They Still Don’t Exist: Deregulatory Takings

A recent ruling in Florida may signify the death knell of the argument that deregulation “takes” property.

Last month, in Bojorquez v. State,the Florida Supreme Court handed down an opinion that hit me as a bit of a blast from the past. Ruling that the state legislature did not commit a taking by repealing a taxicab licensing law for Hillsborough County—the county that includes the city of Tampa—the court joined a united chorus of jurisprudence. Those cases hold that taxi owners do not own the exclusivity of their businesses. That is, they do not “own” a right to keep other taxis from competing against them.

The only surprising thing about the ruling was its timing, coming a number of years after similar precedents from both state and federal courts that have cleared the way for taxi deregulation and the entry of more competition. Most importantly, the deregulation has been in the form of allowing ridesharing companies such as Uber and Lyft to operate. But it also has simply been from cities welcoming more taxis onto their streets. Coming “late” in the game, the ruling may signify that we are near the end of a long tail in a tale about taxicabs and takings. Which also means we may be at the end of an era of deregulatory uncertainty. Hopefully the decision now portends a more certain era of continued deregulation. And not just with transportation, but with zoning, licensing, and who knows what else.

Here I’ll give a brief summary of the overall issues of taxis and takings, the law a group of Hillsborough County taxicab owners challenged, and what the Florida Supreme Court said. The Florida case has its own idiosyncratic nooks and crannies, but overall the ruling implied something we’ve said at IJ for years: There is no such thing as a deregulatory taking.

Taxis, IJ, and Uber

Across the country, states and, much more frequently, cities and counties exercise the power to regulate common carriers such as taxis. Nationwide, and even internationally, the abuse of this power and its associated rent seeking is well known. Municipalities often place limits on the number of licenses leading to decreased competition and inflated prices. The privilege to conduct the business becomes more valuable than the business itself. In New York City this led to the infamous “medallions,” transferable licenses to operate an individual taxicab that at one point were going for over one million dollars.

Over the years some cities saw the free-market light and tried to get out of the medallion racket. In response to efforts from the Institute for Justice, Minneapolis did this in 2006, long before Uber or Lyft were a thing. The city didn’t take anyone’s taxi license away. It just lifted the cap, allowing anyone with a safe vehicle that met other neutral requirements to run a taxi. This meant the licenses were no longer artificially scarce and so their value on the secondary market plummeted. Some of the existing taxicab owners then sued Minneapolis, claiming the lifting of the cap was a taking.

After making its way through the courts, and after IJ intervened to help defend the reforms on behalf of a new taxi owner, Luis Paucar, in Minneapolis Taxi Owners v. City of Minneapolis (2009) the Eighth Circuit affirmed throwing the case out. The court explained that the city hadn’t taken away any “property,” which is what the Fifth Amendment bars without just compensation. It was still just as legal for the taxicab owners to operate their businesses. The value of the license was greatly diminished but that value—created through artificial scarcity in the market—was not constitutionally protected. Otherwise the government could never deregulate any market, as that would always result in decreased rents for formerly protected businesses.

That precedent went on to influence a number of similar challenges in the looming age of Uber.

Ridesharing apps hit the country by storm in the early 2010s. I won’t recount the well-known story here that most readers likely remember, but during those years city after city was transformed the moment services such as Uber, Lyft, and (the now defunct) Sidecar showed up. This phenomenon was bad news for taxi services, especially those who enjoyed license caps. Yet the apps had two things going for them: that they were insanely popular with consumers and the Minneapolis Taxi precedent. Although there was a ton of resistance in city halls and state legislatures, lawmakers found it hard to shut down Uber and other similar apps because so many registered voters loved the new transportation options and prices. Thus, a patchwork of legalization appeared, creating the freedom of movement we now take for granted as if it’s always been around.

In cities with caps on taxicabs, this was especially dire news for artificial medallion values. So in lawsuit after lawsuit medallion owners sued cities and states claiming that by allowing ridesharing companies to operate the government had “taken” their medallion values. Even though in many cities there still were caps on taxicabs, the presence of very similar ridesharing options meant the scarcity that held up those values was gone. (Some cities completely lifted their taxicab caps as well, one being Milwaukee, which did so in response to both an IJ lawsuit and the coming of ridesharing apps.) A lot of these lawsuits from established taxicab owners made equal protection and state law claims, almost all of which went nowhere, but the big prize was to try and get this deregulation declared a taking.

