Proposed Ruling on Substandard Uber Luxury Rides Would Threaten Public Safety, Appeal Says

Safety officials at the California Public Utilities Commission thought they had a powerful case against Uber for endangering the public.

In 2019 they discovered that Uber had allowed luxury limousine companies to provide hundreds of thousands of rides for Uber Black, its premium car service, even though these firms had given Uber blatantly false documents or employed drivers not fully insured or enrolled in mandatory drug testing and driving record reviews, the officials later alleged in a legal brief.

As their investigation continued, the safety officials learned that in almost two dozen cases, drivers for these unauthorized subcarriers had allegedly assaulted passengers or engaged in other misconduct, they said in the brief, some of which could have been prevented had Uber properly vetted the limousine firms.

To punish Uber and deter future misconduct, the officials in July 2023 proposed fining the ride-hailing giant $38 million, one of the largest penalties the state has sought against the company.

“Above all, this case highlights the numerous safety risks to the public and passengers of Uber Black,” Travis T. Foss and John Van Geffen, attorneys with the commission’s Consumer Protection and Enforcement Division, wrote in the brief. “Uber turned a blind eye because it generated tens of million dollars in profit.”

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Uber’s attorneys contended in responding briefs that the consumer protection unit’s case was deeply flawed and the proposed penalty “grossly over-reaching.” They said Uber itself had been the victim of a “small percentage” of unscrupulous limousine firms that defrauded it in order to access the Uber Black platform. Above all, they maintained that — contrary to the safety officials’ claims — it was not Uber’s duty to verify whether the limo firms providing rides on Uber Black met state licensing requirements.

And this summer it appeared that the consumer protection unit’s three-year-old case against Uber had crashed.

Rafael L. Lirag, who is one of the commission’s administrative judges, issued a proposed decision Aug. 20 finding that certain subcarriers had given “many” rides on Uber Black without proper insurance, licenses and driver monitoring. He also found that Uber “did not act with due care” when reviewing the documents submitted by independent limousine firms before allowing them to give rides through Uber Black. And he found that Uber itself had submitted “numerous” false records to the commission.

But Lirag also ruled that Uber did not know of the subcarriers’ violations and did “not intentionally” submit the false records to the agency. Moreover, he agreed with Uber that, under the regulations and laws cited by the safety officials, Uber was not responsible for safety violations by subcarrier limousine firms and drivers providing rides on Uber Black.

Lirag recommended fining Uber $50,000 for having submitted false information to the commission, noting there were “mitigating” factors and that this amount “will not impact its ability to conduct business.” He also dismissed all the reforms urged by the consumer protection unit, and instead directed Uber to submit its own proposal to prevent future subcarrier violations and to work with the safety officials to apply it. His 35-page decision did not mention the alleged assaults on passengers.

Foss and Van Geffen, of the commission’s Consumer Protection and Enforcement Division, have appealed Lirag’s proposed decision, arguing it “poses a significant threat to public safety and undermines the effectiveness of the Commission, and CPED specifically, in enforcing critical safety regulations.”

Lirag’s decision departs from “long standing commission precedent” and takes an “overly narrow” view of safety regulations, they said, declaring that if it stands “the result will be a paradigm shift in how public safety regulations are enforced.”

Uber opposed the appeal in a brief filed Oct. 4, calling these contentions “absurd” and “outrageous.” Uber claims it has “substantially complied” with the law and that the real problem is a “systemic flaw” in which the California Public Utilities Commission does not make available information it gathers from limousine companies that Uber needs in order to verify whether they meet safety standards.

The matter is set to be considered Dec. 5 by the full commission during a closed hearing, followed by a public vote on it. The commission agenda refers to a “modified decision” but provides no details about it.

[Read the Public Press’ previous investigations into how the commission withheld from the public and local officials reports on alleged accidents, assaults and other safety issues on Uber and Lyft rides, and how the agency failed to consistently collect the mandatory data.]

Loretta Lynch, who was president of the commission from 2000 through 2002 and a commissioner until 2005, called the proposed decision “disturbing,” contrary to precedent and harmful to public safety. She said the decision “encourages ignorance” by utilities because it holds that “as long as you’re not aware that your subcontractors and agents are violating the law or regulation, then you get off the hook.”

Lynch said the proposed $50,000 fine was “not even a slap on the wrist — it’s a get out of jail free card.” She said the fine would not even cover taxpayers’ cost of the investigation that documented Uber’s failure to adequately screen the limo companies and its submission of false information. Letting Uber propose its own reforms without specific requirements backed by legal citations “basically lets Uber write its own regulations,” she said.

