ALJDEC decisions subject to certification as final

14F-16627-DWM · Department of Weights and Measures · 2014-07-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 9, 2014

APPEARANCES: Todd Joseph Haselhorst and David Donald Sena appeared, both were represented by attorneys Timothy J. Eckstein and Anna H. Finn, Osborn Maledon, PA; the State of Arizona, Department of Weights and Measures was represented by Assistant Attorney General Seth Hargraves.

WITNESSES: J.J. Stroh, DWM Senior Investigator

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Todd Joseph Haselhorst and David Donald Sena (“Appellants”) appeal from Notices of Violation issued by the Arizona Department of Weights and Measures (“Department”) based on allegations that Appellants used their smartphones as unlicensed commercial devices and operated their personal vehicles as unlicensed taxis when Appellants, on separate occasions, transported riders using the Lyft “real-time ridesharing” transportation networking mobile application (hereinafter “the Lyft app”). The Department seeks $1,800.00 in civil penalties from Appellant Haselhorst and $2,100.00 from Appellant Sena. Appellants dispute the violations, maintaining that they did not use commercial devices as defined in statute and that they did not operate as taxis. The parties presented evidence at the hearing, including Department’s Exhibits 1 through 6, and testimony from the witness noted above.[2] Based upon the evidence, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding no violations. FINDINGS OF FACT 1. Appellants are members of, and drivers of vehicles within, a mobile network, accessed through their smartphones, known as Lyft. 2. According to the evidence offered in this matter, Lyft is a mobile application that matches drivers and riders for ridesharing and carpooling: Lyft is “a means to enable persons who seek transportation to certain destinations (“Riders”) to be matched with persons driving to or through those destinations (“Drivers”).”[3] The Lyft app requires acceptance of a “User Agreement” that sets the terms for use of the program.[4] All users, both riders and drivers, agree to the terms of service.[5] Users must also have a current credit card on file with Lyft.[6] When a rider needs a ride, the rider uses the Lyft app to make known to Lyft drivers the pick up location and destination.[7] Any Lyft driver can accept the request if the driver wishes. Accepting a request is completely voluntary; the driver is under no obligation to accept any particular rider.[8] If a driver accepts the rider’s request, the driver picks the rider up at the designated location and drives the rider to the destination, which is ostensibly on the driver’s personal route.[9] At the end of the ride, the Lyft app suggests a “donation” amount to the rider for giving money to the driver.[10] The documentary evidence submitted here does not show how the suggested donation is calculated. It appears to be based on “starting and ending points,” but the hearing record does not show how it is specifically calculated.[11] The rider can, through the Lyft app, accept the suggested amount, raise it, or lower it, even to $0.[12] The rider has sole discretion as to what amount, if any, to give the driver.[13] No matter what amount the rider gives the driver, including giving the driver nothing, the driver has no legal recourse against the rider.[14] The driver must accept the rider’s choice as to the amount given for the ride.[15] 3. On October 18, 2013, Department Investigator J.J. Stroh was contacted by the Tempe Police Department after officers observed Appellant Sena in his vehicle in a designated taxi zone. Appellant Sena stated to both the Tempe Police and Stroh that he was a driver for Lyft and was picking up a rider.[16] Stroh cited Appellant Sena for operating an unlicensed taxi, failing to have taxi signage (interior and exterior), failing to have taxi insurance, failing to have a taxi license plate, and failing to have a taxi meter.[17] 4. On December 8, 2013, Stroh observed Appellant Haselhorst transporting a passenger and recognized a Lyft logo sticker on Appellant Haselhorst’s car. He stopped the car and spoke to Appellant Haselhorst.[18] Stroh cited Appellant Haselhorst for the same violations as Appellant Sena.[19] 5. The Department issued separate Notices of Violation to Appellants on December 12, 2013.[20] The Notices of Violation charge Appellants with the violations noted above.[21] 6. At hearing, Stroh testified about the events on October 18, 2013, and December 8, 2013. He also testified that his knowledge of how the Lyft system works comes primarily from its website, and also from talking to drivers and riders. Exhibits 3 and 4 are the only website information submitted into this record. 7. Neither party called Todd Joseph Haselhorst or David Donald Sena as witnesses.[22] There is no evidence on this record as to whether or not Appellants received any compensation from the two riders in these two instances. CONCLUSIONS OF LAW 1. The Department may impose a civil penalty for violation of any provision regulating the taxi business.[23] The Department has the burden of showing a violation that warrants a civil penalty. The standard of proof is “preponderance of the evidence,” meaning evidence showing that a particular fact is “more probable than not.”[24] Therefore, the Department bears the burden of showing, by a preponderance of evidence, that Appellants have violated the statutes cited in the Notices of Violation. For the reasons set forth below, the Department has not met that burden. 2. The Department alleges violations against Appellants for use of unlicensed commercial devices in violation of A.R.S. § 41-2091 and operation of unlicensed taxis in violation of A.R.S. § 41-2091 and A.R.S. § 41-2096.[25] These charges will be addressed separately. Use of an Unlicensed Commercial Device 3. The Department argues that Appellants’ use of their smartphones with the Lyft app as drivers of riders in the Lyft network constitutes the use of commercial devices. Because the “devices” were not licensed by the Department under A.R.S. § 41-2091(A), the Department argues that Appellants’ use of the devices was unlawful and Appellants are subject to the imposition of civil penalties. 4. “Commercial device” is defined by A.R.S. § 41-2051(7) as: any weighing, measuring, metering or counting device that is used to determine the direct cost of things sold or offered or exposed for sale, or used to establish a fee for service if the cost is based on weight, measure or count, except that it does not include those devices used for in-house packaging, inventory control or law enforcement purposes. (Emphasis added.)

