SAN DIEGO (CN) – A San Diego taxicab company’s class action lawsuit alleging that Uber made false and exaggerated claims about passenger safety and driver background checks has survived the ride-hailing service’s attempt to throw it out of court.
Delux Cab, an operator of seven taxicabs in San Diego, sued Uber in December 2016 in the Southern District of California, accusing the company of touting “industry-leading” background screening and strict safety standards while making disparaging remarks about competing taxicab owners and drivers.
Delux Cab says Uber exaggerated the thoroughness of its background screening, including claims the checks encompass the past seven years for applicants and include checks at the county, state and federal levels. Such procedures are not “industry-leading” as Uber claims, according to Delux.
In fact, San Diego and most other cities require taxicab companies to run drivers’ fingerprints through the U.S. Department of Justice’s and FBI’s databases, according to the lawsuit. As a result, the taxicab company says, Uber’s background checks have an error rate of 43 percent compared to a one percent error rate for taxicab companies that run applicants’ fingerprints during background screening.
Uber asked U.S. District Judge Cathy Bencivengo to throw out the lawsuit, which alleged a single count of false advertising under the Lanham Act. But on Thursday, Bencivengo ruled that the taxicab company had done enough to advance its case.
A “reasonable consumer might conclude that Uber’s claims that its rides are safest, its standards are strictest, and its background check procedures are more rigorous than competitors’ are based in objectively measurable fact, and might reasonably rely upon them in deciding whether or not to use Uber,” Bencivengo wrote in her 15-page order.
Bencivengo found the taxicab company had clearly alleged that Uber’s statements about its superior safety and background checks caused lost revenue, a drop in profits and a dent to its reputation.
“As a direct result, customers were induced to choose Uber’s products and services over plaintiff’s and the taxi industry’s products and services,” the judge continued.
Bencivengo agreed with Uber on one point, finding that official statements made to the media in connection with news reports on flaws in ride-hailing services’ background checks are protected under the First Amendment of the U.S. Constitution.
“Because the challenged statements are ‘inextricably intertwined’ with the reporters’ coverage of a matter of public concern, i.e. whether Uber is safe for riders, they cannot constitute commercial speech actionable under the Lanham Act,” Bencivengo wrote in her 15-page order.
The San Diego court relied heavily on an earlier ruling, L.A. Taxi Cooperative v. Uber Technologies Inc., in a San Francisco court that dealt with similar claims. U.S. District Judge Jon Tigar presided over that case.
However, the parties voluntarily dismissed that lawsuit this week.
Uber is valued at $70 billion and offers its services in more than 70 countries. Despite its success, the Silicon Valley startup has been at the center of multiple controversies surrounding its business practices. Current and former employees have revealed an aggressive workplace culture, including allegations of drivers cheated out of their full fees, discrimination and sexual harassment.
Since its inception in 2009, the company has grown into an industry leader even as it has faced a wave of lawsuits from cities, governments, drivers, passengers and competitors. Last year, CNN Money reported more than 70 pending lawsuits against Uber over employee benefits, accessibility, price fixing, safety and safe-riding fees.
Uber agreed to pay $25 million in April 2016 to settle a lawsuit filed in San Francisco and Los Angeles over its claims about background checks. Some have voiced concern that criminals can sign up to drive for the company because it does not require fingerprint checks.
Judge Bencivengo denied Uber’s motion to strike the taxicab companies’ class allegations and denied Uber’s request for a hearing in the judge’s courtroom, ordering the company to file an answer to the complaint by May 5.
Uber declined a request for comment on the case’s most recent developments.