San Diego Cab Companies Withdraw Bogus $12 Million Takings Claim Against MTS

J. Justin Wilson
J. Justin Wilson · July 14, 2015

San Diego – With its lawsuit crumbling and the city gearing up to issue new taxi permits, San Diego’s existing taxi cartel has quietly moved to voluntarily dismiss its takings claim for compensation against Metropolitan Transit System (MTS). In seeking the dismissal, the companies have abandoned their bogus argument that the city owes them as much as $12 million on the theory that the value of taxi permits will decline as new taxis begin rolling on the city’s streets later this summer.

“From the start, this lawsuit has been nothing more than a baseless attempt to preserve existing cab companies’ control on the taxi market,” said Institute for Justice Attorney Wesley Hottot, who represents drivers who are attempting to break up San Diego’s taxi cartel by obtaining new permits. “The cab cartel’s lawsuit is doomed. California courts have made it clear that cities can issue additional taxi permits without paying existing taxi companies for any loss in value of their permits. At this point, it appears that even the cab companies recognize that there is nothing unconstitutional about new competition. Unfortunately, the companies continue to press their other, equally weak arguments.”

Prior to the dismissal, the cab companies argued in court that they had a property stake in their cab permits and that additional competition amounted to a regulatory taking. But consumers aren’t property, and competition isn’t theft. California law is clear that taxi permit owners do not have any right to freeze the value of their permits.

The dismissal follows two earlier blows to the companies’ case. On April 30, Superior Court Judge Ronald S. Prager rejected their request to halt taxi permitting and also allowed two taxi drivers to formally intervene in order to protect their interest in obtaining permits for themselves.

With the help of the Institute for Justice, the two intervenors—entrepreneurs Abdi Abdisalan and Abdullahi Hassan— are, along with dozens of other drivers, in the process of obtaining permits and starting new taxi businesses.

The cab companies filed suit in March 2015, four months after the San Diego City Council voted 8-1 to lift its cap on the number of available taxi permits. The cap had been in place since 1984. Proponents hailed the vote because it gave drivers the opportunity to become small-business owners. Today, most drivers have to lease permits and cabs from the existing permit owners or come up with over $100,000 to buy one of the existing permits.

Although the cartel has moved to dismiss the takings claim, its lawsuit against MTS will proceed under two remaining claims challenging statutory and procedural issues. But next month, Superior Court Judge Gregory Pollack is set to hear a potentially decisive motion from the intervenors, arguing the companies’ whole case must be dismissed. The hearing is currently set for August 24.