Philadelphia Taxi Association, Inc. et al v. Uber Technologies, Inc.

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Under Fed. R. Civ. P. 12

E.D. Pa.December 5, 2016

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA PHILADELPHIA TAXI ASSOCIATION, INC., et al., Plaintiffs, v. UBER TECHNOLOGIES, INC., Defendant. NO. 2:16-cv-01207-JS JURY TRIAL DEMANDED DEFENDANT UBER TECHNOLOGIES, INC.’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), Defendant Uber Technologies, Inc. moves to dismiss Plaintiffs’ Second Amended Complaint in full and with prejudice. In support of its motion, Defendant incorporates the accompanying memorandum of law. Dated: December 5, 2016 Respectfully submitted, MORGAN, LEWIS & BOCKIUS LLP /s/ Steven A. Reed Steven A. Reed steven.reed@morganlewis.com R. Brendan Fee brendan.fee@morganlewis.com 1701 Market Street Philadelphia, PA 19103 Telephone: +1.215.963.5000 -and- Brian C. Rocca (pro hac vice) brian.rocca@morganlewis.com Sujal J. Shah (pro hac vice) sujal.shah@morganlewis.com One Market, Spear Street Tower San Francisco, CA 94105 Telephone: +1.415.442.1000 Counsel for Defendant Uber Technologies, Inc. Case 2:16-cv-01207-JS Document 28 Filed 12/05/16 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA PHILADELPHIA TAXI ASSOCIATION, INC., et al. Plaintiffs, v. UBER TECHNOLOGIES, INC. Defendant. NO. 2:16-cv-01207-JS JURY TRIAL DEMANDED MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT UBER TECHNOLOGIES, INC.’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT Brian C. Rocca (pro hac vice) brian.rocca@morganlewis.com Sujal J. Shah (pro hac vice) sujal.shah@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP One Market, Spear Street Tower San Francisco, CA 94105 Telephone: +1.415.442.1000 Facsimile: +1.415.442.1001 Steven A. Reed steven.reed@morganlewis.com R. Brendan Fee brendan.fee@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103-2921 Telephone: +1.215.963.5000 Facsimile: +1.215.963.5001 Counsel for Defendant UBER TECHNOLOGIES, INC. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 1 of 20 TABLE OF CONTENTS Page i INTRODUCTION ......................................................................................................................... 1 ALLEGATIONS OF THE SECOND AMENDED COMPLAINT............................................... 2 STANDARD OF REVIEW ........................................................................................................... 4 LEGAL ARGUMENT................................................................................................................... 5 I. Plaintiffs’ Claims of Injury to Their Businesses Is Not Antitrust Injury........................... 5 II. Plaintiffs Have Not Alleged Facts Plausibly Establishing Any Element Of A Proper Claim For Attempted Monopolization. .................................................................. 8 A. Plaintiffs Have Not Plausibly Alleged That Uber Has A Dangerous Probability Of Achieving A Monopoly In A Properly Defined Market ................ 8 B. Because Uber’s Alleged Conduct Enhanced Competition and Increased Output, It Cannot Be Anticompetitive ................................................................. 10 C. Plaintiffs Have Not Alleged That Uber Specifically Intended To Achieve A Monopoly, Rather Than Advancing Its Business Goals .................................. 13 III. PTA Lacks Standing To Pursue Its Claims...................................................................... 13 IV. Plaintiffs’ Case Should Be Dismissed With Prejudice .................................................... 14 CONCLUSION............................................................................................................................ 14 Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 2 of 20 ii TABLE OF AUTHORITIES Page(s) CASES A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 683 F. Supp. 680 (S.D. Ind. 1988) ...........................................................................................10 Advo Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191 (3d Cir. 1995).....................................................................................................13 Ashcroft v. Iqbal, 556 U.S. 662 (2009)...................................................................................................................4 Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990)...................................................................................................................6 Bell Atl. Corp. v. Twombly, 550 U.S. 554 (2007)...................................................................................................................4 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).............................................................................................................6, 11 Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104 (1986).................................................................................................................11 Chicago Prof’l Sports Ltd. P’ship v. Nat’l Basketball Ass’n, 95 F.3d 593 (7th Cir. 1996) .....................................................................................................11 Eisai Inc. v. Sanofi-Aventis U.S., LLC, No. 08-cv-4168, 2014 WL 