sdny class action suit against uber

8/18/2019 SDNY Class action suit against Uber

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UNITED STATES

DISTRICT COURT

SOUTHERN DISTRICT OF

NEW

YORK

- - - - - - - - - -- - - - - - - - - - -- - - - - - - - - - -- - - - - x

SPGNCER MEYER,

i nd iv idua l ly

and on

behal f

of those

s imi l a r l y

s i t u a t ed ,

P l a i n t i f f s ,

15 Civ. 9796

OPINION ND ORDER

-v -

_ , ~ - i - · ' ...

· - ' ' - ' ~ ' ' ' ' ° ' '

u

c l

TRAVIS KALANICK, D o c : ; ~ :·: ,\;T

r · '" ' '° '"; . ~ . . , T

.

~ ~ ~ ~ ~ ~ ~ ~

~ ~ ? ~ ~ ~ M ~

JED

S.

RAKOFF, U.S.D.J .

On

December

16, 2015, p l a i n t i f f

Spencer

Meyer,

on

behal f

of

himsel f and those

s imi l a r l y s i t u a t ed ,

f i l e d t h i s p u t a t i v e

a n t i t r u s t c la s s ac t i o n l awsu i t ag a i n s t defendant Trav is

Kalanick, CEO and co-founder

o f

Uber Technologies ,

Inc .

( Uber ) .

See

Complaint ,

Dkt.

1.

Mr.

Meyer ' s F i r s t Amended

Complaint , f i l e d on

January

29,

2016,

a l l eg ed t h a t Mr. Kalanick

had orches t ra t ed and

f a c i l i t a t e d an

i l l e g a l

p r i ce - f i x in g

consp i racy in v io l a t i o n

of

Sect ion 1

of

the f ed e ra l Sherman

Ant i t rus t Act, 15 U.S.C. § 1,

and

the

New York Sta t e

Donnelly

Act ,

New York Genera l

Business

Law

§

340. See

F i r s t

Amended

Complaint

( Am. Compl. ) , Dkt. 26, g[g[ 120-140. P l a i n t i f f

cla imed, in essence,

t h a t

Mr. Kalanick, whi le

d i sc l a imin g t h a t

he was running

a t r anspor ta t ion

company, had

consp i red

with Uber

dr ive rs

to use Uber s

pr i c ing

a lgor i thm to se t the p r i c e s

charged to

Uber r i d e r s ,

thereby r e s t r i c t i n g p r i c e compet i t ion

1

Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 1 of 27


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among

dr ive rs

to the

de t r iment

o f

Uber r i d e r s , such

as p l a i n t i f f

Meyer.

See

id .

1, 7.

On

February

8, 2016, defendant Ka lan ick moved to

di smiss

the

Amended

Complain t .

See Notice

o f Motion, Dkt.

27.

P l a i n t i f f

opposed on

February

18,

2016;

defendant r e p l i e d on February

25,

2016; and

o ra l

argument

was

he ld on March 9,

2016.

Having

cons ide red a l l o f the p a r t i e s '

submiss ions and

arguments , t he

Court hereby den ies

de fendan t ' s

mot ion

to

dismiss .

In r u l i n g on a

mot ion

to dismiss ,

t he

Court accep ts as t r u e

t he

f a c t u a l a l l e g a t i o n s in

t he

compla in t and draws

a l l

reasonab le

in f e rences in

favor of the

p l a i n t i f f . Town o f Babylon

v.

Fed. Hous.

Fin. Agency, 699

F.3d 221, 227 (2d Ci r . 2012). To

surv ive

a

mot ion

to dismiss , a compla in t

must

co n ta in su f f i c i e n t

f a c t u a l mat t e r , accep ted as

t rue , to

s t a t e

a

cla im to

r e l i e f

t h a t

i s

p l a u s i b l e on

i t s

f ace .

Ashcrof t

v.

Iq b a l ,

556

U.S.

662,

678 (2009)

( in t e rna l

q u o ta t i o n marks o mi t t ed ) . In the

a n t i t r u s t

con tex t , s t a t i n g a cla im under

Sec t ion

o f the Sherman

Act

r e q u i r e s a complaint with enough

fac tua l

mat t e r ( taken as t rue)

to

sugges t t h a t an agreement was made. Asking fo r

p l a u s i b l e

grounds

to

i n f e r

an

agreement does

not impose a p ro b a b i l i t y

requirement a t the

plead ing

s tage ;

t s imply c a l l s

fo r enough

During

or a l

argument ,

the

Cour t i n v i t e d both s ide s t o submit l e t t e r s

regard ing

c e r t a i n s tud ie s

c i t ed

by p l a i n t i f f

in the

Amended

Complaint . See

T r ansc r ip t

of Proceedings dated

March

9,

2016 ( Tr . ) ,

24:12-16. These

l e t t e r s , r espec t ive ly

dated

March

11,

2016 ( P l . Let te r )

and

March

15,

2016

( Def. L e t t e r ), w i l l

be

docke ted

along with

t h i s

Opinion.

2



3/27

fac t

to r a i s e a reasonab le

expec ta t ion

t h a t discovery w i l l

r ev ea l evidence of

i l l e g a l

agreement . Bel l Atl . Corp. v.

Twombly,

550 U.S.

544,

556

(2007).

The r e l ev an t a l l eg a t i o n s

of

the Amended Complaint are as

fo l lows .

Uber,

founded

in

2009,

i s a technology company

t h a t

produces an

app l i ca t ion

fo r smartphone dev ices

( the

Uber

App )

t h a t matches r i d e r s with

dr ive rs

( ca l l ed d r iv e r - p a r tn e r s

2

See

Am Compl. 2, 21, 24, 27. Uber

s t a t e s

t h a t

t

i s not

a

t r anspor ta t ion

company

and

does

not employ

dr iver s .

See id .

2,

23.

Defendant Kalanick,

in

ad d i t i o n

to

being the co- founder

and CEO

of

Uber,

i s a

dr ive r

who has used the Uber

app.

See id .

3. P l a i n t i f f Meyer i s

a

re s iden t

of

Connect icu t ,

who

has

used

Uber ca r s e rv i ces

in

New

York. See id .

7.

Through the

Uber App, users can

reques t

p r iv a t e

d r i v e r s t o

pick

them

up

and

dr ive

them

to

t h e i r

d es i r ed

l oca t ion .

See

id .

24.

Uber

f a c i l i t a t e s payment

of the f a r e

by

charg ing the u s e r ' s

c r ed i t ca rd o r

o t h e r payment in fo rmat ion

on f i l e .

See id . 32.

Uber c o l l e c t s

a

percen tage o f

the f a r e as a

sof tware

l i c ens ing

fee

and remi ts

the

remainder to

the dr iver .

See Am

Compl.

27.

Drive rs us ing

the Uber

app do not

compete

on

pr ice , see id .

2,

and cannot

nego t i a t e

fa res

with dr ive rs fo r

r ides ,

see id .

34.

2 The Court uses dr iver s and sometimes Uber dr iver s ins tead of Uber ' s

term

dr iver -par tner s for the sake of s impl ic i ty ,

but

t h i s

usage

i s

not meant to

imply

any employment

r e l a t ionsh ip between

Uber

and these

dr ive r s ,

which

defendant

f i rmly denies .

3



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Ins tead , dr ive rs

charge the f a r e s s e t

by

the Uber a lgor i thm. See

id .

2. Though Uber

c la ims to

a l low

d r i v e r s to depar t downward

from the f a r e

s e t

by the a lgor i thm, t he re i s no p ra c t i c a l

mechanism by which dr ive rs

can do

so. See id . 69.

Uber ' s

surge

p r i c i n g model , designed by Mr. Kalanick, permi ts fa res

to

r i s e up to

t en

t imes the

s t an d a rd

fa re

dur ing

t imes

of high

demand.

See id . 26, 48, 50. P l a i n t i f f a l l eges t h a t the

dr ive rs

have a

common

motive to consp i re because adher ing to

Uber ' s pr i c ing a lgor i thm

can

yie ld

su p ra -co mp e t i t i v e pr i ce s , Am

Compl. 90, and t h a t i the dr ive rs were ac t i n g

i ndependent ly

i ns t ead

of

in concer t ,

some

s i g n i f i c a n t p o r t i o n would not

agree to

fo l low

the Uber

pr i c ing

a lgor i thm.

See id .

93.

P l a i n t i f f fu r t h e r

c la ims

t h a t the d r i v e r s have had many

oppor tun i t i e s

to meet

and

enforce t h e i r commitment to the

unlawful

agreement .

Am

Compl.

92. P l a i n t i f f

a l l eges t h a t

Uber holds

meet ings

wi th p o ten t i a l

dr ive rs

when

Mr.

Kalanick

and

his subord ina tes decide to o f f e r Uber App

se rv ice s in

a new

geographic

l oca t ion . See

id .

40. Uber

a l so

organ izes even ts

fo r i t s

dr ive rs

to get toge ther , such

as a picn ic in

September

2015 in Oregon with over 150 d r i v e r s and t h e i r fami l i es in

a t tendance , and other

pa r tne r

ap p rec i a t i o n even ts in

p laces

inc lud ing New York City . See id . 41. Uber prov ides d r i v e r s

with

in fo rmat ion regard ing

upcoming

even ts

l i k e l y

to c rea t e

high

demand fo r t r an s p o r t a t i o n

and informs

the

d r i v e r s what t h e i r



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i n c reased

earn ings

might

have

been

i

t hey had logged on

to the

Uber App dur ing

busy

per iods .

See id .

58.

Moreover p l a i n t i f f

a l l eges , in

September 2014

dr ive rs using the Uber App in New

York City co l luded with one

anothe r

to

n eg o t i a t e

the

r e i n s t i t u t i o n of higher fa res fo r r i d e r s us ing UberBLACK and

UberSUV s e rv i ces

(ce r t a in

Uber

car

s e rv i ce ex p e r i en ces ) . See

id .

25 87. Mr. Kalan ick

as Uber ' s

CEO d i r e c t e d

or

r a t i f i e d

n eg o t i a t i o n s between Uber and t h ese d r i v e r s , and Uber

ul t ima te ly

agreed to r a i s e

fa re s .

See

id . 87.

As

to

market d e f in i t i o n ,

p l a i n t i f f a l l eges

t h a t

Uber

competes

in the

r e l a t i v e l y new mobi le app-genera ted

r ide -sha re

s e rv i ce market , of which Uber

has

an

approximate ly 80 market

share . Amended o m p l a i n t ~

94-95.

Uber ' s

ch ie f

compe t i to r

in

t h i s market

Lyf t , has

only a 20 market share , and a t h i rd

compe t i to r ,

Sidecar ,

l e f t

the

market

a t

the

end

of

2015.

See

id .

95-96.

Although p l a i n t i f f contends, n e i t h e r t ax i s

nor

t r a d i t i o n a l

cars fo r h i r e are

reasonab le s u b s t i t u t e s

fo r

mobi le

app-genera ted

r ide -sha re

s e rv i ce , Uber ' s own

exper t s

have

suggested t h a t

in

ce r t a in

c i t i e s in the

U.S. ,

Uber

cap tu res 50

to

70

of

bus iness cus tomers in the combined

market

of t a x i s ,

ca r s fo r hi re ,

and

mobile-app genera ted

r ide -sha re se rv ice s . See

id .

107.

P l a i n t i f f

cla ims

to sue

on

behal f

of the fo l lowing

c l a s s :

a l l per sons in the United Sta t e s who

on

one

or

more occas ions ,

5



6/27

have used

the

Uber

App to ob ta in r ide s from Uber dr iver -par tne r s

and paid f a r e s fo r t h e i r r ide s se t by the Uber p r i c i n g

a lgor i thm,

with ce r t a in

exc lus ions , such

as

Mr. Kalanick .

See

id . 113. P l a i n t i f f a l s o

i de n t i f i e s

a subc lass o f r i d e r s who

have

paid f a r e s

based on

surge pr i c ing . See id .

114. P l a i n t i f f

a l l eges t h a t he and the puta t ive c las s have s u f f e red

a n t i t r u s t

i n ju ry because , were it not fo r Mr. Kalan ick ' s consp i racy to f ix

the fa res charged by

Uber

dr ive rs , d r ive rs would have competed

on

pr i ce

and Uber ' s fa res would have been su b s t a n t i a l l y lower .

See

id .

109. P l a i n t i f f a l s o contends t h a t

Mr. Kalan ick ' s

des ign has reduced output

and

t ha t , as independent

s tud ie s

have

shown, the e f f e c t of surge

pr i c ing

i s to lower demand so

t h a t

pr i ce s

remain

a r t i f i c i a l l y high. Am Compl. 110. Based

on

these a l l eg a t i o n s , p l a i n t i f f

c la ims

t h a t Mr. Kalanick has

vio la t ed

the

Sherman

Act,

15

U.S.C.

§

1, and

the

Donnelly Act ,

New

York Genera l Bus iness Law § 340. See

id .

120-140.

The

Sherman Act p ro h i b i t s [ e ]v e ry con t rac t , combinat ion in

the form

of

t r u s t

or

otherwise ,

or

consp i racy , in r e s t r a i n t

of

t r ad e

or

commerce. 15 U.S.C. § 1. [A] p l a i n t i f f

c la iming §

v i o l a t i o n must f i r s t es t ab l i s h a combinat ion o r some form of

concer ted

ac t i o n between a t l e a s t two l eg a l l y d i s t i n c t economic

e n t i t i e s . Capi ta l

Imaging Associa tes , P.C. v. Mohawk Val ley

Med. Associa tes , Inc . , 996 F.2d 537, 542 (2d Cir . 1993) .

I f

§

p l a i n t i f f

es tab l i shes

the ex i s tence

of an

i l l e g a l con t rac t

or

6



7/27

combinat ion,

t

must then proceed to demonst ra te t h a t

the

agreement co n s t i t u t ed

an

unreasonable r e s t r a i n t o f

t r ade

e i t h e r

per se

or under

the ru l e

of

reason .

Id .

a t 542.

Conduct cons idered

i l l e g a l

per se i s

invoked

only

in a

l i mi t ed

c la s s

of cases ,

where a

d e fen d an t ' s ac t i o n s

are

so

p la in ly

harmful

to

compe t i t ion

and

so obvious ly l ack in g

in any

redeeming pro-compet i t ive va lues t h a t t hey

are conc lus ive ly

presumed

i l l e g a l

without fu r the r examinat ion . Id . ( in t e rna l

c i t a t i o n and

quota t ion

marks omi t t ed) . By con t ras t , most

a n t i t r u s t

c la ims are analyzed

under

a ' r u l e

o f

rea son , '

according

to which

the f i n d e r of

fac t must

decide

whether

the

ques t ioned p r ac t i c e imposes an unreasonable r e s t r a i n t on

compe t i t ion ,

t ak ing

i n t o account

a

v a r i e ty o f f ac to r s , i n c lu d in g

s p ec i f i c in fo rmat ion about the re levan t bus iness , i t s cond i t ion

before

and

a f t e r

the

r e s t r a i n t

was

imposed, and

the

r e s t r a i n t ' s

h i s t o ry , natu re , and e f f e c t .

Sta t e

Oi l Co.

v. Khan,

522

U.S.

3,

10 (1997).

A n t i t r u s t law a l s o di s t ingu i shes between v e r t i c a l and

h o r i zo n t a l

pr i ce

r e s t r a i n t s .

Res t ra in t s

imposed

by

agreement

between

compet i to rs

have

t r a d i t i o n a l l y been

denominated

as

h o r i zo n t a l r e s t r a in t s , and

t hose

imposed by

agreement between

f i rms a t d i f f e r e n t l eve l s

of

d i s t r i b u t i o n as

ve r t i c a l

r e s t r a i n t s . Bus.

Elecs . Corp. v. Sharp Elecs .

Corp. ,

485

U.S.

717,

730

(1988). Res t ra in t s

t h a t

are per

se

unlawful inc lude



8/27

hor i zon ta l agreements among compet i to rs to f ix

p r i c e s ,

while ,

a t l e a s t in the con tex t o f r esa le pr i ce

maintenance,

[ v ] e r t i c a l

pr i ce r e s t r a i n t s are to be judged

accord ing

to

the

ru le of

reason . Leegin Creat ive

Leather Products ,

Inc. v. PSKS Inc . ,

551

U.S.

877, 886, 907 (2007). In

the

i n s t a n t case , the Court

f inds

t h a t

p l a i n t i f f has adequate ly p led both a hor i zon ta l and a

v e r t i c a l consp i racy .

As to

the hor i zon ta l

consp i racy , p l a i n t i f f

a l l eges t ha t

Uber dr ive rs agree to

p a r t i c i p a t e

in

a consp i racy

among

themselves

when they assen t to

the

te rms o f Uber ' s

wri t t en

agreement

( the

Driver

Terms )

and

accept

r i d e r s

using

the Uber

App. See Am Compl. 70-71.

