Secci v. United Independent Taxi Drivers , 8 Cal. App. 5th 846 ( 2017 )

Filed 2/15/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
EMANUELE SECCI, B270082
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. BC487145)
UNITED INDEPENDENT
TAXI DRIVERS, INC., et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Ralph Dau, Judge. Reversed.
MaryBeth LippSmith, Douglas Adam Linde, and Erica
Allen Gonzales for Plaintiff and Appellant.
Law Office of Cleidin Z. Atanous, Cleidin Z. Atanous
and Michelle L. Villarreal for Defendants and Respondents.
_______________________
Plaintiff and appellant Emanuele Secci appeals from a
judgment in favor of defendants and respondents United
Independent Taxi Drivers, Inc. (United Independent) and
United Taxi of the Southwest (United Southwest)
(collectively, United). Secci obtained a jury verdict for
damages suffered after a motorcycle crash with defendant
Aram Tonakanian.1 Tonakanian was driving a green and
white taxi marked with United’s insignia. The jury found
Tonakanian to be United’s agent, but not an employee. The
court granted United’s motion for judgment notwithstanding
the verdict (JNOV) under Code of Civil Procedure
section 629, finding the evidence insufficient to support the
jury’s finding that Tonakanian was United’s agent. Secci
now seeks reversal, arguing that there was substantial
evidence of agency to support the verdict. United contends
the trial court correctly granted its JNOV motion because
the only evidence supporting an agency finding were
requirements imposed by public regulation or third parties.
We reverse the trial court’s order and reinstate the jury’s
verdict, because California law does not preclude
consideration of controls required by public regulations in
finding an agency relationship.
1 Tonakanian is not a party to this appeal.
2
FACTUAL AND PROCEDURAL BACKGROUND
Relevant facts
We present the evidence in the light most favorable to
Secci. (Bufano v. San Francisco (1965) 233 Cal. App. 2d 61,
68 (Bufano).) Secci was driving his motorcycle through an
intersection in the City of West Hollywood when
Tonakanian’s taxi, coming from the opposite direction,
turned left directly in front of Secci. Tonakanian’s taxi was
painted with United’s green and white color scheme and was
licensed to pick up passengers in the City of West
Hollywood.
United describes itself as an association of taxicab
owners. United had franchise agreements with the City of
West Hollywood and other cities in Southern California to
operate a taxi service. United Southwest was a wholly-
owned subsidiary of United Independent at the time. The
two companies were operated by the same people, and
United dispatchers worked for both companies out of the
same building. United’s franchise agreement with the City
of West Hollywood required it to maintain commercial auto
liability insurance and provide a list of insured vehicles to
the director of the city’s department of transportation.
Like other owner-drivers, Tonakanian owned his taxi
and set his own hours. Tonakanian’s contract with United
stated he was an independent contractor. Drivers paid
monthly dues and other fees to cover United’s expenses.
3
United provided marketing and advertising. Each United
taxi had the company’s phone number painted on it. If a
customer called the number, a dispatcher would enter the
location information into a computer, and the computer
would send out a dispatch request. In order to receive
dispatch requests, a driver would check into the zone where
he or she was located. Drivers were free to accept or reject
dispatch requests, and could pick up passengers on the
street, so long as they were licensed to accept fares within
that city.
Drivers were required to use uniform credit card and
dispatch equipment chosen by United. Credit card charges
were initially paid to United, which would deduct credit card
processing fees, monthly dues, and a small fee for
accounting. Taxi rates were set by meter. Drivers were not
free to charge flat or discounted rates. United required its
drivers to accept vouchers and coupons that drivers could
later submit to United for payment. If a driver transferred
ownership of a United taxi, the buyer and seller had to notify
United and pay a $500 transfer fee.
