SideCar Lawsuit

CAUSE NO.

SIDE.CR, LLC, § IN THE DISTRICT COURT OF§

Plaintiff, §§

v. § TRAVIS COUNTY, TEXAS§

CITY OF AUSTIN, TEXAS, §§

Defendant. § DISTRICT COURT

PLAINTIFF’S ORIGINAL PETITION

COMES NOW SIDE.CR, LLC, Plaintiff, complaining of City of Austin, Defendant, and

would respectfully show as follows:

1. Discovery is intended to be conducted in this case under Level 2, Tex. R. Civ. P.

190.1

I. Introduction and Summary.

2. Plaintiff Side.cr. LLC (“SideCar”) is a technology company that has developed a

computer software platform for use by people who carpool or rideshare. SideCar is, in essence, a

Match.com or “dating service” for carpoolers and ridesharers. People can download the SideCar

mobile app to their smartphones, and use that app to locate other people who are driving or need

rides. SideCar provides the software and the interactive computer system that facilitates the

communication, but it does not own or operate vehicles or direct drivers as to routes or riders.

3. The City of Austin Transportation Department has threated to cite drivers who use

SideCar and SideCar’s corporate representatives for violating the City Code. The City is

incorrect. Neither SideCar nor its users are in violation of the City Code, for multiple reasons:

SideCar maintains a communication platform for individuals to locate each other to share rides. SideCar does not “provide or operate” a “ground transportation service” as defined in the Code.

Plaintiff’s Original Petition –

The City Code only regulates “chauffeured vehicles,” and neither SideCar nor people coordinating rideshares using SideCar are “chauffeurs.”

The City Code only regulates chauffeured vehicles that pick up riders in the City “for a fee.” Any payments made using SideCar are strictly voluntary, discretionary donations, and not “a fee.”

Finally, any application of the Code to SideCar would violate federal law, 47 U.S.C. § 230, which provides protection to the operators of interactive computer services from state regulation based on their users’ communications.

4. SideCar brings this lawsuit to obtain declaratory and injunctive relief to prevent

the City from wrongly applying the City Code to it and its users. SideCar also brings this lawsuit

to defend ridesharing and carpooling in Austin. If the Code is improperly stretched to cover

SideCar, as the City of Austin is doing, the Code would apply to practically every carpooling and

ridesharing arrangement in the City, making every “soccer mom,” ridesharing college student

and carpooling worker potentially liable for citation and impoundment of their personal vehicle.

II. Parties.

5. Plaintiff Side.cr, LLC, is a limited liability company with its primary place of

business in San Francisco, California.

6. Defendant City of Austin is a Texas home rule city, which may be served by

serving its City Manager, Mark Ott, at the Office of the City Manager, 301 W. 2nd Street, 3rd

Floor, Austin, Texas 78701.

III. Jurisdiction and Venue.

7. Jurisdiction is appropriate in a District Court of Travis County, because the

amount in controversy exceeds the minimum jurisdictional amount and because the Plaintiff

seeks declaratory and injunctive relief.

8. Venue is proper in Travis County pursuant to Tex. Civ. Prac. & Rem. Code §§

15.002(a)(1) & (3).


IV. The Facts.

A. SideCar Has Developed and Operates a Mobile App that Facilitates Peer-to-Peer Ridesharing.

9. SideCar publishes a mobile application called “SideCar” and operates a website

located at www.side.cr. Persons who download the app can use it to coordinate ridesharing with

other persons who have also downloaded the app.

10. A person looking to share a ride uses the SideCar app to input their desired pickup

and dropoff destination. That information is uploaded to the SideCar platform, which then

enables the rideshare requester to route the request to either a geographically proximate or

particular driver. The selected rideshare driver receives the request and must either accept or

deny the rideshare request based on their trip specifics and preferences (e.g., pickup point,

destination etc.). If the selected driver accepts the rideshare request, then a match is confirmed; if

it is rejected then it is routed to other available drivers. Like a Match.com dating site, the

platform merely suggests potential matches and the final match must be selected and approved

by both rider and driver. This process is quick and easy, making arranging for a shared ride very

convenient. However, because of this method, and in contrast to a dispatch service, a rideshare

request may go unmatched; SideCar does not and cannot guarantee that a ride request will be

matched.

11. For each ride, the SideCar app displays a “suggested donation,” based on a

computer-generated average or algorithm reflecting factors such as the amount of money that

other riders have donated for rides of a similar distance and duration, the time of day and trip

pickup and drop-off locations. Any donation is strictly voluntary; there is no minimum or

required amount. If a donation is made, 20% of the donation goes to SideCar to cover the cost of

providing the communications platform.


12. In order to use SideCar, a person must agree to SideCar’s Terms of Service,

which define and limit the purposes for which the SideCar app may be used. Participants agree

that they will not use SideCar for any commercial purposes. SideCar is available for personal

ridesharing purposes only, and use of SideCar for any commercial purpose may result in

immediate termination of the user’s SideCar account. SideCar pre-screens persons who wish to

provide rides using SideCar by doing background checks for criminal, DWI or reckless driving

convictions, confirms liability insurance as required by Texas law, and confirms vehicle

registration.

