Author: bedelman

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Uber investor challenged “fraud” by former CEO Travis Kalanick

In a Delaware complaint, Uber investor Benchmark Capital Partrners challenged “the fraud, breaches of fiduciary duty, and breaches of contractual obligations perpetrated by” former Uber CEO Travis Kalanick “to entrench himself on Uber’s Board of Directors and increase his power over Uber for his own selfish ends.” The lawsuit focused in part on Kalanick’s “fraudulently obtain[ing] control” of three new seats on Uber’s boards through “his material misstatements and fraudulent concealment … of material information” that would have led Benchmark to reject the request.

Benchmark said Kalanick engaged in “gross mismanagement and other misconduct” which it summarizes as follows:

Kalanick’s personal involvement in causing Uber to acquire a self-driving vehicle start-up that, according to a confidential report not disclosed to Benchmark at the time (the “Stroz Report”), allegedly harbored trade secrets stolen from a competitor; an Uber executive’s alleged theft of the medical records of a woman who was raped by her Uber driver in India; a pervasive culture of gender discrimination and sexual harassment that ultimately prompted an investigation by the former U.S. Attorney General Eric Holder; and a host of other inappropriate and unethical directives issued by Kalanick.

Benchmark said Kalanick “knowingly concealed these matters from” it and other investors.

Benchmark explained its approach and its concerns in a letter to Uber employees.

In a statement, Kalanick replied: “I am disappointed and baffled by Benchmark’s hostile actions, which clearly are not in the best interests of Uber and its employees on whose behalf they claim to be acting.”

Kalanick moved to send the lawsuit to arbitration, avoiding a deposition that Recore said could have been “damaging.” On August 30, 2017, the Court agreed, ending the public litigation docket and putting all further proceedings in confidential arbitration.

Litigation docket

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Prohibited pricing practices in India

In an August 2017 decision, a New Delhi magistrate held that Uber, as well as local competitor Ola, had violated the Motor Vehicles Act by charging prices other than those specified by law. See Section 67(d).

The decision resulted from a complaint filed by a non-government organization, Nyayabhoomi, which also alleged other violations: vehicles with tourist permits providing services on point-to-point basis in violation of law; running on diesel fuel in violation of orders from the Supreme Court of India.

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Knowingly leased recalled vehicles to drivers in Singapore

Uber knowingly leased recalled vehicles to its drivers in Singapore. A Wall Street Journal report (paid subscription required) describes a driver whose vehicle caught fire, due to the problem fixed by the recall, just after a passenger got out. WSJ explains:

News of the fire rippled through Uber’s Singapore office after its insurance provider said it wouldn’t cover the damage because of the known recall, emails show. Word reached Uber’s San Francisco executives two days later, emails show.

Uber’s lawyers in Singapore began assessing the legal liability, including possibly violating driver contracts for supplying faulty cars and failing to immediately inform the Land Transport Authority about the defective cars, emails show. “There is clearly a large safety/responsible actor/brand integrity/PR issue” for Uber, an internal report read.

Additional coverage from TechCrunch.

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Inferior access to passengers who use wheelchairs (New York City)

A July 2017 complaint, filed by the nonprofit legal group Disability Rights Advocates in New York, criticized Uber’s failure to include wheelchair-accessible vehicles in its standard UberX fleet, claiming that 99.9% of Uber’s vehicles were inaccessible to people with mobility disabilities, in violation of New York’s anti-discrimination laws.

The lawsuit alleged that Uber riders who need wheelchair-accessible vehicles face significantly longer wait times than other passengers, and that at some periods and in some places, no wheelchair-accessible vehicles are available at all.

The lawsuit further alleged that passengers attempting to use Uber’s accessible service face extended wait times, or are denied access to
the service altogether, which the plaintiffs said reveals that the accessible service was “window-dressing designed to avoid government regulation and legal requirements” and insufficient under law.

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Overcharged commissions to New York drivers

For New York drivers, Uber took its commission based on gross fares including state taxes, rather than net fares after deduction of taxes. The New York Times estimated that this overcharged New York drivers by more than $200 million — and increased Uber’s revenue by the same amount.

A subsequent New York Times analysis compared Uber’s tax and billing practices across jurisdictions, examining receipts to assess irregularities and comparing changing contract language to understand Uber’s shifting approach.

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