United States District Court, S.D. New York
MELROSE CREDIT UNION, PROGRESSIVE CREDIT UNION, LOMTO FEDERAL CREDIT UNION, TAXI MEDALLION OWNER DRIVER ASSOCIATION, INC., LEAGUE OF MUTUAL TAXI OWNERS, INC., KL MOTORS, INC., SAFINI TRANSPORT, INC., WHITE & BLUE GROUP CORP., FIMA SERVICE CO., INC., CARL GINSBERG, and JOSEPH ITZCHAKY, Plaintiffs,
THE CITY OF NEW YORK; THE NEW YORK CITY TAXI & LIMOUSINE COMMISSION; and MEERA JOSHI, in her Official Capacity as the Chair of the New York City Taxi & Limousine Commission, Defendants.
OPINION & ORDER
J. NATHAN United States District Judge.
a group of individuals, companies, credit unions, and trade
associations affiliated with New York City's medallion
taxicab industry, bring this action against the City of New
York (the "City"), the New York City Taxi &
Limousine Commission (the "TLC"), and TLC Chair
Meera Joshi (collectively, "Defendants"), alleging
that certain TLC regulations contravene the Equal Protection,
Due Process, and Takings Clauses of the United States
Constitution and analogous provisions of the New York State
Constitution. Plaintiffs also assert a claim sounding in
common law fraud. Before the Court is Defendants' motion
to dismiss pursuant to Federal Rules of Procedure 12(b)(1)
and 12(b)(6). For the reasons set forth below, the motion is
GRANTED with respect to Plaintiffs' federal claims, and
the Court declines to exercise supplemental jurisdiction over
the remaining state law claims.
can be sorted into three groups. One group is composed of
Melrose Credit Union, Progressive Credit Union, and LOMTO
Federal Credit Union (the "Credit Union
Plaintiffs"). Each of these entities is a federally
insured, not-for-profit New York corporation that provides
financing for taxicab medallions in New York City.
See Amended Complaint, Dkt. No. 47
("Compl."), ¶¶ 50, 56, 62. Together, the
Credit Union Plaintiffs hold security interests in thousands
of taxicab medallions. Id. ¶¶ 51, 57, 63.
second group consists of KL Motors, Inc., Safini Transport,
Inc., FIMA Service Co., Inc., Carl Ginsberg, Joseph Itzchaky,
and White & Blue Group Corp. (collectively, the
"Medallion Plaintiffs"). These individuals and
entities own TLC-issued taxicab medallions, which they often
in turn lease to others. Id. ¶¶ 34, 38,
group consists of the Taxi Medallion Owner Driver
Association, Inc. and the League of Mutual Taxi Owners, Inc.
These entities are not-for-profit New York corporations that
represent the interests of hundreds of taxicab medallion
owners in New York City, and engage in advocacy concerning
taxicab regulation. Id. ¶¶ 70-76.
as noted, are the City; the TLC, which is the
"charter-mandated agency, responsible for licensing and
regulating [the City's] taxicabs and liveries, and
implementing transportation initiatives in a manner
consistent with law, " id. ¶ 122; and
Meera Joshi, "the Chair and Chief Executive Officer of
the TLC, " id. ¶ 123.
Medallion Taxis and For-Hire Vehicles
to the Amended Complaint, the City's for-hire ground
transportation industry consists primarily of two segments
that are subject to different regulations and accorded
different privileges. Id. ¶ 5. One consists of
the "traditional New York City medallion yellow
taxicabs." Id. ¶ 23. This group is defined
by its ownership of a medallion, which is a license issued by
the TLC that permits its owner to, inter alia,
"operate a taxicab on the streets of New York, "
"use the license as security for loans (which may
include, but are not necessarily limited to purchase money
loans), and lease the license to other operators for a
fee." Id. ¶ 12.
second industry segment pertinent here is composed of
for-hire vehicles without TLC-issued medallions that are
permitted to transport passengers in the City so long as they
do "not solicit or pick up [p]assengers other than by
prearrangement" ("FHVs"). Id. ¶
134 (quoting 35 R.C.N.Y. § 55-19(a) (2015)). This group
includes well-known companies such as Uber, Lyft, and Gett.
Compl. ¶¶ 23-24, 179.
allege that medallion owners who operate taxis must comply
with a number of regulations imposed by the TLC regarding,
among other things: fare rates, 35 Rules of the City of NY.
("R.C.N.Y.") § 58-26 (2017); surcharges,
id. §§ 58-16(g), 58-03(x), 58-26(a)(3);
and vehicle attributes, such as model, paint, finish,
lighting, upholstery, seats, windows, air conditioner, roof
lights, taximeters, partitions, camera systems, placement of
credentials, and payment systems, id. §§
67-04 to 67-15. See Compl. ¶ 15. Moreover,
Plaintiffs allege, if a medallion owner leases out its
taxicab, it must do so within the strictures of TLC-mandated
"lease caps" and "shift change time
limitations, " which together regulate the amount of
time and money for which a medallion can be leased.
