Chicago Taxi Dispatchers and Medallion Owners Take On Uber

Here in Chicago, the first court decision involving a ride sharing business came down last summer.  In Yellow Group LLC v. Uber Technologies Inc., 12-cv-7967 (July 10, 2014), Judge Sara L. Ellis of the U.S. District Court for the Northern District of Illinois ruled on Uber’s motion to dismiss the plaintiffs’ second amended complaint.  Plaintiffs included multiple Chicago taxi medallion owners, taxi affiliations (dispatch service operators) and a livery service (YPL).  Together they alleged “Uber competes unfairly by misrepresenting certain features of its service, misleading customers as to an association between Uber and Plaintiffs, and encouraging taxi drivers to breach their agreements with Plaintiffs.”

Plaintiffs’ statutory claims alleged violations of the Lanham Act and Illinois’ Consumer Fraud and Deceptive Business Practices Act.  As a preliminary matter, Uber asked the Court to dismiss certain misrepresentation claims, arguing the plaintiffs’ lacked standing.  But citing a recent U.S. Supreme Court decision considering standing in the context of Lanham Act claims, Judge Ellis explained that

plaintiff “need not directly compete with the defendant, but must allege an injury to a commercial interest in reputation or sales, and that the injury must flow directly from the deception wrought by the defendant’s advertising, such that the false advertising directly caused consumers to divert their business from the plaintiff.”

The Court concluded that plaintiff dispatch services and YPL satisfied the above standard at this stage, but that the medallion owners could not, “as they do not allege that Uber’s false advertising causes them a direct injury.”

On the sufficiency of the rate and licensure allegations themselves, the Court concluded plaintiffs adequately alleged claims of misrepresentation relating to Uber taxi rates which appeared on Uber’s website (reference to “standard taxi rates”) and licensure status which appeared in an Uber blog post.  Other statutory claims alleged Uber “misrepresented an association by occasionally referring to its “fleet partners”, using a yellow colored SUV in one of its advertisements, and allowing a vehicle bearing taxi affiliation plaintiffs’ trademarks to arrive to pick up a fare (some of Uber’s Chicago drivers are associated with the plaintiff dispatch services, meaning when they pick up a passenger, they may arrive in a vehicle with non-Uber trademarks).  The Court found that the taxi dispatch plaintiffs adequately alleged claims for misrepresentation of association, while the medallion owners did not.

Uber raised the U.S. Court of Appeals for the D.C. Circuit’s 1996 decision in Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996), wherein the panel held that a limousine service could not pursue Lanham Act claims against a competing cab company solely for purpose of enforcing alleged violations of local taxicab ordinances and regulations.  Plaintiff was instead redirected to the D.C. Taxicab Commission.  To the extent the instant plaintiffs’ claims alleged misrepresentation, Dial A Car is inapplicable.  However, Judge Ellis also ruled that

“[t]o the extent that the Second Amended Complaint alleges that Uber violated the Lanham Act or its Illinois equivalents by simply operating illegally or by misrepresenting the legality of its service, those allegations fail under the rationale in” Dial A Car.

Plaintiffs also alleged claims of tortious interference with contractual relations, asserting Uber “intentionally and knowingly encouraged individual taxi drivers to breach their agreements with” the taxi dispatch services.  The alleged breaches include (i) encouraging drivers to violate the trademark clause in the drivers’ contract by providing them  with Uber branded “handtags” to suspend from the cabs’ interior rearview mirrors; (ii) encouraging drivers to use their cell phones while driving and requiring drivers to process credit card transactions via the Uber app, violations of local laws which are incorporated by reference into the drivers’ contracts; and (iii) allegations that by subscribing to Uber, drivers violate their agreements with the dispatch services that they will not use competing dispatch services.  Again the Court concluded that while the dispatch services adequately pled a cause of action, the medallion owners and YPL failed to do so.

Plaintiffs’ remaining common law claims were for unfair competition.  Such claims by the dispatch services and YPL, which each had surviving Lanham Act claims, were sufficient, while the taxi medallion owner’s claim, which did not contain any additional material allegations, was dismissed.

It would seem Uber could have avoided further litigation (discovery) on even more of the statutory claims here had it more heavily scrutinized its own website and blog copy, and other word choices discussed in the opinion.  Such contents were presumably vetted, and consistent with the company’s business plan, and Uber may end up prevailing on all related claims.  However, alternative but equally effective language/phrasing may have reduced Uber’s exposure here to liability under the unfair competition statutes, which in some cases provide for attorneys’ fees to the prevailing party.

UPDATE:  Five months after the above order was entered, the Court granted plaintiffs’ motion to compel Uber to respond to interrogatories and produce documents.  Earlier this year, after Uber was to have provided such responses, the Court granted plaintiffs’ oral motion to voluntarily dismiss the case.

Posted in Consumer Fraud/Unfair Competition, Lanham Act, Litigation, Ride Sharing
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  1. […] In Manzo v. Uber Technologies, Inc.,13-C-2407, (July 14, 2014), Judge Sara Ellis had another opportunity to rule on a motion to dismiss filed by Uber in a dispute involving area taxi and livery drivers.  This decision came just a few days after Judge Ellis ruled on another FRCP 12(b)(6) motion in Yellow Group LLC v. Uber Technologies. […]

  2. […] In Manzo v. Uber Technologies, Inc.,13-C-2407, (July 14, 2014), Judge Sara Ellis had another opportunity to rule on a motion to dismiss filed by Uber in a dispute involving area taxi and livery drivers.  This decision came just a few days after Judge Ellis ruled on another FRCP 12(b)(6) motion in Yellow Group LLC v. Uber Technologies. […]

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