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APR. 2 3 2020
CLERIC OF ye a
BY:
ty Clark
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
PEOPLE OF THE STATE OF
CALIFORNIA, acting by and through
DENNIS J. HERRERA AS CITY
ATTORNEY OF SAN FRANCISCO,
Plaintiff,
TURO INC., and DOES 1-100, inclusive,
Defendants.
AND RELATED CROSS-ACTION.
1
No. CGC-18-563803
ORDER ON MOTIONS FOR SUMMARY
ADJUDICATION AND MOTIONS TO
SEAL
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On April 16, 2020, the court heard two motions for summary adjudication by Plaintiff the
People of the State of California and Cross-Defendant the City and County of San Francisco (the
City): (1) the City’s motion for summary adjudication of Defendant Turo Inc.’s first and sixth
causes of action in its first amended cross-complaint (FACC) and sixteenth affirmative defense;
and (2) the City’s motion for summary adjudication of Turo’s second, third, and fifth causes of
action in its FACC and fourteenth and fifteenth affirmative defenses. The court also heard Turo’s
motions to seal certain documents filed in connection with those motions. All parties appeared by
their counsel of record.
For the following reasons, the court grants Turo’s motions to seal and the City’s motions
for summary adjudication. On its own motion, the court certifies one of the issues presented by
the City’s motions—whether Turo is a “rental car company” within the meaning of Government
Code § 50474.1—under Code of Civil Procedure section 166.1.
A. Motions to Seal
Turo filed motions to seal certain documents filed in connection with the City’s motions,
including internal emails reflecting non-public discussions regarding issues concerning Tuto’s
product offerings and online platform and portions of a declaration by Dr. Park, Turo’s retained
expert witness. Its motions are supporting by declarations showing that each of the documents or
portions of documents sought to be sealed is important to Turo’s business strategy and has
competitive value, and that the disclosure of those documents could prejudice Turo by giving its
competitors an unfair advantage. (Fang Decl. {| 4, 7, 9, 10; Supp. Fang Decl. § 13.) The Court
finds, as to each of the documents sought to be sealed, that there exists an overriding interest that
overcomes the right of public access to the record; the overriding interest supports sealing the
record; a substantial probability exists that the overriding interest will be prejudiced if the record
is not sealed; the proposed sealing is narrowly tailored; and no less restrictive means exist to
achieve the overriding interest. (Cal. R. Ct. 2.550(e).) Accordingly, Turo’s motions to seal are
granted as to only those documents and pages, or portions of those documents and pages,
specified in its motions, and the documents previously lodged conditionally under seal shall be
sealed. The Court notes that none of the sealed documents or portions is material to its rulings.
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B. Definition of Rental Car Company
The City’s first motion seeks summary adjudication as to Turo’s first cause of action, which
seeks declaratory relief that Turo is not a “rental car company” within the meaning of the
California Government Code. The Government Code authorizes an airport operated by a city and
county, such as San Francisco International Airport (SFO), to require a “rental car company . . . to
collect a fee from its customers on behalf of the airport for the use of an airport-mandated
common use busing system or light rail transit system operated for the movement of passengers
between the terminal and a consolidated on-airport rental car facility.” (Gov. Code, § 50474.1(a);
FACC { 38.) Turo insists that it is not a rental car company within the meaning of this provision,
but rather “an online car sharing platform” that enables “peer-to-peer car sharing.” As Turo’s
counsel conceded in argument, whether Turo is a rental car company within the meaning of
Government Code section 50474.1(a) presents a question of statutory interpretation on undisputed
facts on which the court may properly grant summary adjudication. (See, e.g., Union of Medical
Marijuana Patients, Inc. v. City af San Diego (2019) 7 Cal.5th 1171, 1183 [statutory
interpretation is an issue of law, which courts review de novo]; Walker v. Munro (1960) 178
Cal.App.2d 67, 71.) For the following reasons, the court concludes that Turo is a rental car
company, and the City therefore is entitled to summary adjudication of Turo’s first cause of
action.
That conclusion follows from the plain statutory language, which is unambiguous. “When
we interpret statutes, our primary task is to determine and give effect to the Legislature’s purpose
in enacting the law.” (Jn re H.W. (2019) 6 Cal.Sth 1068, 1073.) “If the language is clear, courts
must generally follow its plain meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend.” (Meza v. Portfolio Recovery Associates, LLC
(2019) 6 Cal.4th 844, 856.) The California Civil Code defines “rental company” as a person or
entity in the business of renting passenger vehicles to the public. (Civ. Code, § 1939.01; see also
Ins. Code § 1758.89 [Rental car company’ means any person in the business of renting vehicles
to the public.”]; Veh. Code § 11752(f) [similar definition].) Neither party has provided the court
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with case law interpreting Civil Code § 1939.01 or Government Code § 50474.1 and the court has
found none.
The key facts are undisputed: Turo is an Internet-based platform that allows owners to list
and customers to rent specific passenger vehicles; Turo receives a percentage of the proceeds
from each rental transaction; Turo sells insurance coverage to car owners and renters; and it has a
detailed terms of service contract governing rentals. Further, Turo admits that it competes with
traditional on-airport and off-airport rental car companies, and does not dispute that it has used
phrases like “rent” and “rental car” in advertisements. The average cost of a Turo transaction is
similar to that of a traditional car rental transaction at San Francisco International Airport (SFO).
