Metro's Price-fixing on trial: Report from the Courtroom

Daniel Horwitz

by Daniel Horwitz

[Author’s note: After discovering that absolutely no one in the media is covering this trial, I wrote all of this up fairly quickly based on my notes at 2:00AM in order to get it out as soon as possible.  I have not had a chance to edit it or review it, so please forgive me for any typos, run-on sentences or incomplete thoughts, which I promise to fix at some point later on.]

Sitting in attendance for day two of the trial between several low-cost limousine companies and the Metro Transportation Licensing Commission (MTLC), I’m happy to report what I thought was a very strong day for the plaintiffs. 

To provide a general summary of what this trial is about, the three plaintiffs in this case –represented by the extraordinarily successful libertarian public interest firm the Institute for Justice – have sued the MTLC over the following four provisions of Metro’s livery ordinance (No. BL2010–685):

(1) The “minimum fare” provision that requires that limousine and sedan service operators charge a minimum of $45.00 per trip;

(2) The “prohibition on leasing” provision that requires that limousine and sedan service operators hold title to their vehicles;

(3) The “dispatch restriction” that requires that operators dispatch vehicles only from their place of business; and

(4) The “vehicle age requirement” that requires that operators take sedans and SUVs out of service if they are more than seven years old, take limos out of service if they are more than ten years old, and refrain from placing any new vehicle in service if it is more than five years old.

I should note that only the minimum fare provision, dispatch restriction and vehicle age requirements were mentioned today, so it’s possible that #2 was dropped at some point between the filings submitted last month and the start of trial without my noticing.  In any case, the plaintiffs have alleged that each of the above provisions violates their constitutional rights under (1) the Due Process clause of the 14th Amendment, (2) the Equal Protection clause of the 14th Amendment, and (3) the Privileges or Immunities clause of the 14th Amendment.  As such, the plaintiffs claim, each of these regulations must be struck down as unconstitutional.  The plaintiffs’ latter claim concerning the Privileges or Immunities clause is, unfortunately, foreclosed by a Supreme Court decision handed down in the late 1800s, but the Institute for Justice and other proponents of economic liberty remain hopeful that the current Supreme Court will eventually decide to reexamine the issue.  It is not, however, going to be a successful claim for relief at this point in this particular case.  

In order to win, the plaintiffs in this case must prove that the regulations above fail what is known as “rational basis review.”  Basically, this means that they bear the burden of proving that these laws do not bear a rational relation to any conceivably legitimate government interest.  The MTLC has asserted that nine separate government interests are advanced by its regulations, so the plaintiffs must therefore disprove, by a preponderance of the evidence, that there is a rational connection between each of the laws above and any of the government’s nine stated purposes.  Those rooting for a favorable outcome for the plaintiffs in this case (and I count myself among them) should not be naïve about just how difficult this burden is to overcome; though the Institute for Justice has been uncannily successful in its recent “economic liberty” lawsuits, victories in cases like these are virtually unheard of.  The fact that this is a jury trial is likely to help the plaintiffs (judges applying the law correctly generally find that the standard in a case like this is all but impossible for plaintiffs to meet), but it’s important to remember that Judge Sharp can always overturn the jury’s verdict. 

Extremely helpful to the plaintiffs in this particular case, however, is the controlling 2002 decision that the Sixth Circuit reached in Craigmiles v. Giles, 312 F.3d 220, 224 (6th Cir. 2002) (also won by the Institute for Justice), which stands for the general proposition that pure economic protectionism is insufficient to provide the rational basis necessary to justify a law under the 14th Amendment.  Though in my own humble opinion (and according to Judge Sharp, the Tenth Circuit and several others) the Craigmiles decision was constitutionally suspect, the case is nonetheless controlling here in the Middle District, and as such it prevents the MTLC from being able to argue that the above regulations may be justified on the basis that they protect more expensive limo companies from competition.  For what it’s worth, I’ve believed for some time that the Tennessee case Consumers Gasoline Stations v. City of Pulaski, 200 Tenn. 480, 292 S.W.2d 735 (1956), stands for a similar anti-protectionism rationale under the Tennessee Constitution, and I hope very much that somebody develops this argument one day.