Id. ¶ 257; see also 35 R.C.N.Y. §
58-21. Collectively, these regulations are hereafter referred
to as the "Medallion Specific Rules."
to Plaintiffs, in exchange for operating under these
allegedly "burdensome" regulations, medallion
taxicabs are accorded, by statute, the "exclusive right
to accept [street hails.]" Compl. ¶ 5. As defined
by TLC regulation, a "hail" is
[a] request, either through a verbal (audio) action such as
calling out, yelling, or whistling, and/or a visible physical
action such as raising one's hand or arm, or through an
electronic method such as an E-Hail App, for on-demand
Taxicab or Street Hail Livery service at the metered rate of
fare as set forth in § 58-26 and § 82-26 of these
Rules by a person who is currently ready to travel.
35 R.C.N.Y.§ 51-03 (2017). The exclusivity of this right
is currently protected by, inter alia, the
New York City Administrative Code, which provides in
pertinent part that "[n]o motor vehicle other than a
duly licensed taxicab shall be permitted to accept hails from
passengers in the street." N.Y.C. Admin. Code tit. 19
§ 504(a)(1) (2017); see also Id . § 502(1)
("'Taxi, ' 'taxicab, ' or 'cab'
means motor vehicle carrying passengers for hire in the city,
designed to carry a maximum of five passengers, duly licensed
as a taxi cab by the commission and permitted to accept hails
from passengers in the street.").
contrast, Plaintiffs allege, FHVs may not accept street
hails, but, correspondingly, are free from many of the
regulatory burdens imposed on medallion owners, such as the
Medallion Specific Taxicab Rules. FHVs are not, for example,
subject to mandated fare rates, but instead file a rate
schedule with the TLC. Compl. ¶¶ 136-37. Similarly,
FHVs are not limited to particular vehicle models dictated by
the TLC. Id. ¶¶ 141-42.
Promulgation of "E-Hail Rules" and the Alleged
"Evisceration" of Hail Exclusivity
allege that, notwithstanding the framework set forth above,
there has been a "collapse of the regulatory structure
governing for-hire transportation in New York City, brought
about by the government-sanctioned proliferation of
smartphone technology being used by companies like Uber to
bypass taxicab medallions and allow passengers to
electronically hail a parallel network of unlicensed
vehicles." Id. ¶ 1. Plaintiffs aver that
the key event in this purported "collapse" was the
TLC's promulgation of the "E-Hail Rules" on
January 29, 2015. Id. ¶ 167; New York City Taxi
And Limousine Commission, E-Hail Rules (2015), available
ehail.pdf. In relevant part, these rules permit passengers,
in sum and substance, to arrange immediate ground
transportation service through an electronic request sent via
smartphone-based application, of the sort maintained by Uber
and its competitors. Compl. ¶¶ 23-24 167-72,
to Plaintiffs, the result of allowing FHVs to engage in
e-hailing is that "[m]edallion taxicabs and companies
such as Uber, Lyft and Gett clearly now operate on business
models that are the same [as medallion taxicabs in] all
material respects." Compl. ¶ 187. Specifically,
Plaintiffs allege that medallion taxicabs and FHVs using
e-hail (1) serve the same "on demand travel"
costumers, id. ¶ 185; (2) "create the same
value for those customers, " id., as
demonstrated by the fact that "passenger wait
times" for e-hailing "have all but disappeared,
" id. ¶ 218; (3) "transact sales in
the same manner" - i.e., often through
smartphones using credit card payments, id.
¶¶ 185, 193, 218; and (4) compete for the same
drivers to operate their vehicles, id. ¶¶
237, 279. Plaintiffs further allege that these developments
have decreased the average medallion's market value,
id. ¶¶ 222-23, leasing value, see,
e.g., Id . ¶ 241, and meter revenue, id.
buttress these allegations, Plaintiffs marshal statements
purportedly made by Defendants that suggest, according to
Plaintiffs, that they too believe that there is no material
difference between a traditional street hail and an e-hail.
For example, Plaintiffs allege that the City stated in a
study that the "once-distinct regulatory categories are
now blurring, and causing more direct competition for
[medallion drivers]." Id. ¶ 191.
Similarly, Plaintiffs allege that the Assistant General
Counsel to the TLC stated in connection with the adoption of
the E-Hail Rules that "[f]or those of you who might be
unfamiliar, e-hailing allows a passenger to make a
taxi-pickup request through his or her smart phone. Basically
it extends a hand hail allowing taxi drivers to see around
corners and increases fare opportunities." Id.