13. SideCar does not employ, contract, direct, manage or control drivers. It does not

dictate hours, schedules or shifts for drivers. It does not dispatch drivers to pick up riders.

Drivers turn on and use the app when they want. Rather, the SideCar communication platform

allows people to get and give rides in a more convenient and efficient way than casual carpools,

paper or electronic bulletin boards, Craigslist, or traditional ride-matching services. Like

Match.com for dating, eBay for products, and HomeAway for rentals, SideCar has developed a

technology allowing drivers and riders a better way to find each other and share rides.

B. The City’s Transportation Department Contends that SideCar’s Application Violates the City Code; SideCar disagrees.

14. The Austin Transportation Department has interpreted the City of Austin Code as

prohibiting SideCar from operating in Austin without a permit. On February 22, 2013, SideCar

received a letter from Robert Spillar, Director of the Austin Transportation Department,

addressed to SideCar’s co-founder and CEO, Sunil Paul. Exhibit 1, attached. The letter claimed

that “your intended operations which connect passengers with drivers using a mobile application

requires permitting and authorization through our Ground Transportation Office.” Id.


15. Although Mr. Spillar’s letter did not identify any specific Code provision that

SideCar is allegedly violating, the Transportation Department nonetheless demanded that

SideCar “immediately cease and desist your current and future operations that are intended to

dispatch vehicles-for-hire within the City of Austin’s right-of-way without securing the proper

authority.” Id. Again without citing any law, the letter claimed that “[o]perating an unpermitted

vehicle for hire without prior authorization is a criminal offence,” and threatened that “[v]ehicles

and drivers observed providing for-hire services without the proper permits will be cited along

with ‘SideCar’ corporate representatives for each violation.” Id. (This letter has been falsely

characterized as a cease and desist “order” by City employees and others. It is not. The City

Transportation Department has no legal authority to issue “orders”; under the Code, if the

Department believes a violation has been committed, it is authorized to issue citations alleging a

violation, which are then adjudicated in a court of law.)

16. SideCar carefully reviewed the Austin City Code with counsel, and on February

27, 2013, Mr. Paul responded in detail to Mr. Spillar’s letter, explaining why SideCar’s

operations and its drivers were not in violation of the City Code, and did not require the

Department’s permitting and authorization. Exhibit 2, attached. Mr. Paul’s letter included a

detailed, seven-page legal memo analyzing the Code and its lack of application to SideCar, as

well as explaining that if the Code did apply to SideCar, it would be preempted by a federal

statute, 47 U.S.C. § 230(c). Exhibit 3, attached.

17. SideCar’s counsel met with a representative of the Transportation Department at a

city councilmember’s office on March 1, 2013, seeking to understand the Department’s position.

Following the meeting, SideCar’s counsel sent a letter requesting that the Department confirm

“that it does not intend to take enforcement action against SideCar or its users who are using the


app in compliance with SideCar’s Terms of Service, while the City addresses the Transportation

Code and its application to carpooling, ridesharing and electronic platforms that facilitate that

activity such as SideCar.” Exhibit 4, attached.

18. SideCar has received no written response to its February 27 or March 1

communications and has received no commitment that the City will not take enforcement action

against it. SideCar has a reasonable belief that if it operates in the City of Austin and any driver

accepts even a nominal donation for sharing a ride, the City will take enforcement action against

both the driver and SideCar’s employees.

V. Declaratory Judgment.

19. The City Transportation Department’s February 15, 2013, letter presents a live

controversy over whether the City Code applies to SideCar and its registered users. The City has

threatened to issue citations against SideCar’s users and its corporate representatives if it

continues to operate in Austin. This presents a live case or controversy for this Court to resolve

and SideCar seeks a declaration of its rights pursuant to Chapter 37 of the Civil Practice &

Remedies Code.

A. SideCar’s mobile app and the persons who use it do not violate the City Codebecause SideCar is not “providing or operating” a “ground transportation service” and therefore is not regulated by Chapter 13-2.

20. Chapter 13-2 of the Austin City Code regulates ground transportation passenger

services. The operative provision of Chapter 13-2 is 13-2-3(A), which provides that “a person

may not provide or operate a ground transportation service that picks up passengers within

the city or represent the person’s business to the public as a ground transportation service,”

without obtaining an operating authority or taxicab franchise. City Code § 13-2-3(A) (emphasis

added).


21. The terms “ground transportation service” and “passenger” are defined terms.

22. “Ground transportation service” means “the service of providing chauffeured

vehicles for compensation for the transportation of passengers within the city.” City Code §

13-2-1(12) (emphasis added).

23. “Passenger” means “an individual being transported for a fee in a ground

transportation service vehicle.” City Code § 13-2-1(17) (emphasis added).

24. “Compensation” is defined broadly as “any money, thing of value, payment,

consideration, reward, tip, donation, gratuity, or profit paid to, accepted, or received by the driver

or owner of any vehicle providing transportation for a person or persons; whether paid upon

solicitation, demand or contract, or voluntarily, or intended as a gratuity or donation.” City Code

§ 13-2-1(3).

25. Importantly, several key terms are not defined: “provide or operate,”

“chauffeured vehicle,” and “for a fee,” and so those words must be given their common, ordinary

meaning.