In any case, with that primer, here’s how the day played out:

Before the jury was brought in, there were a handful of motions made regarding whether certain witnesses could testify.  The plaintiffs won the first two of these motions over the MTLC’s objections, with Judge Sharp ruling that the witnesses “barely get over the bar, but do get over the bar of relevance.”  (Author’s note: only relevant evidence is admissible at a trial, and pursuant to Federal Rule of Evidence 401, evidence is considered relevant only if it has “any tendency to make a fact [of consequence in determining the action] more or less probable[.]”)   A third witness on the plaintiff’s witness list was prohibited from testifying, however.  The witness was apparently going to testify as to the protectionist intent of the lobbying group that drafted the regulations (hereafter, TennLA), but Judge Sharp responded that it is only Metro’s intent that matters, and thus that “the motivation of [TennLA] has nothing to do with whether the Metro Council had a protectionist motive.”  Though the plaintiffs’ attorneys countered – persuasively, in my view – that the drafters of the legislation “had protectionist purposes, and therefore it’s more likely that Metro’s purpose was protectionist,” the witness was nonetheless disallowed.  Two reasons for this ruling that Judge Sharp alluded to were that the witness’s testimony (1) could potentially confuse the jury, and (2) could be seen as being needlessly cumulative since TennLA’s representative, who testified yesterday, apparently did not come across as credible and was consistently evasive on this point.  Since, pursuant to Federal Rule of Evidence 403, relevant evidence may be excluded if its value is substantially outweighed by the danger of issues like these and others, Judge Sharp’s ruling on this point was soundly within his discretion. 

Witness 1: Richard “Limo John” Simpkins

The first witness of the day was Richard “Limo John” Simpkins: former sole proprietor and owner-operator of “Limo for You.”  Dressed in a flashy business suit that his attorney initially mistook for a tuxedo, Mr. Simpkins testified that after holding several uninspiring jobs, he decided he wanted to become self-employed and thus opened a limo company twelve years ago “to make a go of it.”  Drawing inspiration from Cornelius Vanderbilt’s ferry business model, he explained, his goal was to become the low-cost provider in Nashville’s livery market, and to be “very disruptive to the marketplace” by giving customers better deals on fares on both roundtrip and short-trip pricing.  According to Mr. Simpkins, before the recent regulations $20 limo rides made up 80% of his business.  After the $45 minimum fare requirement was enacted, however, Mr. Simpkins claimed he was forced to shut his doors.  Furthermore, Mr. Simpkins noted, his business model depended on a simplified, low-cost dispatch system that is no longer legal today due to the new “dispatch restriction.”  Operating a single white super-stretch Lincoln Town Car which he described as the only true “classic limousine,” Mr. Simpkins testified, he was able run his businesses using nothing more than a calendar and a cell phone. 

On cross-examination, the MTLC touched on several points.  First, they noted, Mr. Simpkins had been kept informed throughout the development of the new livery regulations.  I’m still not quite sure what the point of this line of questioning was, but in any case Mr. Simpkins responded that he had voiced his objections so vociferously that the former director of the MTLC “told me if I opened my mouth again I'd be thrown out.”  Next, the MTLC’s attorney hammered Mr. Simpkins on whether his business model aimed to compete with taxicabs.  (Author’s note: the state is asserting that helping consumers differentiate between taxi and livery services and helping the transportation industry as a whole provide rational bases for the regulations.)  True to form, Mr. Simpkins delivered a line that earned a chuckle from the jury: “I want to compete with taxis, airplanes, and everyone else involved in the transportation business!” he exclaimed.  “I just want to go back to being Limo John.”

Witness 2: Mark Sissel

The second witness of the day was Mark Sissel, a longtime customer of Metro Livery who painted a vivid and personal picture of the way that the new regulations had affected him.  Mr. Sissel explained that he works at an artist management company three miles away from his home, and doesn't have a driver’s license due to his eyesight.  As such, he often uses a car service to get to work and other places (but not always, since he sometimes walks, bikes, or works from home). 