The Department argues that the Appellants’ use of their smartphones with the Lyft app is the use of “measuring/metering/counting devices that establish the fee for the transportation services” that Appellants provided.[26] Under the Department’s analysis, this makes each of Appellants’ smartphones a “commercial device” while using the Lyft app to provide rides to riders. Appellants argue that there has been no showing that use of the Lyft app turns the smartphones into “weighing, measuring, metering or counting devices” and that Appellants did not charge a “fee for service.” 5. The evidence does not show that Appellants’ smartphones, using the Lyft app, were used to weigh[27] or meter.[28] However, the evidence suggests that the smartphones, along with the Lyft app, were used to measure distance[29] or count[30] mileage for determining the “suggested donation.”[31] But, because the evidence regarding how a “suggested donation” is determined consists of vague and undefined references to merely “time and distance”[32] and to “starting and ending points,”[33] the evidence does not show by a preponderance that Appellants’ smartphones, using the Lyft app, are measuring or counting in order to establish a fee for services within the meaning of A.R.S. § 41-2051(7). 6. A “fee” is a “fixed charge” or “a sum paid or charged for a service.”[34] The evidence shows that Appellants were providing services. The evidence does not show that, in these two instances, Appellants were paid for the services because the services were interrupted.[35] Further, under the terms of the User Agreement, Appellants were not entitled to any fee, much less a “fixed” amount. Appellants accepted the User Agreement[36] that states that whether or not a driver is paid any amount at all is at the sole discretion of the rider.[37] Thus, as Appellants correctly argue, Appellants have no recourse against a rider who chooses to pay the suggested amount, or an amount less than the suggested amount, or no amount.[38] Because Appellants have no recourse against a rider for payment of any amount or for lack of payment, and because the riders have sole discretion as to what to pay or even whether to pay, the payments that might have been made had Appellants finished their routes do not fall within the definition of “fees.” The Administrative Law Judge finds them to be more in the nature of gifts or tips that are optional and to which Appellants have no legal rights. 7. Because the weight of the evidence does not show that Appellants used their smartphones, along with the Lyft app, to weigh, measure, meter, or count, and because the evidence does not show that Appellants’ smartphones were used to establish a fee for service, Appellants did not use commercial devices as defined in A.R.S. § 41-2051(7).[39] Operation of an Unlicensed Taxi 8. The Department argues that Appellants’ use of their personal vehicles as drivers of riders in the Lyft network on October 18, 2013, and on December 8, 2013, constitutes the operation of unlicensed taxis. Because the “taxis” had not been inspected and licensed by the Department under A.R.S. § 41-2091(K) and (M), and did not meet the requirements of A.R.S. § 41-2095 and A.R.S. § 41-2096, the Department argues that Appellants’ use of the vehicles for transporting the riders was unlawful and that Appellants are subject to the imposition of civil penalties. 9. “Taxi” is defined by A.R.S. § 41-2051(29) as: a motor vehicle that has a seating capacity not exceeding fifteen passengers, including the driver, that is registered as a taxi in this state or any other state, that provides passenger services and that: (a) Does not primarily operate on a regular route or between specified places. (b) Offers local transportation for a fare determined on the basis of the distance traveled or prearranged ground transportation service as defined in section 28-141 for a predetermined fare. (Emphasis added.)[40]