26. Under the plain language of the Code, Chapter 13-2 only regulates persons who

“provide or operate” a “ground transportation service.” For three reasons, Chapter 13-2 does not

apply to SideCar.

1. Rideshare cars are not “chauffeured vehicles.”

27. SideCar is not a regulated “ground transportation service,” because the persons

participating in ridesharing coordinated by using the SideCar platform are not driving or riding in

“chauffeured vehicles.” Chapter 13-2 applies only if persons participating in ridesharing using

SideCar are driving a “chauffeured vehicle.” The terms “chauffeured vehicle” and “chauffeur”

are not defined in the Code, so their ordinary meaning applies. Merriam-Webster defines


“chauffeur” as “a person employed to drive a motor vehicle.” Miriam-Webster defines “employ”

as “to provide with a job that pays a salary.” From “Driving Miss Daisy” to “Downton Abbey,”

this has always been the common understanding of the word “chauffeur”: a professional whose

job is driving another person around.

28. Individuals who participate in ridesharing coordinated by SideCar are not driving

a “chauffeured vehicle” because they are not “employed” to drive their vehicle, and they do not

work a job that pays a salary. SideCar does not “employ” drivers or pay participating drivers a

salary. Drivers voluntarily participate in ridesharing coordinated through the SideCar mobile

app. SideCar specifically prohibits commercial drivers from participating in its rideshare

coordination service.

29. The SideCar app facilitates the making of a voluntary donation to help cover

vehicle operating expenses, but there is no guaranteed, minimum or required donation. Further,

ridesharing is just that – the SideCar model involves drivers sharing a ride as they travel from

one part of town to the other as they move to their own destination.

2. Rideshare riders are not “passengers” as defined in the Code.

30. Riders participating in ridesharing are not “passengers,” as that term is

specifically defined in the Code. The only regulated “ground transportation service” is one that

“picks up passengers” in the City of Austin. § 13-2-3(A). “Passengers” are only persons who

“are transported for a fee.” § 13-2-1(17). Although the Code includes a broad definition of

“compensation,” the Code uses a different, undefined but clearly narrower term, “fee” in its

definition of passenger. The ordinary meaning of the term “fee” does not include a gratuity or a

reimbursement for expenses. It means a fixed charge for a service. Miriam-Webster defines fee

as “a fixed charge” or “a sum paid or charged for a service.” Therefore, because there is no


“fee” charged by a driver participating in a rideshare coordinated using SideCar, riders are not

“passengers” as defined in the Code, and Chapter 13-2 does not apply.

3. SideCar is not “providing or operating” a ground transportation service.

31. Moreover, Chapter 13-2 applies to SideCar only if it is “providing or operating” a

ground transportation service. Even if rideshare vehicles were “chauffeured vehicles” (they are

not) and even if SideCar riders were “passengers” as defined in the Code (they are not) Chapter

13-2 would not apply to SideCar because it is not “providing or operating” a ground

transportation service.

32. SideCar publishes a mobile application and operates a website. It provides

communication tools for individuals to use to contact each other and coordinate ridesharing.

SideCar does not own, rent, lease, loan or control any vehicles. SideCar does not employ,

contract, manage, direct or control drivers. 1 It does not dispatch drivers to pick up riders. Like

an online dating service, SideCar uses a technology platform to permit individuals with shared

interests (getting from point A to point B) to locate each other. Like an online dating service,

passenger and driver have complete choice on the match. SideCar provides safety, identity

verification, location and tracking mechanisms to promote trust and accountability. SideCar

does not guarantee that any person seeking a rideshare will find another person to share a ride

with (many rideshare requests are unmet). The SideCar app and interactive computer service

simply facilitate voluntary information-sharing by third parties that allows a carpool or rideshare

match, just as other intermediaries have done for decades from university and company bulletin

1 As other companies have done for promotional purposes during the March festivals, for a limited time duringSXSW 2013, a SideCar corporate affiliate plans to pay drivers to be available to give SideCar rides. The rides will be provided at no charge, and these drivers have been instructed not to accept even voluntary donations from riders and therefore will not be receiving either “compensation” or “a fee,” and therefore will not be governed by Chapter 13-2.


boards and modern and constantly evolving electronic exchanges and media. SideCar is therefore

not “providing” or “operating” a “ground transportation service.”

4. If a driver using SideCar is providing an illegal “ground transportation service,” so is every carpooler in Austin.

33. Chapter 13-2 applies to SideCar and persons using the SideCar app only if they

are “providing or operating” a ground transportation service. Even if rideshare vehicles were

“chauffeured vehicles” (they are not) and even if SideCar riders were “passengers” as defined in

the Code (they are not), Chapter 13-2 would not apply to because SideCar is not “providing or

operating” a ground transportation service.

34. Take, for example, a parent who participates in a 3-family, 3-child carpool. The

parents have agreed that every third week, one of the parents will drive all 3 children to school.

In exchange for driving all 3 children once every 3 weeks, each parent receives free

transportation for their child during the other 2 weeks. This exchange of benefits would clearly

qualify as “compensation” within the definition of that term in the Code. (Some carpooling

parents contribute gas money instead of driving, when their schedules do not allow driving or

they do not have a vehicle, which would also be “compensation.”)