Mr. Sissel’s account of how he ended up as a customer of Metro Livery was worth smiling about.  He had been accustomed to taking a cab to work, he said, and one day he called Metro Livery mistakenly believing that they were a cab company.  To his delight, he stepped out of his home that morning to find a polished black Lincoln Town Car with a driver wearing a suit waiting for him.  This “was exceptional” Mr. Sissel noted, beaming from ear to ear.  “Cabs are just means of getting from A to B,” he continued.  But “Metro Livery gave me a sense of dignity.  They treat me like a VIP.  They take care of my son in Franklin when I’m not there, and wait for him to get safely into his apartment.  They make me feel like somebody special.”   

Before the recent regulations, Mr. Sissel testified that he had paid $18 per ride with tip included.  Now, in order to get the same price, he and Metro Livery have to try to exploit a loophole in the minimum fare provision by paying $54 per ride, then taking two rides free.  This arrangement often doesn’t work for him, however, since his schedule is unpredictable and it’s hard to keep track of the “free” rides that are owed.  “I don’t understand why, if someone can create a business model that allows me to work the way I want to in the city I love, then...” he started to say before his testimony was cut short by MTLC’s objection.

Nothing of note was discussed on cross.

 

Witness 3: David Clegg

If Mr. Sissel’s testimony was your average human interest story, Mr. Clegg’s story was the tear-jerking “All I WantFor Christmas Is You” moment from Love Actually.  I’ve watched several trials in my life, and even tried a few myself, but never have I ever seen an entrance quite like this one. 

According to his testimony, Mr. Clegg is “totally blind” and suffers from “severe rheumatoid arthritis and osteoarthritis.”  Swiveling a black cane out in front of him and wearing dark sunglasses to cover his eyes, Mr. Clegg slowly inched his way into the courtroom with the help of his attorney Wesley Hottot.  The jury, visibly sensitive to his difficulties, hung onto every word of his testimony.  “I can’t hardly walk . . . and there’s no cure,” he began.

After explaining his condition, Mr. Clegg explained that he uses Metro Livery four or five times per month, and maybe more.  Before the minimum fare regulation, he also used to be charged just $25 per trip.  “It’s hard to beat a deal like that,” Mr. Clegg noted.  “With my condition I often need extra help, and [Metro Livery] helps me get in my house and makes sure I’m ok before they leave.”  Now, in an effort to keep him as a customer and comply with the minimum fare requirement, Metro Livery has worked out a deal with Mr. Clegg where he’s charged $50 upfront for a round trip.  “It all amounts to about the same, but it means I have to pay more upfront,” Mr. Clegg explained.  “I liked it the way it was.”

 

Witness 4: Theresa Anglan

The fourth witness of the day was Theresa Anglan, the manager and principal dispatcher for Metro Livery.  Ms. Anglan has been with the company since its inception, and handles all duties from car inspection to customer complaints to booking.  She also testified that Metro Livery drivers used to spread out throughout the city in order to maximize the speed of service, but that this is no longer possible due to the dispatch restriction’s requirement that limousines only dispatch from their place of business. 

Ms. Anglan’s testimony started out fairly aggressively, then moved quickly to the emotional.  “Many customers are going out to black tie events, the Ryman, or for a nice night on the town, and they don’t want to show up in a dirty, nasty cab” she exclaimed.  “They want a service that opens a door for them and a driver in a suit.”  Customers also used to be charged an average of $22-$25 per ride, she continued.  But “now, we charge them $45.  Some people— they can’t afford that.  We’ve lost almost 50% of our business” she said, appearing to be on the verge of choking up. 

What would happen if the minimum $45 fare rule remains in effect, she was asked?  “I’ve had to cut our employees hours, then cut them again.”  “We’ll keep losing business,” she said, needing a moment to collect herself.  “It used to be so pleasant, so fun to work in our office.  We can’t make a living here anymore.  You can sit there for hours and hours and the phone doesn’t ring.”  Some employees have already had to leave the company for new jobs to make ends meet, and 70% of Metro Livery’s customers also can’t pay in advance or aren’t comfortable with exploiting the loophole in the law, she explained.  “We shouldn’t have to put this on our customers.  Eventually we’re going to have to shut out doors.  I have worked so hard to build this company, earn these customers and keep these customers.”  “It breaks my heart,” she finished actually choking up this time. 

