IN FOCUS

by Matthew W. Daus, Esq.
President, International Association of Transportation Regulators
Distinguished Lecturer, University Transportation Research Center, Region 2
Contact: mdaus@windelsmarx.com • 156 West 56th Street, New York, NY 10019
T. 212.237.1106 • F. 212.262.1215


THE RIDE STOPS HERE – REGULATORY PUSHBACK AGAINST ROGUE APPS: IATR IS WINNING THE WAR ON ROGUE APPS!

By Matthew W. Daus, Esq. & Jasmine K. Le Veaux, Esq. Transportation Practice Group

Over the past few months, there has been significant activity throughout the country regarding app companies who have launched in jurisdictions throughout the U.S., without first seeking regulatory approval or proper licensing. Local transportation authorities have seemingly had enough of these rogue operations, and in places like Texas, Denver, Maryland and New York City, regulators are fighting back against app companies that have been attempting to provide transportation services to the public without even attempting to comply with the locality’s licensing or insurance requirements or safety standards.

Below is a regulatory round-up of various localities which have created momentum, and which leads me to conclude that we are winning the war against rogue apps at this time. The house of cards created by these phantom technology transportation companies is beginning to crumble, thanks in large part to IATR members' efforts working closely with regulated and law abiding industry members and groups like the Taxi, Limousine and Paratransit Association (TLPA).

At the end of the day, these services are scary and must be stopped before they seek to completely deregulate the industry. To prove my point, before we begin, just click on the terms and conditions of Uber’s contract with passengers.[1] The third paragraph in the “Limited Liability” section includes the egregious statement below:

THE QUALITY OF THE TRANSPORTATION SERVICES SCHEDULED THROUGH THE USE OF THE SERVICE OR APPLICATION IS ENTIRELY THE RESPONSIBILITY OF THE THIRD PARTY PROVIDER WHO ULTIMATELY PROVIDES SUCH TRANSPORTATION SERVICES TO YOU. YOU UNDERSTAND, THEREFORE, THAT BY USING THE APPLICATION AND THE SERVICE, YOU MAY BE EXPOSED TO TRANSPORTATION THAT IS POTENTIALLY DANGEROUS, OFFENSIVE, HARMFUL TO MINORS, UNSAFE OR OTHERWISE OBJECTIONABLE, AND THAT YOU USE THE APPLICATION AND THE SERVICE AT YOUR OWN RISK.

Matthew W. Daus, Esq. (left), partner and Chair of the Transportation Practice Group at Windels Marx is joined by Associate and practice group member Jasmine Le Veaux (right), at the law firm's Midtown Manhattan offices.


Texas

In Austin, the Austin Transportation Department (“ATD”), along with the City Council, has been addressing the threat that rogue ridesharing apps are having on the riding public by proposing amendments to its regulations, including revised definitions of “chauffeur” and “compensation”.

The ATD, Mr. Carlton Thomas, briefed the Commission on May 14, 2013 on the proposed amendments to the City Code and Charter Services Ordinance which would outlaw the operations of rogue “ridesharing” app companies.

The ATD directed the City Manager to explore ridesharing regulations in peer cities and to make recommendations by June 1, 2013. Austin regulator Mr. Carlton Thomas briefed the Commission on May 14, 2013 on the proposed amendments to the City Code and Charter Services Ordinance which would outlaw the operations of rogue “ridesharing” app companies.

Rideshare apps have received several citations over the past year for operating in Austin without a permit. In a memorandum from the ATD to the Mayor and City Council dated May 31, 2013 (“Memo to the Mayor), the ATD recounts at least three instances where the driver and vehicles cited were uninsured.

Further, in one very dangerous instance, a citation was issued for unlicensed for-hire operation. The vehicle was also impounded because the app-affiliated driver was on parole and the vehicle was equipped with an alcohol detection device as a part of the ignition system, a type of equipment usually assigned to persons found guilty of driving under the influence. These scenarios go directly to the heart of the
public safety issue.

On May 23, 2013, the City Council held its meeting and considered the amendments to the City Code in relation to ridesharing. In response to Council direction, the ATD, in working with other Ground Transportation authorities as well as the International Association of Transportation Regulators (“IATR”), recommended clearly defining “rideshare” in the City Code Chapter 13-2-1.

This effort was anticipated to provide and maintain a clear distinction between multiple forms of rideshare services and regulated ground transportation services. It was also recommended that the definition of “compensation” should be amended to exclude reimbursement for fuel and toll costs. The City Council decided to postpone the matter until June 6, 2013 allowing more time for discussion and research, but a vote to block rogue ridesharing operations appears imminent.[2]

The ATD also concludes in its Memo to the Mayor that “ridesharing” for compensation is illegal and should remain illegal as it negatively impacts the public. On June 6, 2013, an attorney for SideCar Austin announced they would “turn off their App for 60 days.”

