The City of Little Rock had only one taxi business, and it was illegal to start a second one. Little Rock’s government had completely forgotten that the right to choose which taxi to hire belongs to customers, and the government does not get to make this choice for them. Yet that is exactly what Little Rock’s government was doing by intentionally providing a monopoly to the only taxi company in town.
Rather than doing what was best for the public, Little Rock’s government had become one company’s henchman. Little Rock’s unusual ban on new taxi companies prevented Little Rock’s citizens from enjoying the competition, job creation, and consumer choice found in most other U.S. cities.
An entrepreneur and his environmentally friendly hybrid taxi business finally had enough. They have filed suit in Pulaski County Circuit Court arguing that the city’s establishment of a private monopoly violates the Arkansas Constitution. Monopolies are harmful to entrepreneurs, employees, and consumers alike, which is why the Arkansas Constitution forbids them.
The Little Rock Board of Directors had directly violated multiple sections of the Arkansas Constitution. Unfortunately, it appeared that only a lawsuit would make the Board notice. That is why a taxi driver and his fledgling business joined forces with the Institute for Justice to vindicate the right of entrepreneurs to compete.
On December 7, 2016, Circuit Judge David Laser granted our motion for judgment on pleadings and held that Little Rock had violated the Arkansas Constitution’s antimonopoly clause. This resulted in a final judgment in entered in Ken’s favor on January 25, 2017, which the city chose not to appeal.
But all was not done. With the unconstitutional barriers removed, Ken was still required to reapply for taxi permits, which he did. On May 16, 2017, the Little Rock Board of Directors begrudgingly agreed that Ken had met all of the other requirements, which also meant that the Board was required to issue the taxi permits to him.
Ken celebrated by purchasing more taxi vehicles and hiring more drivers. Thanks to his willingness to fight for his dream and a little help from the Arkansas Constitution, Ken not only made Arkansas a little freer, but he also won the right to do what he does best— create more jobs in Little Rock.
Ken Leininger just wants to pursue the American dream. After eight years working as a driver for Little Rock’s only taxi company, Leininger decided to start his own business. He founded Ken’s Cab, a taxi company that only uses hybrid vehicles and offers friendly, reliable service. Ken believed he could deliver a better service to the people of Little Rock and successfully compete with the only taxi company in town.
The City of Little Rock, however, had other ideas. It banned any new companies from competing with Little Rock’s one taxi company, Greater Little Rock Taxi Service, LLC (“Yellow Cab”). The way Little Rock’s government does this is by only allowing new taxi permits to be issued if “public convenience and necessity” leave no other choice and if doing so will not harm the existing permit holder (collectively, the “Monopoly Rule”). As Little Rock’s Board of Directors have expressly recognized during their meetings, these regulations exist to establish a monopoly for Yellow Cab.
Unaware of Little Rock’s unusual decision to intentionally create a private monopoly, Ken applied for Little Rock taxi permits in April, 2015. Little Rock’s Fleet Services Department admitted that Ken met all of the requirements other than the Monopoly Rule, but rejected Ken’s application when Yellow Cab objected. Stunned, Ken appealed the decision to Little Rock’s Board of Directors. When the Board heard Ken’s appeal at its October 20 meeting, Fleet Services again admitted that Ken met all of the other requirements. Some Directors even voiced concern over the fact that Little Rock had created a private monopoly. But Yellow Cab’s owner asked the Board to reject Ken’s appeal, so that is what the Board did. And when Ken wanted to come back in December to discuss the matter again during the Board’s renewal of Yellow Cab’s taxi permits, Fleet Services told him not to bother.
As a result, Ken only operates in North Little Rock and other surrounding areas, but not in Little Rock itself. He would like to expand into Little Rock, purchase more hybrid taxis and hire more people. For their part, drivers (who always pay for their fuel themselves) and customers love Ken’s hybrid taxis, which may be why Yellow Cab fought so hard against Ken. And to Little Rock’s Board of Directors, the opinion of Yellow Cab’s owner is the only one that matters.
As Little Rock’s Board of Directors have expressly recognized during their meetings, these regulations exist to establish a monopoly for Yellow Cab.
Little Rock’s Monopoly Rule is not merely immoral and harmful to Little Rock’s public welfare. It is also unconstitutional. The Arkansas Constitution expressly protects Arkansas citizens from the establishment of monopolies. 1 It also guarantees due process of law 2 and equality before the law, 3 which protect against arbitrary and irrational regulations.
With the help of the Institute for Justice, which now represents Ken and his company, Ken is fighting back. This time, by taking Little Rock’s government to court.
