Opinion
SUCV20162180D
01-02-2019
Christopher KAUDERS et al. v. UBER TECHNOLOGIES, INC. et al.
January 3, 2019
MEMORANDUM OF DECISION AND ORDER ON (1) PLAINTIFF’S MOTION FOR RECONSIDERATION OF THE COURT’S ORDER REMANDING CLAIMS TO ARBITRATION and (2) DEFENDANTS UBER TECHNOLOGIES, INC. and EASIER, LLC’s MOTION TO CONFIRM ARBITRATION AWARD
Douglas H. Wilkins, Associate Justice, Superior Court
This court confesses its substantial difficulty in understanding what, if any, limits the federal courts have placed upon the expansion of federal power into traditionally state-law areas concerning contract formation when arbitration is at issue. This court’s difficulty arises largely from sweeping federal decisions regarding Federal Arbitration Act (FAA) preemption that, to a state court, are "untenable." See Feeney v. Dell, Inc., 466 Mass. 1001, 1003 (2013), applying American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2312 (2013). This court again addresses FAA preemption and state contract law in response to the Plaintiff’s Motion for Reconsideration of this Court’s Order Remanding Claims to Arbitration, dated November 28, 2018 (Third Reconsideration Motion, referred to as "the Motion"), which the Defendants have opposed. After hearing on July 25, 2017, the Motion is ALLOWED IN PART AND DENIED IN PART .
PROCEDURAL BACKGROUND
Plaintiffs, Christopher P. Kauders ("Mr. Kauders"), Lee C.S. Kauders ("Ms. Kauders") and Hannah Kauders ("Hannah") (collectively, "Plaintiffs" or "The Kauders") have brought this discrimination, c. 93A and intentional tort action against Uber Technologies, Inc. ("Uber"), Rasier, LLC ("Rasier") and Jorge Munera ("Mr. Munera") for alleged refusal to serve Mr. Kauders because he uses a service dog. The complaint was filed on July 12, 2016, removed to federal court and ultimately remanded to this Court on May 3, 2017, for jurisdictional reasons arising out of the lack of complete diversity of citizenship between one defendant, Mr. Munera and the plaintiffs, all four of whom are all Massachusetts citizens. On June 26, 2017, Uber and Rasier filed "Defendants’ Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay Proceedings" ("Motion"), which the Plaintiffs opposed.
Last year, in light of, among other things, its own prior experience with the Feeney saga, this court applied federal preemption reluctantly in favor of an order compelling arbitration, because:
The Supreme Judicial Court has held that claims arising under G.L.c. 151B are subject to arbitration only if the arbitration clause applies to such claims with "clear intent." Warfield v. Beth Israel Deaconess Medical Center, Inc., 454 Mass. 390, 401-02 (2009). Grounded in public policy concerns, Warfield predated significant developments in the United States Supreme Court. See, e.g., Feeney v. Dell, Inc., 466 Mass. 1001 (2013) (Feeney III), overruling Feeney v. Dell, Inc., 454 Mass. 192, 193 (2009) (Feeney I) and reconsidering Feeney v. Dell, Inc., 465 Mass. 192 (2013) (Feeney II), on the basis of American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2312 (2013). The Supreme Judicial Court later expressed doubt that an "express reference" requirement for arbitration of specific statutory rights survives FAA preemption. Machado, 471 Mass. at 218, fn.19.
If there was any room for argument after Feeney III, and Machado, the Supreme Court recently invalidated the type of clear statement rules articulated in Warfield, which are specifically applicable to arbitration agreements but not to contracts generally. Kindred at __ (Part IIA) ("The Kentucky Supreme Court’s clear-statement rule, in just that way, fails to put arbitration agreements on an equal plane with other contracts").
The Court said: "Even if Massachusetts law did require an arbitration clause to specifically mention applicability to claims under the Wage Act, ‘such a principle’ might be ‘preempted by the [Federal Arbitration Act], ’ Awuah v. Coverall N. Am., Inc., 703 F.3d 36, 45 (1st Cir. 2012), as it could be interpreted to prohibit or disproportionately disfavor arbitration. See AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740, 1747 (2011)."