Further, the City of Dallas has issued two cease and desist letters against Uber for illegal operations and is ticketing the company daily. In addition, Houston has issued a cease and desist letter against Tickengo, a ridesharing app company based in San Francisco, for illegal operations in the city. This included reports that drivers were arriving for scheduled pick-ups in different vehicles than those indicated when the trip reservation was made, as well as some drivers arriving for pick-ups who were not registered by Tickengo as affiliated drivers.


Maryland

Similar forceful action against Uber Technologies, LLC (“Uber”) is taking place in Maryland before the Public Service Commission (the “PSC”). On March 8, 2013, the Maryland Public Service Commission (“PSC”) served Uber with a “Staff Data Request” which raised approximately thirty-five (35) factual inquires regarding their operations. Uber’s responses were due on or about March 18, 2013.


The extensive list of questions included e.g.,

  1. inquiries regarding whether drivers are licensed and/or receive background checks;

  2. how does Uber confirm that drivers and vehicles have the proper level of insurance; and

  3. questions about the company’s rate structure and how fares are calculated.

On April 15, 2013, the IATR served the PSC with a letter (the “IATR letter”) informing the staff of public safety concerns and other accountability issues that are raised when unlicensed transportation technology companies are allowed to operate without oversight. Annexed to the IATR’s letter was the IATR’s Proposed Model Regulations for the PSC’s consideration.

On May 9, 2013, the PSC Staff released its Public Report which finds Uber to be a “common carrier” providing transportation services for-hire.[3] Accordingly, the PSC directed Uber to file for authorization from the PSC. The PSC Staff also stated that each new app company seeking to begin operations in Maryland will be reviewed on a case-by-case basis for the PSC to determine whether they require licensure.

The PSC prominently relied on the IATR’s letter in justifying its recommendation. The PSC scheduled a pre-hearing conference in regard to the Staff’s Public Report in order to consider the nature and extent of regulation over the operations of Uber and other similar companies for June 26, 2013. A final hearing date will be scheduled thereafter.[4] It is not often that the PSC disagrees with Staff recommendations so this will likely result in another win for public safety and consumer protection.


New York City

After announcing in March 2013 that it had launched its ridesharing service operations in New York City, SideCar became the subject of a “sting operation” by the New York City Taxi & Limousine Commission (“TLC”).[5] Representatives acting on behalf of the IATR contacted and complained to the TLC’s Deputy Commissioner for Enforcement who immediately conducted a sting operation based on the information communicated.

Over the course of one weekend in April, TLC inspectors issued violations to two drivers for operating without TLC licenses. In both cases, the vehicles were seized as well. In the first week of May, SideCar appeared before an administrative law judge to defend the driver in the first scheduled appearance for the “free rides” resulting from the sting operation. As a result of being found guilty, SideCar announced on May 15 that it would suspend its New York City operations.


Colorado

The Colorado Public Utilities Commission (the “Colorado PUC”) held two public hearings to address proposed amendments to the state’s transportation rules that would effectively drive Uber out of the state.[6]

The Administrative Law Judge assigned to the Colorado PUC proceeding issued amendments which would expand the definition for “motor carrier” to include any person who advertises or otherwise offers to provide transportation services (Transportation Rule 6001(ff)) and which introduces a definition for a “transportation broker” in Transportation Rule 6001(ee).[7]

Under proposed Transportation Rule 6001(ee), a transportation technology company that solely “arranges, or offers to arrange, passenger transportation for a chartering party” and which “does not provide or offer to provide transportation service,” may be considered a “Transportation Broker” and is not required to be licensed by the Commission. However, if a company advertises to provide transportation service or advertises transportation service other than by brokerage, it may be considered a “common carrier” or “contract carrier”.[8]

As such, if the proposed amendments are passed, Uber will be regulated by the Colorado PUC and will require licensure as a common or contract carrier. Colorado will then represent another jurisdiction moving in the right direction of putting the public’s safety first.


Lawsuits – Massachusetts, Chicago, San Francisco, etc...

In addition to the rulemaking and enforcement actions taking place, there are several lawsuits mounting across the nation against rogue app companies.

In Chicago, several taxicab companies have collectively filed a class action lawsuit against Uber in federal court alleging, among other things, that Uber violates city, state and federal law designed to protect public safety and welfare through the use of deceptive business methods.

The Chicago complaint also alleges that Uber prohibits the Chicago Plaintiffs from complying with current regulations regarding data collection. This includes mandated reporting of all payments collected including fares and extra charges, and whether the fare was dispatched or hailed.

