Desoto Cab Co., Inc. v. Picker

          ORDER DENYING DEFENDANTS’ MOTION TO DISMISS DOCKET NO. 31

          EDWARD M. CHEN United States District Judge

         Plaintiff Desoto Cab Company, Inc., d/b/a Flywheel Taxi (“Flywheel”), has filed a suit for declaratory and injunctive relief against the Commissioners of the California Public Utilities Commission (“CPUC”), in their official capacities only. Flywheel, a “traditional” taxi company, asserts a § 1983 equal protection claim against the CPUC based on its assertion of jurisdiction over new transportation carriers such as Uber, Lyft, and Sidecar. Flywheel contends that these so-called transportation network carriers (“TNCs”)^[1] are de facto taxi companies and therefore should be subject to the same rules and regulations as traditional taxi companies, which are governed not by the CPUC but rather by local municipalities such as the San Francisco Municipal Transportation Agency (“SFMTA”). The gist of Flywheel's complaint is that the CPUC's rules and regulations are less strict than the rules and regulations of, e.g., the SFMTA, so that, by exercising jurisdiction to regulate TNCs and freeing them of the more demanding regulatory requirements of the SFMTA, the CPUC is affording TNCs more favorable treatment than traditional taxi companies. According to Flywheel, because TNCs are taxi companies just like traditional taxi companies, all should be treated equally: all should be regulated by either local municipalities such as the SFMTA or the CPUC.

         The CPUC moved to dismiss Flywheel's complaint based on ripeness, jurisdictional, and joinder grounds. Having considered the parties' briefs and accompanying submissions, the Court hereby DENIES the motion to dismiss.

         I. FACTUAL & PROCEDURAL BACKGROUND

         A. California Public Utilities Code and CPUC Orders and Decisions

         Before reviewing the allegations in Flywheel's FAC, the Court first considers relevant sections from the California Public Utilities Code and then some of the orders/decisions issued by the CPUC regarding TNCs.^[2]

         Chapter 8 of the California Public Utilities Code governs “charter-party carriers of passengers.” “'[C]harter-party carrier of passengers' means every person engaged in the transportation of persons by motor vehicle for compensation, whether in common or contract carriage, over any public highway in this state.” Cal. Pub. Util. Code § 5360. Charter-party carriers of passengers are required to “operate on a prearranged basis”; “prearranged basis” means “the transportation of the prospective passenger was arranged with the carrier by the passenger, or a representative of the passenger, either by written contract or telephone.” Id. § 5360.5; see also Id. § 5381.5(a) (providing that the CPUC must “ensure that every charter-party carrier of passengers operates on a prearranged basis within the state”). The distinction between charter-party carriers and traditional taxi companies seems to turn on this concept of “prearranged.” Traditional taxicabs can provide an on-demand service - i.e., they can be hailed in the street - and therefore there is no prearrangement. Charter-party carriers, in contrast, may not be hailed in the street.

         The CPUC has the authority to “supervise and regulate every charter-party carrier of passengers in the State.” Id. § 5381; see also Cal. Const., art. XII, § 4 (providing that the CPUC “may fix rates and establish rules for the transportation of passengers”). Chapter 8, however, does not apply to “[t]axicab transportation service licensed and regulated by a city or county, ” Cal. Pub. Util. Code § 5353(g), or to “transportation service . . . rendered wholly within the corporate limits of a single city or city and county and licensed and regulated by ordinance.” Id. § 5353.5; see also id § 5353(a) (providing the same); Cal. Gov't Code § 53075.5 (providing that, “[n]otwithstanding Chapter 8 (commencing with Section 5351) of Division 2 of the Public Utilities Code, every city or county shall protect the public health, safety, and welfare by adopting an ordinance or resolution in regard to taxicab transportation service rendered in vehicles designed for carrying not more than eight persons, excluding the driver, which is operated within the jurisdiction of the city or county”).

         In December 2012, the CPUC issued an order instituting rulemaking related to TNCs. See generally Docket No. 22 (Ex. A) (order instituting rulemaking (“OIR”)). The CPUC's order took note of the new business model being used by TNCs such as Uber, Lyft, and Sidecar and expressed concern about the potential impact of these companies on public safety. The CPUC sought comment on various issues, including not only safety and insurance but also “how the Commission's existing jurisdiction . . . should be applied to businesses like Uber, Sidecar, and Lyft.” Docket No. 22 (Ex. A) (OIR at 6); see also Docket No. 22 (Ex. A) (OIR at 10) (summarizing issues for which comment was sought).

         In September 2013, the CPUC issued a decision adopting rules and regulations related to TNCs. This decision shall hereinafter be referred to as the Phase I decision. See generally Docket No. 22 (Ex. B) (Phase I decision).