Terrie Prosper, director of strategic communications for the commission, did not respond to an emailed question asking how the proposed decision would affect public safety. However, Prosper said Judge Lirag did not reduce the fine “but rather finds that Uber Black is not liable for most” of the alleged violations. She said the scope of this proceeding was limited to determining whether Uber and Uber Black subcarriers had violated the rules and regulations specified by the safety officials and “does not include broader public safety” that the commission “addresses in other ways.”

Prosper noted that the proposed ruling directed Uber to work with safety officials to “establish new methods” for screening Uber Black subcarriers because prior ones “were found to be inadequate.” She did not respond to a question on what assurance the public would have that Uber adopted adequate screening measures if the commission did not specifically require them.

Uber spokesman Zahid Arab said in an email, “Judge Lirag’s decision acknowledged that Uber meets its current compliance obligations and called for collaboration with the CPUC to increase access to information and further promote compliance among fleet operators. We take this directive seriously and understand the importance of regulatory standards for the safety and integrity of our platform.”

In response to a follow-up email, Arab acknowledged that the judge found Uber had violated a commission rule by submitting false information. Arab said Uber now confirms that every limousine company giving rides on Uber Black has a valid license from the commission and that each driver is subject to criminal and motor vehicle record screenings. He noted the Uber app has several safety features, including an emergency button.

Lawyers for Uber and the consumer protection unit did not respond to an emailed request for comment.

Uber Black’s ‘elevated service’

The Uber Black case has been pending at the California Public Utilities Commission since 2021 but has received no media coverage. It highlights the agency’s efforts to regulate a still young and powerful industry that has prided itself on breaking established modes. At its heart is this question: What is Uber’s legal duty to ensure that the limos and drivers giving rides through its Uber Black platform meet state safety standards? 

Passengers — such as executives, wedding parties and teens celebrating on prom night — pay a premium to use Uber Black, which boasts of providing “perfect” rides featuring only top-rated drivers and posh, all-black vehicles. “Expect elevated service from professional drivers,” Uber’s website says. “People driving with Uber Black must maintain a minimum rating requirement of 4.85 stars, be insured to drive commercially, and meet state- or local-level livery regulations.”

But according to the judge’s findings and Uber’s own testimony, Uber actually did not know whether the limousines and drivers on Uber Black met state safety standards, and in many cases they did not meet them.

The world’s largest ride-hailing business, San Francisco-based Uber Technologies reported revenue of $11.2 billion for the three-month period ending Sept. 30, with income of $2.6 billion. It is best known as a transportation network company for the smart phone-enabled app that connects people seeking rides with individual drivers using personal vehicles. Uber is required to verify that these non-professional drivers meet safety standards set by the commission, such as those for drug testing and monitoring of driving records. 

But Uber is also a transportation charter party company and under its Uber Black brand uses the same app to connect passengers with professional drivers working for independent companies with fleets of limousines and luxury vehicles like stretch SUVs. Uber maintains that, as a transportation charter party, it is required only to ensure these subcarriers have a current commission permit, and is not required to verify whether the firms and their drivers meet underlying safety standards as Uber must for non-professional drivers. According to Uber, each subcarrier is responsible for meeting its own requirements.

Uber has paid millions of dollars over the last decade to settle claims by state and local officials in California that it misled consumers about its safety measures, failed to investigate complaints about drunk drivers, and withheld safety and trip data from the commission. In 2020, the commission fined Uber $59 million for failing to turn over data on alleged sexual assaults, though that case was settled with Uber paying $9 million to support safety initiatives and a $150,000 fine. In each instance, Uber has denied wrongdoing, said problems occurred on only a tiny percentage of rides and touted its safety features.

The Uber Black case was initiated by the commission’s Consumer Protection and Enforcement Division, which describes itself as “the first line of defense for California utility customers.” The division’s Transportation Enforcement Branch reviewed whether Uber and its Uber Black subcarriers had accurately reported revenue as the basis for their state fees. It then asked Uber for information on its subcarriers, including documents they had given Uber in applying to be on Uber Black.

Hundreds of subcarriers gave illegal rides

The investigators discovered that 533 subcarriers had provided rides after their authority to operate had been revoked for various reasons, according to their report. Some 145 subcarriers had submitted vehicle identification numbers for limos not listed with the state Department of Motor Vehicles; insurance certificates that did not match insurance company documents; or other records suggesting “signs of falsification,” it said.

