Surge pricing applies!
You really have to feel for taxi operators who invested what could be huge amounts of money to obtain a taxi medallion getting whacked by the competition from ridesharing outfits like Lyft and Uber. These services look and feel an awful lot like taxis, don’t they? As we wrote in a recent article:
These services—at least from the consumer’s standpoint—operate a heck of a lot like taxis do. You hail a ride (not with your arm and a sharp whistle, but with your fingers and your smartphone), you get in, you go, you get where you are going, you pay the driver (again, with the app, not by handing the driver cash or your credit card). Is that enough of a difference to say that ridesharing isn’t taxicabbing? On that, I am mostly with the taxicab operators. Having used Uber and Lyft more than a few times, they sure do seem like taxis with some very inconsequential differences.
But they, unlike yellow cabs, don’t need a city-issued medallion.
But like other courts before it, in Glyka Trans, LLC v. City of New York, No. D55245 (May 2, 2018), the Second Department of New York’s Appellate Division concluded the differences between ridesharing and taxicabbing were enough that a city would not be held liable for a taking of taxi medallions after it adopted rules regulating ridesharing services, not subjecting them to the same rules which apply to New York’s existing three types of vehicles for hire (yellow medallion cabs, street hail liveries, and for-hire vehicles):
The fourth and fifth causes of action sought a judgment declaring that “the City’s decision to allow black cars to pick up e-hails constitutes an unconstitutional taking of the Petitioners’ property without just compensation” under the Takings Clause of the Fifth Amendment of the United States Constitution and article I, § 7 of the New York Constitution.
The petitioners alleged in the amended petition/complaint that medallion yellow taxicabs have the exclusive right to pick up passengers via “hail,” which includes both a “request, either through a verbal (audio) action … and/or a visible physical action” and “an electronic method such as an E-Hail App” (35 RCNY 51-03). The petitioners alleged that “[t]he TLC’s decision to allow companies like Uber to pick up e-hails—even though Uber is not required to shoulder the enormous financial burden of purchasing medallions and is not bound by the fare limitations and other significant restrictions that apply to yellow taxis in consideration for their hail exclusivity—enables Uber to compete unfairly with yellow taxis.”
Slip op. at 2-3.
The trial court agreed with the city, and the Appellate Division affirmed. The court first concluded that the city was not acting unreasonably when it determined that using an app to call a rideshare was not the same as a street hail: “We also agree with the Supreme Court’s determination that the TLC did not act arbitrarily or capriciously in deciding that the use of a smartphone application to request a ride from an FHV was a form of prearrangement and not synonymous with a street hail.” Slip op. at 5.
On the takings issue, the court held that a taxi medallion isn’t a property right to be free from competition:
The crux of the petitioners’ claim is that the TLC’s decision to “allow black cars to pick up e-hails” has diminished the value of their medallions, decreased the number of taxicab trips per day, and reduced their medallion income. However, “‘[p]roperty’ does not include a right to be free from competition” (Illinois Transp. Trade Assn. v City of Chicago, 839 F3d at 596). Accordingly, the TLC’s decision to allow companies such as Uber to pick up passengers via a smartphone application does not interfere with a taxicab’s use of its medallion or exclusive right to pick up passengers via street hail.
Slip op. at 5.
This is consistent with every other court which has addressed the issue, so this result should not come as much of a surprise. But medallions are often very expensive, and many of the owners have invested their lives’ work into acquiring one and have built up expectations that it gave them certain rights. So to have the courts simply conclude that these expectations are not reasonable doesn’t feel quite “right.” We’re not sure there’s much that takings doctrine can do, but there it is.
Glyka Trans, LLC v. City of New York, No. D55245 (N.Y.A.D. May 2, 2018)