United States District Court, D. Massachusetts
BOSTON TAXI OWNERS ASSOCIATION, INC., RAPHAEL OPHIR and JOSEPH PIERRE Plaintiffs,
CITY OF BOSTON, BOSTON POLICE COMMISSIONER WILLIAM EVANS, CHAIRMAN ANGELA M. O’CONNOR, COMMISSIONER JOLETTE A. WESTBROOK, COMMISSIONER ROBERT HAYDEN, DEPARTMENT OF PUBLIC UTILITIES, and MASSACHUSETTS DEPARTMENT OF TRANSPORTATION SECRETARY STEPHANIE POLLOCK, Defendants.
MEMORANDUM & ORDER
Nathaniel M. Gorton United States District Judge
In this action, the Boston Taxi Owners Association, Inc., along with two individual Boston taxicab license owners, Raphael Ophir and Joseph Pierre (collectively, “plaintiffs”), challenge city and state regulations with respect to the registration and operation of vehicles providing transportation-for-hire services. Plaintiffs bring claims on federal constitutional, state contract and equitable grounds. The suit is brought against the City of Boston and Boston Police Commissioner William Evans (collectively, “the city defendants”) and against Angela M. O’Connor, the Chairman of the Massachusetts Department of Public Utilities (“DPU”) and Jolette A. Westbrook and Robert Hayden, DPU Commissioners (collectively, “the DPU defendants”), and Stephanie Pollack, the Secretary of the Massachusetts Department of Transportation (“MassDOT”) (collectively, “the state defendants”).
Recent amendments to the state regulations establish standards for the registration of motor vehicles providing services for so-called Transportation Network Companies (“TNCs”), such as Uber, Lyft and Sidecar. See 540 CMR § 2.05. Plaintiffs contend that those amendments create an arbitrary, two-tiered system between TNCs and taxicabs that violates plaintiffs’ constitutional and contract rights. Moreover, they argue that the continuing failure of the City of Boston and Commissioner Evans to enforce existing local regulations governing the Hackney Carriage industry against TNCs also violates plaintiffs’ constitutional and contract rights.
Pending before the Court are three motions to dismiss filed by the City of Boston, William Evans, and the state defendants. Also pending before the Court is plaintiffs’ second motion for a preliminary injunction against the City of Boston.
A. City Regulation of the Taxi Industry
The main source of regulation for the City of Boston (“the City” or “Boston”) taxicab industry is its Police Commissioner (“the Commissioner”), who is authorized by state statute to regulate the taxi business in Boston. In exercising that authority, the Commissioner requires anyone who drives or is “in charge of” a “hackney carriage” (i.e. taxicab) to possess a license known as a “taxicab medallion.” There are currently 1, 825 city-issued medallions.
In 2008, the Commissioner issued a comprehensive set of taxicab regulations under Boston Police Department Rule 403 (“Rule 403”). Rule 403 defines a taxicab as “[a] vehicle used or designed to be used for the conveyance of persons for hire from place to place within the City of Boston.” Since its inception, Rule 403 has not been applied to livery vehicles, despite the fact that the rule’s broad definition of a taxicab would seem to encompass them.
The rule requires all taxicab operators, inter alia, to possess a medallion, maintain a properly equipped and functioning taxicab, display a hackney carriage license at all times, refrain from cell phone use while operating a taxicab and belong to an approved dispatch service or “radio association.” Rule 403 also sets out the approved manner in which a taxicab in the City can engage customers.
Beginning in 2012, companies such as Uber, Lyft and Sidecar began operations in Boston and surrounding communities. The cellular phone app-based, for-hire transportation services have quickly gained popularity and serve as an alternative to traditional taxicab or livery services. The new companies rely, to varying degrees, on drivers who provide pre-arranged transportation services in their own private vehicles.
The City of Boston has yet to issue regulations specifically targeted at such companies, nor does it enforce Rule 403 against them. In October, 2014, however, the City convened a “Taxi Advisory Committee” which is authorized to examine the City’s regulatory framework of for-hire transportation services and to develop new policies to account for these relatively new entrants into the market.
B. State Regulation of Motor Vehicle Registration
Overlaying the specific city regulations for taxicabs, MassDOT has enacted statewide requirements for the registration of all motor vehicles. 540 CMR § 2.05. Prior to a set of amendments enacted in 2015, 540 CMR § 2.05 outlined two ways in which small-scale vehicles (designed to carry 15 or fewer passengers) need to be registered in order to carry passengers for hire. The first kind of registration pertained to “taxicabs”, defined as
any vehicle which carries passengers for hire, and which is licensed by a municipality pursuant to M.G.L. c. 40, § 22 as a taxicab.
The second kind of registration was for a “livery vehicle”, defined as
any limousine or other vehicle which ... carries passengers for hire ... [but] is not required to obtain a taxicab license pursuant to M.G.L. c. 40, § 22.
