San Francisco Taxi Coalition et al v. City and County of San Francisco et al, No. 3:2019cv01972 - Document 40 (N.D. Cal. 2019)
Court Description: ORDER DENYING 19 MOTION FOR PRELIMINARY INJUNCTION. By Judge Alsup. (whalc3, COURT STAFF) (Filed on 6/6/2019)
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San Francisco Taxi Coalition et al v. City and County of San Francisco et al Doc. 40 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 11 For the Northern District of California United States District Court 10 12 13 16 17 ORDER DENYING PRELIMINARY INJUNCTION Plaintiffs, 14 15 No. C 19-01972 WHA SAN FRANCISCO TAXI COALITION, PATRICK O’SULLIVAN, SAI LEE, GEORGE HORBAL, ALLIANCE CAB and S.F. TOWN TAXI INC., v. CITY AND COUNTY OF SAN FRANCISCO; SAN FRANCISCO MUNICIPAL TRANSIT AGENCY; EDWARD D. REISKIN, Director of Transportation; and DOES 1 through 20, 18 Defendants. / 19 20 INTRODUCTION 21 In this action, taxi medallion holders move to preliminarily enjoin the City of San 22 Francisco from implementing a newly promulgated rule. This rule would restrict certain 23 categories of taxi medallion holders from picking up fares at San Francisco International 24 Airport. The preliminary injunction is DENIED. 25 STATEMENT 26 1. 27 The San Francisco Municipal Transit Agency issues permits to individuals, joint tenants, 28 TAXI MEDALLIONS. or businesses to operate particular taxis in the City and County of San Francisco. These Dockets.Justia.com 1 permits, called taxi medallions, remain the property of the city. Fewer than 1500 medallions 2 operate throughout San Francisco (Dkt. No. 26 ¶¶ 8–9). 3 These medallions can be divided into three general categories. First, medallions issued 4 before 1978. Second, medallions issued between 1978 and 2010. Third, medallions issued after 5 2010. 253 medallions remain in the first category, 559 in the second category, and 625 in the 6 third (id. ¶ 9.a–d).1 The medallions issued pre-1978 had few limitations. They could be held by both For the Northern District of California United States District Court 7 8 companies and individuals, one holder could hold more than one medallion, the medallions 9 could be transferred, and the medallion holders had no obligation to drive a minimum number 10 of annual miles. One corporation currently holds 16 medallions. The City of San Francisco 11 issued these pre-1978 medallions for thousands of dollars (id. ¶¶ 9.a–b, 13–14).2 In 1978, Proposition K regulated the taxi industry. Among other reforms, Proposition K 12 13 eliminated corporate-held medallions, limited individuals to one medallion each, and required 14 these individuals to drive full time (800 hours/year or 156 four-hour shifts/year). These rules 15 did not apply retroactively. In addition, post-1978 medallions could only be sold if the 16 medallion holder was at least 60 years old or had a permanent disability. In stark contrast to the 17 pre-1978 class of medallion holders, post-1978 medallion-holders paid $200 for their 18 medallions (id. ¶¶ 9.c, 15). 19 In 2010, the San Francisco Municipal Transit Agency began selling medallions for 20 $250,000. Most of these medallions had been purchased from permanently disabled taxi drivers 21 or taxi drivers over the age of 60. The Transit Agency paid these drivers $200,000 to surrender 22 their medallions, keeping the remainder. The Transit Agency generated $63 million in revenue 23 from these medallion sales (id. ¶¶ 9.c, 18, 19). 24 25 26 27 28 1 An additional two categories of medallions less pertinent to this motion exist: medallions issued to wheelchair accessible vehicles and medallions leased month-to-month. Thirty-eight medallions remain in the former category and three in the latter (Dkt. No. 26 ¶¶ 9.e–f). 2 The pre-1978 medallions are no longer permitted to be transferred or sold (Dkt. No. 26 ¶¶ 9.a–b). 2 1 2 Almost always, lenders took a security interest in the medallion. The San Francisco Federal 3 Credit Union financed hundreds of medallion sales (id. ¶ 16). For the Northern District of California 4 United States District Court Many individuals who purchased medallions after 2010 took out loans to buy them. Shortly after this change, any best of times for medallion holders turned into the worst 5 of times. Starting around 2012, “ride-sharing” technology companies (like Uber and Lyft) 6 disrupted the taxi industry. In 2014, annual taxi trips from San Francisco Airport numbered 7 over two million. By 2018, this number sank to slightly over one million. The credit union has 8 foreclosed on over 160 medallions. The Transit Agency has not sold a single medallion since 9 April 2016 (id. ¶¶ 21–22, 24, 49).3 10 2. THE 2018 REGULATIONS. 