Saturday, October 13, 2018

Is Diva Limousine’s Race-to-the-Bottom Suit Against Uber Coherent?

The pattern has now become clear. The Uber strategy continues to be to shunt as many independent contractor suits into arbitration as possible, where it no doubt hopes they will be silently and favorably (or at any rate non-precedentially) resolved. Plaintiffs, for their part, seek Uber/Lyft driver class participants who intentionally/presciently or inadvertently opted out of arbitration. Shannon Liss-Riordan soldiers on.

An additional wrinkle has developed, however. A company—a burdened industrial competitor—claiming to have played by “the rules,” alleges injury caused by another company (Uber) not playing by the rules. The torts professor in me hears this as a tortious interference with business relations claim, and it is one that presumably will force a public ruling on the merits respecting the employee-status of Uber’s drivers, since Diva is not in (what I will call) “arbitration-privity” with Uber: no sweeping this dispute into arbitration (i.e., under the rug).

Of course, it has since “time immemorial” been the law that commercial injury resulting from a better business model is “damnum absque injuria” (I discuss with my students every year Holmes’s famous 19th century dissent in Vegelahn v. Guntner). As Holmes long ago put it, “the doctrine generally has been accepted that free competition is worth more to society than it costs.” But not illegal competition. Although I do not have access to the Diva case pleadings, I assume the arguments will unfold around California statutory and case law similar to the principles embodied in the Restatement Second of Torts §§ 762-774. (Interestingly, Diva itself has previously been the subject of wage law violation allegations, see Ghazaryan v. Diva Limousine, Ltd., 169 Cal.App.4th 1524 (2008) – clean hands problem?).  

All of this has significant implications for workers’ compensation because workers’ compensation law presumes and requires the existence of covered employees. If employee categories are extinguished through reclassification in one legal regime, there is the very real possibility that the extinction will spread. The public’s broad misunderstanding of Dynamex demonstrates the popular inability to distinguish employee standards across employment law regimes. And I suspect that reality is behind this entire renewed gambit (which is not exactly stealthy to lawyers with some gray hair).

Michael C. Duff

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