By Richard Newsome, Esq. & William C. Ourand, Esq.

Self-driving cars and transportation network companies will soon converge and bring about a paradigm shift of tectonic plate proportions for the auto industry, auto insurance industry, and lawyers who handle auto crash cases. The industry is already preparing for the upcoming revolution, and is taking calculated political action to create a favorable legal framework and limit legal liability for the auto tort cases of tomorrow. The Plaintiffs’ Bar, on the other hand, remains far behind, and is in real danger of being stuck with a horrible set of rules and regulations dreamed up by the industry.

This article will address the upcoming transportation revolution, will move on to discuss the industry’s political action, the Plaintiff Bar’s failure to keep up, and will conclude by offering suggestions for next steps.

The Old Model Will be Replaced Sooner Than You Think

For the past 100 years, the auto industry has been dominated by the Big Three from Detroit and overseas auto manufacturers. That is all changing, now. Newcomer Tesla’s stock has continued to climb sky high—with the companies’ recent valuation of $51 billion surpassing Ford ($35 billion) and General Motors ($44 billion)—despite Tesla being a money losing business to date.[1] Indeed, Ford’s stock recently sunk so low that the company fired its CEO, just two years after the company posted a record-breaking pre-tax profit of $10.8 billion.[2]

So how is a money-losing company valued higher than a company posting billion dollar profits? According to Tesla founder Elon Musk, the answer is simple: “Tesla is absurdly overvalued if based on the past, but that’s irrelevant. A stock price represents risk-adjusted future cash flows.”[3] And it’s not just Tesla that is highly valued for being ready for the future. A team of financial analysts from Morgan Stanley recently estimated that Waymo, Google’s self-driving car division, would be worth more than $70 billion by itself, if it were spun off as an independent company.[4]

The development of self-driving cars is only half of the story, though. The other half is the continued explosive growth of so-called “transportation network companies” (“TNCs”)—i.e. Uber, Lyft, and similar rideshare businesses. Goldman Sachs has declared that TNCs are part of a new “pay-as-you-go” car era, and that ridesharing will grow eightfold by 2030.[5] To achieve that level of market dominance, Goldman Sachs envisions TNCs managing fleets of self-driving cars, potentially earning a “profit of $14,000 per car over three years, nine times what [a manufacturer] currently makes from selling a car.”[6] And it’s not just today’s TNC companies that will profit from this dynamic. Auto-manufacturers themselves are looking to transition towards operating fleets of rideshare vehicles instead of selling and leasing vehicles to individual consumers through dealerships.[7] GM, BMW, and Ford are each currently experimenting with their own versions of on-demand car-sharing in several U.S. cities, with the hopes of laying the foundation for profitable autonomous vehicle rideshare fleets.[8]

Make no mistake: the combination of self-driving cars and TNCs will bring about a complete paradigm change in automotive transportation. As explained by Morgan Stanley, “[t]he 100-year-old auto industry business model is . . . moving from ‘millions of units sold’ annually to ‘trillions of miles traveled annually,” with the new model being marked by “[s]hared, autonomous and electric mobility.”[9] Under the new paradigm, individual car ownership will become a rarity. Think tank RethinkX, cofounded by Stanford instructor Tony Seba, recently predicted that only 20% of Americans will own a personal car by the year 2030, with most other Americans relying upon “autonomous, electric ride-shares” for their daily transportation needs.[10]

Existing Tort Law Would Provide the Best Solution for the New Transportation Paradigm

Automotive tort jurisprudence has evolved over the past century to provide a set of sensible, workable liability rules for car crash cases. The common law and statutory frameworks generally attach liability to a vehicle’s owner, operator, and, if a defect can be proven, the manufacturer, dealer, and component part suppliers.[11] When taxi, bus, train, and similar businesses undertake to provide transportation services to the public, courts generally regard them as being “common carriers,” and imbue them with an elevated, non-delegable duty to provide safe passage.[12]

There is simply no reason why these rules cannot be applied to the new transportation paradigm. When companies like Lyft or GM offer an autonomous vehicle rideshare service, they will be simply providing transportation services to the public, and should be held to the same standards as a common carrier. TNCs, however, have already fought hard against being treated as common carriers for purposes of tort liability. They initially fought this battle in the Courts—arguing that they are not common carriers, but are instead mere “brokers” and “technology companies”—but were soundly defeated in that venue. As explained by one Court:

