Case Information
*1 Before P OSNER , W ILLIAMS , S YKES , Circuit Judges . P OSNER , Circuit Judge
. This case, closely parallel Joe Sanfelippo Cabs, Inc. v. Milwaukee No. de cided today, involves constitutional challenges en *2 ‐ 2077, deavor of a city (Chicago in this case, Milwaukee in oth ‐ er) stimulate greater competition in “for ‐ hire auto transportation market.” That is composed of owners of one hails street, of livery ser ‐ vices, which are usually summoned phone (as for matter taxis sometimes are), newer auto ‐ transport services for hire, which best known is Uber (the sec ‐ ond best known Lyft); generically these services known either as Transportation Network Providers (TNPs) ridesharing services.
Because acronym well known, nor term ridesharing services, Uber very well known, we’ll focus Uber, which “at its core … just an app you download your smartphone get a nearby Uber driver come pick you up. While services getting board these newfangled apps most for ‐ rent cars still wait at stand require you give service dispatch center a call advance. Uber doesn’t that. … You can only hitch Uber ride via service’s app.” Kristen Hall ‐ Geisler, “5 Ways Uber Is Really Different from a Regular Taxi,” http://auto.howstuffworks.com/tech transport/5 ‐ ways ‐ uber ‐ really ‐ different ‐ ‐ regular ‐ taxi1.ht m (visited Oct. was other website opin ion). (However, Uber now added feature allows customers schedule Uber pickup advance. See Ub er.com, “Scheduled Ride Extra Peace Mind,” www.uber.com/info/scheduled rides/.) There dif ferences, consumers consider advantages over taxis: storage payment information, so one does need carrying cash credit card; ability see time estimate how long pickup will take driver’s rating past users; ability re *3 quest ride from wherever one ( e.g. from the comfort of home, inside during the rain) rather than by hailing on street).
The plaintiffs are companies own and operate either livery vehicles Chicago provide ser vices companies, such as loans and insurance. Taxi companies tightly regulated by the City regarding driver and vehicle qualifications, licensing, fares, and insurance; livery companies tightly regulated, but we won’t need discuss them separately. Uber (which remember we’re treating representative of the TNPs) less heavily regulated the taxi and livery companies (until it wasn’t regulated at all) and different business model. For example, you can’t hail an Uber vehicle on the street; you must smartphone app summon Uber car. Since and other TNPs been governed by ordinance, but different ordinances govern ing livery services and more permissive; exam ple, allows companies set their own fares, other ways allows them contract things Chicago ordinances require livery com panies do.
The plaintiffs challenge ordinance seven grounds, four based U.S. Constitution other three Illinois law. district judge dismissed all two claims accuse denying protection laws allowing compete livery services being subject all regu lations governing services. plaintiffs appeal judge’s dismissal five their claims appeals judge’s refusal dismiss two well.
All seven of the plaintiffs’ claims weak. first allowing the into the livery markets taken away the plaintiffs’ property a public use compensating them. A variant of a claim would have merit had the City confiscated medallions, the licenses authorize the of automobile a taxi. Confiscation of the medallions would amount to confiscation of the taxis: no medallion, no right to own a taxi, Boonstra v. of Chicago N.E.2d 694–95 (Ill. App. 1991), though company might be able to convert vehicle to another use. Anyway not confiscating any medallions; it merely exposing companies to new competition—competition from TNPs.
“Property” does include a right to free from com petition. A license operate a coffee shop doesn’t authorize licensee enjoin a tea shop from opening. When proper ty consists of a license operate a a particular way, does carry a right free from competi tion market. A patent confers exclusive right make sell patented product, right prevent competitor inventing noninfringing substitute prod uct erodes patentee’s profits. Indeed when new technologies, new business methods, appear, common result decline even disappearance old. Were old deemed have constitutional right preclude entry new into markets old, economic pro gress might grind halt. Instead taxis we might horse buggies; instead telephone, telegraph; instead computers, slide rules. Obsolescence entitlement. *5 16 ‐ 2009, 2077, 2980 5
Taxi medallions authorize owners to own oper ‐ ate taxis, not to exclude competing transportation services. The plaintiffs in this case cannot exclude competition from buses or trains or bicycles or liveries or chartered sight ‐ seeing vehicles jitney buses or walking; indeed they can ‐ not exclude competition from taxicab newcomers, City has reserved right (which plaintiffs don’t chal ‐ lenge) to issue additional tax medallions. Why then should plaintiffs allowed to exclude competition from Uber? To question they offer answer.
All City gives ‐ medallion owners right to operate taxicabs in Chicago, see Municipal Code Chica ‐ go § ‐ ‐ 020(b) (a parallel provision, § 9 ‐ 114 ‐ 020(b), gov ‐ erns liveries). That isn’t a right exclude competitive pro viders transportation. As pointed out in Boston Taxi Own ers Ass’n, Inc. v. Boston WL at *5 (D. Mass. March 2016), “if person who wishes operate medallion prevented from doing so, because he she would violate municipal regulations, not because he she violate medallion owners’ property rights.” Section ‐ 020(b) Municipal Code, cited above, has been books since entitles medallion owners exclusive providers ser vice, exclude alternatives service they offer. has created property right in medallions; created property right all commercial transpor tation persons automobile Chicago. plaintiffs continue receive insulation
competition, because they alone permitted operate Chicago. Taxicabs preferred oth er riders, because you don’t *6 app to summon them—you just wave at one that drives to ‐ ward you the street—and because the fares are fixed by City.