As of January 16, 2015, MassDOT revised 540 CMR § 2.05 to include a third alternative for the registration of small-scale vehicles used to carry passengers for hired transportation. Under this third option, private passenger vehicles can be registered and used as “personal transportation network vehicles” on behalf of Transportation Network Companies, or TNCs. TNCs are defined as
entit[ies] operating in Massachusetts that, for consideration, will arrange for a passenger to be transported by a driver between points chosen by the passenger.
The amended regulations also restrict the way in which drivers using their own private vehicles on behalf of a TNC can solicit customers. Specifically, the TNC must have pre-arranged for the driver to provide transportation services and the driver is not permitted to solicit or accept an on-demand ride, otherwise known as a “street hail” or “hail pick-up.” Thus, the amended regulations broadly define TNCs and permit TNC drivers to use their own private vehicles so long as they register the vehicle as a “personal transportation network vehicle” and provide transportation services only to passengers that the TNC pre-arranged. Accordingly, the new regulations provide some restrictions on the way in which companies such as Uber, Lyft and Sidecar operate within the Commonwealth. The new state regulations do not address whether TNC drivers must obtain taxi medallions, which is a matter of local regulation.
The amendments to 540 CMR § 2.05 also set standards for TNC drivers’ driving records. Further, although the regulations were promulgated by MassDOT, they instruct DPU to regulate TNCs by (1) requiring TNCs to obtain a certificate from DPU in order to do business in Massachusetts, (2) ensuring that TNCs and their drivers to carry appropriate liability insurance and (3) requiring TNCs to perform background checks on their drivers.
Since the amendments were promulgated, however, the new gubernatorial administration has adopted a different interpretation of DPU’s authorizing legislation which does not permit DPU to implement the aforementioned duties without a further legislative act granting the agency the authority to do so. Accordingly, the restrictions on TNCs which were to be implemented by DPU have not yet begun to be enforced.
C. Procedural History
Plaintiffs filed their lawsuit and an emergency motion for a preliminary injunction on January 16, 2015, the same day that MassDOT’s amendments to 540 CMR § 2.05 went into effect. After briefing by both parties and a hearing, the Court denied the motion on February 5, 2015. In a memorandum and order, the Court explained that its assessment of the balance of harms entailed by the proposed preliminary injunction was informed by its conclusion that issuing an injunction at that moment would short-circuit an ongoing political process at the city and state level through which potential legislation regulating TNCs was being considered.
The Court stated, however, that it expected that the City would demonstrate a purposeful commitment to action by promptly submitting recommendations on the regulation of TNCs to the City Council. The City was warned that failure to do so would cause the Court to re-examine plaintiffs’ request for injunctive relief.
On May 15, 2015, after plaintiffs had filed an amended complaint, defendants filed three motions to dismiss, one by the City of Boston, one by Commissioner Evans and one by the state defendants. On August 26, 2015 plaintiffs filed a second motion for a preliminary injunction against the City.
D. Legislative and Regulatory Developments Since the Court’s Consideration of Plaintiffs’ First Motion for a Preliminary Injunction
Since the Court’s ruling on plaintiffs’ first motion for a preliminary injunction, developments with respect to the potential regulation of TNCs have occurred at both the city and state level. Specifically, the City of Boston’s Taxi Advisory Committee has continued to convene and Commissioner Evans has purportedly been considering several changes to Rule 403, including a reduction in the required vehicle lease rates for taxi drivers, elimination of the requirement that medallion owners be radio association members and withdrawal of the requirement that taxicabs be factory new vehicles.
Further, several proposed bills that would regulate TNCs have been filed in the state legislature. On March 7, 2016 the Massachusetts House of Representatives reported out of committee a revised version of House Bill H.4049, a bill proposed by Governor Baker on April 27, 2015. The bill immediately moved to the House floor and was passed with amendments on March 9, 2016. The Massachusetts Senate is purportedly in the process of drafting its own bill with the intention that the chamber will approve a bill in time for both houses to agree on a final version before the end of the legislative session in July, 2016.
II. Defendants’ Motions to Dismiss
The City of Boston, Commissioner Evans and the state defendants each moved to dismiss all of plaintiffs’ claims against them for failure to state a claim under Fed. R. Civ. P. 12(b)(6). The state defendants also move for dismissal of plaintiffs’ claims for lack of jurisdiction under Fed. R. Civ. P. 12(b)(1). Although the same claims apply to all parties, each party’s motion will be discussed individually with discussion of the substantive claims preceding any necessary examination of plaintiffs’ remedial claims.
A. Legal Standards
1. Motion to Dismiss for Failure to State a Claim
To survive a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), a complaint must contain “sufficient factual matter” to state a claim for relief that is actionable as a matter of law and “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible if, after accepting as true all non-conclusory factual allegations, the court can draw the reasonable inference that the defendant is liable for the misconduct alleged. Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011). A court may not disregard properly pled factual allegations even if actual proof of those facts is improbable. Id. Rather, the relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw. Id. at 13.