Memorandum of Decision and Order on Defendants’ Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay Proceedings, dated August 1, 2017 (2017 Arbitration Order) at 4. This rationale addressed the plaintiffs’ principal argument, which focused upon Warfield . Plaintiffs’ Opposition to Defendants’ Motion to Compel Arbitration and Dismiss or, In The Alternative, Stay Proceedings (June 15, 2017) at 4-6 (Pl. First Opp.). The Court did strike the offending portions of the Limitation of Liability Clause, along with the cross-reference in the "Arbitrator’s Decision" paragraph and ordered arbitration of the disputes raised by Mr. and Ms. Kauders. See Machado v. Svstem 4, LLC, 471 Mass. 204, 220 (2015) (Ordering arbitration, but applying a contractual severability clause to sever an invalid confidentiality provision in the parties’ contract).
On September 1, 2017, this court declined to reconsider the 2017 Arbitration Order. See Memorandum on Plaintiff’s Motion for Reconsideration of Ruling on Defendants’ Motion to Compel Arbitration (First Reconsideration Order). The court did, however, modify the 2017 Arbitration Order so that it applies to all plaintiffs, including Megan Kauders. The court again denied reconsideration on November 28, 2017 (Second Reconsideration Order).
After these rulings, the parties proceeded to arbitration, where Uber prevailed on the ground that, although the drivers did violate state law, Uber lacked sufficient connection with the drivers’ actions to be liable in its own right. In the meantime, however, the First Circuit Court of Appeals rejected Uber’s interpretation to the same agreements at issue here. Cullinane v. Uber Techs., Inc., 893 F.3d 53 (1st Cir. 2018). Cullinane reversed a District Order— cited by the parties and the court in the 2017 proceedings in this case— which had rejected an argument that, among other things, challenged whether, under state law of contract formation, Uber had obtained an enforceable agreement to arbitrate on virtually the same facts as those present here. The First Circuit’s decision suggested that, perhaps, there is a limit upon FAA preemption which this court should have applied in the 2017 Arbitration Order. It is highly persuasive that, in fact, Massachusetts may apply its usual rules of contract formation to these facts.
Because the court has serious concerns about the correctness of the 2017 Arbitration Order in light of the First Circuit’s decision in Cullinane, the court grants the Motion for Reconsideration and vacates the 2017 Arbitration Order to the extent that it enforced the putative contract to arbitrate.
FACTUAL BACKGROUND
The Complaint alleges the following: Christopher Kauders is a legally blind Massachusetts resident and guide dog user. On three separate occasions in 2015 and 2016, Uber and Rasier allegedly refused to allow Mr. Kauders into their transportation service vehicles because he uses a guide dog. His wife and daughter were with him on at least one occasion. Uber and Rasier had notice of each incident before the next one occurred. Mr. Kauders alleges that these refusals violated the prohibition on discrimination against dog guide users. See G.L.c. 272, § 98A, which is incorporated into G.L.c. 151B, § 5.
The parties do not context the following: Mr. and Ms. Kauders registered with Uber at different times (on June 27, 2014 and May 13, 2015, respectively). In or around October 2015, Hannah Kauders signed up for an Uber account and presumably entered into a version of the Agreement substantially similar to the ones affecting her parents.
The additional material facts— apparent primarily from the screen shots submitted by Uber— are as follows: Before riders can request transportation services through the Uber App, they must register, which requires creating an Uber account and accepting Uber’s terms and conditions. Registration includes clicking on a button deemed to create a contract, known as a Service Agreement ("Agreement").
The registration process involves three basic steps. Each step appears as a single screen on the user’s smartphone, with no scrolling required. Step One is "Create an Account." A legend appears stating: "We use your email and mobile number to send you ride confirmations and receipts." At that stage, prospective riders enter their email address, mobile phone number and a chosen password. They then hit the "Next" button at the top right of the screen to move to the next step.
