A string of fresh lawsuits, court rulings and regulations laying out new mandates for ride-hailing providers such as Uber and Lyft has escalated the turf war with taxicab companies, experts say, increasing the pressure on lawmakers to balance policy and competition concerns.
Cities and municipalities have scrambled to regulate so-called transportation network companies amid the exploding popularity for on-demand services, spurring some of the most contentious fights in the transportation sector in cities like Miami, Chicago and Philadelphia where taxicab and livery companies are challenging what they view as unfair rules allowing their new tech-based rivals to operate in their backyards mostly unchecked.
It's an escalating battle with high stakes, pitting Uber Technologies Inc., Lyft Inc. and their aggressive expansion interests against traditional taxicab, livery and other for-hire transportation companies worried about their future livelihood, experts say. And that's left local lawmakers caught in the middle as they struggle to level the playing field by mandating insurance coverage levels, background checks and other operating requirements that have triggered a bevy of constitutional and other legal challenges.
The cases underscore how the new market entrants have disrupted the transportation and livery business, according to Tad Devlin, a commercial and insurance litigation partner at Kaufman Dolowich & Voluck.
“That, combined with the lack of existing [regulatory] infrastructure … has led to either anarchy — i.e. drive until you get caught — or rapid adoption of rules to permit the TNCs to operate,” Devlin said.
Here, Law360 examines a few of the most high-profile challenges to cities’ rules and regulations concerning transportation network companies.
Florida has been particularly ripe ground for taxicab companies and medallion holders peeved about the uneven regulations. A series of lawsuits in Broward and Palm Beach counties have popped up within the past year, but Miami-Dade County has emerged as the newest target.
Taxicab operators hit Miami-Dade County with a putative class action on May 4 seeking upward of $1 billion, just a day after county commissioners approved a draft ordinance legalizing ride-hailing providers such as Uber and Lyft.
Plaintiffs Miadeco Corp., B&S Taxi Corp. and Checker Cab Operators Inc. claimed in their suit that the county violated their equal protection rights with the new ordinance and that its actions have drastically diluted the value of the medallions — which are city-issued licenses or permits to operate cabs — that existing for-hire passenger service providers must have, amounting to an inverse condemnation.
The estimated drop in value of the medallions, spread across roughly 2,000 potential class members, would amount to about $600 million to $700 million in total damages, and that figure is likely to reach $1 billion by the time the suit goes before a jury, according to attorney Ralph G. Patino of Patino & Associates LLP, who is representing the taxicab companies.
The taxi operators are mostly seeking damages, saying the tech-based newcomers should be subject to the same regulations as other for-hire transportation providers and that local officials have slapped together an ordinance giving Uber and Lyft an unfair competitive advantage.
“What the existing industry would generally like is a level playing field [and] to be treated the same or at least similarly as these new entrants to the marketplace,” said Mark Stempler of Becker & Poliakoff PA, who has represented taxicab companies in other Uber-related litigation in Broward County. “Whether they can accomplish that by these lawsuits is another story. That would be government taking action, and the time to do that is during the regulatory process.”
The case is Miadeco Corp. et al. v. Miami-Dade County, case number 2016-4244-CA-01, in the 11th Judicial Circuit Court of the State of Florida.
The Windy City also hasn’t been able to dodge a challenge to new Uber-related regulations. An Illinois federal judge ruled in April that Chicago must face a suit alleging its regulations unfairly favor Uber and other ride-hailing platforms over taxicabs and limousines in violation of the Equal Protection Clause of the Fourteenth Amendment.
U.S. District Judge Sharon Johnson Coleman rejected Chicago’s third attempt at booting a suit alleging the city has allowed Uber, Lyft and similar ride-hailing platforms to coast through and compete in the market unfairly by drafting new regulations last fall establishing separate passenger pickup zones at Chicago’s airports that seemingly gave preferential treatment to the ride-hailing platforms. The Chicago taxi industry claimed the regulations were destroying their business.
The Chicago spat, like so many of the other lawsuits, highlights many of the cost pressures that traditional taxicab companies face compared to their tech-based rivals, experts say.
“The cab companies are essentially saying, 'we’re subject to all of these onerous regulations on how you operate a taxicab business, with medallions, badges, and Uber and Lyft aren’t forced to play by the same rules that we are,'” Daniel H. Handman, a partner with Hirschfeld Kraemer LLP, told Law360. “[They’re saying], 'That’s not fair. By necessity we have to charge a higher price, and it’s not fair to allow Uber and Lyft to have a natural advantage.'”
According to a plaintiff in the suit, the Illinois Transportation Trade Association, Chicago’s “lopsided” ride-sharing ordinance allows the ride-share or ride-hailing industry to operate on the city’s streets without important consumer protections like city-sponsored background checks, fingerprinting, drug testing and adequate commercial insurance.
“The Illinois Transportation Trade Association is litigating the case because it believes it is the only way to obtain change in the city’s approach to ride-sharing and to protect our drivers, their livelihoods and their families,” ITTA spokeswoman Mara Georges said in a statement. “The court acknowledges what we all know to be true — that businesses providing the same service should be treated the same way.”