35. Likewise, Capital Metro provides a carpooling matching service, which it

advertises as “a great way to save on the high cost of commuting.” Cap Metro encourages

drivers to alternate driving or “[a]nother choice might be to have one person drive all of the time

and the others share the cost of gas.” Cap Metro even says it is “happy to help you organize a

carpool.” It uses “a special matching program” to coordinate ridesharing. “We give you the list,

and you decide what works best for you.” See http://www.capmetro.org/rideshare.aspx?id=55.

36. For the same reason Chapter 13-2 does not apply to SideCar participants, these

carpoolers are not subject to Chapter 13-2. They are neither providing a “chauffeured vehicle”


nor are they receiving a “fee” for driving the children to school, so the children are not

“passengers” as defined in the Code. The informal exchange of “compensation” (even a

voluntary payment) alone is not enough to make a “ground transportation service” under the

Code. There must also be a “chauffeured vehicle” and a passenger transported “for a fee” before

the Code applies.

37. The Transportation Department has overlooked (or is ignoring) these specific

limitations on the scope of Chapter 13-2. The City cannot pick and choose, however, to whom

the Code applies. If Chapter 13-2 applies to SideCar participants, it also applies to every

informal carpool arrangement in Austin. Hopefully the City does not intend to start ticketing

carpooling parents and impounding their cars. The City has not offered any basis for

distinguishing between SideCar users and other carpoolers and ridesharers.

B. In the alternative, even if the City Code applies to SideCar, the Code is preempted by federal law, 47 U.S.C. § 230(c).

38. SideCar operates an interactive computer service. SideCar publishes a mobile

application and operates interactive computer services that facilitate the exchange of information

and communications between individuals. SideCar does not create or initiate the communications

seeking rides, nor does it create or initiate the communications accepting ride requests. SideCar

does not dispatch drivers or give riders and drivers directions or instructions regarding their

specific rides.

39. In order to fit SideCar into Chapter 13-2 of the City Code and claim that SideCar

is “providing” or “operating” a “ground transportation service,” the City must hold SideCar

responsible for the communications and actions of the riders and drivers who are coordinating

their activities through exchanges of information using SideCar’s computer system. This would


be treating SideCar as the publisher of its users’ electronic communications, since they are the

ones requesting and offering rides. This would be illegal, under federal law.

40. Federal law preempts any state or local law that would treat the provider of an

interactive computer service as the publisher of its users’ communications, and therefore would

preempt Chapter 13-2’s application to SideCar. 47 U.S.C. § 230(c).

41. Section 230 was enacted by Congress after it concluded that “[t]he rapidly

developing array of Internet and other interactive computer services available to individual

Americans represent an extraordinary advance in the availability of educational and

informational resources to our citizens.” 47 U.S.C. § 230(a)(1). Congress recognized that “[t]he

Internet and other interactive computer services have flourished, to the benefit of all Americans,

with a minimum of government regulation,” and “[i]ncreasingly Americans are relying on

interactive media for a variety of political, educational, cultural, and entertainment services.” 47

U.S.C. § 230(a)(4) & (5).

42. In order to protect interactive computer services from state and local regulation

that would interfere with Congress’ goals of fostering technological innovation, Section 230(a)

provides that “[n]o provider or user of an interactive computer service shall be treated as the

publisher or speaker of any information provided by another information content provider.” 47

U.S.C. § 230(c)(1). State law that is consistent with this restriction is not preempted, but any

state law that would treat an interactive service provider as the publisher of information

generated by its users is preempted: “No cause of action may be brought and no liability may be

imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. §

230(e)(3).


43. Application of Section 13-2 to SideCar – because it would treat SideCar as

responsible for the content of its users’ communications – would be preempted and prohibited by

Section 230. Although SideCar informed the City of the application and immunity provided by

Section 230 in its February 27, 2013 letter and during the March 1, 2013, meeting, SideCar has

received no indication that the City intends to comply with that federal law.

VI. Temporary and Permanent Injunctive Relief.

44. SideCar is likely to prevail on the merits of its declaratory judgment claims.

45. Based upon the City’s cease and desist letter of February 15, 2013, and its

erroneous interpretation of the City Code, SideCar, its employees and the users of its mobile app

face imminent adverse enforcement action by the City should they offer, provide, or facilitate

any exchange of value for sharing rides.

46. Likewise, based on the City’s erroneous interpretation of the City Code, every

person who participates in a rideshare or carpool in the City and gives or receives

“compensation” such as gas money or a reciprocal promise to provide a ride, now faces potential

enforcement and impoundment of their vehicles because – according to the City’s interpretation

of the Code – they are “providing a ground transportation service.”

47. Such adverse enforcement action may consist of citation, arrest, and

impoundment of personal vehicles, which constitutes irreparable harm. SideCar does not have a

legal remedy that is adequate in lieu of temporary and permanent injunctive relief.

48. SideCar therefore requests that the Court enter temporary and permanent

injunction enjoining the City of Austin and its employees from taking any enforcement action

against Plaintiff Side.cr, LLC, its officers, directors, employees, agents and users of its mobile

application, for violation of Section 13-2 of the Austin City Code.


