Case 9325: Uber and the legality of ridesharing in Maryland

Uber and Lyft have been operating their ridesharing services in Maryland for months, but ridesharing is in danger of disappearing in the Land of Pleasant Living. Arguably the face of ridesharing nationwide, Uber is saying in an online petition that its future in the state is “in jeopardy.”

It’s with the aim of preserving the services provided by ridesharing companies that the state legislature is now calling for the establishment of “Transportation Network Services.” The purpose? To carve out a framework, by the creation of a new, separate regulatory system within the state’s public utilities law, that would allow ridesharing services such as Uber and Lyft to operate legally in Maryland and in accordance with the state’s Public Service Commission (PSC).
Both the state Senate and House held committee hearings last week on the proposed legislation.
“It would put into place a structure that would allow services like Uber and UberX in the state to stay. We’re really excited about this legislation,” said Nairi Hourdajian, a spokeswoman for Uber, in a phone interview.
So excited, it appears, that Uber is tag-teaming the proposed legislation with ridesharing competitor Lyft, according to state Sen. Bill Ferguson, who is sponsoring the Maryland Senate’s version of the Transportation Network Services bill. Ferguson, who represents the state’s 46th District in southeastern Baltimore, believes it’s the “first time” in the U.S. that the two ridesharing startups have worked on legislation together, he told Technical.ly Baltimore. (Uber wouldn’t confirm this, and multiple e-mails to Lyft asking for comment for this article went unreturned.)
An online petition, Save Uber Maryland, was circulating last week allowing Uber devotees to voice their support for the ridesharing legislation, cross-listed in the Maryland House by Del. Ben Barnes, representative of District 21 in Prince George’s and Anne Arundel counties. As of Monday night, more than 10,300 people had signed it. A hashtag, #MDNeedsUber, has been popping up on Twitter promulgating the Transportation Network Services legislation, which would make three big changes to current public utilities law:

1. It defines ridesharing companies as Transportation Network Application Companies, their drivers as Transportation Network Operators, and ridesharing acts as Transportation Network Services.
2. It establishes that a “common carrier,” as currently defined under Maryland public utilities law, does not include Transportation Network Application Companies and Transportation Network Operators. So, combining parts one and two, what does this mean?
3. To regulate ridesharing companies like Uber and Lyft, the Maryland Public Service Commission must do so under a new, separate regulatory system, since statuary provisions in current public utilities law related to rate regulation and for-hire driving services would not apply to ridesharing companies if the proposed legislation passes.

Read the Transportation Network Services legislation
Additionally, the Transportation Network Services legislation lays out a structure for drivers working for ridesharing companies to report their rates to the PSC, and it codifies safety, driver background check and insurance protocols that ridesharing companies and their drivers would have to follow. Among them:

• Before approving a new driver, a ridesharing company would be required to conduct a background check using the National Sex Offender Registry and the FBI’s National Instant Criminal Background Check system.
• Ridesharing companies would also have to carry commercial liability insurance with at least $1,000,000 of coverage per accident.

But what explains the push now for new legislation, and why was it introduced at the beginning of the General Assembly’s 2014 session in the first place? For answers, turn to Case Number 9325, which has been going on in the state’s Public Utility Law Judge Division since May 2013.

While the Transportation Network Services legislation would be a boon to the operations of both Lyft and Uber, the primary consideration in Case 9325 has been Uber.

The underlying question: is Uber really a ridesharing company if it helps ferry passengers in exchange for cash, or is it just skirting cities’ car-for-hire regulations and providing unlicensed taxi services?
As Technical.ly Baltimore reported in November, Uber argues it’s running a legal business in Maryland because its traditional service, UberBLACK, partners with drivers already licensed by the state’s Public Service Commission to transport passengers for remuneration. Its technology platform provides those drivers with a wider dispatch service, and the increased competition as a result of a bigger pool of cars on the road might draw the ire of existing taxi drivers and companies, but rides coordinated via UberBLACK are legal. Also, because the ridesharing startup doesn’t own the vehicles, it says it’s not a “common carrier” under Maryland law.
(Lyft and UberX, on the other hand, operate wholly outside of Maryland’s public utilities law, as Technical.ly Baltimore has explained. Both use everyday drivers not licensed by the PSC to carry passengers in exchange for payment. For the purposes of this article henceforth, the matter at hand is UberBLACK, which we refer to as Uber — a startup with more than $300 million in venture capital and a reported $200-plus million in revenue each year.)
Critics would say that under existing Maryland public utilities law, Uber is operating a car-for-hire service and therefore must file for “common carrier” status with the Public Service Commission. Ridesharing’s loudest critic in Maryland, and Baltimore city specifically, is Yellow Transportation, which was petitioning the Public Service Commission to prohibit Uber’s operations in Maryland even before the company launched its UberBLACK service in January 2013.
Concerns over the relative safety of the rides provided by Uber-equipped vehicles were cited, but make no mistake that Yellow Transportation has skin in the game: it owns 527 of 1,151 total taxi permits issued for Baltimore city by the PSC.
It initially seemed that the Public Service Commission wouldn’t listen to Yellow Transportation, which had asked the PSC to prohibit Uber’s operating in Maryland in October 2012. But in early May 2013, after the PSC staff counsel was instructed to study Uber’s business model, it returned a report recommending the commission “direct Uber to file for authorization to operate as a passenger-for-hire company if it intended to continue to operate in Maryland.” By late May, the question of Uber’s legality was sent for hearing to the Public Utility Law Judge Division as Case Number 9325.

