Dan Handman spoke to Law360 on yet another ruling that went against cab drivers in their battle with ridesharing companies.
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Pinning Uber Woes On Regulators A Hard Road For Cabbies
By Dan Packel
Philadelphia this week became the latest city where cab drivers failed to convince a court that regulators unconstitutionally harmed their industry by going easy on ride-hailing services like Uber and Lyft, once again showing the sway of an early appellate ruling on the issue by now-retired jurist Richard Posner.
Ever since the then-Seventh Circuit judge wrote in a 2016 opinion that cabs and ride-hailing services were clearly different types of businesses, judges in other jurisdictions have fallen in line. The latest to do so was U.S. District Judge Michael Baylson in Philadelphia.
On Monday, he ruled that the Philadelphia Parking Authority’s alleged failure to regulate ride-hailing companies like it does cabs doesn’t run afoul of the equal protection and takings clauses of the U.S. Constitution.
Patrick Doran, an Archer & Greiner PC partner who represented the PPA, said the judge relied on “an increasingly large and unanimous body of law rejecting this exact type of claims.”
But Judge Posner’s twin rulings favoring Chicago and Milwaukee taxi regulators came first.
“You could see [Judge Baylson] was treating Posner’s opinion as chapter and verse on this,” said Daniel H. Handman, a partner with Hirschfeld Kraemer LLP.
There, the Seventh Circuit concluded that cab companies were clearly different from newcomers like Uber and Lyft. Consequently, it found, regulators were under no obligation to treat the new entrants in the same way they treated taxis.
When he first weighed in on the case in July, Judge Baylson indicated that he was sympathetic to the Philadelphia taxi drivers’ arguments that the PPA failed to take any “substantial” enforcement action against the newcomers, which were operating illegally when they first arrived in the city.
Even though that ruling, on the PPA’s motion to dismiss, came after the Seventh Circuit decision, he credited the cab drivers’ “detailed allegations” that taxis and the ride-hailing services were similarly situated and decided to advance the case.
But following discovery, the judge concluded that the only similarity between taxicabs and ride-hailing services, at least in Philadelphia, was that they provided single-ride transportation by a car and a driver for a fee. In all other ways, he found, the two entities presented entirely different business models.
That, in the judge’s analysis, freed the PPA from any obligation under the equal protection clause to crack down on Uber and Lyft, even if the companies were flouting state laws by offering their services in the city.
Becker & Poliakoff PA attorney Mark Stempler, who has represented cab companies, took issue with the finding, saying that the ride-hailing services and taxis provided essentially the same services.
“It’s like the restaurant business. To run a restaurant, you need a license to serve food, permits for the building, and you probably pay other fees to the government. If a restaurant comes in and operates illegally, it has a comparative advantage because it’s not subject to these fees,” he said. “One may be serving Chinese food, the other may be serving Indian food, but they’re still in the same industry.”
But, luckily for the PPA, Judge Baylson could point to no previous court that had found that legal operators can win damages for a regulator’s soft treatment of illegal operators.
At oral argument last week, Judge Baylson asked for letters from the cab drivers and the PPA identifying precedents addressing that equal protection argument. The PPA’s response noted that in 2017, a New Mexico federal judge dismissed an equal protection claim by a limousine operator that accused state regulators of failing to crack down on illegal operators.
“The taxi companies have identified no case law in which a court has found that a legal market participant suffered a violation of the equal protection clause of the Fourteenth Amendment through the laxity of a regulator toward an illegal competitor, and this court has found none,” the judge said.
Stempler noted that Judge Baylson’s finding that the two types of transportation were fundamentally different — and his related decision to grant the PPA a certain degree of discretion in regulating the new arrivals — relied on the state’s 2016 move to legalize the ride-hailing services. Before the General Assembly passed legislation, the companies operated with temporary experimental licenses elsewhere in the state but were banned in Philadelphia, where they nevertheless continued to operate.
“The judge has said, ‘The legislature has given us direction. They’re clearly considering the [transportation network companies] as a new form of for-hire transportation,’” he said.
Fox Rothschild LLP attorney Brett Berman, who represents the taxi drivers, said an appeal to the Third Circuit was a possibility.
“We’re deeply disappointed with the ruling, and we’re analyzing the merits of an appeal,” he told Law360. “It’s an unfortunate day for the taxi industry in Philadelphia.”
Further guidance could be coming soon, as the Third Circuit is mulling a similar case brought by Newark taxi drivers. Appeals are also pending in the Second and Eleventh circuits.
If an appeal follows, the cab drivers may have to turn to a second part of their argument: that the PPA’s refusal to regulate the new entrants qualified as an unlawful taking by causing the value of taxicab medallions to crater.
Judge Posner also dismissed that argument in his Seventh Circuit opinion, and Judge Baylson in Philadelphia followed suit. But the cab drivers have argued that their case is distinct because of a Pennsylvania state law that, unlike in other jurisdictions, limits the number of medallions available in the city.
“In any appeal, that’s what they would have to hang their hat on: This ordinance is different from the other ordinances,” Handman said. “That’s the only argument that could have some sway with an appeals court.”
Checker Cab Philadelphia Inc. and the other cab companies are represented by Brett A. Berman and Mark J. Fanelli of Fox Rothschild LLP.
The defendants are represented by Gary D. Fry, Patrick J. Doran and Thomas W. Nardi of Archer & Greiner PC, and Dennis G. Weldon of the Philadelphia Parking Authority.
The case is Checker Cab Philadelphia Inc. et al., v. The Philadelphia Parking Authority et al., case number 2:16-cv-04669, in the U.S. District Court for the Eastern District of Pennsylvania