Eighth Circuit Court of Appeals Protects Minneapolis Taxi Entrepreneurs Right to Compete

J. Justin Wilson
J. Justin Wilson · July 14, 2009

Minneapolis—A federal appellate court today unanimously affirmed a district court’s dismissal of a lawsuit brought by members of the taxi cartel to overturn Minneapolis’s free market reforms.

“This is yet another victory for both aspiring taxi entrepreneurs and for Minneapolis consumers,” said Scott Bullock, a senior attorney at the Institute for Justice who argued the case.  “The appellate court made it clear that the law cannot be used to cut off competition and to close down the market to new taxi companies.”

The Institute for Justice Minnesota Chapter (IJ-MN) intervened in the case on the side of the city of Minneapolis to defend its free-market reforms that removed a cap on the number of taxis allowed to operate within city limits.  The reforms, finalized on March 30, 2007, will open the market to entrepreneurs who are fit, willing and able to serve the public, increase the number of cabs by 180 in the coming years, and eliminate completely the cap on the number of cabs in Minneapolis by 2011.

In response to the free-market and consumer-friendly reforms, the established taxicab cartel sued the city, demanding the reversal of reforms and proclaiming its owners should be able to keep the spoils of the old law that excluded new competitors from the taxi market in Minneapolis for more than 10 years.

But the U.S. Court of Appeals for Eighth Circuit ruled that taxi licenses do not “provide an unalterable monopoly over the Minneapolis taxi market.” In rejecting the cartel’s “takings” argument, the Court further held that the “property interest that the taxicab-license holders” may possess does not extend to the market value of the taxicab licenses derived through the closed nature of the City’s taxicab market.”

Throughout this case, the Institute represented taxi entrepreneur Luis Paucar, who had tried for nearly four years to provide service in Minneapolis.  He has received 22 licenses under the new law.
“All I ever wanted to do was to enter the market and compete,” said Paucar. “Today’s ruling protects my right to do so.”

“We got involved in this case to defend the city’s free-market reforms because taxicab entrepreneurs have the right to earn an honest living in the occupation of their choice free from anti-competitive barriers to entry,” said Lee McGrath, executive director of IJ-Minnesota.  Our goal in all of our cases is to ensure that constitutionally enshrined rights are respected in Minnesota.”

McGrath was a leading proponent of the 2007 reforms adopted by the city council to open up the taxi market to competition.

Chip Mellor, president and general counsel of the Institute for Justice, concluded, “We will not rest until the fundamental right of economic liberty is vindicated for all Americans.”