Advertising Law

Red Light! Cab Companies Claim Uber Falsely Claims to Be Safer Service

What’s safer—riding in a cab or riding in an Uber car?

A new false advertising lawsuit raised that question when a coalition of 19 taxicab companies throughout California alleged upstart Uber deceives consumers with claims that its rides are “safer than a taxi” and “the safest rides on the road.”

Uber’s Web site emphasizes that it provides “safe pickups,” adding, “no more waiting alone on a dark street hoping you can hail a taxi.” According to the complaint, the claims caused lost revenues and reputational harm to the companies.

The taxicab companies argue that their method of evaluating the safety of both drivers and their vehicles trumps that of Uber. The companies run a finger print-based criminal background check that eliminates concerns about drivers using false names. Drivers must also pass a written exam and driver safety course. As for vehicles, the companies conduct a 75-point inspection of all cars used. By comparison, Uber merely checks a driver’s name against court records, driving records, and a national sex offender database. And drivers are only obligated to submit a copy of a 19-point inspection for their vehicles. For these reasons, Uber’s safety considerations are far more cursory in comparison, according to the companies.

Uber also adds a $1 “Safe Rides Fee” to every fare, regardless of the duration or distance of the ride, which Uber states supports the company’s “continued efforts to ensure the safest possible platform for Uber riders and drivers.”

According to the complaint, consumers “will [reasonably] expect that they will be receiving a ride safer than that provided by Plaintiffs’ taxicabs, as Plaintiffs’ taxicabs simply charge a total fare, without imposing any additional surcharge to ensure a ‘Safe Ride.’”

The plaintiffs also cited to a lawsuit filed by the District Attorneys’ offices in San Francisco and Los Angeles, alleging that Uber engaged in deceptive practices with regard to its driver background check process, in violation of state law.

The taxicab companies seek injunctive relief, restitution, and treble damages for violations of the Lanham Act and California state law.

To read the complaint in L.A. Taxi Cooperative v. Uber Technologies, click here.

Why it matters: Calling the lawsuit “frivolous” and “simply without merit,” a spokesperson for Uber said the company plans to fight the case and defend the safety of its rides. “As riders across the country know, Uber’s multi-layered driver screening includes county, federal and multi-state checks and the rating system and traceability of the Uber platform gives riders and drivers unprecedented transparency,” spokesperson Eva Behrend told the Los Angeles Times. “This lawsuit was filed by an industry that for decades has ignored the safety of riders and drivers—and that in San Francisco, allows up to two drug or alcohol offenses for drivers and only looks back five years into a driver’s background, with limited recourse for complaints and wrongdoings.”

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Grocery Chain Blocks Jordan’s Shot at Win; Case Headed to Trial

Michael Jordan’s lawsuit against Jewel Food Stores looks to be headed to a jury after a federal court judge denied the basketball legend’s motion for summary judgment.

Jordan sued Jewel-Osco in 2009 when the grocery chain placed an ad page in a commemorative issue of Sports Illustrated recognizing Jordan’s induction into the Hall of Fame. The ad featured an image of a pair of basketball shoes with the number 23 under text reading: “A Shoe In! After six NBA championships, scores of rewritten record books and numerous buzzer beaters, Michael Jordan’s elevation in the Basketball Hall of Fame was never in doubt! Jewel-Osco salutes #23 on his many accomplishments as we honor a fellow Chicagoan who was ‘just around the corner’ for so many years.”

The ad also featured Jewel-Osco’s logo and slogan “Good things are just around the corner.”

Jordan alleged the ad violated Illinois’s Right of Publicity Act (IRPA), a state deceptive practices statute, and the federal Lanham Act. Relying on the First Amendment, Jewel-Osco moved to dismiss the suit on the grounds that the ad was noncommercial speech and entitled to full constitutional protection.

A federal district court agreed with Jewel-Osco, but the Seventh Circuit Court of Appeals reversed last year, finding the ad to be commercial speech and therefore subject to the laws invoked by Jordan. It emphasized that modern commercial advertising “is enormously varied in form and style.”

The basketball star then filed a motion for summary judgment on his IRPA claims (declining to pursue his Lanham Act allegations).

