Judge allows Lyft to operate in Kansas City while it prepares for court battle

07/09/2014 10:24 AM

07/09/2014 6:28 PM

Lyft, a ride-sharing service based on a smartphone app, got a legal lift of its own Wednesday from a federal judge in Kansas City.

The company can continue operating here for at least two more months while the company and city officials prepare for a court battle.

Arguing that Lyft is operating illegally by not complying with local regulations governing taxicab and livery services, city officials had hoped that District Judge Brian Wimes would shut the service down immediately.

But Wimes said the city provided no evidence that it would suffer “irreparable harm” if the service continued to operate while both sides prepare for that three-day trial set to begin Sept. 17.

Wimes also said the city has not “exhausted its available legal remedies” by fully processing the 18 tickets it has issued to Lyft drivers since May and has not legally cited Lyft for operating without a business license.

Lyft is among a host of ride-sharing services now operating in dozens of cities in the United States and Europe.

Lyft, UberX, Sidecar and others have become a popular transportation option for those who value the convenience and prices that are generally lower than those charged by regular cab companies.

But like many other municipalities, Kansas City has taken Lyft to court, maintaining that it and the others ought to be subject to the same local regulations as taxicabs and limousines. Among those requirements: a business license, certificates licensing drivers to carry passengers, and required inspections and insurance.

“We are still happy to welcome Lyft to the marketplace if they will simply take care of their licensing and permits like everyone else,” Kansas city spokesman Chris Hernandez said.

Lyft, on the other hand, says it is not subject to the same requirements as cab and livery companies because it is a matchmaking service, not a transportation company. Lyft drivers are independent contractors who charge a suggested donation rather than a set fare, and they ferry passengers about town in their own cars, rather than from some company fleet.

Lyft lost a similar legal battle in St. Louis last month when a state circuit court granted a temporary order shutting the company out of the market. So Wimes’ ruling in U.S. District Court was a welcome victory for a company that says its service has been well received by customers since its launch here in late April.

“We’ve seen a very positive response from the Kansas City community, which has enthusiastically embraced Lyft’s arrival,” company spokeswoman Katie Dally said. “Alternative transportation options like Lyft benefit the local economy, improve residents’ quality of life, and provide safe and affordable rides for the people of Kansas City.”

Legal challenges have not stopped the company’s growth. Lyft operates in 60 U.S. communities and will enter the New York City market later this week, starting with the outer boroughs of Brooklyn and Queens.

Its larger competitor, UberX, has been in the New York market for two years.

Not all cities have met the arrival of ride-sharing services with as much apprehension as Kansas City.

Indianapolis recently welcomed the arrival of UberX and Lyft. Under that city’s code, ride-sharing services are not considered vehicles for hire and need not meet the same requirements as cab companies.

UberX followed Lyft into Kansas City back in May but has not been the subject of litigation. Unlike Lyft, UberX applied for a business license in Kansas City and is working to get its drivers licensed to carry passengers here.

The city’s get-tough policy toward Lyft began shortly after the company’s drivers started accepting money for rides after a two-week free trial period.

The ensuing debate seemed to put Kansas City officials on the defensive.

After all, Kansas City has been promoting itself as a good place for innovative, high-tech companies to do business. Yet here was the city trying to block a new business model popular with the tech-savvy millennial generation.

Hernandez responded to that impression in a statement issued after Wednesday’s court ruling.

“Keep in mind that the city embraces tech and innovation,” he said. “We think it’s great that companies are bringing innovative products to Kansas City, but when we have a public safety interest to enforce, we do require compliance with those simple permitting and licensing rules.”

But the conservative/libertarian Show-Me Institute issued a statement back in May pointing out that those rules aren’t as accommodating as the city makes them seem.

Under the regulations, Lyft can’t be licensed as a cab company because it collects donations and not set fares, the institute said. And it can’t be licensed as a livery service because it doesn’t have flat pricing like limousine services.

“Kansas City’s livery and taxicab regulations prohibit Lyft’s business model,” the institute said.

Bill George disagrees.

George, president of the Kansas City Transportation Group, which has both traditional taxis and the zTrip mobile app service, said the city’s rules do allow for services like Lyft and UberX.

It’s just that Lyft, he said, doesn’t want to spend the money it would take to comply.

“They are doing the exact same thing that we do, and if there are rules for all of us, then they should apply to all of us,” he said.

Dally, the Lyft spokeswoman, said the company’s drivers are all subject to background checks and are required to have insurance on their vehicles.

Jim Ready, head of regulated industries for the city, said Lyft drivers were issued 15 tickets before May 8, then three others were cited during a sting operation on June 21.

In that latter instance, two African-American investigators arranged to have a Lyft driver pick them up. When the driver arrived, he drove past them and stopped.

When the two investigators called the driver to say he’d missed them and started walking toward the car, the driver took off, explaining later that he’d been summoned elsewhere.

“In my investigator’s opinion, it was because of the race of the investigators,” Ready said. “This has not happened with white investigators.”

Dally, Lyft’s spokeswoman, disputed the allegations of racism.

Rather, she said, the driver was more likely worried about getting a ticket.

Despite losing this week’s legal battle, Kansas City will continue to enforce its regulations by issuing citations to Lyft drivers it feels are violating city code.

The Star’s Lynn Horsley contributed to this story.

To reach Mike Hendricks, call 816-234-4738 or send email to mhendricks@kcstar.com.

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