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Could Uber's Forced Arbitration Agreements Kill the Company?

By William Vogeler, Esq. on May 10, 2019

If you haven't heard, Uber is going public today with a projected valuation of $84 billion. What you may not hear, however, is what is happening inside some 60,000 private arbitration claims against the company.

The tip of that iceberg came up as part of Uber's public disclosures, which included the revelation that its drivers have filed more than 60,000 arbitration demands. Analysts say it could take $600 million to resolve the claims. Reporting on the public filing, Bloomberg says it could be "death by 60,000 cuts" for the ride-sharing company. But in real time, that will probably cost the company relatively nothing.

Less Than One Percent

The estimated cost of the arbitration claims is less than one percent, for anybody who is counting. Siri says $600 million of $84 billion is 0.7142 percent. If the drivers win their claims, the liability could be much higher. Like two percent? Seriously, after all the lawsuits against the company, private arbitration is not likely to be the death of Uber.

If class-actions couldn't do it, what will? In March, Uber paid $20 million to settle a related lawsuit on behalf of 13,600 drivers. That's quantum small in the overall Uber universe.

Not even founder Travis Kalanick could fell the company with a brash style and toxic company culture. Two years later, Uber is about to break the internet.

'Certain Risks'

Still, forced arbitration has a nasty smell to it. Uber acknowledged as much in its disclosures. The company said the expenses "may become more costly for us, or the volume of arbitrations may increase and become burdensome."

"The use of arbitration provisions may subject us to certain risks to our reputation and brand, as these provisions have been the subject of increasing public scrutiny," Uber said in its filing. To minimize the risks, the company said it may voluntarily limit arbitration agreements. But that apparently won't happen until about $84 billion from now.

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