¶ 167; see also Id . ¶ 164 (alleging that
the TLC stated in an unrelated court proceeding that
"e-hail apps are just that; they're hails. It's
somebody indicating that they want to be picked up ... within
a prescribed area, without saying where they're going,
without saying their race or gender or color, without saying
what the fare will be and how much it will be.");
id. ¶ 236 (alleging that the TLC stated that
"[differential regulations for taxis compared to other
categories of for-hire vehicles limit traditional yellow
taxis' ability to compete effectively with e-dispatch
The "Accessible Conversion Rules"
addition to the Medallion Specific Taxicab Rules and the
E-Hail rules, Plaintiffs' claims also implicate certain
recently promulgated TLC regulations concerning the handicap
accessibility of medallion taxicabs. Specifically, Plaintiffs
allege that in 2015 the TLC adopted 35 R.C.N.Y. § 58-50
(2015) (the "Accessible Conversion Rules"), which
provides that, by 2020, 50% of all medallion taxicabs in the
City shall be made accessible to passengers with
disabilities, in part pursuant to an ongoing multi-tiered
lottery selection process conducted by the TLC. Compl.
¶¶ 16, 145. According to Plaintiffs, the Accessible
Conversion Rules "effectively convert the unrestricted
medallion - i.e., a medallion that was never
required to be placed on accessible vehicle - into a
restricted medallion - i.e., a medallion that is
required to be placed on accessible vehicle, " on at
least an "alternating basis." Id. ¶
147-48. These "accessible medallions, " it is
alleged, are "far less valuable than unrestricted
medallions" for several reasons, including the increased
operating costs associated with handicap-accessible vehicles,
certain call response obligations assumed by those driving
such vehicles, and, correspondingly, the "extreme
difficulty]" of leasing such vehicles. Id.
¶¶ 148, 157-58. Indeed, individual Plaintiffs
Ginsberg and Itzchaky were, according to the Amended
Complaint, "both selected by the TLC to convert their
previously unrestricted medallions into accessible medallions
as part of the first such lottery held pursuant to the
Accessible Conversion Rules, " id. ¶ 34,
and "as a result of the forced conversion, both of them
have been dropped by their leasing agents." Id.
also allege that the TLC implemented the Accessible
Conversion Rules pursuant to a rulemaking that was initiated
in connection with the settlement of a class action civil
rights lawsuit brought against it under a the Americans with
Disabilities Act and the New York City Human Rights Law:
Noel v. N. Y.C. Taxi & Limousine Comm 'n,
837 F.Supp.2d 268 (S.D.N.Y. 2011), vacated, 687 F.3d
63 (2d Cir. 2012). Compl. ¶ 145; see also Id .
¶ 145 n.8 ("[TLC] entered into a settlement
agreement, which stated that the TLC would begin rulemaking
within 30 days of the execution of the settlement that would
require medallion owners to progressively utilize accessible
vehicles."). Other than the assertion that the
Accessible Conversion Rules effectively "arose out of
the Noel settlement, " Compl. ¶ 145, the
complaint contains no allegations concerning either the
rulemaking process by which the TLC promulgated those Rules
and or the specific terms of that settlement.
filed this suit on November 17, 2015. Dkt. No. 1. On December
29, 2015, Plaintiffs moved for a preliminary injunction,
arguing principally that the Medallion Specific Rules and the
Accessible Conversion Rules violate the Equal Protection
Clause. Dkt. Nos. 19, 31. The Court denied that motion on the
record during a hearing held on January 26, 2016.
See Dkt. No. 43 (memorializing denial). Plaintiffs
moved for reconsideration, Dkt. No. 48, and the Court denied
that application, as well. Dkt. No. 57.
March 7, 2016, Plaintiffs filed an Amended Complaint
asserting three federal causes of action pursuant to 42
U.S.C. §§ 1983 and 1988 and seeking both injunctive
and declaratory relief as well as compensatory, exemplary,
and punitive damages. Comp. ¶¶ 310-27, 342-48,
368-77. First, Plaintiffs assert that the TLC rules and
regulations discussed above, including the Medallion Specific
Rules, contravene the Equal Protection Clause by imposing
disparate burdens on participants in the medallion taxicab
industry relative to purportedly similarly situated FHV
companies, such as Uber and its competitors. Compl.
¶¶ 310-17. Second, Plaintiffs aver that the current
TLC regulatory structure effects a taking without just
compensation of their statutory right to hail exclusivity in
violation of the Takings Clause of the Fifth Amendment.
Compl. ¶¶ 318-19. And third, Plaintiffs allege that
the TLC's adoption of the Accessible Conversion Rules
runs afoul of the Fourteenth Amendment's Due Process
Clause in purportedly "forcing" medallion owners to
"convert" unrestricted ...