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Malden Transportation, Inc. v. Uber Technologies, Inc.

United States District Court, D. Massachusetts

September 6, 2019

Malden Transportation, Inc., et al., Plaintiffs,
v.
Uber Technologies, Inc. and Rasier, LLC, Defendants.

          MEMORANDUM OF DECISION

          Nathaniel M. Gorton United States District Judge.

         This case involves a suit by the Anoush plaintiffs (taxi medallion holders in the Greater Boston) who allege that Uber Technologies, Inc. and Raiser, LLC (collectively “Uber” or “defendants”) competed unfairly in the on-demand, ride-hail Boston transportation market in violation of M.G.L. Chapter 93A, § 11 and Massachusetts common law.[1]

         The Court presided over a seven-day bench trial in late July, 2019, and early August, 2019, and now publishes its findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

         FINDINGS OF FACT

         I. Parties

         1. The Anoush plaintiffs (“plaintiffs” or “plaintiff corporations”) are 34 corporations in the business of leasing City of Boston taxicabs (and medallions that authorize their use) to independent drivers. All 34 corporations are owned and operated by the Tutunjian family which collectively controls 362 medallions.[2] The plaintiffs' taxicabs are branded under the name “Boston Cab.”

         2. The plaintiff corporations do not have employees themselves but, pursuant to individual and identical management agreements with EJT Management, Inc. (“EJT”), EJT conducts most of their day-to-day business. EJT is also owned by the Tutunjian family.

         3. Under the individual management agreements, EJT serves as an agent for the plaintiff corporations with respect to the collection of leasing revenue and the maintenance of leased taxicab vehicles for which it charges management fees. It also pays taxes and bills for plaintiffs. EJT does not, however, own any of the medallions at issue.

         4. Boston Cab Dispatch, Inc. (“Dispatch”), also owned by the Tutunjian family, is a radio association that provides taxi dispatch services to its “membership.” The 34 corporate plaintiffs are all members and pay membership fees to “Dispatch.”

         5. Ed Tutunjian (“Mr. Tutunjian”) was the controlling shareholder of all 34 plaintiff corporations for most of the period of alleged unlawful conduct, i.e., June 4, 2013, through August 4, 2016 (“the conduct period”). He transferred his ownership interest in all the Tutunjian entities (34 plaintiff corporations, EJT and Dispatch) to his wife, Nancy Tutunjian, for no consideration in 2016.

         6. Mary Tarpy (“Ms. Tarpy”), the daughter of Ed and Nancy Tutunjian, is the president, secretary and treasurer of all 34 plaintiff corporations and is the president of EJT and Dispatch. She has managed the day-to-day operations of the plaintiff corporations and EJT since mid-2013. As the corporate secretary, Ms. Tarpy is also responsible for the corporate books and records of all plaintiff corporations and EJT.

         7. John Weeden (“Mr. Weeden”) serves as the accountant for the plaintiff corporations. While Mr. Weeden maintained separate trial balances for each of the plaintiff corporations, EJT would compile the daily leasing transactions and corporate expenses (mostly transactions with EJT) within a general ledger.

         8. In 2013, Dispatch and EJT sued Uber for unfair competition. That lawsuit was dismissed with prejudice in July, 2016.

         9. Uber is a Delaware corporation with its principal offices in San Francisco, California. It is a technology company that uses a mobile software application (“app”) to match up potential riders with drivers seeking customers for prearranged transportation.

         10. Uber began providing transportation services in Massachusetts in 2011, well before the launch of its disputed ridesharing or peer-to-peer (“P2P”) service, UberX P2P.

         11. In October, 2011, Uber began a service called UberBLACK in Boston which allowed consumers to use an app on their phone to prearrange a ride in a livery vehicle with a livery licensed driver. In Fall 2012, Uber began providing UberTAXI in Boston which allowed riders to arrange traditional taxi rides from medallion-licensed taxicabs through the Uber app. In February, 2013, Uber offered UberX Livery which allowed riders to request rides from drivers with livery plates via the Uber app. UberX Livery fare rates were lower than UberBLACK which Uber considered a premium product.

         12. Rasier, LLC (“Rasier”) is a wholly owned subsidiary of Uber that operates as a transportation network company (“TNC”) in Massachusetts. References to “Uber” operating as a TNC apply equally to Rasier.

         II. Chapter 93A Liability

         A. Regulatory Framework

         13. Historically, the City of Boston has regulated taxis under a set of municipal rules, ordinances and regulations (“Taxi Rules”) and the Boston Police Commissioner (“the Commissioner”) has the authority to regulate hackney carriages and stands. The Commissioner may delegate his authority to the Inspector of Carriages, who is the Commander of the Hackney Carriage Unit (“HCU” or “Hackney Unit”). The Hackney Unit has approximately 12 assigned police officers but typically only two of those officers serve on the street during any one shift.

         14. In 2008, the Commissioner issued the Hackney Carriage Rules and Flat Rate Handbook (“Rule 403”), which regulates hackney carriage fares, medallions and hackney licenses, among other things.

