Tuesday, November 19, 2019

Taxi medallion owners win class-action status as reported in Cranes New York Business

"A lawsuit charging that the city sold 400 taxi medallions under false pretenses about their worth and then breached its contract by letting ride-hail operators enter the market and undermine medallion values has been certified as a class-action suit.

The suit, brought by five medallion owners and filed in early October, could now apply to more than 150 medallion owners, according to Daniel Ackman, one of the lawyers for the plaintiffs. The decision in State Supreme Court in Queens County was delivered late last week.

The disputed medallions were bought at three auctions held by the Taxi and Limousine Commission in 2013 and early 2014—when prices were still astronomically high and Uber had barely dented the market. The sales netted the city $360 million.

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Ackman is asking for the city to take back the medallions from the auction winners and return the $360 million they paid for them. The medallions' prices ranged between $803,000 and $965,000 for independent medallions and $1.025 million and $1.259 million for corporate medallions, according to the suit.

Medallions are currently selling at private auctions for less than $150,000 apiece.

"Not once before the Auctions did the City warn prospective buyers that it was about to radically change the economics of the taxi industry by allowing a massive influx of new for-hire vehicles—principally cars hailed through electronic apps—that would decimate the value of the yellow taxi medallions," attorneys write in the suit. "Nor did the TLC disclose that it would license the e-hail taxis as “black cars” despite the fact that they did not qualify for these licenses. Instead, Defendants omitted this information which, had it been known, would have dissuaded potential Auction bidders."

Both the city and the plaintiffs have asked the court for summary judgment.

The city's law department and the Taxi and Limousine Commission did not respond immediately to a request for comment.

But in a related suit brought by Ackman that is currently before the same court, the city has argued that in its contracts with the medallion owners it made no claims "as to the present or future value of a medallion, or the present or future application of TLC rules."

The city also noted that the contracts did not imply an "obligation to protect [the medallion purchasers] from competition from app-based companies such as Uber, when their contracts explicitly said otherwise, and when Uber was already operating in the market at the time of their purchases."

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The city and the TLC have a good record defending themselves from the claims of medallion owners who blame them for the plunge in medallion values. In one noted case in Queens Supreme Court in 2015, a judge ruled that an e-hail was a prearranged ride--essentially what black car services have always provided--and did not conflict with medallion owners' street-hail privileges.

Ackman maintains that his case is narrower than earlier suits, applying only to medallion owners who bought the assets directly from the city, and centers on the contractual relationship between them. It is also coming at a time when there is wider recognition of the hardships medallion owners have faced--highlighted by multiple suicides--and more interest among elected officials in taking steps to help them.

A favorable ruling "could have implications beyond this case," Ackman said. "It's possible if a judge says, 'Yes, the city's conduct destroyed the value of the medallions,' that could spur other actions by the city or the state.""

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