Hail? No! There's an App for That: Georgia Courts Signal Favor for Innovation Over Monopolies as Taxis Battle Against Rideshares for Market Dominance
| Publication year | 2021 |
Hail? No! There's an App for That: Georgia Courts Signal Favor for Innovation Over Monopolies as Taxis Battle Against Rideshares for Market Dominance
Sara Snowden
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Atlanta Metro Leasing, Inc. v. City of Atlanta1 was a battle in the making between traditional taxis2 and novel rideshares3 since the latter emerged in Atlanta's vehicle-for-hire marketplace.4 As a major player in Atlanta's traditional taxi industry, Atlanta Metro Leasing, Inc. (Atlanta Metro) went toe-to-toe with the City of Atlanta (City) for refusing to enforce its ordinances against rideshare companies, such as Uber and Lyft.5 Atlanta Metro contended the City's failure to enforce its ordinances eroded Atlanta Metro's previously enjoyed exclusivity in the vehicle-for-hire industry, and therefore, diminished the value of taxi
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medallions.6 Looming in the background, the advent of rideshares prompted a nationwide rash of similar, but unsuccessful, lawsuits.7 In addition to this unfavorable, yet persuasive precedent, Atlanta Metro faced the challenge of overcoming the City's sovereign immunity defense.8
In an attempt to overcome these hurdles, Atlanta Metro presented the court with a matter of first impression: whether the City's issuance of taxi medallions created franchise agreements.9 The appeal of this argument to Atlanta Metro was that a franchise agreement10 is a contract protecting market exclusivity.11 And according to the Georgia Legislature, a government entity cannot hide behind sovereign immunity when it has breached a contract.12 Ultimately, the court disagreed and held that the issuance of medallions did not constitute a franchise agreement.13 The court's response to these arguments reflects its forward-thinking approach and receptive attitude to the advancement of technological innovations.
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The City has long required that taxis, a type of vehicle for hire, have a medallion and a City-issued license to operate.14 After the City capped the number of authorized medallions, the medallions themselves became lucrative investments in what was considered a closed, exclusive market.15 This medallion cap also fostered an understanding among medallion owners "that the city would take reasonable measures to enforce the [taxi] ordinance[s] such that unlicensed taxicab businesses in the City would be curtailed and . . . [medallion] values would be protected from diminution arising out of unlawful competition."16
Fast forward to 2012, the City saw the emergence of rideshare companies, namely Uber and Lyft, operating as rivals to traditional taxis.17 The City initially responded by ticketing rideshare drivers as unlicensed taxis but suspended these efforts entirely in 2014.18 The City's deferential treatment of rideshares has had dire consequences on medallion values.19 In 2014, a single medallion in Atlanta was valued at $80,000.20 By 2017, the estimated value was less than $10,000.21 This is similar to plummeting values in other cities across the nation due to the advent of rideshares. For example, the average cost of a medallion in New York City fell from $1.16 million down to $164,518 between March 2014 to November 2019.22
Atlanta Metro filed suit against the City in the Fulton County Superior Court for breach of franchise agreements allegedly created when the City issued taxi medallions.23 Atlanta Metro claimed that taxis were "urban transportation companies," and therefore, met the statutory classification requirements of section 36-34-2(7)(A) of the Official Code of Georgia Annotated,24 under which the City was authorized to grant
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franchises.25 Furthermore, Atlanta Metro asserted that, in addition to vesting property rights, medallion ownership guaranteed market exclusivity, and by failing to enforce taxi regulations equally against rideshares, the City permitted illegal competition to damage medallion values.26 The lawsuit spanned from 2014, when the City stopped issuing citations to rideshares operating without medallions, until 2015 when the Georgia General Assembly enacted legislation governing rideshares.27 In response, the City filed a motion to dismiss. The trial court granted the City's motion but gave no basis for its ruling.28
On appeal, the Georgia Court of Appeals affirmed the trial court's ruling.29 The court of appeals rejected the assertion that taxis were urban transportation companies.30 Therefore, since taxis did not fall into one of the statutorily required classifications necessary for franchise formation, the court held no franchise agreement or promise of market exclusivity was created when the medallions were issued.31
A. Local and State Legislative History
The Atlanta Code of Ordinances (Code)32 has given the City the power to regulate taxis as vehicles for hire, since 1977.33 Per the Code, taxis must be licensed by the City to operate in Atlanta.34 However, the City
