Joe Sanfelippo Cabs, Inc. v. City of Milwaukee, 16–1008

• Decision Date: 07 October 2016
• Docket Number: No. 16–1008,16–1008
• Citation: 839 F.3d 613
• Parties: Joe Sanfelippo Cabs, Inc., et al., Plaintiffs–Appellants, v. City of Milwaukee, Defendant–Appellee, and Jatinder Cheema and Saad Malik, Intervening Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

839 F.3d 613

Joe Sanfelippo Cabs, Inc., et al., Plaintiffs–Appellants,

v. City of Milwaukee, Defendant–Appellee,andJatinder Cheema and Saad Malik, Intervening Defendants–Appellees.

No. 16–1008

United States Court of Appeals, Seventh Circuit.

Argued September 19, 2016

Decided October 7, 2016

Steven D. Sanfelippo, Attorney, Cunningham Swaim, LLP, Dallas, TX, for Plaintiffs–Appellants.

Adam B. Stephens, Attorney, Milwaukee City Attorney's Office, Milwaukee, WI, for Defendant–Appellee City of Milwaukee.

Anthony Brian Sanders, Meagan A. Forbes, Attorneys, Institute for Justice, Minneapolis, MN, for Defendants–Appellees Jatinder Cheema and Saad Malik.

Cynthia Fleming Crawford, Attorney, LeClairRyan, Washington, DC, for Amicus Curiae Reason Foundation.

Before Posner, Williams, and Sykes, Circuit Judges.

Posner

, Circuit Judge.

The issue presented by this appeal, as by the similar appeal in Illinois Transportation Trade Association, et al. v. City of Chicago, et al. , Nos. 16–2009, 16–2077 & 16–2980, also decided today, is whether the Fifth Amendment's prohibition against the taking of private property for public use without just compensation forbids Milwaukee, in this case, and Chicago, in the parallel case, to allow competition with established taxi services in the city, whether from new taxi companies (in Milwaukee) or from companies that provide close though not identical substitutes for conventional taxi services, such as Uber Technologies, Inc. (better known just as “Uber”) (in Chicago).

The intervenors, who support Milwaukee's opposition to the plaintiffs' claims, obtained taxi permits under a new Milwaukee ordinance that is the target of the plaintiff-appellant taxi companies; they could not have afforded to buy taxi permits under the old ordinance that the plaintiffs wish to see reinstated. The district judge dismissed the plaintiffs' suit on the pleadings, precipitating the appeal and the filing of a brief in opposition by the intervenors, which need not be discussed separately however because it differs from Milwaukee's brief only in that the intervenors are intensely suspicious of the City's bona fides and fear it will revert to the old ordinance. Suspicion alone can't support a legal claim, but the intervenors were the plaintiffs in the state-court case that held that the permit cap violated the Wisconsin constitution, and the district court reasoned that if Milwaukee's new ordinance was found to be a taking, this would be in conflict with the state court's decision. As we'll see, there's no conflict.

From 1992 to 2013, a Milwaukee city ordinance (a component of Wisconsin state law, because Milwaukee's local government is part of the state government) limited the number of taxicab permits in the city to the number in existence on January 1, 1992, that were renewed. No new permits would be issued; and although permits could be sold, this would not increase the number of permits. Since not all taxicab permits are renewed, the effect of the ordinance was not only to place a ceiling on the number of permits but also to lower the ceiling over time by virtue of the nonrenewals; the number of permits could not increase, because no new permits could be issued, but it decreased every time a permit was not renewed. By 2013 the number of permits (equal to the number of cabs) had diminished from about 370 to about 320, and as a result the price of permits on the open market (for remember that while no more permits could be issued, existing permits could be sold) soared as high as $150,000. (We don't know what the average price was just after the 1992 ordinance.)

In 2013, after a lawsuit successfully challenged this permit-cap ordinance as a violation of the equal protection and substantive due process clauses of the Wisconsin state constitution, the City experimented with conducting a lottery offering as prizes 100 brand-new taxicab permits to be issued by the city. The lottery attracted 1700 permit seekers, which suggested that the market was believed to be under-served. There were other indications that as a result of the 1992 ordinance there was a taxi shortage. Milwaukee had in fact only one taxicab per 1850 city residents, a much lower ratio than comparable cities. See Bruce Vielmetti, “Cab Drivers to Sue Milwaukee over Limit on Permits,” Milwaukee Journal Sentinel , Sept. 26, 2011, archive.jsonline.com/news/milwaukee/130609278.html.

The City responded to the shortage the following year (2014) by taking the lid off the number of permits that the city would issue. Now a new permit would be issued to any qualified applicant. The shortage flagged by the lottery attracted not only permit applicants, theretofore barred since 1992, but also substitutes for conventional taxicab service, such as Uber. The combination of new taxi permittees and taxi substitutes (sometimes called “ridesharing” companies, more precisely app-based such companies) such as Uber and Lyft diminished the profitability of the existing taxi companies, which had faced little competition under the ancien...