Uber is no more a ‘technology company’ than Yellow Cab is a ‘technology company’ because it uses CB radios to dispatch taxi cabs, John Deere is a ‘technology company’ because it uses computers and robots to manufacture lawn mowers, or Domino Sugar is a ‘technology company’ because it uses modern irrigation techniques to grow its sugar cane. Indeed, very few (if any) firms are not technology companies if one focuses solely on how they create or distribute their products. If, however, the focus is on the substance of what the firm actually does (e.g., sells cab rides, lawn mowers, or sugar), it is clear that Uber is most certainly a transportation company, albeit a technologically sophisticated one. In fact, as noted above, Uber’s own marketing bears this out, referring to Uber as ‘Everyone’s Private Driver,’ and describing Uber as a ‘transportation system’ and the ‘best transportation service in San Francisco.’[13]

This result also comports with the sound public policy underlying the common carrier doctrine; namely that “the passenger must entrust his or her bodily safety to the care and control of the carrier’s vehicle and employees, and he or she cannot freely or independently walk away, once the undertaking has commenced.”[14] A consumer is no better able to protect themselves once they enter a TNC vehicle than they are when they enter a taxi cab. There is no logical reason to treat a passenger travelling in a TNC vehicle less favorably than a passenger travelling in a taxi-cab. Disparate treatment between those two individuals, with the TNC passenger receiving less legal protection, would constitute horrific and regressive public policy.

The common carrier doctrine would also be particularly important when considering the many hats that auto manufacturers and other transportation providers will wear moving forward. Three separate defendants in a typical auto products liability case of today—the owner, operator, and manufacturer—will likely be distilled down to one entity, or family of entities, in an autonomous, fleet vehicle crash case of the near future. The common carrier doctrine could operate alongside products liability and negligence doctrines to ensure that auto manufacturers and others are held accountable for each of the several hats they will wear under the new paradigm.

The Industry is Working Feverishly to Enact a Framework that Favors Industry and Disfavors Consumers

Over the past several years, Florida has enacted or considered several laws that are significant to both self-driving cars and TNCs. We believe these lobbying efforts are emblematic of the greater industry strategy to lay a favorable legal foundation for the new transportation paradigm—one that would differ from the traditional common law doctrines discussed in the preceding section.

In 2016, under the nose of the sleeping Florida Justice Association (“FJA”), the Florida Legislature passed a radical bill allowing for self-driving cars to be operated on Florida’s roadways with no human physically present in the vehicle.[15] That same year, the Legislature eliminated the requirement that an entity testing autonomous vehicles in Florida submit a $5 million-dollar bond.[16] As a result, Florida became the state with the laxest laws on the testing and operation of self-driving cars, all without any fight from the Florida Plaintiffs’ Bar, or any other consumer advocacy group.

This year, a coalition of auto industry and TNC players sought to pass an even more aggressive bill in Florida. Specifically, they attempted to add language which would provide that the autonomous vehicle itself would be deemed the “operator” of the vehicle when the vehicle is operating in “autonomous mode.”[17] They also attempted to pass language which would allow anyone in the world to simply push a button and “engage” an autonomous vehicle in Florida.[18] Even Florida’s current laws, as lax as they, require that: (1) a licensed human driver “engage” the autonomous technology, and in doing so, be deemed the “operator” for purposes of establishing legal liability; and (2) the vehicle have some means to alert the human operator if there is a failure with the autonomous technology.[19] If passed, the industry’s new proposed language would have eliminated those minimal requirements, and allowed for self-driving cars to operate throughout the state without absolutely no human oversight or monitoring, which would be disastrous from both a safety and a liability perspective.

When some of us spotted the 2017 proposed Florida legislation, we were shocked to learn that consumer groups initially identified the bill as not being harmful for consumers or the civil justice system. We then explained our concerns to the various consumer groups, and worked to stop the bad language from becoming law. The battle was waged throughout the legislative Session this year, with the bill first being killed in committee, only to be revived by an army of industry lobbyists at the last second through a proposed amendment to a larger transportation bill, and killed once again in the last few days of Session.[20]

On the TNC front, industry lobbyists successfully pushed a separate TNC bill through the Florida Legislature. This legislation sets out some basic insurance and other requirements for TNC network operators (Uber, Lyft, etc.), and then otherwise attempts to statutorily limit the application of various common law doctrines to those entities. Most notably for purposes of this Article, the bill provides that a “TNC . . . is not a common carrier . . . .”[21] This new law will take effect July 1, 2017.[22]

Thankfully, the definition of TNC in the Florida statute is tied to the use of human drivers, and as such, should not affect the applicability of the common carrier doctrine to rideshare networks operated by autonomous vehicle fleet owners.[23] Industry lobbyists did, however, include a provision specific to autonomous vehicles used by TNCs in their last-ditch effort to get their relaxed autonomous vehicle language tacked onto the larger transportation bill.[24] As discussed above, that late amendment to the transportation bill was defeated—for now—in the final days of Session.