The plaintiffs argue that discriminated against them by failing to subject Uber and other TNPs to same rules about licensing fares (remember that fares are set City) that ordinance subjects plaintiffs to. That anticompetitive argument. Its premise every new entrant into market should be forced to comply with every regulation applicable to incum ‐ bents whom new entrant will be competing.
Here’s analogy: Most cities towns require dogs but cats to be licensed. There are differences between animals. Dogs average are bigger, stronger, more ag ‐ gressive than cats, feared more people, can give peo ple serious bites, make lot noise outdoors, barking howling. Feral cats generally innocuous, pet cats confined indoors. Dog owners, other who own cats as well, like cats have be licensed, argue failure government require “competing” animal licensed deprives dog owners constitutionally protected property right, al ternatively subjects them unconstitutional discrimi nation. plaintiffs present case stronger argument requiring Uber subjected same licensure scheme owners. Just people prefer cats dogs, some people prefer Yellow Cab, Flash Cab, Checker Cab, et al . They pre fer one business model another. wants en *7 courage this competition, rather than stifle it as urged the plaintiffs, who are owners.
So there no merit to the plaintiffs’ claim the taken property them compensation, there need to discuss four their six claims, whether based on the Constitution or on Illinois common law add nothing to the takings claim. The two ad ditional claims we need to discuss are the equal protec tion claims, because the claims the judge thought had sufficient potential merit survive mo tion dismiss. She ruled the City, failing place as regulatory burdens TNPs on companies, might have denied latter equal protection law. But was taking equal protection literally, should not be taken so. Otherwise prospective entrants market who had lower costs incumbent firms would not allowed enter unless regulatory entity burdened new entrants with regulations, whether not necessary or even appropriate, eliminated any cost advantage new entrants would otherwise have competing with incumbent firms. imposition impediment competition disservice consumers absurd. proper question ask regarding protection whether regulatory differences between Chicago Chicago TNPs arbitrary defensible, makes compelling case they’re latter. Taxis permitted take passengers persons who hail them street. Rarely will passenger pri relationship driver, often with cab company either; makes sense therefore *8 ‐ try protect passengers by screening taxi drivers assure that they’re competent and imposing a uniform system of rates based time or distance or both. So service is regulated of Chicago, but so is TNP service, though differently because service is different service. A major difference customers, ra ther than being able hail Uber car, must sign up Uber before being able summon it, and sign up creates a contractual relationship specifying such terms fares, driver qualifications, insurance, and any special need of potential customer owing his her having disability. Unlike taxicab service assumes primary responsibility screening potential drivers and hiring only found qualified, and passengers receive more information in advance about their prospective rides—information includes only driver’s name pictures of him (or her) and of car. Furthermore, part ‐ time drivers extensively, believed these part timers drive their cars fewer miles average drivers, who constantly patrolling streets hope being hailed; fewer miles driven less likely vehicle experience wear tear may impair comfort ride even increase risk accident breakdown.
There enough differences between service TNP service justify different regulatory schemes, existence justification dissolves plaintiffs’ equal protection claim. Different products services matter constitutional law, indeed common sense, always require identical regulatory rules. fallacy judge’s protection analysis her equating her personal belief there significant differences *9 16 2009, 2077, 2980 9 tween and TNP service with perception consumers that there differences—a perception based on commonplace concerns convenience, rather discriminatory or otherwise invidious hostility their drivers. If all consumers thought ser ‐ vices were identical that there was therefore ad ‐ vantage having choice between them, TNPs could never gotten established Chicago.
Suppose judge happened think dogs cats interchangeable, ground ruled that requir ‐ ing dogs but not cats be licensed (the law Chicago) was violation protection. proper response would be she entitled her opinion but not entitled im pose when perceives, we noted earlier reasonable nondiscriminatory grounds perceiv ing, rational difference between competing animals she does not perceive. Her belief taxis interchangeable similarly not shared entire relevant consumer market.
A “legislature, having created statutory entitlement, precluded altering even eliminating entitle ment later legislation. Were rule otherwise, ‘statutes ratchets, creating rights could never re tracted even modified buying off groups up rights had been conferred.’” Dibble v. Quinn , F.3d 809 (7th Cir. 2015), quoting Pittman v. Chicago Board Education , F.3d (7th Cir. 1995); see Wisconsin & Michigan Ry. Co. v. Powers U.S. (1903) (“the legislature making promises, framing scheme public revenue public improvement”).
Beginning in 1970s deregulation movement swept country, powered belief competition often superior alternative regulation. Entire agencies vanished, Civil Aeronautics Board, had greatly lim ited competition airline industry. Many cities loosened regulatory limitations services—and well fore there were any TNPs. See Adrian T. Moore & Ted Ba laker, “Do Economists Reach Conclusion Taxi Deregu lation?” Econ Journal Watch (2006). deregula tion movement has surged with advent TNPs. Chicago, like Milwaukee our companion Sanfelippo case, chosen side deregulation, thus competition, over preserving traditional monopolies. That legally permissible choice. judgment court affirmed all court’s ruling plaintiffs’ protection claims; ruling reversed with instructions dismiss
claims prejudice.