January 3, 2018

Dan Handman Quoted in Law360 on Transportation Cases to Watch in 2018


Dan Handman is quoted in the Law360 on the upcoming transportation cases to watch.Text of the article is below.

Transportation Cases To Watch In 2018
By Linda Chiem

Employment lawsuits challenging the independent-contractor classification of drivers in the commercial trucking, delivery and ride-hailing industries, and the U.S. Department of Transportation’s bid to revive Amtrak’s standards-setting power, are among the court battles that transportation attorneys will have their eye on in 2018.

The employment cases playing out in California and the District of Columbia have the potential to significantly shake up how transportation companies staff their operations and how the federal government has traditionally regulated certain facets of the sector.

Here’s a breakdown of some of the high-profile legal battles that transportation attorneys will be tracking closely in 2018.

Driver Misclassification Battles

Motor carriers, package delivery giants, and ride-hailing and delivery apps in the so-called gig economy are fighting off blistering attacks from drivers seeking to be classified as employees to secure the benefits and job protections that typically come with that classification.

And transportation attorneys remain riveted by these driver misclassification battles, especially ones targeting Uber Technologies Inc.

The Silicon Valley company has long promoted itself as a technology company with a ride-hailing app that makes connecting ride seekers with willing drivers more seamless. But lawsuits across the country have slammed Uber for allegedly misclassifying drivers as independent contractors instead of employees. The most high-profile of these battles include several class actions in Northern California that are currently on appeal at the Ninth Circuit to address a central part of the litigation: whether Uber’s arbitration provisions are valid and enforceable.

Uber has been trying to get the circuit to reverse or vacate several orders from California’s U.S. District Judge Edward M. Chen that paved the way for the driver misclassification suits to advance toward class certification, rather than be pushed into arbitration as Uber has long fought for.

“It’s no coincidence these cases are proceeding in California’s Ninth Circuit, which is a worker-friendly jurisdiction,” Hirschfeld Kraemer LLP partner Daniel H. Handman told Law360. “Even if they were to lose the California litigation, I don’t think that would be the death knell of their business. The way that they’re fighting this … there are other avenues open for them and just because the Ninth Circuit takes one position doesn’t mean other states and jurisdictions will. I believe this calls out dramatically for some type of legislative action.”

“Asking a jury to decide this independent contractor versus employee issue is like trying to put a square peg in a round hole,” Handman said. “You’re setting them up for failure. You’ll never be able to decide that because these laws were created when there were door-to-door salespeople and there was a milkman.”

The Ninth Circuit in September 2017 paused the consolidated appeal involving the four class actions overseen by Judge Chen, known as the O’Connor, Yucesoy, Mohamed and Del Rio cases, saying the appeals court will hold off on ruling until the U.S. Supreme Court decides a trio of closely watched cases on whether employers can legally include class waiver provisions in employee arbitration agreements.

The Supreme Court on Oct. 2 heard oral arguments in the cases — National Labor Relations Board v. Murphy Oil USA Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris — which address whether employment agreements forcing workers to sign away their rights to pursue class claims are legal.

Where the high court lands on this will influence whether the Ninth Circuit upholds or strikes down Uber’s arbitration agreements with drivers.

Carl Mayer of plaintiffs-side firm Mayer Law Group LLC told Law360 that the bulk of courts have been blessing these arbitration agreements, which he described as a way of “privatizing law in America.”

“In many ways, 2017 was the year of the arbitration agreement,” Mayer said. “It’s really been an assault on the right of Americans to take their case to court. The courthouse doors are being increasingly closed on Americans. I think it’s bad for the rule of law.”

“And as a general proposition, what’s going on here, and more and more are coming to understand, is that the so-called disruptive companies out of Silicon Valley are not only profitable because of the technology they’re putting out, but because they’re not following the law,” Mayer said.

