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Joe Sanfelippo Cabs Inc. v. City of Milwaukee

United States District Court, E.D. Wisconsin

December 7, 2015

JOE SANFELIPPO CABS INC., et al., Plaintiffs,
CITY OF MILWAUKEE, Defendant, and JATINDER CHEEMA and SAAD MALIK, Intervenor-defendants

          For Joe Sanfelippo Cabs Inc, GCC Inc, Roy WMS Inc, Frenchy Cab Co Inc, 2 Sweets LLC, Plaintiffs: Dean P Laing, LEAD ATTORNEY, O'Neil Cannon Hollman DeJong & Laing SC, Milwaukee, WI; Michelle L Jacobs, LEAD ATTORNEY, Steven M Biskupic, Biskupic & Jacobs SC, Mequon, WI.

         For City of Milwaukee, Defendant: Adam B Stephens, Milwaukee City Attorney's Office, Milwaukee, WI.

         For Jatinder Cheema, Saad Malik, Intervenor Defendants: Lawrence G Salzman, LEAD ATTORNEY, Institute For Justice, Arlington, VA; Anthony B Sanders, Meagan A Forbes, Institute For Justice, Minneapolis, MN; Michael D Dean, Michael D Dean LLC, Brookfield, WI.


         LYNN ADELMAN, District Judge.

         Plaintiffs, taxicab companies and owners of City of Milwaukee taxicab permits, challenge the constitutionality of a 2014 City ordinance that removed the cap on the number of permits that the City could issue. Several taxicab drivers have intervened on the side of the City. The City and the intervenors now move to dismiss plaintiffs' complaint.

         I. Background

         The City of Milwaukee has regulated the taxicab industry for decades. In 1992, it enacted an ordinance barring the issuance of new permits but allowing transfer of previously issued permits. M.C.O. § 100-50-3-a (1992). That ordinance created a downward-floating cap; the cap could not increase because the City did not issue new permits, but it decreased when a permittee chose not to renew or when a permit was revoked. The ordinance thus created a market for permits, and since then the value of a permit has risen steadily. Plaintiffs collectively own 162 permits, only 6 of which they obtained directly from the City. Plaintiffs purchased the others, paying as much as $150,000 for a permit.

         In 2011, several individuals including the present intervenors successfully challenged the cap under the state constitution in state court. In response, the City increased the cap by 100 permits. Approximately 1,700 drivers applied for the 100 new permits. In addition, rideshare companies like Uber and Lyft, which connect passengers with drivers through a smartphone app, had begun to operate outside the permit system. Faced with the state court decision, the great demand for permits, and the activity of the rideshare companies, the City enacted the 2014 ordinance which both removed the cap and established regulations governing the rideshare companies. The removal of the cap allegedly destroyed the value of the permits in the commercial market.

         Plaintiffs then commenced the present action. They originally argued that the new ordinance violated substantive due process and equal protection but subsequently amended their complaint and now allege that the ordinance violates the Takings Clause of the Fifth Amendment. They also bring supplemental state law claims.

         II. Discussion

         I apply the same standard to defendant's motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) and to intervenors' motion to dismiss under Rule 12(b)(6). Adams v. City of Indianapolis, 742 F.3d 720');">742 F.3d 720, 727-28 (7th Cir. 2014). To survive defendants' motions, plaintiffs must " state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). I accept the complaint's factual allegations as true, but allegations in the form of legal conclusions are insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

         A. Takings Clause Claim

         The Fifth Amendment provides that " private property [shall not] be taken for public use, without just compensation." To allege a Takings Clause claim, plaintiffs must plead that (1) they have a property interest protected by the Fifth Amendment, (2) the 2014 ordinance effected a taking of that interest, (3) the taking was for public use, and (4) the state did not provide just compensation.[1] See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000-01, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984).

         I first ask whether plaintiffs possess a protected property interest. Property interests " are created and their dimensions are defined by existing rules or understandings; " in other words, plaintiffs must plead " rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). A protected interest can arise from state law or a mutually explicit understanding. Dennis Melancon, Inc. v. City of New Orleans, 703 F.3d 262, 274 (5th Cir. 2012). Plaintiffs must show more than an abstract need or desire or a unilateral expectation; rather, they must have a legitimate claim of entitlement. Roth, 408 U.S. at 577. Those with a legitimate ...

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