Car-booking startup Uber has claimed one victory in court, recently defeating Boston-area officials who were seeking to slow the company’s expansion. But the well-financed startup still has two more federal lawsuits on the docket in Massachusetts.
That pair of court battles has pitted San Francisco-based Uber, which has raised nearly $50 million in venture investment, against a major competitor and a disgruntled partner.
Neither lawsuit is currently stopping Uber from operating in the Boston market, where its smartphone app lets users arrange and pay for cabs, more expensive “black car” rides, and less-regulated “ridesharing” pickups from regular car owners wanting to make a few bucks.
But winning or settling the lawsuits could be crucial for the young company, which is racing with several competitors to crack open America’s sometimes tightly regulated car-for-hire industry. Competitors include Lyft and Sidecar, which offer “ridesharing” services, and apps that book traditional taxis, including Hailo and TaxiMagic.
The first lawsuit was filed by David Lavitman, a cab driver from Milton, MA, who claims that Uber was breaking a Massachusetts law by taking up to half the 20 percent tip from passengers. Lavitman has also said that his lawsuit could turn into a class action covering dozens of drivers.
Uber says it only takes a $1 booking fee and 10 percent of the base fare for each cab ride, leaving drivers the balance of the fare and the entire tip. In its legal filings, the company is asking the federal court to throw out Lavitman’s lawsuit. It offers two arguments, which Lavitman disputes: the state law governing how tips can be distributed doesn’t apply to drivers because they’re not Uber employees, and drivers who sign up agree that all disputes will be settled in California courts.
If the lawsuit isn’t tossed out, Uber wants the Massachusetts court to send it to a judge in its home state of California.
The second lawsuit comes from a pair of large Boston-area cab companies: Boston Cab Dispatch, which dispatches cabs, and EJT Management, which owns and leases taxi licenses, or “medallions.” Both companies are owned by the same person, Edward J. Tutunjian.
Tuntunjian has his own legal problems. Boston Cab was recently raided by IRS agents and other authorities, and he is among the cab fleet owners being sued by drivers who say they were underpaid. The Boston Globe, which recently published a multi-part investigation of apparently shady practices in the local cab market, describes Tuntunjian as “the king of Boston’s taxi industry.”
The lawsuit from Tuntunjian claims that Uber is violating several state and federal laws, including trademark laws and racketeering statutes, which are typically used to prosecute organized crime.
The heart of the cab companies’ argument is that Uber is not obeying the regulations that restrict how taxi and “black car” services should operate in Massachusetts, including background checks and licenses for drivers and dispatchers.
Uber is asking the federal court to toss out this lawsuit, saying that local regulators should settle any dispute, not the courts. Uber also says the federal laws in question don’t apply in this case.
(Both lawsuits were initially filed in Massachusetts state courts, but Uber successfully moved them to the federal level, where judges regularly referee disagreements between parties from multiple states.)
Legal disputes are now a regular part of doing business for technology startups trying to make their way in the car-booking market, with battles and political settlements happening from coast to coast. Earlier this week, Los Angeles officials told Uber and competitors Lyft and Sidecar to stop operating “ridesharing” services, which let non-cabbies rent out rides in their personal cars.
Uber in particular has become a darling of the tech industry for its rapid expansion plans, which have included several battles with regulators and stodgy incumbents. The company has prevailed, at least partially, over initial objections to its black car and taxi services in San Francisco, Washington, DC, and New York.
A big part of that success has been the demand from vocal fans, who love the company’s super-slick and convenient app as a replacement for chasing down a cab or calling into a dispatch center.
Supporters have also successfully pointed out that shutting down new competitors like Uber and other smartphone ride-booking apps could wind up tamping down technological innovation, something politicians are keen to cultivate in an era of high unemployment.
That’s what happened last year in Massachusetts, where state-level regulators initially rejected Uber’s method of using smartphone GPS sensors to calculate car fares. Gov. Deval Patrick responded to an outcry by reversing the decision, saying Uber should be allowed to operate while standards are being developed to accomodate smartphone technologies.