11 In 2017, the Transit Agency brought in an outside consulting group to study the industry 12 and make recommendations. PFM Consulting and Schaller Consulting issued a report with 13 three conclusions in May 2018. First, the report found that “[post-2010 m]edallion holders are 14 under severe financial pressure.” Between $1,500–$2,500 per month in obligatory loan 15 payments distinguished the financial burden of the post-2010 medallion holders from the rest. 16 Second, more than three quarters of existing medallions are “underutilized” as only 17% of 17 medallions brought in at least $65,000 in annual revenue. Third, increased taxi wait times at the 18 airport caused congestion. Taxis wait for over 90 minutes between fares in the airport taxi hold 19 (the taxi waiting area in San Francisco Airport) (id. ¶¶ 24, 26–29). 20 Based on this report, the Transit Agency’s in-house research and input it received from 21 the industry (after holding six taxi town hall meetings between May and September 2018), the 22 Transit Agency submitted a number of reforms to its board of directors. One of these reforms 23 delegated authority to the Transit Agency’s director to impose restrictions on the types of 24 medallions authorized to pick up fares at the airport. The board adopted the resolution in 25 October 2018 (id. ¶¶ 31–33). 26 27 28 3 In a separate action, the credit union brought suit against the Transit Agency for $28 million in damages (San Francisco Sup. Ct. Case No. CGC-18-565325). The allegations included that the Transit Agency breached its obligation to foster and maintain a vibrant taxi industry, breached lender agreements, and made misrepresentations. 3 Pursuant to this authority, in December 2018, the Transit Agency director announced For the Northern District of California United States District Court 1 2 new regulations to go into effect February 1, 2019. These regulations governed taxi pickups at 3 the airport, restricting access based on medallion. More specifically, the 1978–2010 and post- 4 2010 medallion holders were still permitted to pick up fares at the airport. Pre-1978 medallions 5 were not. Further, the 1978–2010 and post-2010 medallion holders no longer had the same 6 access. The post-2010 medallions would be dispatched from one lot at a 3:1 ratio in 7 comparison to the lot dispatching the 1978–2010 medallion holders (id. ¶¶ 34–35).4 8 The purported reasons for this rule were as follows. First, the rule aimed to reduce taxi 9 congestion at the airport. Between holding lots and designating curbside areas, the airport can 10 accommodate 476 taxis on site. These spots are often full. Taxis unable to find a spot then 11 circle the terminal waiting for an opening. This leads to congestion (id. ¶¶ 37–39). Second, the rule aimed to force more taxi cabs to operate in San Francisco. Because 12 13 pre-1978 medallion holders may only service trips originating in San Francisco proper, 14 individuals in San Francisco will purportedly have swifter access to taxis (id. ¶¶ 40–42). Third, the rule aimed to drive revenue to the post-2010 medallion holders. To recall, 15 16 most of these medallion holders paid $250,000 for their medallions. Most of these taxi drivers 17 financed this purchase through loans. Now, these medallion holders owe between 18 $1,500–$2,500 per month. This has led to over 160 post-2010 medallion foreclosures. These 19 medallion holders have suffered the most. Defendants aver that a post-2010 medallion holder is 20 estimated to earn less than $40,000 per year on average, whereas a medallion holder from 21 1978–2010 earns over $54,000 annually (id. ¶¶ 45–50).5 22 3. 23 In March 2019, six plaintiffs filed suit in California state court. A brief description of 24 THIS ACTION. each plaintiff follows. 25 26 27 28 4 Medallions issued to wheelchair-accessible vehicles remained permitted to pick up fares at the airport but had secondary access. Medallions leased month-to-month were prohibited from the airport (Dkt. No. 26 ¶ 34). 5 A fourth reason applies solely to the wheelchair-accessible category of drivers, but is not pertinent to the claims here (Dkt. No. 26 ¶ 51). 4 For the Northern District of California United States District Court 1 According to the complaint, plaintiffs Patrick O’Sullivan and Sai Lee both hold pre- 2 1978 medallions. Plaintiff George Horbal holds a 1978–2010 medallion. Plaintiffs Alliance 3 Cab and S.F. Town Taxi Inc. lease medallions from medallion holders and re-lease those 4 medallions to willing drivers. Plaintiff San Francisco Taxi Coalition is a nonprofit corporation 5 with members who will be adversely affected by the 2018 regulations (Dkt. No. 1 at Exh. B ¶¶ 6 33–36). 7 In declarations filed in California state court, but not on this docket, plaintiffs added 8 the following detail (plaintiffs’ counsel attached prior declarations from plaintiffs to his own 9 declaration) (Dkt. No. 22). Defendants did not object. 