Lyft uses pink mustaches to identify its cars.
Lyft uses pink mustaches to identify its cars.

By Tim Redmond

A taxi association has filed a pair of legal appeals that could directly undermine the state’s decision to allow companies like Uber, Lyft, and Sidecar to pick up passengers in San Francisco.

The case has received very little press attention, but it could upend a key part of the “sharing economy” in the city and force companies that are trying to act as unregulated cabs to curtail their operations – at least for now — or subject themselves to local regulation.

In San Francisco, that could mean seeking taxi permits, adopting stricter driver-screening and training rules, accepting rate regulation, and allowing passengers to complain to the Taxi Commission about service problems.

Among other things, the two legal filings argue that the California Public Utilities Commission had no right to legalize the ride-share companies without a full review under the California Environmental Quality Act.

The claims also suggest that the state agency undermined the ability of local government to regulate the cab industry.

If either of the arguments convinces the courts, then the CPUC could be forced to suspend its approval of the ride-sharing services – meaning the Lyft, UberX, and SideCar would be operating illegally until local governments granted approval.

The role these new companies play in the local transportation system, and the legality of what they’re doing, has been an issue for years. And the cab companies have been talking about suing for some time now.

The basic problem: The taxi industry has been tightly regulated for hundreds of years in major cities. In London, New York, Chicago, San Francisco and most other urban centers, cabs are considered part of the transportation infrastructure.

Every cab has to have an operating permit. Every driver has to undergo a background check and training. Rates are set by the city. Taxi drivers are required to pick up fares anywhere in town and can’t discriminate against seniors, disabled people, or any ethnic group.

If you don’t like the way you’re treated by a cab driver, you can complain to the city – and that driver could lose his or her permit. No such luck with the new services — although if a Lyft driver doesn’t like YOU, and posts that on the app, you could be SOL on ever getting a ride again.

The old system has its flaws – drivers get no health insurance, there are too few cabs in some parts of town and at some times of day, and the San Francisco industry was way too slow to adopt modern technology (that is, a cell-phone app that could summon a cab and give you an honest estimate of when it will be there).

But when the new ride-share companies entered the market, they simply ignored all the existing rules. There were no insurance requirements, no licensing, no permits – people just started driving their personal cars around and picking up passengers.

Then, in the face of possible local restrictions, the companies asked the CPUC to weigh in — and the agency, which has not traditionally interfered with cab rules, issued a finding that the new services were not cabs and could continue on with few significant changes.

The companies that wrote the apps that made this possible insisted that they weren’t in the taxi business at all – they just made ride-sharing possible. But the drivers were operating their cars pretty much exactly like cabs.

The two cases were filed separately May 9, one with the Court of Appeal and the other with the state Supreme Court. That’s because the two courts are responsible for different issues – and the cases raise several.

The law firm of Freidman and Springwater is representing the Taxicab Paratransit Association of California.

Among the claims that are before the Appeals Court: The CPUC can’t legally grant permission to ride-sharing companies to pick up passengers in cities because the state Legislature has specifically given that authority to local government.

“The Commission arrogated to itself authority far in excess of that duly delegated to it by the Legislature,” the lawsuit argues, “creating wholesale violation of municipal taxi regulation throughout the state.”

The case before the Supreme Court raises another issue, one that hasn’t been much discussed in the local debate over the ride-shares. The Supreme Court hears all appeals from state agencies like the CPUC when there’s a CEQA issue – and the taxi association lawyers say that the agency should never have issued these rules without a full environmental study.

The commission “has caused thousands of vehicles to engage in commerce operations on city streets and roadways” without the benefit of the sort of clean-air rules that apply to local taxis, the filing states.

The suit notes that San Francisco has become a national model for creating a green taxi fleet – a high percentage of the regulated, permitted vehicles are either hybrids or run on natural gas.

There are no such rules for ride-sharing vehicles, which can be old gas guzzlers or new clean-air cars; Lyft, UberXand SideCar don’t care.

That’s the crux of a lot of the argument here: If cities can’t regulate this type of vehicle traffic and commerce, and the state regulations are really loose, there are all sorts of unforeseen problems.

Depending on the scope of the ruling, the CEQA suit could put implementation of the rules allowing ride-shares on hold; a full environmental impact report could take as long as a year or more. If the other claims are upheld – again, depending on the scope of the ruling – the entire regulatory system could be overturned, the rules allowing ride sharing companies to continue to operate could be revoked, and San Francisco could begin working on its own local regulations.

The Taxi Commission has been deeply concerned about the lack of local rules. At the very least, the commission’s director, Chris Hayashi, wants the drivers to apply for permits (which the city could, and most likely would, limit), pay a reasonable fee, and undergo background checks. She also wants to be sure UberX, Lyft, and SideCar are buying enough insurance to cover their drivers.

In other words, instead of these ride-sharing companies saying they are nothing but apps that allow individuals with no formal connection to the corporation to use their cars to make money, the city wants them to take responsibility for what they do.

That could have an impact on so much else in the “sharing economy” – companies like Airbnb argue that they aren’t hotel operators, just middlemen connecting two private parties, the way Ebay is just a site that facilitates private sales.

The difference is that taxis have always been treated as public utilities, and hotels have always been regulated and taxed; before Ebay, private parties could sell stuff in the classified ads. Ebay really is just a medium for exchange; the other industries are something different.

If you buy a car on Ebay and run someone over the next day, Ebay clearly isn’t at fault. But if Lyft signs you up as a driver and you run someone over while working for hire, is Lyft on the hook?

If it acts like a taxi and works like a taxi and has all the impacts on the city of a taxi, is it really a taxi?

That’s what the courts are going to have to wrangle with – and the outcome could go far beyond a ride-sharing app.