Diva Limousine, Ltd. v. Uber Techs., Inc.

392 F.Supp.3d 1074

DIVA LIMOUSINE, LTD., Plaintiff,

v.UBER TECHNOLOGIES, INC., et al., Defendants.

Case No. 18-cv-05546-EMC

United States District Court, N.D. California.

Signed June 20, 2019

Michael A. Geibelson, Aaron M. Sheanin, Robins Kaplan LLP, Mountain View, CA, Ashley Conrad Keller, Pro Hac Vice, Seth Adam Meyer, Pro Hac Vice, Thomas Kayes, Pro Hac Vice, Travis Lenkner, Pro Hac Vice, Keller Lenkner LLC, Chicago, IL, Tai Snow Milder, Office of the Attorney General, San Francisco, CA, Warren D. Postman, Pro Hac Vice, Keller Lenkner, Washington, DC, for Plaintiff.

Brian C. Rocca, Kent Michael Roger, Sujal Shah, Minna L. Naranjo, Morgan, Lewis & Bockius LLP, San Francisco, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS, AND DENYING WITHOUT PREJUDICE PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Docket Nos. 33, 113

EDWARD M. CHEN, United States District Judge

Plaintiff Diva Limousine ("Diva"), a licensed provider of livery services in California, brings this putative class action on behalf of providers of pre-arranged ground transportation services against Uber Technologies and its subsidiaries ("Uber"). Diva alleges that Uber secures unlawful cost savings by misclassifying its drivers as independent contractors instead of employees. In doing so, Uber takes business and market share from competitors like Diva who operate their businesses in compliance with the law. Diva also alleges that Uber, armed with cash from investors, prices its services below cost in order to drive out competitors. Diva asserts that Uber's actions violate the California Unfair Competition Law ("UCL") and the California Unfair Practices Act ("UPA").

Pending before the Court are Uber's motion to dismiss Diva's First Amended Complaint and Diva's motion for partial summary judgment on the issue of driver misclassification. See Docket Nos. 33, 113. For the reasons discussed below, Uber's motion to dismiss is GRANTED in part and DENIED in part , and Diva's motion for partial summary judgment is DENIED without prejudice .

I. BACKGROUND

A. Factual Background

The First Amended Complaint alleges the following. Diva is a licensed provider of limousine and chauffeur-driven ground transportation services in California. Docket. No. 106 ("FAC") ¶ 39. Diva maintains affiliate relationships with limousine companies outside of California. Id. ¶ 44. These out-of-state affiliates refer clients who are looking to book rides in California to Diva and receive a fee or commission for the referral. Id.

Uber is a company that "provides prearranged transportation services for compensation using an online-enabled application or platform." Id. ¶ 4. According to Diva, two aspects of Uber's business unlawfully undermine competition and cause harm to Diva. First, "Uber willfully misclassifies its California drivers as independent contractors" in violation of the California Labor Code. Id. ¶ 90. Diva alleges that Uber drivers should properly be classified as employees under California law because the drivers are integral to Uber's business and Uber "controls the precise manner in which the driver delivers Uber's service." Id. ¶¶ 69, 106 (emphasis removed). By misclassifying its drivers, Uber avoids paying minimum and overtime wages and providing benefits to its drivers as employees, saving it "a massive amount of money" and allowing it to lower prices, taking market share from competitors like Diva. Id. ¶¶ 90, 112, 125.

Second, Uber prices its rides "at a level that is far below the total average costs attributable to those rides with the purpose of injuring competition." Id. ¶ 129. Because Uber charges less for rides than the costs of providing the rides, it has "consistently lost massive amounts of money." Id. ¶ 131. Uber is able to continue operating at a loss because of substantial influxes of cash provided by investors. Id. ¶ 147. "The only rational purpose for Uber subsidizing rides as it has done and continues to do is to drive enough competitors out of business to be able to raise prices down the road." Id. ¶ 146.

