Federal court rules against Uber’s forced arbitration

A federal court of appeals on Monday ruled against Uber’s forced arbitration clause which made customers who had legal issues with the company settle them privately.

A panel of First Circuit Court of Appeals judges reversed U.S. District Judge Douglas Woodlock’s decision to let Uber handle a price gouging case in private arbitration.

The judges, Juan Torruella, Ojetta Rogeriee Thompson and William Kayatta Jr. said in their ruling that Uber did not “reasonably communicate” that when users agreed to the app’s terms of service they were waiving their rights to take the company to court.

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Uber argued that before users agree to its terms of service they presented with a box linking them to the full agreement that they can click if they so choose.

The judges said that because the link was presented in a “grey rectangular box,” as opposed to blue underlined text that they said commonly communicates a hyperlink, users could not reasonably be expected to know that they were seeing a link to Uber’s terms of service.

“Because the Plaintiffs were not reasonably notified of the terms of the Agreement, they did not provide their unambiguous assent to those terms. We therefore find that Uber has failed to carry its burden on its motion to compel arbitration,” they wrote.

The decision follows ruling earlier this month from a New York state court that similarly decided Uber’s private arbitration clause didn’t hold up.

Such clauses have long been criticized by consumer advocates who say that they unfairly force consumers into waiving their rights.

They argue that the terms are often unclear and, in many cases, consumers need to use to the products they agree to such terms to and don’t have ample choice in whether or not to agree to arrangements.

They also contend that Uber and companies like it regularly move through the private arbitration process and that can lead to more comfortable relationships with the arbiters they pay to resolve legal disputes.

In May, Uber also ended its arbitration clause for sexual misconduct claims.