Judge expresses notable concerns over proposed $100M settlement in Uber case

by Cyrus Farivar

Uber

SAN FRANCISCO—New lawyers for dozens of Uber drivers who feel that the previous lead attorney did not represent their interests in a proposed class action settlement forcefully argued on Thursday for the deal to be halted.

Several weeks ago, the two sides came to a proposed agreement of $100 million and other benefits, which would end the class-action lawsuit known as O’Connor v. Uber. The lawsuit covers

385,000 current and former drivers in California and Massachusetts. The settlement requires sign-off by the judge to take effect.

However, some Uber drivers, including lead plaintiff Douglas O’Connor, feel the settlement was grossly insufficient and that the underlying issue—whether drivers should be treated as employees rather than contractors—remains unresolved.

Earlier in the day, Uber was hit with yet another related lawsuit brought by drivers in New York City. The Thursday hearing also came just one day after Saudi Arabia agreed to invest $3.5 billion in the company.

Classifying Uber drivers as employees rather than contractors would entitle them to a number of benefits under federal law. This includes unemployment benefits, workers’ compensation, the right to unionize, and most importantly the right to seek reimbursement for mileage and tips. This reclassification would also incur new and significant costs for Uber.

Uber attorney Theodore Boutrous reiterated to US District Judge Edward Chen that anyone who wants to remove themselves from the class and pursue legal claims on their own is free to do so.

"I do think that people who opt out of the case could band together and could seek to bring another case," he said in court.
Similarly, Shannon Liss-Riordan, the lead attorney who initially represented O’Connor and continues to represent the certified class of drivers essentially argued that she got the best deal that she could. If the proposed settlement is approved, her firm would receive $25 million in fees.

"The reality is that had we not been able to give Uber that global peace, there would not have been a resolution and we would not have been able to obtain the monetary and non-monetary benefits that I believe are significant," she said. "That was my judgement, others may disagree, it is for the court to determine whether this settlement we have proposed is a fair and adequate settlement."

However, Judge Chen expressed significant concern that the settlement was "giving away" rights to future litigation and forces future disputes to arbitration, a private process that largely favors corporations.

Let's make a deal?

O’Connor lambasted the terms of the settlement in a court filing weeks after it was agreed upon:

When I initiated the O’Connor action nearly 3 years ago, I did so because it was apparent to me that the failure to properly classify Uber drivers as employees presented the most significant hazard to the economy and public safety in a generation. A "gig economy" does not mean an economy without rules and regulations that protect both driver and passenger. Employee protections exist for the benefit of employees and the communities they serve. The fact that services now take place across Internet applications like Uber does not vitiate these employee protections or make these protections less necessary. Unfortunately, the magnitude of this generational threat was given short shrift in the O’Connor class action as almost no meaningful discovery or depositions were taken, but where the average Uber driver will now receive an offensive settlement worth less than a tank of gas. I cannot in good conscience support this disastrous settlement agreement.

Similarly, Steven Price, the lead plaintiff in a related case filed in state court in Los Angeles (Price v. Uber), argued in his own filings that the proposed settlement terms are "illusory," and that "over half of the Settlement Class stand to receive less than $25 from the proposed Settlement."

As his attorney, Christopher Morosoff, wrote:

The main goal of the O’Connor case, and every other related case including the Price action, is to have Uber drivers declared to be "employees" rather than "independent contractors" under California law. The proposed settlement would abandon this goal and unjustifiably concede that the drivers are and have been independent contractors. Thus, the main aspect of the proposed settlement is contrary to the original goal of the lawsuit. This Court should not approve a settlement agreement that is contrary to the original goal of the lawsuit.

If drivers convince a judge that they should be considered employees, it would represent a momentous victory over Uber—but that proposition remains a tall order at this stage.
Uber's attorneys argued in filings last month that the settlement should be approved, as the objectors constitute a "minuscule percentage (0.00008 percent) of the potential settlement class members," and therefore cannot halt the settlement process at this stage.

"If the objectors believe the settlement is unfair or inadequate, they are entitled to object again at the final approval stage and/or opt out of the settlement class–not defeat the settlement in its entirety," Theane Evangelis wrote.

Further, she added, while the average monetary reward for each driver would be relatively small, "these objections generally do not account for, or even mention, the substantial risk that there would be no recovery on these claims."

In court, Boutrous also argued that Uber has agreed to implement numerous non-monetary policies, including creating a "Drivers Association," which will be able to represent drivers to the management each quarter.

"One way to work out the issues is for individuals to litigate their claims and that likely will happen," he said. "This settlement is a landmark and it advances the entire enterprise and I don’t want to get that lost as we go right to the objectors."

Similarly, Liss-Riordan retorted to the objecting attorneys: "I did the best we could under the circumstances."

Judge Chen is expected to rule on the matter within the coming months.