By Linda Chiem

Law360 (July 15, 2020, 8:40 PM EDT) -- A former Lyft driver told a D.C. federal court Tuesday that the ride-hailing company can't hide behind its arbitration agreement to dodge proposed class claims it's flouting D.C. law by failing to provide paid sick leave to drivers.

Plaintiff Cassandra Osvatics asked U.S. District Judge Ketanji Brown Jackson to reject Lyft Inc.'s motion to compel arbitration, saying in a Tuesday filing that the company can't escape judicial scrutiny of its systemic failure to provide sick leave to thousands of its drivers, as required by the D.C. Accrued Safe and Sick Leave Act.

The suit, filed in May, claims Lyft's refusal to offer paid sick leave to drivers during the global COVID-19 pandemic is jeopardizing public health and safety and leaving drivers vulnerable to exposure to the novel coronavirus.

Determined to keep the dispute in court instead of being pushed into private arbitration, Osvatics said that she and similarly situated Lyft drivers are interstate workers who are exempt from arbitration under the Federal Arbitration Act. But Lyft has argued that the FAA's so-called transportation worker exemption doesn't stretch so far as to include ride-hail or ride-share drivers, according to court filings.

Section 1 of the FAA exempts from arbitration "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." But the statute does not define the phrase "engaged in foreign or interstate commerce," nor does it specifically identify which "class[es] of workers" count toward the exemption.

Osvatics, a Maryland resident, says Lyft drivers routinely connected with and picked up passengers from airports, train stations and bus terminals within the District of Columbia metropolitan area and neighboring Virginia, which more than establishes the interstate nature of their work, she said.

"Lyft largely turns a blind eye to these allegations, arguing instead that Section 1's interstate commerce exception applies only to the transportation of goods, not passengers, and the proper framework for analysis is 'all rideshare drivers' (not even all Lyft drivers) anywhere in the United States," Osvatics argued in Tuesday's brief.

"But this first proposed limitation is nowhere in the statutory language, contradicts the well-established understanding of 'commerce' both at the time the FAA was enacted and today, and was roundly rejected by the only appellate court to be squarely presented with the question," Osvatics said.

Importantly, the Third Circuit's Singh v. Uber ruling last year suggested that drivers transporting passengers, not just traditional goods, could potentially qualify for the Section 1 exemption. Singh opened up an avenue for gig-economy workers to pursue employment disputes in court so long as they can prove they are engaged in interstate commerce.

Osvatics ripped Lyft's "untested and self-serving" argument that ride-hail or rideshare drivers nationwide don't cross state boundaries or the company's suggestion that drivers travel interstate only on "sporadic" or "incidental" occasions. That argument, according to Osvatics, "is untethered from plaintiff's well-pleaded allegations and Lyft's own acknowledgment of the geographic reality of the D.C. metropolitan area."

She also urged the court to reject Lyft's attempt to pivot and have its arbitration agreement enforced under the D.C. Revised Uniform Arbitration Act, arguing that Lyft is completely ignoring the fact that its terms of service expressly requires that arbitration is "governed" by the FAA, and not any state law.

"Lyft's TOS did not specify that D.C. law would apply in the absence of the FAA, and expressly declined to have California law apply to the arbitration clause," Osvatics said. "Lyft's omission is especially telling because Lyft had unilateral control over drafting the terms of its TOS and chose for only the FAA to apply."

On top of that, Lyft's arbitration agreement is self-defined as a "consumer" contract, which the RUAA specifically renders unenforceable and D.C. maintains a strong public policy that prevents the enforcement of mandatory adhesive contracts like Lyft's, especially when they contain a class waiver, according to the brief.

But Lyft's arbitration clause is just plain unconscionable, Osvatics said.

"As to procedural unconscionability, Lyft's TOS and arbitration clause are undisputedly presented on a take-it-or-leave-it basis in a contract of adhesion," Osvatics argued. "The TOS is 'not, of course, negotiable,' and plaintiff had little meaningful choice in rejecting the contract because mandatory arbitration clauses have become 'nearly ubiquitous' in the rideshare industry."

Lyft argued in its June 15 motion that drivers who sign up to use the Lyft app clearly agree to settle all of their legal disputes with the company through individual arbitration and that they're barred from pursuing any class actions. And Osvatics knew what she was getting into, Lyft said.

Osvatics, who drove for Lyft from about November 2015 to June 2018, first accepted the company's terms of service on Oct. 4, 2015, then again on Oct. 30, 2016, May 4, 2018, and May 4, 2020, according to Lyft.

"Plaintiff agreed to the terms multiple times over many years, each time being presented with their text," Lyft said. "When plaintiff agreed to the currently operative terms, she was presented with the terms and able to scroll through them before clicking a large purple button at the bottom that said 'I Accept.'"

Osvatics kicked off the suit in May seeking to represent a class of drivers who work or worked for Lyft in D.C. for at least 90 days between when Lyft started operating there and the date of final judgment in the suit.

The suit asks for an injunction to bar Lyft from continuing to violate the Accrued Safe and Sick Leave Act, seeks compensation for the value of paid sick leave denied by Lyft, and other damages.

The Lyft website includes a page dedicated to how riders and drivers can protect themselves from COVID-19, including health guidance from the World Health Organization and the U.S. Centers for Disease Control and Prevention.

The company said it is providing funds to those who are diagnosed with COVID-19 and helping drivers access federal funds that include paid sick leave. But attorneys for Osvatics and the proposed class of drivers have said it's difficult for drivers to get money from the fund and it doesn't address the fundamental issue in the case: that paid sick leave is needed, with or without a pandemic.

No stranger to employment-related litigation concerning their treatment of drivers, Lyft and its larger rival Uber Technologies Inc. have been hit with a rash of new or revised lawsuits in recent months that are more aggressively challenging their policies concerning paid sick leave for drivers in light of the COVID-19 pandemic.

Existing lawsuits primarily claiming that the ride-hailing companies are flouting state and local wage and hour laws by classifying their drivers as independent contractors instead of employees have since been rejiggered to also assert paid sick leave claims.

So far, some of the more high-profile suits in California and Massachusetts have yielded a mixed bag of court rulings on whether they can move forward in court or get kicked into arbitration.

The Ninth Circuit is currently weighing an appeal involving a group of Massachusetts drivers, whose lawsuit was transferred to the Northern District of California in late March, seeking to reverse a California federal judge's May decision denying their emergency motion for a preliminary injunction that would've immediately forced Uber to reclassify its drivers as employees and grant them paid sick leave. In that case, the district court judge held that "Uber drivers do not perform an integral role in a chain of interstate transportation" that would make them exempt from arbitration under Section 1 of the FAA.

Meanwhile, the First Circuit is weighing cross appeals in connection with a Massachusetts federal judge's late March decision that Lyft couldn't force a similar dispute into arbitration. In that case, the judge found the Lyft drivers did, in fact, meet the definition of transportation workers engaged in interstate commerce who are exempt from arbitration.

Counsel or representatives for the parties could not be immediately reached for comment Wednesday.

Osvatics is represented by Christopher M. McNerney, Sally J. Abrahamson, Mikael A. Rojas and Pooja Shethji of Outten & Golden LLP.

Lyft is represented by Elaine J. Goldenberg, Rachel G. Miller-Ziegler, Rohit K. Singla and Justin P. Raphael of Munger Tolles & Olson LLP.

The case is Cassandra Osvatics v. Lyft Inc., case number 1:20-cv-01426, in U.S. District Court for the District of Columbia.

--Additional reporting by Rachel O'Brien and Lauren Berg. Editing by Amy Rowe.

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