Friedman v. City of Chicago Department of Business & Consumer Protection
Docket: Case No. 13-cv-07622
Court: District Court, N.D. Illinois; June 11, 2014; Federal District Court
Plaintiffs, representing taxicab medallion owners and affiliated parties, have filed a lawsuit against the City of Chicago and the Open Doors Organization, seeking monetary damages and injunctive relief related to new regulations and fees imposed on wheelchair accessible vehicle (WAV) medallion management. The Complaint alleges violations of the Contracts Clause, Commerce Clause, and Privileges and Immunities Clause, along with a state law breach of contract claim. The Defendants have moved to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.
The plaintiffs include Evgeny Friedman, an individual WAV medallion owner; Dispatch Taxi Affiliation, Inc. (DTA), a licensed medallion manager; and the Greater Chicago Taxi Association, which advocates for various medallion owners and managers. The City of Chicago's Department of Business and Consumer Protection (BACP) regulates the taxicab industry, while Open Doors is a non-profit disability advocacy organization involved in the centralized dispatch system for WAVs.
In 2012, BACP sought proposals for a centralized dispatch service for WAVs, transitioning from the previously used third-party provider, Flash Cab Company. DTA submitted a proposal but was not selected; instead, Open Doors was chosen in March 2013. Following the City Council's approval of an ordinance for this selection in June 2013, Open Doors informed WAV medallion owners of new requirements, including purchasing tablets for a dispatch app and paying various fees. On July 16, 2013, DTA's prior complaint against the City was dismissed with prejudice and not appealed. The plaintiffs contend there are significant issues with the newly implemented Open Taxis dispatch system.
The Open Taxis dispatch system has been non-functional since its intended launch on August 1, 2013, due to ineffective tablets. Open Doors has resorted to a makeshift system that contravenes its contractual duties, forcing WAV operators to use personal devices while driving, which violates Illinois law. The Municipal Code mandates participation in the Chicago Taxi Access Program (T.A.P.) or similar initiatives, but the Open Taxis system does not permit WAV drivers to preauthorize payments through T.A.P. or PACE Mobility Direct cards, hindering payment collection from disabled passengers. Concerns have also been raised by WAV medallion owners about potential theft and insurance coverage related to the new equipment. In September 2013, DTA's general manager objected to fees and communication requirements imposed by Open Doors. Subsequently, the plaintiffs expressed concerns regarding traffic violations linked to the Open Taxis system. On September 11, 2013, BACP notified DTA of a code violation for non-compliance with the WAV dispatch system. Plaintiffs initiated legal action on October 24, 2013, seeking injunctive and monetary relief, leading to a temporary restraining order on October 31, 2013, against BACP's enforcement of certain code provisions. A motion for a temporary restraining order against Open Doors was filed on January 16, 2014, but was denied on January 21, 2014, due to the plaintiffs' lack of standing. The legal standards for a Rule 12(b)(6) motion emphasize the necessity for a complaint to provide a clear and plausible basis for the claim, allowing the court to infer the defendant's liability based on sufficient factual allegations.
The Contracts Clause of the U.S. Constitution prohibits states from enacting laws that impair existing contracts. A three-part test is applied to determine if a law violates this clause, which assesses whether there is a substantial impairment of a contractual relationship, if a significant purpose justifies the law, and if the law's impact on contracts is reasonable in relation to public purpose. A city ordinance can infringe upon this clause.
In Count I, Plaintiffs contend that the June 15, 2013 Ordinance, which allows the City Council to contract with Open Doors, violates their rights by impairing contractual relationships with drivers, Flash Cab, and third-party insurance companies due to the imposition of a non-functional dispatch system. Specifically, they argue that the Ordinance negatively affects their relationship with drivers through a taxicab lease agreement, citing the Municipal Code's requirement for two-way dispatch equipment. However, the Plaintiffs fail to specify any contractual rights or provisions in the Taxicab Lease that the Ordinance impacts. The Defendants assert that the Plaintiffs do not demonstrate substantial impairment since they do not identify specific contractual rights.
Moreover, the Plaintiffs admit that the Taxicab Lease lacks detailed obligations and rely solely on the Municipal Code. This level of generality is deemed insufficient to support a Contracts Clause claim. The Plaintiffs also do not present evidence of contractual relationships with their insurers, only stating that they must provide additional insurance due to the new system. Overall, the Plaintiffs have not established substantial impairment of their contracts with either insurance providers or Flash Cab, thus failing to state a valid claim under the Contracts Clause.
Plaintiffs claim they had a standard lease for dispatch equipment while Flash Cab operated the WAV dispatch system, but they do not allege that their contractual rights were negatively affected when the City switched to a new operator, Open Doors. Their assertion that the Open Taxis program is ineffective is insufficient to claim impairment of rights related to Flash Cab. Consequently, Count I is dismissed without prejudice.
Regarding Count III, the Dormant Commerce Clause restricts states from burdening or discriminating against interstate commerce. The Seventh Circuit has categorized state laws affecting commerce into three groups: those that explicitly discriminate, those that are neutral but have a discriminatory effect, and those that do not discriminate against out-of-state firms. The court previously ruled that Chicago's spray paint ban did not violate the Dormant Commerce Clause, as it caused no disparate treatment or impact.
Here, Plaintiffs do not assert that the Ordinance discriminates against interstate commerce and concede there is no disparate treatment or impact. They argue instead that the City lacked a rational basis for contracting with Open Doors, despite acknowledging the City's rationale to enhance access for the disabled community. The Plaintiffs' claims that the City acted irrationally due to Open Doors’ non-fulfillment of obligations do not convincingly demonstrate a lack of rational basis. Their analogy comparing the requirement to an unrelated task is unpersuasive, as the City merely contracted with a disability advocacy organization for dispatch services for wheelchair-accessible cabs.
Plaintiffs' argument regarding the City's reasoning being flawed, as referenced in National Paint, is misunderstood. The court clarifies that even if a law is overbroad, it can still be constitutional. The dormant commerce clause does not protect individuals from self-harm due to misjudgment of the law's influence. Plaintiffs' claims that Open Doors failed to meet contractual obligations do not establish a violation of the Commerce Clause, resulting in the dismissal of Count III without prejudice.
In Count IV, concerning the Privileges and Immunities Clause, Plaintiffs fail to demonstrate that the Ordinance affects out-of-state medallion owners differently than in-state owners, leading to an implicit concession of their claim. Consequently, Count IV is also dismissed without prejudice.
Defendants' Motions to Dismiss are granted. Plaintiffs may amend their claims within thirty days if compliant with Rule 11. The only remaining claim is a state law breach of contract claim in Count II. Following the dismissal of all federal claims before trial, the court is inclined to relinquish jurisdiction over related state law claims. If Plaintiffs do not amend their federal claims, Count II will be dismissed without prejudice, allowing for refiling in state court. Additionally, on December 13, 2013, Plaintiffs voluntarily dismissed Defendant Driven Solutions LLC, and Defendant Open Doors Organization has joined the City of Chicago’s motion without submitting a separate brief.
