Callahan v. City of Chi.

• Decision Date: 17 February 2016
• Docket Number: No. 15–1318.,15–1318.
• Parties: Melissa CALLAHAN, Plaintiff–Appellant, v. CITY OF CHICAGO, ILLINOIS, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

813 F.3d 658

Melissa CALLAHAN, Plaintiff–Appellant,

v.CITY OF CHICAGO, ILLINOIS, Defendant–Appellee.

No. 15–1318.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 3, 2015.

Decided Feb. 17, 2016.

Thomas H. Geoghegan, Attorney, Despres, Schwartz & Geoghegan, Chicago, IL, for Plaintiff–Appellant.

Jonathon D. Byrer, Attorney, City of Chicago Law Department, Chicago, IL, for Defendant–Appellee.

Before WOOD, Chief Judge, EASTERBROOK, Circuit Judge, and BRUCE, District Judge.^*

EASTERBROOK, Circuit Judge.

Between January 2009 and August 2011, Melissa Callahan frequently drove a taxicab in Chicago. She does not own a cab, nor does she own a medallion that represents the City's permission to operate a taxi. She leased both from owners by the week, day, or half day. She brought to the transaction her time, her skill as a driver, and her chauffeur's license, which permits her to operate leased taxis. Callahan asserts, and we assume, that her net proceeds (fares and tips, less lease fees and gasoline) averaged less than the minimum wages required by the Fair Labor Standards Act, 29 U.S.C. §§ 201 –19, and the Illinois Minimum Wage Law, 820 ILCS 105/1 to 105/15.

Callahan contends that the City of Chicago must make up the difference. She presents two theories: first that the City's regulations (Chicago sets the rates, per mile and per minute of waiting time, that taxis may charge passengers) are confiscatory, and second that the City's regulations are so extensive that Chicago must be treated as her employer. As far as we can see, both theories are novel; no other federal court has addressed either of them.

Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson

City,

473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), holds that takings claims usually belong in state court, because the Constitution is not offended if the state pays for what it takes, and state litigation (an inverse condemnation suit) is the way to get a state to pay. But in response to questions at oral argument, Chicago conceded that Williamson does not require Callahan to pursue her takings claim in state court, because Illinois provides compensation for physical but not regulatory takings. See 745 ILCS 10/2–103 ; Sorrells v. Macomb, 2015 IL App (3d) 140763 ¶¶ 25–26, 398 Ill.Dec. 424, 44 N.E.3d 453. Compensation therefore is unavailable in Illinois court, and this permits federal litigation. See Sorrentino v. Godinez, 777 F.3d 410, 413–14 (7th Cir.2015).

District Judge Kennelly dismissed the takings claim under Fed.R.Civ.P. 12(b)(6). 2012 WL 5989341 at *2–3, 2012 U.S. Dist. LEXIS 169755 at *4–8 (N.D.Ill. Nov. 29, 2012). We agree with his rationale and result, which rest on the fact that Callahan does not own any asset whose market value has been reduced by the City's regulation of taxi fares. Persons who own cabs or medallions are (potentially) adversely affected by caps on what owners can charge to customers—or to drivers (the City sets maximum lease rates). But none of Callahan's property is subject to rate regulation. She owns her own time, but Chicago does not require her to devote any of that time to taxi driving. Callahan and others similarly situated will not drive a taxi unless they believe that they are apt to obtain more income (or other satisfactions) from that occupation than from the next best alternative. Competition in the labor market tells Callahan what an hour of her time is worth, and she cannot recover from the City if she now rues devoting as much time as she did to driving other people's taxis.

Even cab and medallion owners would have a hard time showing a regulatory taking, because Chicago's rate regulation has not driven the price of those assets anywhere near zero. (On the standard for regulatory takings, compare Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992), with Horne v. Department of Agriculture, –––U.S. ––––, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015).) Chicago limits the number of medallions, producing a regulatory scarcity that offsets the effect on owners of capping what they can charge drivers or passengers. According to the record in this case, medallions sold for $64,000 in 2007. Early in 2013 new medallions went for $360,000 in an auction conducted by the City. Later that year medallions sold from existing to new owners for $348,000. These values imply the absence of confiscatory regulation. Uber entered the Chicago market in fall 2011, but medallion prices still rose substantially between 2007 and 2013. See also Scott Walsten, Has Uber Forced Taxi Drivers to Step Up Their Game?, The Atlantic (July 9, 2015).

After Judge Kennelly dismissed the takings claim, the case was transferred to Judge Shah, who granted summary judgment in the City's favor on the minimum-wage claims. Judge Shah gave several reasons; we need consider only one of them. An insuperable obstacle to Callahan's suit is the fact that Chicago is not her employer. It acts as a regulator, while minimum-wage laws govern employment.

Callahan does not contend that Illinois supplies a definition of "employer" more expansive than that in the Fair Labor Standards Act, so we turn to 29 U.S.C. § 203(g), which says that "employ" includes "suffer or permit to work". The City of Chicago permitted her to drive a cab and thus became her employer, Callahan maintains; and if more were needed, she says, there's the fact that taxis are important to the City. Commerce would be hampered if taxis were unavailable. People use cabs to get to restaurants, to airports, to conventions, to plays and operas, and so on. No taxis, and City tax revenue would collapse as residents fled to New York, Los Angeles, or Anchorage. Because the City gains from having taxis, and has not regulated them out of existence (thus suffering drivers to work), Chicago is every driver's employer and must pay minimum wages plus overtime. So Callahan's argument goes.

This is an extravagant claim. If taxis are vital, so are restaurants and retail shops and hotels and hospitals and ... Well, the list is endless. Everyone who contributes to city life (and directly or indirectly to the tax base) would be a public employee. Restaurants often fail, and their proprietors may find that they have lost money on the venture; if Callahan is right, however, every failed restaurateur could turn to the City for the minimum wage. More than wages are at stake. If workers in regulated occupations really are public employees, then they are state actors under 42 U.S.C. § 1983 and bound by all of the Constitution, just as the City itself is. No one could be fired in Chicago unless the City approved, after notice and...