Uber hack flap is adding to its already daunting list of lawsuits -- here's a rundown
- Last week, the city of Chicago and the attorney general for the state of Washington filed separate lawsuits against Uber over a previously undisclosed data breach.
- Plus, the ride-hailing company still faces legal battles over harassment, driver classification, 'greyballing' and more, lawyers say.
- A long list of pending litigation could pose a challenge for the company's likely IPO in the next year or two.
Uber keeps adding to a growing list of lawsuits, with recent filings over the ride-hailing company's undisclosed 2016 hack — a trend that continues to plague the company's cultural reversal.
CEO Dara Khosrowshahi has made clear and sweeping changes since being tapped for the position in August to rid the company of scandal tied to founder Travis Kalanick.
The company has made efforts to improve working conditions for drivers and has played nice with city officials who wanted to ban the service from operating in London. Japanese investment giant Softbank is eyeing a $48 billion stake in the company, and Khosrowshahi has hinted at an IPO as early as 2019.
While most of the pending litigation facing Uber is carried over from its former CEO, a laundry list of suits could stand as a hurdle to the company's financial and cultural turnaround.
Here are seven of the biggest legal threats ahead for the company, updated from our previous list that ran in June.
1. Failure to disclose a 2016 data breach
In November, Uber revealed a previously undisclosed 2016 hack that included the personal information of 57 million users and drivers.
The company has said it paid the hackers $100,000 to delete the data and keep the breach quiet — raising consumer protection concerns.
Last week the city of Chicago and the attorney general for the state of Washington filed separate lawsuits against the company, alleging misconduct by the company.
The Washington lawsuit claims Uber violated the state's data breach notification law, which requires that the state be notified within 45 days of a breach if more than 500 Washington residents were impacted.
The hack revealed the information of 10,888 Uber drivers in Washington, according to The Seattle Times.
The Chicago lawsuit claims Uber failed to correct previously known security vulnerabilities:
"After the details of Uber's May 12, 2014 data breach were revealed to the public, Uber was investigated by a number of state and federal regulators that were concerned about its inadequate data security practices. Uber ultimately promised to bolster its data security policies by, inter alia, adopting protective technologies for the storage, access, and transfer of private information ... less than a year later the same failures led to a breach that was one thousand times worse."
The breach is also under investigation by several other states and the Federal Trade Commission, opening the door to potential future lawsuits.
2. Intellectual property battle with Waymo — and a regulatory investigation
Uber's courtroom fight with Alphabet, Google's parent company, has also heated up in recent weeks.
Alphabet's self-driving car unit, Waymo, is claiming that Uber is using a key part of Waymo's self-driving technology. The fight centers around an engineer named Anthony Levandowski, who was deeply involved in Google's self-driving car initiative before leaving to found a self-driving truck start-up, Otto, in early 2016. Uber acquired Otto later that year.
Waymo's lawyers have asserted that Levandowski stole documents from Alphabet, and that Levandowski was already negotiating with Uber before he left Alphabet. Levandowski has tried to stay out of the fray, looking to invoke his Fifth Amendment rights, and Uber has fired him.
Last week, Judge William Alsup granted another delay in the lengthy legal battle in light of a letter written by a second former Uber employee, Richard Jacobs, that claims Uber employees were encouraged and enabled to steal trade secrets from competing companies.
Uber has said Jacobs's letter was nothing more than an attempt to extort money from the company, but the contents appeared to carry weight with Alsup, who said it would be a "huge injustice" to force Waymo to go to trial now, adding that Uber "withheld evidence."
3. Emboldened claimants of discrimination, sexual harassment, and retaliation
During Kalanick's tenure as CEO, Uber was the subject of several workplace culture investigations, one of which resulted in the dismissal of at least 20 employees. Another probe resulted in a 13-page list of recommendations for overhauling the company.
The company says it investigated 215 claims: 54 of discrimination, 47 of sexual harassment, 45 of unprofessional behavior, 33 of bullying, 19 of other harassment, 13 of retaliation, 3 of physical security and 1 wrongful termination claim.
The company is facing several suits from women and former employees of color, alleging that Uber disproportionately favors white men.
While Uber has taken steps to make sure these incidents don't repeat themselves, sexual harassment does not work like bankruptcy, said Phil Bezanson, white collar partner at Bracewell.
"Just because they are doing their best going forward, doesn't erase liability for things they have done in the past," Bezanson said. He said potential litigants may feel emboldened to file a lawsuit after seeing the results of the investigation.
"I do a lot of harassment training for companies," said Kate Bischoff of tHRive Law & Consulting. "Sometimes after that training, the HR department gets complaints, people saying, 'I didn't want to stick my neck out, but now I know that it's a big deal.' I don't know if litigation comes out of that .... We might see more come out of Uber."
Bischoff said a lot depends on meeting various statutes of limitation, both at the state level and at the federal level under Title VII and the U.S. Equal Employment Opportunity Commission. Other factors are whether the company took "timely and appropriate action" on the claims, and whether the interactions were between co-workers or with managers. There's also the option for "commissioners charge," a different way of handling such cases.
It gets even more complicated when one considers arbitration agreements — a very common way for employers to keep legal matters private — and a release of claims that employees may sign when they resign, freeing their former employer from legal responsibility.
