Keep the Change: Eleventh Circuit Rejects Cab Companies’ Constitutional Challenge to Rideshare Ordinance

The Eleventh Circuit has affirmed the dismissal of taxi companies’ claims that a Miami-Dade County ordinance permitting rideshare services to participate in the for-hire transportation market constituted a taking of the cab companies’ property and/or a denial to them of equal protection.  Checker Cab Operators, Inc. v. Miami-Dade County, 2018 WL 3721227 (11th Cir. Aug. 6, 2018).

Before 2016, provision of for-hire transportation in Miami-Dade County required a county-issued “medallion,” the use and alienability of which was heavily regulated.  The county generally limited the number of medallions issued (though the ordinance itself included no cap on the number), resulting in a lucrative secondary market.  In 2012, for example, the county auctioned off medallions for more than $400,000 each.

But in 2014, rideshare services like Uber and Lyft entered the scene.  Drivers offering those services lacked medallions, and were ticketed for offering rides for hire without them, until the County enacted a new ordinance—the “Transportation Network Entities,” or “TNE” Ordinance—in 2016.  The TNE Ordinance authorized TNEs to enter the for-hire transportation market, subject to some different regulatory requirements than those applicable to cabs.  The value of medallions fell sharply after this expansion of the for-hire market.  In June 2016, a group of medallion holders filed a putative class action against the county in Florida state court, claiming that the TNE Ordinance constituted a “taking” without just compensation and a violation of the Equal Protection Clauses of the Florida and United States Constitutions.  The county removed the case to federal court and filed a motion to dismiss for failure to state a claim.  The district court granted the motion, and the plaintiffs appealed.

The first step for the Eleventh Circuit, in an opinion written by Judge Marcus and joined by Judge Wilson and Judge Marcia Morales Howard, vising from the Middle District of Florida, was to address the effect on the plaintiffs’ claims of a Florida state statute enacted in 2017, after the case was filed, which preempted the ordinance at issue.  The court determined that plaintiffs’ claims for injunctive and declaratory relief had become moot—“[w]hen a challenged law is preempted, it cannot inflict further injury redressable by declaration or injunction”—but their claims for damages still presented a live controversy.

Turning to the merits, the court affirmed the dismissal of the plaintiffs’ claims.  There could be no compensable taking, the court noted, if there were not a constitutionally protected property interest in the first place.  There was no dispute that the plaintiffs owned an “intangible property interest” in their medallions—the ordinance regulating medallions explicitly stated as much.  But the real question was “whether that interest includes the right to market exclusivity.”  The court held that it did not.  The right to certain property, the court observed, “does not ordinarily encompass the power to exclude competition, and nothing in the Code signaled a contrary intent.”  Even under the original version of the ordinance, medallions could be revoked or suspended, and were highly regulated, all of which suggested no right to exclusivity in the market.  The court also found unpersuasive the plaintiffs’ argument that they had a reasonable expectation of exclusivity because until 2016 only medallion owners could provide transportation for hire.  The statute creating the medallion system explicitly reserved the County’s right to “authorize . . . additional for-hire licenses . . . with such modifications or upon such terms and conditions as in [the County’s] judgment the public convenience and necessity may require,” so any expectation of perpetual exclusivity would have been unreasonable.  Indeed, the plaintiffs conceded that they had no power to exclude competition from, or limit the number of, other taxi drivers competing in the market.

And “the main purpose behind the County’s medallion policy was not to enrich medallion holders, but rather to enhance consumer welfare. . . . It was entirely foreseeable that the County might erode those restrictions [on transportation providers] if consumer welfare (and demographic changes) demanded it.”  In short, “[w]hile the right to alienability is commonly associated with property, blocking competitors, we repeat, is not.”  So there was no taking of plaintiffs’ property by enactment of the TNE Ordinance—the same result reached by the Seventh Circuit in a similar case, Illinois Transportation Trade Association v. City of Chicago, 839 F.3d 594 (7th Cir. 2016).

Nor was there a violation of the Equal Protection Clauses of the Florida and United States Constitutions.  There being no allegation of discrimination based on a suspect classification, the differences in regulatory treatment of TNEs and cabs were evaluated under rational basis review, under which the plaintiffs “have the burden to negate every conceivable basis which might support” the differences in treatment.  The court found that the regulatory treatment of TNEs and cabs was largely the same.  And while there were some respects in which the regulation of cabs was more burdensome—drivers for medallion holders were required to enter into chauffeur agreements not required for rideshare drivers, for example—those differences were rationally related to legitimate government interests (in the case of chauffeur agreements, to protect drivers from predatory tactics by cab companies).

Posted by Valerie Sanders.

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