L.A. Taxi Cooperative, Inc. et al v. Uber Technologies, Inc. et al, No. 3:2015cv01257 - Document 44 (N.D. Cal. 2015)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS by Judge Jon S. Tigar granting in part and denying in part 16 Motion to Dismiss. (wsn, COURT STAFF) (Filed on 7/17/2015)
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L.A. Taxi Cooperative, Inc. et al v. Uber Technologies, Inc. et al Doc. 44 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 L.A. TAXI COOPERATIVE, INC., et al., Case No. 15-cv-01257-JST Plaintiffs, 8 v. 9 10 UBER TECHNOLOGIES, INC., et al., Defendants. ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS Re: ECF No. 16 United States District Court Northern District of California 11 Before the Court is a motion to dismiss filed by Defendants Uber Technologies, Inc., 12 13 Rasier, LLC, and Rasier-CA, LLC. ECF No. 16. For the reasons set forth below, the Court will 14 grant the motion in part and deny it in part. 15 I. BACKGROUND 16 A. 17 For the purpose of deciding this motion to dismiss, the Court accepts as true the following 18 19 Factual Allegations allegations from Plaintiffs’ complaint. See ECF No. 1. Plaintiffs are nineteen California corporations and limited liability companies that provide 20 taxi services throughout California, including San Francisco County, Los Angeles County, and 21 San Diego County. Compl. ¶¶ 4, 11-29, 34. Defendant Uber Technologies, Inc. (“Uber”) is a 22 transportation network company that uses a smart phone application (“app”) to connect passengers 23 looking for rides with drivers willing to provide rides. Id. ¶¶ 5, 30. Defendants Rasier, LLC and 24 Rasier-CA, LLC are subsidiaries of Uber. Id. ¶¶ 31-32. The parties operate in the same cities and 25 counties, and vie for the same customers. Id. ¶¶ 36-37. 26 27 28 1. Statements Relating to Safety As part of its advertising campaign, Uber makes various statements about the safety of rides on Uber’s platform, and disparages the safety of rides offered by taxi cab companies. Id. ¶ 1. Dockets.Justia.com 1 For example, Uber’s website boasts that it offers the “SAFEST RIDES ON THE ROAD” and that 2 Uber is “GOING THE DISTANCE TO PUT PEOPLE FIRST.” Id. ¶ 42. The website also states, 3 “Wherever you are around the world, Uber is committed to connecting you to the safest ride on the 4 road. That means setting the strictest safety standards possible, then working hard to improve 5 them every day.” Id. ¶ 43. It promises, “SAFE PICKUPS,” with “No more waiting alone on a 6 dark street hoping you can hail a taxi.” Id. ¶ 46. 7 8 Uber’s blog, which is easily accessible from its website, includes the following statement from Uber’s Head of Communications—North America, Lane Kasselman: 9 Uber works hard to ensure that we are connecting riders with the safest rides on the road. The current efforts we are undertaking to protect riders, drivers and cities are just the beginning. 10 We’ll continue innovating, refining, and working diligently to ensure we’re doing everything we can to make Uber the safest experience on the road. United States District Court Northern District of California 11 12 13 Id. ¶ 44. Another statement on the blog, issued after an Uber driver struck and killed a six-year 14 old girl, reads, “We are committed to improving the already best in class safety and accountability 15 of the Uber platform, for both riders and drivers.” Id. ¶ 45. 16 Statements concerning safety also appear in information provided to Uber customers by 17 email after they complete a ride using Uber. Id. ¶¶ 47-48. The email message includes a bill with 18 a fare breakdown, including a $1.00 “Safe Rides Fee.” Id. ¶ 48. Customers who click on a 19 question mark next to the words “Safe Rides Fee” are directed to a website that includes the 20 following information: From the beginning, we’ve always been committed to connecting you with the safest rides on the road. The Safe Rides fee is a fee added to uberX fares on behalf of drivers (who may pay this fee to Uber) in cities with uberX ridesharing. This Safe Rides Fee supports continued efforts to ensure the safest possible platform for Uber riders and drivers . . . . For complete pricing transparency, you’ll see this as a separate line item on every uberX receipt. 21 22 23 24 25 26 Id. ¶¶ 49-50. Uber’s advertising campaign emphasizes the rigor of its background checks for drivers. Id. 27 ¶ 55. The website promises, “BACKGROUND CHECKS YOU CAN TRUST,” explaining that 28 “Every ridesharing and livery driver is thoroughly screened through a rigorous process we’ve 2 1 developed using constantly improving standards . . . .” Id. ¶ 56. Until at least October 29, 2014, 2 the website stated, “Every ridesharing and livery driver is thoroughly screened through a rigorous 3 process we’ve developed using industry-leading standards.” Id. ¶ 57 (emphasis added). 4 5 6 7 8 9 10 United States District Court Northern District of California 11 On Uber’s blog, Kasselman elaborates on Uber’s background check procedure: All Uber ridesharing and livery partners must go through a rigorous background check. The three-step screening we’ve developed across the United States, which includes county, federal, and multistate checks, has set a new standard. . . . We apply this comprehensive and new industry standard consistently across all Uber products, including uberX. Screening for safe drivers is just the beginning of our safety efforts. Our process includes prospective and regular checks of drivers’ motor vehicle records to ensure ongoing safe driving. Unlike the taxi industry, our background checking process and standards are consistent across the United States and often more rigorous than what is required to become a taxi driver. 