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Travel Law: Uber and Lyft battle grounds – Chicago & Milwaukee

Travel Law: Uber and Lyft battle grounds – Chicago & Milwaukee

In this week’s article, we examine recent developments in Chicago, Illinois and Milwaukee, Wisconsin in the ongoing battle between local taxi interests and others against Uber, Lyft and others in the ride sharing business.

The Chicago & Milwaukee Cases

Specifically, we will discuss Illinois Transportation Trade Association v. City of Chicago, No. 16-2009 (7th Cir. October 7, 2016), an action brought by a taxi association asserting “constitutional challenges to the endeavor of a city (Chicago in this case, Milwaukee in the other) to stimulate greater competition in the ‘for-hire auto transportation market’”.
 
Terror Targets Update

Orlando, Florida

In Neuhaus & Blinder, 911 Recordings of Gunman During Orlando Nightclub Siege Are Released, nytimes.com (10/31/2016) it was noted that “The 911 call began with about six seconds of Arabic, and then Omar Mateen switched to English: ‘I want to let you know, I’m in Orlando and I did the shooting’. The words…were spoken on June 12 as Mr. Mateen laid siege to the Pulse nightclub here. And in an array of tones-even and calm at first, then at turns impassioned, incredulous and threatening-Mr. Mateen used his conversations with a dispatcher and a police negotiator to claim that the attack was the work of the Islamic State and to war, deceptively, of nearby bombs…Before he was killed by the police, Mr. Mateen declared his allegiance to the Islamic State and complained about American airstrikes in the Middle East. ‘What am I to do here when my people are getting killed over there?’”.


Zika, Zika, Zika

In McNeil & Cobb, Colombia Is Hit Hard By Zika, but Not by Microcephaly, nytimes.com (10/31/2016) it was noted that “This tropical city on the Caribbean coast may hold the answer to one of the deeper mysteries of the Zika epidemic: Why has the world’s second-largest outbreak, after Brazil’s, produced so few birth defects? In Brazil, more than 2,000 babies have been born with microcephaly, abnormally small heads and brain damage caused by Zika virus. In Columbia, officials had predicted there might be as many as 700 such babies by the end of this year. There have been merely 47. The gap has been seen all over the Americas. According to the World Health Organization, the United States has 28 cases-almost all linked to women infected elsewhere. Guatemala has 15 and Martinique has 12. Had the rest of the Americas been as affected as northeastern Brazil, a tidal wave of microcephaly would be washing over the region. Most experts say that will not happen, but they are at a loss as to why. Discovering what stopped microcephaly in Columbia may help other countries tamp down the epidemic’s worst effects”.

Discrimination Study

In Scott, Study Finds Some Uber and Lyft Drivers Racially Discriminate, nytimes.com (10/31/2016) it was noted “the main conclusion from an academic paper published Monday…said African-American users of these digital (ride-booking services) faced racial discrimination by some Uber and Lyft drivers. The findings-based on roughly 1,500 combined trips in Seattle and Boston-come on the heels of similar racial accusations against Airbnb [see below]]…where people with African-American-sounding names found it harder to rent rooms than their white counterparts …’We found that African-American travelers in Seattle experienced statistically significantly longer delay waiting for a trip request through UberX or Lyft to be accepted’, said the researchers from the University of Washington, M.I.T. and Stanford, UberX is Uber’s baseline service. ‘We theorize that at least some drivers for both UberX and Lyft discriminate on the basis of the perceived race of the traveler’, they added”.

Airbnb Discrimination Case Dismissed

In Benner, Federal Judge Blocks Racial Discrimination Suit Against Airbnb, nytimes.com (11/1/2016) it was noted “Airbnb on Tuesday avoided a potential class-action lawsuit by customers who accused hosts of racial discrimination when a federal judge [see Selden v. Airbnb, Inc., Case No. 16-cv-00933 (D.D.)(CRC), Decision dated November 1, 2016] ruled that the company’s arbitration policy prohibited its users from suing. The case began this year when Gregory Selden, who is African-American, claimed that a host on Airbnb would not rent him a room because of his race. In May, Mr. Selden sued Airbnb…for violating civil rights laws that forbid housing discrimination. But on Tuesday, a federal judge said Mr. Selden needed to adhere to Airbnb’s user agreement, which says that disputes must be settled in private arbitration and that users waive their right to trial by jury or to participate in class-action lawsuits. So long as arbitration provisions are made known to consumers, they are ‘enforceable, in commercial disputes and discrimination cases alike’, Judge Christopher R. Cooper of the United States District Court for the District of Columbia wrote in his ruling”.