The bottom line is that this legislation is critical. Without it, who knows what could happen to options like UberX and UberBLACK in Maryland?

Much of the months-long legal sparring between the PSC and Uber between then and now has focused on a subpoena served by the PSC asking the ridesharing startup for a list of its drivers, a matter that has been appealed several times by Uber and is now being considered by the Maryland Court of Special Appeals. As early as September 2013, however — one month after Uber filed a motion to quash the subpoena — the Court of the Public Utility Law Judge Division ordered that if Uber failed to provide the list of drivers, it should “cease and desist from offering any passenger-for-hire services” in Maryland.
Uber says it cross-checks its list of PSC-licensed drivers with a list available on the PSC’s website, but the commission’s staff counsel remains skeptical. In a reply brief submitted in early January 2014, the PSC’s staff counsel explained the reason for the subpoena: “[D]espite [Uber’s] many claims that it is working with Commission licensed carriers, it has steadfastly refused to provide any proof of that claim to Staff.”
“No other jurisdiction in the country has ever compelled the production of a list,” Hourdajian told Technical.ly Baltimore in the fall.
But the real shot came a month earlier, on Dec. 11, 2013, in a 35-page public brief submitted by the PSC staff counsel. The conclusion? That Uber “operates a motor vehicle-for-hire service and is therefore a ‘common carrier’ subject to Commission regulation.” (When asked by this reporter about the brief, PSC Deputy Staff Counsel Chuck McLean declined to comment.)
In other words, according to the staff counsel of the Public Service Commission, Uber meets the threshold presented in Case 9325: it is a common-carrier public service company as defined by Maryland’s public utilities law, and is therefore subject to PSC regulation. That’s a judgment made by the staff counsel of the Public Service Commission on the basis of two points:

1. The variations in Uber’s fare pricing when the ridesharing company employs “surge-pricing,” in which it increases its fares during times of increased demand, or when it anticipates increased demand. The PSC requires car-for-hire companies to file their rates, which – according to PSC protocol – cannot be changed without requesting a change, with 30 days notice, from the PSC. In its brief, the staff counsel wrote, “Uber has the ability to change its rates whenever it chooses to do so.”
2. The staff counsel’s assertion that Uber manages and controls the vehicles that use the Uber technology to solicit riders. While Uber says it’s not a common carrier because it doesn’t own a fleet of cars, the PSC staff counsel took a different interpretation of definitions outlined in public utilities law § 1-101 by first asserting that Uber is a common carrier, and then referencing part (t) of that subsection, which reads: “Own includes own, operate, lease to or from, manage or control.”

Read Maryland's public utilities law
The PSC staff counsel believes that Uber, by issuing smartphones to drivers, checking in periodically with drivers to ensure that they’re filing rates with the PSC, giving drivers its technology platform to use, and then taking 20 percent from each Uber ride as a licensing fee for the technology platform, is “managing and controlling” a fleet of cars for hire.
Still, as the PSC staff counsel is just one party to Case 9325, its filings “do not represent the opinion of the Commission,” said a Public Service Commission spokeswoman.
Naturally Uber protests the staff counsel’s interpretation, asserting that it is not a common carrier because it neither owns a fleet of cars nor trades rides for remuneration.
Also questionable, it appears, are the motivating factors behind the case. E-mails obtained by Uber through a Maryland Public Information Act show, the ridesharing startup claims, that Yellow Transportation’s legal representation and the PSC staff counsel in Case 9325 “coordinate[d] efforts on both substantive and procedural matters in this proceeding in a manner adverse to Uber.”
Tellingly, however, the staff counsel’s public brief also acknowledges that the case with Uber is one of “first impression” — Maryland’s public utilities law was not written to regulate a company that uses a smartphone app.
This is precisely Uber’s contention, in addition to its assertion that it is not a car-for-hire service. As the counsel for Uber writes in a post-hearing brief dated Dec. 11, 2013 (emphasis ours): “[T]he drafters of the original Public Service Law and its subsequent amendments could not have foreseen the development of the now nearly ubiquitous smartphones and the internet-based services they provide. Nor have more recent sessions of the General Assembly seen fit to provide the Commission with jurisdiction over entities providing smartphone applications to request transportation services.”
Search Case Number 9325 to see all the documents
Enter the proposed Transportation Network Services legislation, which seeks to amend the current public utilities law. As long as that bill remains a bill, the Maryland Public Service Commission seemingly has a clear pathway to shut down Uber — and UberX, and Lyft — anywhere it’s operating in the state, so long as Uber doesn’t file for common carrier status.
“The bottom line is that this legislation is critical,” said Uber spokeswoman Hourdajian. “Without it, who knows what could happen to options like UberX and UberBLACK in Maryland?”
The latest document in Case 9325, a reply brief submitted by Uber in late January, states once again that “Uber’s position [is] that it is not a common carrier under Maryland law…”
If the Transportation Network Services bill becomes law, it takes effect on July 1. Hourdajian said, as of now, there’s “nothing new” from the Public Service Commission, but Uber expects some decision from the PSC this month on whether it must file as a common carrier.
Read the Public Service Commission staff counsel’s Dec. 11, 2013, public brief:

Public Service Commission staff counsel public brief from 12/11/13