On April 18th, the ride-sharing service Lyft entered the St. Louis market with a party on Cherokee Street.
And immediately, it ran into legal trouble.
Lyft's drivers were operating in violation of a cease-and-desist order from the region’s taxi regulator. A few days later, a judge ordered the company to disable its mobile app.
Lyft and the Metropolitan Taxicab Commission are back in court on May 14 arguing over whether the company should be allowed to operate — and who has the power to regulate it in the first place.
Who are the players?
- Lyft – A San Francisco-based company that launched its ride-sharing mobile app in June 2012. It’s the second successful ride-sharing start-up for Logan Green and John Zimmer. In 2008, the duo introduced Zimride, which focused on longer trips between cities. They sold Zimride to St. Louis-based Enterprise in 2013 to raise additional money for Lyft.
- Metropolitan Taxicab Commission – A state-created entity that sets the rules and regulations for vehicles for hire in St. Louis and St. Louis County. That includes everything from taxis to town cars to medical transport vehicles to pedi-cabs to horse-drawn carriages.
What are the relevant laws?
The MTC’s vehicle-for-hire code covers everything. That includes: How much a taxi can charge for a ride; how to resolve disputes over prices; when animals are allowed in the vehicles; and what the dress code is for drivers.
Section 401a of the code reads: "No person shall operate a vehicle for hire in the county or the city without first obtaining an MTC driver’s license authorizing the operation of that particular class of vehicle for hire." You can’t do business without this license. Both companies and drivers must be licensed through the MTC.
So, what is a “vehicle for hire?” Here’s the definition straight from the code.
Vehicle for hire shall refer collectively to airport shuttles, airport taxicabs, alternative transportation vehicles, commercial shuttles, courtesy vehicles, limousine, non-emergency medical transport vehicles, on-call taxicabs, premium sedans, promotional vehicles or vintage premium sedans and any motor vehicle engaged in the business of carrying persons for hire on the streets of the city or county where the compensation for said transportation is made either directly or indirectly. (emphasis added)
That last line is probably the most important in the debate over Lyft. According to its own terms of service, the company makes it very clear that it’s not providing transportation services. In all caps, it says,
Lyft does not provide transportation services, and Lyft is not a transportation carrier. The Lyft platform provides a means to enable persons who seek transportation to certain destinations (Riders) to be matched with person driving them to or through these destinations. (Drivers.)
The company may have a point. The app itself doesn’t provide transportation services. But what about the people who sign up to drive? Unlike taxicabs, Lyft says, payment is voluntary for its system. Therefore, Lyft cars are not technically vehicles for hire.
Drivers with an MTC license undergo background and driving record checks, and carry an insurance policy of at least $200,000. Lyft says it conducts background and driving record checks on those who sign up to drive. But Neil Bruntrager, the attorney for the Metropolitan Taxicab Commission, says the commission can’t take the company’s word for it
What about the “dispatch license?”
In April 2013, the Metropolitan Taxicab Commission created another class of license to address the growing world of smartphone apps. It reads: "Any person or entity that acts as an intermediary of any sort for a fee in the provision of transportation for hire by a vehicle for hire to another person."
That seems to be a reasonable compromise. But there’s a catch. Companies have to work with drivers who are already certified by the MTC. It can’t just be “your friend with a car,” as Lyft likes to call itself.
The court fight
The Metropolitan Taxicab Commission issued a cease-and-desist order before Lyft began its operations in St. Louis on April 18. A few drivers were cited during that first weekend for violating the vehicle-for-hire code. When the cease-and-desist wasn't enough, the MTC went to court.
On April 21, judge David Dowd agreed with the MTC that the commission would face immediate and irreparable injury if Lyft drivers and the Lyft app were allowed to operate without proper licensing from the MTC. Dowd issued a temporary restraining order. The MTC is now seeking a preliminary injunction, which would halt Lyft’s operations until a court can decide if it is subject to the vehicle for hire code.
Lyft made the following arguments in response:
- The company was not notified of the hearing, and therefore the court did not hear all the relevant information.
- MTC licensing requirements do not apply to Lyft. Therefore the case cannot succeed on the merits. (A temporary restraining order is supposed to be granted only if the person requesting the restraining order is likely to succeed when the case is argued in court.)
- There is no harm to the MTC because drivers were cited for failing to comply with the code. There is no proven threat to safety.
- A temporary restraining order actually harms the public by removing an alternate mode of transportation
Regulators in Houston, Kansas City and Columbus have also taken Lyft to court to halt its operations. A federal judge in Houston denied a restraining order. Attorneys in Columbus withdrew their request for an injunction when a similar request against Uber was denied. Lyft successfully got Kansas City’s request for a TRO moved to federal court - a move that failed in St. Louis.
Follow Rachel Lippmann on Twitter: @rlippmann