SUPREME COURT OF THE STATE OF NEW YORK NEW YORK …

[Pages:29]FILED: NEW YORK COUNTY CLERK 07/14/2014

NYSCEF DOC. NO. 23

INDEX NO. 451476/2014 RECEIVED NYSCEF: 07/14/2014

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY --------------------------------------------------------------------X THE PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York; BENJAMIN M. LAWSKY, Superintendent of Financial Services of the State of New York,

Plaintiffs, - against -

Index No. 451476/2014

IAS Part 5 Justice Kathryn E. Freed

LYFT, INC.,

Defendant.

--------------------------------------------------------------------X

DEFENDANT'S MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS' MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

ACTIVE 202632959v.4

SIDLEY AUSTIN LLP 787 Seventh Avenue New York, New York 10019 Tel: (212) 839-5300 Fax: (212) 839-5599

SCLAR ADLER LLP 19 West 34th Street, 1018 New York, NY 10001 Tel: (646) 494-3240 Fax: (212) 537-0359

Attorneys for Defendant Lyft, Inc.

TABLE OF CONTENTS PRELIMINARY STATEMENT .....................................................................................................1 FACTUAL BACKGROUND..........................................................................................................5 ARGUMENT ...................................................................................................................................9 I. PLAINTIFFS HAVE NOT MET THEIR BURDEN OF SHOWING A LIKELIHOOD

OF SUCCESS ON THE MERITS.....................................................................................10 A. Plaintiffs Have Not Met Their Burden of Showing a Likelihood of Success with

Respect to Sections 2102, 2117, and 2122 of the Insurance Law or 11 N.Y.C.R.R. 153(8) .....................................................................................................................10 1. Lyft Is Not Violating Section 2102 of the Insurance Law.........................10 2. Lyft Is Not Violating Insurance Law Section 2117 ...................................13 3. Lyft Is Not Violating Insurance Law Section 2122 ...................................14 4. Lyft Is Not Violating 11 N.Y.C.R.R. ? 153.8............................................15 B. Plaintiffs Have Not Met Their Burden of Showning a Likelihood of Success on their Claims for Violations of Vehicle and Traffic Law ("VTL") ? 370.1 and 501.2(v), Chapter 437 of the City of Buffalo Code, Chapter 108 of the Rochester Municipal Code or Article 19 of the New York City Administrative Code..........15 C. Plaintiffs Have Not Met Their Burden of Showning a Likelihood of Success on the Merits of Their Claims Concerning Alleged Deceptive Business Practices under GBL ?? 349 and 350....................................................................................20 D. Plaintiffs' Business and Corporation Law ("BCL") ? 1301 Claim is Moot ..........20 II. PLAINTIFFS HAVE NOT MET THEIR BURDEN OF SHOWING IRREPARABLE HARM................................................................................................................................21 A. Plaintiffs' Perceived Harm Is Speculative and Contingent....................................23 B. Plaintiff Cannot Show Any Harm That Is Imminent Or Immediate......................24 III. A BALANCING OF THE EQUITIES FAVORS LYFT, NOT PLAINTIFFS .................25 CONCLUSION..............................................................................................................................27

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Defendant Lyft, Inc. ("Lyft") respectfully submits this memorandum of law in opposition

to Plaintiffs' motion for temporary restraining order and preliminary injunction.

PRELIMINARY STATEMENT

Plaintiffs, the Attorney General for the State of New York (the "AG") and the

Superintendent of Financial Services (the "Superintendent") have employed a strategy--

involving misrepresentations to the public and noncompliance with statutory requirements1--

designed to destroy Lyft's business without due process. In fact, rather than permitting the Court

to resolve the motions pending before it, Plaintiffs took to the press on Friday, July 11,

announcing that the Court had "granted the State a temporary restraining order" and accusing

Lyft of "flout[ing] dozens of different laws."2 Plaintiffs' allegations and misrepresentations are

unfounded. Additionally, as set forth fully below, Plaintiffs have failed to meet their burden of

showing any entitlement to the temporary restraining order and preliminary injunction they seek.

It is well-settled that "[p]reliminary injunctive relief is a drastic remedy and will only be

granted if the movant establishes a clear right to it under the law and the undisputed facts found

in the moving papers." Koultukis v. Phillips, 285 A.D.3d 433, 435, 728 N.Y.S.2d 440, 442 (1st

Dep't 2001) (emphasis added). Here, Plaintiffs have failed to meet their burden of showing

undisputed facts and law supporting a likelihood of success on the merits of their claims,