1343254 (D.N.J. Mar. 28, 2014) ..................................................11 Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223 (3d Cir. 2013).......................................................................................................6 Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009).......................................................................................................4 Franco v. Conn. Life Ins. Co., 647 F. App’x. 76 (3d Cir. 2016) ..............................................................................................14 Great W. Directories, Inc. v. Southwestern Bell Tel. Co., 63 F.3d 1378 (5th Cir. 1995) ...................................................................................................13 Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333 (1977).................................................................................................................14 Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 3 of 20 iii Ill. Trans. Trade Ass’n v. City of Chicago, 839 F.3d 594 (7th Cir. 2016) .................................................................................7, 8, 9, 11, 12 In re Ins. Brokerage Antitrust Litig., 618 F.3d 300 (3d Cir. 2010).......................................................................................................4 Joe Sanfelippo Cabs, Inc. v. City of Milwaukee, 839 F.3d 613 (7th Cir. 2016) .....................................................................................................8 Kem-Tech, Inc. v. Mobil Corp., No. 84-cv-1421, 1985 WL 3011 (E.D. Pa. Oct. 9, 1985) ......................................................7, 8 Larry Pitt & Assocs. v. Lundy Law, LLP, 57 F. Supp. 3d 445 (E.D. Pa. 2014) .........................................................................................11 Lum v. Bank of Am., 361 F.3d 217 (3d Cir. 2004).....................................................................................................14 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)...................................................................................................................6 Pa. Dental v. Med. Serv. Ass’n, 745 F.2d 248 (3d Cir. 1984).....................................................................................................13 Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508 (3d Cir. 1994)...................................................................................................9, 10 Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997).......................................................................................................9 Sanderson v. Culligan Int’l Co., 415 F.3d 620 (7th Cir. 2005) ...................................................................................................10 Satnam Distrib. LLC v. Commonwealth-Altadis, Inc., No. 14-cv-6660, 2015 WL 5971583 (E.D. Pa. Oct. 14, 2015) ..................................................9 Schuylkill Health Sys. v. Cardinal Health, No. 12-cv-7065, 2014 WL 3746817 (E.D. Pa. July 30, 2014) ................................................10 SmithKline Beecham Corp. v. Apotex Corp., 383 F. Supp. 2d 686 (E.D. Pa. 2004) .........................................................................................8 Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993)...................................................................................................................8 Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).............................................................................................................13 Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 4 of 20 iv Sw. Suburban Bd. of Realtors, Inc. v. Beverly Area Planning Assoc., 830 F.2d 1374 (7th Cir. 1987) ...................................................................................................4 Travelers Ins. Co. v. Blue Cross of W. Pa., 481 F.2d 80 (3d Cir. 1973).........................................................................................................5 Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242 (2d Cir. 1985).......................................................................................................5 Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715 (3d Cir. 1991).......................................................................................................9 W. Penn. Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010)...................................................................................................8, 12 Xtreme Caged Combat v. Cage Fury Fighting Championships, No. 14-cv-5159, 2015 WL 3444274 (E.D. Pa. May 29, 2015)..................................................3 Yeager’s Fuel, Inc. v. Pa. Power & Light Co., 953 F. Supp. 617 (E.D. Pa. 1997) ..............................................................................................1 OTHER AUTHORITIES Fed. R. Civ. P. 12.............................................................................................................................4 Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 5 of 20 1 INTRODUCTION Plaintiffs’ Second Amended Complaint (the “SAC”) does nothing to address the fatal deficiencies the Court identified in