But that never happened. The Minneapolis Taxi precedent was cited over and over, creating a string cite with no split. You can find many of them in this post I wrote about zoning from five years ago. (Why did I list them in piece about zoning? To make the point that just as liberalizing taxi markets isn’t a taking, liberalizing zoning laws isn’t either.) The Second, Third, Fifth, Seventh, and Eleventh Circuits all addressed this question in the wake of Uber and the Eighth Circuit precedent, as did the Georgia Supreme Court. Many of the plaintiff lawyers in these cases filed writs of certiorari at the U.S. Supreme Court. But the court wasn’t interested in any of them.

Tampa taxis

With all that as background, let’s turn to Florida. Across most of the state, municipalities themselves have traditionally regulated taxicabs. In Hillsborough County, however, beginning in 1976 a state-legislature-created special entity, the Hillsborough County Public Transportation Commission, was given the power to regulate taxis plus other common carriers, such as limos. It involved itself in all kinds of anticompetitive regulation, including minimum fares for limos, something IJ sued about.

In 2012, the legislature turbocharged the PTC’s taxi powers. The law turned taxicab licenses into full-blown medallions and it explicitly called them “private property.”

But see the timing? 2012 was right at the beginning of the ridesharing revolution. Just five years later everything had been turned upside down. Not only was there ridesharing, but IJ’s lawsuit had highlighted the PTC’s abuses, as had other scandals. In response, the legislature passed a law allowing ridesharing companies to operate and be regulated at the state level. And in separate legislation it abolished the PTC completely and repealed the 2012 law. The repeal did not address how taxicabs should be regulated in the county going forward, but through the general powers that local governments have elsewhere in Florida, the county itself now could do so. And the medallion-like permits that taxicab owners in the county had from 2012 to 2017 went up in a cloud of deregulation.

And like clockwork, the owners sued and claimed the deregulation was a taking, naming both the county and the state as defendants. In Bojorquez the takings claim was made under the Takings Clause of the Florida Constitution, but the arguments paralleled what had been argued under the Fifth Amendment in the other cases. Thus, the courts mostly relied on federal caselaw.

On one level the case looks a little different from the others, such as Minneapolis Taxi, because rather than there simply being more competition in the market the Hillsborough taxi licenses were taken away. They literally did not exist anymore. Another difference is that the law explicitly called them “private property.”

And yet, at both the state court of appeals and the state supreme court the owners lost. Crucially, both opinions thought it highly relevant that the owners did not allege that they now could not operate in Hillsborough County. Nor could they. With the abolition of the old PTC, the county now has a taxi licensing system where taxi businesses can get a license to carry on operating. Thus, the owners can get a new piece of paper to replace the old permission slip to do business. The new licenses can’t be traded like the old ones and there’s no guarantee of a stable cap (it’s more a year-by-year fluctuating cap). Yet, in following the Minneapolis Taxi line of cases, the state supreme court ruled that the exclusivity is not “property” that the Takings Clause covers. The court also said that the “private property” label in the 2012 statute didn’t change this underlying reality.

It’s worth adding that one wonders what damages the plaintiffs were hoping to get even if the court had found there was a taking. The lawsuit didn’t challenge the parallel legislation making ridesharing legal statewide. The value of a taxi medallion was already going south. Just like in New York City and elsewhere, although something still remained of the licenses’ value even with ridesharing out there, it was nothing like the pre-Uber valuation.

Could we see more rulings like Bojorquez? It’s possible. Similar “taxi takings” attempts made in the wake of the ridesharing revolution may be chugging along somewhere, although I’m not aware of any.

But the cycle is basically done. Technological innovation and deregulation won. And that victory should embolden other efforts to free our creative energies, from zoning to price controls to tariffs. Whether those caught off-guard by these changes should be compensated—as New York has done for some debt-mired taxi owners—is a question of policy that reasonable people can argue about. But whether it’s constitutionally required is settled, and in the right way. Otherwise the government could never provide more economic freedom without paying off existing rent-seekers. Instead, the right constitutional rule for the future is clear: there is no such thing as a deregulatory taking.

Anthony Sanders is the Director of the Center for Judicial Engagement at the Institute for Justice.