In doing

so, p l a i n t i f f ind ica tes ,

dr ive rs agree to c o l l e c t fa res through the Uber

App,

which

s e t s

fa res fo r

a l l

Uber dr ive rs

accord ing

to the Uber pr i c ing

a lgor i thm.

See

id .

3

In

p l a i n t i f f ' s

view,

Uber

d r i v e r s

forgo

3

Defendant Kalanick contends t ha t Uber ' s Driver

Terms do

provide t ha t

d r i v e r - p a r t n e r s have

the d i sc re t ion

to

charge l e ss than the suggested

pr ice

determined by

Uber ' s

pr ic ing a lgor i thm. Reply Memorandum

of

Law in Support

of

Defendant

Trav i s Kalan ick ' s Motion to Dismiss, Dkt. 34 ( Def. Reply

Br. )

a t

2

n . l ,

c i t i n g

Declara t ion

of

Michael Colman, Dkt.

29,

Exhib i t 2 ( Dr iver

Terms )

4.1 ( Customer sha l l always have the r igh t

to :

( i ) charge a fa re

t h a t i s l e s s

than

the pre-ar ranged fa re . . ) . Customer

here

r e f e r s to

an independent company in

the

bus iness

of

prov id ing

t r anspor t a t ion

se rv ices , t ha t i s , Uber ' s dr ive r -pa r tne r s . See Driver Terms; Memorandum of

Law

in

Opposi t ion

to

Defendant

Travis Kalanick ' s

Motion

to

Dismiss

( Pl .

Opp.

Br. )

a t

4.

Pl a i n t i f f poin t s

out ,

however, t ha t

the Driver

Terms a l so r equ i r e

dr iver s

to

agree t ha t

the

Fare provided under the

Fare Calcu la t ion i s

the

only

payment

Customer wil l rece ive in

connect ion

with

the

pr ov i s ion

of

Transpor ta t ion

Serv ices , Driver e r m s ~ 4.1, and t ha t more impor tant ly ,

the re i s no

mechanism by

which dr iver s can charge

anything but

the App

d i c t a t e d f a r e . Memorandum

of Law in Opposi t ion

to Defendant

Travis

Kalan ick ' s Motion to

Dismiss ( Pl . Opp.

Br . ) ,

Dkt. 33,

a t 4. For

the

purposes of

eva lua t ing de f endan t ' s motion

to d i smiss ,

the Court

wi l l assume

tha t

d r iver s have no p r a c t i c a l mechanism by which

to

depar t from the

fa res

8



9/27

compet i t ion in which they would otherwise

have

engaged

because

they are

guaran teed

t ha t other Uber d r i v e r s wil l not undercut

them on p r i c e . See id . II 72; Memorandum of

Law

in Opposi t ion to

Defendant Trav is Kalanick 's Motion to Dismiss ( Pl .

Opp.

Br . ) ,

Dkt. 33,

a t

11. Without the assurance t ha t a l l dr ive rs wil l

charge the pr i ce

s e t

by

Uber, p l a i n t i f f contends , adopt ing

Uber ' s

pr i c ing a lgor i thm would o f t en not be in an

i nd iv idua l

dr ive r ' s bes t

i n t e r e s t ,

s ince

not competing with o t h e r Uber

dr ive rs

on

pr i ce may

r e su l t in

l o s t

bus iness

o p p o r t u n i t i e s .

See

Am

Compl.

II

72.

The

capac i ty

to genera te

supra-compet i t ive

pr i ce s

through

agreement

to

the Uber pr i c ing a lgor i thm t hus

prov ides , according to p l a i n t i f f ,

a

common motive to consp i re

on

the

par t

of

Uber dr iver s .

See

Amended Complaint 'II 90.

P l a i n t i f f

a lso

draws on

i t s a l l eg a t i o n s

about meetings

among

Uber

dr ive rs

and

the

September

2014

consp i racy , in

which

Uber

agreed to

r e i n s t i t u t e

higher fa res a f t e r nego t i a t ions with

dr ive rs , to b o l s t e r i t s c la im of

a

hor i zon ta l consp i racy . See

Pl .

Opp. Br. a t

14-15;

Am

Compl. ' ' 41, 87, 92. In


view, defendant Kalanick

i s l i a b l e as the o rgan izer

of the

p r i ce - f i x in g consp i racy ,

Am

Compl.

' ' 76,

88; Pl . Opp. Br. a t

9,

and as an Uber d r i v e r

himsel f ,

see id . ' ' 80-85.

se t

by

Uber ' s

a lgor i thm.

Defendant acknowledges t h a t

any

d i s c r e t i o n

dr iver s

may have to charge a lower fa re i s not

mate r i a l

to t h i s

mot ion ,

Def. Reply

Br.

a t n . l ,

and

o r a l argument

proceeded on

the

assumption

t h a t

Uber

s e t s

mandatory

pr ices fo r dr iver s to charge. See

T r ansc r ip t of

Oral Argument dated

March 9, 2016 a t

4:12-16.

9



10/27

Defendant Kalanick argues,

however,

t h a t the d r iv e r s '

agreement to

Uber ' s

Driver Terms

ev inces no

hor i zon ta l agreement

among dr ive rs themselves , as d i s t i n c t

from

ve r t i c a l agreements

between each

dr ive r and

Uber. See

Memorandum

of

aw in Support

of Defendant Trav is

Kalan ick ' s

Motion to Dismiss

( Def.

Br . ) ,

Dkt. 28, a t 9,

12-13;

T ran s c r i p t

of

Oral Argument dated March 9,

2016 ( Tr . ) 3:19-22. According to

Mr. Kalanick,

d r iv e r s '

ind iv idua l dec i s ions to en te r i n to con t rac tua l ar rangements wi th

Uber

co n s t i t u t e mere independent ac t i o n

t h a t

i s i n su f f i c i e n t to

suppor t p l a i n t i f f ' s cla im of

a

consp i racy . See

Def.

Br.

a t 9.

Defendant

a s se r t s

t h a t the

most na tu ra l exp lana t ion fo r

d r iv e r s ' conduct i s

t h a t

each d r i v e r independen t ly decided t

was in h i s

or he r

b es t i n t e r e s t to en te r a ve r t i c a l agreement

with Uber ,

and

doing so

could

be

in a

d r i v e r ' s

bes t

i n t e r e s t

because ,

fo r

example,

Uber

matches

r i d e r s

with

d r i v e r s

and

processes payment. See

Def.

Br. a t 12-13. In d e fen d an t ' s view,

the

fac t

t h a t

a co n d i t i o n

of

[ the agreement with Uber] was

t h a t

the dr iver -par tne r agree to use Uber ' s pr i c ing a lgor i thm

does

not dimin i sh the independence of d r iv e r s ' d ec i s i o n s .

See id .

a t

13.

I t fo l lows ,

defendant contends,

t h a t such

ve r t i c a l

ar rangements

do not suppor t

a hor i zon ta l consp i racy

cla im.

See

Def. Br. a t 13-14, c i t i n g , e .g . , Leegin, 551 U.S. a t

885

(manufac tu rer ' s agreements r eq u i r i n g r e t a i l e r s to charge

ce r t a in

10



11/27

minimum pr i ce s ,

a

form

of

v e r t i c a l minimum r esa le pr i ce

main tenance ,

were

to be judged by the

ru l e

of

r easo n ) ; United

St a t e s v. Colgate

Co., 250 U.S.

300, 307

(1919) (a

manufac turer with no purpose to c rea t e

a monopoly

may ex e rc i s e

h i s

own

independent d i s c r e t i o n

as

to p a r t i e s

with whom he

w i l l

deal and announce

in

advance the c i rcumstances

under which

he

w i l l re fuse

to

s e l l ) .

The

Cour t , however, i s not persuaded to dismiss p l a i n t i f f ' s

h o r i zo n t a l consp i racy c la im. In In t e r s t a t e C i r cu i t

v.

United

Sta t e s ,

306

U.S. 208

(1939) ,

the Supreme Court held

t h a t

compet ing

movie d i s t r i b u t o r s had unlawfu l ly r e s t r a in ed

t r ade

when t hey each

agreed

to

a

t h ea t e r o p e r a to r ' s te rms, i n c lu d in g

pr i ce

r e s t r i c t i ons , as

i nd ica t ed in a

l e t t e r

addressed

to

a l l

the

d i s t r i b u t o r s .