dismissing their first amended complaint. It alleges the same facts this Court already found deficient to demonstrate antitrust injury or to state a claim under the antitrust laws. Plaintiffs’ attempted monopolization claim necessarily fails because Plaintiffs are complaining of increased competition as a result of Uber’s entry into Philadelphia—which they concede has benefited consumers through increased output, choice, and innovation. In its November 3, 2016 Order, this Court dismissed Plaintiffs’ federal attempted monopolization claim and their state law unfair competition and tort claims because “Plaintiffs have not established antitrust standing and have failed to plead a proper basis for either unfair competition or tortious interference.” (Memo. Op. at 1, Dkt. No. 25.) In their latest attempt, Plaintiffs drop their state law claims but re-plead their attempted monopolization claim. They do not, however, allege any new facts to “alert this Court of any negative impact of Uber’s presence in the marketplace . . . on the price, quality, or quantity of taxicab or vehicle-for-hire services— essential indications of antitrust injury.” (Id. at 6.) Instead, the SAC merely adds factual allegations regarding the harm that Uber’s entry caused Plaintiffs and other owners of taxicab medallions. Plaintiffs still cannot allege harm to competition since the harm allegedly suffered by the Plaintiff taxi companies flowed from enhanced competition from Uber, which Plaintiffs expressly allege increased output. Plaintiffs continue to lack antitrust standing because they complain about more competition, not less.1 1 Plaintiff Philadelphia Taxi Association (“PTA”) also lacks Article III standing because it does not allege that it suffered harm. Nor can it establish associational standing because individual participation by its members would be required for PTA’s claims to succeed. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 6 of 20 2 Beyond this fatal defect, Plaintiffs’ attempted monopolization claim also fails as a matter of law because they have not sufficiently alleged that Uber (a) has a dangerous probability of obtaining a monopoly in a properly defined market, (b) engaged in anticompetitive conduct, or (c) had specific intent to achieve a monopoly. Plaintiffs’ attempt to twist the antitrust laws to protect incumbent medallion taxi owners from new, innovative, and more efficient competition—the very thing the antitrust laws are designed to protect—fails as a matter of law. Because Plaintiffs have had multiple opportunities to attempt to state a claim, and any further amendment would be futile, this Court should dismiss Plaintiffs’ claims with prejudice. ALLEGATIONS OF THE SECOND AMENDED COMPLAINT The SAC alleges the same facts that this Court found insufficient to allege antitrust injury. Plaintiffs and other medallion taxi companies were among the incumbent suppliers of “vehicle for hire transportation” services in and around Philadelphia when Uber “entered the market” in October 2014. (SAC ¶¶ 1, 35.) Plaintiffs allege there are 500 medallion taxi cab companies with 1,610 medallions operating in the alleged relevant market. (Id. ¶ 15.) While Plaintiffs allege competition from Uber drivers has resulted in a significant number of riders switching from “medallion cabs” to Uber, they do not allege that Uber’s entry resulted in higher prices or reduced output or innovation overall. (Id. ¶¶ 81-82.) Plaintiffs merely assert that competition from Uber has caused medallion cabs to experience a 30% earnings decrease between October 2014 and October 2016 and that the number of medallion cab trips has decreased by 29%, which allegedly threatens to “put them out of business.” (Id. ¶¶ 17, 80.) But Plaintiffs’ allegations underscore that output overall has increased substantially due to Uber’s entry and actions to “flood[] the marketplace” with new vehicles. (Id. ¶¶ 17, 67.) Plaintiffs Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 7 of 20 3 expressly allege that Uber drivers have “taken in excess of 700,000 riders on more than one million trips…utilizing 1,700 vehicles and drivers.” (Id. ¶ 81.) In contrast, before Uber’s entry only “150 new medallions” would have been sold “over the next seven years to accommodate the growth in demand.” (Id. ¶ 45.) As with their prior complaints, Plaintiffs assert that Uber has violated federal antitrust laws by entering Philadelphia and “evad[ing]” the statutory provisions and regulations of the Philadelphia Parking Authority (“PPA”), which allegedly allows Uber to operate at a lower cost. (Id. ¶¶ 50, 76.) Specifically, Plaintiffs claim that, by denominating itself a Transportation Network Company (“TNC”) that owns no vehicles, employs no drivers, and connects with riders via a smartphone application, Uber sought to exempt itself from the requirements imposed upon Plaintiffs and other taxi companies by PPA regulations. (Id. ¶¶ 48-49, 61.) Plaintiffs contend that this allowed Uber to avoid certain costly obligations applicable to taxis and thus compete more efficiently. (E.g., id. ¶ 76.) Plaintiffs also contend that Uber solicited taxi drivers to drive on the Uber platform by sending representatives to 30th Street Station and Philadelphia International Airport to distribute “written material and