FlightCar Is the Latest Sharing Economy Startup to Face Legal Trouble
FlightCar, a service that helps people rent out their own cars while they’re out of town, was sued this past Friday for flouting San Francisco Airport permit and fee requirements.
On behalf of the state of California, San Francisco City Attorney Dennis Herrera filed the lawsuit for unlawful and unfair business practices, seeking penalties and injunctive relief.
“We already pay the airport, we just don’t pay them according to the car rental fee structure they have,” said CEO Rujul Zaparde in an interview today.
Zaparde added numerous times that as a young company (the three FlightCar founders are teenagers), FlightCar has little knowledge of the legal system but has done its best to accommodate regulations. That’s not to say FlightCar isn’t a serious operation — after launching this year it raised $5.5 million in funding from General Catalyst, Softbank Capital and others.
FlightCar has developed a workaround where it contracts with limo companies to pick up and drop off car owners and car renters from the airport when they arrive and depart. (This is seen as a perk — car owners get a free carwash, free parking, free curbside valet and a cut of the rental income.) Since it costs $3.65 per trip, the company ends up paying $14.60 in total per rental.
Says the lawsuit: “FlightCar’s move to a location off-airport does not relieve FlightCar of its obligations to SFO … In 2012, other off-airport rental car companies paid over $2 million in profit fees and transportation fees to SFO.”
SFO wants FlightCar to pay 11.1 percent of its profits and $20 per rental, Zaparde said, or to get a permit to pick up customers in branded shuttles and pay for associated advertising at the airport. The company has not yet determined how it will respond to the lawsuit, he said.
FlightCar had earlier launched without the contract limo service, but changed its operations after receiving a cease-and-desist notice in February, Zaparde said. Now, “FlightCar employers are at our lot in Burlingame, and nobody employed by FlightCar is ever at the airport or even on an airport road if working for FlightCar,” he said.
FlightCar launched at a second location, Boston, over Memorial Day. Zaparde said the company hasn’t run into regulatory problems there — yet.
“What we’re doing is new and it’s innovative and so we will face trouble from airports and car rental agencies,” he said. “We don’t have anything from Massport yet, but I’m sure it will be coming.”
Here’s the lawsuit: