Meyer v. Kalanick

174 F. Supp. 3d 817, 2016 U.S. Dist. LEXIS 43944, 2016 WL 1266801
District Court, S.D. New York·Decided March 31, 2016·No. 15 Civ. 9796·Published·Cited by 4 cases

Opinion

OPINION AND ORDER

JED S. RAKOFF, UNITED STATES DISTRICT JUDGE.

On December 16, 2015, plaintiff Spencer Meyer, on behalf of himself and those similarly situated, filed this putative antitrust class action lawsuit against defendant Travis Kalanick, CEO and co-founder of Uber Technologies, Inc. (“Uber”). See Complaint, Dkt. 1. Mr. Meyer’s First Amended Complaint, filed on January 29, 2016, alleged that Mr. Kalanick had orchestrated and facilitated an illegal price-fixing, conspiracy in violation of Section 1 of the federal Sherman Antitrust Act, 15 U.S.C. [820] § 1, and the New York State Donnelly Act, New York General Business Law § 340. See First Amended Complaint (“Am.Compl.”),' Dkt. 26, ¶¶ 120-140. Plaintiff claimed, in essence, that Mr, Ka-lanick, while disclaiming that he was running a transportation company, had conspired .with Uber drivers to use Uber’s pricing algorithm to set the prices charged to Uber riders, thereby restricting price .competition among drivers to the detriment of Uber riders, such as plaintiff Meyer. See id. ¶¶ 1, 7.

On February 8, 2016, defendant Kalan-ick moved to dismiss the Amended Complaint. See Notice of Motion, Dkt. 27. Plaintiff opposed on February 18, 2016; defendant replied on February 25, 2016; and oral argument was held on March 9, 2016.1 Having considered all of the parties’ submissions and arguments, the Court hereby denies defendant’s motion to dismiss.

In ruling on a motion to dismiss, the Court accepts as true the factual allegations'in the complaint and draws all reasonable inferences in favor of the plaintiff. Town of Babylon v. Fed. Hous. Fin. Agency, 699 F.3d 221, 227 (2d Cir.2012), “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). In the antitrust context, stating a claim under Section 1 of the Sherman Act “requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. Asking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

The relevant allegations of the Amended Complaint are as follows. Uber, founded in 2009, is a technology company that produces an application for smartphone devices (“the Uber App”) that matches riders with drivers (called “driver-partners”2). See Am. Compl. ¶¶2, 21, 24, 27. Uber states that it is not a transportation company and does not employ drivers. See id. ¶¶ 2, 23. Defendant Kalanick, in addition to being the co-founder and CEO of Uber, is a driver who has used the Uber app. See id. ¶ 3. Plaintiff Meyer is a resident of Connecticut, who has used Uber car services in New York. See id. ¶ 7.'

Through the Uber App, users can request private drivers to pick them up and drive them to their desired’location. See id. ¶ 24. Uber facilitates payment of the fare by charging the user’s credit card or other payment information on file. See id. 1132. Uber collects a percentage of the fare as a software licensing fee and remits the remainder to the driver. See Am. Compl. ¶ 27. Drivers using the Uber app do not compete on price, see id. ¶ 2, and cannot negotiate fares with drivers for rides, see id. ¶ 34. Instead, drivers charge the fares set by the Uber algorithm. See [821] id. ¶ 2. Though Uber claims to allow drivers to depart downward from the fare set by the algorithm, there is no practical mechanism by which drivers can do so. See id. II69. Uber’s “surge pricing” model, designed by Mr. Kalanick, permits fares to rise up to ten times the standard fare during times of high demand. See id. ¶ 26, 48, 50. Plaintiff alleges that the drivers have a “common motive to conspire” because adhering to Uber’s pricing algorithm can yield supra-competitive prices, Am. Compl. ¶ 90, and that if the drivers were acting independently instead of in concert, “some significant portion” would not agree to follow the Uber pricing algorithm. See id. ¶ 93.

Plaintiff further claims that the drivers “have had many opportunities to meet and enforce their commitment to the unlawful agreement.” Am. Compl. ¶ 92. Plaintiff alleges that Uber holds meetings with potential drivers when Mr. Kalanick and his subordinates decide to offer Uber App services in a new geographic location. See id. ¶40. Uber also organizes events for its drivers to get together, such as a picnic in September 2015 in Oregon with over 150 drivers and their families in attendance, and other “partner appreciation” events in places including New York City. See id. ¶ 41. Uber provides drivers with information regarding upcoming events likely to create high demand for transportation and informs the drivers what their increased earnings might have been if they had logged on to the Uber App during busy periods. See id. ¶ 58. Moreover, plaintiff alleges, in September 2014 drivers using the Uber App in New York City colluded with one another to negotiate the reinstitution of higher fares for riders using Uber-BLACK and UberSUV services (certain Uber car service “experiences”). See id. ¶¶ 25, 87. Mr. Kalanick, as Uber’s CEO, directed or ratified negotiations between Uber and these drivers, and Uber ultimately agreed to raise fares. See id. ¶ 87.

As to market definition, plaintiff alleges that Uber competes in the “relatively new mobile app-generated ride-share . service market,” of which Uber has an approximately 80% market share. Amended Complaint ¶ 94-95. Uber’s chief competitor in this market, Lyft, has only a 20% market share, and a third competitor, Sidecar, left the market at the end of 2015. See id. ¶¶ 95-96. Although, plaintiff contends, neither taxis nor traditional cars for hire are reasonable substitutes for mobile app-generated ride-share service, Uber’s own experts have suggested that in certain cities in the U.S., Uber captures 50% to 70% of business customers in the combined market of taxis, cars for hire, and mobile-app generated ride-share services. See id. ¶ 107.

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Meyer v. Kalanick, 174 F. Supp. 3d 817, 2016 U.S. Dist. LEXIS 43944, 2016 WL 1266801 (S.D.N.Y. 2016).

174 F. Supp. 3d 817 (Meyer v. Kalanick) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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