1 Executive Law ? 63(12), the statute under which the AG brings the majority of its causes of action, requires five days' notice prior to seeking an order enjoining business activity or any illegal acts pursuant to the statute. The AG did not comply with this statutory requirement prior to commencing this action. 2 Plaintiffs issued a press release on Friday, July 11, 2014, which erroneously stated: "As a result of [the AG's and the Superintendent's motion for a temporary restraining order], the court has granted the State a temporary restraining order preventing Lyft from launching this evening in New York City." (Second Affidavit of David Estrada, dated July 14, 2014 ("2d Estrada Aff."), Ex. B.) Plaintiffs later made further misrepresentations that they had obtained an injunction and Plaintiffs' misrepresentations are false and without justification. See . As the Court is aware, the Court granted Lyft's application to adjourn the hearing on Plaintiffs motion for a temporary restraining order based upon Lyft's agreement to preserve the status quo. In their joint press release, Plaintiffs also accused Lyft of violating "dozens of different laws . . . putting the safety of New Yorkers at risk" and putting "law-abiding competitors at a substantial disadvantage." 2d Estrada Aff. Ex. A. Neither the Complaint nor the motion for a temporary restraining order alleged dozens of violations of New York law.

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irreparable injury absent an injunction, and a balancing of the equities in their favor. Indeed, there are disputed issues of fact and law that cannot be resolved on the partial record before the Court, which requires denial of Plaintiffs' motion.

First, Plaintiffs have not demonstrated undisputed facts showing that they have a likelihood of prevailing on the merits of their underlying claims. Plaintiffs have not shown that Lyft is violating regulations concerning "for hire" vehicle statutes or any provisions of New York Insurance Law. Lyft is neither a "for hire" car service company nor does it sell insurance in the State of New York. Rather, Lyft is a real-time, mobile-based, peer-to-peer ridesharing platform, which now operates in more than 60 cities throughout the United States, including Buffalo and Rochester and allows users seeking rides to contact rideshare drivers in the vicinity through use of Lyft's application platform on their mobile phone or tablet (commonly referred to as a "smartphone app"). Although the technology behind Lyft's peer-to-peer ride sharing platform is new, it is based on a ridesharing concept which is not new and has long been endorsed by the State of New York as a safe alternative transportation mechanism.

Residents of the State of New York are benefiting from Lyft's innovative platform and enhanced peer-to-peer ridesharing. Indeed, after nearly three months of operating in the State of New York, during which Lyft has repeatedly engaged with State and municipal authorities in an effort to answer their inquiries and address any legitimate concerns they may have, Plaintiffs have come forward with no evidence of any harm or injury to any individual or the public. Moreover, based upon Plaintiffs' own evidence, Lyft is clearly a donation-based rideshare program, not a "for hire" taxicab service. Indeed, as Plaintiffs' witness affidavits from interns at the Office of the Attorney General ("OAG") demonstrate, an individual can use Lyft's

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smartphone app to arrange a rideshare and pay nothing or make any donation he or she desires to contribute regardless of any suggested donation:

"The suggested donation for my ride was $46. . . . At the time of executing this affidavit, I have not paid the suggested donation or any portion thereof."3

* * * "The suggested `donation' for my ride was $63 . . . . I paid instead $50 . . . ."4 While Plaintiffs seek to impose on Lyft, and its users, laws, rules and regulations that the legislature enacted to govern "for hire" car services, Plaintiffs disregard the differences between the Lyft platform and a traditional livery service. Moreover, Plaintiffs also fail to demonstrate that Lyft is violating any "for hire" laws. For example, the Director of Technology Programs of the New York City Taxi and Limousine Commission ("TLC"), states only that "it appears that the service Lyft is providing is most like for hire vehicle service."5 Brian F. Curran, the Deputy Corporation Counsel of the City of Rochester, similarly concludes only that "[a] person who operated a taxi cab within the City by carrying passengers for hire without being licensed as a taxicab and meeting the requirements of the Code may be in violation of [certain] sections of the Code . . ."6 These are not even close to the required undisputed facts and clear violations of law that would support the issuance of a temporary restraining order. Plaintiffs have also failed to meet their burden of showing Lyft's conduct violates the Insurance Law. Contrary to Plaintiffs' allegations, Lyft does not act as an insurance producer, agent or broker because it does not sell, negotiate, or solicit insurance in New York. Nor has Lyft taken any action to aid any unauthorized insurer in effecting any insurance in New York.

3 Affirmation of Robert Vanwey, dated July 9, 2014, ? 9, which is attached to the Affirmation of Melvin L. Goldberg In Support of Application for a TRO, dated July 11, 2014 ("Goldberg Aff.") as Exhibit 11. 4 Affirmation of Evan Biddlecom, dated July 8, 2014, ? 13, attached to Goldberg Aff. as Exhibit 12. 5 See Affidavit of Joanne Rausen ? 13, attached to Goldberg Aff. as Exhibit 5. 6 See Affidavit of Brian Curran, ? 10, attached to Goldberg Aff. as Exhibit 9.

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Lyft's users receive potential insurance benefits only through Lyft's pre-existing nationwide policy. Lyft has never sought to promote or advertise for any insurer, and Lyft only shares details about its insurance in order to provide necessary information to its users and regulatory authorities. Furthermore, Lyft has never required any of its users to purchase insurance from a specific insurer. Thus, Lyft's conduct does not violate any provisions of the Insurance Law and Plaintiffs have not met their burden of showing a likelihood of success on the merits of their underlying claims.