United provided a training manual to each of its
drivers. It required drivers to keep a copy of the manual in
the taxi and to complete a training course before taking the
city’s licensing test. There was conflicting testimony about
whether the City of West Hollywood required United to
provide training to its drivers before a driver could be
licensed in that city. The training manual made reference to
department of transportation rules, but also described
4
additional rules applicable to drivers. For example,
department of transportation rules provide that drivers
“shall provide prompt, efficient service and be courteous at
all times to the general public, other City-permitted taxicab
drivers, and to City investigators/officers” and that a driver
cannot smoke while the taxicab is occupied without the
consent of all passengers. The manual goes farther, stating,
“Taxicab drivers are NOT ALLOWED TO SMOKE while
servicing passenger(s)” and, “Do not discuss or argue with
passengers about controversial subjects such as politics,
religion, etc . . . .” The training manual provided specific
information about the drivers’ appearance, including a dress
code, as well as specifics about driving safely, conducting
themselves while waiting in taxi lines, and interacting with
passengers politely.
United drivers were expected to abide by the company’s
rules and regulations, and drivers acknowledged their
relationship with United could be terminated for violations
of those rules. United had drivers working as “Road
Supervisors.” According to the training manual, road
supervisors were trained by United, and were available to
help in an emergency and to enforce United’s rules and
regulations. A road supervisor had authority to resolve
disputes between drivers, and to cite a driver for a “false
first up, guzzling, dirty cabs, not conforming to the dress
code, missing hubcaps, etc . . . .” Drivers were required to
complete and submit a report if they were involved in an
accident, or risk a fine or suspension.
5
Procedural history
This appeal arises after Secci’s claims survived two
motions for summary judgment and two jury trials. Secci’s
original complaint named United Independent as a
defendant, but not United Southwest. United Independent
moved for summary judgment, but the trial court denied the
motion because United Independent had not demonstrated
the lack of an agency relationship. After the first trial ended
with a jury verdict for Secci, the court granted United
Independent’s motion for a new trial on the ground that the
court incorrectly denied United Independent’s request to
include BAJI No. 13.20, an instruction on the factors to be
weighed in determining whether Tonakanian was acting as
United’s agent or as an independent contractor. Secci later
named United Southwest as a Doe defendant and both
defendants filed a second motion for summary judgment.
Again, the court denied summary judgment because United’s
evidence did not establish the absence of an agency
relationship between United and Tonakanian.
In the second jury trial, the trial court instructed the
jury on how to determine whether Tonakanian was United’s
employee or an independent contractor, using CACI
No. 3704. The court also gave instructions on the question of
agency, relying on both CACI No. 3705 and BAJI No. 13.20.
Under CACI No. 3705, the jury could find agency if Secci
proved that United gave Tonakanian authority to act on its
behalf, and that the grant of authority “may be shown by
6
words or may be implied by the parties’ conduct” but could
not be shown by Tonakanian’s words alone. BAJI No. 13.20
gave additional details about factors the jury should consider
in determining whether an agency relationship existed
between United, as a principal, and Tonakanian, as an
agent. The court instructed, “The most important but not
the only factor, in determining whether one is an agent or
independent contractor is whether the principal has the
right to control the manner and means of accomplishing the
result desired. Strong evidence in support of a principal
agent relationship is the right to discharge at-will without
cause. [¶] Other factor[s] which should be taken into
consideration in determining whether a person is an agent
or independent contractor are[:] [¶] (a) whether the one
performing services is engaged in a distinct occupation or
business[;] [¶] (b) whether, in the locality, the kind of
occupation or business is one in which the work is usually
done under the direction of a principal or by a specialist
without supervision[;] [¶] (c) the skill required in the
particular occupation or business[;] [¶] (d) whether the
principal or the worker supplies the instrumentalities, tools
and the place of work for the person doing the work, or
helpers[;] [¶] (e) the length of time [for] which the services
are to be performed[;] (f) the method of payment, whether
based on time or by [the] job[;] [¶] (g) whether the work is
part of the regular business of the alleged principal[;] [¶]
(h) whether the parties believe they are creating a
relationship of agency or independent contractor[;] and[] [¶]
7
(i) whether the alleged employee’s opportunity for profit or
loss depends on his or her managerial skills.”