VII. Attorney’s Fees.

49. It was necessary for Plaintiff Side.cr, LLC, to hire undersigned legal counsel to

file and pursue this lawsuit. Plaintiff seeks to recover its reasonable and necessary attorney’s

fees pursuant to Tex. Civ. Prac. & Rem. Code § 37.009.

VIII. Prayer.

WHEREFORE, PREMISES CONSIDERED, Plaintiff Side.cr, LLC, prays for the Court

to enter the following relief:

1. Enter a declaratory judgment finding that Plaintiff Side.cr, LLC, and its users who comply with its Terms of Service, are not providing a “ground transportation service” as defined in the Austin City Code;

2. In the alternative, enter a declaratory judgment finding that the City Code is preempted by 47 U.S.C. § 230(c);

3. Enter a temporary and permanent injunction enjoining the City of Austin and its employees from taking any enforcement action against Plaintiff Side.cr, LLC, its officers, directors, employees, agents and users of its mobile application, for violation of Section 13-2 of the Austin City Code;

4. Award Plaintiff Side.cr, LLC, its attorney’s fees and costs; and

5. Such other and further relief, at law or in equity, to which Plaintiff Side.cr, LLC, may show itself to be entitled.

Respectfully submitted,

By: /s/ Peter D. KennedyPeter D. KennedyState Bar No. [email protected] J. WhellanState Bar No. [email protected]


GRAVES, DOUGHERTY, HEARON & MOODY, P.C.401 Congress Avenue, Ste. 2200Austin, TX 78701Telephone: 512-480-5674Facsimile: 512-536-9908

ATTORNEYS FOR PLAINTIFF SIDE.CR, LLC

EXHIBIT 1

EXHIBIT 2

EXHIBIT 3

Page | 11839673.1

M E M O R A N D U M

TO: Dave Phillips, General Counsel, SideCar

FROM: Peter D. Kennedy

DATE: February 27, 2013

RE: Application of Chapter 13-2, City of Austin Code, to SideCar and SideCar Ridesharers.

I. Summary.

SideCar and people who coordinate ridesharing using the SideCar mobile app are not subject to regulation under Chapter 13-2 of the City of Austin Code. Although the City’s Transportation Department has made statements indicating that it believes SideCar and another ridesharing mobile app, Heyride, are in violation of the City Code, the Department’s reading of the Code is incorrect. A careful reading of the language of Chapter 13-2 shows that it does not, in fact, apply either to SideCar or to people who participate in ridesharing using the SideCar app, for three reasons:

First, Chapter 13-2 regulates only “chauffeured vehicles,” and neither SideCar nor participants provide “chauffeured” vehicles.

Second, Chapter 13-2 regulates only drivers who pick up passengers within the City “for a fee.” Neither SideCar nor participants charge a fee. Any payments made by riders are strictly voluntary.

Third, SideCar does not “provide or operate” a ground transportation service. It does not own or operate any vehicles, and it does not employ, control or dispatch any drivers. SideCar provides a technology platform for like-minded persons to use to locate each other. SideCar’s technology coordinates something people have been doing since the car was invented – sharing rides to save money, build community and reduce environmental impact.

If Chapter 13-2 applies to people who use SideCar, it applies to every informal carsharing arrangement in Austin, including any work, school or recreational carpool.

401 Congress Ave., Suite 2200Austin, TX 78701512.480.5600www.gdhm.com

MAILING ADDRESS:P.O. Box 98Austin, TX 78767-9998

A Professional Corporation

Page | 21839673.1

Finally, even if the language of the Code applied to SideCar, which it does not, any attempt by the City to regulate SideCar would be preempted by a highly significant and important federal law. 47 U.S.C. § 230(c) prevents state and local governments from imposing liability or regulation on the operators of interactive computer services such as SideCar based on information shared by their users, which is exactly what the Department appears to be proposing doing to SideCar.

II. SideCar.

Side.cr LLC (“SideCar”) publishes a mobile application called “SideCar” and operates a website located at www.side.cr. Persons who download the app can use it to coordinate ridesharing with other persons who have also downloaded the app.

A person looking to share a ride uses the SideCar app to input their desired pickup and dropoff destination. The software provides that information to persons in the area with available drivers who have also downloaded the SideCar app, have created a SideCar account and have been pre-screened.1 The system displays the available drivers to the person looking to share a ride. The rider then chooses which available driver he or she wants to share a ride with, or simply selects “closest driver.” Once the rider has confirmed the ride, the software provides the driver with the rider’s information.

For each ride, the SideCar app displays a “suggested donation” based on the average donation that other riders have made for rides of a similar distance and duration, taking place at similar times of day and locations. Any donation is strictly voluntary; there is no minimum or required amount. If a donation is made, 20% of the donation goes to SideCar to cover its costs of providing the communications platform. If no donation is made, SideCar receives no funds.

In order to use SideCar, a person must agree to SideCar’s Terms of Service, which define and limit the purposes for which the SideCar app may be used. Participants agree that they will not use SideCar for any commercial purposes. SideCar is available for personal ridesharing purposes only, and use of SideCar for any commercial purpose may result in immediate termination of the user’s SideCar account.