Second, Plaintiffs have not shown immediate and irreparable harm. Plaintiffs' allegations of perceived harm to the public are purely speculative and are based on sheer conjecture. Even the limited evidence presented to the Court by Plaintiffs makes clear that Lyft has been operating in the State of New York since April 2014, without any identifiable irreparable harm. During that period, over 31,000 rides have been connected using Lyft's smart phone app in Rochester and Buffalo. If there were truly any imminent threat of irreparable harm, Plaintiffs would not have waited months to commence this action.

Finally, the balance of equities is not in Plaintiffs' favor. There is no doubt that Plaintiffs--who have been aware of Lyft's operations in the State of New York for months--can remedy any potential violation of the laws, rules and regulations it argues are applicable to Lyft through traditional enforcement mechanisms. Moreover, there are no facts, much less undisputed facts, supporting a finding that Lyft's operation in New York creates a risk to public safety greater than the risk of taxicabs, livery drivers, and other rideshare programs, which New York state agencies encourage, but for which they disclaim any and all liability. By contrast, the imposition of a restraining order or preliminary injunction will be manifestly unfair to Lyft because it will irreparably harm Lyft's reputation, good will and valuable commercial

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relationships in the New York market prior to a determination of the merits of Plaintiffs' claims on a full record. Indeed, Plaintiffs have already damaged Lyft's business reputation in the context of this motion as a result of Plaintiffs' smear campaign in the press. Plaintiffs' inequitable conduct underscores the inappropriateness of the equitable relief they seek before this Court.

FACTUAL BACKGROUND Unlike a traditional livery or taxi service, Lyft is not a "for hire" car service company. Lyft users that own vehicles are not employees or contractors of Lyft, and are instead users of the smartphone app, who provide their own cars and drive in their spare time. Affidavit of David Estrada, dated July 10, 2014 filed in the Supreme Court of New York Case No. 451477/2014 [Dkt. 12] ("1st Estrada Aff.") ? 6. In fact, the statistics currently available for the Rochester and Buffalo markets show the average hours that users who are vehicle owners drive per week are only 14.8 and 15.6, respectively, 2d Estrada Aff. ? 4, numbers very dissimilar to hours logged by a traditional livery or taxi driver. Lyft does not dispatch these drivers. Rather, the smartphone app automatically connects a user with a vehicle and rideshare user, at which point, the driver and rider have the option to either accept or decline a rideshare with each other, which is not the case with traditional livery services. 1st Estrada Aff. ? 5. In addition, Lyft users that own vehicles are not transporting riders for a fixed and agreed upon compensation like in traditional livery situations, rather, the rideshare user determines exactly how much of a donation they will give (not before the ride, but afterwards, up until 24 hours after arriving at their destination). 2d Estrada Aff. ?? 5-6. The donation system in Rochester and Buffalo works as follows:

a. At the end of a ride, Lyft's smartphone app notifies the passenger of the suggested donation for the driver after the passenger is dropped off at the requested destination. 5

b. At anytime within 24 hours after the ride is completed, the passenger has the option of donating nothing at all, the suggested donation amount, more than the suggested donation amount, or less than the suggested donation amount.

c. A user of Lyft's rideshare program that refuses to make a donation for ridesharing does not have their membership terminated.

d. If a passenger selects a donation amount, that donation is processed on the credit or debit card that is stored for that passenger. Unlike taxis or limousine services, Lyft users with vehicles that use the Lyft mobile application are not allowed to accept cash.

2d Estrada Aff. ?? 5-8. The fact that Lyft is a true donation-based system is highlighted by the AG's office itself,

which had no less than three interns download and test Lyft. See Goldberg Aff. Exs. 11-14. For example, Robert Vanwey, an intern at the New York State Office of the AG, who submitted an affidavit stating he personally used Lyft in Buffalo, New York, stated: "The suggested donation for my ride was $46. ... At the time of executing this affidavit, I have not paid the suggested donation or any portion thereof." Goldberg Aff. Ex. 11 ? 9 (Affirmation of Robert Vanwey, dated July 9, 2014). Another intern, Evan Biddlecom, affirmed that after personally using Lyft in Buffalo, New York, "[t]he suggested `donation' for my ride was $63 ... I paid instead $50 ... Lyft provided me with a receipt by email." Id. Ex. 12 at ? 13 (Affirmation of Evan Biddlecom, dated July 8, 2014).

Lyft screens vehicle owners who use the Lyft smartphone app and requires them to meet strict selection criteria. 1st Estrada Aff. ? 10. Lyft also requires that vehicles used in connection with the Lyft rideshare program meet stringent safety requirements. Affirmation of Alan M. Sclar, dated July 11, 2014, filed in the Supreme Court of New York Case No. 451477/2014 [Dkt. 11] ("Sclar Aff.") Ex. F.

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