         15. Rule 403 defines a “hackney carriage” as a vehicle used or designed to be used for the conveyance of persons for hire from place to place within the city of Boston. . . . Also known as a taxicab or taxi.

         16. Rule 403 sets forth leasing and shift rates and taximeter rates. It establishes various vehicle and driver requirements for hackney carriages, including that each vehicle have a taxi medallion, be driven by a licensed hackney carriage driver and bare evidence of membership in a radio dispatch association.

         17. Rule 403 also recognizes Boston's Vehicle for Hire Ordinance (“the Boston Ordinance”) which provides, in relevant part:

no person, firm, or corporation driving or having charge of a taxicab or other private vehicle shall offer the vehicle for hire for the purposes of transporting, soliciting and/or picking up a passenger or passengers unless said person is licensed as a hackney driver and said vehicle is licensed as a hackney carriage by the Police Commissioner.

City of Boston Code 16-15.05: Vehicle for Hire Ordinance.

         18. From 2007 to 2008, Captain Robert Ciccolo (“Captain Ciccolo”) served as the Commander of the Hackney Unit. Captain Ciccolo credibly testified that under his command, the Hackney Unit issued tickets to unlicensed vehicles engaged in street hails (in violation of the Boston Ordinance), but not to vehicles conducting prearranged rides, regardless of whether the vehicles had livery plates.

         19. At some point, after Captain Ciccolo stepped down as Commander of the Hackney Unit and at the beginning of the conduct period, he informed the Commissioner (Ed Davis) and the Civilian Director of Hackney Licensing (Mark Cohen) of the Hackney Unit's policy of not enforcing Rule 403 with respect to prearranged livery rides.

         20. In November, 2013, William Evans became Police Commissioner of the City of Boston. He served as Commissioner until the end of the conduct period in August, 2016.

         21. Captain Steven McLaughlin (“Captain McLaughlin”) served as Commander of the Hackney Unit from January, 2013, to May, 2014, under both Commissioners Davis and Evans. When he was Commander of the Hackney Unit, he instructed his officers not to ticket ridesharing vehicles unless they were involved in street hails.

         B. Nelson Nygaard Report

         22. In 2013, the Boston Globe ran a series of articles on the Boston taxi industry. Following that publication, Mayor Thomas Menino (“Mayor Menino”) commissioned the Nelson/Nygaard Boston Taxi Consultant Report (“the Report”).

         23. Although Uber declined to participate in the preparation of the Report, Captain McLaughlin, while Commander of the Hackney Unit, asked the drafters of the Report to address how the Hackney Unit should regulate ridesharing services such as those provided by TNCs.

         24. The Report, which was published in October, 2013 (four months after Uber launched UberX P2P), concludes that TNCs and livery vehicles are not regulated and do not have a regulatory body providing oversight. It further recommended that the Mayor establish an independent Taxi Advisory Committee (“TAC”).

         25. Senior management at Uber read the Report when it was issued in October, 2013, and concluded that it affirmed Uber's understanding that the Taxi Rules did not apply to ridesharing.

         C. Ridesharing Competitors and UberX P2P

         26. In March, 2013, Sidecar, a competitor to Uber, began the first P2P ridesharing program in Boston. When that happened, Michael Pao (“Mr. Pao”), the General Manager of Uber in Boston at the time, informed Uber executives that the Boston Ordinance prohibits “for hire” private vehicle pickups.

         27. Sometime thereafter, Mr. Pao told Uber's Head of Global Public Policy, Corey Owens (“Mr. Owens”), that Mr. Cohen (the Civilian Director of the Hackney Unit) had purportedly stated that there was almost no chance that the Taxi Rules would be enforced against Sidecar. That led senior Uber executives in Boston to believe that the Taxi Rules would not likely be enforced against Uber.

         28. In April, 2013, Uber publicly issued its national corporate policy (“the White Paper”) with respect to P2P ridesharing in cities where regulatory enforcement was ambiguous. In the White Paper, Uber's then-CEO Travis Kalanick stated:

Uber will aggressively roll out ridesharing on its existing platform in any market where the regulators have given tacit approval. . . . If a competitor is operating for 30 days without direct enforcement against transportation providers, then Uber will interpret that as “tacit approval” of ridesharing activity.

         29. That same month, Meghan Joyce (“Ms. Joyce”) succeeded Mr. Pao as Uber's Boston General Manager, a position she held until early 2015, when she was then succeeded by Cathy Zhou (“Ms. Zhou”).

         30. In May, 2013, Lyft, another Uber competitor began its P2P ridesharing service in Boston.

         31. Following Lyft's entry into the Boston market, Uber accelerated its plan to launch its own P2P service, UberX P2P, which is the disputed conduct at issue in this case. During the week preceding its launch, Uber had several intra-management communications relating to the Boston Ordinance. At that time, Ms. Joyce was familiar with the Boston Ordinance and was specifically aware of the fact that violations could result in $500 fines.

