Singh v. City of N.Y.

• Docket Number: 22,No. 22
• Decision Date: 27 April 2023
• Citation: Singh v. City of N.Y., 40 N.Y.3d 138, 217 N.E.3d 1, 195 N.Y.S.3d 429 (N.Y. 2023)
• Parties: Daler SINGH, Doing Business as Gilzian Enterprise LLC, et al., Appellants, v. CITY OF NEW YORK, et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

40 N.Y.3d 138

217 N.E.3d 1

195 N.Y.S.3d 429

Daler SINGH, Doing Business as Gilzian Enterprise LLC, et al., Appellants,

v.CITY OF NEW YORK, et al., Respondents.

No. 22

Court of Appeals of New York.

Decided April 27, 2023

Wolf Haldenstein Adler Freeman & Herz LLP, New York City(Mark C. Rifkin and Benjamin Y. Kaufman of counsel), Friedman Kaplan Seiler & Adelman LLP, New York City(Robert S. Smith of counsel), and Law Office of Daniel L. Ackman, NewYork City(Daniel L. Ackman of counsel), for appellants.

Sylvia O. Hinds-Radix, CorporationCounsel, New York City(Jesse A. Townsend, Richard Dearing and Devin Slack of counsel), for respondents.

New York State Conference of Mayors and Municipal Officials, Albany (Wade Beltramo of counsel), for New York State Conference of Mayors and Municipal Officials, amicus curiae.

OPINION OF THE COURT

CANNATARO, J.

Few things are as emblematic of New York City as yellow taxicabs.Featured in countless films and television shows, the renowned yellow cab is as synonymous with New York City as Times Square or bagels.Yet despite the ubiquitous appearance of the cabs on City streets, government licenses to operate taxis (called medallions) have long been difficult and expensive to obtain, in part because of the City's careful regulation of their supply and restrictions on competing forms of for-hire transportation.

Plaintiffs are entities that purchased yellow cab medallions from defendantTaxi and Limousine Commission(TLC) at a 2013 auction.As relevant to this appeal, their complaint alleges that TLC and the City breached the implied covenant of good faith and fair dealing by failing to enforce certain licensing requirements against popular smartphone applicated-based competitors like Uber Technologies, Inc.(Uber) and Lyft, Inc.(Lyft).Plaintiffs further allege that defendants engaged in deceptive business practices under General Business Law § 349 in their promotion of the auction.For the reasons that follow, we hold that plaintiffs have failed to state a claim, and therefore affirm.

I.

TLC regulates and supervises taxicabs and other for-hire vehicles in the City (seeN.Y. City Charter § 2303[a]).TLC's powers include promulgating standards for the licensing of drivers and the operation of their vehicles, and developing policies both to foster innovation in the industry and to promote the comfort and convenience of consumers (seeid.§ 2303[b]).

Among the vehicles TLC is charged with regulating are yellow taxis and "black cars."Taxis operate under a transferable license, or medallion, which is a numbered plate issued by TLC that is affixed to the outside of a taxicab (see35 RCNY § 51–03;Greater N.Y. Taxi Assn. v. State of New York,21 N.Y.3d 289, 296, 970 N.Y.S.2d 907, 993 N.E.2d 393[2013] ).Yellow taxis are the only for-hire vehicles permitted "to accept hails from passengers in the street" throughout the entirety of the City (seeAdministrative Code of City ofN.Y. § 19–504[a][1]).Prior to 1996, the number of medallions was capped by the City Councilat 11,787.Between 1996 and 2008, however, the City Council approved the issuance of 1,450 additional medallions, increasing the total by approximately 12% to 13,237.And in 2012, the Legislature enacted the HAIL Act, which called for TLC to issue 18,000 licenses authorizing a new class of vehicles—so-called green cabs—to accept street hails outside Manhattan's central business district (seeGreater N.Y. Taxi Assn.,21 N.Y.3d at 297–298, 970 N.Y.S.2d 907, 993 N.E.2d 393 ).

In contrast, black cars are prohibited from accepting street hails.They may accept passengers only on the basis of telephone contracts or other prearrangements (seeAdministrative Code of City of N.Y.§§ 19–502[u],19–507[a][4],19–516[a]).Specifically, passengers must contact a "base station," which then dispatches a black car to the requested location.The owners of black cars generally are required to have a franchise relationship with or ownership interest in the base station from which their cars accept dispatches (id.§ 19–502[u];35 RCNY59B–03[d][2]).Prior to 2018, the number of black car licenses was not subject to any legal cap.

