By Linda Chiem

Law360 (July 22, 2020, 5:40 PM EDT) -- The Washington, D.C., attorney general's office weighed in on a Lyft driver's suit challenging the ride-hailing company's failure to provide paid sick leave, saying in a Tuesday court filing that D.C. public policy discourages companies from trapping workers and consumers behind mandatory arbitration clauses.

D.C. Attorney General Karl Racine's office filed an amicus brief to clarify where D.C. public policy lands on the issue of contracts of adhesion or other unconscionable mandatory arbitration agreements. The brief was filed in plaintiff Cassandra Osvatics' proposed class action accusing Lyft Inc. of flouting the D.C. Accrued Sick and Safe Leave Act by failing to offer paid sick leave to thousands of drivers amid the COVID-19 pandemic. Osvatics is trying to fend off Lyft's motion to compel arbitration.

Based on precedent from the D.C. Circuit's 2010 decision in Keeton v. Wells Fargo Corp. and 2015 decision in Andrew v. American Import Center , it's likely that Lyft's mandatory arbitration agreements would be found to be unconscionable, according to the D.C. attorney general's office. Keeton and Andrew established that trial courts must take a harder look at arbitration agreements containing terms that are stacked in favor of companies and leave workers or consumers without reasonable choice.

"Ultimately, the facts as alleged in this case bear all the hallmarks of unconscionability identified by the D.C. Court of Appeals in Keeton and Andrew," the D.C. attorney general's office said in the brief. "Many of these factors do not appear disputed — such as the class action waiver, disparate bargaining power, and prevalence of similar arbitration provisions in Lyft's industry — and would sustain denial of Lyft's motion."

However, if there are still open factual issues to iron out, then the court should conduct an expedited evidentiary hearing "in order to render a fulsome decision on the unconscionability issue," the D.C. attorney general suggested.

Additionally, the D.C. attorney general's office disputed Lyft's assertion that D.C.'s Revised Uniform Arbitration Act flatly "requires" arbitration of Osvatics' claim if the court found that the Federal Arbitration Act didn't apply to the dispute.

"Where the FAA does not apply, an adhesive arbitration contract is properly evaluated through the lens of District public policy, which requires a heightened degree of scrutiny," the D.C. attorney general's office said.

Mikael Rojas of Outten & Golden LLP, an attorney for Osvatics and the proposed class, said in a statement to Law360 on Wednesday that the D.C. attorney general's amicus brief, like the positions taken by many other states, "drives home the point that forced arbitration is a threat to the rights of workers and consumers and should not be enforced under D.C. law."

Osvatics filed suit in May alleging 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 argued 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.

She also said that Lyft cannot alternatively enforce its arbitration agreement under the D.C. Revised Uniform Arbitration Act because 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."

Lyft, meanwhile, has maintained that there's no getting around its arbitration agreement, which also bars class or collective actions, and Osvatics knew exactly what she was getting into. 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.'"

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 and are on appeal before the Ninth Circuit, as well as the First Circuit.

Lyft representatives 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 Emily Kokoll.

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