Yazam, Inc. v. D.C. Dep't of For-Hire Veh.

310 A.3d 616

YAZAM, INC., d/b/a Empower, Petitioner,

v.D.C. DEPARTMENT OF FOR-HIRE VEHICLES, Respondent.

No. 21-AA-0751

District of Columbia Court of Appeals.

Argued October 3, 2023

Decided February 29, 2024

On Petition for Review of Orders of the District of Columbia Office of Administrative Hearings (2020-DFHV-000003)

Matthew M. Madden, with whom Lauren C. Andrews, Washington, DC, was on the brief, for petitioner Yazam, Inc., d/b/a/ Empower.

Dia Rasinariu, Assistant Attorney General, with whom Brian L. Schwalb, Attorney General for the District of Columbia, Caroline S. Van Zile, Solicitor General, Ashwin P. Phatak, Principal Deputy Solicitor General, and Graham E. Phillips, Deputy Solicitor General, were on the brief, for respondent.

Before Beckwith, McLeese, and Deahl, Associate Judges.

McLeese, Associate Judge:

Petitioner Yazam, Inc., which does business as Empower, challenges rulings by the Office of Administrative Hearings ("OAH") (1) that Empower is a private vehicle-for-hire company subject to the regulatory authority of the D.C. Department of For-Hire Vehicles ("DFHV"), and (2) upholding a cease-and-desist order that DFHV issued to Empower. We uphold the ruling that Empower is a private vehicle-for-hire company subject to DFHV’s regulatory authority. We reverse the cease-and-desist order.

I. Background

A. Factual Background

The parties stipulated to facts that included the following. Empower’s software can be used to book rides in automobiles. Empower sells subscriptions to that software, and other related support services, primarily to drivers who wish to provide rides to passengers. Subscribers must enter into a subscription agreement with Empower. The standard subscription agreement was not submitted to OAH and is not before this court, but the parties stipulated to some of the provisions of that agreement. The subscription agreement provides that drivers have "the sole right to determine when, where, how, how often, and for how long" drivers provide rides. Drivers determine their own fares, and payments from passengers to drivers are processed through a third party not owned or controlled by Empower. Drivers keep all of the fares and fees they charge passengers.

Passengers who use Empower’s software to book rides must agree to Empower’s acceptable-use policy. That policy is not in the record. Empower does not receive any payments from passengers who use its software. Empower provides email and phone support to drivers and passengers.

Empower requires drivers to provide information about the vehicle the driver uses and also requires drivers to undergo a background check conducted by a third party. Empower does not permit drivers to unilaterally change fares after accepting a request for a ride. Empower requires that drivers charge passengers a cancellation fee in some circumstances.

B. Statutory and Regulatory Background

Vehicles for hire in the District of Columbia are regulated under the Taxicab Commission Establishment Act ("the Act"). D.C. Code § 50-301 et seq. Vehicles for hire are divided into public vehicles and private vehicles. Id. §§ 50-301.03(16A), (17). Operators of public vehicles for hire, such as taxicabs and limousines, are required to obtain special licenses, pay a license tax, and demonstrate their good moral character and their qualifications to operate their vehicle. D.C. Code §§ 50-301.03(17), -301.19; id. § 47-2829(d), (e). Operators and owners of public vehicles for hire are also subject to an extensive set of regulations, which address issues such as the marking of vehicles, nondiscriminatory provision of services, required equipment, annual vehicle inspection, standards of operator conduct, recordkeeping obligations, proof-of-insurance requirements, and operators’ proof of good health. 31 D.C.M.R. §§ 503, 508, 608, 816, 818, 823, 900, 1003.

The Act also regulates private vehicles for hire. D.C. Code §§ 50-301.29a to .29g; 31 D.C.M.R. § 1900-07; see also 31 D.C.M.R. § 9901.1 (regulations use term "private sedan" as "synonymous with the term ‘private vehicle-for-hire’ " as defined in the Act). Regulation of private vehicles for hire under the Act is primarily directed in the first instance at "private vehicle-for-hire compan[ies]," rather than at individual operators. D.C. Code § 50-301.29a. Among other things, private vehicle-for-hire companies must maintain records of their operators and vehicles; disclose required information on their websites; verify detailed initial and annual safety inspections of vehicles; perform background checks on operators; ensure that their operators meet applicable requirements; register their operators; have a policy of zero-tolerance for use of alcohol, use of illegal drugs, and driving while impaired; have a policy forbidding discrimination in the provision of services; provide quarterly reports to DFHV; require their vehicles to display a consistent "trade dress consisting of a logo, insignia, or emblem"; disclose their fees to customers; and either maintain adequate insurance or verify that their operators do. Id. §§ 50-301.29a, .29c, .29d, .29f; 31 D.C.M.R. §§ 1903, 1905. Finally, private vehicle-for-hire companies must register with DFHV and periodically verify that they have met regulatory requirements. D.C. Code §§ 50-301.29a(12), .29g(a); 31 D.C.M.R. § 1902.

