California’s Regulation of Uber & Lyft OK’d

SAN FRANCISCO (CN) – State regulators did nothing unconstitutional when they asserted less strict rules and regulations over Uber and Lyft, a federal judge ruled.

Desoto Cab Company, a traditional taxi service now called Flywheel, claimed the California Public Utilities Commission showed favoritism toward ride-hailing apps Uber and Lyft when it decided to regulate transportation network carriers in 2012.

Traditional cab companies are regulated by cities and counties and are subject to more stringent rules, like requirements that taxi companies maintain workers’ compensation insurance for all drivers and carry a minimum level of liability insurance. Cities also impose a limit on the number of taxis that can operate.

At a hearing last month, Flywheel attorney Shannon Seibert argued that fundamentally, there are no material differences between a traditional cab company and Uber, so they should both be subject to the same rules. Otherwise, the state is giving Uber and Lyft preferential treatment, which violates Flywheel’s equal protection rights.

In a ruling late Thursday, U.S. District Judge Edward Chen said that isn’t what happened.

“[N]ot only is there no specific factual allegation in the complaint supporting such an assertion, Flywheel has not presented any case holding that favoritism by the Legislature or government agency afforded to one segment of commerce over another is equivalent to legislation motivated by animus,” Chen wrote.

He said there is a “a reasonably conceivable set of facts” that justify the commission’s decision to treat ride-hailing apps differently than traditional taxis.

“In a street-hail situation, a passenger is . . . more likely to be in a vulnerable position compared to a passenger who prearranges a ride,” Chen wrote. “That is, in a street-hail situation, the passenger typically has an immediate need for transportation services and therefore, in a more vulnerable position, lacks the assurances that come with a pre-arranged ride. Thus, there is a conceivable basis for a differential approach to regulation, including, e.g., closer regulation of rates and imposition of requirements for taxis.”

Seibert had called cab drivers an “historically unappreciated group,” at times the victims of political animus. Chen said this theory is as yet unproven.

“Flywheel’s complaint alleges no facts substantiating its ipse dixit argument; nor has Flywheel cited any case authority supporting its position,” he wrote.

Chen added, “Even assuming that the commission favored transportation network carriers, without more, it cannot be plausibly inferred that the agency therefore bore ill will or hostility to traditional taxi companies – i.e., that it desired to harm them.”

In an email, commission attorney Jonathan Koltz said the commission is pleased with the ruling.

“As we have always maintained: In asserting jurisdiction over transportation network carriers, we have done nothing more than obey longstanding California law. We’re glad that Judge Chen agreed,” Koltz said.

Seibert did not respond to an email requesting comment.