Attorney Jerry Smith of the MTLC handled the cross, which was primarily dominated by both attorney and witness becoming frustrated about Ms. Anglan claiming she didn’t understand the questions she was being asked.  “It’s a yes or no question,” Judge Sharp once interjected, joining in the frustration.  The cross centered on some hearing at which Ms. Anglan had responded to several questions from MTLC Chairwoman Helen Rogers, and at which some individual named Boyd Kinser – a driver of Metro Livery who had also once been a licensed attorney – had appeared.  I can’t say I understood the relevance, though, and I doubt the jury did either. 

 

Witness 5: Clint Catshod

The fifth witness of the day was Clint Catshod, a current driver for Metro Livery who had once been ticketed for violating the minimum fare ordinance.  Mr. Catshod described a sting operation that MTLC had conducted, and was still visibly perturbed about the experience.  Sometime after the minimum fare regulation went into effect, an MTLC employee apparently called Metro Livery to negotiate a $25 fare, and then halfway through the ride, an MTLC inspector pulled Mr. Catshod over and assessed him a $50 fine. 

To me, the most interesting part of Mr. Catshod’s testimony was the fact that he had been pulled over by an MTLC car equipped with blue lights, and that both the MTLC inspector who had posed as a passenger and the one who pulled him over had flashed official police badges and represented themselves as law enforcement officers.  This, of course, was one of several scandals that wonthe MTLC national headlines last year, as well as a scathingrebuke from Nashville’s Chief of Police Steve Anderson.  MTLC inspectors, of course, are not actually law enforcement personnel, and impersonating a police officer by illegally equipping a car with blue lights, holding oneself out as a law enforcement officer, and flashing a falsified police badge– otherwise known as a “Criminal Impersonation” under TCA§ 39-16-301(b) – is a Class A misdemeanor that carries a sentence up to eleven months, twenty-nine days in prison and a fine of up to $2500.  Despite apparently having engaged in the practice of impersonating police officers for thirty-five years, however, not a single MTLC official was ever charged, presumably because Nashville prefers to waste its resources rotating non-violent drug addicts and homeless people in and out of prison. 

 

Witness 6: Brian McQuistion

After a break for lunch, the trial resumed again at 1:00PM.  The sixth witness of the day was former MTLC Director Brian McQuistion, who for the sake of full disclosure I have been no fan of and publicly demanded be fired several times last year both in the Tennessean and in this blog.  After recounting how he became MTLC Director, the parties spent the following four hours painstakingly tracing the process by which the livery ordinance was enacted.  Several members of the gallery had to get up to stretch and pace the hall in order to prevent from falling asleep throughout this testimony, and more than a few jurors began to nod off at various points as well.  The highlights of his direct testimony, as far as I could tell, were (1) his reading of the MTLC meeting minutes from August 2009 (“Chair Rogers asked where the minimum $50 fare [later reduced to $45] had originated; the Director responded that this had been a recommendation of [TennLA] during the revision process”), and (2) his testimony that “Bo Mitchell put the minimum fare back in” when it was voted on by the Metro Council, and that this “surprised everyone except TennLA.”  Plaintiffs’ attorneys also spent considerable time getting Director McQuistion to rebut, in part, many of the MTLC’s asserted interests in this case (e.g.— Q: “Do you believe that businesses always make more money when they charge higher prices?”  A: “No”).

On cross, the MTLC retraced all the steps of the ordinance’s drafting process.  Toward the beginning of the cross-examination, I was rather surprised that he was asked whether “other cities had used minimum fares” (he had testified that Nashville’s livery ordinance was based in great part on those used in other cities), to which he promptly responded “no.”  This seems like exactly the sort of evidence that helps the plaintiffs in this case, but quite frankly I didn’t follow the relevance of the rest of the cross-examination, either, and may have completely misunderstood whatever trial strategy the government was pursuing.  Mr. McQuistion did state that many other municipalities have dispatch and vehicle age requirement regulations, though, which does lend credibility to the MTLC’s non-protectionism claim.  Another fun fact— apparently Nashville pays fairly hefty dues for our MTLC commissioner to attend some international conference of transportation regulators every year, and for this we get one of the most dysfunctional, embarrassing and borderline corrupt transportation regulatory bodies that you or mother has ever heard of. 