12 Id. ¶ 58. Until at least December 10, 2014, this post stated that Uber drivers “must go through a 13 rigorous background check that leads the industry.” Id. ¶ 59. Similarly, until October 2014, the 14 website explaining the “Safe Rides Fee” stated that the fee “supports our continued efforts to 15 ensure the safest possible platform for Uber riders and drivers, including an industry-leading 16 background check process.” Id. ¶ 60. 17 In addition, Uber has made statements to the media concerning the superior safety of Uber 18 rides. These statements include the following statement made by an Uber representative to NBC’s 19 Detroit affiliate: 20 21 22 23 24 25 26 27 28 What I can tell you is that Uber takes passenger safety very seriously. We work every day to connect riders with the safest rides on the road and go above and beyond local requirements in every city we operate. Uber only partners with drivers who pass an industry-leading screening that includes a criminal background check at the county, federal and multi-state level going back as far as the law allows. We also conduct ongoing reviews of drivers’ motor vehicle records during their time as an Uber partner. ... For more information on what makes Uber the safest rides on the road, please see our website . . . . Id. ¶ 63. An April 29, 2014, article entitled “Faulty Background Checks May Put UberX 3 1 Passengers at Risk, Report Says,” similarly quotes an Uber representative as stating: 2 Uber’s industry-leading background checks help connect consumers with the safest ride on the road . . . . Our driver partner background checks are more thorough than those of taxi [sic] in most cities . . . . We continue to improve and are always working hard to tighten our policies and processes to ensure that Uber remains the safest transportation option available. 3 4 5 6 Id. ¶ 64. Finally, a June 25, 2014, NBCBayArea.com news report quotes an Uber representative 7 as saying, “We’re confident that every ride on the Uber platform is safer than a taxi.” Id. ¶ 65. 8 9 2. Practices and Policies Relating to Safety Plaintiffs allege that Uber’s representations about the safety of its rides are false and misleading because Plaintiffs offer safer transportation than Uber. Id. ¶¶ 66-67. First, Plaintiffs’ 11 United States District Court Northern District of California 10 drivers must submit to Live Scan, which is “considered the gold standard of background checks.” 12 Id. ¶¶ 69-70. Live Scan uses fingerprint identification; analyzes information in Department of 13 Justice and Federal Bureau of Investigation systems that have no time-based or jurisdictional 14 limitations; and continuously refreshes the results of a person’s background check. Id. ¶ 70. By 15 contrast, Uber’s background checks, which are run by a private third-party company, do not 16 involve fingerprinting; have jurisdictional and time-based limits; and are not automatically 17 updated to reflect new information. Id. ¶¶ 74-76. For these reasons, Uber is not employing the 18 most effective background checks available. Id. ¶¶ 80-81. 19 Second, Plaintiffs’ drivers, unlike Uber drivers, are required to take a driver safety course 20 and/or other safety training and to pass a written examination before transporting passengers. Id. 21 ¶¶ 82, 86. Third, Plaintiffs’ vehicle safety inspections and maintenance standards are more 22 stringent than those required by Uber. Id. ¶¶ 90-91. Fourth, unlike Uber drivers, Plaintiffs’ 23 drivers are prohibited from driving for more than one company, which ensures that they are 24 focused on transporting passengers, rather than toggling between dispatch services. Id. ¶¶ 94-96. 25 Because Uber drivers often also drive for a ridesharing competitor such as Lyft, Inc., they can be 26 distracted by attempting to manage ride requests on multiple platforms, often using more than one 27 cellphone. Id. ¶¶ 96-97. 28 4 3. 1 Harm to Competitors Uber’s false and misleading advertisements cause harm to Plaintiffs because they convince 2 3 customers that Uber offers safer rides than taxi companies. Id. ¶ 102. As a result of Uber’s 4 representations about safety, customers choose to use Uber rather than taking a taxi, causing 5 Plaintiffs to lose significant revenue and suffer reputational injury. Id. ¶¶ 102-106. 6 B. Procedural History 7 Plaintiffs’ complaint, filed on March 18, 2015, alleges violations of (1) the Lanham Act, 8 15 U.S.C. § 1125(a); (2) California’s False Advertising Law, Cal. Bus. & Prof. Code § 17500 9 (“FAL”); and (3) California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 (“UCL”). 10 Compl. ¶¶ 110-39. On May 14, 2015, Defendants filed the instant motion to dismiss the action for failure to United States District Court Northern District of California 11 12 state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 16. Plaintiffs oppose 13 the motion. ECF No. 31. 14 C. 15 The Court has jurisdiction over this action pursuant to 28 U.S.C. sections 1331 and 1367. 