A three-judge panel of the U.S. 5th Circuit Court of Appeals said Tuesday that the city can enforce all of the new rules
A federal appeals court has upheld, at least preliminarily, the validity of all the laws the New Orleans City Council passed early this year setting out new rules for the city's taxicab industry. A three-judge panel of the U.S. 5th Circuit Court of Appeals said Tuesday that the city can enforce all of the new rules.
In March, taxis gather outside a hotel in the CBD awaiting fares. A federal district judge in August had lifted a restraining order that for three weeks had blocked city officials from implementing several new regulations for the city's 1,600 taxicabs, such as setting maximum ages for vehicles used as cabs and requiring installation of credit card machines, GPS devices and security cameras.
Judge Eldon Fallon's ruling said the city could enforce all the rules requiring taxi upgrades, which it has proceeded to do.
However, Fallon ruled against the city on two measures that many cab owners considered crucial. He issued an injunction blocking the city from enforcing ordinances declaring cab owners' permits, known as certificates of public necessity and convenience, or CPNCs, to be privileges and not rights, and making the city's recognition of their sale or transfer discretionary rather than automatic.
The appeals court panel Tuesday reversed that part of Fallon's decision, instead upholding the city's position that CPNC holders do not have a property right in the permits.
The two ordinances reinstated by the 5th Circuit mean the city can revoke the permits and block their transfer or sale to other owners, and that drivers probably won't be able to use the permits as security in seeking loans. Many drivers have paid $50,000 or more for a CPNC, which some have referred to as their equivalent of a 401(k) retirement account because they expected to be able to sell it for a greater amount when they retire.
The three-judge panel noted that it was not making a final ruling on the merits of all the cab owners' challenges, only on whether they were entitled to an injunction blocking the city from enforcing the new rules. It said the drivers had failed to show they were entitled to such an injunction either on the upgrade ordinances or on the legal status of CPNCs.
The court's ruling, written by Judge Carolyn Dineen King, suggested that the panel was sympathetic to cab owners' argument that the city has not shown a "rational basis" for the new rules on the maximum age of cabs. It said that if the owners ultimately can persuade a court that that rule -- or the other laws requiring installation of expensive new equipment -- is not justified, the owners could sue the city to recover the money they would have been wrongly required to spend.
All of the new taxicab rules, passed by the City Council in April at the urging of the Landrieu administration and leaders of the city's tourism industry, had originally been scheduled to go into effect Aug. 1. However, they were blocked by a restraining order issued first by a Civil District Court judge and then continued temporarily by Fallon after the lawsuits were transferred to federal court at the city's request.
Proponents of the new rules said many local cabs were in poor condition and presented a poor image of the city to visitors. Critics said some of the reforms went too far and imposed undue financial burdens on owners, causing some to go out of business.
Critics of the new rules said more than half the cabs in the city were too old to meet the new age guidelines, which say that cabs can be no more than 11 years old. Starting in 2014, the maximum age will be reduced to seven years. In addition, starting in 2013, any new or replacement cabs can be no more than 5 years old.
The regulations requiring new equipment and placing new restrictions on cabs' age will force many owners to spend tens of thousands of dollars per vehicle, without offering any way for them to find the money or giving them enough time to comply, the critics charged.
The lawsuits challenged the new rules on a number of grounds, including that they would deprive owners of their property rights without due process or just compensation and that they would violate the constitutional guarantee of equal protection of the law.
Fallon rejected those arguments in regards to the ordinances setting age limits for cabs and requiring new equipment. He said the city had shown a "rational basis" for those ordinances because they would ensure better service for customers, increase safety for drivers and riders, and help New Orleans compete against other cities for conventions and major sports events. "It is within the city's power to enact these upgrade ordinances, " he said.
Although some of the cab owners said the mandated upgrades could cost as much as $40,000 per vehicle, Fallon noted that Malachi Hull, director of the city Taxicab Bureau, said the cost should be only $2,000, provided that the vehicle does not have to be replaced to meet the new age rules. Fallon termed $2,000 "a tolerable price when compared with the public good that comes from the regulations."
City officials have discussed increasing taxi fares in order to help owners pay for the new equipment, although that idea was placed on hold after the lawsuits challenging the new rules were filed. Moreover, Fallon said, by ruling that CPNCs are property, he was giving owners a solid basis on which to borrow money to pay for the upgrades.
Although theoretically the permits have always been owned by the city and simply leased to cab owners, Fallon noted that "since the 1950s, owners of CPNCs have traded, alienated, conveyed, encumbered, mortgaged and liened their interest" in them, giving the owners "a protectable property right" that the city could not erase by simply declaring the permits to be privileges. He said the city had not explained how "placing the issuance and transfer of CPNCs at the sole and complete discretion" of a city bureaucrat would promote the public interest.
Cab owners and companies argued that by defining the permits as privileges and restricting owners' ability to sell or transfer them, "the city has reduced the property value of the CPNC to zero, " leaving owners no way to finance the purchase of new vehicles or buy the newly required equipment. Fallon said they had made a good case for that position.
If those two ordinances were to take effect, he wrote, "an entire industry (would be) gutted of a large amount of its capital and deprived of a means of funding needed upgrades."
However, King's ruling for the 5th Circuit -- joined by Judges Priscilla Owen and Carl Stewart -- said Fallon was wrong in concluding that cab owners have "a protectable property right" in their CPNCs and that the new law illegally deprived them of that right. KIng said the city "historically has viewed and treated a CPNC as a privilege rather than a form of constitutionally protected property:" and said that view was "emphatically supported" by the fact cabs have always been subject to extensive regulation.
Whatever ownership interest drivers may have had in their CPNCs "is the product of a regulatory scheme that also vests the city with broad discretion to alter or extinguish that interest," King wrote. "Such an interest does not fall within the ambit of a constitutionally protected property right."
The appellate panel said it agreed with Fallon in rejecting owners' challenge to the requirements for new equipment on the basis that the new demands violated implied but binding "contracts" between the owners and the city, or that the "upgrade ordinances" amount to "excessive and unreasonable governmental regulation."
Mayor Mitch Landrieu issued a statement late Tuesday calling the 5th Circuit ruling "a win for the residents, businesses and visitors of New Orleans, who deserve clean, reliable and accessible taxicab service." He said the package of ordinances passed by the council is "consistent with common sense and the practical needs of the city, the taxi industry and its customers, and we will continue our efforts to create a world-class taxicab industry in New Orleans."