On March 2, 2016, Ken Leininger and Ken’s Cab joined with the Institute for Justice to file a lawsuit in the Arkansas circuit court for Pulaski County. For Ken and his small business, this lawsuit seeks to vindicate the right to economic liberty. Indeed, Ken is not seeking financial compensation from the court, just permission to compete. And for the people of Little Rock, this lawsuit seeks to allow them to enjoy the same consumer choice taken for granted in most other U.S. cities.
The defendant in this case is the City of Little Rock. The City of Little Rock, through its officials, is responsible for enacting and enforcing a rule that provides a monopoly to one private company.
Legal Claims: The Right to Earn an Honest Living and the Right to Freely Bargain for Yourself
Ken and his business are asserting three separate causes of action in their lawsuit against the City of Little Rock. Although prevailing in any of them would grant Ken the relief he seeks, the Arkansas Constitution says that Ken should win all three.
First, the manner in which the City of Little Rock protects a private company violates the Arkansas Constitution’s anti-monopoly clause located in Article II, Section 19. Quite simply, monopolies in any form are not permitted. Nor is there any legitimate reason to violate that provision here. Most other cities have numerous taxi companies competing with each other. Thus, it is clear that the monopoly enforced by the city is unnecessary and only serves to benefit one private company that does not want competition.
Third, the City of Little Rock enforces the ordinance against newcomers to the taxi market, but protects the only established taxi business simply because it was there first, which is not a constitutionally legitimate reason.
Second, the City of Little Rock is violating Ken’s right to due process, which is protected by Article II, Section 8 of the Arkansas Constitution, by preventing Ken from earning an honest living without advancing any legitimate government interest. In fact, Little Rock’s arbitrary restriction on Ken’s right to grow his business is particularly egregious considering that Article II, Section 2 of the Arkansas Constitution declares the right of “acquiring, possessing and protecting property” to be “inherent and inalienable.”
Third, the City of Little Rock enforces the ordinance against newcomers to the taxi market, but protects the only established taxi business simply because it was there first, which is not a constitutionally legitimate reason. Therefore, the city has violated the promise of equality before the law found in Article II, Section 3 of the Arkansas Constitution.
The Institute for Justice is the national law firm for liberty. IJ’s legal team in Ken’s Cab, LLC, and Ken Leininger v. City of Little Rock is led by IJ-Florida Managing Attorney Justin Pearson. Pearson is joined by IJ Attorney Allison Daniel. They will be assisted by local counsel Christopher Burks of the Sanford Law Firm, PLLC.
The Institute for Justice: A History of Protecting Economic Liberty
The Institute for Justice is a public interest law firm that advocates for a rule of law under which individuals can control their own destinies as free and responsible members of society. Through litigation, communication, outreach and strategic research, IJ secures protections for individual liberty and extends the benefits of freedom to those whose full enjoyment of the rights has been denied by the government.
The Institute for Justice is headquartered in Arlington, Va., and has state offices in Arizona, Florida, Minnesota, Texas and Washington, as well as the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School.
The Institute for Justice has secured numerous victories for economic liberty, including:
- Earl v. Smith—In June 2014, the Institute for Justice filed a federal lawsuit challenging the Arkansas licensing requirements for hair braiders, which included expensive, time-consuming and irrelevant cosmetology training. Prompted by IJ’s lawsuit, Arkansas passed the “Natural Hair Braiding Protection Act,” a law that exempts hair braiders from being forced to obtain a cosmetology license and instead creates an optional certification.
- Ibrahim v. City of Milwaukee—In April 2013, the Institute for Justice challenged the City of Milwaukee’s irrational practice of placing a cap on the number of taxicabs in the city. The Milwaukee County Circuit Court declared the cap unconstitutional, and later the Common Council voted unanimously to completely lift the cap on how many taxicabs may operate in the city. In lifting its cap, Milwaukee became one of the freest cities in the nation for drivers looking to enter the taxicab market.
- Swedenburg v. Kelly—In May 2005, the Institute for Justice won an important economic liberty case before the U.S. Supreme Court, striking down a protectionist law that granted monopoly power to distribute wine to large, politically connected liquor wholesalers.
- Clutter v. Transportation Services Authority—In 2001, the Institute for Justice defeated Nevada’s Transportation Services Authority and its entrenched limousine cartel that had stifled competition in the Las Vegas limousine market.
- Jones v. Temmer—In 1995, IJ helped three entrepreneurs overcome Colorado’s protectionist taxicab monopoly to open Denver’s first new cab company in nearly 50 years. The IJ victory inspired other municipalities to break open their government-sanctioned taxicab monopolies in Indianapolis, Cincinnati and Minneapolis.
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