Boston Cab Dispatch et al v. Uber Technologies, Inc.

Filing 43

Judge Nathaniel M. Gorton: ORDER entered. Memorandum and Order. "In accordance with the foregoing, 1) Defendant's objections to Magistrate Judge Bowler's Report and Recommendation (the R&R) (Docket No. 42 ) are, with respect to Coun ts II and III, SUSTAINED, but are otherwise OVERRULED, and 2) Magistrate Judge Bowler's R&R (Docket No. 41 ) pertaining to defendant's motion to dismiss for failure to state a claim (Docket No. 5 ) is, with respect to Counts I, IV, V, VI, VII, VIII and IX, ACCEPTED and ADOPTED, but is, with respect to Counts II and III, REJECTED. So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
BOSTON CAB DISPATCH, INC. and
EJT MANAGEMENT, INC.,
Plaintiffs,
v.
UBER TECHNOLOGIES, INC.,
Defendant.

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Civil Action No.
13-10769-NMG

MEMORANDUM & ORDER
GORTON, J.
Plaintiffs Boston Cab Dispatch, Inc. (“Boston Cab”) and EJT
Management, Inc. (“EJT”) allege that defendant Uber
Technologies, Inc. (“Uber”) violates various federal and state
false advertising and unfair competition laws and Boston taxicab
ordinances by providing a private car service that allows users
to call taxicabs associated with Boston Cab and other dispatch
services without complying with Boston taxicab regulations.
Plaintiffs’ complaint asserts the following causes of
action: (1) violation of § 43(a)(1)(B) of the Lanham Act, 15
U.S.C. § 1125(a)(1)(B) (Count I); (2) violation of § 43(a)(1)(A)
of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) (Count II); (3)
violation of M.G.L. c. 93A, § 11 based on Uber’s allegedly
unfair and deceptive acts and practices (Count III); (4)
violation of c. 93A, § 11 based on Uber’s unfair competition
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(Count IV); (5) unfair competition under Massachusetts common
law (Count V); (6) interference with contractual relationships
(Count VI); and (7) various violations of the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§
1962(a-c) (Counts VII, VIII and IX).
In April, 2013, Uber moved to dismiss the complaint in its
entirety.

That motion was referred to Magistrate Judge Marianne

Bowler for a Report and Recommendation (“R&R”).

Judge Bowler’s

96-page R&R recommends (1) dismissing Count I with prejudice,
(2) denying the motion to dismiss with respect to Counts II
through V and (3) dismissing Counts VI through IX without
prejudice.

Uber timely objected to Judge Bowler’s

recommendations with respect to Counts II through V.

Plaintiffs

have not filed an objection.
For the reasons that follow, the Court will sustain Uber’s
objections with respect to Counts II and III, reject the
magistrate judge’s recommendations with respect to those counts
and dismiss Counts II and III with prejudice.

It will overrule

Uber’s objections with respect to Counts IV and V, however, and
accept and adopt the magistrate judge’s recommendations with
respect to Count I and Counts IV through IX.
I.

Background
The subject dispute arose after Uber entered the market for

private transportation services in Boston.
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The crux of

plaintiffs’ complaint is that Uber has gained an unfair
competitive advantage over traditional taxicab dispatch services
and license-holders because it avoids the costs and burdens of
complying with extensive regulations designed to ensure that
residents of Boston have access to fairly priced and safe
transportation options throughout the city and yet reaps the
benefits of others’ compliance with those regulations.
The main source of regulation of the Boston taxicab
industry is the Police Commissioner for the City of Boston (“the
Commissioner”), who is authorized by statute to regulate the
taxi business in Boston.

In exercising that authority, the

Commissioner requires anyone who drives or is “in charge of” a
“hackney carriage” (i.e. taxicab) to possess a license known as
a “taxicab medallion”.

Applicants for taxicab medallions must

satisfy certain criteria with respect to driving and criminal
history.

In 2008, the Commissioner issued a comprehensive set

of regulations as Boston Police Department Rule 403 (“Rule
403”).

That rule requires all taxicab operators to, inter alia,

possess medallions, maintain a properly equipped and functioning
taxicab, refrain from cell phone use while operating a taxicab
and belong to an approved dispatch service or “radio
association”.
Pursuant to Rule 403, radio associations are required to
provide 24-hour dispatch capability, two-way radio service and
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discount reimbursements for the elderly.

