BROOKLYN (CN) — Taxi cab drivers are seeking more than $2.5 billion from the New York City Taxi & Limousine Commission, saying they paid artificially inflated prices for their taxi medallions, collectively losing hundreds of millions as a result.
The class action RICO suit, filed Tuesday in the Eastern District of New York, accuses the TLC of running a 13-year scheme to defraud those who bought medallions, which are the metal plates required for taxi drivers to work legitimately.
New York City made $855 million from auctioning off medallions and charging a 5% transfer tax on each transaction, the 105-page complaint says.
Because of the scheme, prices rose drastically under former New York City Mayor Michael Bloomberg, a named defendant in the suit. Between 2004 and 2014, costs jumped from $200,000 in 2001 to more than $1 million in early 2014.
The sky-high prices, drivers were reassured, were worthwhile. Commission representatives told them that the medallions were as “good as gold,” the suit claims, and that the purchase was secure because TLC has a “monopoly” over taxis in New York.
The first named plaintiff, Alec Soybel, says that TLC Chief Executive Officer Matthew Daus had told him that buying a medallion was a “once-in-a-lifetime opportunity” to become a middle-class American and enjoy a “worry-free retirement.”
“Daus further stated that purchasing a medallion was ‘what the American dream is all about,’” the suit says.
The suit further alleges that TLC was aware that inflated prices were plunging drivers underwater.
According to the suit, an internal 2010 report by a TLC policy analyst found that medallion owners were barely earning enough to pay for their medallion loans and operating costs.
The report estimated that a driver would have to earn more than $91,000 annually to service a 15-year mortgage on the badge, plus costs.
“Thus, by 2010, it was already clear that medallions were grossly inflated, and that medallion loans at such inflated prices were unsustainable,” the complaint reads. But TLC did not release that report publicly until June 2019.
Now, drivers say they are at a loss. Soybel is “saddled with a suffocating debt that he has no way of ever paying off,” according to the complaint.
Last year, New York Attorney General Letitia James launched an investigation of the TLC, accusing the commission of charging inflated prices and forcing drivers who bought them to clock obscene hours to make ends meet.
“What’s worse is that the TLC knew their actions were affecting some of the city’s most financially exposed immigrant families,” the attorney general said at the time.
James dropped the matter in February of this year, saying that a lawsuit could take years, and that a bailout for the drivers would be a better option. State legislators have also discussed a potential bailout. The drivers are picking up where she left off.
“Our lawsuit seeks to finish the job that AG James started,” said Jon Norinsberg, attorney for the taxi drivers, in an email to Courthouse News.
Norinsberg said the attorney general “did a great job exposing the fraudulent and deceptive practices engaged in by the TLC and City of New York,” and that the plaintiffs’ own investigation confirmed and expanded upon those findings.
“We are seeking to recover full restitution for all medallion owners, many of whom owe hundreds of thousands of dollars because of TLC’s fraudulent scheme,” Norinsberg said, “which directly led to the collapse of the medallion market.”
Neither the TLC nor New York City’s legal department immediately responded to requests for comment on Tuesday afternoon.
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