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Classic Cab Inc. v. District of Columbia

United States District Court, District of Columbia

January 24, 2018

CLASSIC CAB, INC., et al., Plaintiffs,
DISTRICT OF COLUMBIA, et al., Defendants.



         The District of Columbia's Department of For-Hire Vehicles has been on a years-long campaign to modernize the District's taxicab industry. Facing competitive pressure from app-based ride-hailing services like Uber and Lyft, the Department beginning in late 2016 adopted a series of rules that require taxi operators to transition from traditional analog metering systems to newer systems called “digital taxicab solutions, ” or “DTS.” Like those popular ride-hailing services, the DTS systems are designed to run on mobile devices and calculate fares using GPS technology.

         Classic Cab, Inc., a taxicab operator in the District, along with its owner, brought this eleventh-hour suit on December 29, 2017, seeking to halt the DTS requirement from going into effect on the first day of the New Year. In their motion for a temporary restraining order, they contend that the Department's rulemaking violates several federal constitutional provisions as well as the District of Columbia Administrative Procedure Act, and that those violations have caused them serious economic harm. For the reasons that follow, the Court finds that the plaintiffs are not entitled to preliminary relief, and it will therefore deny their motion.

         I. Background

         The Department of For-Hire Vehicles has regulatory authority over all taxicab operators in the District of Columbia. D.C. Code § 50-301.07. Among the Department's powers is the ability to “[e]stablish standards and requirements relating to the modernization of equipment and equipment design.” Id. § 50-301.07(c)(5). It exercises this power through administrative rulemaking, subject to the requirements of the District of Columbia Administrative Procedure Act (“D.C. APA”), D.C. Code § 2-505. See id. § 50-301.07(d)(1) (providing that D.C. APA applies to Department rulemaking).

         The D.C. APA generally requires agencies to issue notice and hold a public comment period before implementing a rule. See D.C. Code § 2-505(a)-(b). The Department's DTS rules, however, were issued pursuant to § 2-505(c), which allows for “emergency rulemaking” in certain circumstances. That section provides:

[I]f, in an emergency, as determined by the Mayor or an independent agency, the adoption of a rule is necessary for the immediate preservation of the public peace, health, safety, welfare, or morals, the Mayor or such independent agency may adopt such rules as may be necessary in the circumstances, and such rule may become effective immediately. Any such emergency rule shall forthwith be published and filed in the manner prescribed in subchapter III of this chapter. No such rule shall remain in effect longer than 120 days after the date of its adoption.

         Beginning in September 2016, the District issued a string of seven emergency rulemaking notices related to DTS. The first notice provided that, beginning on September 13, 2016, the District would no longer approve any non-DTS systems for use in taxicabs. Def.'s Opp. Ex. B, at 9. Taxicabs would be permitted to use either MTS or DTS systems for a year, but, beginning in September 2017, taxicabs would be required to use DTS systems or else face civil penalties. Id. While not published in the D.C. Register, this first notice was posted on the District's website along with instructions for filing written comments. Def.'s Opp. Ex. B, at 22. The Department also published notice in the D.C. Register of a November 2016 hearing regarding that rulemaking. 63 D.C. Reg. 13694.

         As provided by § 2-505(c), this first rulemaking expired on January 11, 2017, 120 days after its effective date. Following its expiration, the Department issued a second notice that was substantially similar to the first and also unpublished. Id. Ex. C. This process repeated four more times, with notices issued on May 11 (id. Ex. D), June 28 (id. Ex. E), and August 11, 2017 (id. Ex. G). Each of the rules stated that the DTS requirement would become effective on September 1, 2017. Then, on September 1, the Department issued a sixth emergency notice, this time publishing it in the D.C. Register. See 64 D.C. Reg. 8696. The notice, citing concerns about implementation, pushed back the effective date of the DTS requirement to October 31, 2017. See id. The Department held a public hearing in late September, see 64 D.C. Reg. 65396 (hearing notice), and provided a 45-day comment period, see 64 D.C. Reg. 11950.

