A New York federal judge on Thursday said Grubhub, Postmates and Uber Eats cannot force restaurant customers to arbitrate their price-fixing claims against the food delivery companies simply because they’ve used the apps in the past, ruling that their arbitration clauses have no relevance to the claims at hand.
U.S. District Judge Lewis A. Kaplan denied the companies’ motions to compel arbitration, holding that the companies haven’t shown that the customers agreed to arbitrate any claims. And in any event, their arbitration clauses don’t apply to the claims at hand, the judge said. Their claims specifically exclude any purchases made through the defendant companies’ platforms and are based “solely on purchases made directly from restaurants or from non-defendant meal-delivery platforms,” he said.
“The fact that the platform plaintiffs at some time used some of the defendants’ platforms is purely coincidental,” Judge Kaplan said.
In particular, the judge held that — except for terms of use issued in December 2021 — Uber hasn’t established that any plaintiff “expressly manifested assent to any arbitration agreement with Uber or Postmates.”
“Moreover, Uber has failed to establish that the platform plaintiffs were on ‘reasonable notice’ of any such arbitration agreement,” the judge said. “Uber has not submitted any evidence to demonstrate that Uber or Postmates’ website or app would have put a reasonable person in the platform plaintiffs’ position on notice of the existence of any of the alleged arbitration agreements.”
Similarly, Grubhub hasn’t shown that any agreement to arbitrate was made either, according to the decision. The company contends that the plaintiffs agreed to arbitrate because of a so-called “clickwrap” agreement, or a prompt that requires users to accept or reject a company’s terms of use.
But Grubhub merely points to fine print on the order page stating that, by placing their orders, customers agree to the terms of use, Judge Kaplan said. And the Second Circuit has held that this doesn’t constitute a “clickwrap” agreement, which requires users to check a box or take some sort of affirmative action indicating they have agreed to the terms of use, per the decision.
“In all the circumstances, Grubhub has failed to demonstrate that an agreement to arbitrate was made between the company and any plaintiff,” the judge said.
In their 2020 suit, the customers claim that the companies’ allegedly monopolistic behavior has harmed restaurants and diners nationwide. DoorDash was initially also named in the suit, but it was dropped as a defendant months later.
The customers are hoping to certify three different classes: anyone who ordered takeout or delivery from a restaurant subject to any defendant’s no-price-competition clauses, anyone who ordered dine-in at one of the restaurants, and anyone who ordered on a nondefendant platform from one of the restaurants.
According to the customers, the delivery app titans impose no-price-competition clauses on restaurants, forcing them to offer food items for the same price to both delivery and dine-in customers.
Uber argued in its motion that customers agreed to arbitrate any claims when they agreed to the terms of use for both Uber Eats and Postmates, which Uber has acquired. Grubhub similarly argued that the plaintiffs had agreed to its terms of use, which includes an arbitration clause.
But Judge Kaplan said Thursday that Uber hasn’t provided any information on what its app or website looked like when the plaintiffs initially signed up “or at any other relevant time prior to December 2021.” Without that information, it’s impossible to conclude that they were on constructive notice of any arbitration agreement, he said.
Like Uber, Grubhub also hasn’t offered sufficient evidence showing what its app or webpage looked like at the time that the plaintiffs placed their orders, Judge Kaplan said.
Notably, the judge criticized the companies’ arbitration clauses, which he said were examples of a relatively new sort of clause that has been described as “an infinite arbitration clause.” If enforced according to their terms, they would require arbitration of any claims between the companies and the plaintiffs, he said. And that includes arbitrating claims such as securities fraud, personal injury or wrongful termination — things that “have nothing to do with the plaintiff’s use of the platform,” Judge Kaplan said.
The Ninth Circuit and several district courts have declined to enforce arbitration agreements like these, and New York law states that a contract shouldn’t be interpreted to produce a result that is “absurd, commercially unreasonable or contrary to the reasonable expectations of the parties,” according to the decision.
“In sum, as a matter of either contract formation or unconscionability, the court holds that defendants arbitration clauses do not apply to plaintiffs’ claims to the extent they lack any nexus to the underlying contracts — i.e., to the extent they are not brought by plaintiffs in their capacities as current or former users of defendants platforms,” the judge said.
Last year, Judge Kaplan refused to throw out the suit, finding that the consumers had plausibly laid out their antitrust claims. Specifically, he said the proposed classes have adequately alleged injury through the platforms’ no-price-competition clauses, which they claim create supracompetitive prices. The consumers also sufficiently defined the relative national and local markets, Judge Kaplan said.
“Defendants contend that the national market is implausible because they do not ‘compete for transactions’ on a national basis,” the judge said at the time. “But the facts alleged suggest that defendants do compete nationally, and courts have recognized the existence of national markets even when market participants in some sense operate locally.”
Uber, Grubhub and counsel for the customers didn’t immediately respond to requests for comment late Thursday.
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