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From Antitrust Law Daily, January 2, 2018

Unfair competition claims by Boston taxicab companies against Uber proceed

By Edward L. Puzzo, J.D.

In claims by taxicab companies and their drivers against Uber, the federal district court in Boston refused to dismiss plaintiffs' unfair competition claims based on violating local taxi rules and conspiring with drivers to violate those rules, but did dismiss antitrust claims based on alleged predatory pricing. Claims against Uber's individual founders were dismissed based on lack of jurisdiction (Malden Transportation, Inc. v. Uber Technologies, Inc., December 29, 2017, Gorton, N.).

In this consolidated action, seven taxicab groups representing over 700 holders of taxi medallions in the Boston area brought claims against ride-sharing company Uber Technologies and its founders Travis Kalanick and Garrett Camp, alleging that they aided and abetted unfair competition in violation of federal and Massachusetts antitrust law. Both Uber and the individual founders moved to dismiss.

State unfair competition. In support of their claims of unfair competition in violation of state common law and the Massachusetts Consumer Protection Act (Chapter 93A), the plaintiffs stated that taxicabs in Boston must obtain licenses, known as taxi medallions, and otherwise comply with a set of municipal rules, ordinances and regulations collectively known as "Taxi Rules," but that Uber had gained an unfair advantage over taxi medallion owners by failing to comply with the Taxi Rules. Uber responded that it was never subject to the Taxi Rules.

The Massachusetts statutes and regulations, the court noted, govern vehicle registration requirements and impose state-level requirements for entities and their drivers, including "Personal Transportation Network Vehicles" operated by Uber. The Police Commissioner of Boston has imposed additional requirements for vehicles for hire. State regulations explicitly state that livery vehicles are "not required to obtain a taxicab license" but Uber, a Transportation Network Company (TNC) under the statutes, could point to no such regulation or ordinance with respect to TNCs during the complained of period.

Uber contended that it was exempt from the Chapter 93A prohibition against unfair methods of competition or unfair or deceptive acts or practices because its conduct was authorized by a Massachusetts statute passed on August 5, 2016, the Transportation Network Companies (TNC) Act, which preempted municipalities from using local Taxi Rules to regulate entities that used digital networks to connect drivers to riders. The court agreed that Uber was not required to comply with municipal taxi ordinances since the TNC Act was enacted, but they failed to show that the Act was meant to apply retroactively. Thus, the court found, Uber's conduct prior to the enactment of the TNC Act was not exempt from liability under Chapter 93A.

Massachusetts state law has a more expansive understanding of unfair competition than do other states, the court noted. In a previous case before this court with similar claims of unfair competition against Uber, Boston Cab Dispatch, Inc. v. Uber Techs., Inc., 2014 WL 1338148 (D. Mass. Mar. 27, 2014), the court held that plaintiffs had stated a claim that Uber unfairly competed with plaintiffs, in violation of Chapter 93A, by operating its service without incurring the expense of compliance with Massachusetts law and Boston ordinances. Finding that no case cited by Uber here justified dismissal of plaintiffs’ unfair competition claims given the relevant law, alleged facts and regulatory framework, the court denied Uber's motion to dismiss.

Predatory pricing. Certain plaintiffs alleged that Uber attempted to drive taxi companies out of business, in violation of the Sherman Act and corresponding state law, though the use of its predatorily priced UberX service. The court noted that one type of prohibited exclusionary practice, designed to protect or enhance a monopoly position, was the practice of predatory pricing, where a company reduces the price of its product to below cost, hoping to drive competitors out of business and then raise prices once it has achieved a monopoly position. Here, the plaintiffs failed to allege facts supporting a predatory price claim, the court found. Their allegations that Uber's services were priced below its costs because Uber had lost "billions of dollars" were conclusory, and lacked the particularity required of antitrust plaintiffs. The court therefore dismissed the plaintiff's antitrust claims.

Conspiracy. The Anoush Cab, Inc. plaintiffs alleged a different theory of civil conspiracy to engage in unfair competition in violation of the common law and Massachusetts statutory law. They alleged that Uber conspired with its independent contractor drivers to act in violation of the Taxi Rules. They alleged that Uber controls and manages its drivers, such that Uber is directly liable for violating Chapter 93A. Although Uber argued that it did not control its third-party drivers and the Taxi Rules did not apply to its drivers anyway, the court found that the Taxi Rules did apply to its drivers. The court found that the plaintiffs had pleaded facts sufficient to establish that Uber gave substantial assistance to its drivers to violate the Taxi Rules, and further found that the plaintiffs had pleaded facts sufficient to establish, if proven, that Uber had knowledge its drivers were committing torts. The court ruled against Uber's motion to dismiss these claims.

Individual defendants. The claims against the individual defendants were brought only by plaintiff Taxi Maintenance, Inc. Kalanick and Camp moved to dismiss based on a lack of personal jurisdiction. The court found it could not assert general jurisdiction over the defendants because of the lack of specific facts establishing that Kalanick and Camp, as opposed to their corporation, maintained continuous and systematic activity in the forum state. Similarly, the court could not assert specific jurisdiction because the plaintiffs failed to allege facts that demonstrated a nexus between the individual defendants’ contacts and the plaintiff’s cause of action. The plaintiffs also failed to assert facts relevant to obtaining specific personal jurisdiction by piercing the corporate veil. The court therefore granted the individual defendants’ motions to dismiss.

The case is No. 1:17-cv-10598-NMG.

Attorneys: Thomas C. O'Konski (Prince Lobel Tye LLP) for Malden Transportation, Inc. Christopher G. Timson (Law Offices of Christopher G. Timson, PC) for Gill & Gill, Inc. Darin M. Colucci (Colucci, Colucci & Marcus, PC) for Taxi Maintenance, Inc., Alice's Cab, Inc. and George's Cab, Inc. Michael Sheetz (Cooley LLP) for Uber Technologies, Inc.

Companies: Malden Transportation, Inc.; Gill & Gill, Inc.; Taxi Maintenance, Inc.; Alice's Cab, Inc.; George's Cab, Inc.; Uber Technologies, Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices MassachusettsNews

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