For an i l l e g a l consp i racy to

e x i s t ,

the

Supreme

Court

s ta ted :

I t was enough t ha t , knowing

t h a t

concer ted ac t i o n was

contempla ted and i nv i t ed , the d i s t r i b u t o r s gave t h e i r

adherence to the scheme and p a r t i c ip a t ed in it

Acceptance by compet i to rs ,

without

prev ious agreement,

of

an i n v i t a t i o n to p a r t i c i p a t e in

a

plan , the necessary

consequence

of which,

if ca r r i ed out , i s r e s t r a i n t

of

i n t e r s t a t e commerce, i s su f f i c i e n t to

e s t a b l i s h

an

unlawful consp i racy under the Sherman Act.

I n t e r s t a t e Circu i t , 306 U.S.

a t

226-27.

uch

more

recen t ly , the

Second Circu i t s ta ted :

[C]our ts have long recognized the ex i s tence

of

hub-and

spoke

consp i rac ies in which an e n t i t y a t

one

l eve l

of

the market s t r u c tu r e , the hub ,

coord ina tes

an

agreement

among compet i to rs

a t

a

d i f f e r e n t l ev e l , the



12/27

spokes . These ar rangements

cons i s t

of

both

v e r t i c a l

agreements

between the hub

and

each spoke

and a

h o r i zo n t a l agreement among the spokes to adhere to the

[hub 's]

te rms,

o f t en because the spokes

would not

have

gone a long wi th [ the v e r t i c a l agreements] except on the

unders t and ing t h a t

the other [spokes] were agree ing to

the same th ing .

United Sta t e s

v. Apple,

Inc . , 791

F.3d

290, 314

(2d

Cir .

2015),

c e r t . denied, Mar.

7, 2016

( in t e rna l c i t a t i o n and quota t ion

marks

omi t ted) ;

see

a l s o Laumann

v.

N at ' l Hockey League,

907

F.

Supp. 2d 465,

486-87 (S.D.N.Y.

2012) ( where p a r t i e s

to

v e r t i c a l

agreements have

knowledge

t h a t other market

p a r t i c ip an t s

are

bound by

i d en t i c a l agreements , and t h e i r p a r t i c i p a t i o n i s

con t ingen t upon

t h a t

knowledge,

t hey

may be cons idered

p a r t i c ip an t s

in a

h o r i zo n t a l agreement

in

r e s t r a i n t of

t r a de . ) .

In

t h i s

case,

p l a i n t i f f has a l l eg ed t h a t

d r i v e r s agree

with

Uber

to charge ce r t a in fa res with the c l ea r unders t and ing t h a t

a l l

other

Uber

dr ive rs

are

agree ing

to

charge

the

same fa re s .

See Amended

Complaint

70-71. These agreements are

organ ized

and

f a c i l i t a t e d by

defendant

Kalanick,

who

as

a t

l e a s t an

occas ional

Uber dr ive r ,

i s

a l so a

member of the

hor i zon ta l

consp i racy . See id . 76, 84.

n a

motion to dismiss , the Court i s requ i red to draw a l l

reasonab le

in fe rences in p l a i n t i f f ' s favor . See own

of Babylon,

699 F.3d a t

227. Given

t h i s s tandard , the Court f inds t h a t

p l a i n t i f f s

have

plaus ib ly a l l eg ed a consp i racy in

which

dr ive rs

s ign up

fo r

Uber p r ec i s e ly

on the unders t and ing t h a t the

other

12



13/27

[dr ivers] were

agree ing

to

the same p r i c i n g a lgor i thm, and in

which

d r iv e r s '

agreements with Uber would

be

aga ins t t h e i r own

i n t e r e s t s were they

ac t ing

independent ly . Apple, 791 F.3d a t

314, 320.

Fur ther , d r iv e r s '

a b i l i t y to benef i t from reduced

pr i ce compet i t ion

with

other dr ive rs

by

agree ing

to

Uber ' s

Driver Terms plaus ib ly

co n s t i t u t e s

a

common

motive to

consp i re .

Apex

Oil Co. v. DiMauro,

822

F.2d 246,

254

(2d Cir .

1987) .

The

fac t t ha t dr ive rs may

a lso ,

in

s igning

up fo r Uber,

seek to b e n e f i t

from

other

se rv ice s t ha t

Uber prov ides , such as

connect ing

r i d e r s to

dr ive rs and process ing

payment,

i s not

to

the con t ra ry . Of course, whether p l a i n t i f f ' s a l l eg a t i o n s are in

fac t accura te

i s a

d i f f e r e n t mat te r , to be l e f t to

the

f a c t -

f ind ing

process .

The

Court ' s

conclus ion

t ha t

p l a i n t i f f has

a l l eged a

plaus ib l e hor i zon ta l

conspiracy

i s

bol s t e red

by


other a l l eg a t i o n s concerning agreement among dr iver s . P l a i n t i f f ,

as noted supra,

contends

t ha t Uber organ izes even ts

for

dr ive rs

to get

toge ther , see Am

Compl. 41, and, more important ly ,

t h a t

Mr.

Kalanick

agreed to ra i se fa res

fo l lowing d r iv e r s '

e f f o r t s to

negot ia te

higher r a t e s

in September

2014.

See

id .

87.

While

it

i s t rue

t h a t

these

a l l eg a t i o n s about agreements

Though

de f endan t ' s

counsel argued a t o r a l

argument

t ha t i these even t s were

an an t i t r u s t

v io la t ion ,

Mr. Kalanick

would

be a vic t im and not a par t i c ipan t

in

the

conspi racy,

s ince he a l leged ly i n i t i a l l y opposed the h igher r a t es ,

Tr.

37:8-9, the

f ac t

remains t ha t , i p l a i n t i f f ' s a l l ega t ions are taken as

13



14/27

among

dr ive rs

reach ing even

beyond

accep tance o f Uber s Dr iver

Terms

are not

ex ten s iv e , see Def. Reply Br . a t 7 n .8 ,

nonethe less , they provide

add i t iona l

suppor t fo r

a

h o r i zo n t a l

consp i racy ,

and p l a i n t i f f need not p res en t

a

d i r e c t , smoking

gun ev idence

of a consp i racy , p a r t i c u l a r l y a t the p l e a d i ng

s t ag e . Mayor Ci t y Counci l of

Bal t imore ,

Md. v. Ci t ig ro u p ,

Inc . , 709 F.3d 129,

136 (2d

Cir . 2013).

More

b a s i c a l l y , it

i s

wel l

to

remember t h a t a Sherman

Act

consp i racy

i s

but

one form of

consp i racy , a

concept

t h a t

i s

as

an c ien t

as

it i s broad. I t i s fundamental to the law

of

consp i racy t h a t

the

agreements t h a t

form the essence o f

t he

misconduct

are not to

be judged

by

t e ch n i ca l n i c e t i e s

but by

p r a c t i c a l r e a l i t i e s .

So p h i s t i ca t ed

co n s p i r a t o r s o f t en r each

t h e i r agreements as

much

by

the wink and the nod as

by

e x p l i c i t

agreement ,

and

the

i m p l i c i t

agreement

may

be

f a r

more

poten t ,

and

s i n i s t e r ,

j u s t

by v i r t u e

of

be ing imp l i c i t . Recent ly , fo r

example, in United St a t e s v. U lb r i ch t , t he Government

a l l eg ed

t h a t defendant U lb r i ch t

had

organ ized an o n l in e marke tp lace fo r

illi it goods

and s e rv i ces c a l l e d S i l k

Road. See

United

St a t e s

v. U lb r i ch t , 31 F. Supp. 3d 540, 546-47 (S.D.N.Y. 2014). In

ru l i n g on motions

in

l imine

in

U lb r i ch t , Judge Fo r re s t r e j e c t e d

t he

d e f e n s e s argument t h a t

t r a n s a c t i o n s among S i l k

Road 's

users

t r ue , Mr. Kalan ick agreed

to a f a r e

r a i s e t h a t s e t

higher fa res fo r a l l

Uber

dr ive r s i n

the

r e l evan t groups .

14



15/27

gave

r i s e to on ly

buy-se l l

r e l a t i o n sh i p s

and

not c o n sp i r a t o r i a l

behav io r or ,

a t most ,

to a m u l t i t u d e o f d i sc r e t e

c o n s p i r a c i e s .

United

Sta t es

v.

Ulbr ich t ,

79 F.

Supp. 3d 466,

481 (S.D.N.Y.

2015). Ins tead , Judge For r e s t noted

t h a t

the

Government

charged the defendant wi th s i t t i n g a top an

overarch ing

s ing l e

consp i racy , which

inc luded

a l l vendors

who

so ld

any

type

o f

narco t i cs

on

Si lk

Road a t any

t im e .

Id . a t

490.