Arbitration Protecting Airbnb And Uber

In addition to the ruling in the Selden case discussed above, Uber Technologies, Inc. has been the beneficiary of enforceable arbitration clauses in its agreements with its drivers. In Mohamed v. Uber Technologies, Inc., 2016 WL 4151407 (9th Cir. 2016), rev’g 109 F. Supp. 3d 1185 (N.D. Cal. 2015)] “A federal appeals court on Wednesday handed (Uber) a major victory, ruling that drivers suing the company may be bound by arbitration agreements. The U.S. Court of Appeals for the Ninth Circuit ruled that an arbitrator, not a federal judge, must decide whether the agreements used by Uber in 2013 and 2014 are enforceable. The decision reversed a 2015 ruling that voided the company’s arbitration agreements and allowed a driver class action to proceed against the company in court over claims that it violated background check laws” [Hancock, Appeals Court Sends Uber Drivers Into Arbitration, law.com (9/7/2016)].

Uber Drivers In London Win Case

In Johnston, Uber drivers win key employment case, bbc.com (10/28/2016) it was noted that “Uber drivers have won the right to be classed as workers rather than self-employed. The ruling by a London employment tribunal means drivers for the ride-hailing app will be entitled to holiday pay, paid rest breaks and the national minimum wage. The GMB union described the decision as a ‘monumental victory’ for some 40,000 drivers in England and Wales. Uber said it would appeal against the ruling that it had acted unlawfully…The ruling accused Uber of ‘resorting in its documentation to fictions, twisted language and even band new terminology’ adding ‘The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is in our mind faintly ridiculous’.


Uber In Quebec

In Uber issues statement on Quebec ridesharing regulation project, eturbonews.com et.travel/article (10/31/2016) it was noted that “We wish to demonstrate how it is possible to reduce congestion, pollution and the need for land devoted to parking, while improving the accessibility of transportation by using private vehicles for public good. Jean-Nicolas Guillemette, General Manager of Uber Quebec, today made the following statement on the pilot project regulating Uber in the province. First, we would like to thank all our driver partners, our riders and our supporters who, for the last three years, have continuously advocated on our behalf as we worked to obtain regulations for ridesharing in Quebec. By participating (in) this pilot project, our objective is to continue serving our riders and driver partners and to demonstrate that we can and want to operate within a regulatory framework”.

Airbnb In Vancouver

In Airbnb generates $402 million in economic activity in Vancouver, eturbonews.com (11/1/2016) it was noted that “A new report by Dr. Brock Smith, a professor (on) the Faculty of Business at the University of Victoria, shows that Airbnb guests and hosts generated $402 million in local economic activity in Vancouver in the past year. The economic impact reports look at guest travel from September 31, 2015 to August 31, 2016, a period where roughly 267,000 guests booked their stay with Vancouver’s Airbnb hosts and directly spent almost $180 million at local businesses during their stay. ‘This level of economic activity supports more than 9,100 full-time equivalent jobs for the City of Vancouver’, said Dr. Smith…Airbnb tends to attract visitors who stay longer and spend more money in local neighborhoods. Airbnb guests report that more than half of their daytime spending in Vancouver is spent within the neighborhood where they stay…Hosting on Airbnb also helps everyday Vancouverites make ends meet. The typical Vancouver host earns $6,500 a year in modest, supplemental income”.

Airbnb In Nashville, Tennessee

In Barcheneger & Garrison, Judge: Nashville’s Airbnb law unconstitutional, The Tennessean (10/21/2016) it was noted that “A Nashville judge ruled Friday that Metro’s ordinance regulating short-term rentals such as Airbnb’s is vague and thus unconstitutional, delivering a blow to the city’s attempt to manage the fast-growing alternative to hotels. The immediate impact of the ruling is unclear as Metro lawyers say that will likely ask that it not go into effect pending appeal. Council members supported the ordinance…that lays out regulations for short-term rentals said, they too, are evaluating courses of action after the judge’s ruling…The conservative think-tank Beacon Center of Tennessee filed a lawsuit in August 2015 of behalf of Salemtown residents…arguing the ordinance infringed on their rights as homeowners”.

On October 28, 2016, Special Master James B. Johnson, issued an Order in Anderson v. The Metropolitan Government of Nashville and Davidson County, Docket No. 15C3212 (8th Cir. Ct. For 20th Jud. Dist. At Nashville) wherein the Court addressed Plaintiffs’ motion for summary judgment on claims One [“The Short Term Residential Property do not apply to plaintiffs’ property, or in the alternative their property is exempt from the ordinances”], Two [“The ordinances are unconstitutionally vague…”], Four [The ordinances violate the equal protection clauses…”] and Six [“The ordinances create a monopoly…”]. The Court found that regarding Claim Two “the definition of Short Term Residential Property (STRP)…contained within…Metro’s Code in unconstitutionally vague:, regarding Claim Four “The Court concludes that this ordinance passes the rational basis test. Metro has a legitimate interest in balancing the interest between the citizens who want to achieve benefits from renting their property on a short-term basis against the interest of citizens who want to protect the residential character of their neighborhoods. The three percent cap on use permits to non-owner-occupied STRPs is a reasonable method of accomplishing this goal”, and regarding Claim Six the Court “further concludes that, even if the three percent cap constitutes a monopoly, the monopoly created would be a permissible monopoly. The Anti-Monopoly Clause of the Tennessee constitution does not prohibit the granting of a monopoly if such monopoly ‘has a reasonable tendency to aid in the promotion of the health, safety, morals and well-being of the people…Assuming the three percent cap creates a monopoly, the monopoly is not an impermissible one because it has a reasonable tendency to further these goals”.

