Despite the high number of lawsuits that get filed these days, actually taking a lawsuit all the way to trial isn’t as common as a lot of TV dramas would have you believe. It’s an expensive and time-consuming process, which means it’s usually a last resort for everyone involved. Most people try to use mediators or some other form of neutral third party before they resort to asking a judge to weigh in on their dispute.
Even after a lawsuit has been filed, the parties involved get together outside of court to negotiate a settlement agreement. If they can reach a consensus, then they can avoid the hassle of pursuing the trial and put an end to the matter. It’s certainly better than spending the considerable time and money involved in pursuing legal matters, but it takes more than just the two parties agreeing to a settlement in order to avoid trial: the judge presiding over the case has to approve the settlement agreement.
Settlement negotiations can take place any time between the filing of a lawsuit and the start of the trial, which means the judge usually does not have all the information when deciding whether to approve the settlement agreement. Nevertheless, the judge will have received at least the plaintiff’s complaint and some sort of response from the defense. The judge then has to use whatever information they have been given in order to make sure the settlement agreement is fair to both parties.
It’s rare that a judge will send attorneys back to the negotiating table, but that’s just what U.S. District Judge Edward M. Chen did when the attorneys for Uber and a class of drivers presented him with their proposal to settle the case for $100 million.
The lawsuit was filed on behalf of drivers working for the ride sharing company who were classified as independent contractors, but were allegedly treated like employees. Included in the complaint were allegations that drivers would be removed from the app without their knowledge or consent and that the ride sharing company allegedly withheld a portion of the tips they earned.
Although $100 million sounds like a lot, and it will certainly put a dent in Uber’s bank account, Judge Chen pointed out that attorneys for the drivers had previously argued that their clients’ claims were worth much more. For example, the settlement agreement sought to add a claim under the Private Attorneys General Act (PAGA) for $1 million, which is just a fraction of the $1 billion that attorneys for the plaintiffs had previously estimated a claim under the PAGA in this case would be worth.
Judge Chen also pointed out that the drivers ran a greater risk by pursuing the matter in court than Uber because Uber’s employment contract includes an arbitration agreement. If the case makes it to the Ninth Circuit Court, there’s a chance the federal court will enforce the arbitration agreement, in which case each plaintiff will have to pursue their claims individually and abandon the class action. Due to the combination of all these factors, the judge ruled that the proposed settlement agreement is in Uber’s favor to an unfair degree.
Judge Chen further noted that the settlement agreement doesn’t even resolve the issue of whether to classify drivers as employees or independent contractors. Given that was a major factor in the filing of the lawsuit, the matter cannot be considered settled until that question has been decisively resolved.
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