U.S. Supreme Court Rejects Challenge To Minneapolis Taxi Entrepreneur’s Right to Compete

J. Justin Wilson
J. Justin Wilson · February 22, 2010

Minneapolis—Today was a good day for entrepreneurs in Minneapolis.  The U.S. Supreme Court today turned down a petition brought by members of a cartel that sought to overturn Minneapolis’s taxi reforms that opened up the market to competition, thus closing the books on a three-year legal battle.

“This is a 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 through the courts.  “Thankfully, the courts throughout this case have made it clear that the law cannot be abused 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, opened the market to entrepreneurs who are fit, willing and able to serve the public, increased the number of cabs by 180, and eliminated 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 existing license holders 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.

The U.S. District Court rejected these arguments and, in 2009, the U.S. Court of Appeals for the Eighth Circuit also unanimously 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.”   The cartel then petitioned the U.S. Supreme Court, which rejected the appeal today without comment.

The Institute for Justice was a leading proponent of the 2007 reforms adopted by the city council that opened up the taxi market to greater competition.  Throughout this case, the Institute for Justice represented taxi entrepreneur Luis Paucar, who tried for nearly four years to provide service in Minneapolis.  He received 22 licenses under the new law.  “All I ever wanted to do was to enter the market and compete,” said Paucar.  “Now that this legal cloud has finally been removed I can carry on my business without fear.”

“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 this case, as in all of our cases, is to ensure that constitutionally enshrined rights are respected in Minnesota.”