The Chicago plaintiffs argue that when an affiliated driver does not inform the affiliation of its relationship with Uber, Uber places the affiliation at risk because the licensed affiliation is now unable to ensure that its drivers are in compliance with applicable laws. This suit is ongoing.

Similarly, two of Boston’s largest taxicab companies, Boston Cab Dispatch, Inc. and EJT Management, Inc., have filed suit against Uber claiming that Uber’s use of an unlicensed dispatch system ignores regulations that are essential to public safety and that Uber uses a payment system that illegally overcharges customers. Although the lawsuit was commenced in state court, because it includes a federal RICO claim, the Boston lawsuit may wind up in the federal court system.[9]

Further, in California, drivers for San Francisco based Luxor Cab have filed a class action lawsuit against Uber alleging the company is engaging in unfair business practices by skirting rules that apply to traditional taxi services.[10]

The complaint claims that “by partnering with unauthorized and unpermitted drivers to unlawfully compete with law abiding taxicab drivers,” Uber is “acting as a taxicab company while sometimes [denying] this fact in order to avoid all regulations governing taxicab companies.”

The ongoing suit specifically charges that Uber:

  1. dispatches limousines and town cars that are not licensed to act like taxis;

  2. uses illegal GPS enabled metering devices, aka smartphones;

  3. charges rates other than those prescribed by law;

  4. prohibits customers from paying cash; and

  5. operates a service without the necessary licenses.[11]


The aforementioned events suggest that, although rogue app companies are attempting to expand at a rapid pace throughout the country, there seems to be a general consensus among regulators that these apps are dangerous.

Jurisdictions like New York City, Maryland and Austin have recently demonstrated significant pushback against app
companies, either requiring licensure, initiating rulemaking, increasing enforcement and/or interrogating safety issues.

To further address these issues, the IATR has published a legal and policy primer regarding ground transportation regulation as it relates to “ridesharing” apps and transportation technology companies entitled, “Ridesharing Applications: Illegal Hitchhiking or Sustainable Group Riding?” The “Rideshare Report”.[12]

The Rideshare Report summarizes the business models of “ridesharing” app companies, the regulatory challenges presented by their operations, and how jurisdictions throughout the U.S. are addressing such challenges.

The Rideshare Report was prepared in consultation with numerous regulators who commented on and helped draft sections, and also includes the final IATR approved model definition for “rideshare.” This is not just a report sitting on a shelf, but a living document that is being actively used as ammunition in our ongoing battles by and for regulators standing up for what is right and not trendy.

This battle is being fought on several fronts and includes attacks by biased pro-technology media reporting as well as back door political lobbying by rogue apps. Transportation authorities across the nation are taking action to protect the public from the threats rogue app companies pose to the public.They are accomplishing this through thoughtful and necessary rulemaking and/or enforcement requiring the licensure of rogue app companies and mandating that they meet local safety standards. The war is not over, but the tide has turned, and the IATR is winning!


1. https://www.uber.com/legal/terms#
2. Id.
3. http://www.bizjournals.com/baltimore/news/2013/05/10/uber-app-may-be-subjected-to-state.html?page=all
4. http://articles.baltimoresun.com/2013-05-15/business/bs-bz-uber-ruling-20130515_1_century-old-yellow-cab- uber-app-san-francisco-based-uber
5. http://techcrunch.com/2013/05/01/sidecar-sting-nyc/
6. Proposed Rules available at http://www.scribd.com/doc/122690162/
Colorado-PUC-Docket-No-13R-0009TR- with-Proposed-Rule-Changes.
7. “Transportation broker” is referred to in the definition of “chartering party” under Transportation Rules 6201(d) and Rule 6301(b) “Chartering party” is defined as a person or group of persons who share a personal or professional relationship whereby all such persons are members of the same affiliated group, including, a family, business, religious group, social organization or professional organization. “Chartering party” does not include groups of unrelated persons brought together by a carrier, transportation broker, or other third party. Colorado Transportation Rule 6201(d) (emphasis added).
8. Transportation Rule 6016(b); Transportation Rule 6201(f) and 6201(g); Transportation Rule 6203(a).
9. http://www.xconomy.com/boston/2013/03/12/uber-sued-in-boston-case-could-wind-up-in-federal-court/
10. http://www.huffingtonpost.com/2012/11/14/uber-lawsuit_n_2133532.html
11. http://www.scribd.com/doc/113269256/2012-11-10-08-01-07-pdf
12. The Report is available online at http://www.windelsmarx.com/resources/
documents/Ridesharing%20Applications%20-%20May%202013%20-

 


© 2013 TLC Magazine Online, Inc.