The court went on to explain, “One who contracts to act
on behalf of another subject to the other’s control, except with
respect to his or her physical conduct, is both an agent and
an independent contractor. [¶] One who employs an
independent contractor ordinarily is not liable to others for
the acts or omissions of the independent contractor.” The
jury returned a verdict in favor of Secci, finding Tonakanian
was not an employee, but that he was an agent.
United filed a motion for JNOV. In its order granting
JNOV, the trial court focused on whether United could be
found liable under the theory of respondeat superior, as
vicarious liability was only available if Tonakanian was
United’s employee or an agent. The court discussed two
federal cases analyzing whether taxi drivers would be
considered employees in the context of the National Labor
Relations Act.2 The court reasoned that the evidence
produced at trial was more analogous to the situation in a
federal case where the Ninth Circuit found no substantial
evidence supported the National Labor Relations Board’s
finding of an employment relationship. The trial court
discounted evidence that might otherwise weigh in favor of a
principal-agent relationship—such as the driver training
2 The National Labor Relations Act applies to
employees, and defines the term employee as not including
“any individual having the status of an independent
contractor . . . .” (29 U.S.C. § 152(3).)
8
manual, required training classes, required dispatch
equipment, and standardized taxi coloring—reasoning that
such governmental requirements “are not ‘inconsistent with
an independent contractor relationship, [because] such an
incorporation benefits both parties by insuring continued
operation under the contract.’ (SIDA [of Hawaii, Inc. v.
N. L. R. B. (9th Cir. 1975) 512 F.2d 354,] 359.)”
DISCUSSION
Secci contends the court erroneously granted United’s
JNOV motion. He argues there was substantial evidence
supporting the jury’s finding of agency. United contends the
question on appeal is purely legal and subject to de novo
review: whether undisputed facts establish an agency
relationship where public agencies or third parties require a
company to impose certain controls on its independent
contractors.
We reject United’s argument that we must ignore the
controls required by public regulation and find that Secci
presented substantial evidence of agency to support the
jury’s verdict.
Standard of Review
“A motion for a judgment notwithstanding the verdict
may properly be granted only when, disregarding conflicting
evidence and indulging in every legitimate inference which
9
may be drawn from plaintiff’s evidence, the result is a
determination that there is no evidence sufficiently
substantial to support the verdict. On appeal, we must read
the record in the light most advantageous to plaintiff,
resolve all conflicts in his favor and give him the benefit of
every fact pertinent to the issues involved and which may
reasonably be deduced from the evidence [citation].”
(Bufano, supra, 233 Cal.App.2d at p. 68; I-CA Enterprises,
Inc. v. Palram Americas, Inc. (2015) 235 Cal. App. 4th 257,
274.)
“‘The existence of an agency is a factual question
within the province of the trier of fact whose determination
may not be disturbed on appeal if supported by substantial
evidence. [Citation.]’ [Citation.] Inferences drawn from
conflicting evidence by the trier of fact are generally upheld.
[Citation.].” (Michelson v. Hamada (1994) 29 Cal. App. 4th
1566, 1576.) “Only when the essential facts are not in
conflict will an agency determination be made as a matter of
law. [Citation.]” (Wickham v. Southland Corp. (1985) 168
Cal. App. 3d 49, 55.)
United contends a de novo standard of review applies
because the question on appeal is primarily legal. (Crocker
National Bank v. City and County of San Francisco (1989) 49
Cal. 3d 881, 888.) The legal question as framed by United is
“whether controls imposed by an outside agency or third
party that are passed through may constitute the control
required to establish an agency relationship.” There is a
legal question embedded in this appeal, but it only affects
10
whether we will consider externally-imposed requirements
as evidence of an agency relationship between a taxi
company and its drivers. Once we answer this question, the
matter is subject to a substantial evidence standard of
review. On appeal, “[a]s in the trial court, the standard of
review is whether any substantial evidence—contradicted or
uncontradicted—supports the jury’s conclusion. [Citations.]”
(Sweatman v. Department of Veterans Affairs (2001) 25
Cal. 4th 62, 68.)