16 II. Jurisdiction LEGAL STANDARD 17 A complaint must contain “a short and plain statement of the claim showing that the 18 pleader is entitled to relief,” in order to “give the defendant fair notice of what the . . . claim is and 19 the grounds upon which it rests.” Fed R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 20 544, 555 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual 21 matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 22 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A claim has facial plausibility 23 when the plaintiff pleads factual content that allows the court to draw the reasonable inference that 24 the defendant is liable for the misconduct alleged.” Id. In deciding a motion to dismiss pursuant 25 to Federal Rule of Civil Procedure 12(b)(6), the Court must “accept all factual allegations in the 26 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 27 Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). 28 5 1 2 III. DISCUSSION Defendants argue first that Plaintiffs’ complaint should be dismissed because it fails to 3 plead an actionable statement. Second, they argue that Plaintiffs are not entitled to the relief they 4 seek under the UCL and FAL. 5 A. 6 To state a claim for false advertising under the Lanham Act, Plaintiffs must allege: 7 (1) a false statement of fact by the defendant in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products. 8 9 10 United States District Court Northern District of California 11 12 13 Whether Alleged Statements are Actionable 14 Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1110 (9th Cir. 2012). “To demonstrate falsity 15 within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, 16 either on its face or by necessary implication, or that the statement was literally true but likely to 17 mislead or confuse consumers.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 18 (9th Cir. 1997). 19 Similarly, California’s UCL “prohibits any ‘unlawful, unfair or fraudulent business act or 20 practice.’” Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (quoting Cal. Bus. & 21 Prof. Code § 17200). The FAL “prohibits any ‘unfair, deceptive, untrue, or misleading 22 advertising.’” Id. (quoting Cal. Bus. & Prof. Code § 17500). Under the “reasonable consumer” 23 standard applicable to Plaintiffs’ claims under these California statutes, Plaintiffs must show that 24 “members of the public are likely to be deceived.” Id. (quoting Freeman v. Time, Inc., 68 F.3d 25 285, 289 (9th Cir. 1995)). “The California Supreme Court has recognized ‘that these laws prohibit 26 not only advertising which is false, but also advertising which [,] although true, is either actually 27 misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.’” Id. 28 (quoting Kasky v. Nike, Inc., 27 Cal. 4th 939, 951 (2002)). These claims “are substantially 6 1 congruent to claims made under the Lanham Act.” Kwan Software Eng’g, Inc. v. Foray Techs., 2 LLC, No. 12-cv-03762-SI, 2014 WL 572290, at *3 (N.D. Cal. Feb. 11, 2014).1 3 Defendants contend that Plaintiffs have failed to plead an actionable statement because the 4 challenged statements: (1) are not quantifiable and specific; (2) are couched in terms of aspiration 5 or optimism; (3) are taken out of context; and/or (4) are not commercial advertising. ECF No. 16 6 at 2-3. 1. 7 Puffery Defendants argue first that all of the challenged statements are non-actionable puffery and 8 that the complaint should therefore be dismissed in its entirety. ECF No. 16 at 3-5; see Newcal 10 Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1053 (9th Cir. 2008) (“the determination of 11 United States District Court Northern District of California 9 whether an alleged misrepresentation ‘is a statement of fact’ or is instead ‘mere puffery’ is a legal 12 question that may be resolved on a Rule 12(b)(6) motion.”). In the Ninth Circuit: 13 A statement is considered puffery if the claim is extremely unlikely to induce consumer reliance. Ultimately, the difference between a statement of fact and mere puffery rests in the specificity or generality of the claim. The common theme that seems to run through cases concerning puffery in a variety of contexts is that consumer reliance will be induced by specific rather than general assertions. Thus, a statement that is quantifiable, that makes a claim as to the specific or absolute characteristics of a product, may be an actionable statement of fact while a general, subjective claim about a product is non-actionable puffery. 14 15 16 17 18 19 Newcal Indus., 513 F.3d at 1053 (internal citations and quotation marks omitted) (citing Cook, 20 Perkiss, & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 245-46 (9th Cir. 1990)). “Puffing is 21 exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely.” 22 Southland Sod Farms, 108 F. 3d at 1145 (internal quotation marks omitted). Certain alleged statements, such as the claim that Uber is “GOING THE DISTANCE TO 23 24 PUT PEOPLE FIRST,” Compl. ¶ 42, are clearly the type of “exaggerated advertising” slogans 25 upon which consumers would not reasonably rely. See Southland Sod Farms, 108 F. 3d. at 1145 26 27 28 1 The parties agree that the analysis for whether the challenged advertising statements are actionable is substantially the same for Plaintiffs’ claims under the Lanham Act, the UCL, and the FAL. See ECF No. 16 at 2; ECF No. 31 at 5 n.6. 