A group of 45 Philadelphia taxi companies filed suit in federal court Tuesday alleging that Uber, the app-based taxi enterprise, is waging unfair competition against medallion owners who must operate under state laws and regulations.
Lead litigant Checker Cab Philadelphia and the other cab operators accused Uber of racketeering.
"Not since the days of bootlegging has there been a criminal enterprise so brazen and open as to attract hundreds of millions of dollars in investment from investment bankers and to operate in blatant violation of federal and state law as Uber," reads the complaint. The case was filed in the Eastern District of Pennsylvania.
Checker Cab Philadelphia and the plaintiffs group sued Uber; its chief executive officer, Travis Kalanick; Delaware-registered entities tied to Uber; and Google Ventures, which has invested $258 million in Uber.
The suit also names 18 individuals, including Uber drivers it says are operating illegally in the city.
Pennsylvania's Public Utility Commission recently allowed UberX to operate in the state, but not in Philadelphia, where taxis are regulated by the Philadelphia Parking Authority.
UberX is the firm's cheaper car service. Another service, Uber Black, legally provides on-demand limousine service in Philadelphia and elsewhere in the state, complying with regulations on insurance, inspections, and licensing.
Citing financial and reputation damage and loss of sales, among other claims, Checker and the plaintiffs group contend the UberX drivers are operating an illegal enterprise under the federal Racketeer Influenced and Corrupt Organizations Act, known as RICO, damaging the value of taxi medallions.
A taxi medallion in Philadelphia currently costs about $520,000. The total value of the medallions that allow cabs to operate in the city is about $880 million, according to one figure cited in the lawsuit.
As a result of the "unlawful competition of these defendants, the medallion taxicab plaintiffs suffered a significant reduction in the value of their medallions," the suit said.
The plaintiffs are represented by Michael Henry of Salaman Grayson & Henry P.C., a Philadelphia firm that specializes in commercial litigation.
Checker Cab also alleges false advertising over an Uber e-mail and website messages on Oct. 24 that claimed, "In October, the largest taxi insurer in Pennsylvania went bankrupt . . . There's no guarantee that your taxi ride will be insured."
First Keystone Risk Retention, a now-defunct insurer whose policies were to expire on Nov. 20, had insured many city taxi drivers. In the suit, Checker's attorneys said all Philadelphia taxicab medallion plaintiffs had obtained replacement coverage by Oct. 24, despite the insurer's failure.
Kalanick's legal problems extend far beyond Philadelphia. Prosecutors in South Korea on Wednesday charged him, his company, and the head of its domestic business partner, MK Korea Co., with violating a transportation law.
San Francisco Uber faces growing legal challenges as it expands in Asia amid mounting protest from taxi operators, Bloomberg News reported. Uber and other ride-sharing services face similar legal and regulatory challenges in many U.S. cities.
Seoul's Metropolitan Government said this year it might ban Uber's service and similar applications on grounds they are unsafe and compete with licensed taxi services. Starting next week, the government will offer rewards of as much as $905 to people who provide information on Uber's services.
Uber's South Korea unit and MK Korea illegally operated rental cars as taxis, an official with the Seoul Central District Prosecutors' Office said by phone Wednesday. The official, who asked not to be identified, citing internal policy, declined to comment on whether prosecutors expected Kalanick to appear for questioning.
Uber said it would fully cooperate with the investigation and was confident the court would uphold a fair and sensible judgment.
"We firmly believe that our service, which connects drivers and riders via an application, is not only legal in Korea, but that it is being welcomed and supported by consumers," the company wrote in an e-mail distributed by its South Korean public relations representative.