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April 6, 2015

Tortious Interference, Unfair Competition

THE
SOUTHERN DISTRICT OF TEXAS ADDRESSES CLAIMS AGAINST UBER AND LYFT BROUGHT BY EXISTING TAXI CAB COMPANIES AND OPERATORS IN TEXAS FOR TORTIOUS INTERFERENCE, UNFAIR COMPETITION AND FALSE ADVERTISING.

Different modes of transportation, especially in established and growing cities, is a consistently expanding industry. Lately, at the forefront of the cab transportation industry right now is a company called Uber Technologies, Inc. (“Uber”). Lyft Inc. (“Lyft”) is also a major competitor in this relatively new “app” based cab industry. As commuters across the nation rave about this new age transportation, which basically provides riders with an impromptu cab they can hail within minutes right from an app on their phone, the traditional cab industry is not so welcoming of the overwhelming competition. In Texas, the Greater Houston Transportation Company and nine (9) other taxi-cab companies and licensed taxi-operators have filed a lawsuit against Uber and Lyft for tortious interference with business relations, unfair competition, and false advertising under the Lanham Act, 15 U.S.C. §1125(a). In response Uber and Lyft filed a Motion to Dismiss.

The law does have protections for existing businesses when other companies enter an industry and in some way, interfere or compete with their business. This also applies when former employees start new companies within the same industry as their former employer if they take steps that violate the law. In this case, Greater Houston Transportation Co., et al. v. Uber Technologies, Inc. and Lyft Inc., the Greater Houston Transportation Company and the other plaintiffs will have to meet the following four elements to establish their claim that Uber and Lyft are tortuously interfering with their business: (1) the existence of a contract subject to interference, (2) willfull and intentional interference, (3) interference that proximately caused damages, and (4) actual damage or loss. A large part of the Plaintiffs’ claim in this case is that Uber and Lyft are soliciting their independent contract drivers inducing them to breach contracts they have with Plaintiffs to jump ship and work for the new companies. However, the Court determined that Plaintiffs did not provide enough information in their pleading to establish that Uber or Lyft were aware of the contracts. On those grounds, the Court dismissed the tortious interference with existing contracts claim as well as the tortious interference with prospective business relations claim.

The Plaintiffs did claim some victory at this stage of their lawsuit as the Court denied Uber and Lyft’s motion to dismiss Plaintiffs’ Lanham Act Claims (in part) and request for a permanent injunction. The Court decided that because Uber and Lyft were allegedly making misleading comparisons between their products or services and that of Plaintiffs’, a permanent injunction was appropriate. For example, Uber claims that it carries insurance with 20x the requirements taxis have in Houston but the Court determined this could be misleading because the public could believe that Uber’s insurance policy is the same type of insurance as the taxi companies have, which it is not. Because a “presumption of irreparable injury” could result from that type of misleading comparison diminishing the value of Plaintiffs’ product or services in the minds of consumers, the permanent injunction request was not dismissed.

This is just a brief summary focusing on some of the many issues that were addressed by the Southern District of Texas in this early stage of litigation. The Court’s opinion highlights the legal avenues a business can take to defend its products and services and also to protect its position in its respective industry from competitors.

Greater Houston Transp. Co., et al. v. Uber Tech., Inc. and Lyft, Inc., No. 4:14-0941, 2015 WL 1034254 (S.D. Tex. March 10, 2015).