10 Plaintiff Patrick O’Sullivan is 87 years old. He paid between $16,000 and $18,000 for 11 his medallion in 1970. (He noted that at the time, a typical house in San Francisco cost about 12 $15,000.) He leases his medallion for $600/month. His other sources of income include social 13 security, an auto-mechanic union pension, and a surviving spouse stipend. 14 Plaintiff Sai Lee is 72 years old. Plaintiff Lee paid $57,000 for a forced package deal 15 for the medallion (the medallion plus one share of DeSoto Cab stock). He does not pick up 16 work at the airport, but leases his medallion to a night-shift driver who does. If his night driver 17 stops the lease, plaintiff Lee avers his income will be cut by more than half which will render 18 him unable to pay bills, his mortgage, and the costs of daily living. 19 Plaintiff Horbal is 72 years old. He is confined to a wheelchair. He leases his 20 medallion. His sole income is from social security ($1000/month) and the leased medallion 21 ($600/month). 22 In April 2019, defendants removed the case here. Defendants are the City and County 23 of San Francisco, the San Francisco Municipal Transit Agency, and the Transit Agency’s 24 director (Edward Reiskin). 25 On May 9, 2019, defendants moved for judgment on the pleadings under Rule 12(c) 26 (Dkt. No. 12). The next day, the parties stipulated to shorten time to hear plaintiffs’ motion for 27 a preliminary injunction (Dkt. Nos. 15–17). Once the motion had been granted (Dkt. No. 18), 28 5 1 plaintiffs so moved (Dkt. No. 19). Within days, the parties had fully briefed the preliminary 2 injunction motion (Dkt. Nos. 25, 29). This order follows oral argument. 3 ANALYSIS 4 Our court of appeals permits a sliding scale test to grant preliminary injunctions. In this 5 branch of the preliminary injunction test, plaintiffs must demonstrate that: (1) serious questions 6 going to the merits were raised, (2) the balance of hardships tips sharply in the plaintiffs’ favor, 7 (3) there is a likelihood of irreparable harm, and (4) that the injunction is in the public interest. 8 All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–36 (9th Cir. 2011) (incorporating 9 factors from Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008)). Here, the parties both briefed a state court test, specifying only two factors: the For the Northern District of California United States District Court 10 11 likelihood that plaintiffs will prevail on the merits and the balance of the hardships. In any 12 event, plaintiffs have not met their burden under either test because while plaintiffs undoubtedly 13 will suffer irreparable harm, serious questions going to the merits have not been raised, both 14 sides will suffer hardship, and the injunction is not in the public interest.6 15 1. SERIOUS QUESTIONS GOING TO THE MERITS. 16 Plaintiffs assert three claims. First, plaintiffs have been deprived of their rights to equal 17 protection under both the federal and state constitution’s equal protection clause. Second, the 18 2018 regulation discriminated against plaintiffs’ age in violation of California Government 19 Code Section 11135. Third, defendants violated the California Environmental Quality Act in 20 promulgating the new rule. A. 21 The parties agree that rational basis is the applicable standard to evaluate the rule at 22 23 Equal Protection Clause. issue. Under this standard, regulations are “presumed valid, and this presumption is overcome 24 25 26 27 28 6 Plaintiffs filed three requests for judicial notice under Rule 201(b)(2) (Dkt. Nos. 23, 30, 37). The requests for notice include various statutes and codes, reports and memoranda, minutes of board of directors meetings, and e-mail communications. The sources for the e-mail communications, various memoranda, and PowerPoint presentations, can reasonably be questioned and no information had been provided as to their sources in order to establish their accuracy (Dkt. Nos. 23 Exhs. B, D–F, H–K; 30 Exh. B; 37 Exh. A). These requests are therefore DENIED. The statutes, other code sections, board of director minutes, (Dkt. No. 23, Exhs. A, C, G, 30 Exh. A; 37 Exh. B), and the public comments in the body of Dkt. No. 30 do not change the outcome of this order and so those requests are DENIED AS MOOT. 6 For the Northern District of California United States District Court 1 only by a ‘clear showing of arbitrariness and irrationality.’ ” Kawaoka v. City of Arroyo 2 Grande, 17 F.3d 1227, 1234 (9th Cir. 1994) (quoting Hodel v. Indiana, 452 U.S. 314, 331–32 3 (1981)). The government’s distinctions “need only be drawn in such a manner as to bear some 4 rational relationship to a legitimate state end.” Clements v. Fashing, 457 U.S. 957, 963 (1982). 