Embattled ride-hailing giant Uber scored a court victory Thursday, when a federal appeals court ruled in favor of allowing the ride-hailing company to keep its users from filing lawsuits in court against it.
Uber has sought to force customer disputes to be resolved in arbitration instead of in court, citing an arbitration commitment in its user agreement.
The 2nd Court of Appeals for the Southern District of New York overturned a lower court's decision that Uber’s online user agreement doesn’t give customers enough notice that their legal disputes with the company must be settled in arbitration.
Uber's user agreement contains a provision that forces customers to waive their right to sue the company. Instead, according to the agreement, Uber users must settle legal disputes they have with the company in private arbitration outside of a court. Arbitration differs from a government court in that parties involved can choose their own judges. Also, the results of the arbitration can be made confidential.
Uber won a similar case in September when a federal appeals court judge ruled that Uber drivers could not sue for employment status and had to instead take their claims to private arbitrators.
The latest case could have a larger impact on app-based companies' ability to force consumers into agreements where they waive their ability to sue in exchange for access to the app.
Other internet companies such as Airbnb, Netflix and Amazon have arbitration policies. U.S. senators have battled with AT&T over its policy of forcing consumers who sign phone contracts with the company to resolve their disputes through arbitration.
Companies have defended their policies of arbitration. They argue that arbitration is not forced and say that and that it can be an effective means for handling disputes.
"No AT&T customer is ever 'forced' to agree to arbitration," AT&T Executive VP Tim McKone wrote in a letter to senators, in June. "Customers accept their contracts with AT&T freely and voluntarily.”
Opponents of such policies are skeptical of arbitration's fairness. They warn that arbitrators who are cozy with companies could be accordingly biased and point to the potentially high costs of arbitration fees.