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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