Newark Cab Ass'n v. City of Newark, Civ. No. 16–4681 (WHW)(CLW)

235 F.Supp.3d 638

NEWARK CAB ASSOCIATION, Newark Taxi Owner Association, Teterboro Airport Limosuine Service, Abbas Abbas, Petro Abdelmessieh, Sayev Khellah, Michael W. Samuel, and George Tawfik, individually and by certain plaintiffs on behalf of others similarly situated, Plaintiffs,

v.CITY OF NEWARK, Defendant.

Civ. No. 16–4681 (WHW)(CLW)

United States District Court, D. New Jersey.

Signed January 17, 2017

Filed January 18, 2017

Richard W. Wedinger, Barry, McTiernan & Wedinger, Esqs., Edison, NJ, for Plaintiffs.

Gary S. Lipshutz, City of Newark Department of Law, Eric S. Pennington, Newark, NJ, for Defendant.

OPINION

Walls, Senior District Judge

Defendant City of Newark moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss the seven count Complaint filed by Plaintiffs Newark Cab Association et al., ("Plaintiffs"). ECF No. 8. Plaintiffs filed their opposition to Defendant's motion on November 7, 2011. ECF No. 11. The motion being fully briefed and ripe for adjudication, is decided without oral argument under Federal Rule of Civil Procedure 78. Defendant's motion is granted.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs Newark Cab Association, Newark Taxi Owner Association, Teterboro Airport Limousine Service, Abbas Abbas, Petro Abdelmessieh, Sayev Khellah, Michael W. Samuel, and George Tawfik, are entities and individuals engaged in the licensed taxi and limousine industry in Newark, New Jersey (collectively "Plaintiffs"). Compl., ECF No. 1 ¶ 1. They have brought this case, individually and on behalf of others similarly situated, against the City of Newark (the "City") based on allegations that the City "has arbitrarily violated their constitutional rights by applying burdensome and costly taxi and limousine regulations ("Taxi Regulations") to them, but not to de facto taxi companies such as Uber (also knowing as Transportation Network Companies or "TNCs"). Id. ¶ 2. The Complaint asserts seven counts against the City of Newark for violations of the Constitution of the United States of America and New Jersey state law. Id. ¶¶ 103–160.

For the purposes of this opinion, the Court assumes the truth of the following allegations in the Complaint: For decades, the City of Newark has regulated all For–Hire Transportation providers under uniform rules¹ (the Taxi Regulations) set forth in the City's municipal code. Id. ¶ 4; see also Newark, N.J., Code § 34:1–1–1–63. The purpose of these rules is to protect the public, regulate traffic, address transportation congestion, and provide a public service. ECF No. 1 ¶ 4. The Regulations require taxi and limousine drivers to meet certain job qualifications, id. ¶¶ 4(a), 81, pass a background check—including drug testing for limousine drivers—conducted by the Newark Police Department, id. ¶¶ 4(a), 82, pay application fees, id. ¶ 4(a), and obtain special commercial licenses, id. ¶¶ 4(a), 81. Additionally, taxi and limousine vehicles must be serviced and inspected every six months by the Division of Taxicabs, id. ¶¶ 4(b), 88, taxi fares must be measured and imposed by meters in accordance with City-mandated rates, id. ¶¶ 4(c), 94, and all taxi and limousine operators must carry primary commercial liability insurance, id. ¶¶ 4(d). Taxi drivers are likewise prohibited from working at Newark airport until one year after the issuance of their taxi driver's license and the number of medallions is capped by the City at six hundred (600). Id. ¶¶ 92–93.²

The Complaint alleges that the "burdens and expenses" inherent in the Taxi Regulations were part of a "quid pro quo " between taxi and limousine drivers and the City for exclusive rights³ to engage in the business of For–Hire Transportation. Id. ¶ 5. Plaintiffs claim that in reliance on the promise of exclusivity, "taxis, limousines, and related businesses have invested hundreds of millions of dollars." Plaintiffs now contend that they are losing these investments due to the City's arbitrary and unequal treatment of TNC's such as Uber—a ridesharing service that allows customers to summon and pay for for-hire transportation via smartphone app—"which do[ ] exactly the same thing that traditional taxi companies do." Id. ¶ 7.

According to Plaintiffs, before Uber's arrival in Newark in 2013, the City was "committed to the fair regulation of the entire for-hire vehicle industry." Id. ¶ 18. But in 2013, de facto taxi companies, including Uber, "began to offer taxi and limousine services in Newark in open and blatant disregard of applicable City Taxi and Limousine Regulations, including the law requiring taxi medallion ownership." Id. ¶ 21. Plaintiffs allege that the City deliberately "turned a blind eye" to the failure of TNC's to comply with Newark regulations "[d]espite the fact that there is no meaningful difference between licensed taxi and limousine businesses and the businesses of the de facto taxi companies...." Id. ¶ 22–23.