The investigation, still focusing on 2019, next examined 33 subcarriers with the highest earnings, the greatest number of trips and “a broader impact on the passengers’ safety,” the report said. Three were in Northern California, the rest in Southern California. It found:

* Two-thirds of the 33 subcarriers had no permit to operate and no workers’ compensation insurance.

* A third of them did not have the required personal liability and property damage insurance in case of accidents.

* Almost none of their drivers were enrolled in mandatory monitoring of driving records and testing for substance abuse.

In one case, Eric’s Luxury Limousine, of Glendale, near Los Angeles, made thousands of trips for Uber Black from 2019 to 2021 even though its permit had been revoked in 2017, according to a brief the consumer safety unit filed.

Uber’s on-boarding system allowed Eric’s to use “multiple fraudulent” permit numbers, and permit numbers belonging to other limousine companies, without those companies’ knowledge, according to the brief.

One of those permit numbers belonged to Regal Limousine Service, also of Glendale, a legitimate firm that boasts handpicked chauffeurs with “extensive training to ensure your safety.”

A Regal representative was not happy to learn this. “I cannot believe that Uber cannot recognize the fake documents that are submitted,” the representative wrote in an email to a state investigator that was filed in the case.

A representative of Music Express, another legitimate limo service, with offices in San Francisco and Los Angeles, likewise told investigators a permit submitted to Uber Black under its name was phony and “the cars listed have never been owned by Music Express, Inc.”

Armine Manvelyan, who was a manger for Eric’s Luxury Limousine, declined to comment when the Public Press reached him by phone.

The consumer protection unit next directed Uber to conduct “an immediate review” of all Uber Black subcarriers in California.

Uber reported back on Jan. 29, 2021, saying that as a result of the review it had removed 91 subcarriers, deactivated vehicles associated with 85 rejected insurance documents, and disallowed 51 vehicle registrations until the fleet owners submitted valid documents.

Uber also described its system for reviewing subcarrier documents at that time. The consumer protection unit found, however, not only that the process was “deficient” but that Uber had not adhered to it. Uber even failed to identify discrepancies by checking the subcarrier’s documents against the commission’s publicly accessible Carrier Lookup File, according to the investigative report.

Formal inquiry: Did Uber endanger public safety?

Acting on the investigation, the full commission voted on Dec. 2, 2021, to open a formal inquiry into whether Uber and certain Uber Black subcarriers were violating rules and endangering public safety.

Brian Stevens, the administrative law judge then overseeing the case, held a six-day evidentiary hearing in May and June 2023. In its opening brief, the consumer protection unit charged that from 2019 and into 2021 Uber allowed dozens of unauthorized limousine companies to provide more than 200,000 rides on the Uber Black platform around the state. Hundreds of drivers were not properly insured or not enrolled in mandatory programs to monitor their driving records and possible substance abuse. 

Uber failed to adequately screen the subcarriers before “on-boarding” them to give rides on Uber Black, and accepted fake state permits, falsified insurance certificates and phony vehicle identification numbers, the consumer protection unit alleged. Uber effectively “aided and abetted” unauthorized subcarriers on Uber Black from 2019 and into 2021, the unit claimed.

“Uber made it easy for sub-carriers to access the Uber Black platform and perform unauthorized and noncompliant operations by failing to verify and check the adequacy of the sub-carriers’ application information, although Uber had the ability to obtain any information, any documents, ask any questions,” the safety officials said in a brief.

“Uber profited handsomely by not checking, which ensured Uber had access to a large pool of easily available but unauthorized drivers,” they said.

Nearly two dozen drivers for such unauthorized subcarriers allegedly “committed sexual assaults, sexual misconduct, or physical altercations against Uber passengers,” the officials said in a brief. “Uber could have prevented some of these assaults by properly verifying” subcarriers’ records and barring unauthorized ones, they said.

(The briefs contain redactions requested by Uber and allowed by Judge Lirag, to protect allegedly confidential business and personal information, and provide no details about the assaults.)

The consumer protection unit says it proposed the $38 million fine based on the numerous violations, the danger to the public and Uber’s financial resources, and to deter future misconduct. It proposed fines of up to $1.2 million and a permanent ban for each of eight subcarriers, which have not answered the allegations.

Uber pushes back

Uber’s lawyers countered that the consumer protection unit’s case contained legal and factual errors. Uber simply had no legal duty under the specified commission rules to check beyond whether a subcarrier held a permit to operate, they said. The unit was attempting to create an entirely new duty that would turn Uber into “a shadow enforcement agency responsible for all aspects of a subcarrier’s compliance and business.” 

