L.A. Taxi Cooperative, Inc. v. Uber Technologies, Inc.

Citations: 114 F. Supp. 3d 852; 2015 U.S. Dist. LEXIS 94181; 2015 WL 4397706Docket: No. 15-CV-01257-JST

Court: District Court, N.D. California; July 17, 2015; Federal District Court

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The Court has partially granted and partially denied a motion to dismiss filed by Defendants Uber Technologies, Inc., Rasier, LLC, and Rasier-CA, LLC. Plaintiffs, consisting of nineteen California taxi service providers, allege that Uber, a transportation network company, competes with them for customers in various California counties. Uber's marketing includes numerous claims about the safety of its rides, asserting it offers the "safest rides on the road" and emphasizes its commitment to strict safety standards. These claims are supported by statements from Uber's executives and communication materials to customers, which highlight their safety initiatives and background checks for drivers. The "Safe Rides Fee" included in customer receipts underscores Uber's purported focus on rider safety. The Court accepted these allegations as true for the purpose of evaluating the motion to dismiss.

Uber implements a comprehensive three-step background check process for all its ridesharing and livery partners, which includes county, federal, and multistate checks, establishing a new industry standard. This rigorous procedure is consistently applied across all Uber services, including uberX, and is complemented by ongoing checks of drivers' motor vehicle records to maintain safety standards. Until December 10, 2014, Uber promoted its background checks as industry-leading, with additional claims about its safety measures on its website and in media statements. An Uber representative emphasized the company’s commitment to passenger safety, asserting that it surpasses local requirements and partners only with drivers who pass extensive checks.

In contrast, plaintiffs argue that Uber's safety claims are misleading, asserting that their own transportation services are safer. They cite their use of Live Scan background checks, which are more thorough than Uber's third-party checks, as these checks include fingerprinting and have no jurisdictional limitations. Plaintiffs also highlight additional safety measures for their drivers, including mandatory driver safety courses and stricter vehicle maintenance standards. Furthermore, plaintiffs’ drivers cannot work for multiple companies, ensuring they are solely focused on transporting passengers, unlike Uber drivers who may be juggling dispatch services.

Uber drivers frequently operate on multiple ride-sharing platforms, such as Lyft, leading to distractions from managing ride requests across several devices. Uber's misleading advertisements create competitive harm by suggesting its rides are safer than those offered by taxi companies, resulting in a shift in customer preference that negatively impacts the plaintiffs' revenue and reputation. 

The plaintiffs filed a complaint on March 18, 2015, alleging violations of the Lanham Act, California’s False Advertising Law (FAL), and California’s Unfair Competition Law (UCL). In response, the defendants filed a motion to dismiss on May 14, 2015, claiming the complaint failed to state a viable claim, which the plaintiffs oppose. The Court asserts jurisdiction under 28 U.S.C. §§ 1331 and 1367.

To survive a motion to dismiss, a complaint must provide a concise statement of the claim and sufficient factual content that establishes a plausible entitlement to relief. The defendants challenge the plaintiff's claims on two fronts: the lack of actionable statements and the ineligibility for relief under the UCL and FAL. 

For a false advertising claim under the Lanham Act, the plaintiffs must demonstrate several elements, including a false statement of fact, material deception affecting purchasing decisions, and resultant injury. Falsity can be shown through literal falsehood or misleading implications. California's laws similarly prohibit unlawful and misleading advertising practices.

The 'reasonable consumer' standard requires Plaintiffs to demonstrate a likelihood of deception among the public per California statutes. The California Supreme Court has established that these laws address not only false advertising but also true statements that may mislead or confuse consumers. Plaintiffs’ claims align closely with those under the Lanham Act. Defendants argue that Plaintiffs have not presented an actionable statement, citing reasons such as lack of specificity, aspirational language, context removal, and absence of commercial intent.