Further, it is undisputed that Turo lists cars for rental to be picked up at SFO, and that some of
Turo’s customers pick up cars at SFO, including at curbside.
The definition of rent is “compensation for the use or possession of property for a period of
time.” (Barron’s Legal Dict. (6th ed. 2010) p.457, col. 2.); see Wasatch Property Management v.
Degrate (2005) 35 Cal.4th 1111, 1121-1122 [When attempting to ascertain the ordinary, usual
meaning of a word, courts appropriately refer to the dictionary definition of that word.”].) Turo’s
actions fall squarely within the common meaning of “in the business of renting passenger
vehicles to the public.” In Sentry Select Ins. Co. v. Fidelity & Guaranty Ins. Co. (2009) 46
Cal.4th 204, our Supreme Court decided a closely similar question: whether a commercial lessor
was “engaged in the business of renting or leasing motor vehicles without operators” within the
meaning of former Ins. Code § 11580.9(b). The Court concluded that it was, pointing to record
evidence that the lessor routinely leased nearly three quarters of its fleet of trailers to independent
truckers with whom it contracted for hauling jobs, the lease was a business transaction through
which the lessor received 20 percent of the fees the lessee earned on hauling jobs, and the leasing
activity was not merely incidental to lessor’s hauling business. (Jd. at 207-208, 214.) The same
conclusion follows here: Turo derives revenue from the rental transactions its customers enter
into, and that activity is not “merely incidental” to its business. In fact, it constitutes its entire
business.
4
Order On Motions for Summary Adjudication No. CGC-18-563803Contrary to Turo’s central argument, whether Turo owns the vehicles, or they are owned by
other individuals, is not determinative of whether Turo is in the business of renting vehicles.
Nothing in the language of section 50474.1 or Civ. Code § 1939.01 specifies that a rental car
company must own the rented vehicles in order to be considered in the business of renting
passenger vehicles to the public. Courts do not insert words into a statute. (Code Civ. Proc.
§1858; see Ennabe v. Manosa (2014) 58 Cal.4th 697, 719 [*‘[W]e must be careful not to add
requirements to those already supplied by the Legislature.””]; Security Pacific National Bank v.
Wozab (1990) 51 Cal.3d 991, 998 [it is a “cardinal rule of statutory construction that courts must
not add provisions to statutes”].) If the Legislature had meant to specify that only an “owner” of
a motor vehicle may be deemed to be in the business of renting vehicles, it could have easily said
so. Significantly, the Legislature did employ language expressly referring to ownership for other
purposes in the Vehicle Code. (Cf. Veh. Code § 17150 [Every owner of a motor vehicle is liable
and responsible for death or injury to person or property resulting from a negligent or wrongful
act or omission in the operation of a motor vehicle, in the business of the owner or otherwise, by
any person using or operating the same with the permission, express or implied, of the owner.”];
Snyder v. Enterprise Rent-A-Car, San Francisco (N.D. Cal. 2005) 392 F.Supp.2d 1116, 1130
[“Only the registered owner of the vehicle and, in limited circumstances, the holder of a security
interest in the vehicle, is an ‘owner’ for the purposes of § 17150.”].)] Just as a real estate agent is
“Gn the business of” renting or selling real estate even though the agent does not own any of the
properties it lists for rent or sale, Turo is in the business of renting cars even though it does not
own the cars it lists for rent. (See, e.g., Swann v. Burkett (1962) 209 Cal.App.2d 685, 689 [noting
that real estate brokers are “in the business of selling and renting homes”].)
While it is unnecessary to the analysis, this interpretation is also supported by the overall
context of the pertinent statutory provisions and by their legislative history. “If the statutory
language permits more than one reasonable interpretation, courts may consider other aids, such as
the statute’s purpose, legislative history, and public policy.” (Lopez v. Sony Electronics, Inc.
(2018) 5 Cal.5th 627, 634.) Two legislative enactments are pertinent.
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First, in 2010, the Legislature enacted Insurance Code section 11580.24, which explicitly
addressed car-sharing businesses like Turo’s. That statute defined “personal vehicle sharing” as
“the use of private passenger motor vehicles by persons other than the vehicle’s owner, in
connection with a personal vehicle sharing program.” (Ins. Code § 11580.24(b)(1).) It defined a
“personal vehicle sharing program” (PVSP), in turn, as “a legal entity qualified to do business in
the State of California engaged in the business of facilitating the sharing of private passenger
vehicles for noncommercial use by individuals within the state.” (Id. § 11580.24(b)(2).) Section
11580.24 required PVSPs to provide insurance coverage for the vehicle and operator equal to or
greater than the coverage maintained by the vehicle owner, as well as imposing a variety of other
related requirements. (/d. § 11580.24(c).) Its overall purpose was to allow drivers to participate
in such car sharing arrangements without invalidating their personal car insurance policies.