Between approximately 2013 and May 10, 2016, the City, through its officials, expressed competing views regarding the need for Uber and other de facto taxi companies to comply with Taxi Regulations. Id. ¶¶ 50–55, Ex. B. During this time period, de facto taxi companies were not required to meet the Taxi Regulations while Plaintiffs were. Id. ¶ 110. In April 2016, Newark Mayor Ras Baraka announced that an agreement had been reached between Uber and the City, which would solve the de facto taxi problem and "protect the business interests of the taxi and limousine industry." Id. ¶ 55. Under the Uber–Newark Agreement (the "Agreement"), Uber agreed to pay the City $1 million a year for ten years in exchange for permission to operate in Newark. Id.; see also id. , Ex. A. In addition, Uber agreed to a modified regulatory regime: It would provide $1.5 million in liability insurance for all drivers; have a nationally-accredited third party provider conduct background checks on all of its drivers, and enforce a zero-tolerance drug and alcohol abuse policy. Id. ¶ 55; see also id. , Ex. A at 3–5. Most of the agreed-upon regulatory provisions do not meet the requirements of the City's Taxi Regulations. See, e.g., id. ¶¶ 1–2, 6, 8, 56, 66–98.

Plaintiffs now claim that the City's failure to impose the Taxi Regulations on TNCs, since the arrival of Uber in 2013 through the present, "has created a severe economic disadvantage for the taxi industry and [given] Uber a strong, competitive advantage in Newark." Id. ¶ 27. The Complaint alleges that medallion holders like the individual plaintiffs have seen an over 50% drop in the market value of their taxi medallions during this time. Id. Plaintiffs assert that the City is liable for this serious reduction in medallion value because (1) in New Jersey, taxi medallions constitute property, and (2) Newark's "issuance of medallions" and taxi and limousine regulatory scheme "constitute a contract between the City and medallion owners." Id. ¶ 30. Plaintiffs contend that Newark's violation of these property and contract rights give rise to federal and state law claims. Id.

On August 2, 2016, Plaintiffs filed their seven-count class-action Complaint in the District of New Jersey. Id. The Complaint brings class allegations on behalf of two classes. The Medallion Class is defined to include "all individuals or entities that owned a City of Newark taxicab medallion at any time between January 1, 2013, to the present." Id. ¶ 100. The Limousine Class includes "all individuals and entities that held a limousine license pursuant to Title 34 Chapter 2 of the Revised General Ordinances of the City of Newark at any time between January 1, 2013 to the present." Id. ¶ 129. All counts are brought on behalf of the Medallion Class. Id. ¶¶ 103–60. Counts Two and Three are also brought on behalf of the Limousine Class. Id. ¶¶ 109–28.

Count One charges the City with violations of the Takings Clause of the Fifth Amendment to the United States Constitution, as incorporated to the states under the Due Process Clause of the Fourteenth Amendment, based on the City's taking of exclusive property and contract rights from the Medallion Class through the Newark–Uber Agreement, which allows de facto taxi companies to operate without possessing medallions or meeting Taxi and Limousine Regulations. Id. ¶¶ 103–08. Count Two charges the City with violating the Equal Protection Clause of the Fourteenth Amendment, during the time period before the enactment of the Newark–Uber Agreement, through its intentional, irrational and unequal application of the City Taxi Regulations to de facto taxi companies. Id. ¶¶ 109–15. Count Three charges the City with violating the Equal Protection Clause of the Fourteenth Amendment, during the time period after the enactment of the Newark–Uber Agreement, through the City's irrational decision to submit TNC's and Plaintiffs to unequal regulatory schemes. Id. ¶¶ 116–28. Count Four charges the City with violating the Substantive Due Process Rights of the Transportation Plaintiffs and the Medallion Class by arbitrarily and capriciously choosing to apply the City Taxi Regulations to them and not the de facto taxi companies, which deprived them "of their property interests in their medallions and in the businesses they operate based upon the City Taxi Regulations." Id. ¶¶ 134–139. Count Five seeks judgment against the City for breach of contract in violation of New Jersey law based on the relationship allegedly created by the Taxi Regulations between the taxi operators and the City. Id. ¶¶ 140–48. Count Six is an alternative claim to the breach of contract claim. It seeks judgment against the City on a theory of promissory estoppel based on the promises allegedly embedded in the Taxi Regulations. Id. ¶¶ 149–55. Finally, Count Seven alleges that the City is estopped from "enabling and condoning a system of de facto taxi operation" due to its past enforcement of the Taxi Regulations and its decades-long sale of medallions. Id. ¶¶ 156–60.

The City of Newark filed a motion to dismiss Plaintiff's Complaint on ...