Susan Fowler, the sexual harassment whistleblower that most prominently exposed Uber's issues, said in a Supreme Court brief that she was asked to sign a class-action waiver as a condition of employment, and that all employees were required to sign those waivers.
Brooke Schneider, an associate in the Employment practice at Withers Bergman, said exiting employees can refuse to sign releases, or use them to negotiate more severance.
Documents from the California Department of Fair Employment and Housing show a former worker, whose name has been redacted from the document, filed a "right to sue" claim against Uber.
The document says:
Beginning in late 2015, a number of female colleagues sought his intervention regarding alleged sex-based discrimination and harassment they were suffering at the hands of a male supervisor. On several occasions, [redacted] raised these concerns with Uber`s HR department. Instead of investigating the allegations of discrimination and harassment and taking appropriate corrective action, HR told that 'we get a lot of phone calls from employees that we don`t always act on.'
Shortly thereafter, was subjected to a retaliatory investigation, resulting in his termination on or about March 15, 2016.
4. Recourse from sexual assault victims
Several women have come forward in recent months alleging assault by Uber drivers and levying some fault on the part of the company.
In mid-November, two unnamed women sued Uber claiming the company failed to properly vet the drivers who they say assaulted them.
The complaint says:
"Uber has done everything possible to continue using low-cost, woefully inadequate background checks on drivers and has failed to monitor drivers for any violent or inappropriate conduct after they are hired. Nothing meaningful has been done to make rides safer for passengers — especially women. This is no longer an issue of "rogue" drivers who act unlawfully."
Allegations of this kind of misconduct date back several years to 2014, when then-executive Eric Alexander is accused of obtaining the medical records of 26-year-old woman who was allegedly raped by her Uber driver. According to Recode, executives had trouble believing she was telling the truth, speculating that instead the reported rape was an attempt by a competitor to sabotage Uber.
She filed a lawsuit against Uber in June, claiming Uber has intruded in her private affairs and defamed her. Uber helped the prosecution in the rape case at the time it was being heard, and also settled a lawsuit with the woman in 2015. Kalanick publicly said at the time of the case he would do "everything to help bring this perpetrator to justice and to support the victim and her family in her recovery."
It's unclear what international laws and releases of claims apply to the case, lawyers said. Either way, the suit is "just another hit to their brand," Bischoff said.
Tweet: Good. Finally, one of the many women hurt by Uber can actually sue. Women employees are bound by forced arbitration, and won't get justice.
5. Driver classification battles across the globe
Last month a British tribunal ruled on the employee rights of Uber drivers in the country, and again sided with the drivers.
The tribunal ruled that drivers are employees and not self-employed contractors, and therefore entitled to minimum wage and vacation time, according to USA Today.
The company said then it would appeal to decision, and it continues to fight for contractor status on a case-by-case basis in the U.S.
Earlier this year a New York court ruled in favor of three New York Uber drivers aiming for employee benefits, a ruling that could extend to "others similarly situated," according to Law360.
Uber has long argued that drivers, who can set their own hours and own their own cars, are independent contractors. But New York, as well as other local regulators, have found that the start-up exercises considerable control over the drivers, thus treating them like employees.
While Uber headquarters might be undergoing a cultural makeover, the same protections recommended by Eric Holder's report won't necessarily extend to drivers if they are independent contractors, Schneider said. That could stoke even more contention between executives and drivers, she said.
"I look at Uber as a workplace culture that has failed. So now we know, working at Uber is not always pleasant," Bischoff said. "It's difficult, it seems to have this bro culture. Each one of these individual cases now looks more credible. So yeah if they are treating drivers poorly, there's a natural human response to take that seriously."
Uber has updated its app over the past several months, adding a tipping option and giving drivers more control over their trips.
But Michael Solomon, who manages freelance technology talent with 10x Management, said that the treatment of drivers is increasingly starting to affect the perceptions of Uber's technical talent.
"I'm not sure their exact timeline for rolling out autonomous vehicles widespread, but one of the big selling points is they were are making everyone a driver and creating jobs," Solomon said. "That's a big part of their story as the taxi companies are going away. Now they are completely undoing the good part. ... this a company that was very vocal about how good they were to have provided them with gigs, as they rip that out from under them."
6. Regulatory probes into 'greyballing' and data collection
The U.S. Department of Justice launched a criminal investigation into Uber's evasion of authorities in May, according to Reuters. The investigation focuses on a software, "greyball," that Uber used to stay under the radar of transportation authorities, according to The New York Times.
Uber also agreed to years of privacy audits in conjunction with a Federal Trade Commission investigation.
Local authorities in Portland, Ore., found the software was active in that city and denied service to 17 individuals, 16 of which were city government officials, according to Reuters.
7. Lawsuits among board members
Uber itself isn't the target of these suits, but it's certainly unusual to have investors suing each other over corporate governance.
One of Uber's earliest investors, Benchmark, sued former CEO Travis Kalanick earlier this year, alleging Kalanick hid crucial information about the company's problems, which include a sexual harassment investigation. Kalanick said at the time he was baffled by the suit and the dispute ultimately went to arbitration, closing the salacious chapter behind closed doors.
But recent speculation about top executive involvement in covering up the 2016 hack begs the question of whether Uber could see similar suits between board members in the months to come.