This week, taxi owners and lenders sued New York City and the city’s Taxi and Limousine Commission (TLC), claiming that the explosion of the increasingly popular ride-sharing business Uber has been systematically destroying small businesses and threatening livelihoods.
The civil lawsuit was filed in Manhattan federal court and accuses the defendants of allowing Uber drivers – who face less regulations than traditional taxi drivers – to transport millions of passengers using their smartphones to hail rides. The suit claims that by allowing Uber to operate the way it does, the city is infringing upon the cab drivers’ exclusive right to pick up passengers on the street.
Historically, only “medallion taxis,” which are those painted yellow and regulated by the TLC, are permitted to pick up passengers. Uber has dramatically changed that landscape.
According to the complaint, the number of Uber rides hailed in the “core” of downtown Manhattan increased by 3.82 million from April to June of this year, compared with the same period last year. Meanwhile, medallion cab pickups decreased by about that same amount.
The plaintiffs claim that this has driven down the medallions’ value by 40% and caused many loans to default. The complaint also alleges that Uber’s meteoric rise in popularity contributed to the July bankruptcy of over 20 companies run by taxi mogul Evgeny Freidman, as well as New York State’s September seizure of Montauk Credit Union, known for specializing in medallion loans.
Specifically, the complaint states that, “Defendants’ deliberate evisceration of medallion taxicab hail exclusivity, and their ongoing arbitrary, disparate regulatory treatment of the medallion taxicab industry, has and continues to inflict catastrophic harm on this once iconic industry, and the tens of thousands of hardworking men and women that depend on it for their livelihood.”
Lender-plaintiffs include the Lomto, Progressive and Melrose Federal credit unions, which said they have made more than 4,500 medallion loans worth over $2.4 billion. Other plaintiffs include the League of Mutual Taxi Owners Inc and the Taxi Medallion Owner Driver Association Inc which together represents approximately 4,000 medallion owners. Individual medallion owners are also named plaintiffs.
The lawsuit seeks punitive and compensatory damages. Moreover, it requests a reduction in the regulatory burdens currently placed upon cab drivers.
It will be interesting to see how the rights of cab drivers will weigh against new innovation and consumer choice.