Uber and Lyft Users Unite! City of Chicago Beats Back Cab Drivers’ Constitutional Challenge to City Ridesharing Ordinance

An association representing Chicago taxicab drivers recently lost their attempt to invalidate a City of Chicago ridesharing ordinance as unconstitutional.

The crux of the cab drivers claim in Illinois Transportation Trade Ass’n v. City of Chicago, was that a City ordinance governing Transportation Network Providers (TNPs) like Uber and Lyft was too mild and didn’t subject TNPs to the same level of government oversight as Chicago cab drivers; especially in the areas of licensing and fair rates. (For example, TNPs are free to set their own rates by private contracts; something taxicabs can’t do.)

The cab drivers argued the Ordinance’s less onerous TNP strictures made it hard if not impossible for the City cabs to compete with TNPs for consumer business.

The Seventh Circuit struck down all of the plaintiffs claims and in doing so, discussed the nature of constitutional challenges to statutes in the modern, ridesharing context.

Deprivation of Property Right Without Compensation

The Court rejected the plaintiffs’ first argument that allowing TNPs to enter the Chicago taxicab market deprived plaintiffs of a property interest without compensation.

Finding that a protected property right does not include the right to be free from competition, the Court noted the City wasn’t depriving the plaintiffs of tangible or intangible property.  All the Ordinance did was codify Chicago cab drivers’ exposure to a new form of competition – competition from ridesharing services like Uber and Lyft.

And since the right to be free from competition is not a legally valid property right, the plaintiffs’ misappropriation of property theory failed.  The Court wrote that to indulge the plaintiffs’ argument that it had a property right in eliminating transportation service competition would give taxi drivers an unfair monopoly on all commercial transportation.

Equal Protection Claim: Cab Drivers and TNPs Should Be Subject to the Same Regulations

Striking down the plaintiffs’ equal protection claims, the Court framed the issue as whether “regulatory differences between Chicago taxicabs and Chicago TNPs are arbitrary or defensible.”  It found the regulatory variations were indeed defensible.  In reaching this holding the Court focused on the salient differences between taxicabs and TNPs including their distinct business models and levels of driver oversight and screening, as well as stark differences in consumer accessibility: where riders can hail a cab on any street, TNP users must first sign up with the TNP and install an app on their smartphone to hire TNP drivers.

A Dog Differs From a Cat and a Taxi Differs from a TNP Like Uber

In the end, it was the blatant qualitative differences between cab service and TNPs that carried the day and sealed the fate of plaintiffs’ constitutional challenge to the Ordinance.  The Court found there were measurable differences between taxis and TNPs in the areas of business model, driver screening and rate-setting, among others, that justified the City’s different regulatory schemes.

The Court found that the watered-down (according to Plaintiffs, anyway) TNP Ordinance rightly recognized the glaring differences between taxis and TNPs and was rationally related to the City’s interest in fostering competition in commercial transportation business.

Afterwords:

This case presents an interesting application of established constitutional equal protection principles to a progressive electronic commerce context.

In the end the case turned on whether leveling the competitive playing field to the cab drivers’ liking by striking down the Ordinance resulted in stifled competition.  Since the Court said the answer to the question was “yes,” the taxi drivers’ constitutional challenge failed.

 

 

Italian Lawsuit Filed Against Auto Repair Giant Dooms Later Illinois Lawsuit Under ‘Same Parties/Same Cause’ Rule

Where two lawsuits are pending simultaneously and involve the same parties and issues, the later filed case is generally subject to dismissal.  Illinois Code Section 2-619(a)(3) allows for dismissal where “there is another action pending between the same parties for the same cause.”

Midas Intern. Corp. v. Mesa, S.p.A., 2013 IL App (1st) 122048, while dated, gives a useful summary of the same-cause dismissal guideposts in the context of an international franchise dispute.

Midas, the well-known car repair company entered into a written contract with Mesa, an Italian car repairer, to license Midas’s business “System” and related trademarks.  In exchange for licensing Midas’s business model and marks, Mesa paid a multi-million dollar license fee and made monthly royalty payments.  The contract had a mandatory arbitration clause and a separate license agreement incorporated into it that fixed Milan, Italy or Chicago, Illinois as the venues for license agreement litigation.

Mesa sued Midas in an Italian court claiming Midas violated the license agreement by not making capital investments in some of Mesa’s projects.  A month or so later, Midas sued Mesa in Illinois state court for breach of contract and a declaratory judgment that Midas was in compliance with the license agreement and was owed royalties.  The trial court dismissed Midas’ suit based on the pending Italian lawsuit filed by Mesa.  Midas appealed.

Held: Affirmed.

Reasons:

The case turned on whether Mesa’s lawsuit stemmed from the same cause as Midas’s Illinois action.  Dismissal of an action under Code Section 2-619(a)(3) is a “procedural tool designed to avoid duplicative litigation.”  Under this section, actions involve the same cause when the relief sought in two cases rest on substantially the same set of facts.  The test is whether the two actions stem from the same underlying transaction or occurrence; not whether the pled causes of action or legal theories in the two cases are the same or different.

Two cases don’t have to be identical for Section 2-619(a)(3) to apply.  All that’s required is the cases feature a “substantial similarity of issues.”  (¶ 13)

If the same cause and same party requirements are met, the Court can still refuse dismissal if the prejudice to the party whose case is dismissed outweighs the policy against duplicative litigation.  In assessing prejudice caused by dismissal, the court considers issues of comity, prevention of multiplicity of lawsuits, vexation, harassment, likelihood of obtaining complete relief in the foreign forum, and the res judicata effect of a foreign judgment in the local forum (here, Illinois).