7 1 (“Less is More” claim was “precisely the type of generalized boasting upon which no reasonable 2 buyer would rely”). There is no discernible way to measure whether or how Uber might be “going 3 the distance to put people first.” Similarly, the phrase “BACKGROUND CHECKS YOU CAN 4 TRUST,” Compl. ¶ 56, is a general, subjective statement that makes no specific claim about 5 Uber’s services. These statements are therefore non-actionable puffery. 6 Other alleged statements, however, do include “specific” assertions that seem to describe “absolute characteristics” of Uber’s services that could be tested. See Newcal Indus., 513 F.3d at 8 1053. For example, Uber claims that it is “setting the strictest safety standards possible,” that its 9 safety is “already best in class,” and that its “three-step screening” background check procedure, 10 which includes “county, federal and multi-state checks,” adheres to a “comprehensive and new 11 United States District Court Northern District of California 7 industry standard.” Compl. ¶¶ 43, 45, 58. Uber has historically described its background check 12 procedures as “industry-leading.” Id. ¶¶ 59, 60. Uber’s statements also explicitly compare the 13 safety of its services with those offered by taxi cab companies. For example, a statement on 14 Uber’s blog describing its “rigorous” background check procedures reads, “Unlike the taxi 15 industry, our background checking process and standards are consistent across the United States 16 and often more rigorous than what is required to become a taxi driver.” Id. ¶ 58. 17 A reasonable consumer reading these statements in the context of Uber’s advertising 18 campaign could conclude that an Uber ride is objectively and measurably safer than a ride 19 provided by a taxi or other competitor service, i.e., it is statistically most likely to keep riders from 20 harm. References to the “strictest safety standards” and explicit comparisons with competitor taxi 21 services reinforce the impression that Uber’s statements are grounded in fact. See, e.g., In re 22 Toyota Motor Corp. Unintended Acceleration Mktg., Sales, Practices, and Prods. Liab. Litig., 754 23 F. Supp. 2d 1145, 1177 (C.D. Cal. 2010) (“[T]he allegations about product safety are more than 24 ‘mere puffery’ that Toyota’s cars were superior to others. They constitute a campaign by Toyota 25 in which it represented itself as prioritizing (even ‘obsessing over’) safety.”); Star Child II, LLC v. 26 Lanmar Aviation, Inc., No. 11-cv-01842-AWT, 2013 WL 1103915, at *4 (D. Conn. Mar. 16, 27 2013) (statement that defendant “had implemented the most stringent safety standards is outside 28 the ken of mere puffery” because it “is a statement of fact”); Giles v. Inflatable Store, Inc., No. 078 1 cv-00401-PAB-KLM, 2009 WL 961469, at *4 (D. Colo. Apr. 6, 2009) (“A reasonable jury could 2 determine that the word ‘safest’ has a specific, quantifiable meaning: . . . most likely (among all 3 competing products) to keep participants from harm.”); Guidance Endodontics, LLC v. Dentsply 4 Int’l, Inc., 708 F. Supp. 2d 1209, 1244 (D.N.M. 2010) (“The Court finds that the bulk of these 5 statements – ‘safer,’ ‘more efficiently,’ ‘easier,’ ‘quicker’ – are objectively verifiable and that a 6 reasonable consumer might believe that the seller had engaged in some sort of testing before 7 making these statements. They are therefore not puffing.”); Anunziato v. eMachines, Inc., 402 F. 8 Supp. 2d 1133, 1140-41 (C.D. Cal. 2005) (the phrase “most stringent quality control tests” is “a 9 specific factual assertion which could be established or disproved through discovery, and hence is not mere puffery”). At this stage in the litigation, the Court cannot conclude that the challenged 11 United States District Court Northern District of California 10 statements, considered together, are all “exaggerated advertising, blustering, and boasting upon 12 which no reasonable buyer would rely.” Southland Sod Farms, 108 F. 3d at 1145. Defendants’ 13 argument that the complaint should be dismissed in its entirety for failure to plead an actionable 14 statement therefore fails.2 2. 15 “Aspirational Statements” 16 Second, Defendants argue that certain advertising statements they describe as 17 “aspirational” are non-actionable puffery because there is no way to quantify or prove false 18 “generalized statements of aspiration and optimism.” ECF No. 16 at 5-6 (citing City of Pontiac 19 Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014)). According to 20 Uber, statements such as, “We are committed to improving the already best in class safety and 21 accountability of the Uber platform, for both riders and drivers,” Compl. ¶ 45, are non-actionable 22 because any claims about safety are couched in aspirational language that makes Uber’s claims too 23 vague and subjective to support Plaintiffs’ false advertising claims. 24 25 26 27 28 2 Although some of the challenged statements may not be actionable, on a motion to dismiss the relevant question is whether plaintiffs have sufficiently pled a claim regarding the defendant’s statements in their totality. This is not a motion to strike. See In re Royal Ahold N.V. Sec. & ERISA Litig., 351 F. Supp. 2d 334, 399 (D. Md. 2004) (“While some of the statements cited by plaintiffs will not be actionable, at this stage of the proceedings, I need not address each individual statement allegedly made by the defendants to make that determination”). 