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May 10, 2017 Practice Points

Do Employment Arbitration Clauses Apply When the Former Employee Is Not Named as Defendant?

By Alexander F. Stopak

Yet again, two tech giants are engaged in a legal battle. This time, it is Waymo, a subsidiary of Alphabet (parent company of Google), and Uber technologies. Waymo has claimed that Uber infringed on Waymo's patent, as well as misappropriated trade secrets, in Uber's development of their driverless cars program.

At the crux of Waymo's claim is former Waymo engineer Anthony Levandowski. Levandowski resigned from Waymo in January of 2016, and subsequently founded Otto Trucking, which was acquired by Uber in August of 2016. Waymo alleges in its complaint that before resigning, Levandowski, among other things, downloaded roughly 14,000 confidential files from Waymo's servers. During Levandowski's tenure at Google and Waymo, he signed two different employment contracts. Both of these contracts contained arbitration clauses that required any disputes between Levandowski and the company be resolved through arbitration.

On March 27, Uber filed a motion to compel arbitration. In its motion, Uber argued that the arbitration clauses from Levandowski's employment contracts should apply to the current dispute, because Waymo based its complaint on the assertion that Uber benefitted from the supposed violation of those employment contracts.

There appears to be some legal precedent to support Uber's motion. For example, a San Jose federal judge ordered Torbit, a tech company, to arbitrate its case against a fired software developer who allegedly misappropriated the tech company's trade secrets while starting his own company. Torbit, Inc. v. Datanyze, Inc., No. 5:12-CV-05889-EJD, 2013 U.S. Dist. LEXIS 19584, (N.D. Cal. Feb. 13, 2013). However, in the Torbit case, the former employee was the named defendant in the law suit. Here, Waymo has not included Levandowski as a defendant.

In its motion, Uber claims that Waymo deliberately omitted Levandowski as a defendant in order to circumvent the precedent of Torbit that would require Waymo to participate in arbitration. According to Uber, "Waymo's purpose for proceeding in this curious manner seems clear: through artful pleading, it hopes to avoid arbitrating the misappropriation… claims at all costs." Waymo, LLC v. Uber Technologies, Inc.,2017 U.S. Dist. LEXIS 54662, Case No. 3:17-cv-00939 (N.D.Cal S.F. Apr. 10, 2017). Uber further bolsters its case by pointing out that Waymo had attempted to force Levandowski into arbitration over the same matter last November.

Waymo contends that Uber is the party conducting shady litigation practices. Along with the motion to compel arbitration, Uber proposed an expedited timeline that gave Waymo only 7 days to respond to the motion. The attorney for Waymo, John W. McCauley, filed a declaration in support of Waymo's opposition to Uber's motion to shorten time. In this declaration, McCauley essentially claims that Uber purposefully delayed filing its motion in order to limit Waymo's time to reply to Uber's motion to compel arbitration.

This case is still ongoing, but the outcome of Uber's motion is certain to have an effect on future cases involving arbitration. Although Waymo alleges misconduct from various former employees that went to work for Otto and subsequently Uber, Levandowski is the only employee it has identified by name, and he clearly is a major focus of Waymo's claims. This case will essentially determine whether a company can sue for violation of employment agreements, and bypass its own arbitration clauses, by simply not naming the employee and suing the company that ultimately benefits from that employee's alleged violation.

Keywords: alternative dispute resolution, adr, litigation, trade secret, misappropriation, Uber, Google, arbitration

Alexander F. Stopak is a 2017 J.D. candidate at DePaul University College of Law in Chicago, Illinois.

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