By 4:00PM – after three hours of testimony from Mr. McQuistion and seven hours of trial – I had to leave.  Something like 12 exhibits detailing the minutiae of the bill’s drafting process had been introduced at this point in his cross examination (with several more to come) though, and I’m relatively certain that nobody was paying attention anymore. 

 

In any event, I’m looking forward to tomorrow. 

-Daniel Horwitz

I showed up for a while yesterday, just to get a flavor for what was going on to extend moral support ot Ali Bokhari, owner of Metro Livery. I heard Brian McQuistion testify that one to the justifications for the minimum fare for limo companies was to protect the taxi industry and to insure that taxi drivers make a decent wage. Astonishingly, at least to me, he said that this was important or the taxi drivers would resort to criminal activity to earn a living.  That seems pretty paternalistic if not racist and anti-immigrant given the demographic of the taxi drivers.

I am astonished that no local media is covering this trial. Thanks to Daniel Horwitz for this excellent report. Rod

 

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Taxi Licensing Commission still dysfunctional and unconcerned

by Daniel Horwitz

The Metro Taxi Licensing Commission met Thursday and here are a few interesting things that occurred that the Commissioners could not have appeared to care less about:

Cab Companies Continued to whine about competition

Notwithstanding the existing cab companies' repeated assurances that no new cab companies are necessary because they are already providing exceptional customer service to the people of Nashville, the RPM taxi report very explicitly and quite scathingly concluded that "[n]o company was exempt from poor service— there were multiple instances of poor service on rides from all of the companies" (p. 3-24).  Additionally, given that RPM's secret shoppers also concluded that "United Cab’s arrival time also appeared to be longer than the other taxi companies," that "United Cab drivers were more often found to be either refusing credit cards or very reluctant to accept them," and that United Cab's atrocious customer service was the "most egregious of all" because its drivers "would appear to be routinely overcharging their unsuspecting customers" (p. 3-24), today's comments from the United Cab executive who cried that the closed industry was being unfairly crucified by the media were particularly entertaining.  

Cab company owners can continue to whine about the extreme unfairness of having some potential competition in Nashville's taxi industry, but for years now they've enjoyed all the profit without doing any of the work.  As I've previously noted in great detail, the only people who do any work or take any risks at all are the drivers themselves.  

Cab company owners continue to lie about their "fleets"

There is really no other way to say this, but when cab company owners like Taxi USA's Michael Solomon and Checker Cab's Mulugeta Abebe make grand promises about their "fleets" of taxis, they are lying.  These owners don't actually own any cabs.  They merely own the permits that give people the lawful ability to drive cabs, and they sublease these permits to actual cab drivers for between $150 and $205 per week (p. 1-4).  In sum, the five current "cab companies" in Nashville (which, it should be noted, actually describe themselves as "franchising companies") are outrageously profitable but completely unnecessary middle men who provide absolutely no goods or services whatsoever to the community.  

If we're going to be dealing with facts, there are 585 total permitted cabs in Nashville, and the RPM transportation consultants clearly stated that "virtually all of the regular taxicabs are owned by the taxi drivers" (p. 3-1)-- leaving very little room left for any of the current cab company owners' aforementioned "fleets."  Perhaps notably, the study also found that Taxi USA-- Nashville's biggest cab company by far with 205 taxi permits (p. 3-1)-- has only "one company-owned sedan" (p. 3-3).  

MTLC continues to defer new cab permits

The Volunteer Taxi drivers first submitted their permit application in November 2011.  At the November 2011 hearing, the TLC deferred its decision on their application to December 2011.  At the December 2011 hearing, the TLC then placed two future conditions on the granting of Volunteer Taxi's permits, and deferred a final decision until June 2012.  At the June 2012 hearing, the TLC then deferred its decision until today, July 26th.  Today, after wasting hundreds of people's time for about three hours, the TLC again decided to defer a final decision until August, citing their own failure to provide adequate public notice for today's hearing.  

I'm generally very supportive of public servants who volunteer their time for the good of the community, and I don't want to allege bad faith without any specific basis for believing that there's something illicit going on behind the scenes, but this is beyond ridiculous.  Either do the job, or step aside and let someone else do it.  

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu. 