Agency3 and vicarious liability
A corporation may be held vicariously liable as a
principal for the torts of its agents. (Meyer v. Holley (2003)
537 U.S. 280, 285–286.) “Whether a person performing work
for another is an agent or an independent contractor
depends primarily upon whether the one for whom the work
is done has the legal right to control the activities of the
3 Although there is considerable overlap between the
evidence of an employment relationship and an agency
relationship, no party has argued that the jury’s finding that
Tonakanian was not United’s employee affects whether
there is substantial evidence of agency. We point this out
only because the parties rely on employment and agency
cases interchangeably. This approach is supported in law
because many employment cases look to agency law in
defining the employer-employee relationship. (See, e.g.,
S. G. Borello & Sons, Inc. v. Department of Industrial
Relations (1989) 48 Cal. 3d 341, 350–351.)
11
alleged agent.” (Malloy v. Fong (1951) 37 Cal. 2d 356, 370.)
“Actual agency typically arises by express agreement.
[Citations.] . . . . [¶] ‘“Agency is the relationship which
results from the manifestation of consent by one person to
another that the other shall act on his behalf and subject to
his control, and consent by the other so to act.” [Citation.]
“The principal must in some manner indicate that the agent
is to act for him, and the agent must act or agree to act on
his behalf and subject to his control.” [Citation.]’ [Citation.]
Thus, the ‘formation of an agency relationship is a bilateral
matter. Words or conduct by both principal and agent are
necessary to create the relationship . . . .’ [Citation.]” (van’t
Rood v. County of Santa Clara (2003) 113 Cal. App. 4th 549,
571.) “‘In the absence of the essential characteristic of the
right of control, there is no true agency . . . .’ [Citations.] [¶]
‘The fact that parties had a preexisting relationship is not
sufficient to make one party the agent for the other . . . .
[Citation.] An agency is proved by evidence that the person
for whom the work was performed had the right to control
the activities of the alleged agent. [Citation.]’ [Citations.]”
(Id. at p. 572.)
“[W]hether an agency relationship has been created or
exists is determined by the relation of the parties as they in
fact exist by agreement or acts [citation], and the primary
right of control is particularly persuasive. [Citations.] Other
factors may be considered to determine if an independent
contractor is acting as an agent, including: whether the
‘principal’ and ‘agent’ are engaged in distinct occupations;
12
the skill required to perform the ‘agent’s’ work; whether the
‘principal’ or ‘agent’ supplies the workplace and tools; the
length of time for completion; whether the work is part of the
‘principal’ regular business; and whether the parties
intended to create an agent/principal relationship.
[Citation.]” (APSB Bancorp v. Thornton Grant (1994) 26
Cal. App. 4th 926, 932–933.)
Caselaw examining the legal relationship between a
taxi company and its drivers
In a 1948 case remarkably similar to the one before us,
this court upheld a judgment after a jury verdict in favor of a
motorcyclist plaintiff against an association of taxi drivers,
based on a finding that the taxi driver at fault in the
accident was an agent of the association. (Smith v. Deutsch
(1948) 89 Cal. App. 2d 419 (Smith).) In that case, there was
conflicting evidence on whether the driver was a member of
the association, but the evidence did show that the
association “engaged in an effort to obtain a franchise in its
own name to operate taxicabs in the city of Los Angeles; it
had a number of taxicabs painted in uniform colors and
design and with the insignia and name of the association
thereon . . . ; it advertised to the public, engaged public
relations counsel; spent more than $40,000 to obtain the
franchise; made substantial deposits and performance bonds
therefor and had a surplus in trust in the bank; it purchased
meters and obtained a commitment on approximately 200
13
new taxicabs.” (Smith, supra, at pp. 421–422.) The
association maintained insurance on all taxis bearing its
name and insignia. The bylaws provided that members of
the association were subject to expulsion on various grounds
including disorderly conduct, lewd remarks, “gross
dishonesty, wilful intoxication, insubordination, inefficiency
or ‘inability to perform the duties for which the member of
this association was expressly employed to do.’” (Id. at
p. 423.) The association had supervisors on the streets
during the day and night shifts. (Id. at p. 422.) “Drivers
were instructed how to operate; their method of dealing with
customers was prescribed; before cabs were allowed to be in
operation they were examined and approved; the competency
and sobriety of drivers was observed and instructions were
given by the association to the drivers as to the use of
taxicab zones.” (Id. at p. 423.) Weighing against an agency
finding was testimony that the driver in question was not a
member of the association, even though he was driving a taxi
with the association’s colors and insignia. The association
did not tell drivers when or where to drive, but that
approach was typical of the taxicab business. (Ibid.) The
court concluded that the evidence established that the driver
“was operating under the direction and control of the
defendant association.” (Id. at p. 423.) The judgment was
affirmed. (Id. at p. 426.)
