Ill. Transp. Trade Ass'n v. City of Chi.

134 F.Supp.3d 1108

Illinois Transportation Trade Association, et al., Plaintiffs,

v.The City of Chicago, an Illinois municipal corporation, Defendant.

Case No. 14 cv 827

United States District Court, N.D. Illinois, Eastern Division.

Signed September 22, 2015

Edward W. Feldman, Michael L. Shakman, Melissa Bema Pryor, Miller Shakman & Beem LLP, Stuart Michael Widman, Miller Shakman & Beem LLC, Chicago, IL, for Plaintiffs.

William Macy Aguiar, Andrew W. Worseck, David Michael Baron, City of Chicago, Department of Law, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

SHARON JOHNSON COLEMAN, United States District Judge

Plaintiffs, Illinois Transportation Trade Association et al., include various taxi medallion owners, operators, and other taxi related companies (collectively "Taxis"), filed a seven Count Second Amended Complaint alleging constitutional violations under the Takings Clause, Equal Protection Clause, and Substantive Due Process in addition to state law claims of breach of contract, promissory and equitable estoppel. Defendant City of Chicago moves to dismiss the Second Amended Complaint in its entirety for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) [45]. For the reasons stated herein, the motion is granted in part and denied in part.

Background

The following facts are taken from the Second Amended Complaint. (Second Amended Complaint ("SAC"), Dkt. 33). The plaintiffs are individuals and entities engaged in the licensed taxi and livery industry in Chicago, Illinois. Plaintiffs allege that the City of Chicago has arbitrarily violated their constitutional rights by applying burdensome and costly taxi and limo regulations to them, while permitting drivers in "Transportation Network Providers" ("TNP") to compete in the "for-hire" transportation industry without having to comply with the same cost and regulations as plaintiffs.

The City regulates the taxi and livery/limousine services pursuant to its power to regulate the use of its streets by enacting ordinances regulating various aspects of taxi and livery service and issuing 6,800 licenses, known as medallions. The Municipal Code of Chicago Chapter 9–112 ("Ordinance") mandates that owners/operators of motor vehicles used for the transportation of passengers for hire with the city to be licensed as a taxicab (a medallion). The City further regulates the rescission, termination, revocation of the licenses as well as where the operators can go. See Chicago Mun.Code § 9–112–020 (SAC at ¶ 59). The City also regulates the sale and transfer of medallions. See Chicago Mun.Code § 9–112–480 (SAC at ¶ 60). The City has also issued Rules and Regulations governing taxis. (SAC ¶ 25).

Plaintiffs allege that the new ordinance governing TNPs, enacted on May 28, 2014, and codified in Municipal Code of Chicago Chapter 9–115, does not provide the same requirements for insurance, driver qualifications, vehicle qualifications, and fares as are imposed in the taxi ordinance. TNPs allegedly are subject to less onerous regulation, for example: taxis must undergo Chicago Police Department background check, TNPs do their own checks; taxis must submit annual drug tests conducted by authorities approved by the Commissioner, TNPs must have a drug policy but it does not need to include testing; taxis must undergo regular safety and maintenance inspections by the City, while it allows TNPs to be inspected elsewhere without a City-defined standard.

Plaintiffs allege the ordinance provides more onerous insurance requirements for taxis, including public liability insurance (minimum of $350,000 per occurrence) and workers' compensation insurance, typically costing well over $4,000 per year per taxi for coverage. The TNP ordinance now requires insurance, but it does not need to be issued by an insurance company "authorized to do business in the State of Illinois," and "qualified under the laws of Illinois to assume the risk amounts" set forth in the Ordinance; it can be excess as opposed to primary; the minimum amounts are only $20,000 when the driver is awaiting dispatch, though it must be $1 million when providing a ride, and no workers' compensation insurance is required.

Taxis must pay $1,200 annually to the City for their license and the taxi affiliations must pay $500 plus $15 for each affiliated medallion. TNP's must pay $10,000 annually for their fleet regardless of the number of cars it deploys. The City sets maximum meter rates for taxis. TNPs set their own rates. Taxi drivers must have a chauffeur license, requiring a background check by the Chicago Police Department, training, safety courses and continuing education. Taxis must meet certain vehicle requirements under the Ordinance, including age and condition. The Ordinance further requires taxis to undergo regularly performed City vehicle inspection. TNPs are not required to have City inspections or any inspections at particular intervals. Taxi affiliations with more than 20 medallions must have 5% of their fleet that is wheelchair accessible, yet there is no such mandate that TNPs have wheelchair accessible cars in their fleet. Taxis are prohibited by the Ordinance to refuse service to a passenger based on destination. Further, taxis are required to abide by all federal, state, and City, non-discrimination laws, while there is no similar mandate for TNPs.