Step Two is "Create a Profile." On this screen, the following words appear: "Your name and photo helps your driver identify you at pickup." Prospective Riders enter their first and last names and hit the "Next" button to move to the final step.
Step Three is "Link Payment." Here, prospective riders either scan or enter their credit card information. The following message appears at the bottom of the screen: "By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy." The words "Terms & Conditions and Privacy Policy" are a hyperlink which directs the rider to a screen with two links: one to Uber’s Terms and Conditions and a second to Uber’s Privacy Policy. However, the version of the "Link Payment" screen attached to Uber’s papers show that the words "Terms & Conditions and Privacy Policy" are enclosed within a rectangular box and are as bold as the words "scan your card" and "enter promo code," but do not have the customary appearance of a hyperlink, namely set forth in blue and underlined. The rider must click on the appropriate link to view either document. Otherwise, the "Terms & Conditions & Privacy Policy" do not appear on the rider’s screen during any of the three steps of the registration process. Upon entering their payment information, riders create their Uber account by clicking the "DONE" button on the top left corner. Prospective riders cannot complete the registration process without completing all three screens and clicking the "DONE" button on the final screen.
The defendants’ papers attach three different versions of the Agreement, with somewhat different language. All plaintiff’s Agreements include an arbitration clause, which states:
Dispute Resolution
You and Company agree that any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation of validity thereof or the use of the Service or Application (Collectively "Disputes") will be settled by binding arbitration, except that each party retains the right to bring an individual action in small claims court and the right to seek injunctive or other equitable relief in a court of competent jurisdiction to prevent the actual or threatened infringement, misappropriate or violation of a party’s copyrights, trademarks, trade secrets, patents or other intellectual property rights. You acknowledge and agree that you and Company are each waiving the right to trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding.
* * *
Arbitration Rules and Governing Law
The arbitration will be administrated by the American Arbitration Association ("AAA") in accordance with the Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes (the "AAA Rules") then in effect, except as modified by this "Dispute Resolution" section ... The Federal Arbitration Act will govern the interpretation and enforcement of this Section.("Arbitration Clause"). The "Terms & Conditions" define "service" and "Application" as follows: "By using or receiving any services supplied to you by the Company (collectively, the ‘Service’), and downloading, installing or using any associated application supplied by the Company which purpose is to enable you to use the Service (collectively, the ‘Application’), you hereby expressly acknowledge and agree to be bound by the terms and conditions of the Agreement, and any future amendments and additions to this Agreement as published from time to time at https://www.uber.com/terms or through the Service."
The Agreements also include a Limitation of Liability clause, quoted and invalidated in the 2017 Arbitration Order. The Arbitration Clause includes the directive that "[t]he arbitrator’s award [of] damages must be consistent with the terms of the ‘Limitation of Liability’ section above as to the types and the amounts of damages for which a party may be held liable."
DISCUSSION
I.
With two exceptions, the court has already addressed the issues. The first exception is the argument based upon Ajemian v. Yahoo!, Inc., 83 Mass.App.Ct. 565, 573-74 (2013), which was the key authority cited by the First Circuit in Cullinane and which the Plaintiffs addressed in Pl. First Opp. at 8-10. The 2017 Arbitration Order did not address this argument, which this court erroneously treated as equivalent to the plaintiffs’ challenge based upon lack of conspicuousness, which is no longer viable after Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S.Ct. 1421 (2017).
Ajemian was not an arbitration case. It set forth the following generally-applicable principles of contract formation:
Although forum selection clauses contained in online contracts have been enforced, courts have done so only where the record established that the terms of the agreement were displayed, at least in part, on the user’s computer screen and the user was required to signify his or her assent by "clicking" "I accept." [citations omitted]. This is known as a "click-wrap" agreement ... By contrast, a "browsewrap" agreement is one "where website terms and conditions of use are posted on the website typically as a hyperlink at the bottom of the screen." [citations omitted]. Although forum selection clauses have almost uniformly been enforced in clickwrap agreements, we have found no case where such a clause has been enforced in a browsewrap agreement.Id., 83 Mass.App.Ct. at 576. The burden to show that the terms of the contract were reasonably communicated and accepted lies on the party seeking to enforce the clause in question. Id. at 574-75. Ajemian ’s description of a browsewrap agreement fits the putative agreement in this case perfectly.
