Uber Sued in Boston; Case Could Wind up in Federal Court
[Updated 5:40 pm Eastern with comment]
Uber, the smartphone-based car-for-hire service that has been running into taxi industry opposition around the country, has just landed in court again. And the case is a doozy.
Two of Boston’s largest cab companies are suing San Francisco-based Uber in a local court, arguing that the heavily financed startup is violating several state and federal laws—including trademark laws and the RICO statutes, famously used to prosecute organized crime syndicates. I’ve embedded a copy of the complaint below.
In their lawsuit, the cab companies lay out in blistering terms how Uber is allegedly ignoring a long list of regulations that govern how taxis and other “black car” services must operate in Massachusetts. Those rules include detailed background checks and licenses for drivers and dispatchers, along with things like the ability to accept transportation vouchers for poor people.
Uber declined to comment on the specifics of the lawsuit, saying that it hadn’t reviewed the case (which was just filed Monday afternoon). Michael Pao, the company’s general manager for Boston, noted that Massachusetts Gov. Deval Patrick had previously cleared the way for Uber’s smartphone technology to operate under state regulators: “Uber is legal in the Commonwealth of Massachusetts, and we proudly give thousands of riders a safe, reliable ride and hundreds of drivers a new source of income for them and their families.”
The new lawsuit from the taxi companies, however, tackles much broader legal complaints than the matter of how fares are calculated via the Uber app. And since the Boston lawsuit includes complaints that Uber is breaking federal laws, the company could wind up in the federal court system again. “That could be the future of this case,” says Sam Perkins, the attorney representing Boston Cab Dispatch Inc. and EJT Management.
Some sort of legal reckoning seems inevitable for Uber. The startup has attracted vocal fans for its super-slick smartphone app system, which brings towncars and taxis to a person wanting a ride with a few text messages and taps on the touchscreen.
The transactions are handled completely online, with Uber charging the customer’s payment card for the journey and tip. I’ve used it, and it’s definitely a step up from traditional cab rides.
But Uber is trying to enter a highly regulated industry, and it appears to be doing so city by city without getting the permission opponents say it’s supposed to have under various state and local laws. Which is why the taxi companies are miffed—to them, it’s kind of like opening a hot new restaurant without shelling out for a health inspection, fire system inspection, and licensed bartenders.
There’s also the issue of competition. Cities or other local bodies often impose a limit on the number of licensed cabbies who may operate in a certain area. Scarcity keeps income relatively stable for those who have licenses, and also makes it hard to break into the business if you’re a new player.
That’s the case in Boston, where there are only 1,825 legally licensed cabbies, according to the lawsuit.
Uber has initially tried to get around those concerns in some cities by signing up “black car” or private-driver services, which are regulated differently than regular cabs in many places, including Boston. But there are problems there, too—as in Boston, many places require that towncar services be booked in advance, rather than on the spot, and require them to charge flat rates instead of fees based on time and distance.
In any case, Uber has since moved into signing up actual taxi drivers too, the Boston lawsuit says, directly competing with cabbies who already are on the clock with one of the legally sanctioned cab companies. The company also has experimented with UberX, which is an attempt to sign up regular people to give rides for hire, as its competitor Lyft does in San Francisco.
Clearly, innovation is overdue in the taxi industry. And there are actually smartphone apps that may not be quite as slick as Uber’s, but have played by the rules. Boston Cab Dispatch offers one, called “Boston Cab,” and the independent app TaxiMagic also works in the region.
But it looks like Uber is not going to be able to jam its way into the local taxi markets without some nasty fights. At least the startup has raised nearly $50 million to help pay for its strategy’s legal costs.
It’s also worth noting that Uber’s tech-heavy, startup-loving user base has been an effective political lobbying base when the company has encountered government resistance. In one case, the city council of Washington, D.C., moved to peg Uber’s rates far above those of other car services, until a social media campaign led by Uber investor Menlo Ventures turned the tide. Here in Massachusetts, state regulators attempted to shut down Uber, an effort erased by Gov. Deval Patrick after organized outcry from Uber supporters.
But the city of Cambridge didn’t go along with that plan, separately suing Uber in local court. Add another lawsuit to Uber’s docket in Massachusetts, and stay tuned.