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The indefensible public policy of shielding big taxi companies from competition

by Daniel Horwitz

Daniel Horwitz

The 149-page final report on “Taxicab and Other Passenger Vehicles for Hire in Nashville” released by the Mayor’s office yesterday has several important implications for the future of Nashville’s transportation industry, only a few of which have been picked up by local news outlets.   

Though I was among the first to question the value of Metro’s $172,810 expenditure on this study, let me also be the first to say that the fact-finding done by RPM Transportation Consultants appears to be exceptional, and that this alone may have been worth the price of admission.  Now that the underlying facts of the industry are no longer in dispute, we can finally shift the conversation to the indefensible public policy components of the current transportation licensing system, and can hold Metro legislators accountable if and when they refuse to reform it. 

The consultants’ final report includes a great many findings about both the taxi industry and the livery industry in Nashville, which I will address in turn.  With respect to the market for taxi services, the most important facts are as follows:

1)   The Transportation Licensing Commission has currently capped the number of taxi permits allowed in Nashville at 585, all of which are owned by one of five private taxi companies.

2)    In order to be able to drive a cab in Nashville, all taxi drivers must pay one of these private taxi companies a weekly fee (known as a “lick”) which ranges from $150/week to $205/week.

3)   Taxi drivers independently own or lease every single cab in Nashville.

4)   Taxi drivers themselves bear all the costs of insurance, gasoline, vehicle maintenance, and credit card processing, and also pay out of pocket for the FBI background check, driver training class, driving test, physical, and eye exam annually required by Metro.

5)    Each of Nashville’s five private taxi companies has designated its drivers as “independent contractors,” meaning that these companies do not have to provide employee benefits like health insurance or workers’ compensation, and also do not have to comply with minimum wage requirements. 

If this doesn't immediately strike you as outrageous, allow me to explain why, as both a consumer of taxi services and someone who cares very deeply about fair working conditions, Nashville’s current taxi licensing system has my blood boiling.  Take, for example, the business model of Taxi USA— Nashville’s largest cab company and the lucky owner of 205 of Nashville’s 585 taxi permits (over 35%).  “Developed in 2006 by two well known taxi industry owners and investors,” according to the consultants’ report, Taxi USA makes money by subleasing each of its 205 taxi permits to individual cab drivers at a rate of $205 per week.  Since most drivers work about 50 weeks each year, Taxi USA’s annual revenues amount to somewhere around $2.1 million annually. 

What operating expenses does Taxi USA have to offset these revenues?  Well, the company doesn't have to purchase any taxis— those are all owned or leased by the drivers themselves.  It also doesn't have to pay for insurance, gasoline, vehicle maintenance, or any other driving-related expenditures— cabbies bear those costs in full as well.  Additionally, rather than having to meet payroll and pay its employees a salary like a normal business, Taxi USA actually gets to charge its employees for the privilege of being able to work (which has got to be the most unbelievable legal scam I’ve ever heard of).  

 Finally, by designating its employees as mere “independent contractors,” Taxi USA’s owners also get to take advantage of a legal loophole that allows them to avoid having to provide employee benefits, and can fire workers who attempt to unionize.  With a system like this, it’s really no wonder that the secret shoppers commissioned by the Metro consultants found that “[n]o company was exempt from poor service.”  Taxi drivers in Nashville are affiliated with their parent companies only on paper, and as such, they have absolutely no incentive to care about the name painted on the side of their cabs.  Notably, unless Volunteer Taxi (Nashville’s first driver-owned and driver-operated taxi company) is granted the 61 permits it has requested on July 26th, the poor quality of taxi service in Nashville is unlikely to change anytime soon.

How exactly do Taxi USA and the other four taxi companies in Nashville get away with a scheme that allows them to generate millions in revenue with almost no operating expenses?  The short answer is that all of Nashville’s 585 taxi permits are owned by one of these five taxi companies, and the TLC has completely shielded these companies from competition by refusing to lift the artificial permit cap.  In terms of actual transportation services, though, 100% of the benefits to the Nashville community are provided by the “independently contracting” drivers themselves— not the “taxi” companies (which actually describe themselves as “franchising” companies anyway). 

Notwithstanding the fact that Michael Solomon, executive Vice President of Taxi USA, has publicly whined that running a taxi franchising company in Nashville is “a challenge” and that “everybody thinks it’s easy,” best I can tell, the job of taxi company management is merely to show up to work once a week, collect money from the drivers, and go home. 

