Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D.Cal.: California false advertising claims against transportation company proceed, (Dec 10, 2013)

By Linda O’Brien, J.D., LL.M.

In a class action by drivers for hire against a transportation network company for violations of California’s Unfair Competition Law (UCL), allegations of false advertising were sufficiently pleaded to withstand the defendant’s motion to dismiss, the federal district court in San Francisco has decided (O’Connor v. Uber Technologies, Inc., December 6, 2013, Chen, E.). However, the plaintiffs’ UCL claims for unfair or fraudulent business practices were dismissed.

Uber Technologies, Inc. is a transportation network company that offers a mobile phone application used to connect passengers with drivers of vehicles for hire. The plaintiffs, former drivers and users of the application, filed a class action against Uber, alleging violations of UCL, among other claims. The plaintiffs claimed that Uber falsely advertised on its website and in marketing materials to passengers that a gratuity was included in the total cost of the service, thereby discouraging customers from tipping. However, Uber did not remit the full amount of the gratuity received from customers to the driver. Uber moved to dismiss all claims.

Regarding the plaintiffs’ UCL allegations of unfair or fraudulent business practices that related to claims based on breach of contract, quantum meruit, and tortious interference with contractual relations that were previously dismissed by the court, those standalone claims were also dismissed as derivative of the predicate claims.

However, the plaintiffs did state a claim under the “fraudulent” prong of the UCL. To assert a claim under the UCL based on false advertising or promotional practices, the plaintiff must show that members of the public are likely to be deceived. In their complaint, the plaintiffs sufficiently alleged that Uber’s advertisement that a gratuity was included in the total cost could cause reasonable customers to expect that the drivers would receive the gratuity. Since Uber did not remit the gratuity in its entirety to the drivers, the advertising was deceptive and misleading, and it was plausible that customers would be deceived to the detriment of the drivers.

The case is No. C-13-3826 EMC.

Attorneys: Monique Olivier (Duckworth Peters Lebowitz Olivier) for Douglas O’Connor. Robert Jon Hendricks (Morgan, Lewis & Bockius) for Uber Technologies, Inc.

Companies: Uber Technologies, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews