Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

McElrath v. Uber Technologies Inc.

United States District Court, N.D. California

March 30, 2017

LENZA H. MCELRATH, Plaintiff,
v.
UBER TECHNOLOGIES, INC., Defendant.

          ORDER DENYING MOTION TO COMPEL ARBITRATION AND GRANTING MOTION TO STAY PROCEEDINGS RE: DKT. NO. 18

          JACQUELINE SCOTT CORLEY United States Magistrate Judge.

         In this putative class action, Defendant Uber Technologies, Inc.'s (“Uber”) moves to compel arbitration of Plaintiff's individual claims and to stay the class claims, or alternatively, to stay the entire action. (Dkt. No. 18.) The primary issue concerns whether Uber's Alternative Dispute Resolution Agreement, which contains a class action waiver, is enforceable under Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir 2016). After this action was filed, the Supreme Court granted certiorari of Morris. See Ernst & Young v. Morris, 2017 WL 125665 (Jan. 13, 2017). As compelling Plaintiff to arbitrate his individual claims would run afoul of Morris, the Court DENIES the motion to compel arbitration. However, in light of the significance of Morris to this case, the Court STAYS proceedings pending the Supreme Court's ruling.

         BACKGROUND

         Uber is an online logistics and transportation company located in San Francisco, California. (Complaint at ¶ 8.) Uber develops, markets, and operates a mobile “app” which allows customers to submit trip requests with their smartphones, which connects the customer to a nearby Uber driver. The driver then picks the customer up and drives them to their destination. (Id.) In mid-2014, Plaintiff was recruited by Uber and another technology company for employment as a software engineer. (Id. at ¶ 27.) Relying primarily on Uber's offer to provide Plaintiff with 20, 000 Incentive Stock Options (“ISO”), Plaintiff joined Uber. (Id.)

         Plaintiff subsequently entered into an Employment Agreement with Uber. Among other things, the Agreement promised Plaintiff 20, 000 ISOs “to the maximum extent allowed by the tax code” and that an ISO-qualifying exercise schedule would apply, specifically: “[t]he Option shall vest and become exercisable at the rate of 25% of the total number of option shares after the first 12 months of continuous service and the remaining option shares shall become vested and exercisable in equal monthly installments over the next three years of continuous service.” (Id. at ¶ 28.)

         The Employment Agreement included (1) an Offer Letter, (2) a Confidential Information and Invention Assignment Agreement, (3) and an Alternate Dispute Resolution Agreement. (Dkt. No. 1-1 at 1-9; Dkt. No. 1-2 at 1-24.) The Offer Letter required Plaintiff to sign the Employment Agreement, and noted that he must agree that all disputes relating to his employment would be fully and finally resolved by binding arbitration. (Dkt. No. 1-1 at ¶ 8(f).) The Alternate Dispute Resolution Agreement (“The ADR Agreement”), which Plaintiff also signed, states that it is governed by the Federal Arbitration Act, 9 U.S.C. Section 1 and covers “any disputes.” (Dkt. No. 18-4 at 10-11.) The ADR Agreement also contains a class action waiver:

You and the Company agree to bring any dispute in arbitration on an individual basis only and not on a class collective or private attorney general representative basis. There will be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective, representative or private attorney general action, or as a member in any purported class, collective, representative or private attorney general proceeding, including without limitation pending but not certified class actions (“Class Action Waiver”). Disputes regarding the validity and enforceability of the Class Action Waiver may be resolved only by a civil court of competent jurisdiction and not by an arbitrator. In any case in which (1) the dispute is filed as a class, collective, representative or private attorney general action and (2) a civil court of competent jurisdiction finds all or part of the Class Action Waiver unenforceable, the class, collective, representative and/or private attorney general action must be litigated in a civil court of competent jurisdiction, but the portion of the Class Action Waiver that is enforceable shall be enforced in arbitration.

         (Dkt. No. 18-4 at 11.)

         Approximately two months after beginning work, Plaintiff received a Notice of Stock Option Grant, granting him the promised number of options (20, 000). The notice stated it was an “Incentive Stock Option.” (Dkt. No. 1 at ¶ 30.) However, the Notice contained a different and accelerated exercisability schedule, “allowing the grantee to exercise all the options after six months, regardless of the vesting schedule.” (Id.) Plaintiff contends Defendant failed to state in the Notice that this was a material change from the Employment Agreement, and that Defendant's position was that most of the options would be disqualified from ISO treatment. (Id.)

         In or about April 2015, Defendant adopted an online stock administration system where Plaintiff discovered most of his options were Non-Qualified Stock Options (“NSO”), not ISO as promised. (Id. at ¶ 31.) Of the 20, 000 stocks, Defendant deemed 14, 000 as NSO, and the remaining 6, 000 as ISO. (Id.) In January 2016, Plaintiff attempted to exercise the options Defendant claimed to be NSOs, and was informed he must immediately pay taxes on the transaction for Defendant to recognize the exercise. As a result of the tax requirement, Plaintiff was unable to exercise all of his vested NSO options. (Id. at ¶ 32.)

         Shortly thereafter, Plaintiff filed an action against Uber in San Francisco Superior Court, alleging claims under the Private Attorney General Act (“PAGA”), as well as two claims of fraud. (Dkt. No. 20-1 at ¶¶ 3-4.) Plaintiff later amended the state court complaint to allege only a PAGA claim. On February 6, 2017, upon the parties' request, the state action was stayed pending final judgment in this action or further order of the state court. (Dkt. No. 20-1 at ¶10.)

         Seven months after filing suit in state court, Plaintiff filed this putative class action in this Court alleging six claims for relief under California law. All the claims are premised on Plaintiff's allegation that Defendant represented to Plaintiff and the putative class that they would receive 20, 000 ISO stocks, but most of what they were given were NSO.

         Defendant now moves to compel arbitration seeking to enforce the ADR Agreement and class action waiver. (Dkt. No. 18.)

         Legal ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.