In the i n s t a n t case , Uber ' s

d i g i t a l l y decen t ra l i zed

n a tu re

does

not

preven t the App

from

c o n s t i t u t i n g marketp lace

through

which

Mr. Kalanick

organ ized

hor i zon ta l consp i racy

among d r i v e r s .

Defendant argues ,

however,

t h a t

p l a i n t i f f ' s a l l eged

consp i racy i s wild ly implaus ib le

and phys i ca l l y im poss ib le ,

s ince

t invo lves

agreement among hundreds o f

thousands

of

independent

t r a n s p o r t a t i o n

p ro v id e r s

a l l

across the

United

S t a t e s . Def.

Br.

a t

1.

Yet as


counse l po in ted

out

a t

o r a l

argument ,

the capac i ty to o r c h e s t r a t e

such an agreement

i s the gen ius o f Mr.

Kalanick and

h i s company, which,

th rough

t he

magic

o f smartphone t echnology, can

i nv i t e

hundreds o f

thousands o f

dr ive r s in f a r - f l ung loca t ions to

agree

to

Uber ' s

terms.

See

Tr. 12:15-16 . The advancement of t e chno log ica l means

fo r

the o r c h e s t r a t i o n

o f l a r g e - sc a l e p r i c e - f i x i n g

consp i r ac ie s

need not

l eave a n t i t r u s t

law behind.

Cf.

Ulbr ich t , 31 F. Supp.

3d a t

559 ( i f t he r e were

an

automated

t e l ephone

l i ne

t h a t

15



16/27

o f fe red o t h e r s the oppor tun i ty to g a th e r t o g e t h e r t o engage

in

na rco t i c s

t r a f f i c k i n g by press ing l ,

t h i s would

s u re l y be

powerful

evidence of

the

b u t t o n -p u s h e r ' s agreement

t o en te r

the

consp i racy . Automation i s

e f fec t ed

th rough

a

human des ign ; he re ,

U lb r i ch t i s a l l eg ed

to

have been t h e d es ig n e r o f

S i l k

Road

. ) . The

fac t

t h a t

Uber

goes

to

such l en g th s

t o por t ray

i t s e l f

one

might

even say disgu i se

i t s e l f as

the mere purveyor

of

an

app cannot s h i e l d it from the

consequences of its o p era t in g as

much

more.

Recent j u r i sp ru d en ce on v e r t i c a l

r e s a l e p r i c e

maintenance

agreements does

not ,

as defendant would have

it

undermine

p l a i n t i f f ' s cla im

of

an i l l e g a l h o r i zo n t a l agreement . See Def.

Br. a t 15.

In Leegin ,

the Supreme Court held

t h a t

r e s a l e

pr i ce

maintenance agreements

~ a r e t a i l e r ' s agreement with a

manufacturer

not

to

discount th e man u fac tu re r ' s

goods

beneath

a

ce r t a in

pr i ce are to be

judged

by

the

ru l e

of reason, unl ike

h o r i zo n t a l

agreements

to f ix p r i ce s , which a re p e r se i l l e g a l .

See

Leegin ,

551 U.S. a t 886, 907. The Court

c i t e d

var ious

procompe t i t ive

j u s t i f i c a t i o n s

fo r

a

man u fac tu re r ' s use of

re sa l e p r i ce

main tenance , id . a t 889,

and concluded

t h a t

al though

t h i s

p ra c t i c e may a l so have an t i co mp e t i t i v e e f f e c t s ,

the

ru l e

of reason i s

the

b es t

approach

t o d i s t in g u i s h i n g r e s a l e

pr i ce

maintenance agreements t h a t v io l a t e the a n t i t r u s t laws

from t hose t h a t do not . See

id .

a t 897-900.

16



17/27

Here

unl ike in Leegin Uber i s not se l l i n g anyth ing to

dr ive rs t ha t

i s

then reso ld to r i d e r s . s

Moreover

the

j u s t i f i c a t i o n s fo r ru l e of reason t rea tment of

r e s a l e

pr i ce

maintenance

agreements

o f fe red i n

Leegin are not

d i r e c t l y

app l icab le to

the

i n s t an t case . See Pl . Opp. Br. a t 15-16; Tr .

20-21. In p a r t i c u l a r ,

the Cour t ' s a t t e n t i o n

has

not been

drawn

to concerns about

f r ee - r i d in g

Uber

dr iver s ,

or to e f fo r t s t ha t

Uber dr ive rs could make to

promote

the App t h a t

w i l l

be under-

provided if Uber does

not

s e t

a

p r i c i n g a lgor i thm. See Leegin

551

U.S.

a t 890-91. While

Mr.

Kalanick a s se r t s t h a t Uber ' s

pr i c ing a lgor i thm f a c i l i t a t e s i t s

market

en t ry as

a

new brand

see Def.

Br. a t

16-17 t h i s observa t ion which i s f a i r l y

conclusory does not ru l e out

a

hor i zon ta l consp i racy among

Uber dr iver s ,

f a c i l i t a t e d

by Mr. Kalanick both as Uber ' s

EO

and

as

a

dr ive r

himsel f .

The

Court

t he re fo re

f inds

t h a t

p l a i n t i f f

has adequate ly pleaded

a hor i zon ta l a n t i t r u s t

consp i racy

under

Sect ion

1 of

the Sherman

Act.

As

to p l a i n t i f f ' s c la im of

a

ve r t i c a l consp i racy ,

a

th resho ld ques t ion i s whether p l a i n t i f f has

a l l eged a

ve r t i c a l

L e e g i n ' s

s ta tement

t h a t

[ t ] o

the ex ten t

a

v e r t i c a l agreement

se t t i n g

minimum r esa le

p r i c e s

i s

en t e red

upon to

f a c i l i t a t e

e i t h e r type o f

c a r t e l ,

it

too, would

need to

be

h e ld unlawfu l

under

the

ru le

of r ea son , 551 U.S.

a t 893 thus does not c l e a r l y apply to t h e i n s t a n t

case ,

s i n ce Uber i s

se t t i n g no minimum r e s a l e p r i c e s . Moreover Leegin

did

not

purpor t to

o v e r ru l e

I n t e r s t a t e

Circu i t , which fo r

t h e

reasons d es c r i b ed

supra , permi ts

a f ind ing of a consp i racy

among

compet i to r s

in

ci rcumstances

such as

those o f

the i n s t a n t

case .

See

I n t e r s t a t e

C i r c u i t , 306

U.S.

a t

226-27.

17



18/27

consp i racy

in the Amended Complaint , which defendant den ies . See

Def. Reply

Br.

a t 8; Def.

L e t t e r

a t 1.

Al though


a l l e g a t i o n s o f a v e r t i c a l consp i racy are

much

more sparse t han

his con ten t ions

about

a h o r i zo n t a l

consp i racy ,

the

Cour t

f inds

t h a t

the Amended

Complaint adequa te ly

pleads a

v e r t i c a l

consp i racy

between

each

d r i v e r and Mr.

Kalanick .6

In p a r t i c u l a r ,

p l a i n t i f f a l l eges

t h a t [ a ] l l of

the independent d r i v e r -p a r t n e r s

have agreed to

charge

the f a r e s

s e t by Uber ' s

p r i c i n g

a lgor i thm, Am

Compl. Jl 68, and t h a t Mr.

Kalanick

designed t h i s

bus iness model,

see

id . Jl Jl 76, 78. The Amended

Complaint

a l so

inc ludes s ev e ra l a l l e g a t i o n s t h a t would be p e r t i n en t to a ru l e

of

reason,

v e r t i c a l p r i ce - f i x in g

theory .

See

id . Jl Jl

94-108.

Under the Sherman

Act

count , p l a i n t i f f s t a t e s t h a t the unlawful

arrangement

cons i s t s

of

a

s e r i e s of agreements between

Kalanick

and

each

of

the

Uber

d r i v e r -p a r t n e r s ,

as

wel l

as

a

conscious

commitment among the Uber d r i v e r -p a r t n e r s

to

the common scheme

of adopt ing

the

Uber

pr i c ing a lgor i thm

. Am . Compl. Jl 124.

P l a i n t i f f c la ims

t h a t Mr.

Kalanick i s per se

l i a b l e

as

o rg an ize r

of

the

consp i racy

and as an occas ional

Uber

d r i v e r , q q

128-29,

and t hen s t a t e s

t h a t

[ i ] n the a l t e rn a t i v e , Kalanick i s a l s o

l i a b l e

under

Sect ion 1

of

the Sherman Act under a ' qu ick look '

6 Indeed , defendant

himsel f r e f e r r e d

in

the

b r i e f i n g

to

a

v e r t i c a l

pr i ce

arrangement

l i k e

t h a t

descr ibed

in

the

Amended

Complain t . Def. Br.

a t

17.