5 “Classifications are set aside only if they are based solely on reasons totally unrelated to the 6 pursuit of the State’s goals and only if no grounds can be conceived to justify them.” Ibid. 7 “[T]hose attacking the rationality of the legislative classification have the burden to negative 8 every conceivable basis which might support it.” F.C.C. v. Beach Communications, Inc., 508 9 U.S. 307, 315 (1993). 10 The group which benefits here are the holders of the post-2010 medallions. The 11 government designed its rule to tilt the scales towards these medallion holders. Pre-1978 taxis 12 will be entirely eliminated from competition at the airport. Furthermore, post-2010 medallion 13 holders will have a dispatch advantage over the 1978–2010 medallion holders. 14 Plaintiffs’ challenge, however, is not to show that the post-2010 medallion holders 15 benefit under the rule. Rather, plaintiffs’ challenge is to show that there is no rational 16 relationship for a legitimate government purpose. They cannot do so. The different classes of 17 medallion-holders are not similarly situated. 18 In the last decade, the post-2010 medallion holders have been hit hardest by the 19 declining taxi industry. These medallion holders paid $250,000 for their medallions. They took 20 out loans due monthly, many with a security interest in the medallion. Almost none has turned 21 a profit due to the crushing effect of the loans. Over 160 of these medallions have already been 22 foreclosed on. By contrast, the other two categories of medallion holders, perhaps because they 23 have held their medallions for decades, have returned a profit. They don’t have loans. It is also 24 significant that the 1978–2010 category paid only $200 for their medallions. 25 Plaintiffs argue that all medallion holders are similarly situated because before these 26 newly promulgated rules, all medallion holders had the same material rights. Even if true, this 27 glosses over the crushing impact of the new taxi reality. The post-2010 medallion holders have 28 been hit hardest due to the loans and higher fees. 7 1 2 the sake of economic protectionism is irrational with respect to determining if a classification 3 survives rational basis review.” Merrifield v. Lockyer, 547 F.3d 978, 991 n.15 (9th Cir. 2008). 4 This argument is inapposite. Here, the newly promulgated rule goes beyond mere economic 5 protectionism. It prioritizes medallion holders who have significantly more expenses resulting 6 from the medallion, who have had much less time (comparatively) to realize value from the 7 medallions, and are disproportionate in precarious financial positions due to the crushing loan 8 balances as a result of the medallions. This is particularly acute when considering that this 9 category comprises approximately half of the entire San Francisco taxi industry. 10 11 For the Northern District of California United States District Court Plaintiffs argue that our court of appeals has held that “mere economic protectionism for B. Age Discrimination. California Government Code Section 11135(a) provides that no person “shall, on the 12 basis of . . . age . . . be unlawfully denied full and equal access to the benefits of, or be 13 unlawfully subjected to discrimination under, any program or activity that is . . . funded directly 14 by the state or receives financial assistance from the state.” Plaintiffs aver that the pre-1978 15 medallion holders are in their 70’s or older and therefore the rule discriminates on the basis of 16 age. This argument of disparate impact remains entirely unsupported. The overwhelming 17 evidence is that the rule has been promulgated on the basis of taxicab efficiency and propping 18 up those medallion holders most heavily hurt by the industry-wide crisis. 19 Although not briefed, here, it is worthwhile to note that the absolute ban against the pre- 20 1978 medallion holders facially appears somewhat extreme. Yet, there is no evidence that the 21 pre-1978 holders are any older than the 1978–2010 medallion holders. Accordingly, plaintiffs 22 have not even shown there has been a disparate impact on older people. Pre-1978 medallion 23 holders may be overwhelmingly over the age of 70, but so too, on average, may post-2010 24 medallion holders. That an individual purchased a medallion in the last ten years is not an 25 indicator of their youth. Without any evidence to support their discrimination claim, plaintiffs 26 have not shown that serious questions exist as to age discrimination against the pre-1978 27 medallion holders. 