         With respect to the issue of the CPUC's jurisdiction over TNCs, the Phase I decision stated as follows:

California law currently recognizes and regulates three modes of passenger transportation for compensation: taxi services, regulated by cities and/or counties; and charter-party carrier services, and passenger-stage companies, regulated by the Commission. In recent years, the communications revolution in wireless service, smartphones, and on-line apps has further facilitated the development and adoption of passenger transportation for compensation to a point where passengers seeking rides can be readily connected with drivers willing to provide rides in private vehicles. This development in passenger transportation for compensation, referred to in this proceeding as TNCs and associated with companies including UberX, Lyft, and Sidecar, does not fit neatly into the conventional understandings of either taxis or limousines, but that does not mean that this Commission's responsibility to public safety in the transportation industry should be ignored and/or left for individual companies or the market place to control.

Docket No. 22 (Ex. B) (Phase I Decision at 11-12).

         Accordingly, in the Phase I decision, the CPUC set certain rules and regulations for each TNC - e.g., “we require each TNC (not the individual drivers) to obtain a permit from the California Public Utilities Commission (Commission), require criminal background checks for each driver, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, and require insurance coverage.” Docket No. 22 (Ex. B) (Phase I Decision at 3).

         The Phase I decision, however, did not foreclose further rules and regulations applicable to TNCs. Indeed, the decision ordered

a second phase to this proceeding to review the Commission's existing regulations over limousines and other charter-party carriers to ensure that the public safety rules are up to date, and that the rules are responsive to the needs of today's transportation market. In addition, the second phase will consider the potential impact of any legislative changes that could affect our ability to regulate the TNC industry. When the second phase is complete, the Commission will initiate the Commission's resolution process to update the General Order (GO) 115 and 157 series to include the new regulations relating to the charter-party carrier subclass of TNC.

Docket No. 22 (Ex. B) (Phase I Decision at 3); see also Docket No. 22 (Ex. B) (Phase I Decision at 74) (discussing the same).

         In January 2016, the CPUC issued a proposed decision on, inter alia, the Phase II issues identified in its Phase I decision. See generally Docket No. 22 (Ex. D) (Prop. Phase II Decision). Several months later, in April 2016 (i.e., after the Commissioners filed the motion to dismiss but before Flywheel filed its opposition thereto), the CPUC issued its Phase II decision. See generally Docket No. 42 (Ex. J) (Phase II Decision). One of the CPUC's rulings was that “every TNC shall certify . . . the nature of their operations, and shall also certify how the fares are calculated.” Docket No. 42 (Ex. J) (CPUC Decision at 4). Also, the Phase II decision addressed fare splitting by TNCs. See Docket No. 42 (Ex. J) (Phase II Decision at 4, 45) (stating that such fare-splitting operations “are permitted, subject to certain conditions”); Docket No. 42 (Ex. J) (Phase II Decision at 9 n.3) (noting use of the term “fare splitting” instead of “ride-sharing” as it was a more accurate representation of the service). The CPUC also stated in its decision that additional issues would be considered in a Phase III proceeding. See Docket No. 42 (Ex. J) (Phase II Decision at 5).

         B. Flywheels Pleading

         Having reviewed the CPUC orders and decisions, the Court now turns to Flywheel's pleading. In its first amended complaint (“FAC”), Flywheel alleges as follows.

         Flywheel is “a taxi company that operates on-demand transportation services in the City and County of San Francisco.” FAC ¶ 13. As a traditional taxi company, Flywheel is regulated by the San Francisco Municipal Transportation Agency (“SFMTA”) and not the CPUC. See FAC ¶¶ 11-12.

         “In October 2012, the SFMTA exercised jurisdiction over UberX, Lyft and Sidecar and began to regulate them as taxi companies.” FAC ¶ 20. However, some two months later (i.e., in December 2012), the CPUC instituted a rulemaking process to assess how companies such as UberX, Lyft, and Sidecar should be regulated. See FAC ¶ 21. The exercise of authority by the CPUC appears to have removed the power of regulating TNCs from the SFMTA, and vested it in the CPUC.

         In September 2013, the CPUC issued its Phase I decision in which it adopted rules and regulations that govern TNCs specifically. See FAC ¶ 23.

         According to Flywheel, TNCs are just like traditional taxi companies because both offer “on-demand private ground transportation services.” FAC ¶ 27. Flywheel implicitly takes the position that hailing a TNC car through a smart phone is just like making an on-street hail. See FAC ¶ 27 (alleging that on-demand services are provided “with rides summoned through street or smart-phone hails”). Flywheel also points out that many traditional taxi companies, including itself, also provide transportation services through the use of smart phones. See FAC ¶ 28 (noting that traditional taxi companies also “arrange transportation services using smart phone applications on telecommunications hardware devices that rely on global positioning system location technology to offer transportation services”; adding that Flywheel “receives 30, 000 service requests per month through smart phone applications”).

         Because, in Flywheel's view, there are no material differences between a traditional taxi company and a TNC, the same rules and regulations should apply to both, but the CPUC's rules and regulations which apply to TNCs are less strict than the rules and regulations promulgated by local municipalities for taxi companies. For example:

• “The CPUC requires liability insurance at levels far below the minimum requirements for taxi companies in San Francisco.” FAC ¶ 34.

• “The CPUC has never required [TNCs] to maintain workers' compensation insurance for drivers. In contrast, taxi companies in San Francisco are required to maintain workers compensation ...