The Uber-related consolidated appeal includes Douglas O’Connor et al. v. Uber Technologies Inc., case numbers 14-16078, 15-17420, 15-17532, 16-15000 and 16-15595; Hakan Yucesoy et al. v. Uber Technologies Inc., case numbers 15-17422, 15-17534 and 16-15001; Abdul Mohamed et al. v. Uber Technologies Inc., case numbers 15-17533 and 16-15035; and Ricardo Del Rio et al. v. Uber Technologies Inc., case number 15-17475, all in the U.S. Court of Appeals for the Ninth Circuit.

Elsewhere in the gig economy, meal delivery apps are catching heat for classifying drivers as independent contractors.

A driver misclassification suit against GrubHub Inc., the company behind an app that provides on-demand food delivery services, went to a bench trial in the Northern District of California in October 2017.

U.S. Magistrate Judge Jacqueline Scott Corley stated at closing arguments in that case that squaring the gig economy with existing labor rules was “tricky,” adding that GrubHub bore the burden of proving that its drivers were properly classified.

“GrubHub and UberEats are leading the convergence of gig economy and food delivery, but they have been plagued by claims and lawsuits surrounding the alleged misclassification of their workers,” said Mark Absher, in-house counsel for ShiftPixy, an app-based staffing agency that directly employs workers and matches them with restaurant and hospitality operators searching for part-time employees. “This legal dissonance has caused some to question the future of the gig economy for delivery purposes.”

“The contractor model also presents a loss of control — as soon as the food goes out the door, the product is no longer in the hands of trusted employees and has not yet reached the customer,” Absher said. “Because of this, the gig economy itself is being disrupted through a move away from contractors to fully employed workers.”

The case is Raef Lawson v. GrubHub Inc. et al., case number 3:15-cv-05128, in the U.S. District Court for the Northern District of California.

Meanwhile, package delivery giant FedEx Ground Package System Inc. has been unable to shake off misclassification allegations even after years of litigation. In late September 2017, FedEx asked a New York federal judge to reject a class certification bid from delivery drivers in the Empire State claiming the company shorted them on pay by misclassifying them as independent contractors, insisting the drivers have freedoms that wouldn’t qualify them as employees.

FedEx is eager to shoot down an attempt by New York delivery drivers to advance another high-profile dispute over the package delivery giant’s employment relationship with drivers — this one, a potential class of drivers who started driving for the company after 2007 and 2008 and were not included in the massive, $240 million settlement that FedEx reached in June 2016 to settle class actions by delivery drivers in 20 states who similarly alleged they were misclassified as independent contractors and shorted on wages.

The current case is Jeffrey Padovano et al. v. FedEx Ground Package System Inc., case number 1:16-cv-00017, in the U.S. District Court for the Western District of New York.

Self-Driving Car Trade Secrets Spat

Uber remains a fixture in other high-profile litigation carrying into 2018. The company is embroiled in a hotly anticipated trade secrets dispute with Waymo LLC, the self-driving car unit of Google parent Alphabet Inc.. The case was supposed to head to trial in early December in Northern California, but Waymo managed to get the trial bumped to February following accusations that Uber hid crucial evidence discovered by federal prosecutors.

The case moved at a lightning pace throughout 2017. It kicked off in February 2017, when Waymo sued Uber alleging that ex-Waymo engineer Anthony Levandowski downloaded about 14,000 documents before leaving Waymo to create his own company, OttoMotto LLC, which Uber later acquired for $680 million as part of a foray into driverless car technology. Levandowski is not a party to the instant suit but is facing a criminal probe. The allegedly stolen files relate to Waymo’s laser-based autonomous vehicle sensor and navigation technology, LiDAR.

It’s a high stakes case — with experts in the trial estimating some $2.6 billion in damagescaused by Uber’s alleged trade secret theft — involving a pair of Silicon Valley giants battling it out to become pioneers in the self-driving car business, which is already looking like the next frontier in car manufacturing.

Much of 2017 was a rollercoaster ride for discovery. Uber invoked privilege on several fronts, asserting attorney-client or attorney-work product privilege for a number of reports and documents sought by Waymo, which in turn has sought Uber’s source code alongside other purportedly withheld evidence.