According to the Second Amended Complaint, individual medallions, allowing the owner to operate a single taxi sold for between $325,000 and $375,000. On September 13, 2013, the City announced that it would auction 50 medallions at a minimum price of $360,000. (SAC at ¶ 22). Allegedly, there are over $900 million in outstanding loans financing Chicago medallions. (SAC at ¶ 31). Medallion owners are personally liable for the unpaid balances of the loans, which usually have a three-year term and many of the lenders have suspended lending activity on medallions. (SAC at ¶ 36). Plaintiffs assert that the City is depriving them of the value of the medallion and the exclusive right to operate a licensed taxi without compensation; subjecting them to disparate treatment without a rational basis for the differences in the law; and otherwise violating their rights under the constitution and state law.

Legal Standard

A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. When reviewing a defendants Rule 12(b)(6) motion to dismiss, the Court accepts all well-pleaded factual allegations in the complaint as true and draws all reasonable inferences in the non-movant's favor. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Detailed factual allegations are not required, but the plaintiff must allege facts that when "accepted as true ... state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

Discussion

1. Count I and IV: Property Interest

Count I of the Second Amended Complaint alleges that the City has taken the taxis' property without just compensation in violation of the Takings Clause of the Fifth Amendment to the United States Constitution applied to the states under the Due Process Clause of the Fourteenth Amendment. Count IV alleges a violation of substantive Due Process. The City moves to dismiss Count I and Count IV based on the lack of protectable property interest at stake.

Both the U.S. Constitution and the Illinois Constitution prohibit private property from being "taken for public use, without just compensation." U.S. Const., amend. V ; Ill. Const.1970, art. I, § 15. Private property includes "every kind and character, whether real, personal, tangible, or intangible." City of Chicago v. Pro L ogis, 236 Ill.2d 69, 77–78, 337 Ill.Dec. 726, 923 N.E.2d 285 (2010) (quoting Illinois Cities Water Co. v. City of Mt. Vernon, 11 Ill.2d 547, 550–51, 144 N.E.2d 729 (1957) ). An action under § 1983 alleging violation of substantive due process rights is limited to a determination of whether the municipality's administration of a local ordinance was arbitrary and capricious and thereby deprived plaintiffs of their property. Flower Cab Co. v. Petitte, 658 F.Supp. 1170, 1179 (N.D.Ill.1987) (citing Barbian v. Panagis, 694 F.2d 476, 480 (7th Cir.1982) ). The Court considers an ordinance "arbitrary" if it is unreasoned or enacted without adequate foundation. See Scudder v. Town of Greendale, Ind ., 704 F.2d 999, 1002 (7th Cir.1983) (citing United States v. Carmack, 329 U.S. 230, 243, 67 S.Ct. 252, 258, 91 L.Ed. 209 (1946) ).

The problem for plaintiffs here is the lack of a property interest. Although they assert that the medallion and its value in exclusivity is a protectable property interest, the Ordinance that issues the medallions provides no minimum value. It is, as plaintiffs point out, tied to market value and the influx of TNPs has diminished the value of the medallions, but so would an increase in the number of medallions with no other changes to the Ordinance. See Minneapolis Taxi Owners Coalition, Inc. v. City of Minneapolis, 572 F.3d 502 (8th Cir.2009). "[T]o have a property interest in a benefit, a person clearly must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it." Flower Cab Co. v. Petitte, 658 F.Supp. 1170, 1175 (N.D.Ill.1987) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972) ).

Plaintiffs cite Boonstra v. City of Chicago, 214 Ill.App.3d 379, 158 Ill.Dec. 576, 574 N.E.2d 689 (1st Dist.1991), and Flower Cab Co. v. Petitte, 658 F.Supp. 1170 (N.D.Ill.1987), for the proposition that medallions are property. In Boonstra, the Illinois Appellate Court recognized a property interest in the assignability of the medallions. Boonstra, 214 Ill.App.3d at 387, 158 Ill.Dec. 576, 574 N.E.2d 689. Even there, the court recognized the ...