SideCar does not employ, contract, direct or control drivers. It does not dictate hours, schedules or shifts for drivers. It does not dispatch drivers to pick up riders. Rather, the SideCar communication platform allows people to get and give rides in a more convenient and efficient way than casual carpools, paper or electronic bulletin boards, Craigslist, or traditional ride-matching services. Like eBay for products, Travelocity for flights, and HomeAway for rentals, SideCar has developed a technology allowing drivers and riders a better way to find each other and share rides.

1 SideCar pre-screens persons who wish to provide rides using SideCar by doing background checks for criminal, DWI or reckless driving convictions, confirms liability insurance as required by Texas law, and confirms vehicle registration.

Page | 31839673.1

III. The Relevant City of Austin Code Provisions.

The operative provision of Chapter 13-2 is 13-2-3(A), which provides that

“[A] person may not provide or operate a ground transportation service that picks up passengers within the city or represent the person’s business to the public as a ground transportation service,” without obtaining an operating authority or taxicab franchise.

The terms “ground transportation service” and “passenger” are defined terms.

“Ground transportation service” means “the service of providing chauffeured vehicles for compensation for the transportation of passengers within the city.” 13-2-1(12).

“Passenger” means “an individual being transported for a fee in a ground transportation service vehicle.” 13-2-1(17) (emphasis added).

“Compensation” means “any money, thing of value, payment, consideration, reward, tip, donation, gratuity, or profit paid to, accepted, or received by the driver or owner of any vehicle providing transportation for a person or persons; whether paid upon solicitation, demand or contract, or voluntarily, or intended as a gratuity or donation.” 13-2-1(3).

Several key terms are not defined: “provide or operate,” “chauffeured vehicle,” and “a fee.”

IV. SideCar is not “providing or operating” a “ground transportation service” and therefore is not regulated by Chapter 13-2.

Under the plain language of the Code, Chapter 13-2 only regulates persons who “provide or operate” a “ground transportation service.” For three reasons, Chapter 13-2 does not apply to SideCar.

First, SideCar is not a “ground transportation service” because the persons participatingin ridesharing coordinated by SideCar are not driving or riding in “chauffeured vehicles.” Chapter 13-2 applies only if persons participating in ridesharing using SideCar are driving a “chauffeured vehicle.” The terms “chauffeured vehicle” and “chauffeur” are not defined in the Code, so their ordinary meaning applies. Merriam-Webster defines “chauffeur” as “a person employed to drive a motor vehicle.” http://www.merriam-webster.com/dictionary/chauffeur. Miriam-Webster defines “employ” as “to provide with a job that pays a salary.” http://www.merriam-webster.com/dictionary/employ. This has always been the common understanding of the word “chauffeur”: a professional whose job is driving another person around.

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Individuals who participate in ridesharing coordinated by SideCar are not driving a “chauffeured vehicle” because they are not “employed” to drive their vehicle, and they do not work a job that pays a salary. SideCar does not “employ” drivers or pay participating drivers a salary. Drivers voluntarily participate in ridesharing coordinated through the SideCar mobile app. SideCar specifically prohibits commercial drivers from participating in its rideshare coordination service.

The SideCar app facilitates the making of a voluntary donation to help cover vehicle operating expenses, but there is no guaranteed, minimum or required donation. Further, ridesharing is just that – the SideCar model involves drivers sharing a ride as they travel from one part of town to the other as they move to their own destination.

Second, riders participating in ridesharing are not “passengers,” as that terms is specifically defined in the Code. The only regulated “ground transportation service” is one that “picks up passengers” in the City of Austin. § 13-2-3(A). “Passengers” are only persons who “are transported for a fee.” § 13-2-1(17). Although the Code includes a broad definition of “compensation,” the Code uses a different, undefined but clearly narrower term, “fee” in its definition of passenger. The ordinary meaning of the term “fee” does not include a gratuity or a reimbursement for expenses. It means a fixed charge for a service. Hence, Miriam-Webster defines fee as “a fixed charge” or “a sum paid or charged for a service.” http://www.merriam-webster.com/dictionary/fee.

Therefore, because there is no “fee” charged by a driver participating in a rideshare coordinated using SideCar, riders are not “passengers” as defined in the Code, and Chapter 13-2 does not apply.

Third, Chapter 13-2 applies to SideCar only if it is “providing or operating” a ground transportation service. Even if rideshare vehicles were “chauffeured vehicles” (they are not) and even if SideCar riders were “passengers” as defined in the Code (they are not) Chapter 13-2 would not apply to SideCar because it is not “providing or operating” a ground transportation service.

SideCar publishes a mobile application and operates a website. It provides communication tools for individuals to use to contact each other and coordinate ridesharing. SideCar does not own, rent, lease, loan or control any vehicles. SideCar does not employ, contract, direct or control drivers. It does not dispatch drivers to pick up riders. Like an online dating service, SideCar uses a technology platform to permit individuals with shared interests (getting from point A to point B) to locate each other. SideCar does not guarantee that any person seeking a rideshare will find another person to share a ride with; it simply facilitates voluntary information-sharing by third parties. It is therefore not “providing” or “operating” a “ground transportation service.”2

2 As other companies have done for promotional purposes during the March festivals, for a limited time during SXSW 2013, SideCar plans to pay drivers to be available to give SideCar riders rides, if requested. These drivers will not accept donations from riders and therefore will not be receiving either “compensation” or “a fee,” and therefore will not be governed by Chapter 13-2.

