Greater Houston Transportation Company v. Uber Technologies, Inc., --- F.Supp.3d ----, No. 4.14-0941, 2015 WL 9660022 (S.D. Tex. Dec. 18, 2015)
[Yes, I know, but I couldn't find a relevant Taxi Driver quote.]
Previous opinion discussed earlier in this space. Plaintiffs hold taxicab permits in Houston and San Antonio. They alleged that Uber falsely advertised the safety of Uber rides compared to taxis, and the superiority of Uber’s background check process compared to that of taxis. “On April 1, 2015, one of Houston’s Uber drivers was arrested for allegedly sexually assaulting a passenger. The Uber driver had passed an Uber background check despite having a criminal record.” Earlier claims related to statements about insurance have been dismissed, except as relevant to the alleged safety misrepresentations, because the Texas legislature passed a relevant law.
Uber argued that the targeted statements were puffery. The court agreed in part and disagreed in part. Uber said it had the “SAFEST RIDE ON THE ROAD—Going the Distance to Put People First.” It continued that its promise meant “setting the strictest safety standards possible, then working hard to improve them every day. The specifics vary, depending upon what local governments allow, but within each city we operate, we aim to go above and beyond local requirements to ensure your comfort and security—and what we’re doing in the U.S. is an example of our standards around the world.” The first slogan was unmeasurable, exaggerated and unreliable puffery. The “specifics vary” supporting language made clear that the overall safety claim was relative to location, and its “aim to go above and beyond” language was aspirational, not factual. So too with the statement, “Wherever you are around the world, Uber is committed to connecting you to the safest ride on the road”: given its massive scope, it was clearly unverifiable, exaggerated, and unreliable. “BACKGROUND CHECKS YOU CAN TRUST” was also a blanket generalization without further explanation, and thus puffery.
Plaintiffs also challenged an October 2014 post on Uber’s blog by former Rudolph Giuliani, headlined “UBER SETTING THE STANDARD FOR SAFETY IN RIDESHARING: Posted by Rudolph Giuliani”: “I am pleased to say that in my opinion and that of my safety consulting team at Giuliani Partners and our partners at Guidepost Solutions, Uber is setting the safety standard in the ride-sourcing industry.” The court found this a nonactionable statement of opinion attributed to a third party. The post also said, “we believe [Uber’s background check process] represents a substantial improvement over the existing safety standards in the personal hire transportation world.” The court deemed it probable that a third party’s opinion would be irrelevant to most people (really? not more relevant because of security expertise?), and anyway opinions aren’t facts, but nonactionable puffery.
Uber’s Head of Communications for North America, Lane Kasselman, also made statements on Uber’s website:
All Uber ridesharing and livery partners must go through a rigorous background check. The three-step screening we’ve developed across the United States, which includes county, federal and multi-state checks, has set a new standard.... We apply this comprehensive and new industry standard consistently across all Uber products, including uberX.
Screening for safe drivers is just the beginning of our safety efforts. Our process includes prospective and regular checks of drivers’ motor vehicle records to ensure ongoing safe driving. Unlike the taxi industry, our background checking process and standards are consistent across the United States and often more rigorous than what is required to become a taxi driver.
By contrast, this statement “was clearly intended to lead and could lead a reasonable consumer to believe that an Uber ride is objectively and measurably safer than a taxi ride.” The court noted the comparative nature of the statement and deemed “consistent” and “more rigorous” to be objective claims.
Plaintiffs also alleged misrepresentations about the “Safe Rides Fee,” a $1 added fee on each ride that Uber claimed “supports continued efforts to ensure the safest possible platform for Uber riders and drivers, including an industry-leading background check process.” The court found that this wasn’t puffery. By stating that a specific amount of money charged will be going towards Uber maintaining “the safest possible platform,” the statement could lead consumers to believe that Uber was specifically using this fee for safety improvements. Uber also argued that the Safe Rides Fee statements weren’t ads because they weren’t made for the purpose of influencing consumers to buy Uber’s services: consumers are sent a link to that statement after an Uber ride terminates. But the webpage would have been available to consumers either before or after an Uber ride, just by going to Uber’s site.
Uber also made safety-related statements that were repeated by journalists in news reports. Were these advertising and promotion? The court used Gordon & Breach (not needing to note that “commercial competition” is probably gone after Lexmark, given the competitive relationship between the parties). Uber argued that each of its statements quoted in news articles are “inextricably intertwined with the reporters’ coverage” in each article, citing Boule v. Hutton, 328 F.3d 84 (2d Cir. 2003), which held that statements reported in a magazine weren’t commercial advertising or promotion. Moreover, Uber argued that its statements weren’t commercial speech because they did more than propose a commercial transaction.
Ony, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), found that “publication and dissemination of a scientific study that had the effect of touting a company’s product is noncommercial speech and was thereby immune from the false advertising provisions of the Lanham Act.” However, Ony treated the statements as potentially commercial; the Fifth Ciruit followed suit in Eastman Chem. Co. v. PlastiPure, Inc., 775 F.3d 230 (5th Cir. 2014), holding that disseminating scientific study results in a marketing campaign is commercial speech. The Lanham Act thus applied more broadly than Uber claimed.