Courts also look to which case was filed first; although order of case filing isn’t by itself a dispositive factor.

Rejecting Midas’ argument that the Italian lawsuit was separated in time and topics from the Illinois lawsuit, the Court noted that Mesa’s lawsuit objective was to preemptively defend against Midas’s royalty claims.  Midas Illinois lawsuit, filed only weeks after Mesa’s action, sought damages under a breach of contract theory – that Mesa breached the license agreement by not paying royalties.

Since the outcome in the Mesa (Italian) case will determine the Midas (Illinois) case, the Court found the Illinois case was barred because Mesa’s action involved the same parties and same cause: both cases originated from the same license agreement.

The Court also found that Midas wouldn’t be prejudiced due to the dismissal of the Illinois action. Midas has the resources to file a counterclaim in the Italy case and the license agreement provides that either Milan or Chicago are possible lawsuit venues.  Since Illinois and Italy each had similar interests in and a connection to the dispute (the royalty payments were sent from Italy and received in Illinois), the trial court had discretion to dismiss Midas’ Illinois lawsuit. (¶ 25).

Afterwords:

1/ This case lays out the different factors a court considers when determining whether to dismiss an action under the same cause/same parties Code section;

2/ The timing of the filing of two lawsuits along with each forum’s connection to the dispute are key factors considered by the court when deciding whether avoiding redundancy in litigation trumps a party’s right to have its case heard on the merits.

Avvo’s ‘Sponsored Listings’ Not Commercial Enough to Escape First Amendment Protection in Lawyer’s Publicity Suit – IL ND

img_1953

In its decade old existence, Avvo, Inc., an “on line legal services marketplace,” has been no stranger to controversy.  Private attorneys and bar associations alike have objected to Avvo’s business model and practices – some filing defamation lawsuits against the company while others have demanded in regulatory venues that Avvo stop its unconsented “scraping” of attorney data.

Vrdolyak v. Avvo, Inc. is the latest installment of a lawyer suing Avvo; this time challenging Avvo-pro, the on-line directory’s pay-to-play service.

For about $50 a month, Avvo-pro users can ensure that no rival attorney ads appear on their profile page.  But if the attorney chooses not to participate in Avvo-pro, he will likely see competitor ads on his Avvo page.

The plaintiff, a non-Avvo-pro participant, sued Avvo under Illinois’ Right to Publicity Act.  He argued that by selling competitor ads on his profile page, Avvo usurped plaintiff’s right to monetize his identity.

In effect, according to plaintiff, Avvo was capitalizing on plaintiff’s brand and using it as a platform for rival lawyers to peddle their services to anyone who visited plaintiff’s Avvo page.

The Court granted Avvo’s motion to dismiss on the basis that Avvo’s ads were protected by the First Amendment to the U.S. Constitution.

The key inquiry was whether Avvo’s site constitutes commercial or non-commercial speech.  If speech is non-commercial, it is entitled to expansive First Amendment protection that can only be restricted in extraordinary circumstances.

Commercial speech, by contrast, receives less First Amendment protection.  It can be more easily scrutinized and vulnerable to defamation or publicity statute claims.

The court cited daily newspapers and telephone directory “yellow pages” as prototypical examples of non-commercial speech.

While both sell advertising, a newspaper’s and yellow pages’ main purpose is to provide information.  Any ad revenue derived by the paper or phone directory is ancillary to their primary function as information distributor.

Commercial speech proposes a commercial transaction, including through the use of a trademark or a company’s brand awareness.  If speech has both commercial and non-commercial elements (e.g. where a commercial transaction is offered at the same time a matter of social importance is discussed), the court tries to divine the main purpose of the speech by considering if (1) the speech is an advertisement, (2) it refers to a specific product and (3) the speaker’s economic motivation.

The Court agreed with Avvo that its site was akin to a computerized yellow pages; That the core of Avvo was non-commercial speech: it provides attorney information culled from various sources.

The court distinguished basketball legend Michael Jordan’s recent lawsuit against Jewel food stores for taking out an ad in Sports Illustrated, ostensibly for commending Jordan on his recent basketball hall of fame induction.

The Seventh Circuit there found that Jewel’s conduct clearly aimed to associate Jordan with Jewel’s brand and in the process promote Jewel’s supermarkets.  As a result, Jewel’s actions were deemed commercial speech and subject to a higher level of court scrutiny. Jordan v. Jewel Food Stores, Inc., 743 F.3d 509, 515 (7th Cir. 2014).

In the end, the Avvo case turned on this binary question: was Avvo a non-commercial attorney directory with incidental advertising, or was each Avvo attorney profile an advertisement for the competitors’ “Sponsored Listings” (the name ascribed to competing attorneys who paid for ads to be placed on plaintiff’s profile page).

Since not every attorney profile contained advertisements and none of the challenged ads used plaintiff’s name, the Court found Avvo was like a newspaper or yellow pages directory entitled to free speech protection.

The Court likened Avvo to Sports Illustrated – a publication that features ads but whose main purpose is non-commercial (i.e. Providing sports news).  Like SI, Avvo publishes non-commercial information – attorney stats – and within that information, places advertisements.

To hold otherwise and allow plaintiff’s publicity suit to go forward, “any entity that publishes truthful newsworthy information about….professionals, such as a newspaper or yellow page directory, would risk civil liability simply because it generated ad revenue” from competing vendors.

Afterword:  This case presents an interesting application of venerable First Amendment principles to the post-modern, computerized context.

A case lesson is that even if speech has some obvious money-making byproducts, it still  can garner constitutional protection where its main purpose is to impart information rather than to attract paying customers.