The 2018 trial will hinge on how much Uber knew, when it knew it, and how far along the company went with that knowledge, experts say. Complicating matters will be the intricacies of trade secrets law, the technological issues jurors must sort through, and where to draw the line on what counts as a trade secret, Hirschfeld Kraemer’s Handman explained.

“It’s sort of trite, but what did they know and when did they know it?” Handman said.

The case is Waymo LLC v. Uber Technologies Inc. et al., case number 3:17-cv-00939, in the U.S. District Court for the Northern District of California.

Rail On-Time Performance Metrics

In a case that reset the constitutional boundaries for Congress giving an entity regulatory power over its commercial rivals, the U.S. Department of Transportation is making a play at preserving a federal law that the D.C. Circuit has already struck down as unconstitutional.

The DOT in 2017 sought to have a D.C. federal judge “sever” an arbitration provision, known as Section 207(d), in the Passenger Rail Investment and Improvement Act of 2008. The federal statute allowed Amtrak to help set performance and scheduling standards along the nation’s passenger railways, most of which is owned by freight railroads.

The D.C. Circuit invalidated PRIIA in April 2016, but the DOT argued that getting rid of the lone problematic provision — Section 207(d) — would render the statute constitutional. When a D.C. district judge disagreed in March 2017, the DOT appealed to the D.C. Circuit.

Freight railroads represented by the Association of American Railroads, which won the earlier fight to get PRIIA stricken, insist that Amtrak cannot have a say in regulating its competitors, so no amount of slicing and dicing would suddenly make the law constitutional.

“On the D.C. Circuit side, the government has made this a much longer trip than it should, but no matter how long they stretch out the journey, the destination remains the same: The law is unconstitutional,” said Gibson Dunn & Crutcher LLP partner Tom Dupree, who is representing the Association of American Railroads in the dispute.

The case is Association of American Railroads v. U.S. Department of Transportation et al., case number 17-5123, in the U.S. Court of Appeals for the District of Columbia.

In a separate yet parallel battle, Amtrak asked the U.S. Supreme Court in November 2017 to determine whether the Surface Transportation Board has authority to define an “on-time” passenger train when investigating railroads for delays, saying the recent void in the law jeopardizes Amtrak’s long-standing right of way over cargo traffic on railways.

Amtrak’s Nov. 9 certiorari petition seeks review of the Eighth Circuit’s “errant,” July 2017 decision vacating a July 2016 final rule by the STB defining the threshold for triggering a federal investigation into railroads that may not be giving priority to Amtrak trains over cargo-hauling trains on their tracks, even though the railroads are required by federal law to do so.

The Eighth Circuit had concluded that the STB, the nation’s economic rail regulator, exceeded its authority because it’s unlikely Congress intended to establish potentially competing standards within the same law, PRIIA.

The relevant sections of PRIIA at issue in that challenge are Section 207 and Section 213.

Section 207 instructed the Federal Railroad Administration and Amtrak to jointly develop standards for measuring performance and service quality of intercity passenger trains, at least some of which would trigger STB investigations into whether freight railroads were giving Amtrak track preference.

Section 213 authorized the STB to begin an investigation whenever the on-time performance of any intercity passenger train, for two consecutive calendar quarters, averaged less than 80 percent or did not meet service quality standards.

Freight railroads, which kicked off the Eighth Circuit challenge in August 2016, argued that Congress gave the Federal Railroad Administration and Amtrak — not the STB — the authority to define on-time performance. And just because the D.C. Circuit, in the separate legal challenge, invalidated PRIIA as being unconstitutional in April 2016, it doesn’t mean that the STB could just take up the mantle by stepping in and exercise the rule-making power that Congress gave only to the Federal Railroad Administration and Amtrak.

The Amtrak petition is National Railroad Passenger Corp. v Union Pacific Railroad Co. et al., case number 17-699, in the Supreme Court of the United States.

A link to the article can be found here.