They must also keep

records of their dispatch services and, specifically, where each
taxicab is dispatched at any given time.

Moreover, each radio

association maintains specific colors and “markings” approved by
the Inspector of Carriages and taxicab operators must paint
their taxicabs in the colors and markings of the association to
which they belong.
Plaintiff Boston Cab is an approved radio association under
Rule 403.

It has contracted with the owners of 500 medallions

(i.e. 500 licensed taxicab operators) who pay weekly membership
fees to Boston Cab and paint their taxicabs with Boston Cab’s
colors and markings in exchange for Boston Cab’s dispatching
services.
Plaintiff EJT states that it has
contracted with the owners of 370 Boston medallions to
manage all aspects of the ownership, licensing and
leasing of the owners’ medallions and the taxis
bearing these medallions.
EJT also asserts that it has the authority to seek the
protection of those 370 taxicab owners/medallion holders’ rights
against all forms of unfair competition and trademark
infringement.
Defendant Uber provides a tool for requesting private
vehicles-for-hire to users who download Uber’s free “smart phone
application” (“the Uber app”).

Users who open the Uber app on

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their mobile phones are shown a map of their location or
designated pick-up point and the available Uber-affiliated
vehicles in that vicinity.

The user can select a type of car

based on price and the number of seats they need.

At the time

the motion to dismiss was filed, Uber offered three kinds of
vehicles-for-hire: 1) “Uber Black Cars”, which are unmarked
four-seat sedans, 2) “Uber SUVs”, which are unmarked SUVs that
seat six passengers and 3) “Uber Taxis”, which are vehicles
operated by Boston taxicab drivers.1
Uber requires all drivers of Uber-affiliated vehicles to
carry mobile telephones.

They must respond to assignments

generated by the Uber computer system “within seconds” or they
will lose the job.

The fare for each ride arranged through the

Uber app is charged automatically to the customer’s
preauthorized credit card and therefore Uber-affiliated drivers
cannot accept cash or other credit cards.
Uber does not own any taxicabs or taxicab medallions.
Instead, taxicab drivers who are subject to Rule 403, own or
lease medallions and belong to radio associations such as Boston
Cab have agreed to be available for hire through Uber while they
are working shifts and subject to dispatch by their radio
associations.

Their fares are calculated based on the flat rate

1

Since the motion to dismiss was filed, Uber added a fourth
option, “UberX”, which are privately-owned vehicles that cost
less to hire than Uber Black Cars or Uber SUVs.
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applicable to all Boston taxicab drivers.

Uber adds a $1 “fee”

and a 20% “gratuity” to the flat rate and therefore the final
charge exceeds the maximum that taxicabs are permitted to charge
under Rule 403.

While Uber’s website represents that the 20%

gratuity is “for the driver”, drivers in fact only receive a 10%
gratuity and Uber retains the other 10%.
Uber Black Cars and Uber SUVS, in contrast to Uber Taxis,
do not comply with Rule 403 regulations with respect to, inter
alia, 1) membership in approved radio associations or dispatch
services, 2) regular inspections, 3) partitions between drivers
and passengers, 4) panic buttons and GPS tracking to allow
customers to alert police when they are in danger, 5) criminal
background checks of drivers, 6) non-discrimination with respect
to passengers with handicaps and 7) use of mobile telephones.
There is no evidence in the Fed. R. Civ. P. 12(b)(6) record
that Boston Cab has suffered any harm as a result of members of
its association picking up passengers who request a vehicle
through the Uber app rather than through Boston Cab’s dispatch
service or that EJT has lost business as a result of Uber.
plaintiffs’ opposing memorandum, however, they contend that
By falsely portraying taxis, including the plaintiffs’
500 cabs, as one choice among several Uber-affiliated
forms of transportation that appear on a smartphone
screen, Uber diverts fares that would go to licensed
Boston taxis if Uber did not falsely claim taxis were
part of its affiliated businesses. This diversion of
business has already caused a decrease in the demand
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In

for the plaintiffs’ cabs, a diminution in the number
of cabs leased, and a loss of revenue.
II.

Report and Recommendation on the Motion to Dismiss
Judge Bowler’s R&R recommends that this Court (1) dismiss

Count I with prejudice, (2) deny the motion to dismiss with
respect to Counts II through V and (3) dismiss Counts VI through
IX without prejudice.