Defendants assert that all challenged statements constitute non-actionable puffery and request dismissal of the complaint. Determining whether a misrepresentation is factual or mere puffery is a legal question appropriate for resolution under Rule 12(b)(6). In the Ninth Circuit, puffery is defined as claims unlikely to induce consumer reliance, with the distinction between actionable statements and puffery hinging on the specificity of claims. Specific, quantifiable assertions about a product can be actionable, while general claims are typically considered puffery.

Examples of non-actionable puffery include exaggerated slogans like Uber's "GOING THE DISTANCE TO PUT PEOPLE FIRST" and the "Less is More" claim, which lack measurable content. Similarly, the phrase "BACKGROUND CHECKS YOU CAN TRUST" is deemed a general, subjective statement without specific claims. In contrast, some statements, such as claims about Uber setting "the strictest safety standards possible" and its "three-step screening" process, include specific assertions about service characteristics that could be tested and compared to competitors, thus potentially qualifying as actionable statements.

A reasonable consumer could interpret Uber's advertising as suggesting that its rides are statistically safer than those of competitors, supported by references to "strictest safety standards" and factual comparisons. Allegations regarding safety are not mere puffery; they indicate a commitment to prioritizing safety, distinguishing them from vague promotional statements. Specific claims about safety standards are factual assertions that can be substantiated or disproven, thus not qualifying as puffery. The court emphasizes that terms like "safest," "more efficiently," and "most stringent quality control tests" are objectively verifiable and imply some level of testing. Consequently, the court cannot dismiss the case based on the argument that all challenged statements are mere exaggerations.

Defendants also claim certain statements labeled as "aspirational" are non-actionable puffery due to their vague nature. However, the court rejects the notion that such aspirational language, like "committed to improving safety," automatically exempts Uber from liability. While general statements about a company's priorities may be considered puffery, the addition of aspirational phrases does not inherently shield a defendant from liability under false advertising laws. The court clarifies that phrases indicating a company's commitment do not negate the potential for actionable claims.

The court in Glen Holly Entertainment determined that statements about product development being a "high priority" were too generalized and vague to be actionable, classifying them as mere puffery. The presence of "aspirational" language does not exempt a statement from scrutiny regarding its potential to mislead consumers. In this case, statements made by Uber regarding its commitment to safety included specific claims that a reasonable consumer could interpret as factual, such as its assertion of having "best in class safety." Although some of Uber's statements may appear to be puffery, the inclusion of measurable claims prevents dismissal of these statements under the motion.

The defendants argued for dismissal based on the claim that the plaintiffs misrepresented statements out of context, emphasizing that the plaintiffs focused on subjective claims while ignoring undisputed factual statements about safety measures, such as background checks. However, the court noted that if the challenged safety statements are actionable and potentially misleading, their contextual analysis must consider whether a reasonable consumer could rely on them as factual, which the plaintiffs assert.

Additionally, to qualify as commercial advertising under the Lanham Act, representations must involve commercial speech aimed at influencing consumers and must be sufficiently disseminated to the relevant public. The defendants contested the characterization of several statements as non-commercial advertising. The court clarified that "commercial speech" refers specifically to proposals for transactions, while media statements about public matters are protected under the First Amendment and do not constitute commercial speech.

Speech that is not classified as "purely commercial" is eligible for full First Amendment protection. In this case, several statements made by Uber representatives to journalists, which appeared in independent articles addressing the safety of Uber, are considered part of a public discourse rather than commercial speech. The articles, which critically evaluate Uber's safety, included these statements, making them inextricably linked to the coverage of a matter of public concern. Therefore, they cannot be deemed commercial speech actionable under the Lanham Act.

Plaintiffs argue that Uber’s statements are commercial despite appearing in journalistic contexts, referencing cases like Kasky v. Nike, which involved press releases rather than responses to journalists. The distinction is significant, as Kasky’s statements were not made in the context of independent reporting. Similarly, in SKEDCO, statements were made in an interview for a specialized magazine closely associated with paid advertisements, differing from the critical articles in question here.

