The Yellow Cab Empire Strikes Back (In The Empire State)

The age of Uber has not been good for the traditional cab service anywhere — and in New York City in particular. And, having failed to meaningfully hold off or stop Uber’s expansion this summer in the city, the cab drivers have decided to sue.

But they’re not suing Uber. Instead, they are focusing their considerable ire on the city itself and its Taxi and Limousine Service, according to a Reuters report. Joining the taxi owners in the suit filed in Manhattan federal court are lenders that support the industry with financing for taxicab medallions.

Taxi lenders — mostly comprised of smaller banks and credit unions who favor this type of underwriting as historically low risk — have been hit hard by Uber. The value of medallions — once necessary for those who wanted to drive in New York City where yellow cabs have an exclusive legal right to pick up customers on the street — have fallen sharply. Medallions once worth $1.3 million are now worth between $700,000 and $800,000.

So if Uber ruined their lives, why sue the city?

Essentially, the taxi owners and lenders are arguing that city has insufficiently protected its exclusive right to operate within New York — and made it all too easy for firms like Uber to come in and supplant them with regulation-ignoring ways.

“Defendants’ deliberate evisceration of medallion taxicab hail exclusivity, and their ongoing arbitrary, disparate regulatory treatment of the medallion taxicab industry, has and continues to inflict catastrophic harm on this once iconic industry, and the tens of thousands of hardworking men and women that depend on it for their livelihood,” the complaint notes.

Or, as Slate put it more simply yesterday “Uber Won New York,” — and cab companies and lenders are hopping mad about it.

And, in their complaint, the companies point to evidence of Uber’s extreme success in the market as evidence that New York has been insufficiently diligent in its efforts to protect the local cab industry.

The success is really hard to argue with. In New York City, about 30,000 new users find Uber every week and since Labor Day 2015, Uber has seen its NYC ride volume spike to 10 million trips. That is almost three times higher than it was a year ago. UberX, Uber’s private ride service, makes up over 80 percent of all of Uber’s rides in the city, according to Josh Mohrer, Uber’s senior manager for the state of New York.

Mohrer further notes that Uber is projecting sales tax on Uber rides to rise as high as $100 million this year. Since NYC’s sales tax rate is 8.87 percent, some quick number crunching leads to the inference that Uber is planning to exceed $1 billion in NYC bookings alone this year.

Lack of effort on the city’s part to regulate or control Uber, on the other hand, is harder to argue, since New York is actually one of the more regulated markets Uber operates in. Moreover, this summer the firm found itself in an embroiled battle which saw legislators in NYC pushing for a cap on Uber’s local growth in the name of studying congestion in the city. The measure was backed and heavily pushed by Mayor Bill de Blasio, and set off a summer-long battle for the future of Uber in New York.

But ultimately, facing a city wide freakout about an Uberless future,a compromise was reached. The city dropped the cap, and Uber agreed to finance a traffic study.

Everyone won. Or at least everybody claimed to have won (Uber definitely won).

The cab drivers and lenders, on the other hand, feel they definitely lost — and are suing the city they say failed to uphold their exclusivity rights.

The lawsuit seeks compensatory and punitive damages, such as alleged violations of cab drivers’ property and equal protection rights under the U.S. Constitution. The law suit further pushes for reductions in cab companies’ regulator burdens, which they claim put them at an inherent competitive disadvantage to Uber, which is merely too new to be regulated. One burden they are looking to remove? The requirement their cabs be accessible for disabled people by 2020.

The concept of sympathetic defendant may not be well understood by the plaintiffs in this case.

Sympathetic or not, however, they may face an uphill battle. In September of this year, a state judge in Queens dismissed a lawsuit by one of the credit unions involved in this federal filing that sought to stop the city from supporting Uber’s expansion.