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Local taxi companies staying out of Uber, Lyft lawsuit

Updated: July 25, 2014 - 2:15 pm

Posted: July 25, 2014

By Reynolds Hutchins
reynolds.hutchins@insidebiz.com

Roughly $30,000 in state-levied fines and a pair of matching cease-and-desist letters haven't stopped ridesharing app developers Uber and Lyft, but a permanent injunction could.

A coalition of eight Virginia taxi and limousine companies filed a civil action lawsuit against the San Francisco-based companies earlier this month.

The band of eight are asking a Fairfax County Circuit Court judge to put the brakes on the trendy, or rather trending, businesses that have operated in the commonwealth for nearly five months without the proper licensure.

The plaintiffs hail from a swath of Virginia, from Richmond to Alexandria, but one locale is noticeably absent and it's technically the only Virginia location Uber and Lyft have a base of operations: Hampton Roads.

"We're not getting involved," said Frank Azzalina, director of business development at Hampton Roads Transportation Inc., a local taxi service dispatcher.

Azzalina's business provides accounting, administrative, maintenance and dispatch services for Black and White Cabs of Norfolk and Virginia Beach, Norview Cars, Norfolk Checker Taxi and Yellow Cab of Norfolk, Hampton and Newport News.

Collectively the companies own 286 taxicabs operated by roughly 500 licensed, independent lessee drivers. They even have their own mobile app: App-A-Cab.

Azzalina has been a vocal opponent of Uber and Lyft since the two made their debut in Virginia this past April.

The companies have been serving customers in Northern Virginia as business has trickled down from their bases in Washington, D.C., but a full-fledged Virginia operation wasn't launched until the companies moved into Hampton Roads earlier this year.

Until last month, though, neither company had applied for the necessary brokers' licenses to operate in the state.

Azzalina points out that neither Uber nor Lyft was subjected to the costly driver screening processes that are obligatory among traditional taxi companies.

The businesses have now applied for the proper authority to operate in the state and even temporary operating authority to continue to do business in the meantime.

Those applications are "still in the evaluation phase," state Department of Motor Vehicles spokeswoman Sunni Brown said last week.

Nevertheless, Lyft and Uber have continued to operate in Virginia.

And though an injunction from a civil court would have a strong case behind it, Azzalina said he doesn't know if a civil action lawsuit is opportune or even necessary at this point.

Not because a suit might not be successful, but because - at least for now - it seems as if the state and ridesharing services are working to compromise.

"We're just not considering that at this time," he said. "I would stand behind any traditional taxi company in its efforts to try and have Uber and Lyft play by the rules and become legal.

But, we're still hopeful the companies will pursue that on their own."

Uber and Lyft representatives said their companies are pursuing just that.

"We are continuing to work with the DMV and state leaders to come to a solution that preserves a future for ridesharing in the state of Virginia," said Lyft spokeswoman Chelsea Wilson.

Both Uber and Lyft released statements that they were committed to fighting the civil suit.

"The lawsuit is without merit and we look forward to resolving it quickly and effectively," Wilson said.

"While we can't comment on active litigation," Uber spokeswoman Kaitlin Durkosh said, "Uber will vigorously defend the rights of riders to enjoy competition and choice, and for drivers to build their own small businesses."

The facts of the case, however, aren't in their favor, legal experts say.

"I'd expect the court to grant the requested preliminary injunction in light of the fact that the DMV has previously ordered the defendants to cease and desist, an order it appears that the defendants have thus far ignored," said Ben Spencer, professor of law at the University of Virginia.

Spencer said Uber and Lyft's refusal to comply with standing state regulations and their defiance of the state DMV puts them in a precarious position.

One of their only hopes, Spencer said, is a speedy licensure process.

"Since both companies have now applied for the requisite licenses, the matter could become moot if the licenses are granted," he said.

But that's only if the licenses are granted before the civil suit goes before a judge.

If the licenses arrive too late or are ultimately denied, the court would likely side with the plaintiffs and grant an injunction, he said.

And unlike a cease-and-desist letter or a state fine, Spencer said, "Uber and Lyft could not ignore any preliminary or permanent injunction without facing sanctions."

State transportation officials last week steered clear of conversations regarding the civil suit.

"The suit, as far as I'm concerned, doesn't affect anything we're looking at," said Secretary of Transportation Aubrey Layne. "We're in review with those companies and that's what we're focused on."

Layne said he's a fan of both Uber and Lyft's business models and is impressed by statistics that show DUIs and other dangerous driving behavior decrease in cities that host ridesharing services.

That said, Layne added, "We're going through our due diligence."

Both Uber and Lyft will be held responsible for the fines levied against them and will still have to answer for uninsured drivers, he said.

"What we're mostly concerned about is protecting the commonwealth, the citizens in terms of their safety," he said.

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