9 1 To the extent Uber contends that our cases delineate a category of “aspirational statements” that are immune from liability under the false advertising laws, the Court rejects the 3 argument. Defendants are correct that statements “generally describing the ‘high priority’” a 4 company places on certain efforts may constitute puffery. Glen Holly Entm’t, Inc. v. Tektronix, 5 Inc., 352 F.3d 367, 379 (9th Cir. 2003). But Defendants cite no authority in support of the 6 proposition that the simple addition of phrases such as “Uber is committed to . . .,” “Uber works 7 hard to . . .,” or “We’re doing everything we can to . . .” to an advertising statement automatically 8 shields a defendant from liability. See Compl. ¶¶ 43-45. In Pontiac Policemen’s and Firemen’s 9 Retirement System, a securities action, the court noted that “general statements about reputation, 10 integrity, and compliance with ethical norms are inactionable ‘puffery,’” and stated that “[t]his is 11 United States District Court Northern District of California 2 particularly true where, as here, the statements are explicitly aspirational, with qualifiers such as 12 ‘aims to,’ ‘wants to,’ and ‘should.’” 752 F.3d at 183. In Glen Holly Entertainment, the court 13 examined statements that product development was a “high priority” and concluded that the 14 statements at issue were “generalized, vague and unspecific,” and therefore puffery. 352 F.3d at 15 379. The use of an “aspirational” phrase was not conclusive in either court’s analysis and did not 16 alter the relevant inquiry. Where a challenged statement includes “aspirational” language, a court 17 must still determine whether it “is extremely unlikely to induce consumer reliance.” Newcal 18 Indus., 513 F.3d at 1053. 19 Here, the challenged statements do not merely assert that Uber places a high priority on 20 safety. They also incorporate assertions that a reasonable consumer might rely on as based in fact. 21 For example, Uber claims that, “We are committed to improving the already best in class safety 22 and accountability of the Uber platform, for both riders and drivers.” Compl. ¶ 45. This statement 23 makes claims concerning both Uber’s commitment to safety and the objective safety and 24 accountability of its platform. And while Uber’s claims concerning its corporate commitment 25 may not be measurable and may therefore be dismissed by readers as puffery, a reasonable 26 consumer could conclude that Uber’s “best in class safety” is an objective fact. Because the 27 statements classified by Defendants as “aspirational” include plausibly measurable factual claims, 28 Defendants’ motion to dismiss as to these alleged statements is denied. 10 3. 1 Context Defendants also contend that the complaint should be dismissed because it impermissibly 2 3 and misleadingly takes statements out of context. ECF No. 16 at 6-8. More specifically, they 4 argue that Plaintiffs have focused on general, subjective statements amounting to puffery, while 5 ignoring specific, factual statements relating to safety, the truth of which they do not dispute. For 6 example, Plaintiffs do not dispute that Uber screens criminal records going back seven years and 7 conducts county, federal, and multi-state checks. ECF No. 35 at 7-8. This argument holds water only if the statements concerning safety that are challenged in 8 9 Plaintiffs’ complaint are not actionable. As explained above, a reasonable consumer might conclude that Uber’s claims that its rides are safest, its standards are strictest, and its background 11 United States District Court Northern District of California 10 check procedures are more rigorous than competitors’ are based in objectively measurable fact, 12 and might reasonably rely upon them in deciding whether or not to use Uber. Plaintiffs allege that 13 these factual claims are false, in part because a background check that screens records going back 14 seven years and involves county, federal, and multi-state checks is not an “industry-leading” 15 background check. See Compl. ¶¶ 68-81. Plaintiffs need not allege that every factual statement in 16 Defendants’ advertising materials is false in order to state a false advertising claim. 4. 17 To constitute commercial advertising or promotion under the Lanham Act, a representation 18 19 Commercial Advertising must be: 20 1) commercial speech; 2) by a defendant who is in commercial competition with plaintiff; 3) for the purpose of influencing customers to buy defendant’s goods or services. While the representations need not be made in a ‘classic advertising campaign,’ but may consist instead of more informal types of ‘promotion,’ the representations 4) must be disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion within that industry. 21 22 23 24 Rice v. Fox Broad. Co., 330 F.3d 1170, 1181 (9th Cir. 2003) (quoting Coastal Abstract Serv. v. 25 First Am. Title Ins. Co., 173 F.3d 725, 735 (9th Cir. 1999)). Here, Defendants argue that several 26 of the challenged statements are not actionable because they are not commercial advertising.3 ECF 27 28 3 Defendants argue, and Plaintiffs do not dispute, that because Plaintiffs’ UCL and FAL claims are 11 1 2 3 No. 16 at 8-10. a. Media Statements “‘[T]he core notion of commercial speech’ is that it ‘does no more than propose a 4 commercial transaction.’” Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180, 1184 (9th Cir. 5 2001) (quoting Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66 (1983)). Statements made to 6 the media and published in a journalist’s news article concerning a matter of public importance are 7 not commercial speech, and are protected under the First Amendment. Boule v. Hutton, 328 F.3d 8 84, 91 (2d Cir. 2003); see also id. (“we have been careful not to permit overextension of the 9 Lanham Act to intrude on First Amendment values”); Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 906 (9th Cir. 2002) (“If speech is not ‘purely commercial’ – that is, if it does more than 11 United States District Court Northern District of California 10 propose a commercial transaction – then it is entitled to full First Amendment protection.”). 12 Here, several of the challenged statements were made by Uber representatives to 13 journalists and published in independent online articles.4 Compl. ¶¶ 62-65; Declaration of A. 14 Matthew Ashley in Support of Defendants’ Motion to Dismiss, ECF No. 16-2, ¶¶ 6-8, Ex. D 15 (“Local 4 Defenders: Is Uber X safe?”), Ex E. (“Faulty Background Checks May Put UberX 16 Passengers at Risk, Report Says”); Ex. F (“Is Uber Keeping Riders Safe?”). Each article discusses 17 whether using Uber is safe, and each includes responsive statements from an Uber representative. 18 Because the challenged statements are “inextricably intertwined” with the reporters’ coverage of a 19 matter of public concern, i.e. whether Uber is safe for riders, they cannot constitute commercial 20 speech actionable under the Lanham Act. TYR Sport, Inc. v. Warnaco Swimwear, Inc., 709 F. 21 Supp. 2d 802, 818 (C.D. Cal. 2010); see also Nat’l Servs. Grp. Inc. v. Painting and Decorating 22 Contractors of Am., Inc., No. 06-563-CJC (ANX), 2006 WL 2035465, at *5 (C.D. Cal. July 18, 23 2006) (“Where particular speech includes commercially-motivated statements that are inextricably 24 25 26 27 28 based on the same false advertising theory, the same test applies to those claims. ECF No. 16 at 8 n.3 (citing Rice, 330 F.3d at 1182). 4 Although the articles at issue are not attached to the complaint, they are incorporated by reference and the Court may therefore consider them in deciding the motion to dismiss. See Knievel, 393 F. 3d at 1076 (“[T]he ‘incorporation by reference’ doctrine . . . permits us to take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff’s] pleading.” (internal quotation marks omitted)). 12 1 intertwined with otherwise fully protected speech, the entirety of the speech may be fully 2 protected” (internal quotation marks omitted)). Plaintiffs argue that Uber’s statements constitute commercial speech notwithstanding the 3 4 fact that they appear in journalistic articles, citing Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002), and 5 SKEDCO, Inc. v. ARC Prods., LLC, No. 13-cv-00696-HA, 2014 WL 2465577 (D. Or. June 2, 6 2014). ECF No. 31 at 12. But these cases are inapposite. Kasky involved statements written by 7 the defendant and distributed as press releases and letters to the editor, rather than statements made 8 in response to journalists’ inquiries and published in independent news articles. 27 Cal. 4th at 9 947-48. And in SKEDCO, the statements at issue, which highlighted the newest features of SKEDCO’s products, were made in a published interview with a company executive. 2014 WL 11 United States District Court Northern District of California 10 2465577 at *5-6. The interview appeared in a specialized magazine targeted toward the business’s 12 primary customer and was placed in close proximity to a paid advertisement. Id. Here, the 13 challenged statements are one part of longer, independent articles that are largely critical of Uber. Because the challenged statements made to the media are not commercial speech, the 14 15 motion to dismiss is granted as to those statements.5 b. 16 Receipts Defendants also contend that statements made about Uber’s “Safe Rides Fee” on users’ 17 18 emailed receipts are not commercial speech because they are made after a user completes a ride. 19 ECF No. 16 at 10. Therefore, Uber argues, they relate to transaction that has already occurred, 20 rather than proposing a transaction or influencing consumers to purchase Uber’s services in the 21 future. See Rice, 330 F.3d at 1181 (a commercial advertising statement must be made “for the 22 purpose of influencing consumers to buy defendant’s goods or services”); Gonzalez v. Allstate 23 Ins. Co., No. 04-cv-1548-FMC (PJWx), 2005 WL 5891935, at *8 (C.D. Cal. Aug. 2, 2005) 24 (notices relating to commercial transactions that have already occurred and that require no action 25 by the customer are not commercial speech). 