Jordan pointed to language from the Seventh Circuit decision that “Jewel’s ad has an unmistakable commercial function” and “an ad congratulating a famous athlete can only be understood as a promotional device for the advertiser.”

But those comments were made in the context of the First Amendment argument, not consideration of the IRPA claims, the federal district court judge ruled on remand. While Jordan had satisfied two elements of the state statute—an appropriation of the plaintiff’s name or likeness without his consent—the question remained whether Jewel’s ad served a “commercial purpose.”

Jordan’s motion failed to include any case law or legal arguments on the issue, U.S. District Court Judge Gary Feinerman wrote, and instead simply relied on the Seventh Circuit opinion for support.

But the federal appellate panel had explicitly declined to opine beyond the issue of Jewel’s First Amendment defense, writing that “[b]ecause the merits have not been briefed, we express no opinion on the substance of Jordan’s claims under the Lanham Act or any of the state-law theories.”

Jordan’s failure to elaborate on the commercial purpose of Jewel’s ad left the plaintiff unable to “get the W,” the judge said.

“Put simply, Jordan argues that because the Seventh Circuit’s opinion said what it said, Jewel’s ad has a ‘commercial purpose’ under the IRPA,” the court said. “But that is precisely what the Seventh Circuit twice made clear it was not saying.”

Judge Feinerman did let Sports Illustrated’s publisher, Time, Inc., off the hook, as the IRPA is an intentional tort and if Jewel were found to be liable, state law would prevent contributory liability from being imposed on Time.

To read the opinion in Jordan v. Jewel Food Stores, Inc., click here.

Why it matters: The issue of what constitutes commercial speech in a First Amendment analysis may be different when considered under the Illinois statute, the court noted, and remains an unanswered question. If the parties don’t settle the case in the coming months, Jordan and the grocery chain are set to try the case before a federal jury in Illinois beginning December 8, 2015.

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RadioShack’s Bankruptcy Snafu; State AGs Object

Providing an important reminder about the intersection of privacy promises and bankruptcy, the Texas Attorney General has filed an order to halt the sale of customer information in RadioShack’s bankruptcy.  

With the hope of keeping the company alive, RadioShack offered to sell various assets in the course of its bankruptcy case. Included in the list: “customer lists and other customer-related information.” Texas Attorney General Ken Paxton took the deposition of two RadioShack witnesses and learned that the information included customer names, phone numbers, mailing addresses, e-mail addresses, and in some situations the activity data of 117 million customers—or roughly 37 percent of the country’s total population.

Paxton filed an objection with the Delaware bankruptcy court overseeing RadioShack’s proceedings, citing violations of state consumer protection laws. The company’s online policy stated: “We will not sell or rent your personally identifiable information [PII] to anyone at any time,” while in-store signage stated: “At RadioShack, we respect your privacy. We do not sell our mailing list.”

“All versions of the [RadioShack] privacy policy contain an unequivocal provision that consumer PII will not be sold,” the AG told the court. “Therefore, the Debtors have made expressed representations to consumers that consumer PII would never be sold and yet . . . the Debtors seek to do the exact opposite of what they promised.”

The proposed sale was therefore impermissible as a “false, misleading, and deceptive business practice” in violation of Texas state law, the AG argued.

A few days later the state of Tennessee joined with Texas. Paxton then supplemented his filing to inform the bankruptcy court that an additional 21 governmental entities had expressed their support for the objection, including Arkansas, Colorado, Connecticut, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Montana, Nebraska, Nevada, Rhode Island, South Carolina, Washington, and Wisconsin.

The bankruptcy court permitted the sale of RadioShack’s assets to move forward, albeit without the customer PII, leaving the issue to be resolved at a later date.

To read the Texas Attorney General’s objection in RadioShack’s bankruptcy case, click here.

To read the AG’s supplemental motion, click here.

Why it matters: Companies do not typically plan on filing for bankruptcy, but such an event should be a consideration when drafting a privacy policy. Approval of the sale of RadioShack’s customer information—and ability to continue operations—may now hinge on how the PII collected by the company will be dealt with. The problem is not unique to RadioShack, with similar issues plaguing the bankruptcy of Crumbs bakery and the Federal Trade Commission getting involved in the recent bankruptcy proceedings of national bookstore chain Borders over concerns about the sale of consumer data.