Here, the statements directly reached out to or addressed consumers. Statements reported in the media included the claim that Uber “want[s] to assure all riders ...”—a direct quote from Uber’s website. As in Eastman, “[e]ach of Uber’s statements was issued by its corporate spokesperson or on Uber’s own official website as part of a concerted campaign by the company in response to incidents that had been publicized in the media.” Three were made by Uber’s Head of Communications for North America, one by Uber’s Senior Communications Associate, and one by Uber’s Public Policy representative. In context, this was commercial speech with a coherent theme, as part of an effort by Uber “to influence consumers to buy defendant’s goods or services....” The statements formed “a group of internally consistent statements in a manner similar to an advertising campaign,” but using “sophisticated advertising techniques… to transform traditional news media into a method of influencing consumers.” The court concluded:
In the modern age of hybrid advertising and advertising in social media, Courts must remain vigilant in order to separate commercial from non-commercial speech, regardless of the form in which it was disseminated. Uber has previously argued for a paradigm shift regarding its business model: asserting that it should be viewed as a software company, not a transportation company. Likewise, here, the Court finds that Uber’s disputed statements, although released in traditional news media, require a paradigm shift, to evaluate the statements as commercial speech because their predominant purpose is promotional and persuasive. The evolution in business requires us to reevaluate the use of the media as advertising to understand the commercial use and significant business benefits that many companies derive from the media in today’s economy. The comments issued by Uber’s communication executives demonstrate a careful, uniform, and orchestrated message designed to encourage and facilitate the commercial use of its product and service.
In addition, on a motion to dismiss, the court accepted that the statements were “disseminated sufficiently to the relevant purchasing public,” the final element of “advertising or promotion.”
Puffery: The statement of Uber’s Senior Communications Associate read:
What I can tell you is that Uber takes passenger safety very seriously. We work every day to connect riders with the safest rides on the road and go above and beyond local requirements in every city we operate. Uber only partners with drivers who pass an industry-leading screening that includes a criminal background check at the county, federal and multistate level going back as far as the law allows. We also conduct ongoing reviews of drivers’ motor vehicle records during their time as an Uber partner.
For more information on what makes Uber the safest rides on the road, please see our website ...
This statement contained specific, measurable and concrete factual assertions that could be falsified: a factfinder could determine whether Uber used the screening described and conducted ongoing reviews of records. Similarly, another statement claiming “Our driver partner background checks are more thorough than those of taxi [sic] in most cities and include county, state and federal screens going back seven years” was falsifiable: it mentioned specific procedures and made an explicit comparison to taxis. Moreover, the context made its seem more fact-like: it was released to news media because of the public interest in Uber’s safety, meaning that “it would be more likely to be viewed as objective and verifiable information by the public.” Similar statements, “We’re confident that every ride on the Uber platform is safer than a taxi,” and “We’re confident that every ride on Uber is safer than a taxi,” were also potentially quantifiable, despite the “we’re confident” intro. “[S]tatements as to the comparative safety of a product are specific and measurable, and thus frequently considered actionable.”
Uber’s public policy representative also said: “Uber works with Hirease to conduct stringent background checks going back seven years, which all drivers must undergo and clear to partner with Uber. This driver [who killed a child] had a clean background check when he became an Uber partner.” These were objectively verifiable statements on which consumers could rely. Similarly, responding to news that an Uber driver in Chicago had been previously convicted of a felony but had not been screened out by Uber’s background check process, Uber wrote: “[W]e have already taken steps to prevent this from happening again, by expanding our background check process to set new industry-leading standards ... We are sincerely sorry for this error, and want to assure all riders that we are taking the necessary steps to fix it and build the safest option for consumers.” The first part was factual, while the second part was mere puffery.
For the same reasons, Texas common law unfair competition claims survived.
Uber’s related motion for summary judgment on the surviving claims failed. Plaintiffs argued literal falsity and introduced expert testimony and official reports creating genuine issues of material fact on falsity/misleadingness. For example, plaintiffs’ background check expert, the former Deputy Director of the Department of Homeland Security, Alonzo Pena, affirmed that background checks employing fingerprinting are inherently superior to background checks that do not employ fingerprinting. “[N]o statement of relative safety or of the superiority of Uber’s background checks could be true if a trier of fact found that Uber employs fundamentally inferior background check and safety practices.” Likewise, an official Houston report suggested that Uber’s background check process fails to search across all states and counties, and leaves large gaps where criminal background information would not be detected, including Delaware, Massachusetts, South Dakota and Wyoming.
The court also didn’t rule on materiality; literal falsity would allow a jury to find materiality without further evidence, and also I can’t imagine that comparative safety is immaterial to consumers even if communicated implicitly.
Uber, inexplicably, disputed whether its advertised goods or services “travelled in interstate commerce.” There was no disputed fact issue on the interstate nexus here. Uber “use(s) smartphones, mobile communications, credit card processing transactions, bank to bank payments, and transfers of funds to receive payments from customers and provide payments to their employees and/or drivers.” Uber’s challenged statements were published on the internet, reaching across state lines to a national and international audience. Uber’s own interstate background checking process showed that its business involves interstate commerce, not to mention its interstate and international operations. (Well, that’s at least $400 of lawyer time wasted.)
Injury: injury to plaintiffs could be presumed from a false or misleading comparative ad.
The court also refused to dismiss plaintiffs’ request for permanent injunctive relief. Irreparable injury could be presumed from a showing of likely confusion, so that relief remained on the table. (This will be cited by many a plaintiff!)