Overton v. Uber Techs., Inc., Case No. 18-cv-02166-EMC

Decision Date03 August 2018
Docket NumberCase No. 18-cv-02166-EMC
PartiesARCHIE OVERTON, et al., Plaintiffs, v. UBER TECHNOLOGIES, INC., et al., Defendants.
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS
Docket Nos. 51, 59

Plaintiffs Archie Overton and S. Patrick Mendel sue the California Public Utilities Commission ("CPUC") and CPUC Commissioners in their individual and official capacities (together, the "CPUC Defendants") for creating a licensing scheme for "Transportation Network Companies" (TNCs) which Plaintiffs allege is preempted by federal transportation law and violates their Fourteenth Amendment rights. Plaintiffs also sue Rasier-CA, LLC for "acting in concert with the Commissioners" to secure a TNC permit "to avoid and subvert" federal transportation laws. Finally, Plaintiffs sue Uber Technologies, Inc. and its subsidiaries Uber USA, LLC, Rasier-Ca, LLC, and unknown Doe Defendants (collectively, "Uber Defendants" or "Uber") under the Federal Motor Carrier Act ("FMCA"), 49 U.S.C. § 14102, and for state law causes of action for breach of contract, fraud and intentional deceit, negligent misrepresentation, constructive fraud, and negligent and intentional interference with contract and prospective economic advantage. The CPUC and Uber Defendants have filed separate motions to dismiss all claims with prejudice. For the reasons stated below, the Court GRANTS both motions and dismisses all claims with prejudice, except as stated below.1

I. LEGAL CONTEXT

Three areas of federal and state regulation are essential to understanding Plaintiffs' allegations: the Federal Motor Carrier Act (FMCA) and California's laws and regulations pertaining to transportation charter-party carriers (TCPs) and Transportation Network Carriers (TNCs). Each is summarized below.

A. Federal Motor Carrier Act (FMCA)

The Federal Motor Carrier Act (FMCA), 49 U.S.C. §§ 13102, et seq., regulates "transportation by motor carrier and the procurement of that transportation, to the extent that passengers, property, or both, are transported by motor carrier—

(1) between a place in—
(A) a State and a place in another State;
(B) a State and another place in the same State through another State;
(C) the United States and a place in a territory or possession of the United States to the extent the transportation is in the United States;
(D) the United States and another place in the United States through a foreign country to the extent the transportation is in the United States; or
(E) the United States and a place in a foreign country to the extent the transportation is in the United States; and
(2) in a reservation under the exclusive jurisdiction of the United States or on a public highway."

49 U.S.C. § 13501. The regulatory reach of the FMCA thus essentially extends to motor carrier transportation that crosses state or international boundaries. The statute exempts several specific forms of transportation that would otherwise fall with the FMCA's reach, 49 U.S.C. §§ 13502-13506, but the main exemption relevant here is that related to "transportation of passengers by motor vehicle incidental to transportation by aircraft." 49 U.S.C. § 13506(a)(8)(A) (hereinafter, the "incidental-to-air exemption"). The U.S. Department of Transportation has construed motor vehicle transportation to be "incidental to transportation by aircraft" when:

(1) . . . it is confined to the transportation of passengers who have had or will have an immediately prior or immediately subsequentmovement by air and
(2) . . . the zone within which motor transportation is incidental to transportation by aircraft [except as the Secretary otherwise determines] shall not exceed in size the area encompassed by a 25-mile radius of the boundary of the airport at which the passengers arrive or depart and by the boundaries of the commercial zones (as defined by the secretary) of any municipalities any part of whose commercial zones falls within the 25-mile radius of the pertinent airport.

49 C.F.R. § 372.117(a) (emphasis added). The FMCA does not purport to regulate motor carrier transportation that occurs entirely within the boundaries of a single state when such transportation is not part of a longer trip between two states or two countries (i.e., one leg of a longer trip).

The FMCA defines two groups of regulated service providers: "brokers" and "motor carriers." A "motor carrier" is "a person providing motor vehicle transportation for compensation." Id. § 13102(14). A "broker" is a "a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for transportation by motor carrier for compensation." 49 U.S.C. § 13102(2). The difference is, essentially, between those who provide the transportation service (motor carriers) and those who arrange it (brokers).

