Turo argues it’s not a rental service because its users don’t use any of the rental car facilities at LAX.
PASADENA, Calif. (CN) — A Ninth Circuit panel dissolved an injunction Wednesday against a car-sharing service that sometimes saw users exchange cars at Los Angeles International Airport.
San Francisco Bay Area-based Turo dubs itself as a peer-to-peer car-sharing service where a private car owner can hand off their keys and rent their vehicle to someone over the company’s mobile app or online service.
Sometime in 2016, LA learned some Turo users were exchanging their vehicles at LAX and wanted the company to get a permit to conduct business at the international hub. Turo says it sought to negotiate a permit, but the city declined.
The company sued LA in 2018 claiming its business was threatened with fees and had been misclassified as a rental car company, even though the company does not operate its own fleet.
Turo says it wanted to give customers the option to trade vehicles at LAX, but the city said the company would have to fork over 10% of its gross receipts along with a daily fee. Turo countered that the fees were unconstitutional and violated California’s Proposition 26, the so-called “Stop Hidden Taxes Initiative” approved by voters in 2010.
While U.S. District Judge Christina Snyder agreed she needed more information on the fee issue to make a decision, she still issued a preliminary injunction against Turo and three individuals listed in the complaint.
On Wednesday, a three-judge Ninth Circuit panel reversed the injunction and sent the case back to Snyder, finding that the city did not establish it was likely to suffer irreparable harm.
U.S. Circuit Judges Consuelo Callahan, a George W. Bush appointee, and Paul Watford, a Barack Obama appointee, and U.S. District Judge Jed Rakoff, a Bill Clinton appointee sitting by designation from the Southern District of New York, made up the panel in the unanimous, unpublished opinion.
Snyder had looked at whether the city would suffer harm without an injunction. Before the pandemic, roughly 127 vehicles exchanged daily under the Turo service at LAX.
“But the record also shows that, during the same period, there were more than 30,000 pickups and drop offs at LAX per day by transportation network companies (like Uber and Lyft), taxis, and limousines,” the Ninth Circuit panel wrote. “Counting all forms of traffic, thecCity alleges that approximately 100,000 vehicles pass through LAX’s central terminal area per day.”
An expert witness for Turo testified that the small volume of traffic generated by Turo’s service was “unnoticeable” in the face of the total volume at LAX.
“On this record, we conclude that the city has not adequately shown that Turo’s 127 transactions at LAX per day impact traffic conditions at the airport to such a degree that the city will be irreparably harmed in the absence of immediate relief,” the panel found.
The panel did not take up the issue of whether the city of LA violated a part of the Communications Decency Act, namely if Turo should be held liable for its users’ online content and related offline conduct when they exchanged vehicles at LAX.
Turo declined to comment on the opinion. Attorneys for LA did not immediately respond to an email seeking comment.