Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Pa.: Claims that Uber misrepresented taxicabs’ insurance coverage may proceed, (Mar 8, 2016)

By Linda O’Brien, J.D., LL.M.

In an action by taxicab companies against ride sharing service Uber Technologies, the companies alleged sufficient facts to pursue a claim that Uber disseminated false representations about the companies’ lack of insurance coverage, the federal district court in Philadelphia has decided (Checker Cab Philadelphia, Inc. v. Uber Technologies, Inc., March 7, 2016, Alejandro, N.).

In December 2014, Checker Cab Philadelphia, Inc., 44 other taxicab companies, and a taxicab dispatch company filed suit against Uber Technologies, asserting claims under the Lanham Act, Racketeering Influenced and Corrupt Organizations Act (RICO), and state unfair competition laws. Specifically, Checker alleged that Uber engaged in unfair competition by operating a taxi service that violated state and local cab ordinances and disseminated false representations about Checker’s insured status and Uber’s comparable fares.

In March 2015, the taxicab companies’ motion for preliminary injunction was denied, for failing to show a likelihood of success on the merits of their claims. Subsequently, Uber moved for dismissal.

False advertising. The court determined that the taxi companies sufficiently pleaded that customers were induced by alleged false representations about the insured status of the plaintiffs to use Uber’s services. Uber had publicized that there was “no guarantee” consumers’ taxicab rides would be insured due to the bankruptcy of the state’s largest taxicab insurer. The plaintiffs alleged that, although the company’s policies were cancelled as of November 2014, the city regulatory authority notified all of the company’s policyholders to obtain replacement coverage by October 2014 and most of Philadelphia’s taxicab drivers obtained replacement coverage by that deadline. Thus, Uber’s statements were literally false, the plaintiffs maintained.

However, the plaintiffs’ claims based on alleged misrepresentations regarding Uber’s fares, in comparison to those of the plaintiffs, failed as a matter of law, the court found. The taxi companies alleged that Uber violated the Lanham Act by representing that its fares were at least 20 percent cheaper than the plaintiffs. To support Uber’s representation, the challenged statement included sample pricing costs comparing Uber and taxicab rates for three different trips. Thus, the fare samples showed the literal truth of Uber’s statement.

State and local law violations. Additionally, the plaintiffs’ claims premised on the alleged unlawful or unauthorized provisions of taxi services in Philadelphia were barred. The court cited decisions in Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d. 222 (3d Cir. 1990), and Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996), in ruling that private parties could not invoke the Lanham Act or RICO to create a private cause of action for enforcement of local taxi regulations.

RICO. The court also found that the plaintiffs failed to plead sufficient facts to meet the continuity requirement for a substantive RICO claim. The alleged three instances of false advertising with respect to the insured status of the plaintiffs occurred within a three day period—which was not over “substantial period of time”—and did not form the requisite continuous pattern of racketeering activity.

Furthermore, the plaintiffs failed to allege any facts to show an injury separate and distinct from the predicate fraudulent acts themselves. Allegations that the mere use of racketeering proceeds supported a business did not quality as an “investment’ injury for purposes of a RICO claim, the court concluded.

The case is No. 2:14-cv-07265-NIQA.

Attorneys: Michael S. Henry (Salaman/ Henry PC) for Checker Cab Philadelphia, Inc., AF Taxi, Inc. and AG Taxi, Inc. A. Scott Bolden (Reed Smith LLP) for Uber Technologies, Inc., Rasier, LLC, and Gegen, LLC.

Companies: Checker Cab Philadelphia, Inc.; AF Taxi, Inc.; AG Taxi, Inc.; Uber Technologies, Inc.; Rasier, LLC; Gegen, LLC

Cases: Advertising RICO StateUnfairTradePractices PennsylvaniaNews