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Taxi Companies Asked Georgia for a Bailout and Got Laughed Out of Court

New competition from ride-sharing services is not grounds for a takings claim, Georgia Supreme Court rules, because no taking took place. Obviously.

Ingram Publishing/NewscomIngram Publishing/NewscomTaxi companies that sued the state of Georgia over a 2015 law allowing ride-sharing services to operate in the state got laughed out of the Georgia Supreme Court this week.

Their case, such as it was, went like this. Back in 2015, the Georgia state legislature enacted changes to the state's laws governing taxi companies, allowing ride-sharing services like Uber and Lyft to operate for the first time. Prior to that, taxis had enjoyed a pretty sweet monopoly in Atlanta, where the number of taxi medallions had been capped at 1,600 for more than two decades. That artificial limit on the number of taxis, naturally, had caused the value of those medallions to skyrocket, making them valuable investments. One medallion was sold for $80,000 (and that's actually cheap compared to the value of taxi medallions in bigger cities like New York, where they can be worth more than $1 million).

Then, Uber and Lyft came along. Since the new ride-sharing services effectively removed the artificial cap on taxis in Atlanta, the value of those taxi medallions—technically known as "Certificates of Public Necessity and Convenience" or CPNCs—fell.

In court, the taxi companies claimed that by legalizing the new competitors, the state legislature had deprived them of their "exclusive right to provide rides origination in the city limits," and that the 2015 law had damaged the value of their medallions. As such, they argued that the state government must compensate them for the lost value—this is known as a "takings claim," along the lines of what happens when governments seize property through eminent domain.

Lower courts disagreed with the taxi companies, but they pushed the case all the way to the Georgia Supreme Court, where Justice Carol Hunstein issued a scathing, and unanimous, nine-page decision that tears through every part of the taxi companies' claim.

"Though it may be true that an occupational or business license – once secured – can become a protected property right," Hunstein writes, "there is no argument here that the [new law] deprives appellants of their CPNCs or of their right to engage in the taxicab business; indeed, a CPNC is still necessary to operate a taxicab in the City of Atlanta."

So the government didn't take anything away from the taxi companies. That seems pretty clear, but what about the claim that the taxis had lost their "exclusive right" to operate in Atlanta, and that it was that exclusivity which created value? Nonsense, says Hunstein. "Appellants have pointed to no law that would have prevented the city of Atlanta or the legislature from increasing the CPNC limit (and thus, the number of drivers)."

In short, the new law "does not take business property for a public use, it merely requires an already regulated business to adjust its property to the new law," Hunstein concludes.

This is all exactly right. It's unfortunate that taxi companies have seen the value of their medallions fall because of new competition, but some investments succeed and others fail. Atlanta's taxi medallions had an inflated value because of government-imposed caps on the taxi market, but those caps, as Hunstein points out, could have been increased or removed at any time. The medallions' value was based on little more than the expectation that the government would continue to protect a privileged monopoly.

Atlanta is hardly the only place where this is happening. As Nick Sibilla points out in Forbes, federal courts have rejected similar arguments from taxi companies looking for bailouts in Boston, Chicago, Miami, Milwaukee, Minneapolis, and New York City. Courts elsewhere should do the same.

If taxi medallion owners made a bad investments because they wrongly believed they could use the government to restrict competition and inflate the value of those investments, well, they were wrong. And there's no good reason why the taxpayers of Georgia should have to bail them out for making a bad investment.

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  • Fist of Etiquette||

    If taxi medallion owners made a bad investments because they wrongly believed they could use the government to restrict competition and inflate the value of those investments, well, they were wrong.

    Sounds like they should have invested a little more in the state legislature.

  • dantheserene||

    Investing in politicians is usually a sure bet, unless they are such toxic candidates that they are unelectable.

  • Rhywun||

    It's unfortunate that taxi companies have seen the value of their medallions fall because of new competition

    Yeah, no. I am richly enjoying the whining coming from those wretched scum.

  • BYODB||

    In some respects I do still feel bad for the cabbies. If you bought one of those medallions to run your own cab, the only legal method to be a cabbie, it is kind of bullshit that the investment you just made was essentially pulled out from under you.

    That being said, the true bullshit is that Atlanta would have artificially kept the supply of cabs so low that it inflated the value of those medallions so much. One would think that a 'wise' government would look at the value of those tokens on the market and expand the supply since it indirectly indicates demand for cabs within their city. New York especially should have realized this a long, long time ago but...New York unions are well known for their rent seeking.

    In other words, this is just more proof that centralized command and control is a terrible idea. The writing is on the wall for Cab companies unless they can innovate their way out of the mess they're in. Somehow, I doubt it'll work out for them.

  • loveconstitution1789||

    Crony capitalists get exactly what they deserve from trying to control markets using government rather than thru good products and services that people want.

    These taxi medallion schemes were concocted many decades ago and the government did not just come up with that idea out of the blue. Taxi/ horse carriage businessmen I am sure had input to keep start ups out.

    At the Atlanta airport, car services are not supposed to ask if you want a ride but they do all the time.

  • Rhywun||

    Meh, I'm not weeping for this guy or others like him.

    But the bulk of cabs aren't mom and pop operations, either. Fifty-eight percent of New York City's cabs are owned by corporate entities such as ["Taxi King"] Freidman's. Just a third are owned by the people who drive them.
  • Agammamon||

    I think the judge got it wrong.

    If I was sitting on the bench my ruling would have been 'yeah, you're right that the change in regulation is harming you. I award you elebenty-bajillion dollars. But if its harming you then the previous regulation set *benefited* you at the expense of the consumer - and so I say you owe elebenty-bajillion dollars of rebates to the customers you were able to bilk through your government-backed cartel'.

  • Tamfang||

    Yes, any scheme involving "certificates of public necessity" is a taking from others of the freedom to enter the biz; it may not look like a taking because the victims are diffuse.

  • Jerryskids||

    This is where the "Living Constitution" comes in - it seems to me that if the taxi companies argued there was an implied contract with the government and a reasonable expectation that a license to operate was an exclusive license, there's nothing at all in the written law to support that argument but there sure is plenty in case law and prior actions of the state to support it. Is it laughably silly to expect that if the government officials have always been willing to sell themselves to the highest bidder or their dearest buddies that they will continue to do so? There certainly is a legal argument to be made that the law must be enforced consistently, when consistent corruption, cronyism and self-dealing becomes the expected norm, the government can't just suddenly change that on a whim.

  • timbo||

    This competition shit is just making everything cheaper.
    If we keep allowing these free market reforms to happen, people will keep having more choices and clearer price signals.
    Does anyone see how dangerous this innovation and technology is to the advancement of the human condition?

    What we need is central control that leads to corruption and misery.

    Communism works if it is done right.

  • loveconstitution1789||

    If only we had competition and free market with healthcare.

  • eyeroller||

    It's unfortunate that taxi companies have seen the value of their medallions fall because of new competition

    No it isn't.

  • BambiB||

    This does a good job of laying out the case of "Taxi Medallions as Speculation" - but a poor job of addressing the fact that anyone in the taxi business was compelled by the state to buy the medallions to operate their business. In other words, it wasn't the taxi businesses that drove up the price of entry into the taxi business - but the government itself.

    It's akin to the crap that governments pull when they try to woo a new business to set up shop in their locale. Tax waivers for five years? What about the suckers who have been running their businesses under the onerous taxation policies for decades - and must now face new competition that is being given an unfair decrease in operating costs by the government?

    None of this is defense of the the Taxi Medallions - rather, it is an indictment of the government, which lies, cheats and steals... which is, I suppose, how we know it IS government.

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