Budget limo companies hit snag in case against minimum fare, may be on right track

Sunday, April 15, 2012 at 10:05pm

Nashville’s own Metro Livery may be one of the only budget limousine companies in the country to have an active news section featured on its website. But the company’s unique situation warrants it.

Metro Livery and two other Nashville limo companies are embroiled in a legal battle over a $45 minimum fare ordinance imposed on the companies by the city’s Metropolitan Transportation Licensing Commission. The Metro Council passed the ordinance in 2010.

The ordinance directly targeted a profitable niche that Metro Livery and other “affordable” transportation companies created. Instead of charging $40 for rides to the airport like cab companies, Metro Livery charged $25 for rides in black sedans. Most cab companies offer a $25 flat rate from a downtown zone and Opryland to the airport, but prices outside the zone are based on mileage.

But MTLC stepped in, arguing that if taxis required regulation, other “for-hire” car companies were subject to regulations, as well. Metro Livery and two other companies responded with a lawsuit in 2011. The case gained momentum, and the Institute for Justice, a libertarian public-interest law firm in Seattle, stepped in to represent the liveries.

In the most recent action, U.S. District Judge Kevin Sharp rejected a motion for injunction by Metro Livery, which requested that the court prevent Metro from enforcing the $45 minimum fare while the case was being decided.

And even though the ruling wasn’t in the liveries’ favor, Sharpe’s decision scoffs at the ordinance, points a finger at the Metro Council, and could lay out a path for the overturning of the bill.

 

 

Wesley Hottot, Institute for Justice’s lead counsel for Metro Livery, said his team is attempting to use the 14th Amendment’s equal protection clause as a basis to convince Sharp that the $45 minimum fare is unconstitutional.

As part of the challenge, the defense will have to prove a “rational basis” for the ordinance. Rational basis is a broad term — and Sharp acknowledged that “even foolish and misdirected provisions are generally valid” under the rational basis standard of review.

Sharp also took a shot at the ordinance, noting that lower fares would “undoubtedly” benefit Nashville citizens and tourists, but that it’s up to the Metro Council to make those determinations.

“However, and as already noted, what is best for Nashville in terms of regulating the ground transportation industry is not a decision for this Court to make,” Sharp wrote. “That decision lies with the Metro Council.”

But Sharp’s ruling on the injunction was only preliminary — and Hottot believes his team can successfully challenge Metro’s rational basis after compiling more evidence. 

“Judge Sharp emphasized that this is a preliminary ruling and indicated that if there were more evidence available to him that he might be willing to strike down the minimum fare,” Hottot said.

“This motion was an emergency motion ... as a result of that, we did not have all of the evidence Judge Sharp felt he needed to put a stop to this law while we continue toward trail.”

According to court filings, Metro’s “rational basis” for the $45 minimum fare is fivefold:

The ordinance reflects an “effort to differentiate between types or classes of licenses.” For example, it helps distinguish a taxi company from a limo service.

• Economic concerns would be addressed by the ordinance. For instance, it would ensure fair pay for drivers, rather than forcing lower payouts due to overall lower, more competitive prices.

• The ordinance prevents poaching so that companies like Metro Livery can’t “encroach on taxi driver’s turf and vice versa.”

• Customers will have a clearer understanding of what they are purchasing if there’s a minimum fare in place.

• Overall, the minimum fare would help the city attract more tourists and bid for large events.

Hottot argues, though, that the institution of a minimum fare had little to do with any of those reasons and more to do with protecting expensive limo companies’ interests. If his side can produce evidence to emphasize that disconnect, he believes Judge Sharp will strike down the ordinance.

“There are two paths to victory: We can demonstrate that the Metro Council was motivated by nothing other than economic protectionism, or we can show that the government’s method of regulations doesn’t sufficiently advance its interest of distinguishing taxi cab and black car companies to justify an across-the-board increase in prices,” Hottot said.

Metro attorney Derrick Smith, citing local rules, declined to comment on ongoing litigation.

 

 

In his ruling, Sharp compares this case to one decided by the 11th U.S. Circuit Court of Appeals that involved the city of Atlanta. In that case, a judgment was issued in favor of the city and the court ruled that the minimum fare passed “the rational basis test, albeit with little room for comfort.”

Sharp said that Metro’s use of a draft from the Tennessee Livery Association, a representative of high-end limo companies, in coming up with the minimum fare is a bit suspect in Nashville’s case.

“Defendant’s rationale is not overly compelling, and the near wholesale use of TLA’s draft legislation seems a bit fishy,” Sharp wrote in his memorandum.

Hottot claims that Metro’s rational basis is vulnerable — and it’s just a matter of giving the court all the evidence, which they haven’t had time to compile yet.

“[Judge Sharp] seems open to our case and we think we’re ultimately going to win,” Hottot said.     

6 Comments on this post:

By: WickedTribe on 4/17/12 at 5:57

So it's the government's fault for these insanely high cab fares and not the cab companies being greedy?

By: willtw on 4/18/12 at 6:23

Metro ordinance, enforced by certain TPSC rules, have for years been a source for "protectionism" in the various phases of charter and public transport for hire. More than public issues, restrictions have usually been placed on "new comers" to public for hire livery, be it limo, or larger vehicle, non-taxi transportation. The tour industry in years past had barriers not to protect the public but to limit competition, thus holding prices at levels that were fixed. If one tears apart the parties set on price controls, it usually is one or more persons engaged in providing that service rather than the City efforts to artifically maintain higher pricing....We experienced it in the 1980's wanting to provide commuter and downtown employee work to lot bus service. Because of that insanity and price fixing, we closed our doors and sold our equipment to some of the very people benefiting from the fiixed pricing of the government agencies....had we been "minority or woman owned enterprise, it would have likely been approved....the public rarely gets the full story and may be the case with taxi fares....MTA had no dog in the hunt!

By: JeffF on 4/18/12 at 9:33

does it seem that Tennessee and Nashville get used as "barriers to entry" a lot more than other governments not in the Northeast?

Nashville protects:
- Incumbent taxi companies
- Airport owned parking
- cable companies
- hotel and honky tonk owners in downtown

Tennessee has barriers that protect:
- auctioneers
- funeral directors
- liquor distributors
- liquor retailers

these businesses can whine all they want about having to get state licensing, but we all know that they wanted the state and locals involved in order to keep out the 2nd and 3rd wave of competitors. We saw it in the ATT v. Comcast fiascos a few years ago and we see it in requirements that "protect" people from price shopping for funeral services.

Personally, I dislike with a passion that my elected government is used as a protection racket, choosing winners or losers.

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