Plaintiffs assert that the FMCA requires brokers and motor carriers to register with the United States Department of Transportation (USDOT). In fact, the FMCA's registration requirements do not apply to all covered brokers and motor carriers, but only a subset. For example, only a "broker for transportation of property," 49 U.S.C. § 13904(a) (emphasis added), not of passengers, is required to register. Similarly, the FMCA requires registration of "a motor carrier using self-propelled vehicles the motor carrier owns, rents, or leases." Id. § 13902(a). To obtain registration, a broker or motor carrier must demonstrate various proficiencies and satisfy certain insurance requirements. See 49 U.S.C. § 13902(a)(1)(A)-(D) and § 13904(a)(1)-(2).

Although enforcement of the FMCA is generally handled by government agencies, see 49 U.S.C. §§ 14701-14703, the FMCA also creates two private rights of action. First, under Section 14704, "[a] person injured because a carrier or broker providing transportation or service subject to jurisdiction under chapter 135 does not obey an order of the Secretary or the Board, asapplicable, under this part, except an order for the payment of money, may bring a civil action to enforce that order under this subsection." 49 U.S.C. § 14704(a)(1); see also id. § 14704(a)(2) (permitting recovery of "damages sustained by a person as a result of an act or omission of that carrier or broker in violation of this part"). Second, Section 14707 provides that "[i]f a person provides transportation by motor vehicle or service in clear violation of [the statutory registration requirements], a person injured by the transportation or service may bring a civil action to enforce any such section." 49 U.S.C. § 14707(a). Under Section 14707, the requirement for a "clear violation" is jurisdictional rather than a standard of proof. See Mercury Motor Exp., Inc. v. Brinke, 475 F.2d 1086, 1093 (5th Cir. 1973) (quoting legislative history stating that the words "clear and patent" "are intended as a standard of jurisdiction rather than a measure of the required burden of proof and that the district courts of the United States should entertain only those actions under these sections, as amended, which involve clear and patent attempts to circumvent regulation in the areas involved"); Tri-State Motor Transit Co. v. Int'l Transport, Inc., 479 F.2d 171, 175 (8th Cir. 1973) (quoting legislative history explaining that "[t]he language of the section is designed to make it clear that the courts would entertain only those suits which involve obvious attempts to circumvent operating regulation"). Plaintiffs' First Amended Complaint only asserts a cause of action against Uber under Section 14707, for failure to comply with registration requirements.

B. California Regulation of TCPs and TNCs

Separate from federal regulation under the FMCA, the California Public Utilities Commission (CPUC) regulates certain transportation services. The two relevant services here relate to charter-party carriers (TCPs) and transportation network carriers (TNCs).

TCPs are defined to mean "[e]very person engaged in the transportation of persons by motor vehicle for compensation, whether in common or contract carriage, over any public highway in this state. Charter-party carrier of passengers includes any person, corporation, or other entity engaged in the provision of a hired driver service when a rented motor vehicle is being operated by a hired driver." Cal. Pub. Util. Code § 5360. TCPs must have a permit to provide transportation services with limited exceptions not relevant here. See Cal. Pub. Util. Code § 5371. There are several species of TCP authorization, but the two relevant here are Class A and Class Bcertificates: a Class A certificate has no "restrict[ions] as to point of origin or destination in the state of California," Cal. Pub. Util. Code § 5371.1(a), while a Class B certificate only permits the holder to "operate from a service area to be determined by the [CPUC]," but not to "encompass more than a radius of 125 air miles from the home terminal," id. § 5371.2(a). The key distinguishing characteristic of TCPs, as opposed to traditional taxis, is that the transportation must be "prearranged" rather than hailed on the street. Id. §§ 5360.5, 5381.5(a).

The CPUC has statutory authority to charge TCPs an annual fee. See Cal. Pub. Util. Code § 421(a). These are known as PUCTRA ("Public Utilities Commission Transportation Reimbursement Account") fees and they are currently charged a quarter of one-percent of a TCP's "gross intrastate operating revenue" (0.25%). See http://www.cpuc.ca.gov/General.aspx?id=3764.2 The CPUC does not purport to charge fees for interstate operating revenues. A TCP license may be suspended for failure to pay the required fees. See Cal. Pub. Util. Code § 5387.5.

In 2017, California enacted laws regulating "transportation network companies" (TNCs), the new business model represented by Uber and similar companies. See Cal. Pub. Util. Code...

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