Regarding Uber’s “Safe Rides Fee” statements on user receipts, defendants assert that these do not constitute commercial speech since they relate to completed transactions. The legal precedent supports that communications about past transactions are not designed to influence future purchases. Plaintiffs counter that these receipts, which remind users of the fee each time they ride, could encourage repeat usage of Uber services by influencing consumer expectations about safety. The complaint claims that such statements may lead users to believe they will receive a safer ride compared to traditional taxis.

The 'Safe Rides Fee' indicates Uber's commitment to providing a safe platform and appears as a distinct line item on uberX receipts, suggesting Uber's intention to encourage repeat usage by customers. In a favorable interpretation for the Plaintiffs, the complaint sufficiently claims that statements regarding the 'Safe Rides Fee' aim to influence consumer usage of Uber. Consequently, Uber's motion to dismiss the complaint concerning these statements is denied.

To succeed under the California Unfair Competition Law (UCL), a plaintiff must show that the defendant engaged in fraudulent, unlawful, or unfair business practices. Defendants argue that Plaintiffs lack standing to pursue claims under any of these categories, particularly the fraud prong, as they did not demonstrate reliance on Uber’s allegedly misleading advertising. California law mandates that plaintiffs alleging fraud under UCL must show actual reliance on false advertising, as reliance is essential to proving fraud. Federal courts in California have differing opinions on whether competitor plaintiffs need to show their own reliance or if consumer reliance suffices. Most courts agree that competitors must demonstrate their own reliance on alleged misrepresentations. As the Plaintiff does not consume Defendants’ services, they cannot establish reliance on Defendants' statements, thus lacking standing under the UCL’s fraud prong. However, some cases suggest that demonstrating customer reliance can suffice for a competitor's claim. The Plaintiff asserts that they suffered competitive harm due to consumer reliance on Defendants’ misrepresentations, which diverted sales. The context of Proposition 64 indicates a legislative intent to limit standing under the UCL to prevent abusive lawsuits, but it does not exclude competitors from bringing claims when they are injured by reliance on misleading advertising.

Plaintiffs lack standing under the California Unfair Competition Law (UCL) to pursue claims based on alleged false advertising by Uber because they did not plead their own reliance on the misrepresentations. The California Supreme Court defines actual reliance as the defendant's misrepresentation being an immediate cause of the plaintiff's injury-producing conduct. Furthermore, fraud claims cannot be based on third-party reliance, and since the UCL claims under the unfair and unlawful prongs are based on the same misrepresentation theory, they also lack standing. Allegations of misrepresentations necessitate a demonstration of reliance, which applies to all prongs of the UCL when misrepresentation is involved. 

Regarding restitution, Defendants assert that Plaintiffs cannot claim restitution under the UCL or FAL because they lack a direct ownership interest in Uber’s products. Plaintiffs do not dispute that restitution is limited to money or property taken directly from them or in which they have a vested interest. Although Plaintiffs argue it is premature to determine restitution entitlement, their complaint does not establish ownership of any profits or a confirmed contractual relationship with Uber’s customers, thus seeking non-restitutionary disgorgement, which is not permitted. 

The court grants Defendants' motion to dismiss the UCL claim and also the motion to strike the restitution claim under the FAL, allowing Plaintiffs to file an amended complaint by August 3, 2015.

The court has ordered that the analysis for determining the actionability of challenged advertising statements is largely the same for the plaintiffs' claims under the Lanham Act, the Unfair Competition Law (UCL), and the False Advertising Law (FAL). Although some statements may not be actionable, the focus at this stage is on whether the plaintiffs have adequately pled a claim regarding the totality of the defendant's statements. The court will not assess each statement individually at this stage. It is acknowledged that the UCL and FAL claims are based on the same false advertising theory, thus applying the same legal test. Although the articles referenced in the complaint are not physically attached, they are considered under the 'incorporation by reference' doctrine, which allows for the consideration of documents mentioned in a complaint if their authenticity is not disputed. The court typically does not entertain motions to dismiss that address less than all challenged statements; however, it acknowledges that Uber’s media statements form a distinct category. The business press emphasizes the importance of maintaining positive relationships with customers to foster loyalty and repeat business, suggesting that post-sale communication is vital for ongoing consumer engagement and trust.