United States District Court, N.D. California
ORDER DENYING DEFENDANTS’ MOTION TO DISMISS
DOCKET NO. 31
M. CHEN United States District Judge
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”) 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.
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.
FACTUAL & PROCEDURAL BACKGROUND
California Public Utilities Code and CPUC Orders and
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.
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
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”).
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).
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).
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).
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).
Phase I decision, however, did not foreclose further rules
and regulations applicable to TNCs. Indeed, the decision
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).
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).
reviewed the CPUC orders and decisions, the Court now turns
to Flywheel's pleading. In its first amended complaint
(“FAC”), Flywheel alleges as follows.
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.
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.
September 2013, the CPUC issued its Phase I decision in which
it adopted rules and regulations that govern TNCs
specifically. See FAC ¶ 23.
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”).
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 ...