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Legal Memo - SideCar and City of Austin Code - 2-27-13

Legal Memo - SideCar and City of Austin Code - 2-27-13

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Published by Sidecar
SideCar's egal response to Austin's Cease & Desist against SideCar.
SideCar's egal response to Austin's Cease & Desist against SideCar.

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Published by: Sidecar on Feb 27, 2013
Copyright:Attribution Non-commercial


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401 Congress Ave., Suite 2200 Austin, TX 78701 512.480.5600 www.gdhm.


A Professional Corporation

MAILING ADDRESS: P.O. Box 98 Austin, TX 78767-9998

MEMORANDU M TO: FROM: DATE: RE: Dave Phillips, General Counsel, SideCar Peter D. Kennedy February 27, 2013 Application of Chapter 13-2, City of Austin Code, to SideCar and SideCar Ridesharers.



SideCar and people who coordinate ridesharing using the SideCar mobile app are not subject to regulation under Chapter 13-2 of the City of Austin Code. Although the City’s Transportation Department has made statements indicating that it believes SideCar and another ridesharing mobile app, Heyride, are in violation of the City Code, the Department’s reading of the Code is incorrect. A careful reading of the language of Chapter 13-2 shows that it does not, in fact, apply either to SideCar or to people who participate in ridesharing using the SideCar app, for three reasons: First, Chapter 13-2 regulates only “chauffeured vehicles,” and neither SideCar nor participants provide “chauffeured” vehicles. Second, Chapter 13-2 regulates only drivers who pick up passengers within the City “for a fee.” Neither SideCar nor participants charge a fee. Any payments made by riders are strictly voluntary. Third, SideCar does not “provide or operate” a ground transportation service. It does not own or operate any vehicles, and it does not employ, control or dispatch any drivers. SideCar provides a technology platform for like-minded persons to use to locate each other. SideCar’s technology coordinates something people have been doing since the car was invented – sharing rides to save money, build community and reduce environmental impact. If Chapter 13-2 applies to people who use SideCar, it applies to every informal carsharing arrangement in Austin, including any work, school or recreational carpool.

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Finally, even if the language of the Code applied to SideCar, which it does not, any attempt by the City to regulate SideCar would be preempted by a highly significant and important federal law. 47 U.S.C. § 230(c) prevents state and local governments from imposing liability or regulation on the operators of interactive computer services such as SideCar based on information shared by their users, which is exactly what the Department appears to be proposing doing to SideCar. II. SideCar.

Side.cr LLC (“SideCar”) publishes a mobile application called “SideCar” and operates a website located at www.side.cr. Persons who download the app can use it to coordinate ridesharing with other persons who have also downloaded the app. A person looking to share a ride uses the SideCar app to input their desired pickup and dropoff destination. The software provides that information to persons in the area with available drivers who have also downloaded the SideCar app, have created a SideCar account and have been pre-screened.1 The system displays the available drivers to the person looking to share a ride. The rider then chooses which available driver he or she wants to share a ride with, or simply selects “closest driver.” Once the rider has confirmed the ride, the software provides the driver with the rider’s information. For each ride, the SideCar app displays a “suggested donation” based on the average donation that other riders have made for rides of a similar distance and duration, taking place at similar times of day and locations. Any donation is strictly voluntary; there is no minimum or required amount. If a donation is made, 20% of the donation goes to SideCar to cover its costs of providing the communications platform. If no donation is made, SideCar receives no funds. In order to use SideCar, a person must agree to SideCar’s Terms of Service, which define and limit the purposes for which the SideCar app may be used. Participants agree that they will not use SideCar for any commercial purposes. SideCar is available for personal ridesharing purposes only, and use of SideCar for any commercial purpose may result in immediate termination of the user’s SideCar account. SideCar does not employ, contract, direct or control drivers. It does not dictate hours, schedules or shifts for drivers. It does not dispatch drivers to pick up riders. Rather, the SideCar communication platform allows people to get and give rides in a more convenient and efficient way than casual carpools, paper or electronic bulletin boards, Craigslist, or traditional ride-matching services. Like eBay for products, Travelocity for flights, and HomeAway for rentals, SideCar has developed a technology allowing drivers and riders a better way to find each other and share rides.


SideCar pre-screens persons who wish to provide rides using SideCar by doing background checks for criminal, DWI or reckless driving convictions, confirms liability insurance as required by Texas law, and confirms vehicle registration.

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The Relevant City of Austin Code Provisions.