Uber timely objected to Judge Bowler’s

R&R with respect to Counts II through V.

Plaintiffs have not

objected to any recommendation made in the R&R.
When a district court refers a dispositive motion to a
magistrate judge for a recommended disposition, it must
“determine de novo any part of the magistrate judge’s
disposition that has been properly objected to”. Fed. R. Civ. P.
72(b)(3).

Thus, the Court reviews de novo the magistrate

judge’s recommendations with respect to Counts II through V,
seriatim.
A.

Legal Standard

To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim
to relief that is plausible on its face. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).

In considering the merits of

a motion to dismiss, the Court must accept all factual
allegations in the complaint as true and draw all reasonable
inferences in the plaintiff's favor. Langadinos v. Am. Airlines,

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Inc., 199 F.3d 68, 69 (1st Cir. 2000).

Yet “[t]hreadbare

recitals of the elements of a cause of action, supported by mere
conclusory statements,” do not suffice to state a cause of
action. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Accordingly, a complaint does not state a claim for relief where
the well-pled facts fail to warrant an inference of anything
more than the mere possibility of misconduct. Id. at 679.
B.

False association under the Lanham Act (Count II)

Plaintiffs allege in Count II of their complaint that Uber
violates § 43(a)(1)(A) of the Lanham Act by misrepresenting that
it is affiliated with Boston Cab.

Section 43(a)(1)(A) provides,

in relevant part, that
Any person who, on or in connection with any goods or
services ... uses in commerce any word, term, name,
symbol, or device, or any combination thereof, or any
false designation of origin, false or misleading
description of fact, or false or misleading
representation of fact, which-(A) is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation,
connection, or association of such person with
another person, or as to the origin, sponsorship,
or approval of his or her goods, services, or
commercial activities by another person, ...
shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged
by such act.
15 U.S.C. § 1125(a)(1)(A) (emphasis added).

To succeed on such

a claim, plaintiffs must prove each of the following elements:

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(1) [d]efendant[] used a designation (any word, term,
name, device, or any combination thereof); (2) the use
was in interstate commerce; (3) the use was in
connection with goods or services; (4) the designation
or false designation is likely to cause confusion,
mistake, or deception as to (a) the affiliation,
connection, or association of defendant with another
person, or (b) as to the origin, sponsorship, or
approval of defendant’s goods, services, or commercial
activities by another person; and (5) plaintiff[s]
ha[ve] been or [are] likely to be damaged by these
acts.
Brown v. Armstrong, 957 F. Supp. 1293, 1300 (D. Mass. 1997)
aff'd, 129 F.3d 1252 (1st Cir. 1997).
Uber objects to the magistrate judge’s report that 1) Uber
“uses” Boston Cab’s colors and markings in violation of the
Lanham Act and 2) plaintiffs have sufficiently pled that they
are likely to be damaged or have been damaged by said use.
The Court need not address Uber’s first objection because
it finds, contrary to the magistrate judge’s finding, that
plaintiffs have not carried their burden of pleading damages so
as to survive Uber’s Fed. R. Civ. P. 12(b)(6) motion.

The

magistrate judge identified three possible sources of injury to
plaintiffs but each of the potential harms lacks a causal
connection to the alleged use of Boston Cab’s color and
markings.
First, the magistrate judge reasoned that plaintiffs could
suffer damage to their reputation and goodwill because Uber
Black Cars and Uber SUVs lack the safety features mandated by

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Rule 403, such as a panic button or GPS.

Uber objects and

points out that the false-association claim is based entirely on
Uber’s alleged use of taxicab colors and markings and has
nothing to do with the other Uber options.

This Court agrees

that the complaint does not claim a connection between the
alleged use of the Boston Cab colors and markings and the lack
of safety features in Uber Black Cars or Uber SUVs. See Cashmere
& Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 318 &
n.16 (1st Cir. 2002) (requiring causal connection between
alleged violation and harm to prove false advertising claim
under § 43(a) of Lanham Act).

