M & Z Cab Corp. v. City of Chicago

18 F.Supp.2d 941

M & Z CAB CORPORATION, Marina Bay Cab Co., Inc., Renegade Cab Co., Eight, Illinois corporations, and Miljohn C. Zeravich, Petitioners, v. CITY OF CHICAGO, Mayor's Licensing Commission and the Chicago Department of Consumer Services, Respondents.

No. 98 C 60.

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

September 24, 1998.

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Alexander S. Vesselinovitch, Jeffery J. Wawrzyniak, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Petitioners.

Robert T. Shannon, Assistant Corporation Counsel, Special Prosecutions, Anita K. Modak-Truran, Chief Assistant Corporation, Special Prosecutions, Chicago, IL, for Respondents.

MEMORANDUM OPINION AND ORDER

ANDERSEN, District Judge.

Plaintiffs, M & Z Cab Corporation, Marina Bay Cab Co., Inc., Renegade Cab Co., Eight, and Miljohn C. Zeravich filed this administrative review action against defendants, the City of Chicago, the Chicago Mayor's Licensing Commission, and the Chicago Department of Consumer Services, seeking to reverse the decision of the Mayor's Licensing Commission to revoke three taxicab medallions pursuant to the Chicago Municipal Code. The defendants have filed a motion to dismiss the amended complaint pursuant to Fed. R. Civ. Proc. 12(b)(6). For the following reasons, defendants' motion is granted.

BACKGROUND

The plaintiffs' well-pleaded allegations, which we presume are true and view in a light most favorable to the plaintiffs for purposes of this motion, are as follows. Plaintiff Miljohn C. Zeravich ("Zeravich") is a resident of the City of Chicago, Illinois, and is currently the sole shareholder of M & Z Cab Corporation, Marina Bay Cab Co., Inc., and Renegade Cab Co., Eight. The three medallions at issue in this litigation were obtained by Zeravich on behalf of the three corporate defendants. Zeravich obtained medallion number 2892 TX on behalf of Marina Bay Co. on February 27, 1964. On July 1, 1990, Zeravich obtained medallion number 874 TX on behalf of M & Z Cab Corporation and, on or about December 15, 1992, number 5244 TX on behalf of Renegade Cab Company, Eight.

The events which resulted in the present litigation began to unfold on February 13, 1997 when the Mayor's Licensing Commission mailed a notice of hearing to plaintiffs informing them that an administrative hearing would be held on March 12, 1997 concerning a proposed revocation of their licenses. This notice informed plaintiffs of the time and location of the hearing and that defendants sought to revoke the licenses pursuant to City of Chicago Municipal Code § 9-112-270. Section 9-112-270 provides that a license shall be revoked if the licensee is convicted of a felony or crime of moral turpitude. The notice set forth the justification for the purported revocation and advised plaintiffs of their right to be represented by counsel, produce witnesses, and introduce evidence on their behalf at the hearing.

Six days after the notice of hearing was mailed to plaintiffs, Zeravich resigned as an officer or director of the three licensee corporations and attempted to sell the medallions and his stock in the corporations. In order to effectuate this transfer, Zeravich presented completed transfer applications to the Department of Consumer Services. The Department of Consumer Services denied the proposed transfer on the basis that the medallions were on "hold" pending the conclusion of the revocation hearing. The defendants deprived plaintiffs of their ability to assign, transfer or sell the medallions prior to any hearing or proceeding on the merits of the hold or the suspension. Despite the hold placed on the medallions, defendants renewed the medallion issued to Renegade Cab Co.

The revocation hearing took place on September 10, 1997 before Deputy License Commissioner Nicholas Comerford. At the hearing, plaintiffs stipulated that Zeravich had been convicted of a felony while he was president of the defendant corporations. In support of their position, plaintiffs had an opportunity to present evidence, cross examine witnesses, and submit a written memorandum of law. Approximately one month later, the Mayor's Licensing Commission issued an order revoking the three medallions issued to plaintiffs. The medallions were revoked pursuant to the Chicago Municipal Code which provides that a license shall be revoked if the licensee shall be convicted of a felony or any criminal offense involving moral turpitude, or in the case of a corporate licensee, if any officer or director is convicted of a felony and the corporation fails to sever immediately its relationship with the officer or director.