Relying upon Ajemian ’s statement of Massachusetts law, the First Circuit held that virtually the same fact pattern failed to establish an agreement to arbitrate. It followed the Massachusetts Appeals Court’s analysis, which asks first: whether the contract terms were "reasonably communicated to the plaintiffs" and, second, whether those terms were "accepted and, if so, the manner of acceptance." Cullinane, 893 F.3d at 61-62, quoting Ajemian, 83 Mass.App.Ct. at 612-13. The First Circuit concluded:
[T]he design and content of the "Link Card" and "Link Payment" screens of the Uber App interface ... lead us to conclude that Uber’s "Terms of Service & Privacy Policy" hyperlink was not conspicuous. Even though the hyperlink did possess some of the characteristics that make a term conspicuous, the presence of other terms on the same screen with similar or larger size, typeface, and with more noticeable attributes diminished the hyperlink’s capability to grab the user’s attention ...
Furthermore, when we consider the characteristics of the text used to notify potential users that the creation of an Uber account would bind them to the linked terms, we note that this phrase was even less conspicuous than the "Terms of Service & Privacy Policy" hyperlink. This notice was displayed in a dark green small-sized non-bolded font against a black background. The notice simply did not have any distinguishable feature that would set it apart from all the other terms surrounding it.Cullinane, 893 F.3d at 63-64. There is no meaningful distinction between the facts of this case and those in Cullinane . In fact, Uber declined to point to any such distinction when asked in this case.
The Plaintiffs in this case point to an additional source of confusion, even beyond the problems discussed in Cullinane . It is unclear at what point and by what action, if any, the App user agrees to the "Terms & Conditions and Privacy Policy." Uber therefore cannot meet its burden to show acceptance of the on-line terms, including the Arbitration Clause for purposes of contract formation.
The confusion results from the sequence of the three screens. As noted above, the. first screen is entitled "create an account." Not until the third screen does the Uber App refer to the "Terms & Conditions and Privacy Policy." It does so with the unfortunate language: "By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy." Since the App states expressly that the rider "creates" an account by completing the first screen, a user reasonably concludes that, by the third screen, he or she has already created an Uber account and therefore has already agreed to the Terms & Conditions. Clicking on the link in the third screen would therefore appear futile. That exacerbates the inherent problem with a browsewrap agreement, which does not timely alert the user at the point in the process when he or she is agreeing to terms not shown on the screen.
The Plaintiffs presented all of these arguments in timely fashion, in opposition to the defendants’ original motion to compel arbitration. It now appears that, under Ajemian and Cullinane, this court erred in ordering arbitration. While arbitration has already occurred, that does not preclude full judicial consideration of the validity of the arbitration clause. See Feeney v. Dell, 454 Mass. 192, 298-99 (2009) (appellate jurisdiction existed to review an order compelling arbitration, even though the arbitration had already occurred). Therefore, the court vacates its 2017 Arbitration Order.
II. MOTION TO CONFIRM ARBITRATION AWARD
The second area not previously addressed by court is Defendants Uber Technologies, Inc. and Rasier, LLC’s Motion to Confirm the Arbitration Award ("Motion to Confirm"). Because Uber has a right to appeal the above order denying its application to compel arbitration (see Feeney, 454 Mass. at 298-99), the court addresses these issues, in the interest of efficiency.