But see Def. Reply Br. a t

8

( The Amended Complaint does not a l l ege

a

v e r t i c a l r e s t r a i n t

in

v i o l a t i o n o f the a n t i t r u s t

l aws . ) .

18



19/27

or ' r u l e of reason ' an a ly s i s . Id . 130. In the Co u r t ' s view,

these a l l e g a t i o n s

of

l ega l theory , when coupled

wi th

the

a l l e g a t i o n s

of per t inen t f ac t s ,

are

s u f f i c i e n t

to

plead

a

v e r t i c a l consp i racy theory .

The

ques t ion , then, i s whether t h i s theory

i s plaus ib l e

under

a

ru l e of reason

ana lys i s .

Under

t h i s ana lys i s ,

p l a i n t i f f bears the

i n i t i a l burden of

showing

t h a t

the

cha l l enged ac t i o n

has had

an

ac tua l

adverse

e f f e c t

on

compe t i t ion

as a whole

in the r e l ev an t market . Capi ta l Imaging,

996 F.2d a t

543.

To

surv ive a Rule

12(b)

(6)

motion

to

dismiss ,

an a l l eged product market must bear a

r a t i o n a l

r e l a t i o n

to

the

methodology

cour t s

pre sc r ibe

to def ine a

market

fo r a n t i t r u s t

purposes an a l y s i s of

the i n t e r c h a n g e a b i l i t y

of

use

or the

c r o s s - e l a s t i c i t y

of demand, and t

must be

p lau s ib l e . Todd v.

Exxon

Corp. ,

275

F.3d

191,

200

(2d

Cir .

2001)

( i n t e rn a l

c i t a t i o n

and quota t ion marks

o mi t t ed ) .

As to

market d e f in i t i o n , p l a i n t i f f

def ines the re l evan t

market

as

the mobi le app-genera ted

r ide -sha re se rv ice

market .

Am.

Compl.

94.

P l a i n t i f f

a l l eges

t h a t Uber has an

approximate ly 80 market

sha re

in the United Sta t e s in t h i s

market ; Uber ' s

ch ie f

compe t i to r

Lyft

has near ly a 20 market

share ;

and a

t h i rd

compet i to r ,

S idecar , l e f t the market a t

the

end

of 2015.

Id . 95-97. P l a i n t i f f then

exp la ins

t h a t

t r a d i t i o n a l t ax i

s e rv i ce i s

not

a reasonab le su b s t i t u t e

fo r

19



20/27

Uber, s ince , fo r

example,

r ide s genera ted by mobile app can be

a r ranged

a t

the push of but ton

and t racked

on

r i de r s '

mobi le

phones; r i d e r s need not ca r ry cash o r c re d i t card , o r ,

upon

a r r i v a l ,

spend

t ime paying fo r the r ide ; and

r i d e r s

can r a t e

dr ive rs and

see

some in fo rmat ion on them b efo re

en te r ing

the

veh ic le .

Id .

104. Indeed, p l a i n t i f f claims, Uber has i t s e l f

s t a t ed t h a t t does

not view

t ax i s

as r ide -sha r ing compet i t ion .

Id .

105.

P l a i n t i f f a l s o a l l eges

t h a t

t r a d i t i o n a l cars fo r h i r e are

not

reasonab le su b s t i t u t e s ,

s in ce t hey

gene ra l ly

need

to be

scheduled in

advance fo r

prear ranged l oca t ions .

Id . 106.

However,

p l a i n t i f f never the less

contends t h a t

Uber has obta ined

s ig n i f i c an t

share

of

bus iness in the combined markets

of

t ax i s ,

cars fo r h i re , and mobile-app genera ted r ide -sha re

s e r v i ce s ,

and

t h a t

Uber ' s

own

exper t s

have

sugges ted

t h a t

in

some

U.S.

c i t i e s , Uber

has

50 to 70

of bus iness cus tomers

among

a l l t ypes o f

r i d e s , which seems to r e f e r to these

combined markets .

Id .

107.

Defendant con te s t s p l a i n t i f f ' s proposed

market d e f in i t i o n ,

arguing t h a t p l a i n t i f f prov ides inadequa te j u s t i f i c a t i o n fo r

the

exclus ion not j u s t

of t ax i s

and car se rv ice s ,

but

a l s o

of

publ ic

t r a n s i t

such

as

subways

and

buses , p erso n a l

veh ic le

use ,

and

walking. See

Def.

Br. a t 18;

Def.

Reply Br. a t

8.

In d e fen d an t ' s

20



21/27

view, [ e ] ach

of

these

a l t e r n a t i v e s

i s a

c l ea r

su b s t i t u t e fo r

the s e rv i ces prov ided by d r iv e r - p a r tn e r s . Def. Br. a t 18.

One could argue

t h i s

e i t h e r way (and d e fen d an t ' s a t t o rn ey s

are encouraged to h e r e in a f t e r walk from t h e i r o f f i c e s to the

cour thouse

to put t h e i r theory to the t e s t ) . But fo r presen t

purposes , p l a i n t i f f has provided p l a u s i b l e ex p lan a t io n s fo r i t s

proposed market d e f in i t i o n , and the accuracy of

these

exp lana t ions may be t e s t ed th rough discovery

and,

i necessary ,

t r i a l . Market d e f in i t i o n i s

a

deeply f ac t - i n t en s iv e

inqu i ry

[and] cour t s [ therefo re] h e s i t a t e

to

gran t motions

to

di smiss

fo r

f a i l u r e

to plead a

r e l ev an t produc t market . Chapman v.

New

York

Sta t e Div.

fo r

Youth,

546 F.3d

230,

238. P l a i n t i f f ' s

a l l eg a t i o n t h a t Uber an i n d u s t ry member

recognizes

t h a t it

does not

compete

with t ax i s ,

see Am Compl.

105,

a l s o

dese rves

cons idera t ion .

See

Todd

v.

Exxon

Corp. ,

275

F.3d

191,

206 (2d

Cir . 2001) (dec l in ing to exclude

evidence

o f

i ndus t ry

recogn i t ion from the an a l y s i s

of

market d e f i n i t i o n ) .

The

Court

f inds t h a t p l a i n t i f f has pleaded

a plaus ib l e re l evan t

produc t

market .

See Capi ta l

Imaging

Associa tes ,

996

F.2d a t 546.

The Court

fu r t h e r

f inds t h a t p l a i n t i f f has

adequate ly

pleaded

adverse e f f e c t s in

the r e l ev an t

market .

S p ec i f i c a l l y ,

p l a i n t i f f pleads

t h a t

Kalan ick ' s ac t ions

have

fu r t h e r

r es t r a ined

compe t i t ion by

decreas ing outpu t ,

Am

Compl. 110

(c i t i ng independent s tud ies ) ; Uber ' s

market

p o s i t i o n

has

21



22/27

a l ready helped fo rce S idecar out of the marke tp lace , id .

r

102;

Uber ' s

dominant

p o s i t i o n and cons iderab le name recogn i t ion has

a l so

made it

d i f f i c u l t for

p o ten t i a l compet i to rs to

en te r the

mark e tp l ace ,

id .

r

103.

7

Defendant counters

t ha t Uber prov ides

many

pro-compet i t ive

benef i t s , see Def.

Reply Br.

a t 9, and

a lso

dispu tes the

conclusions t ha t p l a i n t i f f purpor t s to draw from

the

c i t ed

s tud ie s .

See

Def. Let te r . Defendant ' s coun te r -as se r t ions , while

ce r t a in ly

wel l worth

a

f a c t - f i nde r ' s

cons idera t ion ,

do

not

persuade the Court to

grant a

motion to

dismiss .

The

Court hence

determines t ha t p l a i n t i f f has plaus ib ly pleaded

adverse

e f f e c t s

in the

re levant

market . Consequent ly , the Court f inds t ha t

p l a i n t i f f

has

presen ted a plaus ib l e cla im of a ve r t i c a l

consp i racy under Sect ion

1

of the Sherman Act.

Fina l ly ,

the

Court

addresses


s t a t e

law

Donnelly

Act c la im.

The

Second Circu i t has held t ha t t h i s ew

York

a n t i t r u s t

s t a tu t e

was modeled on the Sherman Act and has

g en e ra l l y been cons t rued in accordance

with fede ra l p receden t s .

Williams v. Cit igroup

Inc . ,

659 F.3d 208, 211 n.2

(2d

Cir .

2011) Though p l a i n t i f f

contends t ha t hi s

Donnelly

Act cla im

surv ives even i his Sherman Act cla im f a i l s , see Pl . Opp. Br.

a t 21, the

Court

has no

occas ion

to assess t h i s con ten t ion , fo r

7

In p l a i n t i f f ' s l e t t e r

submi t ted a f t e r

o r a l argument , p l a i n t i f f f u r t h e r

descr ibed the

i ndependent

s tud ie s quoted

anonymously

in Amended Complaint II

110 t h a t supposed ly suppor t

these

a s s e r t i o n s .

See Pl .

Le t t e r .

22



23/27

it holds t h a t p l a i n t i f f ' s Sherman

Act

cla im withs tands

defendan t ' s motion to

di smiss and,

fo r the

same

reasons , the

Court

dec l ines

to di smiss


Donnelly

Act cla im.a

For these

reasons ,

the Court

denies

defendant

K alan ick ' s

motion to dismiss . Concomitant ly , the Court lifts the s t ay

of

d i scovery p rev io u s ly imposed pending the Co u r t ' s d ec i s i o n

on

t h i s motion . Counsel are

d i r e c t e d to

submit

to

the Cour t , by no

l a t e r than Apri l 7, 2016, a case management plan in the Co u r t ' s

Form

D t h a t

wi l l

have t h i s

case

ready fo r

tri l by

November 1,

2016.

The

Clerk

o f Court

i s di rec t ed to

c lo se docket e n t r i e s 22

and 27.

Dated:

New York,

March

31,

Y

2016

OS

RAKOF U.S.D.J .

8

Defendant argues t ha t p l a i n t i f f i s

equ i t ab ly

es topped from avoiding the

c las s

ac t ion

waiver

in the user agreement t ha t p l a i n t i f f made

with

Uber.

See

Def.

Br. a t

21;

Colman Declara t ion ,

Dkt. 29,

Exhib i t

1

(User Agreement), a t

8-9.

The

r e l evan t p r ov i s ion

of the

User

Agreement reads :

Dispute Resolut ion: You and

Company

agree t ha t

any di spu te ,

claim

or con t roversy a r i s i n g out of or r e l a t i n g

to

t h i s Agreement

wil l

be

s e t t l e d by binding a r b i t r a t i o n You

acknowledge

and

agree t ha t you and

Company

are each waiving the r igh t to a

t r i a l

by

j u r y

or

to p a r t i c i p a t e as

a

p l a i n t i f f or c las s User in

any

purpor ted

c las s

ac t ion

or

r ep resen ta t ive

proceeding.

User Agreement a t 8-9. Although p l a i n t i f f has sued Mr. Kalanick

pe r sona l ly

and

not

Uber, defendant claims

tha t


claims aga ins t Mr.

Kalanick

are

in t imate ly founded in and i n t e r tw ined with the under ly ing agreement

with

Uber.

See Def.

Br. a t

23, quot ing Kramer

v. Toyota

Motor

Corp. , 705 F.3d

1122,

1128 (9th Cir . 2013) . The Court f inds , however, t ha t s ince

defendant

i s

not

seeking to compel a r b i t r a t i o n , and p l a i n t i f f i s not seeking

to

enforce

the User Agreement

aga ins t

defendant, p l a i n t i f f

i s not equ i t ab ly

es topped

from pursuing a c las s

ac t ion

s u i t

aga ins t

Mr. Kalanick, nor has p l a i n t i f f

waived the r igh t to proceed through t h i s mechanism.

23



24/27

BY ELECTRONIC MAIL

Hon. Jed S. Rakoff

United States District Judge

United States Courthouse

500 Pearl Street, Room 1340

New York, New York 10007

e

Harter Secrest Emery LLP

ATTORNEYS

AND

C OU N S E L O R S

WWW.HSELAW.COM

March 11, 2016

Re: Meyer v. Kalanick, 5 Civ. 9796 (JSR)

Dear Judge Rakoff:

We write in response to the Court's request that Plaintiff identify the studies referenced in

Paragraph 110 of the First Amended Complaint. That paragraph alleges that Defendant's

actions have further restrained competition by decreasing output, and that independent studies

have shown [that] the result of

Kalanick's

collusive surge pricing is not, as he claims, to

perfectly match supply with demand, but instead to remove

some

demand so that prices stay

artificially high and Kalanick reaps artificially high profits. This letter cites two independent

studies supporting these allegations.

The first is a Northeastern University study by researchers Le Chen, Alan Mislove, and

Christo Wilson, published in October 2015 (the

Northeastern

University Study ). See

L.

Chen,

A. Mislove, & C. Wilson, Peeking Beneath the Hood of Uber, October

2015,

available at

http://www.ccs.neu.edu/home/cbw/pdf/chen-imc

5 .pdf

(last visited Mar. 10, 2016).

The

Northeastern University Study concluded that surge pricing

seem[s]

to have a small effect on

attracting

new

cars, but

appears

to have a larger, negative effect on

demand,

which causes cars

to either become idle or leave the surge area. Id.

at

12. Significantly, although the study used

the term demand, it actually measured output, defining demand as

fulfilled demand,

i.e.

the

number

of rides supplied by Uber driver-partners. Id. at 4. That

is

the equivalent of output.

See e.g. General Leaseways

Inc. v.

Nat l Truck Leasing ss

n, 744 F .2d 588, 594 (7th Cir.

1984) (Posner, J.) (equating amount supplied to ''output ). Thus, the study concluded that

surge pricing had

' 'a

large, negative effect on

demand,

see

Northeastern

University Study at

12, by measuring a large, negative effect on output.

The second study supporting the allegations in paragraph 110 was conducted by Nicholas

Diakopoulos of the University of Maryland (the

University

of

Maryland

Study ). See N.

Diakopoulos,

How

Uber surge pricing really works, Washington Post,

available at

1600

BAUSCH LOMB PLACE

ROCHESTER NY

1 4 6 4 ~ 2 7 1 I PHONE: 585 . 232 . 6500

FAX:

585 . 232 . 2152

ROCHESTER

NY , BUFFALO

NY

• ALBANY NY , CORNING NY , NEW YORK NY



25/27

Hon. Jed S. Rakoff

March 11, 2016

Page 2

Harter Secrest

Emery

LLP

TTORNEYS ND COUNSELORS

https:llwww.washingtonpost.com1newslwonklwpl2015104117 how-uber-surge-pricing-really

worksl (last visited Mar. 10, 2016). The University

of

Maryland Study suggested "that rather

than motivating a fresh supply of drivers, surge pricing instead re-distributes drivers already on

the road."

Id

"[I] t appears that rather than getting more drivers on the road in the short-term,

Uber's surge pricing instead depletes drivers in adjacent areas. A price hike in one area means

drivers move there, but away from another, leaving it underserved .... At the end of the day the

Uber systems appears to

be

more about

re-allocation

of existing supply." Id

These studies support the allegation

in

paragraph 110 that Defendant's actions, including

his implementation of an agreement among all driver-partner competitors to surge prices, have

decreased output. In particular, these studies suggest that drivers' commitments to Defendants'

surge pricing have artificially lowered output during periods of high demand by decreasing

output-either by decreasing output in absolute terms

i.e.,

decreasing the number of fulfilled

sales), see Northeastern University Study at

12

or by decreasing output in relative terms i.e.,

preventing supply from increasing as expected during periods of heightened demand), see

University

of

Maryland Study.

Paragraph 110

of

the First Amended Complaint thus alleges that Defendant has

orchestrated a surge pricing conspiracy among competing drivers to maintain "prices artificially

high and reap[] artificially high profits." First Amended Complaint i 110. That conclusion

reflects the economic reality that price-fixing agreements, like the one orchestrated by

Defendant, are the equivalent to restrictions on output:

If

firms raise price, the

market's

demand for their product will fall, so the amount supplied will fall

too-in

other words, output

will be restricted. If instead the firms restrict output directly, price will as mentioned rise in

order to limit demand to the reduced supply. Thus raising price [and] reducing output

have the same anticompetitive effects." General Leaseways, Inc., 744 F.2d at 594-95.

Thank you for your consideration of this submission. If Plaintiff can provide any further

assistance to the Court, please do not hesitate to contact us.