applications for becoming Uber drivers” and offering “monetary inducements” such as payment to cover the cost of gasoline. (Id. ¶ 51.) Plaintiffs allege that Uber had “no legitimate reason” to target Plaintiffs’ drivers. (Id. ¶ 53.) The SAC adds a new section on antitrust injury, but this section primarily contains arguments—not facts—regarding Plaintiffs’ belief that the so-called “Medallion System” for providing “vehicle-for-hire transportation” is harmed by Uber’s entry into Philadelphia. (See id. ¶¶ 9-23.) The only facts alleged in this section relate to price and innovation prior to Uber’s entry (e.g., id. ¶ 13) or the loss in value of medallions and harm to medallion taxi companies after Uber’s entry (e.g., id. ¶¶ 17-18). Plaintiffs still fail to allege any facts showing that Uber’s Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 8 of 20 4 entry resulted in higher prices or reduced output or less innovation overall. Finally, the SAC also alleges new facts regarding legislation—“intended to preserve and enhance competition rather than to create a monopoly in favor of some local governmental entity or private party”—passed on October 24, 2016 “legalizing the operation of transportation network companies in the City of Philadelphia.” (Id. ¶¶ 84, 86.) Plaintiffs, however, highlight differences in how TNCs are treated compared to medallion taxis, claiming that the legislation “would facilitate the creation of an illegal monopoly in the relevant market.” (Id. ¶¶ 90-97.) STANDARD OF REVIEW To survive a motion to dismiss, a complaint must plead facts—not merely “labels and conclusions”—that on their face plausibly suggest entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). In determining whether a complaint meets this standard, courts in the Third Circuit first must separate the well-plead facts from mere legal conclusions, and disregard the latter. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations omitted). The court “must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.” Id. at 211. Assessing plausibility is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Because “context matters” in determining whether a pleading can survive a Rule 12 challenge, “what suffices to withstand a motion to dismiss necessarily depends on substantive law and the elements of the specific claim asserted.” In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 320 n.18 (3d Cir. 2010). Hence, “[s]ome claims will demand relatively more factual detail…while others require less.” Id. In antitrust cases, more facts typically are needed to make a claim plausible in light of “common economic experience.” Id. at 320 n.18, 326. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 9 of 20 5 LEGAL ARGUMENT In previously holding that Plaintiffs failed to allege antitrust injury, this Court identified a fatal defect in Plaintiffs’ claim that cannot be cured. Plaintiffs continue to invoke the antitrust laws to preserve their historical stranglehold on part of the “for hire” transportation market in Philadelphia and insulate themselves from competition. This fundamental incongruity between the purpose of the antitrust laws—i.e., to “protect competition, not competitors”—and Plaintiffs’ case theory is proof of their continued inability to allege (a) facts sufficient to establish antitrust injury, and (b) the requisite elements of their Section 2 claim. Travelers Ins. Co. v. Blue Cross of W. Pa., 481 F.2d 80, 84 (3d Cir. 1973) (“[S]tiff competition is encouraged, not condemned”); Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242, 243 (2d Cir. 1985) (the antitrust laws “were never intended to provide a balm for the hardships occasioned by vigorous competition”). I. Plaintiffs’ Claims of Injury to Their Businesses Is Not Antitrust Injury. In its November 3 Order, this Court noted that Plaintiffs’ allegations regarding the harm caused by Uber’s entry into Philadelphia were: [L]imited to injuries Plaintiffs have suffered as competitors with Uber: the value of Plaintiffs’ medallions have decreased sharply; taxicab companies, including plaintiffs, have experienced a decline in demand and thus earnings; Plaintiffs’ share of the Philadelphia market is shrinking; and a portion of Plaintiffs’ employees have stopped working for them and now work for Uber. (Memo. Op. 6, Dkt. No. 25.) As this Court recognized, “[w]hile Plaintiffs themselves have undoubtedly suffered injury since Uber began operating in Philadelphia, competition has not.” (Id. (noting Plaintiffs’ allegations that Uber has provided “1,000,000 trips to 700,000 riders, using 1700 vehicles”).) The SAC simply reiterates the same factual allegations this Court found lacking before: medallion taxi companies have suffered from increased competition by experiencing (a) a decline in ridership and earnings; (b) lower market share; (c) a decrease in the Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 10 of 20 6 value of medallions; and (d) a loss of drivers who now work for Uber. (SAC ¶¶ 78, 80-82.) Despite the harm allegedly suffered by Plaintiffs, they continue to allege that overall output has increased. (Id. ¶ 81.)2 The SAC adds nothing more to Plaintiffs’ previous complaints that assert, ultimately, that Plaintiffs’ injuries are the result of new disruptive competition from Uber, which cannot be an actionable antitrust injury. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977); Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 233 (3d Cir. 2013). At most, Plaintiffs allege they suffered injury because Uber’s entry into Philadelphia violated PPA regulations. But even then, “violation of state law or municipal regulations does not give rise to antitrust injury. To establish antitrust injury, Plaintiff ‘must prove more than injury casually linked to an illegal presence in the market.’” (Memo. Op. at 7, Dkt. No. 25 (quoting Brunswick Corp., 429 U.S. at 489); see also id. (“Even if this Court were to find Uber’s operation unlawful, it would do so under PPA regulations, not antitrust law.”). Because it is “inimical to the antitrust laws to award damages for losses stemming from continued competition,” alleged harm does not qualify as antitrust injury unless it is attributable to “a competition-reducing aspect or effect of the defendant’s behavior.” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990); see also Brunswick Corp., 429 U.S. at 487-88. 2 Plaintiffs’ conclusory allegation that “Uber would be in a position to charge excessive prices” at some point in the future is insufficient to allege antitrust injury. (SAC ¶ 62.) Not only is this claim unsupported and speculative, Uber would only be able to “charge excessive prices” in the future if there were sufficient barriers to entry to prevent new entrants from competing with Uber. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986) (observing that “without barriers to entry it would presumably be impossible to maintain supracompetitive prices for an extended time”). Plaintiffs do not allege any such barriers to entry. Nor could they, since their central complaint is with Uber’s entry into the alleged market. Moreover, Plaintiffs allege that Uber and other TNCs can easily enter the alleged market because they have a “non-expensive, readily available pool of drivers” to provide transportation services and they do not have to abide by certain PPA regulations. (SAC ¶¶ 53, 76.) Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 11 of 20 7 Plaintiffs recast their allegations of harm to competitor taxi companies as harm to the “competitive market model known as the Medallion System,” which they claim, without support, is “an effective efficient competitive market.” (SAC ¶¶ 16-17.) Relying on an economics textbook, which is admittedly inconsistent with antitrust injury jurisprudence (see id. ¶ 22), Plaintiffs confuse harm to the so-called “medallion system” with harm to competition (see, e.g., Id. ¶¶ 16-22). The antitrust laws are concerned with the effect of conduct on output, price, quality, and innovation to the market as a whole, not whether a self-defined “system” or “model” favors one set of competitors over another. As this Court explained, “‘[a]ll that the City [of Philadelphia] gives taxi-medallion owners is the right to operate taxicabs in [the City],’ which ‘isn’t a right to exclude competitive providers of transportation.’” (Memo. Op. at 7, Dkt. No. 25 (quoting Ill. Trans. Trade Ass’n v. City of Chicago, 839 F.3d 594, 597 (7th Cir. 2016)).) Despite Plaintiffs’ claim that the “medallion system” is an “effective efficient competitive market,” their factual allegations demonstrate the opposite. “For-hire vehicle transportation,” not the “medallion system,” is the alleged relevant market (SAC ¶ 24), and as the SAC makes clear, Uber’s entry into Philadelphia has resulted in greater output, choice, and innovation in the alleged relevant market, even though the value of medallions has fallen. In other words, harm to the “medallion system” is merely another way of describing harm to competitors, not competition. Plaintiffs’ allegations of harm to the “medallion system” are insufficient to establish antitrust injury because the harm to medallion taxis—lost sales, reduced profitability, and the reduced value of their medallions—is the result of “greater competition, not less.”3 Kem-Tech, 3 Plaintiffs also fail to acknowledge that the “medallion system” continues to provide them with “some insulation from competition” because only medallion holders are able to operate taxis, which are preferred to Uber and other TNCs by “many riders, because you don’t have to Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 12 of 20 8 Inc. v. Mobil Corp., No. 84-cv-1421, 1985 WL 3011, at *5 (E.D. Pa. Oct. 9, 1985); see also SmithKline Beecham Corp. v. Apotex Corp., 383 F. Supp. 2d 686, 699 (E.D. Pa. 2004). Plaintiffs still have not pled “injury of the type the antitrust laws were intended to prevent,” and thus cannot establish antitrust injury. (Memo. Op. at 7, Dkt. No. 25.) II. Plaintiffs Have Not Alleged Facts Plausibly Establishing Any Element Of A Proper Claim For Attempted Monopolization. In addition to antitrust standing, a complaint asserting a claim for attempted monopolization under Sherman Act Section 2 must allege “(1) that the defendant has a specific intent to monopolize, and (2) that the defendant has engaged in anticompetitive conduct that, taken as a whole, creates (3) a dangerous probability of achieving monopoly power.” W. Penn. Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 108 (3d Cir. 2010) (citing Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, (1993)). Plaintiffs’ SAC does not adequately plead any of these elements, which separately requires dismissal. A. Plaintiffs Have Not Plausibly Alleged That Uber Has A Dangerous Probability Of Achieving A Monopoly In A Properly Defined Market. Before holding that a defendant has a “dangerous probability of achieving [a] monopoly,” there must be an “inquiry into the relevant product and geographic market and the defendant’s economic power in that market.” Spectrum Sports, 506 U.S. at 459. Plaintiffs fail to allege “dangerous probability” because they have not alleged (a) a valid relevant market, or (b) that Uber has market power in that market. Plaintiffs merely complain about Uber’s market entry. A plaintiff pursuing a Section 2 claim must allege a relevant market that includes all use an app to summon them—you just wave at one that drives toward you on the street—and also because the fares are fixed by the City.” Ill. Trans. Trade Ass’n, 839 F.3d at 597; Joe Sanfelippo Cabs, Inc. v. City of Milwaukee, 839 F.3d 613, 616 (7th Cir. 2016) (noting that a medallion system with a limited number of medallions is a “cartelized” market that is antithetical to a “competitive market”); see also (SAC. ¶ 62 (alleging that elderly persons may prefer taxis because some do not own smartphones and thus cannot access either the Uber platform or other TNCs)). Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 13 of 20 9 “reasonably interchangeable” products. See Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997). When a plaintiff fails to allege facts allowing the court to assess whether the posited relevant market includes all reasonably interchangeable products, dismissal is appropriate. See Satnam Distrib. LLC v. Commonwealth-Altadis, Inc., No. 14-cv-6660, 2015 WL 5971583, at *9 (E.D. Pa. Oct. 14, 2015) (“Plaintiff’s Sherman Act claims must contain sufficient allegations of a viable relevant product market in order to survive Defendants’ motion to dismiss.”). Similar principles apply to allegations setting the metes and bounds of the relevant geographic market. Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 726 (3d Cir. 1991). Despite having been given multiple opportunities to address this flaw, the SAC still contains only two conclusory paragraphs defining the relevant product and geographic market (SAC ¶¶ 24-25),4 neither of which alleges any facts ruling out as reasonable substitutes for “for- hire transportation” the myriad potentially interchangeable products, including personal vehicles, SEPTA regional rail, the subway, buses and trolleys, bicycles, and even walking. Cf. Ill. Trans. Trade Ass’n, 839 F.3d at 597 (noting that taxi cab medallion owners compete with “buses or trains or bicycles or liveries or chartered sightseeing vehicles or jitney buses or walking”). Nor does the SAC allege any facts with respect to the limitations of the proposed geographic market. These omissions make it impossible for the Court to assess the boundaries of the market, much less the “probability” that Uber would obtain monopoly power, which forecloses Plaintiffs’ attempted monopolization claim. Plaintiffs similarly fail to allege adequately that Uber has sufficient market power to have a “dangerous probability of achieving a monopoly.” The SAC contains no factual (as opposed to 4 At least one reading of paragraph 10 of the SAC is that the relevant market being alleged is the “Medallion System,” in which case Uber would not even be a participant. It is axiomatic that a firm cannot attempt to monopolize a market in which it does not compete. Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508, 513 (3d Cir. 1994). Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 14 of 20 10 conclusory) allegations regarding barriers to entry, the strength of competition, or most critically, Uber’s market share—much less that Uber, which Plaintiffs describe somewhat paradoxically as a “start-up” (SAC ¶ 83), has a share traditionally sufficient to establish an attempt claim. See Pastore, 24 F.3d at 513 (“[there is a] presumption that attempt[ed] [monopoly] does not occur in the absence of a rather significant market share”); see also Schuylkill Health Sys. v. Cardinal Health, No. 12-cv-7065, 2014 WL 3746817, at *38 (E.D. Pa. July 30, 2014) (dismissing attempted monopolization claim where plaintiff had not alleged that defendant had more than 40% market share) (Sanchez, J.). Moreover, in terms of market power, the SAC is self- defeating. Setting aside the threat of competition from other TNCs such as Lyft, Plaintiffs identify 500 companies that Uber would have to eliminate before achieving a monopoly. (SAC ¶ 15.) Given these allegations, Plaintiffs’ attempted monopolization claim is not plausible. B. Because Uber’s Alleged Conduct Enhanced Competition and Increased Output, It Cannot Be Anticompetitive. Plaintiffs’ attempted monopolization claim is predicated mainly on Uber’s new entry into the Philadelphia market in alleged violation of PPA regulations. This theory simply does not square with the bedrock principle that the antitrust laws may not “be used to penalize a more efficient competitor who employs new technology to increase its output.” A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 683 F. Supp. 680, 696 (S.D. Ind. 1988), aff’d, 881 F.2d 1396 (7th Cir. 1989); see also Pastore, 24 F.3d at 514 (describing as “ironic” plaintiff’s attempt to insulate its incumbent position from new entry “by use of an antitrust suit”). At most, “[i]f Plaintiffs seek to prevent Uber from operating in the Philadelphia market, it may seek refuge in PPA regulations, not antitrust law.” (Memo. Op. at 7, Dkt. No. 25.) The antitrust laws “favor competition of all kinds, whether or not some other producer thinks the competition ‘fair.’” Sanderson v. Culligan Int’l Co., 415 F.3d 620, 623 (7th Cir. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 15 of 20 11 2005); see also Ill. Trans. Trade Ass’n, 839 F.3d at 597 (“Taxi medallions authorize the owners to own and operate taxis, not to exclude competing transportation services.”). To be actionable under Section 2, conduct must increase price by decreasing output. Id.; see also Chicago Prof’l Sports Ltd. P’ship v. Nat’l Basketball Ass’n, 95 F.3d 593, 597 (7th Cir. 1996) (“The core question in antitrust is output. Unless a contract reduces output in some market, to the detriment of consumers, there is no antitrust problem.”). Plaintiffs’ antitrust claim founders on this key principle. The challenged behavior by Uber, as Plaintiffs acknowledge, does not reduce output. On the contrary, Plaintiffs concede that Uber “flooded the marketplace,” (SAC ¶¶ 17) which increased output and dooms their antitrust claim from the outset (see e.g., id. ¶ 45 (projecting 150 new medallions over 7 years before Uber); id. ¶ 81 (additional 1,700 vehicles in 18 months after Uber)). Moreover, the only plausible inference from Plaintiffs’ allegation that they lost business to Uber as a result of Uber’s substantially lower operational costs (id. ¶¶ 50, 76) is that those decreased costs were passed on to riders in the form of lower prices. See Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 116 (1986) (it would be a “perverse result” if the antitrust laws limited “vigorous competition, including price competition”); Eisai Inc. v. Sanofi-Aventis U.S., LLC, No. 08-cv-4168, 2014 WL 1343254, at *15 (D.N.J. Mar. 28, 2014), aff’d, 821 F.3d 394 (3d Cir. 2016) (“[Price] [c]ompetition for market share is not forbidden by the antitrust laws.”). In short, Plaintiffs do not allege facts demonstrating any injury to competition or to consumers in the form of decreased output or higher prices. See Brunswick, 429 U.S. at 488; see also Larry Pitt & Assocs. v. Lundy Law, LLP, 57 F. Supp. 3d 445, 452-53, n.29 (E.D. Pa. 2014) (defendant’s “alleged success in attracting clients, at the expense of its competitors” thus Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 16 of 20 12 resulting in lost revenue did not violate Section 2). In fact, Plaintiffs’ allegations confirm that Uber’s conduct had exactly the opposite effect and thus cannot be actionable under Section 2. Plaintiffs also attempt to state a “predatory hiring” claim by making the conclusory allegation that Uber “hired” Plaintiffs’ drivers “for the purpose of harming the Plaintiff[s].” (SAC ¶ 53.) But Plaintiffs only allege that because Uber “had a readily accessible and non- expensive method for obtaining the services of drivers . . . it had no legitimate reason to lure away Plaintiffs and other medallion drivers other than to inflict harm on Plaintiffs and other medallion cab companies.” (Id.) The fact that Uber had other sources for obtaining the services of drivers does not make any solicitation of Plaintiffs’ drivers illegitimate. Plaintiffs still have not alleged a necessary element of a predatory hiring claim, which requires the defendant to “hir[e] a rival’s employees not to use them but to deny them to a rival.” W. Penn Allegheny Health Sys., 627 F.3d at 109 (emphasis added). Not only have Plaintiffs failed to allege that Uber did not use the services of these drivers, they claim the opposite, alleging that Uber has “taken in excess of 7000,000 riders on more than one million trips . . . utilizing 1,700 vehicles and drivers.” (SAC ¶ 81.) Finally, Plaintiffs take issue with legislation “legalizing the operation of transportation network companies in the City of Philadelphia,” claiming it would “facilitate the creation of an illegal monopoly in the relevant market.” (Id. ¶¶ 85, 97.) This argument is premised on the mistaken belief that the antitrust laws compel “every new entrant into a market … to comply with every regulation applicable to incumbents in the market with whom the new entrant will be competing.” Ill. Trans. Trade Ass’n, 839 F.3d at 597. Such reasoning overlooks that the Commonwealth has expressly stated its desire to encourage competition through two sets of regulatory schemes that account for different business models. Id. At their core, these Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 17 of 20 13 allegations only reinforce the conclusion that Plaintiffs’ real complaint is with increased competition (not harm to competition), and with any legislation that Plaintiffs believe facilitates that competition. C. Plaintiffs Have Not Alleged That Uber Specifically Intended To Achieve A Monopoly, Rather Than Advancing Its Business Goals. “[P]laintiffs alleging [attempted] monopolization under [Section] 2 must produce [specific] intent