As a result of these practices, since Uber began operating in Los Angeles, Diva has lost corporate and retail client business, and has been compelled by Uber's lower prices not to raise its own rates in line with expenses. Id. ¶¶ 41–42. It has also received fewer referrals from its out-of-state affiliates. Id. ¶ 43. Diva asserts two causes of action: a claim under the UCL, premised on Uber's alleged misclassification of its drivers, id. ¶ 127, and a claim under the UPA, premised on Uber's alleged loss-leader pricing, id. ¶¶ 162–63. Diva seeks injunctive relief under the UCL and damages and injunctive relief under the UPA. Id. ¶¶ 50, 60.

Diva seeks to certify two classes of Plaintiffs. The UCL class includes "[a]ll business entities that earned revenue through the provision of pre-arranged limousine or chauffeur-driven ground transportation services for non-shared rides in California from September 10, 2014 to the present." Id. ¶ 47. The UPA class is defined identically, with the exception that the class period runs from September 10, 2015 to the present. Id. ¶ 57.

B. Procedural Background

Diva filed its class action complaint on September 10, 2018. Docket No. 1. It then filed a motion for partial summary judgment on a "single issue": whether Uber drivers are properly classified as independent contractors or employees under the California Supreme Court's recent ruling in Dynamex Operations W. v. Superior Court , 232 Cal.Rptr.3d 1, 416 P.3d 1 (2018). Docket No. 33 ("PSJ Mot."). Uber requested that the pending PSJ motion "be held in abeyance subject to a further scheduling order" or "denied without prejudice as premature under the one-way intervention rule." Docket No. 48. The Court ordered briefing on the one-way intervention issue. Docket No. 98.

Uber moved to dismiss Diva's original complaint in January 2019. Docket No. 100. Diva responded by filing the FAC. Docket No. 106. Uber then moved to dismiss the FAC under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Docket No. 113 ("Mot."). The motion to dismiss and the one-way intervention question on the PSJ motion are currently before the Court.

II. LEGAL STANDARDS

Under Federal Rule of Civil Procedure 12(b)(1), a party may move to dismiss for lack of subject matter jurisdiction. When subject matter jurisdiction is challenged, "the party seeking to invoke the court's jurisdiction bears the burden of establishing that jurisdiction exists." Scott v. Breeland , 792 F.2d 925, 927 (9th Cir. 1986). A Rule 12(b)(1) motion will be granted if the complaint, considered in its entirety, fails on its face to allege facts sufficient to establish subject matter jurisdiction. See Savage v. Glendale Union High Sch. , 343 F.3d 1036, 1039 (9th Cir. 2003).

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint for failure to state a claim. To overcome a Rule 12(b)(6) motion to dismiss, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (internal quotation marks omitted).

On a Rule 12(b)(6) motion, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008). The Court need not, however, "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Fayer v. Vaughn , 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (internal quotation marks omitted). Thus, "a Plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ).

III. UBER'S MOTION TO DISMISS

A. Subject Matter Jurisdiction

Diva asserts that this Court has subject matter jurisdiction over the claims in this case under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). FAC ¶ 26. CAFA "vests the district court with ‘original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which’ the parties satisfy, among other requirements, minimal diversity." Abrego Abrego v. The Dow Chem. Co. , 443 F.3d 676, 680 (9th Cir. 2006) (quoting 28 U.S.C. § 1332(d) ). Minimal diversity exists where "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A).

The FAC alleges that Uber is incorporated in Delaware and headquartered in San Francisco. FAC ¶¶ 17–21. For diversity purposes, then, Defendants are citizens of Delaware and California. See 28 U.S.C. § 1332(c)(1) ("[A] a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business...."). Each of the two putative classes in this action are a combination of "limousine and chauffeur-driven ground transportation services within California" and "business entities outside of California" that have affiliate relationships with in-state Plaintiffs. FAC ¶¶ 48 (UCL class), 58 (UPA class) (emphases added). The in-state Plaintiffs...