Wake-Up Call: The Plaintiffs’ Bar Must Engage

The big takeaway from our recent experience in the Florida fight over bad self-driving car and TNC bills is that the Plaintiffs’ Bar is several steps behind the industry. Industry lobbyists are hard at working laying the foundation for a pro-industry legal framework that could result in horrible, anti-consumer tort liability rules. Plaintiffs’ lawyers must be equally involved, with an eye on what transportation will look like to tomorrow.

The best way to get involved is to take an active role in state and local trial lawyers’ associations, as well as the American Association for Justice (“AAJ”). In doing so, it will be critical to work to leverage the power of those organizations to defend against bad bills. Beyond that, the Plaintiffs’ Bar should also take appropriate affirmative action where viable. Examples of pro-consumer legislation solutions that Plaintiffs’ organization may consider advocating in favor of include (but are by no means limited to):

Requiring entities and individuals who test, own, and operate self-driving cars to demonstrate and maintain sufficient insurance, a bond, or other means to ensure the ability to answer for civil judgments.

See, e.g., NHTSA, Federal Automated Vehicles Policy, 42: “The application should include evidence of the manufacturer’s or other entity’s ability to satisfy a judgment or judgments for damages for personal injury, death, or property damage caused by a vehicle in testing in the form of an instrument of insurance, a surety bond, or proof of self-insurance, for no less than 5 million U.S. dollars.”

See, e.g., Michigan Vehicle Code Section 257.2b(7)(c): Requiring self-driving car manufacturers to obtain and provide “an instrument of insurance, surety bond, or proof of self-insurance in the amount of at least $10,000,000.00.”

Requiring the entity responsible for testing or operating self-driving vehicles to submit a sworn statement to the effect that it has conducted sufficient testing to ensure proper operation under real-world operating conditions.

See, e.g., California DMV, Application for Permit to Deploy Autonomous Vehicles on Public Streets, p. 2: Requiring the applicant to certify that “[t]he manufacturer has conducted test and validation methods and is satisfied that the autonomous vehicles are safe for deployment on public roads in California.”

See, e.g., NHTSA, Federal Automated Vehicles Policy, 41-42: “The application should include the manufacturer’s or other entity’s safety and compliance plan for testing vehicles, which should include a self-certification of testing and compliance to NHTSA’s Vehicle Performance Guidance for the technology in the test vehicles under controlled conditions that simulation the real-world conditions (various weather, type of roads, times of the day and night, etc.) to which the applicant intends to subject the vehicle on public roadways . . . .”

Requiring that data be recorded in a manner that would ensure self-driving car crashes can be properly analyzed by third-party consultants and experts.

See, e.g., NHTSA, Federal Automated Vehicles Policy, 17: “Manufacturers and other entities should have a documented process for testing, validation, and collection of event, incident, and crash data, for the purposes of recording the occurrence of malfunctions, degradations, or failures in a way that can be used to establish the cause of any such issues.”

See, e.g., California Vehicle Code, Section 387502(2)(G): Requiring that, “[t]he autonomous vehicle has a separate mechanism, in addition to, and separate from, any other mechanism required by law, to capture and store the autonomous technology sensor data for at least 30 seconds before a collision occurs between the autonomous vehicle and another vehicle, object, or natural person while the vehicle is operating in autonomous mode. The autonomous technology sensor data shall be captured and stored in a read-only format by the mechanism so that the data is retained until extracted from the mechanism by an external device capable of downloading and storing the data. The data shall be preserved for three years after the date of the collision.”

Requiring the accurate and timely reporting of self-driving car crashes.

See, e.g., NHTSA, Federal Automated Vehicles Policy, 18: Explaining that autonomous vehicle manufacturers “have great potential to use data sharing to enhance and extend safety benefits,” that “each entity should develop a plan for sharing its event reconstruction and other relevant data with other entities,” and that “[a]ll manufacturers and other entities should also participate in the Early Warning Reporting program and should submit EWR information quarterly regardless of total production volume.”

Conclusion

Society is on the precipice of a rapid paradigm shift away from individual ownership of vehicles and towards fleets of self-driving cars operated on a rideshare basis. This cataclysmic change will send shockwaves through corporate America and will upend the auto tort practice as it exists today. The industry is already hard at work attempting to remold the legal system in a way that is favorable for it and unfavorable for injured consumers. The Plaintiffs’ Bar must be equally engaged in the process to ensure that the courthouse doors remain open in the years to come.

