DECISION AND ORDER
Plaintiffs, taxicab companies which own taxicab vehicle permits in the City of Milwaukee, challenge the constitutionality of a new city ordinance that removes the cap on the number of taxicab permits issued by the City and regulates new so-called rideshare companies like Uber and Lyft. Plaintiffs allege that parts of the ordinance violate their Fourteenth Amendment rights to substantive due process and equal protection and seek a preliminary injunction.
I. Background
For decades, the City of Milwaukee has capped the number of taxicab permits issued each year. Prior to 1992, the taxicab ordinance required the City to find “that the public welfare, safety, convenience and necessity require” a change in the number of permits. M.C.O. 100-5 (1991). Pursuant to this requirement, the City held annual adequacy hearings to determine whether additional permits were needed and to issue such permits. Prompted in part by a disposition to eliminate these hearings, the City revised the ordinance effective in 1992 barring the issuance of new permits while allowing permittees to transfer their permits to others. M.C.O. 100-50-3-a (1992).
The 1992 ordinance created a downward-floating cap; the cap could never increase but could decrease if a permittee chose not to renew a permit or if the City revoked a permit. The combination of the cap and the transferability of permits created a secondary market, and the value of permits has risen steadily. Plaintiffs collectively own 162 taxicab vehicle permits only 6 of which were obtained directly from the City. Plaintiffs purchased the other permits paying as much as $150,000 for them.
In September 2011, several would-be cab drivers challenged the cap in state court, and Judge Jane Carroll found that the cap violated the Wisconsin Constitution because the City did not establish a rational basis for it. In May 2013, Judge Carroll enjoined the City from enforcing the cap but stayed her order pending appeal. In the meantime, the City again amended the taxicab ordinance, increasing
Also in February 2014, a number of long-standing permittees (including the plaintiffs in the present case) challenged the cap increase in federal court alleging that it violated the equal protection and due process clauses of the United States Constitution. In March 2014, Judge Charles Clevert, Jr. denied the plaintiffs’ request for a preliminary injunction finding that they had not shown that they would suffer irreparable harm or that they were likely to succeed on the merits. The plaintiffs then voluntarily dismissed the case.
Meanwhile, a new type of taxi service began operating in Milwaukee outside of the permit process. Companies such as Uber and Lyft (“network companies”) connect passengers with drivers through a smartphone app. The parties agree on a price via the app, and the driver then takes the passenger to her destination.
In July 2014, in the face of Judge Carroll’s decision and the arrival of the network companies, the City adopted yet another new ordinance, this one regulating network companies and eliminating the cap on taxicab vehicle permits altogether. The ordinance took effect on September 1, 2014, and it is this ordinance that plaintiffs contest.
II. Discussion
On September 3, I held a hearing and the City clarified that under the ordinance a traditional taxicab could also operate as a “network vehicle” (1) if it “operated] under contract service” and (2) if such service was “arranged through a network company.” M.C.O. 100-3-14 (2014). “Contract service” means that the transportation is arranged “for a fixed fare by agreement prior to entry of the passenger” into the vehicle, M.C.O. 100-3-2 (2014), and “network company” is defined as a transportation company “that uses an online, digital or electronic platform” to connect passengers and vehicles, M.C.O. 100-3-13 (2014). Thus, as long as a passenger agrees in advance to a fixed fare and the agreement is reached via an electronic or online platform, like a smartphone app, any permittee can operate as a network vehicle. Thus, a taxi can operate as both a network vehicle and a traditional metered fare cab depending on how it contracts for the fare. Based on this clarification, plaintiffs dropped their contention that the new ordinance was unconstitutionally vague.
Plaintiffs continue to seek injunctive relief based on their contention that the new ordinance violates substantive due process and equal protection. A plaintiff seeking a preliminary injunction must establish that: (1) she is likely to succeed on the merits and (2) no adequate remedy exists at law and she will suffer irreparable harm if a preliminary injunction is denied. Ezell v. City of Chi,
A. Likelihood of Success on the Merits
1. Substantive Due Process
Plaintiffs allege that removing the cap on the number of permits violates
Plaintiffs contend that they have a property interest in the secondary market value of their vehicle permits and when the City removed the cap, it devalued their permits and unlawfully deprived them of this property interest. The City contends that while permittees may have a property interest in the permit itself, they do not have a constitutionally protected property interest in the value of the permit on the secondary market. The City asserts that to confer a property interest, the law must entitle a person to a benefit and not merely provide an expectation of one. See Bd. of Regents v. Roth,
Under rational basis scrutiny, in order to be valid the ordinance must merely bear a rational relationship to a legitimate governmental purpose. Goodpaster,
The City offers several justifications for removing the cap. First, it was faced with new companies like Uber and Lyft that were redefining the way that taxicab services operated in Milwaukee and were entirely unregulated. In' the City’s view, in order to regulate these companies, the City had to significantly expand the number of available vehicle permits. Second, when the City increased the number of available permits by 100 in February 2014, it realized that there was a significant demand for such permits, much greater than it initially contemplated. Third, the City wished to increase the availability and accessibility of cost-effective transportation. Fourth, the City was under a state court order to remove the cap. Any one of these reasons would likely provide a‘ rational basis for removing the cap. Taken together, however, they offer a compelling justification for the City’s reworking of its taxicab regulations. Thus, plaintiffs are unlikely to be able to establish that the City’s removal of the cap was irrational.