Significantly, the bill’s legislative history reflects that the Legislature was aware that existing
“[c]ompanies such as Gettaround, Inc., and City CarShare support the bill, which would enable
them to supplement or replace company owned fleets with temporary use private vehicles owned
by others during periods when the owner does not need the vehicle.” (Sen. Comm. on Banking,
Finance, and Insurance, AB 1871 (Jones), as amended June 1, 2010.)
Turo argues that because it is a PVSP within the meaning of § 11580.24, it cannot be a
rental car company. The Court disagrees. Because the Legislature used a different term in
Insurance Code section 11580.24 (“personal vehicle sharing program”) than it had in Gov. Code
section 50474.1 (“car rental company”), and did not amend or even refer to the latter, there is no
reason to infer that it intended the insurance legislation, which had a different purpose, to limit or
affect the prior statute. As the Legislative Counsel’s digest explains, the legislation “would
prohibit a private passenger motor vehicle, as defined, from being classified for insurance
purposes as a commercial, for-hire, or permissive use vehicle, or livery solely on the basis of it
being used for personal vehicle sharing, as defined,” provided that certain conditions are met.
(Stats. 2010, ch. 454 (AB 1871) (emphasis added).) The two statutory schemes are entirely
distinct.
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Second, in 2016, the Legislature enacted legislation amending provisions of the
Government Code and the Insurance Code relating to rental passenger vehicles, including the
specific provision (Gov. Code § 50474.1) at issue here. (Stats. 2016, ch. 183 (AB 2051), eff. Jan.
1, 2017.) That legislation, which post-dated by several years Turo’s commencing operations at
SFO, was intended to “modernize” those regulatory provisions, and makes it clear that the
Legislature was well aware of other developments in the car rental industry.! For example, before
the amendments were enacted, Vehicle Code section 14608 provided that a person could not rent
a motor vehicle to another person without first inspecting his or her driver’s license and
comparing the signature or photograph with the renter’s. (Veh. Code § 14608(a)(1),(2).) The
2016 legislation carved out an exception to that requirement for rental companies that do not rent
vehicles in person: “A rental company is not subject to the requirements of Section 14608 of the
Vehicle Code if the rental is subject to the terms of a membership agreement that allows the
renter to gain physical access to a vehicle without a key through use of a code, key card, or by
other means that allow the vehicle to be accessed at a remote location, or at a business location of
the rental company outside of that location’s regular hours of operation.” (Civ. Code § 1939.37.)
The Legislature also recognized that “a person or entity other than a rental company, including a
passenger carrier or a seller of travel services,” may also advertise rental rates for vehicle rentals.
(Ud. § 1939.19(g).) This provision made it clear that if an airline or a travel service such as
Expedia advertises rental cars, it is responsible for disclosing the additional charges that a
consumer will need to pay.
Taken together, these two legislative actions are irreconcilable with Turo’s position. In
enacting Insurance Code section 11580.24, the Legislature expressly addressed car-sharing
businesses such as Turo’s, with the knowledge that existing car rental companies that owned their
own fleets were interested in getting into that business. Thus, contrary to Turo’s position that
ownership is an essential attribute of a car rental company, the Legislature recognized that such
companies could also operate PVSPs without owning the shared vehicles. And six years later, the
' It is undisputed that Turo’s predecessor RelayRides first began operating in California in
2011, and that SFO first became aware of car-sharing companies such as Turo by early 2013.
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Legislature amended the regulatory provisions governing car rental companies to address
technological and other developments affecting their industry. Significantly, however, neither
enactment amended the statutory definition of rental car company, although the later legislation
did amend Gov. Code § 50474.1 in other respects. Moreover, the 2016 legislation expressly
confirmed and expanded airports’ authority to collect fees from rental car companies, including
newly-authorized customer facility charges to be collected by rental companies from renters.
(AB 2051, §§ 7, 8, adding Gov. Code §§ 50474.21, 50474.3.) That the Legislature enacted these
amendments without changing the definition of rental car company is persuasive, if not
conclusive, evidence that it did not intend to exclude Turo or similar car-sharing companies from
that definition.
Turo relies on Village of Bedford Park v. Expedia, Inc. (7th Cir. 2017) 876 F.3d 296 and
similar cases. In Expedia, the issue was whether thirteen local hotel tax ordinances applied to
online travel agencies (Expedia, Priceline, Travelocity, and Orbitz). Of those, seven ordinances
placed the duty to collect and remit the tax on owners, operators, and managers of hotels or hotel
rooms, while three placed the duty to pay the tax on the owner, manager or operator of the hotel.
(id, at 300-301.) The court found that the OTAs were not owners, managers, or operators of
hotels. (Id. at 303-305.) That holding is of no benefit to Turo since, as discussed above, Civil
Code § 1939.01 makes no reference to ownership, operation, or management in defining rental
car company. The court did find, applying Illinois law, that the three ordinances that impose a tax
on those engaged in renting hotel rooms or engaged in the business of renting hotel rooms did not
apply to the OTAs, concluding that “renting implies ownership and granting possession of
property—here, hotel rooms. As discussed, the OTAs do not own hotels or hotel rooms and they
cannot independently grant consumers access to hotel rooms.” (Jd. at 305.) For the reasons
discussed above, however, the court does not find either the holding or the reasoning of Village of
Bedford Park to be persuasive. Rather, the court agrees with the reasoning of Crawford v. Uber
Technologies, Inc. (N.D. Cal. Mar. 1, 2018) 2018 WL 1116725, which rejected arguments nearly
identical to Turo’s.
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Crawford was an action against Uber for failing to make reasonable accommodations under
the Americans with Disabilities Act (ADA) and state disability law. Uber moved for judgment on
the pleadings, arguing that it is not a covered entity because it is not “primarily engaged in the
business of transporting people” within the meaning of the ADA, which prohibits discrimination
on the basis of disability in “specified public transportation services provided by a private entity
that is primarily engaged in the business of transporting people.” (42 U.S.C. § 12184(a).) Rather,
“Uber views itself as a technology company that is engaged in the business of facilitating
networking between drivers and riders. Because Uber does not own its own vehicles or lease
them to Uber drivers,” it argued that it fell outside the scope of the ADA. (2018 WL 1116725 at
* 3.) Relying on Village of Bedford Park, Uber argued that “the service it offers is akin to that
provided by expedia.com, a website through which individuals can book rooms at third-party
hotels.” (/d.) Finally, exactly as Turo urges here, Uber argued that the ADA definition did not
apply “because plaintiffs admit that drivers, rather than Uber, convey passengers in vehicles not
owned by Uber.” (/d.)
The court rejected those arguments, which it found “miss the mark.” (/d. at *4.) First, it
reasoned that “nothing in Section 12185 requires that an entity own or lease its own vehicles in
order to qualify as a private entity providing taxi service within the meaning of the statute.” (Id.)
As discussed above, the same is true of Government Code section 50474.1, which makes no
mention of ownership. Second, it viewed Uber’s analogy of its business to that of expedia.com as
“strained”:
Expedia facilitates a transaction that is not dependent on the service it offers. Hotels have
rented rooms to guests long before the creation of expedia.com, and can do so without the
website’s assistance. By contrast, without Uber and its competitors, non-professional
drivers would find it difficult—if not impossible—to locate a rider and transport her to the
destination of her choice for monetary compensation. To say that Uber merely facilitates
connections between “both sides of the two-sided ridesharing market” obscures the fact that
Uber arguably created a market for this type of transportation.
Ud.) Again, precisely the same could be said of Turo, which arguably created a market for
personal car-sharing.
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The Court recognizes that the issue addressed in this section is one for which there is no
precedent squarely on point. On its own motion, the Court certifies the issue as a controlling
question of law as to which there are substantial grounds for difference of opinion, appellate
resolution of which may materially advance the conclusion of the litigation. (Code Civ. Proc. §
166.1.)
C. Equal Protection Claims
Turo’s sixth cause of action alleges SFO violated Turo’s equal protection rights under the
federal and California Constitutions by overcharging Turo and its users compared to other
assertedly similarly-situated Transportation Network Companies, taxi and limousine companies,
without any rational basis for doing so. (FACC { 129.) Turo’s sixteenth affirmative defense
similarly asserts plaintiffs’ claims are barred by the equal protection clauses of the California and
U.S. Constitutions. (Answer 21:23-26.) The Court is unpersuaded.
“The federal equal protection clause (U.S. Const., 14th Amend.) and its California
counterpart (Cal. Const., art. I, § 7, subd. (a)) provide that persons who are similarly situated with
respect to the legitimate purpose of a law must be treated alike under the law. [Citations.] Equal
protection challenges typically involve claims of discrimination against an identifiable class or
group of persons. The United States Supreme Court in Village of Willowbrook v. Olech (2000)
528 U.S. 562, 564... , however, held that a plaintiff who does not allege membership in a class
or group may state a claim as a ‘class of one.’” (Las Lomas Land Co., LLC v. City of Los Angeles
(2009) 177 Cal.App.4th 837, 857.) “To succeed on a class of one claim, a plaintiff must establish
that ‘(1) the plaintiff was treated differently from other similarly situated persons, (2) the
difference in treatment was intentional, and (3) there was no rational basis for the difference in
treatment.”” (Gerawan Farming, Inc. v. Agricultural Labor Relations Bd. (2017) 3 Cal.5th 1118,
1114.)
The third element is essentially the same rational basis test that courts typically apply in
equal protection cases involving economic regulations. (Las Lomas Land Co., LLC, 177
? At the hearing, neither party objected to certification of this issue.
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Cal.App.4th at 858.) Under that test, making regulatory distinctions among different categories
or classes of persons who may pose varying degrees of risk of harm “ ‘inevitably requires that
some persons who have an almost equally strong claim to favored treatment be placed on
different sides of the line, and the fact [that] the line might have been drawn differently at some
points is a matter for legislative, rather than judicial, consideration.” (Gerawan Farming, Inc., 3
Cal.5th at 11141.) “The rational basis test is extremely deferential and does not allow inquiry
into the wisdom of government action. [Citation.] A court must reject an equal protection
challenge to government action ‘if there is any reasonably conceivable state of facts that could
provide a rational basis for [the difference in treatment].’ . . .. Under the rational basis test, courts
must presume the constitutionality of government action if it is plausible that there were
legitimate reasons for the action. In other words, the plaintiff must show that the difference in
treatment was ‘so unrelated to the achievement of any combination of legitimate purposes that we
can only conclude that the [government’s] actions were irrational.”” (Las Lomas Land Co., LLC,
177 Cal.App.4th at 858-859.) Turo has the burden to negate every conceivable basis that might
support the classification. (Garcia v. Four Points Sheraton LAX (2010) 188 Cal.App.4th 364,
383 [on demurrer, rejecting equal protection challenges to city hotel service charge ordinance
requiring nonunionized hotels in Century Corridor near LAX to pass along mandatory service
charges to workers].)
