The Second Department held that the City of New York did not take property from taxicab companies that own medallions.  The proceeding arises out of the rapid growth of for-hire vehicle services provided by companies such as Uber which allow passengers to use a smartphone application to electronically request on-demand ground transportation.

The Court held, inter alia: Moreover, we agree with the Supreme Court’s determination that the TLC’s alleged decision to “allow black cars to pick up e-hails” did not, as a matter of law, constitute an unconstitutional taking of the petitioners’ property (see Illinois Transp. Trade Assn. v City of Chicago, 839 F3d 594 [7th Cir]; Minneapolis Taxi Owners Coalition, Inc. v City of Minneapolis, 572 F3d 502, 509 [8th Cir]; Boston Taxi Owners Assn. v Baker, 2017 US Dist LEXIS 9628 [D Mass, No. 16-11922-NMG]; Newark Cab Assn. v City of Newark, 235 F Supp 3d 638 [D NJ]).  The crux of the petitioners’ claim is that the TLC’s decision to “allow black cars to pick up e-hails” has diminished the value of their medallions, decreased the number of taxicab trips per day, and reduced their medallion income.  However, “‘[p]roperty’ does not include a right to be free from competition” (Illinois Transp. Trade Assn. v City of Chicago, 839 F3d at 596).  Accordingly, the TLC’s decision to allow companies such as Uber to pick up passengers via a smartphone application does not interfere with a taxicab’s use of its medallion or exclusive right to pick up passengers via street hail.  Matter of Glyka Trans. LLC v City of New York, 2018 N.Y. App. Div. LEXIS 3094 (2d Dept, May 2, 2018).

The Fifth Amendment to the United States Constitution, made applicable to the states by the Fourteenth Amendment, provides that private property shall not “be taken for public use, without just compensation”; Penn Central Transp. Co. v New York City, 438 US 104, 123-124, 98 S Ct 2646, 57 L ED 2d 631 [1978]).  The “Taking Clause” of the Fifth Amendment does not prohibit governmental interference with property rights, per se, but rather insures compensation in the event that government interference goes too far, (Lingle v Chevron U.S.A., Inc., 544 US 528, 536-537, 125 S Ct 2074, 161 L Ed 2d 876 [2005]; First English Evangelical Lutheran Church of Glendale v County of Los Angeles, 482 US 304, 314, 107 S Ct 2378, 96 L Ed 2d 250 [1987], [the Takings Clause “does not prohibit the taking of private property, but instead places a condition on the exercise of that power”]; Armstrong v United States, 364 US at 49, [Takings Clause prevents government “from forcing some people along to bear public burdens which, in all fairness and justice, should be borne by the public as a whole”]).

The classic taking involves a direct governmental appropriation of, or physical invasion upon, private property (Armstrong v United States, 346 US at 49; Lingle v Chevron U.S.A., 544 US 537; (Palazzolo v Rhode Island, 533 US 606, 617, 121 S Ct 2448, 150 L Ed 2d 592 [2001, [“The clearest sort of taking occurs when the government encroaches upon or occupies private land for its own purposed use”]).  The Supreme Court in (Pennsylvania Coal Co. v Mahon (260 US 393, 415, 43 S Ct 158, 67 L Ed 322 [1922]), recognized, however, that government regulation of private property may, in some instances, be “so onerous that its effect is tantamount to a direct appropriation or ouster – – and that such ‘regulatory takings’ [are also] compensable under the Fifth Amendment” (Lingle, 544 US at 537, 539 [the Supreme Court’s taking jurisprudence aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain]).  Thus, “governmental regulations which limit owners’ right to possess, use or dispose of property may also amount to a taking of the affected property” (Manocherian v Lenox Hill Hosp., 84 NY2d 385, 393, 643 NE2d 479, 618 NYS2d 857 [1994]).

Two categories of governmental regulation of private property have generally been deemed to be a per se “takings” for Fifth Amendment purposes: (a) a permanent physical invasion of property, however minor, and (b) a regulation that “completely deprive[s] an owner of all economically beneficial us[e] of her property” (Lingle, 544 US at 538, citing Lucas v South Carolina Coastal Council, 505 US 1003, 1019, 112 S Ct 2886, 120 L Ed 2d 798 [1992]).  “Outside [of] these two relatively narrow categories (and the special context of land-use exactions…) regulatory takings challenges are governed by the standards set forth in Penn Central Transp. Co. v New York City, 438 US 104 [123-124], 98 S Ct 2646, 57 L Ed 2d 631” (Lingle, 544 US at 538; see also Consumer Union of U.S., Inc. v State of New York, 5 NY3d 327, 357, 840 NE2d 68, 806 NYS2d 99 [2005]).

In our experience, Fifth Amendment claims are usually not successful in wrongs that are more likely administrative abuse or torts.  It is an unfortunate result.  Taxi medallions were very valuable because they provided an exclusive privilege.  Many cab owners paid a million dollars or more for their medallions and mortgaged the purchase.  To cover that debt many taxi drivers have to drive most of the day to break even.  There should be some form of relief for the City’s action in allowing the competition.

Posted in Fifth Amendment, Inverse Condemnation, Regulatory Taking
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