The conviction underlying the revocation was a 1994 federal felony conviction Zeravich received for making a false entry to a governmental agency in violation of 18 U.S.C. § 1001. This conviction was the result of a guilty plea in which Zeravich admitted that he submitted false trip tickets to the Transportation Service Corporation in order to obtain reimbursement for transportation services for handicapped individuals under the Chicago Transit Authority's ("CTA") Special Services Program. As a result of this guilty plea, the court sentenced Zeravich to thirteen months in federal prison, restitution of $8,496 to the CTA, 200 hours of community service, and a $3,000 fine. Shortly before pleading guilty, Zeravich resigned as Secretary of M & Z Cab, Marina Bay Cab, and Renegade Cab.

On November 7, 1997, plaintiffs filed a Petition for Writ of Certiorari/Review of Administrative Proceedings in the Circuit Court of Cook County, Chancery Division seeking to reverse the decision of the Mayor's Licensing Commission. On November 10, 1997, plaintiffs filed an emergency motion seeking to stay the execution of the Order of Revocation. That same day, the Circuit Court denied the motion. On January 7, 1998, defendants properly removed this administrative review proceeding to this court. See City of Chicago v. International College of Surgeons, 522 U.S. 156, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997) (holding that removal is proper for an administrative review action raising federal constitutional claims).

The plaintiffs then amended their complaint alleging that the Chicago Municipal Code sections upon which the revocation was based are unconstitutional on both due process and equal protection grounds. Specifically, in Count I plaintiffs allege that the pre-hearing hold on the medallions violated their procedural due process and equal protection rights, and that Section 9-112-270 is overly broad and unduly vague. Similarly, in Count II plaintiffs claim that Section 9-112-280 is unduly vague, is not rationally related to a legitimate government interest in violation of the equal protection clause, and the pre-hearing hold on the medallions violated their procedural due process rights. Finally, in Count III plaintiffs allege that the decision to revoke the medallions should be reversed on the ground that the doctrine of laches bars defendants from revoking the medallions.

LEGAL STANDARD

A motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(6) does not test whether the plaintiff will prevail on the merits but instead whether the claimant has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). In deciding a motion to dismiss, the court must assume all facts alleged in the complaint to be true, construe the allegations liberally, and view the allegations in a light most favorable to the plaintiff. Chaney v. Suburban Bus Div. of Reg'l Transp. Auth., 52 F.3d 623, 626-27 (7th Cir.1995). Dismissal is proper only "if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Cushing v. City of Chicago, 3 F.3d 1156, 1159 (7th Cir.1993) (internal quotations omitted).

While the court ordinarily is limited to the allegations contained in the pleadings, it may consider documents incorporated by reference into the pleadings and documents attached to the pleadings as exhibits. Fed. R.Civ.P. 10(c). Moreover, the court may take judicial notice of matters of public record including records and reports of administrative agencies. United States v. Wood, 925 F.2d 1580, 1582 (7th Cir.1991); see also Intermedics, Inc. v. Ventritex, Inc., 775 F.Supp. 1258, 1261 (N.D.Cal.1991) ("[f]acts properly held the object of judicial notice in the context of a motion to dismiss under 12(b)(6) include, among others, records and reports of administrative bodies ... items in the record of the case or matters of general public record ... and copies of a document (i.e. a contract) attached to the complaint as an exhibit.") (citations omitted).

DISCUSSION

I. Due Process Analysis

The due process claims currently before the court challenge the Chicago Municipal Code provisions at issue on both procedural and substantive grounds. The amended complaint alleges that the Municipal Code violates plaintiffs' procedural due process rights because it does not provide for a hearing before the defendants may place a "hold" on the transfer of the medallions pending the revocation hearing.¹ Plaintiffs also claim that the ordinances at issue violate the due process clause because they are unduly vague and overbroad. We address each of these contentions in turn.

A. Procedural Due Process

The procedural due process analysis requires the court to undertake a two-step inquiry. First, the court must determine whether plaintiffs were deprived of a protected interest in life, liberty, or property. Hamlin v. Vaudenberg, 95 F.3d 580, 584 (7th Cir.1996). If the plaintiffs were deprived of such an interest, the court must then determine what process was due with respect to that deprivation. Id.; see also Ledford v. Sullivan, 105 F.3d 354, 356-57 (7th Cir.1997). Here, defendants concede, and we think correctly, that plaintiffs have a constitutionally protected property interest...