FlightCar: Sharing Economy Takes Another Legal Hit

The sharing economy may have been a raving success with consumers last year, but not necessarily with big city governments. First there was Airbnb’s dustup with the city of New York. Now there is FlightCar and its legal challenges with San Francisco and Millbrae, Calif.

Probably one of the most innovative sharing economy models to come along, FlightCar was started by three college dropouts: Kevin Petrovic, Shri Ganeshram and Rujul Zaparde (actually Petrovic and Zaparde didn't even make it to orientation). It’s the quintessential proof that sometimes ingenuity, drive and moxie can carry you almost as far as a degree.  Their idea was to offer the harried airline passenger a way to avoid parking their car at the airport, where fees mount up and become an added overhead to vacations and business trips.

"FlightCar lets people parking at the airport rent their vehicles out to other travelers," says the company website. To ensure that there are no liability hassles, every car is insured with a $1 million policy. The renter pays a nominal cost for the use, and the owner gets a free car-cleaning and 20 cents per mile. In a metropolis like San Francisco, that change can add up.

Their idea was so popular that it garnered $5.5 million in venture capital and a roll-out at SFO, which is owned by the city. As the trio quickly found out, not everyone is fond of the sharing economy concept.

Parking fees are a big issue to airports, particularly those the size of SFO, which has steep overhead to contend with and relies on those fees for revenue. From the city’s point of view, FlightCar wasn’t paying for taxes and other fees that are normally paid by car rental agencies. From FlightCar’s vantage point, they don’t maintain a location at the airport; in fact, since the business operates out of Millbrae (just outside the airport boundary), the owners argue, they aren’t even based in the city of San Francisco. Therefore, they shouldn’t have to pay fees and taxes that regular car-rental agencies pay the city.

But that’s not the only problem that the company has faced with its neighbors lately. On Nov. 4, the Millbrae Planning Commission voted to pull  FlightCar’s conditional use permit. The city listed a number of non-compliance issues, all of which FlightCar insists have already been addressed or had nothing to do with its conditional use permit. Two weeks later, the company launched a lawsuit, stating that Millbrae "thoroughly and capriciously prejudice[d] the rights of the plaintiff by denying it the ability to operate its business."

Local San Mateo County resident Doug Radtke noted in his blog post on the day the lawsuit was launched that there may have been other options available to the city council before trying to "kick out a business because folks on the planning commission think it's a 'failed experiment'; there are rules, laws and procedures."  He questioned "why there was no formal abatement process" such as disciplinary or corrective action taken if the city felt the business wasn’t complying with regulations that would have lessened the chance of being slapped with a lawsuit.

Meanwhile, the showdown between FlightCar and San Francisco has only just begun. The city and FlightCar went to court last week, but there’s been no official word of the outcome. While San Francisco has some hefty arguments on its side, it may be hard to shake the public image of robbing hard-working, well-intentioned teens that were sharp enough to see a better way of doing things.

"We’re not asking for the keys to the kingdom without doing the hard work to get there," said co-founder Rujul Zaparde in a Nov. 23 blog post. "We are asking for a clearly defined set of rules that that aren’t designed to favor incumbents — and allow us to rise to the occasion to satisfy a new customer base with rising expectations."

Image of San Francisco from SFO courtesy of Manuel Calavera

This piece has been updated since it was published to correct the following errors: only Ganeshram attended MIT, FlightCar raised $5.5 million not 3.5 million, and the company has never operated at Oakland International Airport.