Nor can any reasonable inference

be drawn that a consumer would hold the lack of safety features
in Uber Black Cars or Uber SUVs against plaintiffs, resulting in
harm to their reputations or goodwill. Beacon Mut. Ins. Co. v.
OneBeacon Ins. Grp., 376 F.3d 8, 15-16 (1st Cir. 2004)
(explaining that harm to goodwill or reputation suffices under §
43(a) of the Lanham Act).
Second, the magistrate judge reasoned that plaintiffs could
be harmed because Rule 403 forbids mobile phone use by taxi
drivers and yet drivers who contract with Uber, including those
who use the Boston Cab colors and markings, are required to use
mobile telephones to communicate with Uber and Uber customers.
Accepting, for the purpose of a motion to dismiss, that driver
cell phone use increases the potential for accidents and
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therefore risk to passengers, plaintiffs do not allege any facts
that would support the conclusion that plaintiffs are harmed by
that risk as a result of consumers possibly mistaking the
relationship between plaintiffs and Uber.

Even if Uber’s

service resulted in an increase in accidents involving taxis
bearing the Boston Cab markings, any harm to Boston Cab’s
reputation would not be the result of customer confusion about
the relationship between Uber and Boston Cab. See Cashmere &
Camel Hair Mfrs. Inst., 284 F.3d at 318 & n.16.
Finally, the magistrate judge explained that plaintiffs
alleged that they are harmed by lost revenues due to Uber
offering Uber Black Cars and Uber SUVs as an alternative to
taxicabs.

Uber objects that the entry of Uber SUVs and Uber

Black Cars into the market has nothing to do with any alleged
confusion about the relationship between Uber and Boston Cab and
therefore, any harm due to those new alternatives lacks the
requisite causal connection to Uber’s alleged use of Boston
Cab’s marks.

This Court concurs and finds that this allegation

of plaintiffs also fails to satisfy the pleading requirements
with respect to harm.
Because the Court finds that plaintiffs have not adequately
pled damages under the Lanham Act, it declines to address Uber’s
other objections to the recommendation with respect to Count II.
Count II will be dismissed with prejudice.
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C.

Violation of Chapter 93A based on unfair and deceptive
acts (Count III)

Count III of plaintiffs’ complaint alleges that Uber has
engaged in a series of false representations that constitute
unfair and deceptive acts in commerce.

The magistrate judge

recommends denial of defendant’s motion to dismiss.

The Court

agrees with Uber that Count III fails to meet the pleading
standards and should be dismissed.
Chapter 93A proscribes those engaged in trade or commerce
from employing “unfair methods of competition and unfair or
deceptive acts or practices” and authorizes businesses to sue
one another for engaging in such practices. M.G.L. c. 93A, §§ 2,
11.

Whether a particular set of circumstances is unfair or

deceptive under Chapter 93A is a question of fact. Incase, Inc.
v. Timex Corp., 421 F. Supp. 2d 226, 239 (D. Mass. 2006).

In

the context of disputes among businesses, where both parties are
sophisticated commercial players, the “objectionable conduct
must attain a level of rascality that would raise an eyebrow to
the rough and tumble of the world of commerce.” Vision Graphics
v. E.I. Du Pont de Nemours, 41 F. Supp. 2d 93, 101 (D. Mass.
1999) (quoting Levings v. Forbes & Wallace, Inc., 396 N.E.2d
149, 153 (Mass. App. Ct. 1979) (Kass, J.)). Yet even under the
heightened standard governing business disputes,
misrepresentations may be so seriously deceptive and
harmful as to permit some recovery for the injury
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really caused by them.... Business strategy ‘in the
rough and tumble of the world of commerce’ should not
use conscious misrepresentation as a competitive
weapon.
Zayre Corp. v. Computer Sys. of Am., Inc., 511 N.E.2d 23, 30
n.23 (Mass. App. Ct. 1987).
Count III alleges that the following four
misrepresentations of the defendant Uber give rise to a claim
under Chapter 93A:
a)

that it is affiliated with medallion owners and radio
associations;

b)

that it only collects a $1 fee and pays the full 20%
“gratuity” to taxi drivers;

c)

that its service is lawful under Boston Taxi Rules;
and

d)

that its black cars, SUVs and UberX vehicles do not
need to be licensed and regulated as taxis in Boston.

Alleged misrepresentations (a) and (b) fail to meet the
pleading requirements for the reasons stated above and by the
magistrate judge in her R&R.

The former rests upon the same

theory as plaintiffs’ false association claim under the Lanham
Act but, as this Court explained above, plaintiffs have not met
their burden of pleading injury as both the Lanham Act and
Chapter 93A, § 11 require. See Frullo v. Landenberger, 814
N.E.2d 1105, 1113 (Mass. App. Ct. 2004) (“[T]he unfair or
deceptive act or practice must be shown to have caused the loss
of money or property that § 11 makes actionable.”).

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Similarly, the magistrate judge found that plaintiffs have not
pled a cognizable injury caused by misrepresentation (b) in
recommending dismissal of Count I, plaintiffs’ misrepresentation
claim arising under the Lanham Act.
With respect to alleged misrepresentations (c) and (d),
Uber correctly notes that, elsewhere in her R&R, the magistrate
judge explained that
[t]he complaint does not identify a representation in
which Uber states explicitly or conveys by necessary
implication that “Uber assigned taxis are operating
lawfully” ....
The Court agrees with the magistrate judge that Uber has not
made such explicit representations and also notes that
plaintiffs have alleged no facts to support their allegations
with respect to either (c) or (d).

Conclusory allegations such

as these, unsupported by facts, will not survive a motion to
dismiss. Iqbal, 556 U.S. at 678.
D.

Violation of Chapter 93A based on unfair competition
(Count IV)

Count IV of the complaint alleges that Uber unfairly
competes with plaintiffs, in violation of Chapter 93A, by 1)
“operating” its service without incurring the expense of
compliance with Massachusetts law and Boston ordinances and 2)
diverting revenues for credit card processing that the
plaintiffs are contractually obligated to pay to its credit card
processor.

The magistrate judge recommended dismissing the
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second part of the claim but allowing the first to survive.

The

Court agrees that plaintiffs have sufficiently stated such a
claim.
The Court finds Uber’s objection to the magistrate judge’s
reasoning unconvincing.

Uber claimed in its memoranda in

support of its motion to dismiss that it could not be held
liable under Chapter 93A because it does not own any cars,
medallions, or radio associations and does not employ drivers.
The magistrate judge correctly found that Uber’s argument was
based on an unduly narrow conception of the term “operating”.
The Court agrees with the magistrate judge that there is
sufficient evidence that Uber exercises control over (or is “in
charge of”) vehicles-for-hire that compete with plaintiffs in
the private transportation business.
Uber’s other objections require only brief examination.
The Court finds no fault with the finding that plaintiffs’
Chapter 93A claim is not barred by regulations that, according
to Uber, occupy the field.

Moreover, it disagrees with Uber

that plaintiffs have failed to state a claim against Uber
because any unlawful conduct is attributable only to drivers and
not Uber in light of the fact that Uber sets policies that those
drivers follow, such as the use of mobile telephones.

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E.

Common law unfair competition claim (Count V)

For similar reasons, the Court will accept and adopt the
magistrate judge’s recommendation to deny the motion to dismiss
Count V, which alleges unfair competition in violation of
Massachusetts common law.
In its memoranda submitted in support of its motion to
dismiss, Uber rests on the argument that plaintiffs’ common law
claim was derivative of the claims set out in Counts I through
IV and therefore should fail because those claims fail.

The

Court has found that plaintiffs stated a claim with respect to
Count IV and therefore that argument is unavailing.
Now that the magistrate judge has recommended denying the
motion to dismiss Count V, Uber argues that her reasoning with
respect to Count V is inconsistent with her reasoning with
respect to Count II.

The Court finds that argument irrelevant

because plaintiffs’ common law unfair competition claim closely
tracks Count IV, not Count II, and the magistrate judge found
only that plaintiffs did not assert a “palming off” claim with
respect to Count II.

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ORDER
In accordance with the foregoing,
1)

Defendant’s objections to Magistrate Judge Bowler’s
Report and Recommendation (“the R&R”) (Docket No. 42)
are, with respect to Counts II and III, SUSTAINED, but
are otherwise OVERRULED, and

2)

Magistrate Judge Bowler’s R&R (Docket No. 41)
pertaining to defendant’s motion to dismiss for
failure to state a claim (Docket No. 5) is, with
respect to Counts I, IV, V, VI, VII, VIII and IX,
ACCEPTED and ADOPTED, but is, with respect to Counts
II and III, REJECTED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated March 27, 2014

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