ND California Orders FCRA Case to Arbitration Based on Lyft Ride-Sharing App’s TOS

The Northern District of California has ordered a proposed class action lawsuit that was filed against ride-sharing app Lyft and based on purported violations of the Fair Credit Reporting Act (“FCRA”) to arbitration.   In Peterson v. Lyft, Inc., No. 16-CV-07343-LB (N.D. Cal., November 19, 2018), a California man, Peterson, downloaded and installed the Lyft app on his mobile phone in order to create an account with the company on two separate occasions. As part of the installation process, Peterson checked a box stating he agreed to Lyft’s Terms of Service (“TOS”).  Both of the TOS Peterson assented to included an agreement to arbitrate all legal claims against Lyft.

Next, Peterson twice filed an application to become a Lyft driver.  Each time, Lyft declined to employ Peterson based on the results of a background screening that was conducted by a third party.  Despite that Lyft denied the man’s employment application based on the results of a background check, Lyft failed to provide Peterson with a copy of the background report or written notice regarding his rights under the FCRA.  About 17 months after Peterson’s initial application, he finally obtained a copy of the third party background report.

Later, Peterson filed a putative class action lawsuit in a California federal court alleging Lyft violated the FCRA when the company failed to provide him with a copy of the background report used to deny his driver application or written notice regarding his rights under the law.  Lyft responded to the case by filing a motion to compel the dispute to arbitration based on the company’s TOS.  Peterson then claimed the arbitration provision included in Lyft’s TOS was unconscionable and should not be enforced.

In its written opinion, the California federal court first held a valid agreement to arbitrate existed between the parties.  After that, the court turned to whether the arbitral provision included a delegation clause.  The court stated “the parties’ contract expressly delegates questions of the arbitrability of any dispute to the arbitrator.”  The Northern District of California then turned to whether the agreement to arbitrate was unconscionable.

After stating the burden of proving unconscionability was placed on “the party opposing arbitration,” the federal court held the contract was not procedurally unconscionable.  Next, the court examined whether the parties’ contract was substantively unconscionable under state law.  Although Peterson offered four bases for substantive unconscionability, he offered no authorities to support two of his claims.  In addition, the federal court stated:

Third, Mr. Peterson argues that AAA rules contain a privacy provision that is unconscionable, citing Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003). As the Ninth Circuit has held, subsequent California state-court decisions have undermined the holding in Ting. Under current California and Ninth Circuit law, privacy provisions like the one at issue do not render the arbitration provision unconscionable. Poublon, 846 F.3d at 1265–67 (citing Ting, Sanchez v. CarMax Auto Superstores Cal. LLC, 224 Cal. App. 4th 398, 408 (2014), and other authorities).

Finally, Mr. Peterson argues that the arbitration provision waives his statutory right to bring a claim under the California Private Attorney General Act (“PAGA”) and that this waiver is unconscionable. This argument fails for two reasons. First, the Ninth Circuit has held that while a PAGA-claim waiver in an agreement is unenforceable, such a waiver does not render an arbitration provision in the agreement substantively unconscionable. Poublon, 846 F.3d at 1264.  Second, Mr. Peterson has not pleaded a PAGA claim in any event, and thus lacks standing to challenge a PAGA waiver provision that is not being applied to him. Gerton v. Fortiss, LLC, No. 15-cv-04805-TEH, 2016 WL 613011, at *3 n.3 (N.D. Cal. Feb. 16, 2016) (citing Arellano v. TMobile USA, Inc., No. 10-05663 WHA, 2011 WL 1362165, at *5 (N.D. Cal. Apr. 11, 2011)).

Finally, the Northern District of California concluded:

The court finds that (1) the parties entered into a binding agreement that contains an arbitration provision, (2) the parties in their arbitration provision delegated questions about the arbitrability of disputes — such as whether Mr. Peterson’s FCRA claim falls within the scope of the arbitration provision — to the arbitrator, and (3) the arbitration provision is enforceable and not unconscionable. The court grants Lyft’s motion to compel arbitration and dismisses this action. Cf. Loewen, 129 F. Supp. 3d at 966 (“Because the Court concludes that arbitration should be compelled, it has the discretion to stay the case under 9 U.S.C. § 3 or dismiss the litigation entirely. Neither side has presented any compelling reason to keep this case on the Court’s docket and the case is hereby dismissed.”) (citations omitted).

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