S.D. Texas Refuses to Overturn Arbitration Award Issued in Favor of Uber

The Southern District of Texas has denied an Uber driver’s motion to vacate an arbitration award that was issued in favor of the company and granted Uber’s motion to confirm the award.  In Barysas v. Uber Technologies. Inc., No. 4:22-CV-03876 (S.D. Tex. July 14, 2023, report and recommendation adopted Aug. 2, 2023), a man, Barysas, initiated arbitration proceedings against rideshare app company Uber claiming the company miscategorized him as an independent contractor. According to Barysas, Uber willfully and consistently failed to pay him a minimum wage and overtime compensation as required under the Fair Labor Standards Act (“FLSA”) over a period of about five years.

Following arbitration proceedings, an arbitrator, Judge Soussan, issued a 20-page award in favor of Uber.  In her award, the arbitrator examined the economic reality of the parties’ relationship and addressed each of the five factors identified by the Fifth Circuit to determine whether a worker is an independent contractor under the FLSA.  Following arbitral proceedings, the arbitrator found Barysas “was an independent contractor in business for himself. He was not Uber’s employee.”

Dissatisfied with the outcome, Barysas filed a motion to vacate the award in a Texas state court.  Uber removed the case to federal court and filed a motion to confirm the arbitrator’s decision.  The case was then referred to a magistrate judge.  

In his report and recommendation, the magistrate judge first stated the grounds for vacating an arbitration award are exceedingly narrow under the law. He then turned to the various claims put forth by Barysas regarding why the arbitrator’s award should be vacated.  

First, the magistrate judge dismissed the former Uber driver’s claim the arbitrator exceeded her authority.  According to the magistrate judge:

I need not wade into minutiae to determine whether I agree with Judge Soussan’s ultimate conclusion that Barysas was an independent contractor. Given the controlling precedent discussed above, I am not permitted to re-examine the legal or factual underpinnings of the arbitration award issued by Judge Soussan. So long as Judge Soussan “even arguably constru[ed] or appl[ied] the contract,”  her Final Award must stand because the parties “bargained for [her] construction of their agreement.” Oxford, 569 U.S. at 569 (quotation omitted). On this point, I am certain: because, Judge Soussan, at a bare minimum, arguably construed or applied the agreement between the parties, I cannot vacate the Final Award based on alleged errors of fact or law.

Barysas attempts to circumvent this stringent standard for vacatur by arguing that a provision in the arbitration agreement-which states that “[t]he Arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error” (Dkt. 1-2 at 52)-provides the standard for determining whether Judge Soussan exceeded her powers as an arbitrator. Barysas is mistaken.

In Hall Street Associates, the Supreme Court held that the statutory grounds in § 10 of the FAA are the exclusive grounds to vacate an arbitration award. See Hall St. Assocs., 552 U.S. at 584. Because the FAA provides the exclusive framework for determining when to vacate an arbitration award, the parties may not expand the grounds for vacating an arbitration award by agreement. See id. at 583 n.5 (The FAA limits parties’ ability to “contract for expanded judicial review.”). The parties’ agreement in Hall Street Associates allowed the district court to vacate an arbitration award “where the arbitrator’s findings of act are not supported by substantial evidence” or “where the arbitrator’s conclusions of law are erroneous.” Id. at 579. The Supreme Court held that this provision was not enforceable because if the parties are permitted to supplement the grounds for vacatur, it would “open[] the door to the full-bore legal and evidentiary appeals that can render informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process.” Id. at 588 (cleaned up). The same analysis applies to the present case. The FAA simply does not permit the parties to expand by agreement the scope of judicial review of an arbitration award. Section 10 “provide[s] the FAA’s exclusive grounds for expedited vacatur.” Id. at 584.

Next, the magistrate judge addressed whether the arbitrator exhibited evident partiality:

Barysas cannot establish evident partiality. There is a laundry list of reasons why. To start, although Barysas now complains that Uber submitted prior arbitration awards to Judge Soussan for her consideration, Barysas’s counsel actually invited Judge Soussan to review those same arbitration awards. See Dkt. 1-2 at 1063 (“And a fun fact, Judge, is the last three arbitrators have ruled against us, and we welcome you to read their opinions and their–and how they  analyze this case. And, of course, we’re critical of that analysis, and that’s why we need to challenge you.” (emphasis added)). By not objecting to this evidence until after the arbitration award was issued, Barysas unquestionably waived his right to object. See Dealer Comput. Servs., Inc. v. Michael Motor Co., 485 Fed.Appx. 724, 727 (5th Cir. 2012) (“A party seeking to vacate an arbitration award based on an arbitrator’s evident partiality generally must object during the arbitration proceedings. Its failure to do so results in wavier of its right to object.”).

Even if Barysas had not waived his right to object to such evidence, his argument still falls flat. As Uber points out, “[p]rior awards in favor of Uber in misclassification cases involving drivers are indisputably relevant to Uber’s position that it properly classified Barysas as an independent contractor.” Dkt. 5 at 15. Barysas has no response to that argument. And there is more. After Barysas’s counsel encouraged Judge Soussan to review the previous arbitration awards, Judge Soussan went out of her way to say: “I can guarantee all of you that I make up my own mind. I don’t rely on other opinions . . . I make up my own mind, and my mind is made up on the law and the facts. That is how I will proceed in this case.” Dkt. 1-2 at 1064-65. Suffice it to say that Barysas has failed to come anywhere close to “produc[ing] specific facts from which a reasonable person would have to conclude that the arbitrator was partial to” Uber. See Householder Grp., 354 Fed.Appx. at 852 (quotation omitted).

The magistrate judge then found the arbitrator did not improperly exclude evidence that was material to the dispute because ‘an arbitrator has ‘broad discretion to make evidentiary decisions.’ Int’l Chem. Workers Union v. Columbian Chems. Co., 331 F.3d 491, 497 (5th Cir. 2003).”  Furthermore, the magistrate judge stated Barysas failed to show that any of the arbitrator’s evidentiary decisions “denied him the right to a fair hearing.”

The magistrate judge added:

It is not my role, as a federal judge, to second-guess each and every discovery ruling an arbitrator makes during an arbitration proceeding. See ARMA, S.R.O. v. BAE Sys. Overseas, Inc., 961 F.Supp.2d 245, 264 (D.D.C. 2013) (“[D]istrict courts are not empowered to second-guess such decisions-procedural or substantive- even if there is evidence that the arbitrator erred.”). “Courts rarely take issue with an arbitrator’s discovery-related decisions, so long as excluded evidence was not materially necessary to making a claim.” Hale v. Morgan Stanley, 571 F.Supp.3d 872, 884 (S.D. Ohio 2021). By considering and deciding the parties’ discovery-related motions, I find Judge Soussan exercised her “full authority to determine whether or not certain evidence would prove relevant to [her] determination.” ARMA, 961 F.Supp.2d at 264.

Finally, the magistrate judge recommended that the federal court deny Barysas’s motion to vacate the arbitral award and grant Uber’s motion to confirm.  The Southern District of Texas then issued an order adopting the magistrate judge’s report and recommendation in the case.

Photo by: Paul Hanaoka on Unsplash