In sum, by artificially restricting the number of taxi permits allowed in Nashville and thereby preventing anyone else from being able to compete, the Transportation Licensing Commission has created five outrageously profitable but completely unnecessary middle men who provide no goods or services whatsoever to the people of Nashville.  (For anyone who cares, this nonsensical system is quite similar to the former version of our Federal student loan program, interestingly enough.) 

Practically speaking, Nashville’s cab drivers are currently paying the equivalent of a $10,000 annual tax for the mere privilege of being able to drive a cab in this city, yet instead of going into Metro’s general fund, this tax is both levied and collected by the owners of the city’s private taxi companies.  Strange as it seems, this is precisely why the Metro consultants found that so many cab drivers actually oppose a fare increase (despite making only about $2.40 per hour after expenses, according to a 2008 preliminary report to the TLC).  If fare prices were to go up, the drivers complained, companies like Taxi USA would simply raise the weekly “lick” (tax) they have to pay, and the drivers themselves wouldn’t see so much as an extra dime.   

The solution to this problem is simple.  Similar to Tennessee’s “shall issue” system for everything from bartender certification licenses to attorneys’ licenses to gun carry permits, anyone who takes the necessary classes and meets Metro’s stated requirements for being able to drive a taxi should be given a taxi permit.  More specifically, anyone who wants to drive a cab in Nashville should be permitted to do so provided that he or she: 1) passes the aforementioned FBI background check, driver training class, driving test, physical, and eye exam required by Metro; and 2) complies with Metro’s maximum fare price and quality control ordinances.   

The notion that the Transportation Licensing Commission can use its power to protect Nashville’s existing taxi oligopoly (cartel) by continually refusing to grant permits to would-be competitors like Volunteer Taxi is absurd, and quite frankly, the Tennessee Supreme Court held that this kind of behavior “clearly violates Article I, Section 8 of the Constitution of Tennessee” all the way back in 1956.  Personally, I don’t blame the Mayor’s Office for this mess at all; to the contrary, in fact, Mayor Dean has gone out of his way to understand the awful working conditions faced by Nashville’s taxi drivers, even though the TLC makes up less than .2% of the overall Metro budget.  But if your Metro Councilman is among those local legislators who oppose free market competition in the taxi industry, you really need to consider voting that person out of office in the next election.

With respect to the livery industry, the consultants’ findings were shorter but no less dire.  (For those who are unfamiliar with either the content or the lobbyist-motivated origin of the Metro livery regulations enacted last year— which require, among other things, that limo companies charge their customers more and wait longer to pick them up— a complete summary can be found here.)  Most importantly, the consultants concluded both that: (1) “there is considerable interest in being able to offer a lower cost sedan service at $25.00, if it is legal,” and (2) “the structure for regulating [sedan] service is reasonable, as is the $45 minimum fare which provides a sufficient ‘differentiator’ between taxi service and [sedan] service.” 

Even for those who are completely unfamiliar with the state of the livery industry in Nashville, there is no need to detail what makes this latter conclusion so stupid.  If there is consumer demand for a service, Metro’s role is not to make the provision of that service illegal.  If I want to take a limo ride for $25, and if the limo company wants to charge me $25 for that ride instead of $45, there isn’t a reason in the world why we should be legally prohibited from entering into that transaction.   

Metro also has no business whatsoever favoring the taxi industry over the livery industry, and given the blind eye that the Metro government has repeatedly turned to the plight of Nashville’s taxi drivers, the notion that these regulations were actually intended to protect taxi drivers is highly disingenuous at best.  At the very least, the attorneys over at the Institute for Justice (who have sued the TLC for “impos[ing] a host of arbitrary and irrational regulations on limousine and sedan services in an unconstitutional effort to eliminate competition in the transportation market and benefit a small group of industry insiders”) can be grateful that Metro’s consultants agreed that the purpose of the recent livery regulations was pure and unfettered economic protectionism, and that these regulations had nothing at all to do with public safety.  And just like the broken taxi licensing system, this mandatory price-fixing scheme similarly justifies voting out your Metro Councilman if he or she refuses to repeal it.  Price-fixing is not the government’s role, and legislators should be punished for sacrificing basic principles like this in order to appease the influential Tennessee livery lobby TennLA.

