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Houston Cab Companies Sue to Stop Uber, Lyft

The lawsuit asks a federal judge to declare the companies are violating Houston and San Antonio ordinances by accepting payments for taking riders to destinations.

Taxi companies in Houston and San Antonio have taken their turf war with two online companies to federal court, saying Uber and Lyft are operating illegally and skimming money from taxi firms that abide by the law.

The lawsuit, filed in U.S. district court late Tuesday in Houston, asks a federal judge to declare the companies are violating Houston and San Antonio ordinances by accepting payments for taking riders to destinations.

Trips generated by Uber and Lyft - which connect interested riders with willing drivers via smartphone apps -- have led to 26 citations in Houston; 15 were issued to drivers and the rest to the companies.

Rule changes possible

Both companies jumped into Houston's ride market in February as the city began to consider changing its rules on taxi service. At the time, city officials said the two could operate but not accept payment.

City officials are still considering possible changes to Houston's rules to accommodate the companies. Wednesday, members of a joint City Council committee grilled Uber and Lyft officials, as well as consultants paid by the city to study the taxi industry.

The rollout of the services has been chaotic. The number of citations for accepting payment has jumped in recent weeks, leading taxi companies to file the lawsuit, lawyer Martyn Hill said. It became clear, he said, that the citations hadn't discouraged the two companies from operating and accepting payment.

Hill said city penalties aren't strong enough to keep the companies from violating strict rules that govern taxi companies and drivers.

"If I could run a bar and all I had to do was pay a fine of $500 for not paying taxes, I might still run the bar and pay the fines," Hill said. "That's what's happening here."

No plans to stop

Uber had not seen the lawsuit, spokeswoman Nairi Hourdajian said, but planned to continue operating.

"As they see the demand for services like Uber in Houston and they see city officials taking an informed look at the services, they are taking desperate measures," Hourdajian said of the taxi and limo companies. "Their time and energy might be better spent improving that service."

She said courts have repeatedly ruled in the company's favor. In Dallas, the city accused the company of advertising an illegal limo service, Hourdajian said.

"It took a jury 10 minutes to bring back a unanimous verdict," she said.

Lyft did not respond to a request for comment.

The lawsuit lists 24 plaintiffs, including Houston's two largest taxi companies and others that collectively hold three-fourths of the permits in the city. Independent taxi and limo operators also joined in the lawsuit.

The suit claims the companies have failed to comply with Houston and San Antonio laws related to insurance coverage and driver background checks. By operating illegally, they are taking premium trips from cab companies that have valid permits and must provide services to disabled and senior riders, the suit claims.

Consultants hired by the city urged the City Council to tread lightly, though they differed on approaches.

Ray Mundy, who studied Houston's cab market, suggested officials wait for other states to figure out the rules and shelve their own plans for up to two years. James Cooper, who conducted surveys to gauge taxi demand in Houston, warned things might move faster than that, calling the app market "difficult to keep up with and impossible to regulate at the present speed."

Council frustrated

In Houston and San Antonio, the companies are operating within a vague regulatory area. Cities set rules for cabs and limos, but Uber and Lyft consider themselves ride-sharing services. They connect drivers and passengers, and take a cut of what the passenger pays.

Both have insurance beyond that of the personal driver, but cab companies have called into question the validity of the insurance since neither company owns the cars. Their ability to certify the quality of the cars is also an issue, taxi operators have said.

That uncertainty, the quick jump into Houston's cab market and requests by the companies to do their own background checks has frustrated some council members.

"They basically told us to go fly a kite," Councilman Dave Martin said.

Demand for apps that connect riders and drivers, however, is high. More than 10,000 people signed an online petition urging the city to allow Uber, and both companies have signed up additional drivers since they launched.

"The demand is off the charts," Hourdajian said.

©2014 the Houston Chronicle