The arbitrator found in favor of the defendants on the ground that, although the drivers violated G.L.c. 272, § 98A, Uber and Rasier lacked sufficient connection with those drivers to make them liable for those violations. The Court’s power to vacate an arbitration award is very limited. Conway v. CLC Bio, Inc., 87 Mass.App.Ct. 203, 506-07 (2015). See also Superadio Ltd. Partnership v. Winstar Radio Products, LLC, 446 Mass. 330, 333-34 (2006). The Uniform Arbitration Act, G.L.c. 251, § 12, provides:
That section provides:
(a) Upon application of a party, the court shall vacate an award if:—
1. The award was procured by corruption, fraud or other undue means;
2. There was evident partiality by an arbitrator appointed as a neutral, or corruption in any of the arbitrators, or misconduct prejudicing the right of any Party;
3. The arbitrators exceeded their powers;
4. The arbitrators refused to postpone the hearing upon sufficient cause being shown therefore or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section five, as to prejudice substantially the rights of a party ...
Notably, the statute does not authorize the court to vacate an award if it disagrees with the arbitrator’s interpretation of the law or its resolution of the fact disputes. School Dist. of Beverly v. Geller, 50 Mass.App.Ct. 290, 293 (2000) ("Neither error of fact nor error of law provides grounds for vacating an award").
The Appeals Court in Conway, 87 Mass.App.Ct. at 506-07, set forth the limits on judicial review of an arbitrator’s award under a private arbitration agreement:
Absent fraud, corruption, or other undue means in the procurement of the agreement to arbitrate or a showing that the award is otherwise void or voidable, an arbitrator’s award is binding. Id. at 336-37. McInnes v. LPL Financial, LLC, 466 Mass. 256, 262-63 (2013). An arbitrator’s findings of fact and conclusions of law are binding even if erroneous. Boston Water Power Co. v. Gray, 6 Met. 131, 181 (1843). Jones v. Boston Mill Corp., 6 Pick. 148, 156 (1828). Trustees of the Boston & Me. Corp. v. Massachusetts Bay Transp. Authy., 363 Mass. 386, 390 (1973). Dane v. Aetna Cas. & Sur. Co., 369 Mass. 966, 967 (1976) (Dane). However, an arbitrator’s award may be vacated if the arbitrator exceeded her authority. See G.L.c. 251, § 12(a)(3); Superadio L.P., supra at 334.
... An arbitrator exceeds her authority if she awards relief beyond the scope of the arbitration agreement, beyond that to which the parties bound themselves, or enters an award prohibited by law. Superadio supra . "The fact that an arbitrator [may have] committed an error of law does not alone mean that [s]he has exceeded [her] authority." City of Boston v. Professional Staff Ass’n, 61 Mass.App.Ct. 105, 112 (2004) (quotation omitted) ...
The plaintiffs have not shown that any of the very narrow grounds for vacating an arbitration award exist here. If the appellate courts hold that an agreement to arbitrate exists here, therefore, the arbitrator’s award must be affirmed. This court denies the Motion to Compel only because, as stated in part I, above, it holds that there was no valid agreement to arbitrate.
CONCLUSION
For the above reasons:
1. Plaintiff’s Motion for Reconsideration of this Court’s Order Remanding Claims to Arbitration, dated November 28, 2018 (P # 32) is ALLOWED.
2. Upon reconsideration, Defendants’ Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay Proceedings (P # 21) is DENIED.
3. Defendants Uber Technologies, Inc. and Rasier, LLC’s Motion to Confirm the Arbitration Award (P # 29) is DENIED.
4. The stay of proceedings is VACATED.
Notwithstanding any other provision of law, any blind person ... or other physically handicapped person accompanied by a dog guide, shall be entitled to any and all accommodations, advantages, facilities and privileges of all public conveyances ... and places of public accommodation, within the commonwealth, to which persons not accompanied by dogs are entitled ... and no such blind person ... or other physically handicapped person shall be required to pay any charge or fare for or on account of the transportation on any public conveyance for himself and such dog so accompanying him in addition to the charge or fare lawfully chargeable for his own transportation. Whoever deprives any blind person ... or other physically handicapped person of any right conferred by this section shall be punished by a fine of not more than three hundred dollars and shall be liable to any person aggrieved thereby for such damages as are set forth in section five of [G.L.c. 151B]; provided, however that such civic forfeiture shall be of an amount not less than one hundred dollars.