Taxis and ridesharing services such as Uber and Lyft will continue to be regulated under different city ordinances after a federal appeals panel ruled the separation violates neither property nor equal-protection rights of cab drivers.
While taxi services are tightly regulated by a City of Chicago ordinance that governs their companies’ operations, ridesharing services — formally called Transportation Network Providers — are more loosely regulated to let those companies set their own rules in areas such as fare-setting and driver-vetting that the city otherwise requires of taxi services.
A group of companies who either own and operate their own taxicabs, own and operate their own livery services such as chauffeured limousines or provide services to those groups challenged the difference in regulation. They argued allowing services like Uber into the taxi and livery markets takes away their property without compensation and denies them equal protection under the law.
But in a 10-page opinion authored by Judge Richard A. Posner, the 7th Circuit Court of Appeals held that a right to property “does not include a right to be free from competition,” and there are enough differences between the business models of taxi and livery services and ridesharing services to justify regulation under separate ordinances.
The court’s opinion affirms U.S. District Judge Sharon Johnson Coleman’s decision to dismiss the plaintiffs’ property claims, and it reverses her decision to keep their equal-protection claims alive with orders to dismiss them with prejudice.
But it also fails to “come to grips with the issues that were presented by both sides,” said Michael L. Shakman, a partner at Miller, Shakman & Beem LLP who represents the taxi businesses.
He said both sides briefed for the court the application of the U.S. Supreme Court’s landmark case Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), which discusses compensation for regulatory takings. But the court’s opinion neither mentions the case nor addresses the arguments either side presented regarding its control over this matter, he said.
“[The opinion] refers to cats and dogs, but that’s not really helpful in terms of the difference between two kinds of transportation providers, each providing the same type of transportation,” Shakman said. “We think it’s clear that when you charge somebody $360,000 for a medallion to operate a taxi, the government is generating investment-based expectations that trigger the Takings Clause of the Fifth Amendment.”
The appeals panel held the plaintiffs’ property claims would have merit if the city had confiscated taxi medallions — which signify a person’s ability to own instead of lease a taxi cab.
“Confiscation of the medallions would amount to confiscation of the taxis: no medallion, no right to own a taxi … though the company might be able to convert the vehicle to another use,” Posner wrote. “Anyway the [c]ity is not confiscating any taxi medallions; it is merely exposing the taxicab companies to new competition from Uber and the other TNPs.”
Using an analogy, Posner wrote that many cities and towns require dogs to be licensed but not cats.
While some dog owners would like cats to also require licensure, he wrote, they don’t argue the government’s failure to require the “competing animal” to be licensed deprives them of a constitutionally-protected property right or subjects them to unconstitutional discrimination.
“The plaintiffs in the present case have no stronger argument for requiring that Uber and other TNPs be subjected to the same licensure scheme as the taxi owners,” Posner wrote. “Just as some people prefer cats to dogs, some people prefer Uber to Yellow Cab, Flash Cab, Checker Cab et al. They prefer one business model to another.”
A major difference between taxi and ridesharing services is passengers’ ride-hailing ability, the panel noted. While taxi passengers can hail a cab from the side of the street, ridesharing passengers must sign up and enter into a contractual relationship with a particular service before being able to hail a ride from it.
But there are more distinct differences between the two models, the panel noted, including ridesharing services’ extensive use of part-time drivers who aren’t consistently “patrolling the streets in hope of being hailed.”
And there are enough of such differences between the two to justify the regulation difference, the panel ruled.
“Different products or services do not as a matter of constitutional law, and indeed of common sense, always require identical regulatory rules,” Posner wrote.
“The fallacy in the district judge’s equal protection analysis is her equating her personal belief that there are no significant differences between taxi and TNP service with the perception of many consumers that there are such differences — a perception based on commonplace concerns with convenience, rather than on discriminatory or otherwise invidious hostility to taxicabs or their drivers.”
Judges Ann Claire Williams and Diane S. Sykes concurred in the opinion.
The city was represented by assistant corporation counsels Andrew W. Worseck, Myriam Zreczny Kasper, Kerrie E. Maloney Laytin and deputy corporation counsel Benna Ruth Solomon.
A spokesman for the city said it is “extremely pleased with the court’s ruling, which confirms what we have maintained from the outset: The taxi industry’s legal challenges to the city’s ride share ordinance are completely baseless.”
Shakman said while he and his clients disagree with the result, they are “very disappointed by the lack of discussion of the issues presented by the parties.” He said he is discussing with his clients whether their next step is to petition the appellate court for a rehearing or petition the Supreme Court for a writ of certiorari.
The plaintiffs are also represented by Miller, Shakman & Beem partners Melissa B. Pryor and Edward W. Feldman and associate William J. Katt.
The case is Illinois Transportation Trade Association, et al., v. City of Chicago, Nos. 16-2009, 16-2077 and 16-2980.