In Yellow Cab Cooperative, Inc. v. Workers’ Comp.
Appeals Bd. (1991) 226 Cal. App. 3d 1288 (Yellow Cab), the
court held a taxi driver who leased his taxi from the lessor
14
taxi company was an employee, not an independent
contractor, for the purpose of workers’ compensation law.
Discussing S. G. Borello & Sons, Inc. v. Department of
Industrial Relations, supra, 48 Cal. 3d 341 (S. G. Borello), a
seminal case for distinguishing employees from independent
contractors, the Yellow Cab court noted, “The traditional
definition of ‘employment’ evolved at common law to
delineate the hirer’s vicarious liability for the tortious acts of
the person hired.” (Yellow Cab, supra, 226 Cal.App.3d at pp.
1294–1295.) The court found that the taxi company
exercised a sufficient level of control over its drivers to
conclude that the drivers were employees, not independent
contractors. The lease agreement between the driver and
the company stated that the driver was self-employed, but
the court found that to be non-dispositive, because the
parties’ actions determine the relationship, not the labels
they use. (Yellow Cab, supra, at p. 1297.) Drivers were
trained on how to conduct themselves, including rules of
good driving behavior. The company emphasized that
drivers possessed a large degree of independence, with
freedom to not take radio calls or to use the cab to carry
family members rather than paying passengers. The court
found such freedoms were inherent in the nature of the
work, because economic reality dictated that a cab driver
would need to carry paying passengers during the lease time
frame. In addition, the company exercised control over the
drivers by prohibiting them from driving for other
companies, and possessed the ability to terminate leases
15
based on write-ups or customer complaints. “Liability to
discharge for disobedience or misconduct is strong evidence
of control.” (Id. at p. 1298.) The Yellow Cab court also
rejected the argument that the lease arrangement created
an entrepreneurial relationship more characteristic of an
independent contractor, pointing out that drivers did not set
their own rates, and there was no evidence to warrant such a
finding. (Id. at p. 1301.) Neither Smith nor Yellow Cab
contained any discussion of the argument pressed by United.
In other words, those courts did not examine whether
controls required by local government or third parties could
be considered in deciding whether a taxi driver was the taxi
company’s agent.
Two Ninth Circuit Court of Appeals opinions have
analyzed whether a taxi driver was an employee of a taxi
company, in the context of determining whether the
National Labor Relations Act applied. (N. L. R. B. v.
Friendly Cab Co., Inc. (9th Cir. 2008) 512 F.3d 1090
(Friendly) and SIDA of Hawaii, Inc. v. N. L. R. B. (9th Cir.
1975) 512 F.2d 354, (SIDA).) In SIDA, the Ninth Circuit
found there was not substantial evidence to support the
National Labor Relations Board’s finding of an employer-
employee relationship between SIDA, an association of taxi
owner-operators, and its members. (SIDA, at p. 357.)
