Uber Technologies Inc on Thursday won a victory in its effort to keep unhappy customers from suing in court, persuading a federal appeals court to send a Connecticut passenger's price-fixing case against the ride-service company into arbitration.
Overturning a lower court ruling, the 2nd U.S. Circuit Court of Appeals in Manhattan said Uber and former Chief Executive Officer Travis Kalanick properly notified customers in online user agreements that disputes should be arbitrated.
In a 3-0 decision, the appeals court also said the passenger, Spencer Meyer, agreed to arbitrate his own claims, but could try to show Uber waived its right to arbitration by actively fighting him in court.
Brian Feldman, a lawyer for Meyer, in a statement said Uber did waive that right, and "we look forward to pressing ahead with the litigation."
Uber and its outside lawyer welcomed the decision.
"The Second Circuit's powerful and commonsense opinion will serve to protect online contracting and strengthen commerce nationwide," the lawyer, Theodore Boutrous, said in a statement. "We are thrilled with the decision."
Thursday's closely watched decision was a boost for efforts to enforce arbitration requirements, which are often buried in long lists of terms and conditions that customers never see.
Internet companies and the U.S. Chamber of Commerce warned that a loss by Uber could inhibit growth in mobile commerce and call into question the enforceability of online contracts.
The decision also offered a lift to San Francisco-based Uber, which has been besieged by high-profile problems.
Kalanick resigned as CEO in June after a shareholder revolt, and is the target of a lawsuit by Uber investor Benchmark Capital to force him off the company's board.
Uber also faces sexual harassment and bias accusations by female staff, a federal inquiry into software that helps drivers avoid police, and a trade secrets lawsuit by Google parent Alphabet Inc's self-driving car unit Waymo.
Meyer accused Uber and Kalanick of conspiring with drivers, whose earnings are shared with Uber, to charge "surge pricing" fares during peak demand periods.
He claimed he never saw a hyperlink to Uber's arbitration requirement when he used his smartphone to sign up.
Internet users often agree to such terms and conditions through "clickwrap" agreements by checking an "I agree" box, or "browsewrap" agreements where terms are posted via hyperlinks.
U.S. District Judge Jed Rakoff in Manhattan denied Uber's request for arbitration in July 2016, saying the company never properly alerted Meyer to its policies.
In overturning that ruling, Circuit Judge Denny Chin said typical smartphone users would find the disclosures "reasonably conspicuous," even on smaller screens common to mobile devices, and Meyer was not excused for not following the hyperlink.
"While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes," Chin wrote.
Rakoff will decide whether Uber waived its right to arbitrate with Meyer.
On Sept. 20, a federal appeals court in San Francisco will hear arguments on whether some Uber drivers can recoup expenses and tips in a class action because they are employees, or must arbitrate their claims.
The case is Meyer v. Uber Technologies Inc, 2nd U.S. Circuit Court of Appeals, No. 16-2750.