Respectfully submitted,

Harter

Secrest

Emery P

Isl Brian M. Feldman

Brian M. Feldman

DIRECTDIAL 5852311201

EMAIL BFELD:v AN@HSELAW COM

cc: Peter M. Skinner (via electronic mail)

Lead Counsel for Defendant



26/27

BOIES SCHILLER FLEXNER P

5301 Wisconsin Avenue N.W.

*Washington,

DC 20015-2015

*PH

202.237.2727 *FAX 202.237.6131

VIA E MAIL

Hon Jed

S Rakoff

500 Pearl Street, Room 1340

New York, NY I 0007

March 15, 2016

Re:

Meyer v Kalanick 15

Civ. 9796 (JSR)

Dear Judge Rakoff:

We write in

response to Plaintiffs letter brief dated March 11, 2016,

in

which Plaint iff purports to identify the

"studies" he relies on for his allegation that surge pricing "restrain[s] competition by decreasing output." Am.

Comp .

i

110.

As an initial matter, even if Plaintiff is correct about these "studies," he has still failed to state a claim for a

vertical restraint

in

violation

of

the rule

of

reason. As we noted at oral argument, the Amended Complaint

alleges only a horizontal price-fixing conspiracy

among driver-partners in

which Mr. Kalanick allegedly

participated.

Id i

126 (alleging a single claim under the Sherman Act based on a conspiracy, combination, or

agreement between all driver-partners to charge the same price"). The Amended Complaint nowhere contains

a claim based on a

vertical

restraint

in

violation

of

the rule

of

reason (or the quick look doctrine).

Plaintiffs

allegations

of

a horizontal conspiracy, whether examined under per se, quick look or the rule

of

reason, fail

because the Amended Complaint describes an implausible horizontal agreement based exclusively on legal

vertical conduct

in

which individual driver-partners agree with Uber to the Driver Terms.

Id

i 38. Any

allegations that Plaintiff now relies on to argue for a claim

of

a vertical restraint

in

violation

of

the rule

of

reason are irrelevant because the Complaint does not make such a claim.

Notwithstanding this threshold pleading defect, Plaintiffs self-styled "studies"

in

fact disprove the very

proposition he cites them for: that surge pricing reduces output. The Chen

Paper-which

has never been

accepted for publication

in

any academic journal (or non-academic journal for that

matter)-finds

that surge

pricing operates only "during times

of

strained supply" and modestly expands the supply

of

driver-partners

in

the short-term by providing an immediate financial incentive to offer rides. Chen Paper at l 0-11. The

Diakopoulos Blog

Post-which

was written by a journalism professor and was not subjected to any peer

review-concludes

that surge pricing,

in

the short term, reallocates supply from low demand areas to high

demand areas-meaning it increases efficiency at no cost to output. More broadly, Diakopoulos observes that

surge pricing greatly expands supply

in

the

long-term: The

benefit

of

surge pricing on overall driver supply

appears to stem from the long term effects of communicating to drivers when they should

in

general get on

the road for periods of expected high demand."

See

Am. Comp .

i

58 (Uber informs drivers

of

"recent

busy periods" and expected periods

of

high future demand). To expand supply when supply is strained

expands output-it does not "decrease" it, as Plaintiff alleges. See United Air Lines Inc v C.A.B. 766 F.2d

1107, 1115 (7th Cir. 1985) (Posner, J.).

1

The "studies" also squarely refute

Plaintiffs

allegation in Paragraph 110 that surge pricing

is

used to maintain

"artificially high" prices beyond that necessary to equalize supply and demand. The Chen Paper finds that

"the vast majority of surges are short-lived" (less than l 0 minutes) and that surge pr icing occurs only when

supply is constrained. Chen Paper at 10 They further show that, contrary to

Plaintiffs

allegation, surge

pricing is rarely applied and is eliminated as soon as supply and demand equalize.

See

id at 8 (in New York

The Chen Study finds that surge pricing correlates with low numbers of fulfilled rides, and somehow concludes that surge

pricing is causing

low output. But

in

acknowledging that surge pricing only arises when supply is constrained, the Chen Study

itsel f proves that low output drives surge pricing rather than the other way around. For example, when a Yankees game

concludes, demand may outstrip supply in the Bronx, leading both to fewer fulfilled rides and to surge pricing taking effect.

But in no way could surge pricing be deemed the cause of the low output.

WWW.BSFLLP COM



27/27

City, surge pricing is in effect only 14% of the time); Diakopoulos Blog Post (surge "prices tend to tick down

in bigger steps than they move up" and "change every three or five minutes," which is "great for riders").

Even if surge pricing reduced output, which it does not,

Plaintiffs

own "studies" expose why he cannot state a

rule

of

reason claim under any antitrust theory. First, both "studies" confirm that Plaintiff's relevant market

definition-which Plaintiff defines as the "mobile app-generated ride-share service, with a relevant sub

market

of

Uber car service -utterly fails as a matter

of

law. Am. Comp . 121. As the "studies" explain,

Uber competes

in

a broad transportation marketplace that includes an array

of

local transport options,

including taxis and public transportation. By its own terms, the Chen Paper' s methodology is only valid if one

assumes the relevant market includes taxis. Because Uber driver-partners "compete with traditional taxis," the

Chen Paper purports to use publicly available taxi data as the control group to "validate[] the accuracy

of

our

Uber measurement methodology." Chen Paper at 2-3. Plaintiffs allegation of a "proposed relevant market

that clearly does not encompass all interchangeable substitutes" alone requires granting the motion to dismiss.

Bookhouse o Stuyvesant Plaza, Inc v Amazon.com, Inc., 985 F. Supp. 2d 612,

621

(S.D.N.Y. 2013).

Chen's paper also observes that "[t]axis are much denser than Ubers"

in

Manhattan-with 43 Uber driver

partners competing in the same space as 172 taxis in midtown-and states that the "dearth of Ubers in

Manhattan may be due to greater availability

of

taxis and better public transport." Id. at 3,

7.

According to

Chen, "Uber accounted for 29%

of

all rides in NYC during 2014." Id at

3.

Even if the relevant market were

limited

just

to car services, therefore, Uber would not have market power

in

New

York City, the only specified

place that Plaint iff has used Uber's services. Am.

C o m p . ~

7; see Bookhouse, 985 F. Supp. 2d at 622 ("courts

have rejected market shares between 30 percent and 40 percent as inadequate to demonstrate market power").

Second, the "studies" confirm that Uber has benefited consumers by lowering prices and improving service. A

study relied on by Chen found that the average cost of a ride with an Uber

driver-partner-including

rides

subject to surge pricing-is more than 10% cheaper than the average taxi fare.

In addition, both studies

observe that surge pricing is an essential component of Uber' s goal to provide consumers the ability to "push a

button and get a ride within minutes." Am. Comp . 52. The Chen Paper states that "Uber offers expedient

service" with average wait times

of

approximately 3 minutes

in

New York City, and concludes that the

"complex interplay between supply and demand supports

Uber's

case for implementing dynamic pricing" to

reduce wait times for consumers. Chen Paper at 7-8; see Diakopoulos Blog Post ("surge pricing works to

maintain or improve service quality" by "reduc[ing] estimated times"). Surge pricing is therefore a classic

example of what the Supreme Court concluded was legal

in

Leegin:

a new market entrant using resale price

maintenance to offer enhanced services. Leegin Creative Leather Products, Inc. v PSKS, Inc., 551 U.S. 877,

891 (2007). Surge pricing must therefore survive the rule of reason as a pro-competitive action.

Finally, Plaintiffs assertion

of

reduced output attributable to surge pricing assumes that Uber driver-partners

do not compete with any other transportation service. Yet

Plaintiffs

"studies" show the exact opposite: when

surge pricing is

in

effect, riders react by switching to reasonably substitutable services, such as taxis and

public transport. Unless one assumes that consumers react to surge pricing by deciding to cancel their social

plans or not go to work, options which are not suggested

in

either "study," the price-sensitivity

of

riders proves

that Uber driver-partners have a positive cross-elasticity

of

demand with competing services-and therefore

that Plaintiffs market definition fails

as

a matter

of

law. This not only accords with common sense, but also

the facts as presented by Plaintiff's "studies."

If

a consumer facing surge pricing is

in

midtown surrounded by

172 taxis,

43

Uber driver-partners, the crosstown 7 subway line, several bus lines, and

is

wearing comfortable

walking shoes, she will naturally, and economically rationally, survey the range of her local transportation

options and perhaps choose a competing

service--or just

walk. Output in the relevant market

is

not reduced.

Sincerely,

Isl William A. Isaacson

Brad Stone, Uber Is Winning Over Americans Expense Accounts, Bloomberg, April 7, 2015, available at

http://www. bloomber_g,_com/n ews/ arti cl es/20 I 5-04:Q7Lh QS:J:j§.

7

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