marronlaw Catalina Landing 320 Golden Shore, Suite 410 Long Beach, California 90802

1. Bandits With SmartphonesorLegitimate Transportation Option------Update on the Über Messy World of “Transportation Network Companies” www.marronlaw.com Catalina Landing 320 Golden Shore, Suite 410 Long Beach, California 90802 (562) 432-7422 (562) 432-8682 Presented by Steven C. Rice, Esq. srice@marronlaw.com Monday, September 15, 2014 AGTA – Fall Meeting 2014

2. Q: How Are “TNCs” Different From Bandit Taxicabs? A: They have a better lobbyist. • TNCs began operating as illegal pseudo-taxicabs using smartphone apps to connect passengers with private drivers who charged using GPS-based fare calculators . “App“ uses cellphone as a taximeter. Fares calculated based on time and mileage. • Growth resulted in crackdowns by many municipalities and other regulators. Drivers fined, cars impounded. • TNCs sought protection when operations were threatened with shut-down • California became the leading battleground state (others included New York, Illinois, Colorado, Texas). • In CA, transportation providers are regulated by the Public Utilities Commission (“CPUC”). Taxicabs are locally regulated.

3. Standard TNC Features Usage of a GPS enabled smartphone to: • Electronically hail a “ride”; • Calculate fares/donations based on GPS data collected by the user’s smartphone; • Display transactions; • Access “ratings” of drivers/passengers Non-Cash transactions – credit card only Creation of a profile for each passenger • Credit card information; • Contact info; and • Community rating. Creation of a profile for each driver – • ID and rating. No special license required.

4. UBER • Launched in 2010 in San Francisco. • Expanded to Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Detroit, New York, Philadelphia, Phoenix, Sacramento, San Diego, Seattle, Washington D.C, etc. • Raised a total of $49.5 million in venture capital.

5. Services • Uber offers 4 services utilizing three classes of drivers (not all are available in all areas): • TCP (limo license) Drivers: • Uber Black: Town cars • Uber SUV:SUVs • Unlicensed Drivers: • UBERx: Hybrid and mid-range cars • Taxi Drivers: • Uber Taxi: Use Uber to request and pay for a taxi, at standard taxi meter rates plus a $1 booking fee. A 20% gratuity is automatically added for the driver by default.

6. Fares • For all Uber fares (with the exception of TAXI) the fare breakdown is this: • Base + Distance + Time = Uber Fare* • In order to calculate a passenger’s fare, Uber takes GPS data from his/her smartphone and charges for distance or time depending on the vehicle’s speed. • When the vehicle is travelling over 11mph, Uber charges a distance rate.  • When the vehicle is travelling at or below 11mph, Uber charges a time rate. San Francisco Pricing

7. Services • SideCar and Lyft market themselves as peer-to-peer smartphone applications that connect drivers with passengers. • Drivers: • Non-professional drivers that are seeking to make money on the side by giving people rides in their personal cars. • They are not licensed by any municipal regulatory body or by the PUC.

8. CPUC Rulemaking Proceeding • On December 27, 2012, the CPUC initiated a rulemaking proceeding to discuss TNCs and consider whether: • The CPUC has jurisdiction over TNCs; • TNCs have adequate insurance coverage; • TNCs meet public safety requirements; • TNCs meet access requirements imposed on passenger carriers.

9. The CPUC Rejected TNC Arguments: • “CPUC has no jurisdiction” because: • As “Information Service Providers” they are immune from regulation pursuant to the Telecommunications Act of 1996. • As “IP-Enabled Services” they are immune from regulation pursuant to sec. 710 of the Public Utilities Code. • SideCar, Lyft and others are not engaged in the transportation of passengers for “compensation.” • SideCar, Lyft and others fall within the “ridesharing” exemption, since they do not charge fares and drivers do not “profit.”

10. CPUC Sidestepped Industry Arguments • TNCs use GPS-enabled smartphones as “taxi meters” using largely undisclosed formulas for calculation. • TNC “private car” services are not “pre-arranged”∴ taxicab regulations should apply. • TNCs follow none of the detailed, expensive regulatory requirements that apply to taxicabs - unfair.

11. CPUC Findings Against TNCs- Jurisdiction - • CPUC has jurisdiction over TNCs because: • They are engaged in the transportation of passengers for compensation. (“Donations” are a fiction.) • TNCs are engaging in on-demand passenger transportation activities, activities which must be regulated. (However, CPUC found that state law defining taxicabs was not specific enough to cover TNCs, therefore CPUC could regulate.) • TNCs do not provide “ridesharing” because they are for-profit operations, and they do not reduce overall traffic. • The “Information Service Provider” and the “IP-Enabled Service” immunities are inapplicable where passengers are being transported according to a TNC’s business plan.