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FCC Faces Multiple Suits Over New Net Neutrality Regs

In February the FCC approved a new net neutrality measure in a 3-to-2 vote that would ban fast lanes and relabel broadband as a utility similar to water, gas and electricity by reclassifying broadband Internet as a telecommunications service rather than an information service under Title II of the Communications Act.

FCC Chairman Thomas Wheeler promised three “bright line” rules for the new regulations: (1) No paid prioritization favoring some Web sites over others, (2) no throttling of Internet traffic, and (3) no blocking of access to legal content.

After the new regulations were announced, just one question remained: Which entity would file suit to challenge the rules?

The answer: Two separate lawsuits, one by a major trade group representing some of the biggest players in the telecom industry, the other by a Texas-based ISP that serves about 700 subscribers and a bill, the Internal Freedom Act, introduced by Rep. Marsha Blackburn (R-Tenn) which specified that the FCC’s order “shall have no force and effect.”

The United States Telecom Association (USTelecom) filed its protective petition for review in the D.C. Circuit Court of Appeals, requesting that the federal appellate court “hold as unlawful, vacate, enjoin, and set aside” the FCC’s proposed regulations.

“USTelecom seeks review of the Order on the grounds that it is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act . . . violates federal law, including, but not limited to, the Constitution, the Communications Act of 1934, as amended, and FCC regulations promulgated thereunder; conflicts with the notice-and-comment rulemaking requirements of [the APA]; and is otherwise contrary to law,” the plaintiff alleged.

Similarly, Alamo Broadband petitioned the Fifth Circuit Court of Appeals to review the FCC’s order, which it said was issued “in excess of the Commission’s authority,” “contrary to constitutional right,” and was “arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act.”

The litigation is only the latest chapter in the saga of net neutrality.

On two prior occasions the FCC has promulgated regulations that ended in the courtroom. In the most recent effort, the D.C. Circuit found that the FCC exceeded its authority and struck down the regulation in January 2014.

When the agency thereafter indicated it was considering new regulations that would allow for “fast lanes”—where Internet service providers afford certain companies preferential treatment when they pay for faster service—a record-setting number of comments were filed, of which the majority were in opposition.

To read the petition in United States Telecom Association v. FCC, click here.

To read the petition in Alamo Broadband v. FCC, click here.

Why it matters: Litigation challenging the FCC’s new proposal was inevitable, but the plaintiffs may face a procedural problem, however, as they filed their petitions before the agency published its regulations in the Federal Register. USTelecom noted it filed its petition “out of an abundance of caution” and the procedural bump could be a minor hurdle. On the last go-around challenging the FCC’s rules, Verizon’s suit was initially tossed because it was filed early, but the company refiled and ultimately prevailed. Chairman Wheeler, for one, isn’t worried—he recently predicted that “the FCC’s new rules will be upheld by the courts.”

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Noted and Quoted . . . Wasserman discusses the focus of an upcoming FDA public hearing on homeopathic regulation on and Goldstein comments on the POM Wonderful ruling in Natural Products Insider recently published an article by Manatt partner Ivan Wasserman, titled “Will FDA change the way it regulates homeopathic drugs? Should it?”

Wasserman admits that there has not been much change in the regulation of homeopathic products in the past decade. However, with the announcement of an April 20-21 FDA public hearing titled “Homeopathic Product Regulation: Evaluating the Food and Drug Administration’s Regulatory Framework After a Quarter-Century,” may come some overdue updates to the Compliance Policy Guide (CPG). To read the full article, click here.

Natural Products Insider turned to Manatt partner Linda Goldstein for comment on the implications of the POM Wonderful ruling in an article titled “In POM Wonderful Trial, Court Rules One Human Clinical Trial Sufficient.”

Goldstein anticipates companies will resist future attempts by the FTC to require two controlled studies as part of a consent decree in order to substantiate their claims. To read the full article, click here.

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