A former Professor of mine once observed that powerful business interests often follow the strategy “if you can’t beat the competition, make the competition illegal.”  That observation could not be any more true than it is here in Nashville’s transportation market, where entrenched local interests have, to this point, successfully fought tooth and nail to prevent free and fair market competition in the taxi and livery industries.  Without question, the only beneficiaries of the policies that have recently been promulgated by the TLC are the owners of Nashville’s pre-existing cab companies and Nashville’s most expensive limousine companies, whose interests have been steadfastly protected by the Metro government at the expense of both consumers and workers alike.  For obvious reasons, this is completely unacceptable. 

Taxi and limo drivers themselves, many of whom are refugees who proudly accepted American citizenship after arriving here, often lament that they are being denied a fair shot at achieving the American dream.  They are correct.  The right to work and to be free from economic protectionism can be seen as early as the 41st provision of  The Magna Carta of 1215, it was famously reinforced under English law in the landmark “Case of Monopolies” Darcy v .Allen in 1599, and the “sacred right of labor” implicit in the U.S. Constitution itself was referenced by members of our Supreme Court as early as 1872.  

 Whether people who want to earn an honest living should be prohibited from working through intentionally burdensome local regulations is not, and never will be, a partisan issue.  (And just for the record, I’m a Democrat.)  No matter what your political affiliation, we can all agree that these atrocious policies need to end.  If they aren’t repealed soon, the legislators who are responsible for maintaining them need to be replaced.  It’s that simple. 

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu.

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Consultant Report Recommends Moving Transportation Licensing Function to Public Works Department

Transportation Licensing Director to Retire

 

NASHVILLE, Tenn., Press Release from Office of the Mayor – A consultant report on the Transportation Licensing Commission recommends a number of changes, most notably moving the staff that permit and oversee the operation of taxis, wreckers, horse-drawn carriages and other for-hire vehicles in Nashville under the Department of Public Works in order to take advantage of economies of scale.

The report, conducted by RPM Transportation Consultants, was commissioned by the Metro Finance Department earlier this year in order to assess the state of Nashville’s current taxi service providers and private vehicles for hire, and the operations of Metro’s Transportation Licensing Commission which regulates them.

“Nashville has a growing tourism industry. As we see more restaurants and hotels spring up – and especially as the Music City Center opens next year – the demand on taxis and private hire vehicles is only going to increase,” said Helen Rogers, chair of the Transportation Licensing Commission.

“It’s important that these industries remain strong and that their services remain high quality to protect the public that depends on them. This study helps answer a number of questions which have come up in recent years as we work to achieve these goals. I look forward to the board evaluating this report and taking action where appropriate.”

In conjunction with the release of the report, Director of the Transportation Licensing Commission Brian McQuistion announced his plans to retire from Metro Government. McQuistion was appointed to the role in April 2004.

“This presents me with a good opportunity to retire and devote myself to my wife and family,” McQuistion said. 

Chairwoman Rogers said McQuistion has served the agency well. “Brian has been a great administrator and a good public servant. He has led the commission through many significant improvements, including eliminating non-consent towing on private property, regulating all vehicles for hire including limousines, and increasing the number of wheelchair accessible taxi vehicles in the city,” she said.

Mayor Karl Dean’s Administration has offered Billy Fields, currently the director of the Mayor’s Office of Neighborhoods and long-time Metro employee, to serve as interim director, pending final approval by the board.

Moving Metro’s transportation licensing function to Public Works will require Council action in the form of an ordinance. A complete summary of conclusions and recommendations from RPM’s study is attached.

The full study is at http://www.nashville.gov/mayor/docs/TaxiStudy2012/TaxiReport.pdf.

Appendices are at http://www.nashville.gov/mayor/docs/TaxiStudy2012/TaxiReportAppendices.pdf.

My Comment: There's not all that much in the consultant's report that is good for taxi drivers or customers of taxis and it's about the worst and most indefensible set of conclusions imaginable for the limo companies who want to charge less than the $45 minimum fare, but at least Director McQuistion appears to be "retiring" in the wake of the TLC's numerous scandals.

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