PROGRESSIVE 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-Appellants,
v.
CITY OF NEW YORK, NEW YORK CITY TAXI & LIMOUSINE COMMISSION, and CHAIR MEERA JOSHI, in her official capacity as Chair of the New York City Taxi & Limousine Commission, Defendants-Appellees. MELROSE CREDIT UNION, LOMTO FEDERAL CREDIT UNION, Plaintiffs,
Argued
October 24, 2017
Appeal
from the United States District Court for the Southern
District of New York No. 15 Civ. 9042 (AJN), Alison J.
Nathan, District Judge, Presiding.
Plaintiffs,
various entities and individuals associated with the New York
City medallion taxicab industry, brought this action under 42
U.S.C. § 1983 against the City of New York, the New York
City Taxi & Limousine Commission, and the
Commission's Chair, Meera Joshi, asserting violations of
various federal constitutional rights. Plaintiffs alleged
that defendants' regulatory scheme applicable to the
ground transportation market in New York City violated their
equal protection and due process rights and that they
suffered a taking. The district court granted defendants'
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), on the ground that plaintiffs did not adequately
allege that defendants' regulatory scheme failed rational
basis review or that they suffered a deprivation of a
constitutionally-cognizable property right without adequate
procedural protections. The district court also dismissed
plaintiffs' takings claim without prejudice, concluding
it was unripe for review in federal court because plaintiffs
failed to avail themselves of state procedures for seeking
compensation. We affirm.
Todd
A. Higgins, Crosby & Higgins LLP, New York, N.Y., for
appellants Progressive 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.
MacKenzie Fillow (Scott Shorr, Richard Dearing, on the
brief), for Zachary W. Carter, Corporation Counsel of the
City of New York, New York, N.Y., for appellees City of New
York, New York City Taxi & Limousine Commission, and
Chair Meera Joshi, in her official capacity as the Chair of
the New York City Taxi & Limousine Commission.
Before: JACOBS, SACK, and PARKER, Circuit Judges.
BARRINGTON D. PARKER, CIRCUIT JUDGE.
This
appeal requires us to decide whether New York City's
regulatory regime for the for-hire ground transportation
industry violates the United States Constitution by
subjecting yellow medallion taxicabs to different regulatory
requirements than those imposed upon "for-hire vehicles,
"such as services like Uber and Lyft.
Plaintiffs,
credit unions, trade associations, and individuals affiliated
with the medallion taxi industry in New York City, brought
this lawsuit against defendants the City of New York, the New
York City Taxi & Limousine Commission (the
"TLC"), and the Chair of the TLC, Meera Joshi. As
relevant to this appeal, plaintiffs brought, under 42 U.S.C.
§ 1983, three constitutional claims. They alleged: (1)
that the City violates the Equal Protection Clause by
imposing disparate regulatory requirements on medallion
taxicabs and for-hire vehicles because the two categories of
transportation are similarly situated; (2) that the
City's manner of formulating and imposing regulations
regarding taxicab and for-hire vehicle accessibility for
persons with disabilities violated procedural due process by
severely diminishing the value of plaintiffs' medallions
without affording them notice and an opportunity to be heard;
and (3) that the City's regulatory framework resulted in
a taking of their property interests in their medallions
without just compensation.
The
United States District Court for the Southern District of New
York (Alison J. Nathan, District Judge) granted
defendants' motion under Federal Rule of Civil Procedure
12(b)(6), dismissing plaintiffs' federal claims on
various grounds and declined to exercise supplemental
jurisdiction over their state-law claims. See Melrose
Credit Union v. City of New York, 247 F.Supp.3d 356
(S.D.N.Y. 2017). Plaintiffs appeal and we affirm.
BACKGROUND
This
lawsuit arises out of the technology-driven changes to the
for-hire ground transportation market brought about by the
entry into that market of companies such as Uber and Lyft,
and the regulatory regime that the City has put in place in
response to these changes. This regulatory framework
generally divides the City's for-hire ground
transportation industry into two groups. One group consists
of the holders of traditional New York City taxicab
medallions for yellow taxicabs. A medallion is a license
issued by the TLC that permits the holder to operate a yellow
taxicab in New York City, use the medallion as security for
loans, and lease the medallion to other taxicab operators.
Medallion taxicabs are the only vehicles that may pick up
passengers who hail a vehicle, and may do so anywhere on the
streets of the City.[1]
The
other group of industry participants is for-hire vehicles
("FHVs"), which the N.Y.C. Administrative Code
defines in § 19-502(g) as vehicles "other than a
taxicab." This group includes car services and carriers
such as Uber and Lyft that do not possess TLC medallions but
are permitted to transport passengers so long as they do so
"only on the basis of telephone contract or
prearrangement." N.Y.C. Admin. Code § 19-516(a);
see also 35 R.C.N.Y. § 51-03 (Definitions)
(defining "For-Hire Vehicle" as "a motor
Vehicle licensed by the [TLC] to carry Passengers for-hire in
the City, which: . . . (3) is not a Taxicab").