Plaintiffs also argue that the new ordinance regulates network vehicles differently than traditional taxicabs in violation of the equal protection clause. Plaintiffs are not members of a protected class entitled to an elevated level of scrutiny; therefore the ordinance must merely survive rational basis scrutiny. Fed. Commc’ns Comm’n,
The City regulates network vehicles and traditional meter fare taxicabs differently in three respects: fare, vehicle appearance, and provision of information about how a customer can complain. First, the ordinance regulates fares differently depending on whether a vehicle is operating as a network vehicle or a traditional taxicab. In the latter instance, the driver must charge a meter fare which is set by the ordinance. M.C.O. 100-52-2 (2014). A vehicle operating as a network vehicle, however, may charge whatever the market will bear. As discussed, any vehicle with a taxicab permit may operate as a network vehicle as long as the passenger agrees to a fixed fare ahead of time via an electronic or online communication. There appears to be a rational basis for allowing different fares depending on the manner in which a passenger contracts for service. When a person uses a smartphone app to negotiate a price, the passenger and driver reach an agreement before the passenger enters the vehicle. Also, the requirement that the fixed price be contracted electronically ensures the existence of a record of the agreement. Thus, in the event of a dispute, the combination of the pre-ride fixed price agreement and the electronic record of the agreement protects consumers. In contrast, when a consumer hails a cab on the street or calls a cab by telephone, she is not similarly protected. Even if a passenger and driver orally agreed on a fixed price before the ride began, there would be no record of that agreement. Thus, metered fares are still needed to protect consumers in certain situations.
The second way in which the City regulates network vehicles differently than traditional taxis has to do with vehicle appearance requirements. Traditional taxis must be painted a certain color, M.C.O. 100-51.5-3 (2014), and must display the word “Milwaukee,” its permit number, the permittee’s name and other information. M.C.O. 100-51.5-1-c-l (2014). Network vehicles are exempt from these requirements. The City states that visible markings enable prospective passengers hailing a cab to identify a vehicle as a licensed taxi. This encourages the use of cabs and promotes confidence and public safety. Visible markings, however, are unnecessary when a passenger arranges a ride via a smartphone app. This is so because most passengers using network companies have an ongoing relationship with the company and because passengers are aware that the company will connect them with a network driver. Thus, the visual markings are not needed to signal to the passenger
The third regulatory distinction that the City makes concerns communicating information to passengers about making a complaint. Traditional taxicabs must display a placard informing passengers how to complain. M.C.O. 100.51.5-1-e (2014). Network vehicles, however, must provide complaint information when a passenger contracts for service. M.C.O. 100-51.5-1-f (2014). Again, plaintiffs make no specific argument as to why this distinction is irrational, and I can think of none. If a passenger hails a cab, the obvious way to ensure that she has complaint information is by displaying it in the vehicle. When a passenger contracts for service electronically ahead of time, however, it makes sense to also convey the complaint information electronically.
Thus, plaintiffs are unlikely to be able to establish that the differences between the City’s regulation of traditional taxicabs and network vehicles are irrational.
B. Irreparable Harm
Even if plaintiffs could show a likelihood of success on the merits, they would also have to establish the absence of an adequate remedy at law and irreparable harm if the preliminary injunction is denied. Ezell,
C. Balancing of Harms
Because plaintiffs have not established a likelihood of success on the merits, I need not balance plaintiffs’ and the City’s respective harms. See Ezell at 694. Nevertheless, I will do so in order to provide a complete analysis. Thus, I consider whether the respective harms “weigh in favor of the moving party or whether the nonmoving party or public interest will be harmed sufficiently that the injunction should be denied.” Christian Legal Soc’y,
As discussed, the potential irreparable harm to plaintiffs if I do not issue an injunction and it turns out that the ordinance is unconstitutional is lost revenue and possible loss of their businesses. While these would be serious harms, the City and the public, whose interests are
III. Conclusion
For the foregoing reasons,
IT IS ORDERED that plaintiffs’ Motion for a Preliminary Injunction (ECF No. 2) is DENIED.
IT IS FURTHER ORDERED that a telephonic status conference will be held on September 22, 2014 at 11:30 a.m. The court will initiate the call. Counsel should call 414/297-1285 to advise of their participation.
Notes
. The parties agree that owning and being able to sell a taxicab permit is not a fundamental right and that, therefore, rational basis is the proper level of scrutiny. See Good-paster,