         32. While Uber maintains that throughout the conduct period the Taxi Rules did not apply to ridesharing, just before the launch of UberX P2P, Mr. Pao stated that “[t]his would be the first time Uber would be launching in a market without formal or tacit approval.” Despite that initial statement from Mr. Pao, the Court finds that such understanding later changed based on a series of conversations that Uber management had with City officials.

         33. On May 30, 2013, Mr. Owens, Uber's Head of Global Public Policy, emailed Mayor Menino's Chief of Staff, Mitchell Weiss (“Mr. Weiss”), a letter which was drafted, in part, by Ms. Joyce. In that letter, Uber stated that it was “eager to participate in this innovative model” but only “as long as regulators allow this type of transportation.” He requested that the City keep Uber informed of any “changes to Boston's current policy of non-enforcement.”

         34. That same day Mr. Owens spoke with Mr. Weiss by telephone. Mr. Owens reported back to his Uber colleagues that Mr. Weiss said, “just launch.”

         35. The following day, on May 31, 2013, Mr. Owens communicated with Mr. Weiss again and asked him to let Uber know if there were to be “any impending change to the City's interpretation or application of existing law in this area.”

         36. Although Mr. Weiss did not testify, the Court finds that the City's lack of enforcement of the Taxi Rules against Uber competitors, public statements made after the launch and the testimony from hackney officers collectively corroborate Uber's understanding of their communications with City officials prior to the launch of UberX P2P.

         37. Uber launched UberX P2P on June 4, 2013.

         D. Requirements for UberX P2P Drivers

         38. For P2P, Uber did not require its drivers to have a commercial hackney license, a commercial livery license or a hackney medallion. Drivers on the so-called “P2P platform” could drive their personal vehicles with a personal driver's license and a valid license plate. Those drivers were, however, covered by Uber's umbrella commercial insurance policy while transporting riders.

         39. Uber's management knew that its UberX P2P ridesharing model would save Uber drivers thousands of dollars in fees in comparison to taxicab drivers. At the time, plaintiffs estimated that the annual cost of leasing a medallion in Boston was approximately $26, 000, weekly radio association fees ranged from $20 to $88 and onetime retrofitting costs were around $3, 600. By avoiding such fees, Uber expected its drivers to earn 30% more income than a comparable taxicab driver.

         40. Unlike taxis, which are subject to fixed taxi fare rates, Uber set the variable prices for how much a customer would be charged per ride.

         41. Uber engaged in “surge pricing, ” whereby Uber would charge more when customer demand was higher than driver supply. Unlike taxis, Uber was able to increase prices during period of high demand and decrease them during periods of low demand.

         42. In October, 2013, Uber advertised to its customers that UberX P2P in Boston was 30% cheaper than comparable taxi rides.

         E. Ticketing and Government Interactions

         43. In July, 2013, Uber became aware that some of its drivers were receiving citations from local law enforcement. During the conduct period, out of the millions of Uber trips, Uber drivers received 497 tickets, of which 277 cited the Boston Ordinance. Most of those tickets were issued between May, 2014, and December, 2014. In 2015, 46 tickets were issued under the Boston Ordinance, but in 2016, only three tickets were issued.

         44. In response to inquiries from drivers about citations received, Uber employees never told the drivers that UberX P2P was illegal. Rather, Robert Hoyt (“Mr. Hoyt”), an Uber employee who managed communications with the drivers, informed ticketed drivers that the officers were merely “misinformed” about Uber's commercial insurance policy and that he would submit the citations to Uber's legal team. He would then input information about the citations in a spreadsheet which Uber's legal team could access. Uber meticulously tracked its drivers' citations throughout the conduct period.

         45. Uber reimbursed drivers who received tickets for prearranged rides but did not reimburse any drivers who were cited for street hails. It did so in order to retain drivers and to alleviate the cost and hassle of appealing the citations, although some drivers were successful in appealing citations on their own.

         46. In 2014, the volume of citations reached its peak and Uber internally expressed serious concern. At the height of it, the Boston Police Department and the Massachusetts State Police were issuing tickets in the range of $500 to $20, 000 per week.

         47. In February, 2014, Commissioner Evans stated during a radio interview that Uber was an unlicensed service but later rescinded that comment. In April, 2014, Ms. Joyce met with Massachusetts State Police officers overseeing Logan Airport who stated they would not relent on ticketing until there was a legislative change. One month later, however, Mayor Marty Walsh (“Mayor Walsh”) in response to a caller inquiry on a Boston radio program stated that the police, and the City, did not have jurisdiction over Uber.

         48. Internal documents show that during 2014, Ms. Joyce was skeptical that the Mayor's Office was doing anything to stop the ticketing. Uber management subsequently heard from one of its lobbyists that Dan Koh (“Mr. Koh”), Mayor Walsh's Chief of Staff, was “dumfounded” as to why Uber drivers were being ticketed. Mr. Koh later requested that Uber provide him with information about the citations and Uber complied.

         49. Ms. Joyce credibly testified that she had multiple conversations with Mr. Koh about the driver citations and she believed that Mr. Koh was in the process of stopping the issuance of citations.

         F. Taxi ...


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