Owners of taxi medallions in Boston thought that they had some kind of special relationship with the city, perhaps understandably so. After all, taxi medallions are tough to get, are expensive, require the owner to comply with stringent regulations, and are the only commercial vehicles which can pick up passengers on the street (in other words, be "hailed").
But apparently, this relationship wasn't special enough to cover the so-called "sharing economy," because the city, according to the Boston Taxi Owners Association, wasn't doing much of anything to crack down on ridesharing services like Uber, Lyft, and Sidecar. While their models differ somewhat, at their core these services allow owners of private vehicles to give rides to passengers that might otherwise be using taxis. And this means trouble for the owners of taxi medallions because it is lower-cost competition which hurts their bottom line.
So they sued in federal court, alleging that the city's failure to enforce state and city regulations that arguably govern such services was a taking and a violation of the taxi owners' equal protection rights. They sought a preliminary injunction.
The bulk of the court's Memorandum and Order denying the PI is devoted to the "likelihood of success on the merits" part of the injunction test. The court concluded it was very unlikely that the plaintiffs would be able to show either a taking, or a violation of their equal protection rights.
We're naturally focused on the takings part of the court's order, and here are the highlights:
- There's no "property" interest in the market value of a taxi medallion which is derived through the closed nature of the taxi market.
- The claim was not that the government rendered taxicab medallions valueless, only that by not enforcing the rules against rideshare services, the government made those medallions less valuable.
- There's a "Horne" flavor to this part of the opinion: that taxi operators owe their existence to the highly regulated market into which the operators voluntarily injected themselves. In other words, you live by the sword ... See slip op. at 12 ("The Court agrees that the market value in a taxicab medallion, which is derived solely from the strict regulation of taxicabs in the City, cannot constitute a protected property interest in the context of the Takings Clause.").
- However, even if a medallion is a property interest, the owners' "investment-backed expectations" are "significantly tempered" because the market is highly regulated.
- Ironically, that the market is highly regulated and controlled seems to be the operators' exact point. Their beef is that the city isn't enforcing it against those who violate the monopoly.
- In response, the court concluded that "[u]ltimately, purchasing a taxicab medallion does not entitle the buyer to 'an unalterable monopoly' over the taxicab market or the overall for-hire transportation market." Slip op. at 13.
- It's that word "unalterable" that lies at the heart of the court's rationale. Yes, you thought you had a relationship with the city, but you operators mistakenly thought that part of the deal in return for you going through the hoops of getting a medallion was that the city would not let others compete with you unless they also went through those same hoops. It wasn't.
- "Finally, the Court fails to perceive how the City’s decision not to enforce Rule 403 against TNCs constitutes a 'taking' of plaintiffs’ property. The City’s inaction undoubtedly permits new companies to offer services that directly compete with traditional taxicab services but simply allowing increased market competition, which may ultimately reduce the market value of a medallion does not constitute a taking." Slip op. at 13 (emphasis added).
As for the equal protection argument, the court applied the "rational basis" test. And you know what that means.