It is undisputed that the invention and proliferation of smartphones has caused major market disruption throughout the for-hire vehicle industry.Companies like Uber and Lyft allow passengers in the City and other areas to prearrange for-hire transportation through applications on their smartphones (seeMatter of Glyka Trans, LLC v. City of N.Y.,161 A.D.3d 735, 735, 76 N.Y.S.3d 585[2d Dept2018][noting the "rapid growth of for-hire vehicle services provided by companies such as Uber"]).In 2011, TLC determined that the use of smartphone apps to arrange transportation fit within its existing regulatory definition of a prearrangement, making such vehicles black cars for regulatory purposes (see TLC, Industry Notice 11–15, Attention: For–Hire Vehicle drivers receiving dispatches via smartphone apps[July 1, 2011], https://perma.cc/V44J-JQLS;see alsoProgressive Credit Union v. City of N.Y.,889 F.3d 40, 46[2d Cir.2018] ).As early as December 2011, TLC granted an Uber-affiliated entity a license to operate a black car base station in the City, and the complaint alleges that TLC authorized additional Uber-affiliated base stations every year between 2012 and 2015.As a result of these and other licenses, the number of cars affiliated with app-based companies has come to exceed the number of yellow cabs in the City.The resulting loss of market share has significantly diminished the value of taxi medallions.

In 2015, Mayor Bill de Blasio sought legislation capping black car growth from companies like Uber, but the legislation faced significant public and political opposition, including from the Governor and Comptroller.¹Three years later, the City Council enacted Local LawNo. 147(2018) of City of New York, which placed a one-year moratorium on new black car licenses and granted TLC authority to cap such licenses moving forward.New York thus reportedly became the first major city in the country to impose a vehicle cap on companies like Uber.²A cap on black car licenses remains in place today (see35 RCNY § 59A–06[a][1]).

II.

Plaintiffs purchased an aggregate of 14 wheelchair-accessible taxi medallions at a November 2013 auction held by TLC for an average winning bid of $1.34 million per medallion.³Four years later, after their medallions had approximately quartered in value, plaintiffs commenced the instant action against TLC and the City.The complaint alleges that, in advance of the auction, TLC distributed materials to bidders that misrepresented the value of yellow taxi medallions.Plaintiffs further aver that, after the auction, TLC authorized app-based companies to operate black car base stations in the City, even though those companies "submitted no documentation that [they were] owned as a franchise or a cooperative," leading to an influx of allegedly illegal black cars that competed with plaintiffs’ taxicabs and diminished the value of their medallions.Based on these allegations, the complaint asserts causes of action against defendants for, as relevant here, violation of General Business Law § 349 and breach of the implied covenant of good faith and fair dealing.

Defendants moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint.Their papers in support of the motion included auction bid forms executed by plaintiffs’ principal which state, among other things:

"I CERTIFY THAT I HAVE NOT RELIED ON ANY STATEMENTS OR REPRESENTATIONS FROM THE CITY OF NEW YORK IN DETERMINING THE AMOUNT OF MY BID...."

"I understand and agree that the City of New York has not made any representations or warranties as to the present or future value of a taxicab medallion, the operation of a taxicab as permitted thereby, or as to the present or future application or provisions of the rules of [TLC] or applicable law, other than a warranty of clear title to such medallion to successful, qualifying bidders therefore, and I acknowledge that no warranties are made, express or implied, by the City of New York, as to any matter other than warranty of clear title."

Supreme Court denied defendants’ motion insofar as it sought dismissal of plaintiffs’ implied covenant claim, finding unresolved issues of fact.However, the court dismissed plaintiffs’ General Business Law § 349 claim based on their failure to serve a notice of claim within the 90–day period required by General Municipal Law § 50–e, which applies to claims "founded upon tort"( General Municipal Law § 50–e[1][a] ).In the alternative, the court held that plaintiffs failed to state a section 349 claim because the statute does not apply to municipal defendants and the sale of a taxi medallion is not a consumer-oriented transaction, a threshold element of the claim.

Both parties appealed, and the Appellate Division affirmed in part and reversed in part ( Singh v. City of N.Y. , 189 A.D.3d 1697, 139 N.Y.S.3d 307[2d Dept.2020] ).Plaintiffs’ section 349 claim, the Appellate Division agreed, "was subject to the requirements of General Municipal Law § 50–e, as a cause of action sounding in fraud," and thus had properly been dismissed due to plaintiffs’ failure to serve a timely notice of claim ( id. at 1699, 139 N.Y.S.3d 307 ).The Court disagreed, however, that issues of fact existed with respect to plaintiffs’ implied covenant claim, holding that the claim was based on an alleged contractual promise incompatible with the disclaimers in plaintiffs’ bid forms ( id. at 1700, 139 N.Y.S.3d 307 ).This Court granted leave to appeal ( 37 N.Y.3d 912, 2021 WL 4735808[2021] ).We now affirm, although on a different basis with respect to plaintiffs’ section 349 claim.

III.

The first question raised on this appeal is whether plaintiffs have adequately pleaded a claim for breach of the implied covenant of good faith and fair dealing.The complaint alleges that defendants breached the...