Melrose Credit Union v. City of N.Y.

Decision Date30 March 2017
Docket Number15–cv–09042 (AJN)
Parties 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, v. 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.
CourtU.S. District Court — Southern District of New York

Todd Andrew Higgins, Crosby & Higgins, LLP, New York, NY, for Plaintiffs.

Karen Beth Selvin, Michelle L. Goldberg–Cahn, NYC Law Department, Office of the Corporation Counsel, New York, NY, for Defendants.

OPINION & ORDER

ALISON J. NATHAN, United States District Judge

Plaintiffs, 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.

I. BACKGROUND1
A. The Parties

Plaintiffs 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.

A 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, 80–84, 105.

A third 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.

Defendants, 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.

B. Medallion Taxis and For–Hire Vehicles

According 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.

The 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.

Plaintiffs 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 N.Y. ("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."

According 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.").

By 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.

C. Promulgation of "E–Hail Rules" and the Alleged "Evisceration" of Hail Exclusivity

Plaintiffs 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 at http://www.nyc.gov/html/tlc/downloads/pdf/newly_passed_rules_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, 179.2

According 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. ¶¶ 224–26.

To 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 comers 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...

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