Applying common law principles of agency to the facts before
it, and noting that the “essential ingredient of the agency
test is the extent of control exercised by the ‘employer,’” the
court found that SIDA did not exercise sufficient control over
16
its members to be considered an employer. SIDA had a
skeleton corporate structure, and one of the key reasons for
its existence was its exclusive contract with the State of
Hawaii to provide taxi service at the airport. Drivers were
free to choose their hours, to work for other taxi companies,
and to make their own arrangements with clients. Fare
amounts were set by local ordinance, not by SIDA, and
drivers collected and kept their own fares. SIDA kept no
income records for its member drivers, and drivers paid for
their own insurance. The Ninth Circuit rejected the Board’s
reliance on those rules and regulations as evidence of SIDA’s
control over its drivers, finding them to be “standards of
conduct to which all of the drivers should adhere in order to
promote the SIDA image for the mutual benefit of [SIDA]
and its drivers.” (Id. at pp. 358–359.) SIDA’s rules and
regulations required drivers to display SIDA identification,
follow dispatcher instructions, and be neat and courteous.
The Ninth Circuit reasoned that when contractual or
regulatory requirements benefit both the association and the
drivers, such requirements were not inconsistent with an
independent contractor relationship. (Id. at p. 359.)
On different facts, the Ninth Circuit affirmed the
Board’s finding of an employer-employee relationship based
on evidence of control exercised by the Friendly Cab
Company. (Friendly, supra, 512 F.3d at p. 1093.) In that
case, the company leased taxis to its drivers at a weekly rate
that varied based on the type of vehicle and the driver’s
history, and the company retained discretion to decide what
17
type of vehicle a driver would receive. Although the leases
stated no employer-employee relationship was being created,
drivers agreed to comply with requirements set forth in the
company’s policy manual and its standard operating
procedures, including safety requirements, a dress code, and
a prohibition against drivers using personal business cards.
(Id. at pp. 1093–1094.) Drivers could not solicit customers
independently, and were prohibited from using personal cell
phones while driving for any reason, including accepting
calls for service. (Id. at p. 1098.) In addition, the company
would sometimes dispatch drivers to provide voucher
service, where the passenger would pay using a voucher that
the driver must redeem through the company, and the
company retained a portion of the voucher amount. Drivers
could not refuse vouchers, but sometimes received less than
the metered rate for those trips. (Id. at p. 1094.) Drivers
were required to attend annual classes on company policies
and laws concerning discrimination, and the Ninth Circuit
observed that the Board “reasonably found that Friendly’s
training requirements exceed those required by [municipal]
ordinance and constitute some degree of control over the
drivers.” (Friendly, at p. 1101.)
18
California law does not require the trial court to
ignore evidence of control when United claimed that
its policies were based on local regulations.
United urges this court to follow the approach taken by
the trial court, arguing that as a matter of law, when a taxi
company exercises control over its drivers in order to comply
with public regulations or third party requirements, such
activity cannot be considered in determining whether an
agency or employment relationship exists. United argues
that SIDA and Friendly permit courts to ignore any
requirements imposed upon taxi drivers derived from
government-imposed requirements or regulations. United
attempts to bolster its argument with additional federal
cases, most of which cite back to SIDA for the proposition
that rules enforced for the mutual benefit of the taxi
company and its drivers are not a relevant consideration in
determining whether an individual is an employee, rather
than an independent contractor. (E.g., Chase v. Trustees of
W. Con. of T. Pension T.F. (9th Cir. 1985) 753 F.2d 744, 751
[no employment relationship where company directors have
authority to make and enforce rules concerning the personal
conduct of the drivers and power to supervise the vehicles];
Local 777, Democratic U. Organizing Com. v. N. L. R. B.
(D.C. Cir. 1978) 603 F.2d 862, 876 [“to the extent that
municipal ordinances prescribe the conduct of lessee drivers
they are regulated by law, not supervised or controlled by”
the taxi company].)
19
United’s argument relies exclusively on federal cases.4
United does not point to any California law permitting
courts to ignore controls imposed by an employer or a
principal solely because the controls are rooted in such
government regulations, nor are we aware of any California
law to that effect. In addition, United’s argument does not
address the fact that California law recognizes that an
individual hired as an independent contractor may be an
agent. “‘Agency and independent contractorship are not
necessarily mutually exclusive legal categories as
independent contractor and servant or employee are. In
other words, an agent may also be an independent
contractor. [Citation.]’” (Jackson v. AEG Live, LLC (2015)
233 Cal. App. 4th 1156, 1184.)
Based on our analysis of California law governing
vicarious liability for an independent contractor’s negligence,
we reject the federal cases United relies upon. We instead
conclude that public regulation of an industry does not, as a
matter of law, shield a party from vicarious liability when it
hires independent contractors, rather than employees.
