a practice of creating fake Lyft accounts to misdirect Lyft drivers and discourage drivers from driving for Lyft. The complaint asserted causes of action for unfair business practices and intentional interference with prospective economic advantage.

Uber moved to compel arbitration because the named plaintiff also drove for Uber and had thus entered into agreements with Uber that contained arbitration provisions. The provisions called for drivers to arbitrate "any dispute arising out of or related to th[e] Agreement or termination of the Agreement" and were "intended to require arbitration of every claim or dispute that can be lawfully arbitrated, except for those claims and disputes which by the terms of th[e] Agreement [were] expressly excluded from the Arbitration Provision."

The trial court rejected Uber's argument, finding that the action was beyond the scope of the named plaintiff's arbitration agreement with Uber.

The Court of Appeal affirmed, holding that "it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." The named plaintiff's claims, which were "premised on [his] activities driving for Lyft," had "nothing to do with his identity as a driver for Uber" and thus fell "patently beyond the scope" of his arbitration agreement with Uber. Uber had further argued that the named plaintiff's claims were within the scope of the agreement because of a clause that addressed advertising and marketing to attract new users to Uber. The court quickly rejected this argument, holding that Uber's alleged practice, "whether or not with the aim of increasing its own ridership, cannot plausibly be called advertising or marketing."

Class Actions: Supreme Court Limits Tolling for Successive Class Actions

This month, the Supreme Court resolved an emerging circuit split on the availability of tolling for successive class action claims. The split concerned differing interpretations of the Court's decision in American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), which holds that the statute of limitations may be tolled for putative class members during the pendency of a class action. Under American Pipe and subsequent cases, in the event that a class is not certified, putative class members may either (a) join the ongoing action individually, or (b) file new individual actions, notwithstanding the expiration of the limitations period.

In China Agritech, Inc. v. Resh, 584 U.S. ___ (2018), the Court clarified that the American Pipe tolling rule only extends to putative class members who file individual claims after a court declines to certify a class. Tolling under American Pipe does not apply to putative class members who file a new class action complaint beyond the limit set by the applicable statute of limitations.

The Court explained that the purpose of American Pipe tolling is to promote judicial economy (which it said is also a key purpose of the Rule 23 class action procedure) by eliminating the need for would-be class members to file protective motions to secure their claims in the event that the class is not certified. In China Agritech, the Court explained that the same judicial economy considerations warrant the opposite result with respect to filing subsequent class action lawsuits: it is in the interest of the courts and all litigants to resolve class representative issues as early as possible in the litigation, instead of permitting would-be class representatives to wait in the wings while others forge ahead with their claims.

The decision provides new certainty to class action defendants. In the event that a class action complaint fails to achieve certification, and the limitations period has run, putative class members standing on the sidelines may no longer file a new class action complaint.

Consumer Protection: Ninth Circuit Tosses Injunction Claims for Allegedly Misleading Labels Based on Lack of Standing

In Lanovaz v. Twinings North America, Inc., the Ninth Circuit affirmed the district court's order granting summary judgment for tea maker Twinings on a consumer's claims for injunctive relief to remove allegedly misleading labels, because the consumer testified in deposition that she would not purchase Twinings' tea again even if the company removed the labels at issue. Twinings moved for summary judgment on claims under California's Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act, on the ground that the plaintiff lacked Article III standing to seek injunctive relief because she could not show there was a sufficient likelihood that she would again be wronged in a similar way. The district court granted Twinings' motion.

The Ninth Circuit affirmed, relying on the plaintiff's deposition testimony that "she would not purchase Twinings products again, even if the company removed the allegedly misleading labels." The court rejected her argument that "her suit should surivive summary judgment because she stated in an interrogatory response that she would 'consider buying' Twinings products in the future." "[A] some day intention—without any description of concrete plans, or indeed even any specification of when the some day will be—does not support a finding of the actual or imminent injury that Ariticle III requires," the court explained.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.