2015-08-27 / Front Page

Lawsuit Names Uber

By Olga Enger

For the two years since ridehailing company Uber launched in Newport, Daniel Moriarty of Newport’s Orange Cab and Warwick’s Airport Taxi vocally expressed concern that the company is operating illegal taxi carriers in the state. Last week, he took a more aggressive stance by filing a lawsuit in Rhode Island Superior Court.

Orange Cab is authorized for 46 cars in Rhode Island and is one of the largest taxi companies in the state.

Critics say while local taxi companies are forced to comply with strict licensing and regulatory guidelines, Uber operates entirely unregulated. They assert that this presents an unfair playing field between companies and may pose safety risks to passengers.

To operate as a taxi in Rhode Is- land, companies must go through administrative hearings. If approved, they are limited to operate in certain territories, follow guidelines for passenger pick-ups, adhere to strict regulations on their cars and pay assessments to the state.

“It’s a relatively expensive proposition to start a taxi company,” said J. Russell Jackson, the attorney representing Orange Cab. Many Uber drivers use their personal cars, which are unregulated by the state. State law prohibits commercial taxis to be used as personal vehicles.

In addition to expenses such as insurance required on commercial vehicles (which may cost up to $12,000 per taxi), sales tax and licensing fees, the state charges each taxi company that grosses over $100,000 an assessment based on their gross sales.

“My client paid an assessment of $26,000 for 2014,” said Jackson.

Uber does not pay these assessments or licensing fees, nor did the company pay sales tax for the first 18 months of operating in Rhode Island, despite collecting sales tax from riders. The company claims it handed over the tax to collectors in April, but did not disclose the amount.

"While we can't comment on active litigation, we can say we will vigorously defend the rights of our riders and driver partners to greater choice and economic opportunity,” said Carlie Waibel, an Uber spokesperson.

Although the issue has been in front of the General Assembly for the past year and a committee was established to review the issues around ride-hailing companies, no recommendations have been made public.

In addition to Uber and unnamed Uber drivers, the suit includes two state regulators as defendants: Thomas Ahern, Administrator of Rhode Island Division of Public Utilities and Carriers (RIDPUC) and Terrence Mercer, Assistant Administrator.

In five years, Uber has exploded into a $40 billion company, providing services in 300 cities and 58 countries. Uber does not own cars, but uses a smart phone app to process payments and connect riders to drivers, who work as independent contractors. The company, which claims it is not a taxi service, but rather a technology company, has faced similar complaints in cities across the globe. Some communities have started placing penalties on Uber drivers and confiscating cars.

“Many of these drivers are using their personal cars,” said Jackson. “My clients understand that Uber is probably not going to pack up and leave. But what is frustrating is that my clients have spent years complying with regulations; they play by the rules of the ball game, and Uber just comes in and starts to operate,” Jackson explained.

Jackson hopes a judge will require the state’s regulatory agency to intervene.

The complaint states, “Since Uber began its unauthorized taxi service in Rhode Island, the RIDPUC has consistently taken the position that the service is illegal. The agency position has been stated publicly during legislative hearings and through the press by its Associate Administrator Motor Carriers Section, Terrence Mercer.”

Mercer said he was unable to comment directly on the complaint, but confirmed “that has been his agency’s stance” since the beginning.

In a June interview, Mercer told Newport This Week, “[Uber is] providing an illegal transportation service.” At that time, Mercer explained his agency hasn’t enforced the regulations because the issue is outside of their jurisdiction.

“The enforcement grip that my agency has is with licensed carriers,” explained Mercer. “If someone is driving a personal car for hire without a certificate, then it is a criminal matter to be enforced by local and state police departments.” Under state law, individuals operating an unlicensed car service may face a year in jail and/ or up to a $1,000 fine.

Jackson does not agree with Mercer.

The suit highlights Rhode Island General Law ยง 39-1-15.2, which provides the PUC authorization to work with state and local police departments to enforce rules and regulations within their authority.

If a judge accepts the interpretation of the complaint, Mercer and Ahern would be mandated to enforce the regulations. As for other ride-hailing apps, such as Uber’s competitor Lyft, Jackson believes it would apply in the same manner.

“It is eroding the viability of the taxi industry in this state,” said Jackson. “The state is putting an entity like Uber at a competitive advantage.”

Enforcement may be another hurdle.

“While unauthorized taxi operation is criminal, the use of these apps makes it nearly impossible to detect,” said Middletown Police Major Ferenc Karoly. “This is the type of crime that would only be incidentally discovered upon the stopping of a vehicle for some other violation, and even then could easily be missed.” Karoly said. Although Middletown has not experienced issues with Uber, users should use the service with caution, as the cars and drivers are not regulated or screened.

“It’s a much more complex issue than people appreciate,” said Jackson. “You can’t fix the issue within the next couple of weeks. My clients understand there will likely be a legislative solution in the future.”

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