A federal judge on Monday rejected the city of Portland's motion to move its lawsuit against Uber back to Multnomah County Circuit Court.
U.S. Distict Court Judge Michael H. Simon ruled that the controversial car-sharing startup had "proven by a preponderance of the evidence" that it is an out-of-state company at risk of losing significant profits because of enforcement of local regulations.
"Federal district courts have jurisdiction over civil actions in which the litigants are citizens of different states and the amount in controversy exceeds $75,000," Simon wrote in his 4-page Opinion and Order.
Simon scheduled a Dec. 23 hearing in his courtroom on the city's request for a restraining order to force Uber to stop operating in Portland.
After issuing a cease-and-desist order against Uber, which launched in Portland without permission on the night of Dec. 5, city transportation officials have hit Uber with $67,750 in fines.
So far, code enforcement officers have gone after only Uber for operating an unlicensed taxi service. No drivers have been cited yet, said Bryan Hockaday, a policy advisor to Commissioner Steve Novick, who oversees the transportation bureau.
The grace period for drivers is about to end. "After receiving two warnings, drivers will now be issued penalties," Hockaday said.
In many cases, Bureau of Transportation code enforcers have issued fines to Uber after simply ordering a ride from the company's smartphone app, which provide the license plates, photos and drivers' first names.
"But we have also successfully taken some rides," said Frank Dufay, the city's private for-hire transportation manager.
Portland sued Uber in Multnomah County court last week, seeking a judge's injunction to block the company from operating within the city limits.
The complaint contends the app-based ride service UberX violates city regulations governing private for-hire transportation.
However, Uber requested a change of venue to federal court, arguing in court documents that the company stood to lose more than $100,000 in profits if required to follow the city's regulation process for taxis.
"If Uber is prohibited from operating its business in the city of Portland, Uber would suffer significant lost profits," Brooke Steger, Uber regional general manager, said in court documents.
Why does jurisdiction matter?
Portland officials say a local judge would be quicker to rule on their requested injunction against Uber, preventing the company from establishing its service and building additional public support. Such proceedings typically move much slower in federal court, they said.
Uber fines in Portland
During the first 10 days of Uber operating illegally in Portland, the city has fined the company $67,750. The fines increased with repeated violations.
Dec. 8:
$2,750 First violations for unpermitted company and vehicle.
Dec. 9:
$5,000 Second violations for unpermitted company and vehicle.
Dec. 10:
$10,000 Third violations.
Dec. 13:
$10,000 Fourth violations.
Dec. 13:
$10,000 Fifth violations.
Dec. 13:
$10,000 Sixth violations.
Dec. 13:
$10,000 Seventh violations.
Dec. 13:
$10,000 Eighth violations.
In its request to remand the case to county courts, the city argued that a company that has just begun operating illegally isn't in a position to claim significant financial losses. City attorneys also argued that lost profits must mean net profits rather than lost revenue.
Simon disagreed on both counts.
"Both lost profits and the cost of compliance (with the city's strict taxi regulations) are permissible ways to measure the cost of an injunction to a defendant," the judge wrote in his ruling.
"The City also argues that a business may not profit from illegal activity, but whether Uber's activity is illegal is a question reserved for the merits in this case," Simon wrote, adding that Portland can't prevail by "putting the cart before the horse."
In his denial of the city's motion for remand, Simon said the city failed to submit any evidence to disprove Uber's arguments about the cost of compliance.
Federal court documents filed by the city show that transportation officials have hired at least one private investigator to help its officers hail Uber drivers using their private vehicles as de facto taxis.
In a declaration to the court, Nena Baker said she was employed by the city to take five cross-town Uber rides last Tuesday.
Uber has vowed to keep operating, saying the city's "antiquated" taxi laws don't apply to its services, and has promised its contracted drivers that it will pay any fines they receive.
Still, it appears that some drivers aren't eager to announce their presence on the city's streets just yet.
Baker testified that a driver who picked her up in a Dodge Charger in Southeast Portland "told me that Uber sent him a large 'U' decal, but he said it was optional and he did not see a reason to put it on his vehicle."
--Joseph Rose