[1] Robert Ferris, Tesla’s Reward for Hitting Its Targets Could be a Stock Surge Past $500, Says Analysts, CNBC, available at https ://www.cnbc.com/2017/05/24/teslas-reward-for-hitting-its-targets-could-be-a-stock-surge-past-500-says-analyst.html (May 24, 2017); Alanna Petroff, Elon Musk Says Tesla Doesn’t Deserve Market Value, CNN Money, available at http://money.cnn.com/2017/05/18/investing/tesla-elon-musk-valuation-market-cap/ (May 18, 2017).

[2] Dee-Ann Durbin and Tom Krisher, Ford Taps Former Office Furniture Executive to be New CEO, The Seattle Times, available at http://www.seattletimes.com/business/ap-source-ford-replaces-ceo-in-push-to-transform-business/ (May 21, 2017).

[3] Evan Niu, Elon Musk Sends Seemingly Mixed Messages on Tesla’s Valuation, The Motley Fool, available at https://www.fool.com/investing/2017/05/18/elon-musk-sends-seemingly-mixed-messages-on-teslas.aspx (May 18, 2017).

[4] Lucinda Shen, Google Might be Sitting on a $70 Billion Rival to Uber and Tesla, Fortune, available at http://fortune.com/2017/05/23/google-waymo-uber-tesla-alphabet/ (May 23, 2017).

[5] Anita Balakrishnan, Ride-Hailing Companies Will Grow Eightfold by 2030, Dwarfing the Taxi Industry: Goldman Sachs, CNBC, available at https://www.cnbc.com/2017/05/24/goldman-sachs-ride-hailing-companies-will-dwarf-taxis.html (May 24, 2017).

[6] Anita Balakrishnan, Ride-Hailing Companies Will Grow Eightfold by 2030, Dwarfing the Taxi Industry: Goldman Sachs, CNBC, available at https://www.cnbc.com/2017/05/24/goldman-sachs-ride-hailing-companies-will-dwarf-taxis.html (May 24, 2017).

[7] Ruth Reader, In a Driverless Future, Uber and Lyft Will Sit in the Passenger Seat, Fast Company, available at https://www.fastcompany.com/40421139/in-a-driverless-future-uber-and-lyft-will-sit-in-the-passenger-seat (May 17, 2017).

[8] Julie Halpert, Fastern Your Seat Belts: Carmakers Prepare for the Biggest Change Since the Model T, The Fiscal Times, available at https://www.thefiscaltimes.com/2017/01/15/Fasten-Your-Seat-Belts-GM-and-Ford-Prepare-Biggest-Change-Model-T (Jan. 15, 2017).

[9] Matthew DeBord, Morgan Stanley’s Latest Prediction About the Future of Self-Driving Cars Should Terrify Automakers, Business Insider, available at http://www.businessinsider.com/morgan-stanleys-shared-autonomous-30-list-has-no-major-automakers-2017-5 (May 25, 2017).

[10] Leanna Garfield, Only 20% of Americans Will Own a Car in 15 Years, New Study Finds, Business Insider, available at http://www.businessinsider.com/no-one-will-own-a-car-in-the-future-2017-5 (May 4, 2017).

[11] Note, Carpooling Liability? Applying Tort Law Principles to the Joint Emergence of Self-Driving Automobiles and Transportation Network Companies, 85 Fordham L. Rev. 1863, 1880-91 (March 2017).

[12] Agnieska A. McPeak, Sharing Tort Liability in the New Sharing Economy, 49 Conn. L. Rev. 171, 209 (Nov. 2016).

[13] O’Connor v. Uber Techs., 82 F. Supp. 3d 1133, 1141-42 (N.D. Cal. 2015).

[14] Nazareth v. Herndon Ambulance Serv., 467 So. 2d 1076 (Fla. 5th DCA 1985).

[15] https://www.flsenate.gov/Session/Bill/2016/7027/BillText/er/PDF

[16] https://www.flsenate.gov/Session/Bill/2016/7027/BillText/er/PDF

[17] https://www.flsenate.gov/Session/Bill/2017/01066

[18] https://flsenate.gov/Session/Bill/2017/865/Amendment/102880/PDF

[19] Fla. Stat. § 316.85 (2016); Fla. Stat. § 316.145 (2016).

[20] https://flsenate.gov/Session/Bill/2017/865/Amendment/102880/PDF

[21] https://www.flsenate.gov/Session/Bill/2017/221/BillText/er/PDF

[22] Id.

[23] https://www.flsenate.gov/Session/Bill/2017/221/BillText/er/PDF