26 5 27 28 Although the Court generally will not consider a motion to dismiss that applies to fewer than all the challenged statements in a complaint, see n.2 supra, in this instance Uber’s statements to the media comprise a clearly defined category, and the parties treat them as such. The Court therefore follows the parties’ lead. 13 Plaintiffs respond that because Uber relies on passengers repeatedly using its services, and 1 2 because users receive a receipt including a link to the “Safe Rides Fee” information each time they 3 complete an Uber ride, it is plausible that passengers who use Uber and read the information about 4 the “Safe Rides Fee” are influenced to use the service again. ECF No. 31 at 14-15. The complaint 5 alleges that statements like “This Safe Rides Fee supports continued efforts to ensure the safest 6 possible platform for Uber riders and drivers,” bolster consumers’ expectations that Uber provides 7 the safest ride possible, and that users “will be receiving a ride safer than that provided by 8 Plaintiffs’ taxi cabs.” Compl. ¶¶ 50-52 (emphasis added). Furthermore, the explanation of the 9 “Safe Rides Fee” promises “continued efforts to ensure the safest possible platform,” and explains that “you’ll see this as a separate line item on every uberX receipt,” demonstrating Uber’s 11 United States District Court Northern District of California 10 expectation that customers will ride again. Id. ¶ 50. 12 Read in the light most favorable to the Plaintiffs, the complaint adequately alleges that the 13 statements relating to the “Safe Rides Fee” are made for the purpose of influencing consumers to 14 use Uber’s services again. See Heartland Payment Sys., Inc. v. Mercury Payment Sys., LLC, No. 15 14-cv-0437-CW, 2014 WL 5812294, at *6 (N.D. Cal. Nov. 7, 2014) (“[T]he monthly [billing] 16 statements could induce merchants to continue using Mercury’s services, and hence could be 17 considered commercial speech designed to propose a continued business relationship.”).6 Uber’s 18 motion to dismiss the complaint as to statements made in connection with the “Safe Rides Fee” is 19 therefore denied. 20 21 22 23 24 25 26 27 28 6 The business press has frequently observed that all communications between a successful firm and its customers, including post-sale communications, should encourage consumer loyalty and repeat business. See, e.g., Chad Brooks, Customer Loyalty: 5 Tips for Sales Reps, BUSINESS NEWS DAILY (Feb. 10, 2014, 11:49 AM), http://www.businessnewsdaily.com/5901-customerretention-sales-tips.html (“Sales representatives need to establish a positive two-way business relationship with customers in order to encourage future business transactions. . . . The ‘end’ doesn’t really come when you close a deal. Instead, the relationship should evolve into one of trust the relationship should provide a return on investment for the customer.”); Alex Lawrence, Five Customer Retention Tips for Entrepreneurs, FORBES (Nov. 1, 2012, 1:16 PM), http://www.forbes.com/sites/alexlawrence/2012/11/01/five-customer-retention-tips-forentrepreneurs/ (“it’s far easier . . . to sell to existing customers than to brand new prospects”). 14 1 2 B. Availability of Relief under the UCL and FAL 1. Standing under the UCL 3 “[T]o state a claim for a violation of the [California UCL], a plaintiff must allege that the 4 defendant committed a business act that is either fraudulent, unlawful, or unfair.” Levine v. Blue 5 Shield of Cal., 189 Cal. App. 4th 1117, 1136 (2010). Defendants argue that Plaintiffs lack 6 standing to seek relief under any of these three prongs, and that their UCL claim must therefore be 7 dismissed. ECF No. 16 at 11-12. 8 9 Defendants argue first that Plaintiffs lack standing to seek relief under the UCL’s fraud prong because they do not allege that they relied on Uber’s allegedly false or misleading advertising. The California Supreme Court has held that “the amended UCL ‘imposes an actual 11 United States District Court Northern District of California 10 reliance requirement on plaintiffs’ who bring a UCL action ‘based on a fraud theory involving 12 false advertising and misrepresentations to consumers’ because ‘reliance is the causal mechanism 13 of fraud.’” Heartland Payment Sys., Inc. v. Mercury Payment Sys., LLC, No. 14-cv-0437-CW, 14 2015 WL 3377662, at *6 (N.D. Cal. Feb. 24, 2015) (quoting In re Tobacco II Cases, 46 Cal. 4th 15 298, 326-28 & n.17 (2009)). Federal courts sitting in California have disagreed, however, about 16 whether competitor plaintiffs must plead their own reliance, or whether pleading consumer 17 reliance is sufficient for fraudulent business practices claims brought by competitors. Id. at *7; 18 see also id. (“No California court has addressed . . . this issue.”). 19 Most courts have concluded that Plaintiffs must allege their own reliance on the alleged 20 misrepresentations, rather than the reliance of third parties. See U.S. Legal Support, Inc. v. 21 Hofioni, No. 13-cv-01770-LKK/AC, 2013 WL 6844756, at *15 (E.D. Cal. Dec. 20, 2013) (“As 22 Plaintiff is not a consumer of Defendants’ services, it cannot demonstrate reliance on Defendants’ 23 fraudulent statements in order to establish standing under the UCL’s fraud prong”); O’Connor v. 24 Uber Techs., Inc., 58 F. Supp. 3d 989, 1002 (N.D. Cal. 2014) (“UCL fraud plaintiffs must allege 25 their own reliance – not the reliance of third parties – to have standing under the UCL”); ZL 26 Techs., Inc. v. Gartner, Inc., No. 09-cv-2393-JF(RS), 2009 WL 3706821, at *11 (N.D. Cal. Nov. 27 4, 2009) (accepting defendant’s argument that plaintiff alleging only the reliance of potential 28 customers, and not its own reliance, lacked standing to bring UCL claim sounding in fraud). On 15 1 the other hand, in VP Racing Fuels, Inc. v. Gen. Petroleum Corp., a district court concluded that 2 pleading customer reliance was sufficient to state a competitor’s claim under the fraudulent prong 3 of the UCL. No. 09-cv-02067-MCE-GGH, 2010 WL 1611398, at *2 (E.D. Cal. Apr. 20, 2010) 4 (“Plaintiff has been injured