The case is Illinois Transportation Trade Association et al. v. The City of Chicago, case number 1:14-cv-00827, in the U.S. District Court for the Northern District of Illinois.
Ride-hailing companies are also facing significant challenges in the City of Brotherly Love and Pennsylvania as a whole, where Uber has been singled out for going rogue.
A Philadelphia taxi company owned by two Ukrainian refugees sued Uber in January alleging it has created a “black market” for unregulated taxi services that gutted the value of taxi drivers’ permits.
Boris and Alla Kautsky, the owners of Coachtrans Inc., said in their lawsuit that Uber illegally entered the city’s taxicab market without first obtaining proper permits, or medallions, required by city regulators. By sidestepping that requirement, Uber tanked the value of Coachtrans’ three medallions, which the Kautskys had planned to sell off for their retirement, the lawsuit said.
Valued at around $475,000 apiece immediately before Uber’s entry into the market, the medallions, which take months to sell, have since plummeted to around $80,000, the suit alleged. Coachtrans is seeking a minimum of $1.5 million in damages.
The Philadelphia Taxi Association and its members hit Uber with an antitrust suit in March accusing Uber of attempting to monopolize the market. The association, which filed suit alongside several smaller taxi companies, says Uber and its drivers in the region have evaded local regulations covering Philadelphia in order to take over the market.
Uber and Lyft are both currently operating in the state under two-year experimental licenses from Pennsylvania’s Public Utility Commission that were issued in early 2015. But they’re barred from legally providing ride-hailing services within Philadelphia where taxi and related services are overseen by the Philadelphia Parking Authority, not the PUC.
But because Uber had launched some of its services in the state before it got that temporary license, the PUC last month slapped Uber with a nearly $11.4 million fine. Lyft faced similar accusations from the PUC’s Bureau of Licensing and Enforcement and inked a $250,000 settlement with the regulator in July 2015.
Meanwhile, state lawmakers have been advancing legislation that would legalize the ride-hailing services statewide.
The cases are Coachtrans Inc. v. Uber Technologies Inc., case number 2:16-cv-00088, and Philadelphia Taxi Association Inc. et al. v. Uber, case number 2:16-cv-01207, both in the U.S. District Court for the Eastern District of Pennsylvania.
Similar allegations that Uber is flouting local rules are playing out in St. Louis.
Uber and the St. Louis Metropolitan Taxicab Commission — the state-created entity that regulates vehicles for hire, their drivers and vehicle-for-hire companies in the city of St. Louis and St. Louis County — have been dueling over new licensing and background-check regulations the commission adopted in September 2015.
Uber launched the first salvo by teaming up with several drivers to sue the commission in mid-September, blasting the MTC's decision to require anyone who drives for Uber or similar ride-sharing services to obtain a commission-issued license, undergo criminal background checks and be fingerprinted. The antitrust suit claimed several MTC commissioners had ties to local taxicab companies and were heavily influenced to adopt onerous regulations meant to keep out TNCs like Uber and instead protect the interests of taxicab companies and their drivers, effectively snuffing out competition in the process.
The MTC fired back with its own suit in October seeking to block Uber from operating in St. Louis after Uber went ahead and launched its ride-sharing service without getting the official green light from the taxicab commission. Up until then, the MTC and Uber for months had been trying to hammer out a deal allowing Uber to operate in St. Louis, but a major sticking point for both sides had been the background checks for drivers. The dispute was ordered into mediation in December.
Then, a proposed class of taxi drivers jumped into the fray in December accusing Uber of violating St. Louis rules by allowing its drivers to operate in the city without first acquiring commercial driver's licenses and providing fingerprints under those new background check regulations.
“Uber will argue that we’re departing from the old way of doing business, and to be honest, there’s some logical appeal to that notion of we’re doing away with inefficiencies, but there are reasons for these regulations because we want cabs to be safe,” Handman said. “[The taxicab industry] is a monopoly; it’s a state-run monopoly by virtue of them setting a certain number of badges they give out. Uber has really turned that model on its head.”
The antitrust case is Wallen et al. v. St. Louis Metropolitan Taxicab Commission et al., case number 4:15-cv-01432, in the U.S. District Court for the Eastern District of Missouri.
The commission’s case is St. Louis Metropolitan Taxicab Commission v. Uber Inc. et al., case number 4:15-cv-01562, in the U.S. District Court for the Eastern District of Missouri.
The taxicab drivers’ case is Vilcek et al. v. Uber USA LLC et al., case number 4:15-cv-01900, in the U.S. District Court for the Eastern District of Missouri.
There’s also a unique fight brewing in New Orleans, where licensed taxicab drivers in January sued individual UberX drivers operating in the city but did not sue Uber itself, claiming the UberX drivers illegally picked up passengers without having complied with Louisiana law requiring for-hire drivers to hold valid commercial or chauffeur driver’s licenses and get fingerprinted and tested for drugs.
The drivers’ proposed class action sought an injunction blocking the UberX drivers from picking up fares in the city. The New Orleans City Council approved an ordinance in April 2015 that paved the way for UberX to launch in Orleans Parish.
The case is Reginald Green et al. v. Franklin Eliezer Garcia-Victor et al., case number 2016-905, in the Civil District Court for the Parish of Orleans in the State of Louisiana.