Uber sues AAA to block $ 100 million in charges in ‘politically motivated’ arbitration
(Reuters) – In 2018, Uber Technologies Inc was one of the first companies targeted in a mass arbitration campaign. In 2019, Uber was one of the first companies to capitulate, agreeing to pay more than $ 146 million to settle the wage and hourly claims of more than 60,000 drivers.
Now, Uber wants to be the first company to force the American Arbitration Association Inc to waive a fee claim that the company claims gives unwarranted leverage to the other party.
On Monday, Uber’s lawyers at Kaplan Hecker & Fink filed a declaratory judgment suit and a preliminary injunction motion against AAA in the New York State Supreme Court in Manhattan, seeking to prevent the association from charging Uber nearly $ 100 million in administrative and arbitration fees in about 31,000 cases alleging that Uber’s 2020 policy of waiving delivery charges for black-owned restaurants was discriminatory.
Unlike other companies that have protested the AAA fees – unsuccessfully – in the face of mass arbitration claims, Uber has already paid the required fees, around $ 5 million, to initiate the lawsuits. Uber also paid around $ 670,000 to administer the first batch of around 480 cases that will be heard by AAA arbitrators. Uber’s senior legal officer Randall Haimovici told me in an interview that the company is very keen to defend its waiver of delivery charges for black-owned restaurants, which Uber adopted in June 2020 following the death of George Floyd.
But the company said it was unreasonable and violated AAA’s contractual commitment to a fair and cost-effective process for AAA to refuse to discount subsequent administrative and arbitration costs for tens of thousands of cases. with a cookie cutter. By insisting on full transportation costs that will amount to nearly $ 100 million, Uber argues, AAA is effectively giving a huge advantage to plaintiff attorneys at Consovoy McCarthy, a firm with a long history of challenging action policies. positive.
“The AAA, a nonprofit arbitration service provider, considers this astronomical sum to be alleged administrative fees and costs,” Uber’s complaint said. “In fact, this is a ransom orchestrated by politically motivated lawyers, who manipulate the arbitration process to substantiate baseless allegations of ‘reverse discrimination’.”
An AAA spokesperson did not immediately respond to a request for comment on documents filed by Uber, nor did Consovoy name partners William Consovoy and Thomas McCarthy.
AAA cut Uber’s upfront fees after Consovoy McCarthy started filing claims by the thousands in the second half of 2020. AAA last year adopted a new, lower fee schedule for “multiple consumer case deposits.” or mass arbitration of consumer claims. Because AAA determined that Consovoy’s claims against Uber met its criteria for mass arbitration, it charged Uber an arbitration initiation fee of only about $ 140 per claim, and not the $ 500 that the company should have paid for an individual consumer arbitration claim.
The fee reduction, Uber argued in documents filed Monday, showed the AAA’s willingness to exercise its discretion over mass arbitration fees. AAA also acknowledged that Consovoy’s deposits are a mass campaign, Uber’s deposits suggested, in early proposals to streamline cases through a flag process to resolve legal and factual issues that cut across all arbitrations. . But when Consovoy McCarthy insisted that the cases be argued individually, the complaint said, AAA nodded, informing Uber that without Consovoy’s consent to change the process, the usual arbitration rules would apply.
Under those rules, AAA told Uber, the company must pay advance fees to administer each case and pay individual arbitrators – even though, according to Uber, there’s no way the cases will actually be litigated individually. . (The Consovoy McCarthy lists 13 attorneys on its website, a small team for 31,000 cases. And AAA, according to Uber, has only 750 neutral arbitrators across California.) Uber documents indicate that AAA also informed the company that if Uber paid the fees “under protest” to keep a dispute of the amount, AAA would close the arbitrations and potentially send the cases to court.
Uber said it had no choice but to seek an injunction when it received a bill for $ 10.8 million last week. As you know, California passed a law in 2019 to penalize companies that refuse to pay required arbitration fees in mass arbitration cases. Uber said the law exposes the company to stiff penalties, including possible substantive default, if it doesn’t submit the money to AAA. But if it pays, Uber said in its preliminary injunction petition, AAA will no doubt claim that Uber has waived its right to challenge the charges and will claim arbitration immunity.
“We felt like we were stuck in a corner,” Haimovici said. “It’s not like we won’t pay. We just want it to be fair and reasonable. Haimovici said that as proof of its good faith, Uber intended to put $ 10.8 million – charges from AAA’s disputed September bill – into receivership.
The judges, as you will surely recall, were markedly resistant to the fee protests from the companies targeted in the mass arbitrations. On several occasions, the courts have reminded companies that balk at the cost of arbitrating thousands of claims that they are unilaterally forcing arbitration on their workers and consumers, so they are grappling with the consequences of their own arrangements. compulsory arbitration.
Uber’s Haimovici said this case is different because the company has already paid the initiation fee and is willing to pay the cost of arbitration, provided that cost reflects what Uber says is the reality of the way whose business will be transacted.
“The AAA,” he said, “refuses to use the discretion they have to change the way they do things.”
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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the principles of trust, is committed to respecting integrity, independence and freedom from bias.