by consumer reliance upon Defendant’s misrepresentations which 5 have resulted in competitive harm and diverted sales”); see also id. at 3 n.3 (recognizing that, in 6 passing Proposition 64, California voters sought “to limit standing under the UCL in order to 7 prevent abusive UCL actions by attorneys whose clients had not been injured in fact or used the 8 defendant’s product or service,” but concluding that a corporation bringing a UCL cause of action 9 as a competitor “is not the type of plaintiff whose standing was targeted by California voters 10 through Proposition 64”). United States District Court Northern District of California 11 The Court joins the majority of courts to have addressed this question and concludes that 12 because Plaintiffs do not plead their own reliance on Uber’s allegedly false advertising, they lack 13 standing to seek relief under the UCL’s fraud prong. In describing the “actual reliance 14 requirement,” the California Supreme Court explained that “[r]eliance is proved by showing that 15 the defendant’s misrepresentation or nondisclosure was an immediate cause of the plaintiff’s 16 injury-producing conduct.” In re Tobacco II Cases, 46 Cal. 4th at 326 (emphasis added) (internal 17 quotation marks omitted); see also Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 327 n.10 18 (2011) (“a UCL fraud plaintiff must allege he or she was motivated to act or refrain from action 19 based on the truth or falsity of a defendant’s statement”). Furthermore, in general, outside the 20 context of the UCL, “a fraud action cannot be maintained based on a third party’s reliance.” City 21 and Cnty. of San Francisco v. Philip Morris, Inc., 957 F. Supp. 1130 (N.D. Cal. 1997) (citing 22 Mirkin v. Wasserman, 5 Cal. 4th 1082, 1088 (1993)). 23 Because Plaintiffs’ claims under the UCL’s unfair and unlawful prongs are predicated on 24 the same misrepresentation theory, they similarly lack standing to seek relief under those prongs. 25 In re Facebook PPC Adver. Litig., 09-cv-03043-JF, 2010 WL 3341062, at *11 (N.D. Cal. Aug. 25, 26 2010) (“Because Plaintiff’s allegations . . . are premised on a fraud theory involving 27 misrepresentations and omissions, they must allege reliance, irrespective of whether the claims are 28 asserted under the fraud prong or the unfair prong of the UCL”); O’Connor, 58 F. Supp. 3d at 16 1 1003 (“Tobacco II’s actual reliance requirement applies equally to the unlawful prong of the UCL 2 when the predicate unlawfulness is misrepresentation and deception” (emphasis and internal 3 quotation marks omitted)). Accordingly, the UCL claim will be dismissed. 4 5 2. Restitution Finally, Defendants argue that Plaintiffs have no claim for restitution under the UCL or 6 FAL because they have no direct or vested ownership interest in Uber’s products. ECF No. 16 at 7 12-13. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1149 (2003); 8 BizCloud, Inc. v. Computer Sciences Corp., 13-cv-05999-JCS, 2014 WL 1724762, at *4 (N.D. 9 Cal. Apr. 29, 2014) (dismissing UCL claim seeking disgorgement of profits by competitor). 10 Plaintiffs do not dispute that restitution under the UCL and FAL is limited to “money or United States District Court Northern District of California 11 property that defendants took directly from [a] plaintiff” or “in which [a plaintiff] has a vested 12 interest.” ECF No. 31 at 16 & n.24 (citing Innovation Ventures, LLC v. Pittsburg Wholesale 13 Grocers, Inc., No. 12-cv-05523-WHA, 2013 WL 1007666, at *7 (N.D. Cal. Mar. 13, 2013); In re 14 Vioxx Class Cases, 180 Cal. App. 4th 116, 131 n.15 (2009)). They argue, however, that it is too 15 early to determine definitively whether Plaintiffs are entitled to restitution because “Uber has not 16 proven as a matter of law that Plaintiffs did not have confirmed, unconditional business from 17 particular customers that was usurped by Uber.” ECF No. 31 at 17. 18 The problem for Plaintiffs is that the complaint, as written, seeks only “restitution and 19 restitutionary disgorgement for all sums obtained in violation” of the California statutes, Compl. 20 ¶¶ 128, 138; it does not allege an ownership interest in any of those profits or a “confirmed” 21 contractual relationship with any of Uber’s customers. Consequently, Plaintiffs seek “exactly the 22 type of nonrestitutionary disgorgement precluded under Korea Supply.” Luxpro Corp. v. Apple 23 Inc., No. 10-cv-03058-JSW, 2011 WL 3566616, at *8 (N.D. Cal. Aug. 12, 2011) (concluding that 24 plaintiff had alleged facts sufficient to state a claim for restitution only to the extent its claims 25 were premised on its interest in profits and/or revenues from alleged contracts with eleven 26 identified entities). 27 CONCLUSION 28 For the foregoing reasons, the motion to dismiss is granted in part and denied in part. 17 1 Defendants’ motion to dismiss the Lanham Act claim is granted only to the extent the claim is 2 based on protected speech in the media. The motion to dismiss the UCL claim is granted. The 3 motion to strike Plaintiffs’ claim for restitution pursuant to the FAL is granted. Plaintiffs may file 4 an amended complaint by August 3, 2015. 5 6 IT IS SO ORDERED. Dated: July 17, 2015 7 8 9 ______________________________________ JON S. TIGAR United States District Judge 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18
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