Restaurant delivery app Caviar Inc. won't have to defend its use of independent contractors in court, a federal judge ruled Monday, steering claims against the company into arbitration.
U.S. Magistrate Judge Elizabeth Laporte shot down plaintiffs' contention that Caviar's arbitration agreement, which includes a class action ban, is "permeated" by unconscionability. The judge determined that it meets the minimum fairness requirements set by the California Supreme Court, finding the agreement provides for the same types of relief that would be available in court, doesn't impose unreasonable fees on plaintiffs, and provides for neutral arbitrators.
Laporte ruled that Caviar courier Jeffry Levin may proceed with his representative claim under the California Private Attorney General Act. She requested additional briefing as to whether the court or an arbitrator should decide if the PAGA claim can be arbitrated.
Boston-based lawyer Shannon Liss-Riordan, representing Caviar delivery drivers, had argued the arbitration agreement was void because her clients fell under the Federal Arbitration Act's exemption for interstate commerce. But Laporte found no evidence the drivers ever made trips across state lines.
"Plaintiff has not shown that his deliveries to San Francisco Bay Area customers of food prepared by San Francisco Bay Area restaurants constitute 'engaging in interstate commerce,' " Laporte wrote.
Caviar, represented by Keker & Van Nest, is one of several on-demand apps under attack for building its business model on the labor of independent contractors. Liss-Riordan, who is litigating a similar case against Uber Technologies Inc., argued that Caviar drivers should be classified as employees, and are therefore entitled to benefits such as minimum wage and overtime pay. Laporte indicated during an August hearing that she would grant Caviar's motion to compel arbitration, Liss-Riordan said, but ordered additional briefing.
In addressing the plaintiff's PAGA claim, Laporte turned to the California Supreme Court's decision last year in Iskanian v. CLS Transportation Los Angeles, and the U.S. Court of Appeals for the Ninth Circuit's September decision in Sakkab v. Luxottica Retail North America. Both decisions rejected PAGA bans in employer arbitration agreements, but didn't specify what should be done with the PAGA claims if the remainder of a suit is pushed into arbitration.
Because Caviar specified its agreement is governed by the American Arbitration Association, "It would appear that the court may refer the issue of the arbitrability of the PAGA claim to the arbitrator," Laporte wrote.
Caviar had requested the court stay the PAGA claim pending individual arbitration of plaintiff's other claims. Several other California courts have followed that path, Liss-Riordan said, but she's hoping for a quick green-light to adjudicate the PAGA claim.
"We don't want this delayed over procedural issues," she said, "which is what I fear the defendant here, like many other defendants I've litigated against, will try to do."