Taxis, like other passenger vehicles, are required to be registered by the Arizona Motor Vehicle Department[41] and are given special commercial (taxi) license plates upon registration.[42] The Administrative Law Judge reads the registration requirement in the “taxi” definition above as referring to that requirement. 10. Appellants argue that, based on the wording of the “taxi” definition, a vehicle cannot be a considered a taxi unless it is registered as a taxi.[43] This reading of the definition leads to an absurd result: taxi operators purposefully failing to register taxis in order to avoid regulation as taxis. Rather, because statutes should be read in a manner that avoids absurd results,[44] the definition of “taxi” should be read so that it applies to motor vehicles that are operating as taxis and that should be registered as taxis in this state or any other state. This reading of the definition is supported by the use of the word “registered” in the definition. “Registered” is not used to describe the Department’s oversight of taxis, only “licensing” is used.[45] Registration of vehicles is performed by the Motor Vehicle Department, whose applicable statutes require all passenger vehicles to be registered and require vehicles operating as taxis to be registered as such, as noted above. Thus, the definition of “taxi” in A.R.S. § 41-2051(29) assumes that the vehicle is registered as a taxi, as required by law. The Department then has authority to further regulate taxis by licensing them as set forth in A.R.S. § 41-2091, A.R.S. § 41-2095, and A.R.S. § 41-2096. This means that the reference to registration in the definition of “taxi” is merely noting that registration is required, it is not prohibiting the Department from regulating the unlicensed operation of taxis. Appellants’ argument that their vehicles cannot be determined to be taxis because they were not registered as taxis fails.[46] The Administrative Law Judge concludes that the definition of “taxi” could apply to Appellants’ vehicles regardless of the fact that they were not registered as taxis.[47] 11. Appellants correctly note that the definition of taxi also requires that operators offer transportation for a “fare” and that Appellants were not offering their services for a fare. A “fare,” similar to a fee, is “the price charged to transport a person.”[48] Here, Appellants are not charging a price for the services because they understand that the riders might not give them any amount of money for the services, they have agreed that the riders are not obligated to give them any money for the services, and they have agreed that whether to give Appellants money and in what amount is solely at the discretion of the riders. They also agree that they have no recourse against a rider if the rider chooses to not give any amount or only a small amount.[49] Appellants were not offering their services for a fare. 12. The weight of the evidence in this matter does not show that Appellants offered their services for a fare. Therefore, Appellants were not operating as taxis as defined by Arizona statute. 13. In summary, the Department has failed to show by a preponderance of evidence that Appellants used a commercial device or that Appellants operated their vehicles as taxis. Therefore, the allegations in the Notices of Violation have not been proven. 14. Finally, the Administrative Law Judge notes that these findings and conclusions are made only with respect to Appellants and the specific set of facts placed in evidence herein. RECOMMENDED ORDER Based on the above findings and conclusions, IT IS RECOMMENDED that the Director of the Arizona Department of Weights and Measures dismiss the Notices of Violation issued to Todd Joseph Haselhorst and David Donald Sena.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 5 days from the date of that certification.

Done this day, July 31, 2014.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

