Uber Seeks Dismissal of Consumer Gratuity Charge Class Action Lawsuit

On Thursday, Uber Technologies Inc. asked a California federal judge to dismiss a class action lawsuit over driver tips, arguing customers don’t have a right to know how a mandatory gratuity charge is distributed.

Uber has developed an app that enables users to request transportation services from participants, including taxicabs. Plaintiff Caren Ehret filed a class action lawsuit against Uber on behalf of a nationwide Class of people who have used Uber’s app to request transportation from third party taxicab drivers. She alleges that Uber deceives its customers by indicating that it will add a 20 percent gratuity to their fare, then keeping a portion of that gratuity for itself rather than distributing the entire gratuity to the driver. She alleges this conduct is in violation of California’s Unfair Competition Law (UCL).

According to Uber’s motion to dismiss the gratuity charge class action lawsuit, a California appeals court has already ruled that consumers do not have a legitimate interest in what a company elects to do with any mandatory charges added to their bills. Further, Uber argues that Ehret “does not allege that Uber misrepresented anything about the total amount that would be charged for transportation services. Nor does [she] allege that Uber represented it would pay the entire mandatory 20% charge directly to taxi drivers.”

Uber argues that Ehret has failed to state a claim under the UCL. Uber relies on the California Court of Appeals’ decision in Searle v. Wyndham Int’l, which stated a defendant “has no obligation to advise consumers about what it does with the revenue it receives from them.” In Searle, the plaintiff argued that a mandatory 17 percent service charge added to a room service bill violated the UCL because the hotel failed to disclose that the entire service charge would be paid to the room service waiters. As a result, the plaintiff alleged, guests were induced to pay additional gratuities they “would not otherwise feel obligated to provide.”

In the case of Searle, the appeals court held that the plaintiff failed to state a claim under the UCL because the plaintiff had agreed to pay for the service at the stated price and did not have an interest in how the hotel distributed the service charge.

In its motion to dismiss the gratuity charge class action lawsuit, Uber argues that its conduct was not unfair or misleading, and that Ehret did not suffer harm from the gratuity charge. In fact, Uber argues she “received exactly what she paid for—a taxi ride at a stated price—and she therefore lacks standing to assert a UCL claim. … Several courts, in many different contexts, have held that a plaintiff cannot state a UCL claim if the plaintiff received what he or she bargained for.”

At Thursday’s hearing, U.S. District Court Judge Edward Chen expressed doubt that consumers have no interest in misleading representations about mandatory charges they pay. Although he has not yet ruled on Uber’s motion to dismiss the class action lawsuit, he found that Ehret’s allegations under the “fraud” prong of the UCL were sufficiently specific to stand.

Uber customers are not the only ones to take issue with the company’s mandatory gratuity policy. Uber drivers are also pursuing a class action lawsuit against the company, alleging Uber’s policy prevents them from receiving the tips that are customary in the car service industry.

Plaintiffs are represented by Hall Adams III of Law Offices of Hall Adams LLC, Jacie Campbell Zolna and Myron Milton Cherry of Myron M. Cherry and Associates, and Michael Francis Ram of Ram Olson Cereghino & Kopczynski LLP.

The Uber Gratuity Charge Class Action Lawsuit is Caren Ehret v. Uber Technologies Inc., Case No. 3:14-cv-00113, in the U.S. District Court for the Northern District of California.

UPDATE: On July 25, 2016, a proposed settlement has been reached in the Uber Gratuity Charge class action lawsuit.

UPDATE 2: The Uber gratuity charge class action settlement is now open. Click here to file a claim!