Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Consumer’s unfair business practices claims against Uber can proceed, (Sep 18, 2014)

By Linda O’Brien, J.D., LL.M.

A consumer adequately stated unfair and unlawful business practices claims against ridesharing service Uber for allegedly misrepresenting that it charges an additional fee above the metered rate for each ride for the driver while retaining a substantial portion of the fee as a revenue source, the federal district court in San Francisco has ruled (Ehret v. Uber Technologies, Inc., September 17, 2014, Chen, E.).

Uber Technologies allows consumers to arrange for taxi cab rides electronically through an application on their mobile phones. The app also allows consumers to make payments with their credit card information. Caren Ehret used Uber’s app to arrange for a taxi cab ride in September 2012.

Ehret filed a class action suit against Uber, alleging claims under California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA). Specifically, Ehret asserted that Uber charged a 20 percent fee above the metered fare for each ride, misrepresenting the charge as a gratuity that was automatically added for the driver. However, Ehret argued, a substantial portion of the fee was retained by Uber as an additional revenue source. Uber moved for dismissal.

Rule 9(b). The court found that the plaintiff alleged sufficient detail to meet the heightened pleading standard under Fed. R. Civ. Pro. 9(b). Ehret alleged that she used Uber’s app to arrange and pay for a taxi cab ride and paid 20 percent over the metered fare in reliance on Uber’s representation that the fee was a gratuity. She also alleged that Uber advertised the automatic charges on its website and she would not have agreed to pay the fee absent Uber’s misrepresentations. Her allegations were sufficiently specific as to when and where Uber made the alleged misrepresentations and she was not required to state the precise web pages viewed and the precise dates she viewed the misrepresentations, according to the court.

Extra-territoriality. Additionally, the plaintiff’s claims did not require the extra-territorial application of either the UCL or CLRA. Uber’s argument that the UCL did not apply to a nonresident alleging non-California conduct was rejected. In her complaint, Ehret alleged that the deceptive practices originated in the defendant’s California corporate headquarters, the misrepresentations contained on Uber’s website and mobile phone application were maintained in California, and the billing and payments of its services were processed in California. Thus, the court determined that the plaintiff alleged sufficient nexus between California and the misrepresentations that form the basis of the plaintiff’s claims.

UCL. The plaintiff sufficiently alleged economic harm to confer standing under the UCL and CLRA. Ehret contended that she would not have agreed to or paid Uber the full amount charged but for Uber’s misrepresentations. A misrepresentation is deemed to be material if a reasonable person would attach importance to it. According to the court, the plaintiff’s allegations were sufficient to show economic injury and that Uber’s misrepresentations were material. Whether Ehret had the option to not pay the additional fee because it was integral to Uber’s charge was immaterial for purposes of standing under the UCL.

Moreover, the plaintiff stated a claim under the unfairness and fraudulent prongs of the UCL. Her allegations that Uber represented it automatically charges the metered fare plus a 20 percent gratuity for the driver, but keeps a substantial portion for itself, were sufficient to plausibly show that a reasonable consumer would be deceived and would expend more than he or she otherwise would have but for the misrepresentation. In addition, the court noted that at the current stage of litigation, it could not determine whether the cost of the alleged misrepresentation to Uber’s consumers was justified.

CLRA. The court also determined that Ehret stated a claim under the CLRA. Her allegations that Uber represented that its application remitted a 20 percent gratuity to drivers were sufficient to show that Uber’s service was advertised as having a characteristic that it did not have. The allegations also were sufficient to show a violation of the prohibition on representing that a transaction confers obligations which it did not have–in this case, an obligation to remit the fee to the drivers.

The case is No. C-14-0113.

Attorneys: Hall Adams, III (Law Offices of Hall Adams LLC) for Caren Ehret. Amit B. Patel (Quinn Emanuel Urquhart & Sullivan, LLP) for Uber Technologies, Inc.

Companies: Uber Technologies, Inc.

Cases: StateUnfairTradePractices CaliforniaNews