Arranging car rentals doesn’t make a business a car rental company, court says

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Turo Inc. operates an online platform that allows car owners to rent their own vehicle. But because the company doesn’t own the cars itself, it’s not a rental car company, a state appeals court has heard — so it doesn’t have to pay San Francisco a license to operate at San Francisco International Airport.

Turo is based in San Francisco and operates in other US states, Great Britain and Canada. Like rental companies, it charges renters fees, provides insurance, and sets rules for smoking and other behavior in vehicles.

“Turo’s entire business is to permit the public to rent motor vehicles,” the First District Court of Appeals observed Tuesday. But he said the definition of a car lessee under California law — someone who has a contract to “lease or lease a passenger vehicle from a rental company” — does not apply. applies only to companies that own or control the rental vehicles, not to a company like Turo that arranges the rental of vehicles owned by others.

In addition, the court noted, state law states that if a driver damages a rental vehicle, the driver is responsible for repair costs, as well as towing and storage costs.

“These limits assume that the rental company owns or controls the rented vehicle,” which Turo does not, Judge Marla Miller said in the 3-0 decision. The court overturned a 2020 ruling by Superior Court Judge Ethan Schulman holding Turo liable for rental fees to SFO.

The case is somewhat similar to disputes over whether ride-sharing companies like Uber and Lyft are in the transportation business, as state regulators argue, or simply provide the technology that drivers and passengers can use, as the companies claim. A number of courts have classed them as transport companies, tightening regulation and allowing their drivers to be considered employees rather than contractors, a matter currently under consideration before an appeals court in ‘State.

But Miller said the Turo case was different because the car rental law contains the word “rental,” which, she said, only applies to companies that rent their own vehicles.

Turo, founded in 2009, describes itself as “the largest car-sharing marketplace in the world”, with 217,000 vehicles on its online platform as of March 31. Spokesman Steve Webb called the decision “a major victory for Turo and peer-to-peer car-sharing in California” and said it could influence courts in other states considering similar cases.

The company is willing to pay fees to local governments, but shouldn’t be charged as much as car rental companies, said Lou Bertuca, another Turo spokesperson.

“We don’t get the same benefits as them,” he said. “There is no train that takes you to (Turo vehicles), no signage.”

Jen Kwart, spokeswoman for City Attorney David Chiu, said no decision has yet been made on whether to seek a review in the state Supreme Court.

“Turo’s unauthorized activities negatively impact SFO’s operations and unfairly undermine the airport car rental companies that Turo competes with,” she said. Regardless of (Tuesday’s) decision, other aspects of San Francisco’s lawsuit will move forward. SFO still has the power to regulate Turo’s conduct on airport property, whether or not it qualifies as a rental car company.

Bob Egelko is a writer for the San Francisco Chronicle. Email: begelko@sfchronicle.comTwitter: @BobEgelko



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