evidence.” Advo Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191, 1199 (3d Cir. 1995). The failure of the SAC to allege any facts regarding intent is another reason to dismiss Plaintiffs’ Section 2 attempted monopolization claim. See Xtreme Caged Combat v. Cage Fury Fighting Championships, No. 14-cv-5159, 2015 WL 3444274, at *9 (E.D. Pa. May 29, 2015). “Specific intent is the intent to accomplish the forbidden objective, an intent that goes beyond the mere intent to do the act.” Yeager’s Fuel, Inc. v. Pa. Power & Light Co., 953 F. Supp. 617, 639 (E.D. Pa. 1997) (quoting Great W. Directories, Inc. v. Southwestern Bell Tel. Co., 63 F.3d 1378, 1385 (5th Cir. 1995)). In alleging specific intent, a plaintiff must establish “that the acts were not predominantly motivated by legitimate business aims.” Pa. Dental v. Med. Serv. Ass’n, 745 F.2d 248, 260-61 (3d Cir. 1984) (citations omitted). Plaintiffs fail to allege facts—as opposed to bald legal conclusions—indicating that Uber’s conduct was motivated by anything other than its own legitimate business goals. Uber’s conduct is entirely consistent with innovative market entry and output-enhancing competition. Plaintiffs’ Sherman Act claim therefore should also be dismissed for failure to allege specific intent. III. PTA Lacks Standing To Pursue Its Claims. PTA does not allege that it suffered any harm as a consequence of Uber’s alleged conduct, and thus lacks Article III standing to pursue its claims. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016). Nor can PTA, an association of medallion taxi companies founded for Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 18 of 20 14 the purpose of suing Uber (SAC ¶ 3), establish associational standing under Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333 (1977), by merely alleging claims “on behalf of its membership” (SAC ¶ 5). PTA cannot prevail on its claims without demonstrating that its members were injured—a showing that, as Plaintiffs effectively concede (see id. ¶ 4), can only be made here (if at all) by the taxi companies themselves. See Sw. Suburban Bd. of Realtors, Inc. v. Beverly Area Planning Assoc., 830 F.2d 1374, 1381 (7th Cir. 1987) (plaintiff lacked associational standing under Hunt because antitrust claim required proof of actions taken against association members). Inasmuch as individual participation of PTA’s members is required, “it does not matter that . . . [PTA] purports to seek only injunctive and declaratory relief,” PTA still lacks associational standing under controlling law. Franco v. Conn. Life Ins. Co., 647 F. App’x. 76, 83 (3d Cir. 2016) (dismissal of antitrust claim for lack of associational standing). IV. Plaintiffs’ Case Should Be Dismissed With Prejudice Plaintiffs have had two opportunities to remedy the fatal defects in their antitrust claim, yet have been unable to do so because they are perversely trying to use the antitrust laws to block increased competition by Uber in Philadelphia. No amount of additional factual amplification can fix the fundamental flaws in Plaintiffs’ attempted monopolization claim. Any further attempt to amend would be futile. See Lum v. Bank of Am., 361 F.3d 217, 229 (3d Cir. 2004) (affirming with prejudice dismissal of antitrust claims because amendment was futile). CONCLUSION For the foregoing reasons, Plaintiffs’ SAC is defective as a matter of law and should be dismissed. Because Plaintiffs already have amended their complaint twice, and the defects in Plaintiffs’ antitrust claim are incurable, the dismissal should be with prejudice. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 19 of 20 15 Dated: December 5, 2016 Respectfully submitted, MORGAN, LEWIS & BOCKIUS LLP /s/ Steven A. Reed Steven A. Reed steven.reed@morganlewis.com R. Brendan Fee brendan.fee@morganlewis.com 1701 Market Street Philadelphia, PA 19103 Telephone: +1.215.963.5000 -and- Brian C. Rocca (pro hac vice) brian.rocca@morganlewis.com Sujal J. Shah (pro hac vice) sujal.shah@morganlewis.com One Market, Spear Street Tower San Francisco, CA 94105 Telephone: +1.415.442.1000 Counsel for Defendant Uber Technologies, Inc. Case 2:16-cv-01207-JS Document 28-1 Filed 12/05/16 Page 20 of 20 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA PHILADELPHIA TAXI ASSOCIATION, INC., et al., Plaintiffs, v. UBER TECHNOLOGIES, INC., Defendant. NO. 2:16-cv-01207-JS JURY TRIAL DEMANDED [PROPOSED] ORDER AND NOW, this _____ day of ___________________ 2016, upon consideration of Defendant Uber Technologies, Inc.’s Motion to Dismiss Plaintiffs’ Second Amended Complaint and any response thereto, IT IS HEREBY ORDERED that, for the reasons set forth in Defendant’s motion and supporting memoranda, Plaintiffs’ Second Amended Complaint is DISMISSED WITH PREJUDICE. BY THE COURT: Hon. Juan R. Sánchez Case 2:16-cv-01207-JS Document 28-2 Filed 12/05/16 Page 1 of 1 CERTIFICATE OF SERVICE I hereby certify that on this 5th day of December, 2016, the undersigned filed the foregoing Memorandum of Law in Support of Defendant Uber Technologies, Inc.’s Motion to Dismiss Plaintiffs’ Second Amended Complaint via the Court’s CM/ECF system, which sent notice to all counsel of record in this action. /s/ R. Brendan Fee Counsel for Defendant Uber Technologies, Inc. Case 2:16-cv-01207-JS Document 28-3 Filed 12/05/16 Page 1 of 1