So deferential is the rational basis test that courts have described the burden a challenging
party faces to overcome it as “exceedingly difficult,” if not “insurmountable.” (Las Lomas Land
Co., LLC, 177 Cal.App.4th at 859.) Turo does not carry that burden here. As discussed above,
the court finds that as a matter of law, Turo is a rental car company within the meaning of the
applicable statutory scheme. That classification is rationally related to a legitimate legislative
purpose. SFO clearly has legitimate government interests in regulating curbside traffic, in
financing the maintenance, operation, and expansion of its airport road system, in financing the
construction, maintenance, and operation of the AirTrain, which many rental car company
customers use when seeking to rent a car (as Turo’s customers did between October 2013 and
August 2017), and in protecting competition in the market for rental cars. (Cheong Decl. ff 11-
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13.) The City could rationally conclude that classifying Turo as a rental car company would
further those legitimate interests. (See A.J. California Mini Bus, Inc. v. Airport Com’n of the City
& County of San Francisco (N.D. Cal. 2015) 148 F.Supp.3d 904, 916-918 [upholding SFO’s
designation of zones for shared-ride van services to pick up and drop off passengers as rationally
related to legitimate government interests of controlling traffic congestion, allocating limited curb
space, improving pedestrian traffic, and minimizing passenger confusion].)
Turo argues that it is similarly situated to TNCs (such as Uber and Lyft), taxis, and
limousines because its users’ use of airport facilities is no greater than those entities. Whether or
not that is so, there is no denying that it shares at least some of the characteristics of traditional
rental car companies. Like those companies, Turo appeals to customers who wish to select and
drive their own rental vehicle, rather than being transported by a third-party driver; its operations
contribute to use of the airport road system, including the allocation of limited curbside space,
and traffic congestion; and its customers pay amounts that are close to those of traditional car
rental companies rather than to those charged by taxis and TNCs. (Cheong Decl., § 9-10.) Thus,
the City had a rational basis for treating Turo differently than these other types of transportation
modes. Even if the fit is not a perfect one, Turo has “failed to establish that this line drawing is
not rationally related to legislative goals.” (Garcia, 188 Cal.App.4th at 384.)
Finally, the court rejects Turo’s argument that SFO’s purported “animus” or improper
motive warrants denial of summary adjudication. Unlike the federal land use cases upon which
Turo relies, Turo has not shown that Respondents, due to animus, treated it differently than
similar situated businesses. (Cf. Paterek v. Village of Armada (6th Cir. 2015) 801 F.3d 630, 650
[evidence that differential treatment of other comparable businesses stemmed from planning
commissioner’s admitted “personality conflict” with plaintiff]; Swanson v. City of Chetek (7th
Cir. 2013) 719 F.3d 780, 784-785 [plaintiff homeowner who sought to remodel his house
demonstrated hostility by neighboring mayor who used his position to harass plaintiff by taking
“a series of alleged actions . . . that appear illegitimate on their face”].) “Animus” is “ill will,
antagonism, or hostility usually controlled but deep-seated and sometimes virulent,” and “ill will”
is an “unfriendly feeling: animosity, hostility.” (Loesel v. City of Frankenmuth (6th Cir. 2012)
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692 F.3d 452, 466 (quoting Webster’s Third New Int’! Dictionary, Unabridged (2002)).) Even if
the City was “strongly opposed” to Turo going forward with its car-sharing business at SFO, the
animus had to be directed against Turo itself, not against the business it was proposing. (Loesel,
692 F.2d at 467.) Turo has presented no such evidence. The mere fact that rental car companies
lobbied SFO in response to the competitive threat posed to their business by Turo and other
similar companies supports, rather than undermines, the City’s position that Turo is a rental car
company, and does not establish that SFO had an improper motive in treating Turo as an off-
airport rental car company. Accordingly, the City’s motion for summary adjudication of Turo’s
sixth cause of action and the sixteenth affirmative defense in its verified amended answer is
granted.
D. The Gross Receipts Charge and AirTrain Fee Are Not “Taxes” That Require
Voter Approval Under the California Constitution.