The TLC
imposes different regulatory requirements on the two groups.
Medallion taxicab operators must comply with regulations
regarding fare rates and surcharges, see, e.g., 35
R.C.N.Y. §§ 58-26 (Operations-Rates and Tolls),
58-16(g) (Taxicab Improvement Fund), and must follow numerous
rules covering such matters as car model, color, roof lights,
distress signal lights, and rooftop advertising, id.
at §§ 67-04 to 67-19.[2] The regulations also control
other matters such as the amount of time and money for which
a medallion can be leased. Id. at § 58-21
(Leasing a Taxicab or Medallion).
While
the City imposes these and certain other regulatory burdens
only on medallion taxicabs, the City also provides them
significant benefits, most importantly the exclusive right to
pick up passengers by street hail anywhere in the City. The
New York City Administrative Code provides 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 § 19-504(a)(1).
Notwithstanding
these benefits, plaintiffs alleged in their amended complaint
that FHVs are subjected to far fewer regulatory burdens than
those imposed on medallion taxicabs. For example, while
medallion taxicabs must charge fare rates set by the TLC,
FHVs must instead only file a rate schedule with the TLC.
Joint Appendix ("App'x") at A-620. And,
plaintiffs alleged, while medallion taxis must use a vehicle
approved by the TLC, FHVs "are not limited to any
particular vehicle model set by the TLC, thereby unfairly
allowing companies such as Uber to permit drivers to use
newer and higher quality vehicles, giving riders a better
overall experience." Id. at A-621. FHVs are
also not required to comply with numerous other regulations
applicable to medallion taxicabs, such as those requiring
partitions or that the vehicle be painted a particular shade
of yellow.
Although
the City's regulations permit only medallion taxicabs to
pick up passengers who hail a taxi from the street,
plaintiffs alleged that recent regulations promulgated by the
TLC have had the effect of rendering medallion holders'
right to "hail exclusivity" meaningless because
they permit the use of "e-hail" technology. An
"e-hail" is when a passenger uses a smartphone app,
such as Uber or Lyft, to arrange transportation. Through this
technology, plaintiffs alleged, rides in FHVs can be obtained
by a passenger in functionally the same way as a traditional
hail.
Around
2011, the City determined that the use of a smartphone app to
arrange transportation fits within the TLC's
regulations' existing definition of a
"prearrangement" and that FHVs could use smartphone
apps to arrange rides for passengers so long as they complied
with TLC regulations. In January 2015, the TLC promulgated
the "E-Hail Rules, " which, according to
plaintiffs, enable companies to furnish passengers with
electronic, smartphone-based applications that enable them to
arrange ground transportation through companies such as Uber
and Lyft. See, e.g., App'x at A-629-30.
Because
the City permits FHVs to use e-hail smartphone applications,
plaintiffs alleged that no material differences now exist
between a traditional street hail and an e-hail.
Consequently, plaintiffs alleged, a significant benefit
medallion holders once enjoyed-the exclusive ability to pick
up customers who hail a taxi on the street-has effectively
disappeared. The result is that medallion taxicabs and
companies like Uber or Lyft operate on the same business
models, and serve the same "on demand
transportation" passengers, and compete for the same
drivers. Id. at A-635, 648. These developments mean
that "passenger wait times for Uber E-Hails have all but
disappeared" and that soon "response times to
Uber's E-Hails" will be "virtually
instantaneous." Id. at A-643. In the end,
plaintiffs alleged, the effect of these market changes has
been to dramatically decrease medallions' market value,
leasing value, and the number of trips taken by passengers in
medallion taxicabs and the corresponding meter revenue.
Id. at A-644-45, A-649. Plaintiffs plausibly alleged
that these developments have resulted in "catastrophic
harm" to the New York City taxicab industry.
Id. at A-589.
Another
important regulatory difference that plaintiffs emphasize
arises from recently promulgated regulations, known as the
"Accessible Conversion Rules, " 35 R.C.N.Y. §
58-50 (Accessible Vehicle Conversion). These Rules, which are
the focus of plaintiffs' due process claim, were intended
to increase significantly the availability of vehicles
accessible to persons with disabilities, especially those who
use wheelchairs. In 2015, the TLC adopted the Accessible
Conversion Rules, which apply exclusively to medallion
taxicabs and not to FHVs. The City's goal in formulating
the Rules is to make at least 50% of medallion taxicabs
accessible to persons with disabilities by the year 2020.
This goal is to be achieved through a multi-tiered lottery
process administered by the TLC, under ...