Wednesday, March 16, 2016

Checkered result for Uber: some false advertising claims survive

Checker CAB Philadelphia, Inc. v. Uber Technologies, Inc., 2016 WL 950934, NO. 14-7265 (E.D. Pa. Mar. 7, 2016)
Checker sued Uber and Google for Lanham Act and RICO violations.  Unsurprisingly, this opinion kicks out Google and RICO, leaving Uber to face some but not all of the remaining false advertising claims.  (Google was sued in its role as an investor in Uber.)
In October 2014, Uber, through Jon Feldman, posted an ad on Uber’s website and sent a blast email to its account holders in the Philadelphia Metropolitan Area about the launch of UberX service in Philadelphia. The ad included the claim: “This week the largest taxi insurer went bankrupt, which means that as of 5:00 p.m. today, there is no guarantee that your taxicab will be insured.” Uber and Feldman “tweeted” a similar ad on social media with a link to a post on its blog that said: “In October the largest taxi insurer in Pennsylvania went bankrupt. Many uninsured taxis are still on the road; though some may have new policies, there’s no guarantee that your taxi ride will be insured.”
The reference was to First Keyston, which provided insurance to many of the taxi plaintiffs and was going through bankruptcy.  Pursuant to an order of the bankruptcy court, all existing insurance policies issued by First Keystone were cancelled as of November 20, 2014.  The taxi authority told First Keystone policyholders whose proof of insurance was on file with the authority to get replacement coverage within two days, or risk being put out of service.  According to plaintiffs, by that time “almost all” of the First Keystone policyholders contacted by the authority had obtained replacement insurance coverage, and “the rest were awaiting underwriting approval.” The authority then extended its deadline three days, leaving “only a handful” without replacement insurance.  Plaintiffs alleged that no First Keystone policyholders was ever placed out-of-service and no medallion taxicabs operating in Philadelphia were ever uninsured, because the First Keystone policies remained effective until November 20, 2014, or an earlier date when replacement coverage was secured.
The ads also claimed that Uber’s UberX fares were 20% cheaper than a taxi’s fare, using three sample comparisons of Uber’s fares with those of a non-Uber affiliated taxi.
The court first dismissed claims based on Uber’s alleged provision of taxicab services in violation of local and state regulations, which themselves didn’t provide for private causes of action. in Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222 (3d Cir. 1990), the Third Circuit held that “what the FD&C Act and the FTC Act did not create directly, the Lanham Act does not create indirectly, at least not in cases requiring original interpretation of these Acts or their accompanying regulations,” and affirmed the district court’s denial of a preliminary injunction. The same was true here. “For example, in Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996), the D.C. Circuit Court of Appeals relied on Sandoz to hold that private parties may not invoke the Lanham Act to create a private cause of action for enforcement of local taxi regulations.”
Statements based on fare comparisons: Plaintiffs alleged that the 20% cheaper claim was literally false, but the fare samples used in the blog posts “show the literal truth of the challenged statement, i.e., the sample UberX rates are at least 20% lower than the sample non-Uber taxicab fares.”  Plaintiffs didn’t allege that any of these samples were false.
Statements based on claims about plaintiffs’ insured status: Here Uber fell down.  Uber argued that, in light of the facts, Uber’s statement that there was “no guarantee” that a consumer’s cab was insured was literally true since, when Uber disseminated the ads, some Philadelphia taxicab drivers had not obtained replacement insurance coverage.  Uber failed to grapple with the allegation that the Keystone insurance policies were in fact valid until November 20, more than three weeks after the “no guarantee” statements.  The express claim that the insurance policies were terminated/cancelled in October was literally false.
Proximate cause under Lexmark: Plaintiffs alleged that Uber was “willfully, knowingly and intentionally making false claims and descriptions in their advertising and, unless immediately enjoined by this Court, will continue to deceive, mislead, and confuse the riding public into believing that, among other things, Plaintiffs’ taxicab service is inferior, less safe, risky, more expensive, and unsuitable for its intended purpose.”  That was enough, in conjunction with the other factual allegations in the complaint.  (I understand that Lexmark could in theory be used to contract standing.  But not when the ads at issue are comparative ads targeting the plaintiff/s!)
Relation of false advertising to RICO: the false advertising allegations couldn’t support a RICO claim “because the three alleged instances of false advertising (even if deemed to be racketeering activity) do not form the requisite continuous pattern of racketeering activity. The advertisements occurred within a three-day period in October 2014.”  Also, no facts were alleged that could establish that these misrepresentations were part of Uber’s “regular way of doing business.”

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