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also exercised its authority under O.C.G.A. § 36-60-25(a)35 and stipulated that, as a prerequisite to obtaining a license, taxi operators must first possess a limited, and therefore, hard-to-come-by taxi medallion.36 The state of Georgia and the City both recognize that these medallions have inherent property interests.37 Per O.C.G.A. § 36-60-25(b),38 medallions are fully transferrable by way of "purchase, gift, bequest, or acquisition . . . ."39 Georgia Code section 36-60-25(b) also permits that medallions can serve as collateral for loans, granting lenders property rights as well.40 Section 162-62 of the Atlanta City Ordinance,41 which governs medallions in the City, echoes the language of the statute.42
In response to the growing popularity of rideshares and varying degrees of regulation in each municipality, the Georgia General Assembly passed House Bill 225.43 Codified at O.C.G.A. § 40-1-191,44 this statute preempted the entire field of regulation over vehicles for hire, providing uniform administration of taxis and rideshares throughout the state.45 Though O.C.G.A. § 36-60-25(c)46 was also amended to prohibit new taxi medallion regulations, any preexisting mandates, like those in the City, remained enforceable.47
B. Taxis and Rideshares: Equal Protection and Market Exclusivity
1. Bifurcated Schemes and Unequal Treatment
When courts in other jurisdictions considered whether regulatory schemes that held taxis and rideshares to different standards violated
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equal protection rights, they answered in the negative.48 Bifurcated laws that resulted in unequal treatment were constitutional if there was any rational basis for the distinctive classifications.49
The United States Court of Appeals for the Seventh Circuit focused on the differences between taxis and popular rideshare company, Uber, in the 2016 case, Illinois Transportation Trade Association v. City of Chicago.50 Striking down claims of equal protection violations, the court held that the respective modes of operation were sufficiently dissimilar which justified Chicago's separate regulatory structures.51 Notably, there was a marked difference in the process by which passengers engaged taxis and rideshares.52 Taxis were hired by being hailed on the street, called through a dispatch service, or summoned at a taxi stand.53 Ubers, meanwhile, could not be hailed in a point-of-sale fashion.54 Ubers were hired by passengers who registered for an online account prior to summoning the rideshare.55 The court held that, in contrast to hailing a taxi, the process by which passengers requested Ubers created a contractual relationship between the parties.56
Additionally, the court listed several convenience and safety advantages of Uber over taxis.57 Uber stored passenger payment information, provided estimated arrival times, and allowed patrons to hail a ride from anywhere (as opposed to traditional taxi street hails).58 Moreover, Uber featured safety controls that allowed passengers to view driver identification and ratings before the rider entered the vehicle.59 Likewise, passengers were encouraged to leave ratings after each trip as this enticed safer driving practices.60 Furthermore, because Uber hired part-time drivers, the cars presumably were driven less miles and had less wear and tear.61 Regarding taxis, the court noted that some
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passengers still preferred them because they were hailed quickly and were immediately available.62 Also, taxi fares were fixed by the city and predictable.63 However, given that the nature of street hails made passengers more vulnerable, the city was justified when it enacted more stringent oversight of taxis.64 Holding that rideshares and taxis were distinct services, the court reasoned that consumers likely agreed, because if not, rideshares could not have been established.65
Similar to Illinois Transportation, in Checker Cab Philadelphia v. Philadelphia Parking Authority,66 a 2018 case from the United States District Court for the Eastern District of Pennsylvania, the court also considered the merits of alleged equal protection violations.67 The court found the claim lacking because taxi and rideshare companies were not similarly situated, and therefore, unequal treatment was justified.68 Beginning in October 2014, the Philadelphia Parking Authority (PPA) enforced taxi ordinances against illegal rideshares.69 However, in 2016, the PPA and Uber reached a settlement, and the PPA ceased all impound and enforcement actions against rideshares.70 This agreement constituted an acquiescence of rideshares' growing popularity in Philadelphia.71
The court ruled that the legal status of taxis and rideshares was substantially different.72 The court found it "significant that the Pennsylvania legislature enacted new laws specifically"73 for rideshares, rather than adapting existing taxi...
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