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V. Persons participating in a rideshare coordinated using SideCar are not providing a “ground transportation service” and therefore are not regulatedby Chapter 13-2.

For the same reasons explained above, a person who uses SideCar to coordinate a rideshare is not governed by Chapter 13-2.

First, ride sharers are not a “chauffeurs” and are not providing “chauffeured vehicles,” because they are sharing rides. While it is theoretically possible that a person could misuse the SideCar app to simply provide rides in the expectation of payment, SideCar specifically prohibits professional drivers or persons seeking to profit from ridesharingand will terminate the accounts of drivers violating its Terms of Service.

Second, because there is no “fee” paid for a rideshare, riders are not “passengers” as defined by the Code. Again, while it is theoretically possible that a driver using SideCarcould demand a “fixed sum” or require a “payment” for a ride, this would be in direct violation of SideCar’s Terms of Service. While that individual may be in violation of Section 13-2-3(A), the exception proves the rule: in the absence of a “fee” (which SideCar prohibits) riders are not “passengers” as defined, and so participants in rideshares coordinated by SideCar are not subject to regulation under Chapter 13-2.

VI. If SideCar is providing an illegal “ground transportation service,” so is every carpooling parent in Austin.

If the specific language of Chapter 13-2 is not carefully applied, as described above, every person in Austin who is part of an informal carpool or rideshare would be in violation of the City Code.

The author of this memo, for instance, participates in a 3-family, 3-child carpool. The parents have agreed that every third week, one of the parents will drive all 3 children to school. In exchange for driving all 3 children once every 3 weeks, each parent receives free transportation for their child during the other 2 weeks. This exchange of benefits would clearly qualify as “compensation” within the definition of that term in the Code. (Some carpooling parents contribute gas money instead of driving, when their schedules do not allow driving or they do not have a vehicle, which would also be “compensation.”)

For the same reason Chapter 13-2 does not apply to SideCar participants, however, carpooling parents are not subject to Chapter 13-2. They are neither providing a “chauffeured vehicle” nor are they receiving a “fee” for driving the children to school, so the children are not “passengers” as defined in the Code. The informal exchange of “compensation” (even a voluntary payment) alone is not enough to make a “ground transportation service” under the Code. There must also be a “chauffeured vehicle” and a passenger transported “for a fee” before the Code applies.

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The Transportation Department has overlooked (or is ignoring) these specific limitations on the scope of Chapter 13-2. The Department cannot pick and choose, however, who the Code applies to. If Chapter 13-2 applies to SideCar participants, it also applies to every informal carpool arrangement in Austin. Surely the City does not intend to start ticketing carpooling parents and impounding their cars.

VII. Even if Chapter 13-2 applied to SideCar, it would be preempted by federal law, 47 U.S.C. § 230(c).

As explained above, SideCar operates an interactive computer service. SideCarpublishes a mobile application and operates interactive computer services that facilitate the exchange of information and communications between individuals. RideShare does not create or initiate the communications seeking rides, nor does it create or initiate the communications accepting ride requests. SideCar does not dispatch drivers or give riders and drivers directions or instructions regarding their specific rides, other than to draft general rules of the road for SideCar participants.

In order to fit SideCar into Chapter 13-2 of the City Code and claim that SideCar is “providing” or “operating” a “ground transportation service,” the City must hold SideCar responsible for the communications and actions of the riders and drivers who are coordinating their activities through exchanges of information using SideCar’s computer system. This would be treating SideCar as the publisher of its users’ electronic communications, since they are the ones requesting and offering rides. This would be illegal, under federal law.

Federal law preempts any state or local law that would treat the provider of an interactive computer service as the publisher of its users’ communications, and therefore would preempt Chapter 13-2’s application to SideCar. 47 U.S.C. § 230(c).

Section 230, although perhaps not familiar to the City’s Transportation Department, is a significant federal statute that was enacted by Congress after it concluded that “[t]he rapidly developing array of Internet and other interactive computer services available to individual Americans represent an extraordinary advance in the availability of educational and informational resources to our citizens.” 47 U.S.C. § 230(a)(1). Congress recognized that “[t]he Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation,” and “[i]ncreasingly Americans are relying on interactive media for a variety of political, educational, cultural, and entertainment services.” 47 U.S.C. § 230(a)(4) & (5).

In order to protect interactive computer services from state and local regulation that would interfere with Congress’ goals of fostering technological innovation, Section 230(a) provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). State law that is consistent with this restrict is

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not preempted, but any state law that would treat an interactive service provider as the publisher of information generated by its users is preempted: “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. § 230(e)(3).

