Arranging car rentals does not make a business a car-rental company, court says – San Francisco Chronicle

Tyler Karon (right) rents David Chu’s car in Alameda in 2018, a transaction conducted through the company Turo. A state appeals court says since Turo doesn’t own the cars itself, it’s not a car-rental company and thus does not have to pay a permit fee to operate at SFO.
Turo Inc. operates an online platform that allows car owners to rent out their own vehicles. But because the company doesn’t own the cars itself, it’s not a car-rental company, a state appeals court says — so it doesn’t have to pay San Francisco for a permit to operate at San Francisco International Airport.
Turo is based in San Francisco and operates in other U.S. states, Great Britain and Canada. Like rental companies, it charges fees to renters, provides insurance and sets rules for smoking and other conduct in the vehicles.
“Turo’s entire business consists of enabling the public to rent motor vehicles,” the First District Court of Appeal observed Tuesday. But it said the definition of a car renter under California law — someone who has a contract for “lease or hire of a passenger vehicle from a rental company” — applies only to companies that own or control the rented vehicles, and not to a business like Turo that arranges rents of vehicles owned by others.
In addition, the court noted, state law says that if a driver damages a rented vehicle, the driver is responsible for the costs of repair, plus towing and storage charges.
“These limits presume that the rental company owns or controls the rented vehicle,” which is not the case for Turo, Justice Marla Miller said in the 3-0 ruling. The court overturned a 2020 decision by Superior Court Judge Ethan Schulman holding Turo responsible for rental fees at SFO.
The case is somewhat similar to disputes over whether ride-hailing companies like Uber and Lyft are in the business of transportation, as state regulators contend, or merely provide technology for drivers and passengers to use, as the companies maintain. A number of courts have classified them as transportation companies, increasing regulation and allowing their drivers to be considered employees rather than contractors, an issue now under review in a state appeals court.
But Miller said the Turo case was different because the car-rental law contains the word “rent,” which applies, she said, only to companies that rent their own vehicles.
Turo, founded in 2009, describes itself as “the world’s largest car-sharing marketplace,” with 217,000 vehicles on its online platform as of March 31. Spokesperson Steve Webb called the ruling “a major win for Turo and peer-to-peer car-sharing in California” and said it could influence courts in other states that are considering similar cases.
The company is willing to pay a fee to local governments but should not be charged as much as car-rental firms, said Lou Bertuca, another Turo spokesperson.
“We don’t get the same benefits they do,” he said. “There’s no train that takes you to (Turo vehicles), no signage.”
Jen Kwart, spokesperson for City Attorney David Chiu, said no decision has been made yet on whether to seek review in the state Supreme Court.
“Turo’s unpermitted activities negatively impact SFO’s operations and unfairly undercut the rental car companies at the airport with which Turo competes,” she said. Regardless of (Tuesday’s) decision, other aspects of San Francisco’s lawsuit will move forward. SFO still has the authority to regulate Turo’s conduct on airport property whether or not it is deemed a rental car company.”
Bob Egelko is a San Francisco Chronicle staff writer. Email: Twitter: @BobEgelko

Bob Egelko has been a reporter since June 1970. He spent 30 years with the Associated Press, covering news, politics and occasionally sports in Los Angeles, San Diego and Sacramento, and legal affairs in San Francisco from 1984 onward. He worked for the San Francisco Examiner for five months in 2000, then joined The Chronicle in November 2000.
His beat includes state and federal courts in California, the Supreme Court and the State Bar. He has a law degree from McGeorge School of Law in Sacramento and is a member of the bar. Coverage has included the passage of Proposition 13 in 1978, the appointment of Rose Bird to the state Supreme Court and her removal by the voters, the death penalty in California and the battles over gay rights and same-sex marriage.


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