At the same time, Uber’s lawyers asserted in legal papers that the company shares the consumer protection unit’s commitment to safety. They said that once investigators alerted Uber to the problem of unauthorized subcarriers working on Uber Black, the company responded swiftly and in “good faith.” Uber now has a “robust compliance program” that uses better-trained staff to screen subcarrier applications, along with a second level of review and automated software to help detect forgeries, they said.

Relatively few subcarriers on Uber Black had been unauthorized, the lawyers argued in a legal brief, denying that Uber had “aided and abetted” them in any way. 

Moreover, they said, there was no evidence these unauthorized subcarriers had heightened risks to passengers, because the Uber Black app has many added safety features. “To the contrary, a rider transported by a subcarrier using the Uber Platform receives safeguards and protections that do not exist if the rider hired the same subcarrier or driver directly, off the platform,” said Uber attorneys Robert Maguire and Adam S. Sieff in a brief.

The proposed $38 million fine was “coercive,” they said, and the safety officials’ suggested reforms “draconian.” In sum, Uber claimed that since the company has been responsive, made improvements and corrected the “inadvertent” errors in the waybill data it gave investigators, there should be no fine.

Judge says Uber isn’t responsible for subcarrier violations

Judge Lirag concluded that the Consumer Enforcement and Protection Division had proved its case against Eric’s Luxury Limousine and each of the seven other subcarrier limousine firms for various violations such as operating without insurance, drug testing or driver monitoring. He recommended revoking their licenses.

As to Uber, Lirag rejected the consumer protection unit’s central arguments that the firm had a well-established duty to ensure that every subcarrier limousine driver providing rides on Uber Black was properly insured and enrolled in mandatory drug testing and driving record reviews. “A subcarrier’s driver is employed by the subcarrier and Uber is not responsible for said driver’s non-compliance with licensing requirements,” he ruled, interpreting a commission general order.

He also agreed with Uber’s contention that it was unaware of the subcarrier’s violations. He noted that Uber had tried to verify that subcarriers met state requirements but did not have access to necessary official records to do so “completely.” And though he found that “Uber could have done more to verify the list of authorized drivers,” he concluded that “this shortcoming does not equate to a violation.”

Lirag agreed with Uber that the firm could not be found liable for aiding and abetting the substandard subcarriers that had given numerous rides on Uber Black. He again concluded the company was unaware of the violations and that — though Uber “could have done more” to prevent them — this “does not amount to aiding and abetting.”

However, the judge found that Uber had violated commission Rule 1.1, which requires transportation companies to maintain “true and accurate” waybill records. Uber had claimed it could not fully verify some information provided by subcarriers before passing it along to the commission. But the judge noted there were “numerous” false records, some blatantly so, and ruled that “these errors should and would have been easily identified if the document had been properly reviewed.”

“Uber did very little to mitigate the potential harm such as alerting the Commission that it was submitting documents that it could not verify or requesting limited access” to commission records, he wrote.

“Instead, Uber seems to have simply forwarded the information it received from its subcarriers,” he ruled. “Uber is the submitter of false information to the Commission and must be held responsible for its contents because it did not act with due care and sufficient diligence in trying to prevent or at least mitigate the submission of false information.”

He noted that the consumer protection unit “had to spend a great amount of time and resources in reviewing the falsified documents.” But he noted that Uber submitted the false records unintentionally and cooperated with the unit’s investigation.

“Taking the above circumstances into account,” he concluded, “a fine in the amount of $50,000 is appropriate in this case.” Based on Uber’s revenues, he added, “this amount will not impact Uber’s ability to conduct business and perform its operations in this state.”

Lirag rejected all 15 reforms proposed by the Consumer Protection and Enforcement Division, saying they “are not clear or go beyond the scope” of the proceeding, and instead directed Uber to submit its own proposals and work with the unit to apply them. “It is clear that the verification methods currently employed by Uber are insufficient as evidenced by the violations uncovered in CPED’s investigation,” he said. “These deficiencies must be addressed by Uber.” 

The ruling did not address the alleged assaults Uber had acknowledged during the investigation. Peter Sauerwein, a senior manager for Uber on strategic projects and regulatory matters, had testified that there was minimal danger from the unauthorized subcarriers on Uber Black.

“I would say that there may be a slight amount of additional safety risk, but it’s mitigated by a lot of the safety protections that Uber has built into the platform for all drivers,” he testified on cross-examination.

But when pressed, Sauerwein confirmed that Uber had identified a “certain number” of alleged assaults by drivers for unauthorized subcarriers. “So, certainly,” he said, “any incident on the platform is too many, and even one is too many.”