Will a class-action suit put the brakes on Uber?

Taxi drivers protest against transportation network companies such as Uber and Lyft along with Assembly Bill 2293 at the State Capitol in Sacramento, California, June 25, 2014. REUTERS/Max Whittaker

There’s been an inevitability about the spread of Uber, the app-based ride-sharing service, as it’s implanted itself into more cities around the world, including major Canadian ones such as Toronto and Montreal.

Despite its popularity with riders, Uber has met opposition almost everywhere. Taxi operators see it as unfair competition and municipal governments resent Uber thumbing its nose at attempts to regulate the service.

But it keeps expanding. Like the Borg in TV’s ‘Star Trek,’ it seems resistance is futile.

Which raises this question: what chance does a lawsuit filed on behalf of Ontario cabbies have of succeeding where regulators and protesting cabbies almost everywhere have failed?

A law firm has filed a class action worth more than $400 million, alleging the tech company conspired with its UberX drivers to pick up passengers for compensation, breaching Ontario’s Highway Traffic Act.

Section 39.1 of the provincial law bans the practice of giving rides for money without proper licensing, permitting or authorization, the claim alleges. Uber is also accused under another subsection of the act of arranging or offering to arrange the allegedly illegal pickups.

The representative plaintiff, cab owner-operator Dominik Konjevic, alleges Uber “conspired to arrange or offered to arrange for these passengers to be picked up by the UberX drivers thereby diverting millions of dollars of revenue away from licensed taxicab, limousine owners and drivers in Ontario and injuring their ongoing legitimate business interests,” a news release on the suit explains.

Besides hundreds of millions in damages, the claim calls for an injunction prohibiting UberX from operating in Ontario.

Lawyer Jay Strosberg, whose firm Sutts, Strosberg LLP filed the claim last week on behalf of Konjevic, is considering an interlocutory injunction to suspend UberX’s operation until the case is decided. He told Yahoo Canada on Tuesday he has not decided on the timing of an injunction motion.

The allegations remain untested in court and Uber’s Canadian arm has not yet filed a statement of defence.

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Uber issued a statement last week calling the class action a “protectionist suit without merit.” Canadian spokeswoman Susie Heath offered no further comment when contacted Monday.

The company has pointed to a recent Ontario Superior Court ruling that UberX had not violated the City of Toronto’s bylaws governing taxi and limo services by operating as an unlicensed broker for UberX and more upscale UberXL services.

Strosberg actually agrees with that ruling because Uber itself plays no direct part in the transaction between driver and passenger.

“At issue in that proceeding was whether or not Uber was a broker,” Strosberg said in an interview. “The bylaw says that if you’re a broker, you have to be registered. The court quite properly found they weren’t a broker.”

Toronto bylaw ruling not relevant to class action, lawyer says

But he says that’s not relevant to his firm’s class action, which alleges the company and its drivers violated a provincial law, not a municipal bylaw, regarding authorization to take fare-paying customers.

“There’s no question that the drivers of UberX are not registered,” said Strosberg. “Uber can say whatever they like about the lawsuit and that it’s [UberX] lawful, but we allege that it’s not.

“The question is whether Uber is arranging for transportation services without having registered drivers. It’s a very simple lawsuit.”

The Konjevic claim is not the only class action filed against Uber in Canada.

A Montreal law firm filed one last December on behalf of 11,000 city taxi drivers, claiming Uber competes unfairly and flouts regulation governing the taxi sector, according to CJAD News.

Lawyers handling the case were not available this week but lawyer Benoit Marion told CJAD in February he hoped to have the suit certified as a class action later this year. Uber’s Susie Heath would not comment.

Strosberg doubts there will be any problem certifying the Ontario suit as a class action. It requires a judge to rule there is an identifiable class that has common issues, that there’s a suitable representative plaintiff (Konjevic) and that such a suit is preferable for resolving the issue instead of individual lawsuits that Strosberg said could number in the thousands.

