Most of us are familiar with that little box that pops up every time we visit almost any website. It usually says something about agreeing to the terms of service, which are sometimes listed in the box, while other times there’s a link to a full web page devoted to a long list of legal terminology that few people bother to read. More often than not, users check the box without bothering to read all or any of the terms of service so we can go about our business. Reading all the terms of every service we ever use could very well take up most or all our time so we tend to skip over them.
Recently, U.S. District Judge Jed Rakoff recognized this fact when denying Uber’s motion to compel arbitration that was filed in Manhattan federal court.
Spencer Meyer, an Uber customer from Connecticut, sued the ride share company’s CEO, Travis Kalanick, for allegedly participating in a price-fixing scheme with drivers that allegedly raised Uber prices during periods of high demand. Because Uber takes a certain percentage of every driver’s earnings, the lawsuit alleged both Uber and its drivers benefited from the allegedly calculated rise in prices. Although the consumer lawsuit was initially filed only against Kalanick, the complaint was later amended to include Uber as a defendant and that’s when the company asked the court to compel arbitration.
According to Uber, the company’s terms of service require all disputes to be settled via arbitration.
Arbitration was initially created as a way for companies to settle disputes between themselves without crowding the courts with business disputes. Legal matters handled in arbitration are settled privately by a third-party arbitrator and the parties never get an explanation for why the arbitrator ruled the way they did. Although there are arbitrators with a reputation for being fair and unbiased, that is not true of all arbitrators and, because they are in business to make money, it is common for arbitrators to be swayed by the party that tends to bring them a lot of business, even if they’re not necessarily aware of the bias.
Despite the original intention for arbitration to be used as a way to settle disputes between businesses, companies have increasingly been including arbitration agreements in their contracts with their employees as well as their consumers. These agreements put both employees and consumers at a severe disadvantage because arbitration does not have the ability to handle class action lawsuits, which means enforced arbitration agreements prevent many legal disputes from ever being heard at all because individual complaints rarely justify the costs of arbitration. Even when a dispute does make it to arbitration, it rarely gets a chance to benefit anyone not directly involved in the dispute because the private nature of arbitration means anyone with a similar claim never gets the chance to learn that their claim may have a chance in arbitration.
Judge Rakoff, therefore, scored a point for consumers when he ruled that Uber’s arbitration agreement could not be enforced because consumers allegedly consented to the company’s terms and conditions without being explicitly asked to consent to them.
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