12. CPUC Rulemaking • The CPUC’s initial rulemaking was limited to considering whether: • TNCs have adequate insurance coverage; • TNCs meet public safety requirements; • TNCs meet access requirements imposed on passenger carriers.

13. RejectedTNC Arguments- Insurance - • TNCs provide adequate insurance because: • TNCs drivers’ personal auto liability insurance coverage is adequate. • TNCs provide a large “supplemental” insurance policy.

14. CPUC Findings Against TNCs- Insurance- • TNCs do not provide adequate insurance coverage because: • Personal insurance policies do not apply to transportation for compensation situations. • Supplemental or excess insurance which merely provides an overlay to personal insurance coverage is ineffective for same reasons. • TNC operators’ “for compensation” activities are not limited to times when a passenger is in the car.

15. CPUC Rulemaking on TNCsIs Continuing State Legislature is also involved in the insurance issue: • TNC coverage was analyzed as to three time periods: 1. App is on and driver is waiting or staging his vehicle to find passengers via GPS proximity; 2. Connection is made with passenger, and driver is in transit to make pick-up; 3. Passenger is in vehicle (or boarding/leaving vehicle). • Lower coverage limits currently proposed for first period. • Major insurance gaps still exist (Especially as to drivers - personal insurance won’t cover their vehicle damage, no UM, etc.). To drivers “Good luck.” • the TNC must advise its drivers in writing that the driver’s personal automobile insurance policy will not provide coverage when using a vehicle in connection with a transportation network company’s online-enabled application or platform and will not provide collision or comprehensive coverage for damage to the vehicle from the moment the driver logs on to the TNC’s online-app to the moment the driver logs off the TNC’s online-app.

16. CPUC RejectedTNCs Arguments- Public Safety - • TNCs do not cause public safety issues: • Their own background and driver license checks were adequate. • No-Cash Transactions. • Passenger and Driver rating systems increases safety awareness. • GPS tracking of passengers.

17. CPUC Approach to TNCs- Public Safety - • TNCs placed the public at risk: • TNCs’ operations must include driver screening (background checks), vehicle inspections, zero tolerance for alcohol/drug influenced drivers.

18. TNCs – The problem of “Access” • TNCs do not provide universal access : • Drivers for TNCs drive who they want, when they want! • TNCs do not require that their drivers provide transportation services and suitably equipped vehicles to all segments of the population. • No penalty or standards for leaving passengers at the curb. • The “passenger rating system” allows for discrimination.

19. CPUC Rulemaking Re Access Physically Challenged Get “Lip Service” –TNCs required to submit reports on how they will accommodate disabled users. In-vehicle visual impairment issues ignored. Service dog issue ignored. Plus, the reports do not say how and when they will offer wheelchair-accessible vehicles. • "The plans are all quite tentative and don't address the fundamental challenge, which is ensuring enough accessible vehicles to make this transportation system at least minimally accessible for people with mobility disabilities."   Larry Paradis, Exec. Dir., Disability Rights Advocates, Berkeley, CA Discrimination (Race, Religion, Sex/Orientation): TNCs told not to discriminate. Economic: No protections against red-lining, cherry picking, etc.

20. Major Battlegrounds RemainProtections for DriversMinimum wage, OT, business expense reimbursements, etc. are at stake. “Employee” status for drivers due to operational mandates and control. Varies with TNCs, but include: • 95% pick-up rate required • Termination without good cause based on ratings • Cannot accept cash, tips • Unilateral changes in fares, compensation calculations Also, No Protection for drivers’ vehicles • Own insurance will not cover for collision, loss of work, etc. Driver safety from attacks by passengers.

21. Major Battlegrounds Remain“Employee” Classification Issue “Employee” status determination: Varying multi-part tests used by different jurisdictions. Application varies case-by-case. Typical language used by courts: “No one factor is determinative.” Most significantly, courts look to several “key” factors:

22. Major Battlegrounds Remain“Employee” Classification Factors Typical Key factors • Control of the details of the work rather than the result; • Power of hiring party to terminate at will; • Is the contractor in business? [own advertising, own customers, work for others, or exclusive to hirer, set own prices (where not regulated), can hire others to do the work] • Is the contractor in the same business as the hirer?