“We don’t start cases unless they have merit,” he said. “If you look at the track record of our law firm, we’ve recovered more than $1.5 billion for our clients. We don’t start cases unless we believe in them.”

Legal observers don’t see many obstacles to certifying the suit. The cabbies appear to be an identifiable class who have a complaint in common.

But Prof. Allan Hutchinson of York University’s Osgoode Hall Law School said it might be hard to sell a judge on the need for a private cause of action when Uber is allegedly violating a provincial law.

“That’s not an easy argument to make,” he told Yahoo Canada. “Let’s assume Uber were breaking the regulations in some way. That doesn’t mean that private individuals have an action against Uber.”

It’s easier in Britain than in Canada or the U.S. for people to mount civil claims for breaching legislation. The fact the Ontario government has not gone after Uber itself could hurt.

“If the regulators are not bringing an action, that makes it harder,” Hutchinson said.

Judge to decide if class action preferable to individual suits

Luciana Brasil, a veteran class-action lawyer with Vancouver firm Branch McMaster, said many class actions stumble on the question of whether such a suit is the fairest, most efficient way to resolve a dispute. Defendants like Uber will try to show it isn’t, and that individual lawsuits are preferable, which would blunt the impact.

Hutchinson also questioned whether Strosberg will be successful in getting an interlocutory injunction against Uber.

“You’d have to show that whatever damages occurred to the taxi drivers couldn’t be compensated in money, and that’d be a very difficult thing to show, because it could be compensated in money,” he said.

A judge would also likely be unwilling to handcuff Uber’s business without strong evidence the class action is winnable, he added.

If the case is certified, it raises the question whether an out-of-court settlement is in the cards and what that might look like.

Ideally, the taxi industry would like to put Uber out of business, “but that ain’t gonna happen,” said Hutchinson. Likewise, Uber wants to remain unregulated, but if it believes it could lose the class action it might opt to deal directly with the Ontario and municipal governments to negotiate regulations covering its drivers, he said.

“The problem here is how do you settle a case that alleges that they are in breach of legislation?” Brasil pointed out. “Because on a go-forward basis, are they going to be able to continue on breaching the act, or is the settlement going to require them to do some significant change in their behaviour to bring them in compliance with the statute?”

Another wild card is the potential for neutering the case with retroactive legislation that would bring Uber under a regulatory umbrella, she said. It’s not unheard of.

In 2009, the University of British Columbia lost a class-action suit filed by a group that challenged its authority to collect parking fines on campus. But before the university’s appeal was heard, the B.C. government passed a retroactive law giving the school that power and forcing the B.C. Court of Appeal to set aside the judgement.

“What if they were to patch the Highway Traffic Act where they were to contemplate the possibility of Uber picking up people?” Brasil wondered.

Of course, it would take some doing to get Ontario MPPs on board, which brings the whole Uber controversy back into the political realm.

“It’s going to require the legislators to have a sense of whether people, ultimately [what] they’re going to think, what’s better for the voters and they’re going to have to gauge what makes more sense,” said Brasil. “So they’re going to be pitting the taxi operators and drivers against the people that are saying it’s [Uber] convenient and makes sense.”

Need to look at bigger picture, legal expert says

With class actions like this, it’s important to look at the bigger picture, Hutchinson said.

“I think we sometimes think the class action is purely a legal initiative,” he said. “People can bring actions for all kinds of strategic reasons, to draw attention and get a response from people in authority.”

The suit is one initiative intended to bring Uber to the table, Hutchinson said. At this early stage, it’s not expensive, though that would change if the case appears headed for trial.

Uber’s track record suggests it will fight, said Brasil, which would drag out the case. At the same time, expect the company to enlist public opinion on its side. That might not be hard, given the taxi industry’s dubious public image.

“So the taxi drivers as well are going to have to put their own house in order and improve the services they’re offering, which from the public point of view would be no bad thing,” said Hutchinson.

There’s no doubt Uber resisters in other provinces will be watching the Quebec and Ontario cases closely to see if there’s anything they can use, or if it is indeed futile to fight.