When rendering that determination, a court may not look beyond the facts alleged in the complaint, documents incorporated by reference therein and facts susceptible to judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011).
2. Motion to Dismiss for Lack of Subject Matter Jurisdiction
In opposing a motion to dismiss for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1), the plaintiff bears the burden of establishing that the Court has jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). The Court assumes that all material allegations set forth in the complaint are true. See Mulloy v. United States, 884 F.Supp. 622, 626 (D.Mass. 1995); Williams v. City of Boston, 784 F.2d 430, 433 (1st Cir. 1986). The averments of the complaint, as well as their proper inferences, are construed in favor of the plaintiff and the claim will not be dismissed unless "it appears beyond doubt that the plaintiff can provide no set of facts in support of his claim which would entitle him to relief." Williams, 784 F.2d at 433; Mulloy, 884 F.Supp. at 626.
B. City of Boston’s Motion to Dismiss for Failure to State a Claim (Docket No. 38)
Plaintiffs allege that defendants have violated their constitutional rights under the Takings and Equal Protection Clauses and their contract rights under Massachusetts law by declining to enforce Rule 403 against TNCs. Defendants move to dismiss each of these substantive claims as well as plaintiffs’ claim for declaratory relief.
1. Takings Clause (Count 4)
a. Legal Standard
The Takings Clause of the Fifth Amendment prohibits the government from taking private property for public use without just compensation. Maine Educ. Ass’n Benefits Trust v. Cioppa, 695 F.3d 145, 152 (1st Cir. 2012). The clause applies to
not only the paradigmatic physical taking ... but also to regulatory interferences, which transpire when some significant restriction is placed upon an owner’s ... property [use] for which fairness and justice require that compensation be given.
Id. (citation and internal quotations omitted).
Plaintiffs’ first substantive claim alleges that the City’s failure to enforce Rule 403 against TNCs violates the Takings Clause because it constitutes a taking of property without the payment of just compensation. Plaintiffs contend that they hold property rights in their medallions which they claim provide them with the “exclusive right to engage in the taxi business.” By eliminating the exclusivity of the medallions as a means for entering the transportation-for-hire market, plaintiffs aver, the City took their property without paying just compensation.
A threshold question about which the parties disagree is whether the medallions constitute property. This is a difficult and contentious issue given the large investment of resources that plaintiffs have made to comply with the City’s regulations in order to obtain and maintain their medallions. The Court need not, however, decide this issue. Even if the medallions are property the rights associated therewith do not include the right allegedly confiscated.
Plaintiffs frame the taking as the destruction of their “exclusive right to engage in the taxi business” which they obtained through the purchase of their medallions. They correctly note that the right to exclude others from one’s property is “perhaps one of the most fundamental of all property interests.” Lingle v. Chevron U.S.A., Inc., 528, 539 (2005). Assuming, arguendo, that medallions are property, by purchasing medallions plaintiffs each obtained an individual right to enter the transportation-for-hire market. Each medallion owner has the right to exclude others from using his or her medallion and the authority it confers to provide taxi services.
But the owner of a medallion does not possess a property interest in the transportation-for-hire market itself. Consequently, a medallion owner has no right to exclude others from the market. This is evident in the fact that taxi medallion owners may not exclude other taxi medallion owners from participating in the market. Nor would they be able exclude new medallion purchasers if the City were to increase summarily the number of available medallions. Similarly, the aggregation of the rights of all medallion owners does not create a right that is new in kind, the right to exclude non-medallion owners from the market. Rule 403 did not provide medallion owners with “an unalterable monopoly” over the transportation-for-hire market. Minneapolis Taxi Owners’ Coal. v. City of Minneapolis, 572 F.3d 502, 508 (8th Cir. 2009).
The exclusivity of medallion owners’ access to the market prior to the arrival of TNCs existed by virtue of the City’s regulatory structure rather than the medallion owners’ property rights. Medallion owners have no property interest in the enforcement of Rule 403 against others. See Town of Castle Rock, Colo. v. Gonzales, 545 U.S. 748, 766 (2005). If a person who wishes to operate a taxicab without a medallion is prevented from doing so, it is because he or she would violate municipal regulations, not because he or she would violate medallion owners’ property rights.
Plaintiffs have not alleged that the City has revoked, suspended or impeded their ability to use their medallions. Plaintiffs’ sole claim is that the loss of market exclusivity caused by the City’s failure to enforce Rule 403 against TNCs has caused the value of their medallions to diminish. Because plaintiffs have no right to market exclusivity, they have failed to state a claim upon which relief can be granted. As such, defendant’s motion to dismiss Claim 4 of the amended complaint will be allowed.
2. Equal Protection (Count 5)