28 8 1 For the Northern District of California United States District Court 2 C. The California Environmental Quality Act. The California Environmental Quality Act requires that public agencies conduct a 3 preliminary review to determine whether an action is subject to the Act. Muzzy Ranch Co. v. 4 Solano Cty. Airport Land Use Comm’n, 41 Cal. 4th 372, 379–80 (2007). The threshold 5 question is whether an activity is defined as a “project” under California Code of Regulations 6 Section 15378. If it is not a “project” it is not subject to CEQA. “Ordinances passed by cities 7 are clearly activities undertaken by a public agency and thus potential ‘projects’ under CEQA.” 8 Union of Med. Marijuana Patients, Inc. v. City of San Diego, 4 Cal. App. 5th 103, 113 (2016). 9 Section 15378 defined a “project” as “the whole of an action, which has a potential for 10 resulting in either a direct physical change in the environment, or a reasonably foreseeable 11 indirect physical change in the environment.” Here, the Transit Agency concluded the rule 12 changes were not a “project” under CEQA. 13 Plaintiff accuses the Transit Agency of giving the analysis short-shrift. Specifically, the 14 Transit Agency purportedly never conducted a preliminary review to determine whether its 15 proposed rule changes had the potential to cause a change in the environment. According to 16 plaintiffs, “[i]t is difficult to understand how staff could arbitrarily conclude its rule changes 17 would not have some impact on traffic . . . ” (Dkt. No. 9 at 10). For evidence, plaintiffs 18 illustrate that post-2010 taxis will drive to the airport without passengers to take advantage of 19 the new rule. At the same time, the other two categories of medallion holders will rush back to 20 the city because of the lack of options at the airport. This will create toxic gas emissions. 21 This argument is too speculative. We are not talking about millions or even thousands 22 of taxis. In all, San Francisco has approximately 1500 taxis, almost all of which comply with 23 its clean taxi program and are low emission vehicles. Specifically, of the 253 pre-1978 taxis, 24 seven do not use reduced emissions technology. “Common sense leads us to conclude these 25 concerns are too speculative or unlikely to be considered reasonably foreseeable.” Union of 26 Med. Marijuana Patients, Inc. v. City of Upland, 245 Cal. App. 4th 1265, 1276 (2016) (internal 27 quotations omitted). 28 9 For the Northern District of California United States District Court 1 Plaintiffs argue it is not speculative because of the empty taxis commuting to and from 2 the airport. However, plaintiffs do not substantiate this argument. No evidence is provided. 3 For example, plaintiffs do not show how often taxis currently commute to and from the airport 4 without fare to provide a point to compare. 5 2. BALANCE OF HARDSHIPS. 6 The balance of hardships are equal. On the one hand, with the rule in place, the 7 1978–2010 group will be relegated to a second-tier medallion at the airport and the pre-1978 8 medallion holders will lose all access to the airport. Both will accordingly lose the ability to 9 lease their medallions as few will lease either a second-rate medallion or a medallion 10 completely barred from picking up fare at the airport. Because most of these pre-1978 holders 11 are over 70 years old, moreover, many may not be able to drive. The entire value of their 12 medallion stems from leasing it. This value would evaporate. 13 On the other hand, without the rule in place, the post-2010 medallion holders will 14 continue to suffer as discussed above. This may cause the post-2010 medallion holders to reach 15 their tipping point causing their medallions to be foreclosed. Then, the value of their medallion 16 would also evaporate. Accordingly, no matter which way this motion is decided, hardship will 17 result. 18 3. 19 Both sides may incur irreparable harm. The loss of livelihood is particularly acute for IRREPARABLE HARM. 20 medallion holders like plaintiff O’Sullivan who is 87 years old and plaintiff Horval who is 21 confined to a wheelchair. For individuals like these plaintiffs, losing the lease-value of their 22 medallion cannot then be substituted by finding alternate work or through a damages recovery 23 at the conclusion of this action. Their harm would be immediate and irreparable. 24 4. 25 The public has an interest in the taxi industry not collapsing completely. This 26 promulgated rule attempts to avoid this outcome. In addition, the rule allocates more taxicabs 27 in the city thereby providing more competition for ride-sharing and potentially reducing prices PUBLIC INTEREST. 28 10 1 for consumers. It also reduces congestion at the airport by minimizing the amount of taxis 2 driving through. Accordingly, the public interest factor disfavors injunctive relief. 3 4 CONCLUSION For the foregoing reasons, the motion for preliminary injunction is DENIED. 5 6 IT IS SO ORDERED. 7 8 Dated: June 6, 2019. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11
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