Some of the same requirements, and some additional ones, apply to companies, including public or private vehicle-for-hire companies, that "provide[ ]" or "use[ ]" "digital dispatch." D.C. Code § 50-301.31. "Digital dispatch" means "the hardware and software applications and networks, including mobile phone applications, which passengers and operators use to provide public and private vehicle-for-hire service." Id. § 50-301.03(8A). The additional requirements include provisions governing the disclosure and calculation of fares; an obligation to provide service throughout the entire District; and obligations to pay a percentage of gross receipts and a "congestion management fee" to the District. Id. § 50-301.31.

Operators of private vehicles for hire are directly subject to certain requirements. D.C. Code § 50-301.29e; 31 D.C.M.R. § 1904. They may "[a]ccept only rides booked through a private vehicle-for-hire company’s digital dispatch and shall not solicit or accept street hails." D.C. Code § 50-301.29e(a)(1). They also are required to use the private vehicle-for-hire company’s trade dress; have a valid driver’s license issued by D.C., Maryland, or Virginia; have proof of insurance; and be at least twenty-one years old. Id. § 50-301.29e(a).

The principal issue in this case is whether Empower is a private vehicle-for-hire company subject to regulation under the Act. The Act defines "[p]rivate vehicle-for-hire" company as an organization "operating in the District that uses digital dispatch to connect passengers to a network of private vehicle-for-hire operators." D.C. Code § 50-301.03(16B). A "[p]rivate vehicle-for-hire operator" is "an individual who operates a personal motor vehicle to provide private vehicle-for-hire service in contract with a private vehicle-for-hire company." Id. § 50-301.03(16C). As previously noted, DFHV’s regulations use the term "private sedan" in place of "private vehicle-for-hire." 31 D.C.M.R. § 9901.1. Under the regulations, a "[p]rivate sedan business" is an organization "that uses digital dispatch to connect passengers to a network of operators of private sedans." Id. A "[p]rivate sedan operator" is "an individual who operates a personal motor vehicle to provide private sedan service … in association with a private sedan business." Id. "Private sedan service" is "a class of transportation service by which a network of private sedan operators … registered with a private sedan business … provides vehicle-for-hire service." Id. Finally, a "digital dispatch service" is "a dispatch service that provides digital dispatch for vehicles-for-hire." Id.

DFHV is authorized to investigate violations of the Act, to promulgate regulations, and to impose sanctions on companies and operators that fail to adhere to the Act or DFHV’s regulations. D.C. Code §§ 50-301.07(c), .13(g), .29(a), .29g. DFHV can issue ex parte cease-and-desist orders if it "has reason to believe that a person is violating a provision of [Title 31 of the D.C.M.R.] or other applicable law and the violation has caused or may cause immediate and irreparable harm to the public." 31 D.C.M.R. § 705.1. "A cease and desist order shall be in writing … and shall include," among other things, "[t]he grounds for the order, including a citation to the law or regulation that the respondent is violating." Id. § 705.2. The subject of such an order can seek a prompt hearing before OAH. Id. § 705.4.

C. Procedural Background

DFHV issued an ex parte cease-and-desist order requiring Empower to immediately cease operations. The order stated that Empower had failed to register as required with DFHV. The order listed three provisions that DFHV believed Empower had violated: D.C. Code § 50-301.29a(12) (requiring private vehicle-for-hire companies to register with DFHV); 31 D.C.M.R. § 1605.1 (requiring digital dispatch services to register with DFHV); 31 D.C.M.R. § 1902.1 (requiring private sedan businesses to register with DFHV). Empower challenged the order before OAH, which granted summary judgment to DFHV.

Empower argued before OAH that Empower was not required to register with DFHV because Empower lacked the kind of contractual labor relationship necessary for Empower to be "in contract with" its subscribers. See D.C. Code § 50-301.03(16C) (defining "[p]rivate vehicle-for-hire operator" as "an individual who operates a personal motor vehicle to provide private vehicle-for-hire service in contract with a private vehicle-for-hire company") (emphasis added). OAH concluded that Empower was required to register with DFHV. OAH reasoned that D.C. Code § 50-301.03(16C) does not require "that the contract between the operators...