23. Major Battlegrounds Remain“Employee” Classification Factors Typical Key Factors – Reports on Uber (largely duplicated by other TNCs) • Detailed requirements for service, required to have high customer service ratings, training sessions offered to those getting poor ratings, must accept set % of trips • Termination is immediate for low ratings • All of driver’s business comes through TNC app. No provisions for “personals” and simultaneous use of other apps banned. All prices set by Uber, including “surge.” Cannot accept cash, tips, must driver own car. • Clearly, Uber’s private car business depends entirely on these operators to provide the main services Uber is advertising as their own.

24. Major Battlegrounds Remain“Employee” Classification Factors Class action lawsuits in Massachusetts and California. However not an immediate answer. Class actions typically take 3-7 years to resolve and rarely go to trial – typically settled. However, settlements are public. Massachusetts law is not typical and California case is limited in scope (centered on issue of tip splitting). Regulatory action (e.g., EDD, Labor Commission) is “being considered.” Nevertheless, this is major issue for the future of TNCs. Survival expectation of TNCs under employee model = zero Operational modification to “true” IC model has huge problems. Appeal of TNCs directly relates to areas of excessive control.

25. Major Battlegrounds RemainEnvironmental Issues No “green cab” regulation or alternative fuel requirements for TNCs No “age of vehicle” restrictions on TNCs No EIR required by CPUC, although litigation may be on the way. No vehicle smog testing – other than regular passenger vehicle (bi-annual for older vehicles, none for newer)

26. Major Battlegrounds RemainUnfair Competition/Equal Protection Regulations for taxicab operators in direct competition are much more expensive and detailed. E.g.: • Drivers: Registration, training, licensure, testing. • Vehicles: Age, maintenance, equipment, alternative fuels, access, permanent markings. • Forms of payment, regional response, discrimination. • Fare regulations, limitations (no “surge pricing” allowed for taxicabs) • Fees to support infrastructure, medallion costs, taxes.

27. TNCs at Airports A Special Nightmare for Regulators www.marronlaw.com Catalina Landing 320 Golden Shore, Suite 410 Long Beach, California 90802 (562) 432-7422 (562) 432-8682 Fiscal Impact • TNC activity reduces the value of concessions for transportation providers required to adhere to regulations that TNCs are not bound by (or are violating). • TNCs present special traffic and security challenges, taxing airport resources. • TNCs’ approach to breaking the rules now, seeking accommodation later is especially problematic at airports, and potential for extremely “disruptive” activities is enhanced. • Inadequate “access” vehicles mean additional delays as borderline-ambulatory passengers try to use, and non-ambulatory passengers are turned away. Traffic Control - Security Taxicab-like service = one-ride, one-vehicle correlation (not true ride-sharing). Vehicles not clearly marked = riders searching for vehicle, matching is confusing and uncertain, mixed with all other traffic at passenger curb. TNCs not accountable for conduct of operators. No limit to numbers in airport. “Looping” and loitering in roadways, parking areas, other spaces due to GPS based “matching.” Inadequate “access” vehicles mean additional delays as borderline-ambulatory passengers try to use, and non-ambulatory passengers are turned away.

28. TNCs at Airports A Special Nightmare for Regulators--- www.marronlaw.com Catalina Landing 320 Golden Shore, Suite 410 Long Beach, California 90802 (562) 432-7422 (562) 432-8682 Many other issues facing airport regulators, vary by region, vary by legal landscape, and vary according to which TNCs are active and dominant in area. Marron Lawyers knows these issues. We creatively analyze them, and develop a plan for supporting and enforcing the ban on TNCs at your airports. If politicians have mandated TNC activities at airports, Marron Lawyers can help in developing “best” plan to address TNC issues in your area and/or Responding and working toward a political reversal and reinstatement of the ban.

29. TNCs “Bandit” Approach Continues :Shared Ride is Next • “The carpooling services from San Francisco-based Uber, Lyft and Sidecar all allow riders to pay lower fees if they share vehicles with other passengers going in the same direction, and all say the option has been well received by customers. • “Early this month, Uber announced that 100,000 people in the Bay Area had volunteered to test its UberPool service. • “The CPUC sent the companies letters, dated Sept. 8, stating that charging riders different fees for sharing the same car violates state law governing the operations of charter party carriers. “ (www.bizjournals.com) • Look familiar??

30. Familiar Response: Uber, Lyft and SideCar staying in shared ride market, despite CPUC action

31. Thank you! Questions? www.marronlaw.com Catalina Landing 320 Golden Shore, Suite 410 Long Beach, California 90802 (562) 432-7422 (562) 432-8682 Presented by Steven C. Rice, Esq. srice@marronlaw.com Monday, Sept. 15, 2014