Yellow Cabs Sue Taxi Commission, Take Uber Fight to Federal Court

Taxi Drivers Protest Possible Uber Expansion In NYC
Photo: Spencer Platt/Getty Images

Uber’s unbelievable success in New York and other cities has come at a price: It is destroying the value of owning a yellow taxi — or, more specifically, the value of the “medallion,” which gives someone the right to pick up hails on the street in the city (and limits the number of people who can). Now the medallion owners are fighting back, suing the city’s Taxi & Limousine Commission for allowing a “deliberate evisceration” of the way they make a living.

They’re fighting for what they see as their rightful share of the sharing economy.

In the suit, filed Wednesday, the car services contend that the commission has willingly allowed ride-sharing companies — Uber, in particular — to operate without the same burdensome regulatory requirements. On this point alone, the numbers are certainly compelling. FiveThirtyEight recently calculated that Uber added more than 3.8 million passenger pickups in central Manhattan between April and June of this year over last year, and taxi pickups decreased by roughly the same number. All in all, the number of total pickups in Manhattan was pretty much the same as last year — 39.37 million in 2014 versus 39.36 million in 2015. (Pickups in Brooklyn are up for both taxis and Uber.)

The complaint alleges slightly different numbers — 3.82 million from April to June 2015 compared with a year earlier, while medallion-cab pickups fell by 3.83 million — and places the blame for this “catastrophic harm” on the commission’s unwillingness to bring Uber into the same regulatory structure as cabs. Mayor de Blasio started out attempting to control Uber, but quickly beat a retreat. (Uber is now valued at over $60 billion.)

The impact to the cab industry doesn’t just stop with the people who own and operate the vehicles. The cottage industry of financiers and credit unions, making it possible for so many to obtain medallions, has suffered a shock thanks to the rapid devaluation of the permits. Three of the plaintiffs, Melrose, Progressive, and Lomto Federal credit unions, are the most prominent transportation lenders in the city, currently providing 4,600 medallion loans worth $4.2 billion. These loans are rapidly becoming sinking ships. The value of a medallion has plummeted by more than 40 percent in the past year, as Uber continues to gobble up the business, leaving lenders high and dry. 

One such lender, the Montauk Credit Union, was seized in September by state regulators for “unsafe and unsound” lending conditions. In Chicago, the same calcified medallion system is being abandoned by lenders, who are coming to see the loans as increasingly toxic assets. 

A leading plaintiff attached to the suit is taxi magnate Evigny Friedman, one of the largest medallion holders in the city. His small empire declared bankruptcy back in August of 2015, and it seems Wednesday’s lawsuit is a continuing vendetta for the notorious owner of yellow cabs. Despite facing a lawsuit from New York State attorney general Eric Schneiderman for failing to pay his drivers, Friedman has referred to Uber as the “nastiest, most morally corrupt company ever.” 

Roughly 4,000 medallion owners are tied to the suit, which is arguing for punitive and compensatory damages. Furthermore, the suit seeks an easing of certain regulatory requirements, such as accessibility requirements for disabled passengers. The commission has ordered that half of all NYC cabs become compliant by 2020. 

Wednesday’s federal court filing is another in a series of flailing attempts by the taxi industry to stave off Uber. In September, the city won three related suits when a judge ordered that the TLC had the authority to define Uber fares as “pre-arranged trips” and not street hails, which fall under the exclusive domain of medallion vehicles. 

Yellow Cabs File Suit Against City