The operative provision of Chapter 13-2 is 13-2-3(A), which provides that “[A] person may not provide or operate a ground transportation service that picks up passengers within the city or represent the person’s business to the public as a ground transportation service,” without obtaining an operating authority or taxicab franchise. The terms “ground transportation service” and “passenger” are defined terms. “Ground transportation service” means “the service of providing chauffeured vehicles for compensation for the transportation of passengers within the city.” 13-2-1(12). “Passenger” means “an individual being transported for a fee in a ground transportation service vehicle.” 13-2-1(17) (emphasis added). “Compensation” means “any money, thing of value, payment, consideration, reward, tip, donation, gratuity, or profit paid to, accepted, or received by the driver or owner of any vehicle providing transportation for a person or persons; whether paid upon solicitation, demand or contract, or voluntarily, or intended as a gratuity or donation.” 13-2-1(3). Several key terms are not defined: “provide or operate,” “chauffeured vehicle,” and “a fee.” IV. SideCar is not “providing or operating” a “ground transportation service” and therefore is not regulated by Chapter 13-2.

Under the plain language of the Code, Chapter 13-2 only regulates persons who “provide or operate” a “ground transportation service.” For three reasons, Chapter 13-2 does not apply to SideCar. First, SideCar is not a “ground transportation service” because the persons participating in ridesharing coordinated by SideCar are not driving or riding in “chauffeured vehicles.” Chapter 13-2 applies only if persons participating in ridesharing using SideCar are driving a “chauffeured vehicle.” The terms “chauffeured vehicle” and “chauffeur” are not defined in the Code, so their ordinary meaning applies. Merriam-Webster defines “chauffeur” as “a person employed to drive a motor vehicle.” http://www.merriamwebster.com/dictionary/chauffeur. Miriam-Webster defines “employ” as “to provide with a job that pays a salary.” http://www.merriam-webster.com/dictionary/employ. This has always been the common understanding of the word “chauffeur”: a professional whose job is driving another person around.

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Individuals who participate in ridesharing coordinated by SideCar are not driving a “chauffeured vehicle” because they are not “employed” to drive their vehicle, and they do not work a job that pays a salary. SideCar does not “employ” drivers or pay participating drivers a salary. Drivers voluntarily participate in ridesharing coordinated through the SideCar mobile app. SideCar specifically prohibits commercial drivers from participating in its rideshare coordination service. The SideCar app facilitates the making of a voluntary donation to help cover vehicle operating expenses, but there is no guaranteed, minimum or required donation. Further, ridesharing is just that – the SideCar model involves drivers sharing a ride as they travel from one part of town to the other as they move to their own destination. Second, riders participating in ridesharing are not “passengers,” as that terms is specifically defined in the Code. The only regulated “ground transportation service” is one that “picks up passengers” in the City of Austin. § 13-2-3(A). “Passengers” are only persons who “are transported for a fee.” § 13-2-1(17). Although the Code includes a broad definition of “compensation,” the Code uses a different, undefined but clearly narrower term, “fee” in its definition of passenger. The ordinary meaning of the term “fee” does not include a gratuity or a reimbursement for expenses. It means a fixed charge for a service. Hence, Miriam-Webster defines fee as “a fixed charge” or “a sum paid or charged for a service.” http://www.merriam-webster.com/dictionary/fee. Therefore, because there is no “fee” charged by a driver participating in a rideshare coordinated using SideCar, riders are not “passengers” as defined in the Code, and Chapter 13-2 does not apply. Third, Chapter 13-2 applies to SideCar only if it is “providing or operating” a ground transportation service. Even if rideshare vehicles were “chauffeured vehicles” (they are not) and even if SideCar riders were “passengers” as defined in the Code (they are not) Chapter 13-2 would not apply to SideCar because it is not “providing or operating” a ground transportation service. SideCar publishes a mobile application and operates a website. It provides communication tools for individuals to use to contact each other and coordinate ridesharing. SideCar does not own, rent, lease, loan or control any vehicles. SideCar does not employ, contract, direct or control drivers. It does not dispatch drivers to pick up riders. Like an online dating service, SideCar uses a technology platform to permit individuals with shared interests (getting from point A to point B) to locate each other. SideCar does not guarantee that any person seeking a rideshare will find another person to share a ride with; it simply facilitates voluntary information-sharing by third parties. It is therefore not “providing” or “operating” a “ground transportation service.”2


As other companies have done for promotional purposes during the March festivals, for a limited time during SXSW 2013, SideCar plans to pay drivers to be available to give SideCar riders rides, if requested. These drivers will not accept donations from riders and therefore will not be receiving either “compensation” or “a fee,” and therefore will not be governed by Chapter 13-2.

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Persons participating in a rideshare coordinated using SideCar are not providing a “ground transportation service” and therefore are not regulated by Chapter 13-2.

For the same reasons explained above, a person who uses SideCar to coordinate a rideshare is not governed by Chapter 13-2. First, ride sharers are not a “chauffeurs” and are not providing “chauffeured vehicles,” because they are sharing rides. While it is theoretically possible that a person could misuse the SideCar app to simply provide rides in the expectation of payment, SideCar specifically prohibits professional drivers or persons seeking to profit from ridesharing and will terminate the accounts of drivers violating its Terms of Service. Second, because there is no “fee” paid for a rideshare, riders are not “passengers” as defined by the Code. Again, while it is theoretically possible that a driver using SideCar could demand a “fixed sum” or require a “payment” for a ride, this would be in direct violation of SideCar’s Terms of Service. While that individual may be in violation of Section 13-2-3(A), the exception proves the rule: in the absence of a “fee” (which SideCar prohibits) riders are not “passengers” as defined, and so participants in rideshares coordinated by SideCar are not subject to regulation under Chapter 13-2. VI. If SideCar is providing an illegal “ground transportation service,” so is every carpooling parent in Austin.