Application of Section 13-2 to SideCar – because it would treat SideCar as responsible for the content of its users’ communications – would be preempted and prohibited by Section 230, just as a multitude of state laws that would purport to regulate or impose liability on communications platforms have been held to be preempted. E.g., Chicago Lawyers’ Committee for Civil Rights Under Law v. Craigslist, Inc., 519 F.3d 666 (7th Cir. 2008) (under Section 203, fair housing law cannot be applied to Craigslist based on users’ advertisements); Jane Doe v. MySpace, Inc., 528 F.3d 413 (5th Cir. 2008) (under Section 230, MySpace cannot be held liable for users’ communications and later acts); Doe v. MySpace, Inc., 629 F. Supp.2d 663 (E.D. Tex. 2009 (same); Carafano v. Metrosplash.com, 339 F.3d 1119 (9th Cir. 2003) (website does not lose Section 230 immunity by providing tools to create content); Lars Gentry v. eBay, 99 Cal. App. 4th 816 (Cal. App. 2002) (under Section 230, eBay not responsible for communications and acts of eBay seller).

EXHIBIT 4

March 1, 2013

Mr. Gordon Derr via email: [email protected] Transportation DirectorCity of Austin Transportation Department505 Barton Springs Road, Suite 800Austin, Texas 78704

Re: SideCar, ridesharing and carpooling.

Dear Mr. Derr:

Thank you for meeting with me and Michael Whellan today, along with Councilmember Chris Riley and his policy aide, Leah Bojo. Per our discussion, I am sending this letter to clarify some facts about SideCar’s Brand Ambassador program and its community ridesharing platform.

Brand Ambassador program. As we discussed, SideCar is currently in the process of hiring individuals to act as temporary promotional “Brand Ambassadors” for SideCar to publicize and promote the company during the next few weeks, including during SXSW. The Brand Ambassadors are independent contractors. As part of their duties, these Brand Ambassadors will drive their own vehicles and accept rides requested through the SideCar mobile app. These are the drivers who SideCar is currently advertising to hire. In addition to confirming their drivers’ licenses and vehicle liability insurance, SideCar is obtaining additional insurance coverage for these Brand Ambassadors.

The Brand Ambassadors will not accept voluntary donations through the SideCar app, and SideCar will not receive any revenue from rides given by Brand Ambassadors. Brand Ambassadors will be instructed not to accept any tips or other compensation whatsoever from riders. The rides they will be giving therefore will be free of any “compensation” or “fee” under the City Transportation Code.

The purpose of the program is to promote SideCar and to increase the installed base of its mobile app. Because SideCar will receive no revenue, and will be paying these Brand Ambassadors, this is not the company’s business model, but purely a promotional activity. This program is materially identical to the free rides that Chevrolet and Mfft, and probably others, gave around town last year during SXSW as promotions for their brands.

The SideCar mobile app. As explained in greater detail in my memo of February 27, 2013, SideCar publishes a mobile application and operates a website; people who download the app can use it to coordinate ridesharing with other persons who have also downloaded the app.

401 Congress Ave. Suite 2200 Austin, Texas 78701 512.480.5600 www.gdhm.com

Peter D. KennedyBoard Certified, Civil Appellate LawTexas Board of Legal Specialization

512.480.5764512.536.9908 (fax)[email protected]

401 Congress Avenue, Suite 2200Austin, TX 78701-3790

A Professional Corporation

March 1, 2013Page 2

Before authorizing any person to use the app to offer and accept rides, SideCar performs a background check via the Lexis/Nexis risk management platform for criminal, DWI, or reckless driving convictions and bars any such persons from receiving approval to access and uses our rideshare platform. SideCar also performs a separate background check of the US National Sex Offender Registry through Family Watchdog. SideCar also requires prospective drivers to provide proof of a current and valid drivers’ license and proof of current and valid liability insurance as required by state law.

SideCar is not trying to build a cadre of professional drivers. SideCar does not permit commercial use of its app. SideCar has developed and is deploying a peer-to-peer computer network that allows individuals interested in sharing rides to locate each other. SideCar does not consider itself to be displacing existing taxi dispatch services or pre-arranged limousine services. Rather, SideCar’s rideshare platform simply makes is easier and simpler to do what Austin residents are doing already – carpooling and ridesharing to save money, build community and help the environment.

As explained in my February 27 memo, SideCar’s platform is not subject to city regulation, due to the federal immunity granted by 47 U.S.C. § 230(c), and neither SideCar nor its users are operating a “ground transportation service” as defined by the City of Austin Code. As we read the Code, it does not apply to SideCar, but if it does, then it applies to every informal carpool or ridesharing arrangement in Austin, which is surely not the City’s intention.

Given the letter received by SideCar on February 26 from the Transportation Department, , however, SideCar and its community of users are living with considerable uncertainty as to the Department’s enforcement intentions. We are asking, therefore, that the Department confirm that it does not intend to take enforcement action against SideCar or its users who are using the app in compliance with SideCar’s Terms of Service, while the City addresses the Transportation Code and its application to carpooling, ridesharing and electronic platforms that facilitate that activity such as SideCar.

Thank you for your attention to this, and we look forward to working with the Department and the City to foster improved and diverse transportation options for all of Austin’s citizens.

Sincerely,

GRAVES, DOUGHERTY, HEARON & MOODYA Professional Corporation

By: /s/ Peter D. KennedyPeter D. Kennedy

PDK

March 1, 2013Page 3

cc: Mr. Michael Whellan (Firm)Councilmember Chris RileyMs. Leah BojoMs. Karen KennardMs. Deborah Thomas

SideCar Lawsuit

Documents

Transcript of SideCar Lawsuit