Firm Helps AAA Block Uber’s Bid to Cancel $10M Arbitration Bill

October 25, 2021 – In an important victory for firm client American Arbitration Association (AAA), Hughes Hubbard helped secure denial of Uber’s motion for a preliminary injunction seeking to suspend AAA’s $10 million invoice to the ride-hailing giant for administrative costs associated with 7,771 arbitration cases.

Uber commenced its lawsuit in New York Supreme Court’s Commercial Division against AAA after law firm Consovoy McCarthy brought more than 31,000 demands for arbitration on behalf of Uber Eats customers alleging “reverse discrimination” arising from Uber’s efforts to show support for Black-owned restaurants following the police killing of George Floyd in May 2020. AAA is the world’s largest private mediation and alternative dispute resolution service.

While acknowledging this background, Justice Robert Reed of the Commercial Division emphasized that Uber’s suit against AAA “does not in any way involve an analysis of the merits of the ‘reverse discrimination’ claims” asserted by the Consovoy law firm. Rather, in its suit against AAA, Uber sought a declaration barring AAA from billing Uber for the costs associated with the arbitrations on the grounds that those costs were unreasonable and not justified by AAA’s actual costs and expenses.

Justice Reed’s Oct. 14 decision on Uber’s motion for a preliminary injunction to suspend AAA’s invoice came after two days of arguments and testimony from Uber and AAA witnesses. Uber presented expert testimony from Justice Charles E. Ramos, a retired Commercial Division justice who, until his resignation earlier that week, also served as a judicial hearing officer. Uber’s presentation of Justice Ramos caused a re-assignment of the case days before the hearing on the preliminary injunction after the previous judge, Justice Barry Ostrager, notified the parties of his ongoing personal relationship with Justice Ramos.

While Justice Ostrager initially maintained that his relationship with Justice Ramos would not affect his presiding over the case, he decided to recuse himself after AAA objected to Uber’s presentation of a well-known, recently retired Commercial Division justice as an expert in that same court.

Ultimately, Justice Reed sided with AAA, noting Uber’s concession that it could pay the invoice without causing it irreparable harm. And Justice Reed specifically found that, to the extent that Uber could not recover the money it paid to AAA, that was “the natural consequence of [Uber’s] business decision to require” in its consumer agreements that all disputes be determined by the AAA. Uber has appealed to the Appellate Division, First Department.

Law360 reported on Justice Reed’s preliminary injunction decision here and Justice Ostrager’s recusal here.

Dan Weiner, John Townsend and Jack Kilgard represent AAA on the matter.