5th Circuit Sides With New Orleans on Cab Laws

(CN) - New Orleans taxicab licenses are not constitutionally protected property since the city has the right to revoke or suspend them, the 5th Circuit ruled.

After New Orleans amended, or supplemented, its taxicab regulation in April 2012, three groups filed separate challenges in federal and state court.

Each plaintiff either owns or has a stake in a New Orleans taxicab license, referred to under the city's laws as a certificate of public necessity and convenience, or a CPNC.

The plaintiffs took issue with two laws that they labeled an unconstitutional taking of their property rights: the section stating "CPNCs are privileges and not rights," and the section making previously mandatory transfers of the licenses up to the discretion of city officials.

They also challenged six new "upgrade ordinances." These rules declared that certain vehicles may not be used as taxis, required that taxis maintain trip sheets for a two-year period, set an age limits on vehicles used as taxis, and required taxis to be equipped with credit or debt card machines, security cameras and GPS devices.

After a Louisiana state court issued a temporary restraining order that prohibited New Orleans from enforcing the laws in July, the cases were removed to eastern Louisiana federal court and consolidated.

New Orleans moved to dissolve the TRO, while the plaintiffs sought a preliminary injunction.

In a mixed ruling, a federal judge found it likely that the takings claims would prevail but had less hope for the claims that the laws impaired taxicab contracts with the city.

The court also refused to enjoin enforcement of the upgrade ordinances.

On appeal, the plaintiffs argued that New Orleans created a property interest in the licenses because it had limited the number of taxicab licenses to 1,600, and allowed them to be sold, until 2009.

They also presented evidence that a license had sold for $67,000, and that the Small Business Administration uses licenses as collateral in a loan program.

Based on these practices, the plaintiffs claimed to have demonstrated that the license holders and the city reached an understanding that the property interests at stake were constitutionally protected.

For its part, New Orleans argued that the licenses are privileged because it has the authority to revoke or suspend the licenses, impose annual renewal fees, and designate travel routes for license holders.

A three-judge panel of the 5th Circuit sided with the city on its privileges argument Friday.

"To be sure, as plaintiffs argue, the city traditionally has permitted CPNC holders to transfer their certificates for consideration," Judge Carolyn King wrote for a three-judge panel. "By so doing, the City tacitly has contributed to the development of a secondary market wherein CPNCs historically have attained significant value. This does not, however, change our understanding of the fact that CPNC holders merely possess a 'license to participate in the highly regulated taxicab market [that] is subject to regulatory change.'"

The panel vacated the partial preliminary injunction on the takings claim issues, and affirmed denial of the contract-impairment injunction.

"Furthermore, having so concluded, we may also dispose of plaintiffs' claim that the Upgrade Ordinances impair contracts into which they have entered with the City and State of Louisiana," King wrote.

The panel remanded the case for further proceedings.

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