The City’s second motion seeks summary adjudication of Turo’s second and third causes of
action and fourteenth affirmative defense, which assert that SFO’s Gross Receipts Charge and
SFO Facilities Charge (or AirTrain Fee) constitute “taxes” not approved by the voters in violation
of article XIII C of the California Constitution, as amended by Proposition 26 in 2010. The
motion is well-founded. SFO did not “impose, extend, or increase” either of the contested fees
after 2010, when Proposition 26 went into effect. Under controlling authority construing the
California Constitution as it read before the enactment of that proposition, the charges are not
“taxes” within the meaning of article XIII C.3
3 The Court need not reach the City’s additional arguments, which include: (a) the Airport
Commission is not a city, county, or a special district, does not have the authority to levy taxes,
and has no “voters” with authority to approve the charges in question; (b) the Gross Receipts
Charge and the AirTrain Fee are not “imposed” as compulsory taxes, but rather are charges
incurred by companies that voluntarily choose to operate as rental car companies at SFO; (c)
Turo’s challenge to the Gross Receipts Charge is moot; and (d) even if Proposition 26 applied, the
charges would be exempt. Recent authority calls into question the City’s last argument. (See
Zolly v. City of Oakland (Mar. 30, 2020) --- Cal.App.5th ----, 2020 WL 1498339, at *6-*7
[holding, contrary to City’s position, that “[a] charge imposed for entrance to or use of local
government property” (art. XIII C, § 1(e)(4)) must be reasonably related to the value received
from the government].)+
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In Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.Sth 1, our Supreme Court
summarized the scope and application of article XII C: “California voters have, over the past
four decades, adopted a series of initiatives designed to limit the authority of state and local
governments to impose taxes without voter approval. [§{] The first of these initiatives was
Proposition 13, adopted in 1978. It added article XIII A to the state Constitution to assure
effective real property tax relief by means of an interlocking package of four provisions.” (Id. at
10 (citations and internal quotations omitted).)
“In 1996, the voters adopted Proposition 218, known as the Right to Vote on Taxes Act.
It added articles XIII C and XIII D to the state Constitution. Article XIII D, like the first two
provisions of article XIII A, limits the authority of local governments to assess taxes and other
charges on real property. Article XIII C buttresses article XIII D by limiting the other methods
by which local governments can exact revenue using fees and taxes not based on real property
value or ownership. As enacted, article XIII C provided that ‘[a]ll taxes imposed by any local
government shall be deemed to be either general taxes or special taxes.’ Local governments may
not impose, increase, or extend: (1) any general tax, unless approved by a majority vote at a
general election; or (2) any special tax, unless approved by a two-thirds vote.” (Jd. at 10-11
(citations and internal quotations omitted).
“Significantly, Proposition 218 did not define the term ‘tax.’ That definition was provided
14 years later, with the passage of Proposition 26 in November 2010. Proposition 26’s findings
stated that, despite the adoption of Propositions 13 and 218, ‘California taxes have continued to
escalate.’ The findings also took note of a recent phenomenon whereby the Legislature and local
governments have disguised new taxes as “fees” in order to extract even more revenue from
California taxpayers without having to abide by [the] constitutional voting requirements.’ [{] To
ensure the effectiveness of Propositions 13 and 218, Proposition 26 made two changes to article
XII C. First, it specifically defined ‘tax,’ and did so broadly, to include ‘any levy, charge, or
exaction of any kind imposed by a local government.’ However, the new definition has seven
exceptions. A charge that satisfies an exception is, by definition, not a tax.” (Id. at 11 (citations
omitted).) “Second, Proposition 26 requires the local government to prove ‘by a preponderance
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of the evidence that . . . [aJn exaction is not a tax, that the amount is no more than necessary to
cover the reasonable costs of the governmental activity, and that the manner in which those costs
are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or
benefits received from, the governmental activity.”” (Jd. at 11 (citation omitted).)
“Based on article XIII C’s structure, it is apparent that a challenge to an alleged tax
involves three questions: (1) Is the alleged tax a levy, charge, or exaction imposed by a local
government?; (2) Does it satisfy an exception to the definition of tax?; and (3) if it does not, was
it properly approved by the voters?” (Jd. at 12.) Here, Turo’s challenge fails at the first step:
neither the Gross Receipts Charge nor the AirTrain Fee is a “tax” within the meaning of article
XIII C. Whether an imposition is a tax or a fee presents a question of law. (Bay Area Cellular
Telephone Co. v. Union City (2008) 162 Cal.App.4th 686, 693.)
The parties agree that Proposition 26 would apply only if an alleged tax was imposed,
extended, or increased after November 2010, when that initiative was enacted. Here, both
contested charges were imposed prior to November 2010. “ ‘[I]mpose’ ‘in this context means
enacted.” (California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924, 944; accord,
Reid v. City of San Diego (2018) 24 Cal.App.Sth 343, 368.) It is undisputed that SFO first
imposed the Gross Receipts Charge in 1990 and increased it to 10% in 1996. Likewise, SFO
imposed the AirTrain Fee in 2002, effective when the AirTrain began operating in 2003, and last
raised that Fee in July 2010, prior to the effective date of Proposition 26.
Contrary to Turo’s arguments, neither fee has been “extended” or “increased” since the
enactment of Proposition 26. An extension occurs when a tax that was originally adopted as a
temporary measure, with a specific sunset date, is later “extended” into subsequent years. (See
Citizens Assn. of Sunset Beach v. Orange County Local Agency Formation Com. (201 2) 209
Cal.App.4th 1182, 1195 & fn. 16.) That did not occur here. Nor did SFO “extend” or “increase”
the charges simply by applying them to Turo. (See id. at 1195 [construing “increase” to refer to
“a change in the amount of an existing tax rate a taxpayer owes”].) As discussed above, while
Turo may utilize a different business model” than other companies to which the charges apply, it
is nevertheless a rental car company within the meaning of Gov. Code § 50474.1(a).
