Uber Technologies won a victory onThursday in its effort to keep unhappy customers from suing in court by persuading a US federal appeals court to send a Connecticut passenger's price-fixing case against the ride-service company into arbitration.
Overturning a lower court ruling, the 2nd US Circuit Court of Appeals in Manhattan said Uber and former chief executive Travis Kalanick properly notified customers in online user agreements that disputes should be arbitrated.
By a 3-0 vote, the appeals court also said the Connecticut passenger, Spencer Meyer, could not sue Uber in court despite claiming he never agreed to waive that right.
"The Second Circuit's powerful and commonsense opinion will serve to protect online contracting and strengthen commerce nationwide," Theodore Boutrous, a lawyer for Uber, said in a statement. "We are thrilled with the decision."
Meyer’s lawyers did not immediately respond to requests for comment. Kalanick’s law firm referred the request to Uber.
The closely watched decision is a boost for efforts to enforce arbitration requirements, which are often buried in long lists of terms and conditions that customers never see.
Internet companies and the US Chamber of Commerce warned that a loss by Uber could inhibit growth in mobile commerce and call into question the enforceability of online contracts.
The decision also offers a lift to San Francisco-based Uber, which has been besieged by high-profile problems.
Kalanick resigned as CEO in June after a shareholder revolt, and is the target of a lawsuit by Uber investor Benchmark Capital to force him off the company's board.
Conspiring with drivers
Uber also faces sexual harassment and discrimination accusations by female staff, a federal inquiry into software that helps drivers avoid police, and a trade secrets lawsuit by Google parent Alphabet's self-driving car unit Waymo.
Meyer accused Uber and Kalanick of conspiring with drivers, whose earnings are shared with Uber, to charge “surge pricing” fares during peak demand periods.
He claimed he never saw a hyperlink to Uber’s arbitration requirement when he used his smartphone to sign up.
Internet users often agree to such terms and conditions through “clickwrap” agreements by checking an “I agree” box, or “browsewrap” agreements where terms are posted via hyperlinks.
In July 2016, US District Judge Jed Rakoff in Manhattan denied Uber's request for arbitration, saying the company never properly alerted Meyer to its policies.
But in Thursday's decision, Circuit Judge Denny Chin said typical smartphone users would find the disclosures "reasonably conspicuous," even on smaller screens common to mobile devices, and Meyer was not excused for not following the hyperlink.
“While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes,” Chin wrote.
The appeals court returned the case to Rakoff to decide whether Uber waived its right to arbitrate with Meyer by actively fighting him in court.
On September 20th, a federal appeals court in San Francisco will hear arguments on whether some Uber drivers can recoup expenses and tips in a class action because they are employees, or must arbitrate their claims.