If the specific language of Chapter 13-2 is not carefully applied, as described above, every person in Austin who is part of an informal carpool or rideshare would be in violation of the City Code. The author of this memo, for instance, participates in a 3-family, 3-child carpool. The parents have agreed that every third week, one of the parents will drive all 3 children to school. In exchange for driving all 3 children once every 3 weeks, each parent receives free transportation for their child during the other 2 weeks. This exchange of benefits would clearly qualify as “compensation” within the definition of that term in the Code. (Some carpooling parents contribute gas money instead of driving, when their schedules do not allow driving or they do not have a vehicle, which would also be “compensation.”) For the same reason Chapter 13-2 does not apply to SideCar participants, however, carpooling parents are not subject to Chapter 13-2. They are neither providing a “chauffeured vehicle” nor are they receiving a “fee” for driving the children to school, so the children are not “passengers” as defined in the Code. The informal exchange of “compensation” (even a voluntary payment) alone is not enough to make a “ground transportation service” under the Code. There must also be a “chauffeured vehicle” and a passenger transported “for a fee” before the Code applies. Page | 5

The Transportation Department has overlooked (or is ignoring) these specific limitations on the scope of Chapter 13-2. The Department cannot pick and choose, however, who the Code applies to. If Chapter 13-2 applies to SideCar participants, it also applies to every informal carpool arrangement in Austin. Surely the City does not intend to start ticketing carpooling parents and impounding their cars. VII. Even if Chapter 13-2 applied to SideCar, it would be preempted by federal law, 47 U.S.C. § 230(c).

As explained above, SideCar operates an interactive computer service. SideCar publishes a mobile application and operates interactive computer services that facilitate the exchange of information and communications between individuals. RideShare does not create or initiate the communications seeking rides, nor does it create or initiate the communications accepting ride requests. SideCar does not dispatch drivers or give riders and drivers directions or instructions regarding their specific rides, other than to draft general rules of the road for SideCar participants. In order to fit SideCar into Chapter 13-2 of the City Code and claim that SideCar is “providing” or “operating” a “ground transportation service,” the City must hold SideCar responsible for the communications and actions of the riders and drivers who are coordinating their activities through exchanges of information using SideCar’s computer system. This would be treating SideCar as the publisher of its users’ electronic communications, since they are the ones requesting and offering rides. This would be illegal, under federal law. Federal law preempts any state or local law that would treat the provider of an interactive computer service as the publisher of its users’ communications, and therefore would preempt Chapter 13-2’s application to SideCar. 47 U.S.C. § 230(c). Section 230, although perhaps not familiar to the City’s Transportation Department, is a significant federal statute that was enacted by Congress after it concluded that “[t]he rapidly developing array of Internet and other interactive computer services available to individual Americans represent an extraordinary advance in the availability of educational and informational resources to our citizens.” 47 U.S.C. § 230(a)(1). Congress recognized that “[t]he Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation,” and “[i]ncreasingly Americans are relying on interactive media for a variety of political, educational, cultural, and entertainment services.” 47 U.S.C. § 230(a)(4) & (5). In order to protect interactive computer services from state and local regulation that would interfere with Congress’ goals of fostering technological innovation, Section 230(a) provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). State law that is consistent with this restrict is Page | 6

not preempted, but any state law that would treat an interactive service provider as the publisher of information generated by its users is preempted: “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. § 230(e)(3). Application of Section 13-2 to SideCar – because it would treat SideCar as responsible for the content of its users’ communications – would be preempted and prohibited by Section 230, just as a multitude of state laws that would purport to regulate or impose liability on communications platforms have been held to be preempted. E.g., Chicago Lawyers’ Committee for Civil Rights Under Law v. Craigslist, Inc., 519 F.3d 666 (7th Cir. 2008) (under Section 203, fair housing law cannot be applied to Craigslist based on users’ advertisements); Jane Doe v. MySpace, Inc., 528 F.3d 413 (5th Cir. 2008) (under Section 230, MySpace cannot be held liable for users’ communications and later acts); Doe v. MySpace, Inc., 629 F. Supp.2d 663 (E.D. Tex. 2009 (same); Carafano v. Metrosplash.com, 339 F.3d 1119 (9th Cir. 2003) (website does not lose Section 230 immunity by providing tools to create content); Lars Gentry v. eBay, 99 Cal. App. 4th 816 (Cal. App. 2002) (under Section 230, eBay not responsible for communications and acts of eBay seller).

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