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Under closely analogous authority predating the passage of Proposition 26, the Gross
Receipts Charge is not a “tax” within the meaning of article XIII C. (Alamo Rent-A-Car, Inc. v.
Board of Supervisors of Orange County et al. (1990) 221 Cal.App.3d 198, 205.) In Alamo Rent-
A-Car, Inc., exactly as here, Alamo challenged an off-airport rental fee, based on gross receipts,
for operation of rental car agencies located off the premises but serving the passengers of an.
airport. Alamo contended, among other things, that the.charges violated Proposition 13 (Cal.
Const., art. XIII A, § 4), which requires an electoral vote for imposition of any “special tax” not
qualifying as a “user fee” under Gov’t Code § 50076. The court rejected the argument, holding
that the fee was not a tax, but rather “a fee for specific entities [off-airport rental car companies]
which choose to operate on, and derive financial benefit from, the Airport, a self-financing
activity.” (Id. at 205.) The court observed that such gross receipts fees “need not relate only to
use of the airport roads and shuttle stops but may apply to general airport maintenance and
operational costs. They are not levied merely to cover the costs of a service enlarged because of
the presence of Alamo. Rather, construction and maintenance of the Airport was undertaken for
airline passengers, who in turn are the customers for both on- and off-site rental car companies.
Alamo is but one of the businesses which flock to the area, desiring to pluck a portion of the
existing commuter market arising from the Airport’s already established facility. The added
burden Alamo places on the Airport includes, of course, the element of increased traffic from
Alamo’s shuttle buses and the need for a pickup/dropoff area. The benefit Alamo receives,
however, flows from all phases of the Airport operation.” (Jd. at 207-208.) The same holding
and reasoning apply squarely here.*
The same conclusion follows as to the AirTrain Fee. California law expressly authorizes
SFO to collect the AirTrain Fee, specifically stating the “fee is a user fee, not a tax.” (Gov. Code,
‘While Alamo Rent-A-Car, Inc. was decided under Proposition 13 (art. XIII A), the same
conclusion follows under Proposition 218 (art. XII C), which employs closely similar language.
(See Apartment Ass’n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830,
838 [Proposition 218 is Proposition 13’s progeny. Accordingly, it must be construed in that
context.”].)
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§ 50474.3(a)(3).)* User fees are “those which are charged only to the person actually using the
service; the amount of the charge is generally related to the actual goods or services provided.”
(Usaac v. City of Los Angeles (1998) 66 Cal.App.4th 586, 597.) Here, it is undisputed that the
AirTrain Fee is not paid by the public generally, but only by those individuals who rent cars with
off- and on-airport rental car companies. (UMF #30.)° The City shows that the amount of the fee
is reasonably calculated to recover the costs of the construction, maintenance, and operation of
that portion of the AirTrain servicing the RCC, and is not used for any other purpose. (Mann
Decl. {| 19.) Turo has not shown that there are any genuine disputed issues of material fact as to
whether the fee “exceed[s] the reasonable costs to the local government of providing the service.”
(Cal. Const., art. XIII C, § 1(e)(2); Gov. Code § 50474.1(a)(4) [“Revenues collected from the fee
may not exceed the reasonable costs of providing the busing and light rail transit service and shall
not be used for any other purpose.” ].)
Finally, a practical observation supports the court’s analysis. In Alamo Rent-A-Car, Inc.,
the court observed that “prior submission of the proposed fee to the county’s voters for approval
would be nonsensical” because it would have “little impact” on those voters. (221 Cal.App.3d at
205.) Precisely the same is true here: SFO is located in San Mateo County, while the Airport
Commission is an agency of the City and County of San Francisco. But the fees in question are
not paid by the voters of either county, but rather by travelers from all over the world who rent
vehicles at San Francisco International Airport. Yet when the court posed the elementary
question at the hearing as to which jurisdiction’s voters should have been given the opportunity to
approve the Gross Receipts Charge and AirTrain Fee, Turo’s counsel had no answer. As that
5 A legislative body’s designation of the nature of a tax is entitled to weight, although it is
not dispositive. (Building Industry Assn. of Bay Area v. City of San Ramon (2016) 5 Cal.App.Sth
62, 86.) Here, the Legislature amended the relevant Government Code provisions including §
50474.1 in 2016, long after the decision in Alamo Rent-A-Car, Inc. and the enactment of
Proposition 218. The Legislature is deemed to be aware of judicial decisions already in existence
and to have enacted or amended a statute in light thereof. (People v. Scott (2014) 58 Cal.4th
1415, 1424.)
6 Turo’s argument that its customers do not utilize the AirTrain is unavailing. If that is
true, it is only because Turo has flouted the City’s requirement that it obtain a permit to continue
operating at SFO and has insisted, contrary to the requirements of such permits, that its customers
are entitled to exchange vehicles at curbside.
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makes clear, Turo’s attack on these fees as “taxes” is little more than a convenient legal theory in
search of facts to support it.