Travel Law Article: Uber In Chicago & Milwaukee

Stimulating The Transportation Market

In Illinois Transportation Trade Association v. City of Chicago, 2016 WL 5859703 (7th Cir. October 7, 2016) it was noted that “This case…involves constitutional challenges to the endeavor of (two cities Chicago and Milwaukee0 to stimulate greater competition in the ‘for-hire auto transportation market’. This is the market composed of owners of taxicabs that one hails on the street, of livery services, which are usually summoned by phone…and of the newer auto-transport services for hire, of which the best known is Uber (the second best known is Lyft); generically these services are known either as Transportation Network Providers (TNPs) or as ridesharing service. Because the acronym TNPs is not well known, nor the term ridesharing service, but Uber is very well known, we’ll focus on Uber, which ‘at its core…is just an app that you download to your smartphone and use to get a nearby Uber driver to come pick you up”.

The Plaintiffs

“The plaintiffs are companies that own and operate either taxicabs or livery vehicles in Chicago or that provide services to such companies, such as loans and insurance. Taxi companies are tightly regulated by the City regarding driver and vehicle qualifications, licensing, fares and insurance…Uber…is less heavily regulated than the taxi and livery companies…and has a different business model. For example, you can’t hail an Uber vehicle on the street; you must use a smartphone app to summon an Uber car. Since 2014 Uber and the other TNPs have been governed by an ordinance, but it is different from the ordinances governing taxi and livery services and more permissive; for example, it allows the companies to set their own fares, and in this and other ways allows them to do by contract some of the things that Chicago ordinances require taxi and livery companies to do”.

The Challenges

“The plaintiffs challenges the ordinance on seven grounds, of which four are based on the U.S. Constitution and the other three on Illinois law…All seven of the plaintiffs’ claims are weak. The first is that allowing the TNPs into the taxi and livery markets has taken away the plaintiffs’ property for a public use without compensating them. A variant of such a claim would have merit had the City confiscated taxi medallions, which are the licenses that authorize the use of an automobile as a taxi. Confiscation of the medallions would amount to confiscation of the taxis: no medallion, no right to own a taxi…though the company might be able to convert the vehicle to another use. Anyway, the City is not confiscating any taxi medallions; it is merely exposing the taxicab companies to new competition-competition from Uber and the other TNPs”.

Not Free From Competition

“‘Property’ does not include a right to be free from competition. A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening. When property consists of a license to operate in a market in a particular way, it does not carry with it a right to be free from competition in that market…Indeed, when new technologies, or new business methods, appear, a common result is the decline or even disappearance of the ld. Were the old deemed to have a constitutional right to preclude the entry of the new into the markets of the old, economic progress might grind to a halt. Instead of taxis we might have horse and buggies”.

Some Insulation From Competition

“The plaintiffs continue to receive some insulation from competition, because they alone are permitted to operate taxicabs in Chicago. Taxicabs are preferred to Uber…by many riders, because they don’t have to use an app to summon them-just wave at one that drives toward you on the street – and also because the fares are fixed by the City.

Anti-Competitive Argument

“The plaintiffs argue that the City has discriminated against them by failing to subject Uber…to the same rules about licensing and fares…the taxi ordinance subjects the plaintiffs to. That is an anti-competitive argument. Its premise is that every new entrant into a market should be forced to comply with every regulation applicable to incumbents in the market with whom the new entrant will be competing”.

Equal Protection

“The proper question to ask regarding equal protection is whether the regulatory difference between Chicago taxicabs and Chicago TNPs are arbitrary or defensible, and the City makes a compelling case that they’re the latter…There are enough differences between taxi service and TNP service to justify different regulatory schemes, and the existence of such justification dissolves the plaintiffs’ equal protection claim. Different products or services do not as a matter of constitutional law, and indeed common sense, always require identical regulatory rules”.

Deregulation Surges

“Beginning in the 1970s a deregulation movement swept the country, powered by the belief that competition is often a superior alternative to regulation. Entire agencies vanished such as the Civil Aeronautics Board, which had greatly limited competition in the airline industry. Many cities loosened the regulatory limitations on taxi services-and this well before there were any TNPs…The deregulation movement has surged with the advent of the TNPs. Chicago, like Milwaukee (have) chosen the side of deregulation, and thus competition, over preserving the traditional taxicab monopolies. That is a legally permissible choice”.

Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see IFTTA.org.

This article may not be reproduced without the permission of Thomas A. Dickerson.

Read many of Justice Dickerson’s articles here.

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