4 Because we found no state cases analyzing whether
the federal approach would apply under California law, we
invited the parties to submit additional briefing addressing
the applicability of both Smith, supra, 89 Cal. App. 2d 419,
where the court found a driver to be an agent of the taxi
association, and Millsap v. Federal Express Corp. (1991) 227
Cal. App. 3d 425, which discussed the regulated hirer
exception imposing vicarious liability on publicly regulated
companies that hire independent contractors.
20
A company is generally not liable for the negligent acts
of its independent contractors, subject to a growing body of
exceptions to that general rule. (See, e.g., Privette v.
Superior Court (1993) 5 Cal. 4th 689, 693 (Privette) [general
common law rule of non-liability for negligence of an
independent contractor is subject to exceptions so numerous
as to render the rule a mere preface to the inventory of its
exceptions]; Kinney v. CSB Construction, Inc. (2001) 87
Cal. App. 4th 28, 32 [same].) A company that hires an
independent contractor can be held liable to third parties
under the doctrine of peculiar risk (see Privette, supra, 5
Cal.4th at pp. 695–698 [reviewing history and evolution of
peculiar risk doctrine]), the non-delegable duty exception
(see SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal. 4th
590, 596), and the regulated hirer exception (Eli v. Murphy
(1952) 39 Cal. 2d 598 (Eli); Vargas v. FMI, Inc. (2015) 233
Cal. App. 4th 638, 644 (Vargas) [trucking company regulated
by the department of transportation and state law cannot
delegate its responsibility to the public by characterizing its
drivers as independent contractors]). The regulated hirer
exception to the general rule of non-liability for an
independent contractor’s negligence is most pertinent to this
case, as United grounds its defense of the trial court’s order
granting JNOV on the premise that government regulation
and municipal franchise requirements immunize it from
being held liable under an agency theory of vicarious
liability. United’s argument runs counter to the policies
behind the regulated hirer exception.
21
In Millsap v. Federal Express Corp., supra, 227
Cal. App. 3d 425, 433–435 (Millsap), the court of appeal
discussed the regulated hirer exception to the general rule of
non-liability, pointing out that the hirer of an independent
contractor may be held liable when “‘an individual or
corporation undertakes to carry on an activity involving
possible danger to the public under a license or franchise
granted by public authority subject to certain obligations or
liabilities imposed by the public authority . . . .’” (Id. at
p. 434, quoting Taylor v. Oakland Scavenger Co. (1941) 17
Cal. 2d 594, 604 (Taylor).) As the California Supreme Court
has explained, “The effectiveness of safety regulations is
necessarily impaired if a carrier conducts its business by
engaging independent contractors over whom it exercises no
control. If by the same device it could escape liability for the
negligent conduct of its contractors, not only would the
incentive for careful supervision of its business be reduced,
but members of the public who are injured would be
deprived of the financial responsibility of those who had
been granted the privilege of conducting their business over
the public highways. Accordingly, both to protect the public
from financially irresponsible contractors, and to strengthen
safety regulations, it is necessary to treat the carrier’s duties
as nondelegable.” (Eli, supra, 39 Cal.2d at p. 600.)
United argues that when public regulations require a
company to exert control over its independent contractors,
evidence of that government-mandated control cannot
support a finding of vicarious liability based on agency. This
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argument conflicts with the policy behind the regulated hirer
exception, which emphasizes that the effectiveness of public
regulations “would be impaired if the carrier could
circumvent them by having the regulated operations
conducted by an independent contractor.” (Millsap, supra,
227 Cal.App.3d at p. 434.)
United acknowledges that the regulated hirer
exception applies to entities engaged in activities involving
enhanced risk to the public. United argues that in contrast
to the danger posed in those cases, the controls imposed on
the taxi industry are “quality of life” regulations, affecting
public convenience, not public safety. Because the regulated
hirer exception to the general rule of non-liability only
applies to activities that involve an increased risk of danger
to the public, they argue it would not—or should not—apply.