Shawn Marquez , Acting Director Arizona Department of Weights and Measures ----------------------- [1] The Department removed Sharalyn Ellen Riley as a party at the hearing. [2] Appellants offered Exhibits A (pending Arizona legislation) and B (California Public Utilities Commission Decision) into evidence. The Department objected on the grounds of relevance. Appellants argued that these exhibits were relevant to its legal argument, not to the facts of the case. The Administrative Law Judge allowed the documents to be marked as A and B for ease of reference, but did not admit the exhibits as factual exhibits, only as potential legal support for Appellants’ arguments. [3] Exhibit 3 (Lyft Terms of Service, https://www.lyft.me/terms, retrieved on 4/3/2014) at 2. [4] Id. at 1. [5] Id. at 2. [6] Exhibit 4 (How Does Payment Work for Lyft Rides?, http://www.lyft.com/help?article=1003538, retrieved on 4/8/2014) at 2. [7] There is very little information in the evidence as to how Lyft specifically works from a rider’s perspective. For example, there is no evidence about how early one can set up a ride. Can a rider request a ride a week in advance, a day in advance, or an hour in advance? The answers to these questions are not evident in the evidence submitted. [8] Exhibit 3 at 2. [9] Id. (“. . . driving to or through those destinations”). [10] Exhibit 4 at 2. [11] See id. [12] Exhibit 3 at 2, 3, and 8. [13] Exhibit 3 at 3 (“The decision whether to make a Donation and the amount of the Donation is at Your sole discretion, and the Driver will not receive any compensation or consideration for providing You a ride other than the amount (if any) of this voluntary Donation.”) [14] See id. (“Each Driver acknowledges that the decision to provide such Donation and the amount of the Donation is at the Rider’s sole discretion, and that the Driver will not request from the Rider or receive any compensation or consideration for providing a ride to the Rider other than the amount (if any) of the Donation.”) [15] See id. (“IT IS THE RIDER’S SOLE RESPONSIBILITY, AND NOT THE RESPONSIBILITY OF LYFT, TO DECIDE WHETHER AND HOW MUCH TO DONATE TO THE DRIVER.”) (Emphasis in original.) The rider is given 24 hours from the end of the ride to make a “donation.” If the rider does not make any “donation,” including $0, within 24 hours, the rider has agreed that the driver will get the Lyft app’s suggested amount. Id. [16] Finding of Fact 3 is based on the testimony of J.J. Stroh, 4/9/14 Hearing Record (hereinafter “H.R.”) at 0:15:33-0:21:00. [17] Exhibit 1. [18] Finding of Fact 4 is based on the testimony of J.J. Stroh, 4/9/14 H.R. at 0:56:12-1:01:26. [19] Exhibit 2. [20] Exhibits 2 and 6. [21] The Notices of Violation also include a reference to A.R.S. § 41- 2113(B), which makes certain violations of the statutes class 2 misdemeanors. [22] Appellants did call witnesses at the hearing. Appellants’ counsel made a record that Appellants were not testifying due to the potential of a class 2 misdemeanor charge for alleged violation of A.R.S. § 41-2113(B). [23] A.R.S. § 41-2115(A). [24] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996); In the Matter of the Appeal in Maricopa County Juvenile Action No. J- 84984, 138 Ariz. 282, 283, 674 P.2d 836, 837 (1983). [25] These charges are taken from the State’s Closing Argument, filed May 9, 2014. [26] State’s Closing Argument at 3. [27] “Weigh” means “to ascertain the heaviness of . . . .” Merriam- Webster’s Collegiate Dictionary (11th ed. 2004) at 1419. [28] “Meter” means “to measure by means of a meter.” Id. at 780. [29] “Measure” means “to estimate or appraise by a criterion.” Id. at 769. [30] “Count” means “to indicate or name by units or groups so as to find the total number of units involved.” Id. at 284. [31] See Finding of Fact 2 above. [32] Exhibit 4 at 1. [33] Id. at 2. [34] Merriam-Webster’s Collegiate Dictionary (11th ed. 2004) at 459. [35] The Department could not demonstrate that any payment had been made from the riders to Appellants in these two instances. [36] See Finding of Fact 2 above. [37] Exhibit 3 at 3. [38] Appellants’ Response Memorandum at 10, citing Exhibit 3 at 3. [39] Because the Administrative Law Judge concludes that Appellants did not use commercial devices, the rebuttable presumption found in A.R.S. § 41- 2114, as argued by the Department, does not apply, as it only applies when a “weight, measure, meter, counter, or commercial device” is used. [40] The Arizona Motor Vehicle Code at A.R.S. § 28-101(53) defines “taxi” with an identical definition. [41] A.R.S. § 28-2153. [42] A.R.S. § 28-2515(B). [43] Appellants’ Response Memorandum at 13. [44] Patches v. Indus. Comm’n, 220 Ariz. 179, ¶10, 204 P.3d 437, 440 (App. 2009). [45] See generally, A.R.S. § 41-2091. [46] The statutory framework of the statutes governing the Department’s authority includes not only the definition relied on by Appellants, but also requirements that vehicles operating as taxis have taxi meters that are licensed by the Department (A.R.S. § 41-2091(C) and A.R.S. § 41-2095), meet motor vehicle and insurance requirements (A.R.S. § 41-2091(K)), post their Department-issued licenses on the vehicle (A.R.S. § 41-2091(M)), and meet requirements for signage (A.R.S. § 41-2096). This framework gives the Department the implicit authority to identify and assess penalties for the unlicensed operation of taxis. [47] For this reason, it was reasonable for Stroh to question Appellants as to their activities, especially Appellant Sena, who was found in a designated taxi area. [48] Merriam-Webster’s Collegiate Dictionary (11th ed. 2004) at 453. [49] Exhibit 3 at 3.

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