Flywheel Taxi sues state, says cities should regulate Uber, Lyft

Flywheel Taxi has filed suit against state regulators, claiming the taxi industry is regulated unequally compared to its new technology cousins like Uber and Lyft.

The suit was filed U.S. District Court of Northern California on Sept. 23, but announced by litigant Flywheel Taxi late Friday.

“The fact is, I cannot compete against a company that plays by another set of rules,” said Hansu Kim, president of Flywheel Taxi.

Taxis and ride-hail apps like Uber play by two sets of standards, the suit argues. Taxis must have robust vehicle inspections, video surveillance to protect passengers, Department of Justice criminal background checks, in-person training, restrict vehicle carbon emissions, restrict vehicle mileage, be fully insured, and more.

But Uber and Lyft, by contrast, do not need to meet those same strict standards, the suit argues. Notably, Kim said, the taxi industry has taken on financial losses in the face of stiff competition from Uber, and Lyft.

Those technology companies are legally known as Transportation Network Companies, and are regulated by the California Public Utilities Commission, the regulator targeted by the suit.

The CPUC said it hadn’t yet seen the suit, and therefore could not yet comment. Uber did not immediately return requests for comment.

Flywheel Taxi’s suit argues the uneven playing field between the old and new for-hire transit companies is a violation of equal protection under the Fourteenth Amendment.

It also claims those rules differ because two sets of regulators — cities and the state — regulate taxis and for-hire apps. The CPUC, a state entity, regulates Uber and Lyft. But city agencies across California, like the San Francisco Municipal Transportation Agency regulate taxis.

“I’m all for the market determine the best service, but this is an unfair playing field,” Kim said.

The SFMTA, for its part, has long communicated to the CPUC that regulations of TNCs like Uber and Lyft should be stricter. The agency is still reviewing the suit, a representative said.

“At this time, the lawsuit addresses both an industry and issues germane to the SFMTA so we are reviewing this newly filed lawsuit,” said Robert Lyles, an SFMTA spokesman. “Moreover, the SFMTA has longstanding concerns about the fragmented nature of the regulatory frameworks for TNCs and taxis.”

The suit argues Flywheel Taxi’s equal protection rights are violated when there are two sets of rules for similar services. Kim said doesn’t necessarily care which way the rules change – tighter rules for Uber, or looser rules for taxis – but they should be equal.

Kim embraced technology early on for DeSoto cab, when he branded his company with the taxi-hail app Flywheel’s colors. Now president of “Flywheel Taxi,” Kim acknowledged regulators and the taxi industry made mistakes along the way that allowed Uber and Lyft to gain ground.

“I was a fan of Uber when it first started, even though I own the taxi company,” Kim said. “As evidenced by the rise of Uber and Lyft, we did not meet the demand out there.”

“I’m a guy with a libertarian leaning, when you have less regulation I’m all for it. But when you pick up strangers 30 times a day you need to have inspections” and other rules, he said.

Still, he said, the lack of regulation of Uber and Lyft is dangerous.

Update 9/28: Lyft spokeswoman Chelsea Wilson gave a brief statement about the suit.

“The CPUC conducted a thoughtful and thorough rulemaking process that resulted in rigorous safety requirements for ridesharing,” she wrote, in an email to the Examiner. “This framework means TNCs are regulated uniformly across the state, providing consumers with a consistent experience no matter where they are in California.”

Flywheel Taxi’s press release and the full text of the legal complaint are embedded in a PDF below.

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Flywheel Taxi Press Release and CPUC Lawsuit (PDF)

Flywheel Taxi Press Release and CPUC Lawsuit (Text)

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