We disagree.
Public regulations require taxi companies to impose
controls upon their drivers for the sake of public safety.
They are a valid exercise of police power. “The regulation of
the taxicab industry is a traditional subject of the police
power of cities and counties. [Citations.] [¶] Local
authorities act pursuant to their police power in regulating
virtually all aspects of the taxicab business, including who
may operate a cab, how many cabs may be operated, how
much cabs may charge, where cabs may travel, and where
cabs may pick up passengers. [Citations.]” (Cotta v. City
and County of San Francisco (2007) 157 Cal. App. 4th 1550,
1560.) The Government Code directs municipalities to
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regulate taxi service, providing that “every city or county
shall protect the public health, safety, and welfare by
adopting an ordinance or resolution in regard to taxicab
transportation service . . . .” (Gov. Code, § 53075.5, subd.
(a).) Cities rely on franchisees to exercise sufficient control
over taxi drivers to remain in compliance with regulations
intended to protect the public. If a franchisee taxi company
were to decline to carry out its obligations under the
franchise agreement, it would place itself at risk of losing its
franchise with the city. The fact that the state and local
municipalities impose public regulations upon the taxi
industry reflects the same policy considerations that led
California courts to hold common carriers vicariously liable
for their independent contractor drivers in other regulated
hirer cases. (See, e.g., Eli v. Murphy, supra, 39 Cal.2d at pp.
599–600; Taylor v. Oakland Scavenger Co., supra, 17 Cal.2d
at p. 604; Vargas v. FMI, Inc., supra, 233 Cal.App.4th at p.
644.) While driving a taxi is not as potentially dangerous as
transporting hazardous materials or driving a large vehicle
on public highways, the regulations are a matter of public
safety. To the extent the regulations require taxi companies
to exercise a significant level of control over their drivers,
they do not, as a matter of law, preclude holding the
companies vicariously liable for the negligence of the drivers
under their control.
In the absence of any California case law to the
contrary, and in light of the decision in Smith, supra, 89
Cal. App. 2d 419, holding a taxi association liable even when
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it was not publicly regulated, we choose to depart from the
line of federal cases United relies upon. The fact that many
of the controls imposed by the taxi association on its drivers
are based on governmental rules and requirements or
operate for the mutual benefit of the taxi company and its
drivers does not give courts or factfinders license to ignore
those controls in deciding whether a principal-agent
relationship exists. Once we have established that the
status of the taxi industry as a publicly regulated industry
may expose taxi companies to vicarious liability for the
negligent acts of drivers who act as the companies’ agents, it
would be illogical to exclude from consideration the controls
required by such regulations.
The jury’s agency finding was supported by substantial
evidence
Because the test for agency is a multi-factored test, and
there was substantial evidence that United controlled
significant aspects of its drivers’ work, we cannot say that
there was insufficient evidence as a matter of law to support
the jury finding of agency. United retained the authority to
terminate its relationship with any of its drivers, as well as
the ability to fine or discipline them for violating United’s
rules and regulations. United supplied each driver a
training manual with detailed rules of conduct. Drivers
were required to participate in training and to use
equipment purchased by United. According to the training
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manual, drivers were trained and deployed by United as
road supervisors to assist in emergencies and enforce the
company’s rules and regulations. Viewed in the light most
favorable to Secci, the evidence presented at trial was
sufficient to support a jury finding that Tonakanian was
United’s agent and United was vicariously liable for
Tonakanian’s acts. The court’s order granting JNOV was in
error.
DISPOSITION
The judgment is reversed. Costs on appeal are
awarded to Secci.
KRIEGLER, J.
We concur:
TURNER, P.J.
KIN, J.

Judge of the Los Angeles Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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