E. Turo’s Dormant Commerce Clause Argument Lacks Merit.
Finally, the City seeks summary adjudication of Turo’s fifth cause of action and fifteenth
affirmative defense, which assert that the disputed charges constitute an undue burden on
interstate commerce in violation of the dormant Commerce Clause (U.S. Const., Art. I, § 8). This
last claim requires little discussion. It is undisputed that the Gross Receipts Charge and the
AirTrain Fee apply to both intra- and inter- state rental car companies and SFO passengers. (UMF
#52.) Courts have unanimously rejected identical challenges to such charges. (See, e.g., Alamo
Rent-A-Car, Inc. v. Sarasota-Manatee Airport Authority (11th Cir. 1990) 906 F.2d 516, 518-522
[rejecting Commerce Clause challenge to user fee comprising ten percent of gross receipts levied
by airport authority against off-airport car rental companies]; accord, Alamo Rent-A-Car, Inc. v.
City of Palm Springs (9th Cir. 1991) 955 F.2d 30 (per curiam) [upholding access fee of 7% of
gross receipts charged to rental car company for using airport access roads to pick up and drop off
airline passengers who use its cars].) As the Eleventh Circuit observed, “Unquestionably,
maintenance of the airport facility is a legitimate local public interest. Indeed, assuring an
adequate airport facilitates rather than burdens interstate commerce.” (Alamo, 906 F.2d at 518.)
“Furthermore, any burden on interstate commerce is incidental rather than deliberately imposed.
No greater fee is levied on interstate travel as distinguished from intrastate travel.” (Id) Where,
as here, a rental car company “enjoy[s] the indirect “use’ of the entire airport facility through the
travelers it services,” such a user fee “is a fair, albeit imperfect, approximation of use.” (Id.)
Again, the City has shown that the AirTrain Fee is not excessive in relation to costs
incurred by SFO, and Turo has not shown that there are any genuine issues of disputed fact
bearing on the reasonableness of the Fee. (Mann Decl. {ff 2, 17, 19; see Alamo, 906 F.2d at 521-
522 [“given the long term nature of maintaining and developing an airport, it was appropriate for
the authority to factor in future development plans when setting user fees.”]; Alamo, 955 F.2d at
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31 [Alamo has offered no proof that the 7% figure is excessive when this cost [of debt service] is
considered.”].)
CONCLUSION
For the foregoing reasons, Turo’s motions to seal are granted; the City’s motions for
summary adjudication are granted; and the issue specified in Part B is certified under Code of
Civil Procedure section 166.1.
IT IS SO ORDERED.
Dated: aprit22ao20
ON. ETHAN PSC. MAN
JUDGE OF THE SUPERIOR COURT
19
Order On Motions for Summary Adjudication No. CGC-18-563803SUPERIOR COURT OF CALIFORNIA
County of San Francisco
Department 302
PEOPLE OF THE STATE OF CALIFORNIA, acting Case Number: CGC-18-563803
by and through DENNIS J. HERRERA AS CITY
ATTORNEY OF SAN FRANCISCO, CERTIFICATE OF MAILING
Plaintiff(s)
_ vs.
TURO INC., and DOES 1-100, inclusive,
Defendant(s),
And Related Cross Action.
(CCP 1013 (4))
I, Diane Hakewill, a Deputy Cletk of the Superior Court of the County of Sah Francisco, certify that I
am not a party to the within action.
On April 23, 2020, I served the ORDER ON MOTIONS FOR SUMMARY ADJUDICATION AND
MOTIONS TO SEAL by placing a copy thereof in a sealed envelope, addressed as follows:
Michael G. Rhodes
Cooley, LLP
101 California Street, 5t* Floor
San Francisco, CA 94111
Kristine Poplawski,
Deputy City Attorney
1390 Market Street, Suite 425
San Francisco, CA 94102
Celeste M. Brecht, Esq.
Venable LLP
101 California Street, Suite 3800
San Francisco, CA 94111
Marc Price Wolf, Esq.
Deputy City Attorney
1390 Market Street, 6th Floor
San Francisco, CA 94102
Ashley K. Corkery, Esq.
Cooley, LLP
101 California Street, 5" Floor
San Francisco, CA 94111
Zachary C. Frampton, Esq.
Reed, Smith, LLP
355 South Grand Avenue
Los Angeles, CA 90071-1514
Adam S. Gershenson, Esq.
Cooley LLP
500 Boylston Street, 14" Floor
Boston, MA 02116
Elizabeth M. Wright, Esq.
Cooley LLP
500 Boylston Street, 14" Floor
Boston, MA 02116
Stephanie Wilson, Esq.
Reed Smith LLP
506 Carnegie Center, Suite 300
Princeton, NJ 08540
Monique ’B. Howery, Esq.
Reed Smith LLP
10 South Wacker Drive, 40" Floor
Chicago, IL 60606-7507J. Douglas Baldridge, Esq.
Venable LLP
600 Massachusetts Avenue NW
Washington, DC 20001
and, I then placed the sealed envelopes in the outgoing mail at 400 McAllister Street, San Francisco, CA. 94102 on
the date indicated above for collection, attachment of required prepaid postage, and mailing on that date following
T. MICHAEL “O, Clerk
By:
buh MN Deputy Clerk
standard court practices.
Dated April 23, 2020