         To account for the comments submitted-particularly those related to accessibility of the new systems-the Department published a seventh notice on October 27 setting forth the DTS requirement that is currently in force. Id. This “Notice of Second Emergency and Proposed Rulemaking” slightly modified the prior notice and extended the effective date from October 31, 2017 to January 1, 2018. Id. Beginning on that date, no taxicab would be able to operate in the District of Columbia unless it used a DTS system. Id. The Department held a hearing regarding this second notice on December 12, 2017, 64 D.C. Reg. 66538 (Dec. 8, 2017), and purports to be crafting a final, non-emergency version of the rule that will be issued shortly, see Defs.' Opp. at 6-7.

         The substantive content of the seven rulemaking notices was fairly similar. The new rule requires taxicab companies in the District to transition from traditional analog metering systems-known as “modern taximeter systems” or “MTS”-to DTS systems approved by the Department. See 64 D.C. Reg. 11950, 11954-55 (current rule). There is not a single mandatory DTS system, nor is there a requirement that each taxicab company design its own system from the ground up. Rather, each taxicab in the District must use a system supplied by an approved DTS “provider.” Any taxicab company in the District can apply to be approved by the Department as a “provider-meaning that they can supply their DTS system to other companies or use it in their vehicles. Id. at 11955-56. To be a provider, the taxicab company must verify that its system meets or exceeds the Department's technological requirements: namely, that it contains (1) a digital taximeter that calculates fares using GPS and integrates with DC TaxiApp, the consumer taxicab application that predates DTS; (2) a passenger console with a digital display; and (3) a credit card processing device. Id. at 11958-59. So long as it meets these requirements, the DTS system can rely on third-party software or may implement a digital taximeter application that the Department has itself designed and made available to providers. See id. at 11955. Companies can apply to be approved as providers during the Department's annual “open season” period, the first of which concluded in August 2017. Defs.' Opp. Ex. A, at 3 (Department Administrative Issuance from Feb. 14, 2017).

         The notices also spelled out the Department's rationale for imposing the DTS requirement, and for using emergency rulemaking procedures to do so. Citing an uninterrupted decline in taxicab rides for the past year and a commensurate drop in revenues, the more recent, published notices explained that the Department sought to immediately “alleviate the rapidly-deteriorating competitive position of taxicabs in the District's vehicle-for-hire industry” caused by the rise of private-vehicle services like Uber and Lyft. 64 D.C. Reg. 8696; id. at 11950. The Department explained that the DTS requirement would aid taxis' competitive position by mirroring the features of those app-based services and by allowing for future innovation through its open-ended design-results that could not be achieved with the MTS. 64 D.C. Reg. 8696, 8698.

         Three days before the DTS requirement was set to take effect, the plaintiffs-Classic Cab and its owner, Mushtaq Gilani-filed this suit against the District, its Mayor, the Department, and the Department's director in his official capacity. In their complaint and motion for a temporary restraining order, they claim that the Department's emergency rulemaking violates the U.S. Constitution-specifically, the Due Process and the Takings Clauses of the Fifth Amendment, and the Contract and Commerce Clauses of Article I-and runs afoul of the D.C. APA.

         The plaintiffs contend that preliminary injunctive relief is necessary because the rule, even before its implementation, has caused them grave economic loss and that, when the rule takes effect, it will likely force Classic Cab to shut down. Pl.'s Mot. ¶ 37. They explain that, before the DTS rule, a large portion of Classic Cab's revenue derived from MTS. Specifically, for several years prior to August 2017, Classic Cab held an exclusive license from the Department-subject to renewal each year-to provide and maintain MTS. To capitalize on this license, Classic Cab in 2013 executed a seven-year contract with a private third party, Creative Mobile Technologies, based in New York. Under that agreement, Creative would install MTS in Classic Cab's fleet of around 1, 700 vehicles-consisting mostly of taxis owned by other taxicab operators. The contract granted Classic Cab 0.25% of all credit card transactions, $0.10 per credit card swipe, and a $5 monthly maintenance fee-in total, about $300, 000 annually. The plaintiffs claim that the new DTS requirement destroys the value of this contract.

         After reviewing the plaintiffs' motion, the Court instructed the parties to propose a schedule for expedited briefing and a hearing. In response to the Court's request, the District represented that “through January 31, 2018 [the Department] will not begin issuing fines or penalties for violations of the regulations at issue.” Def.'s Proposed Br. Sched. at 1 (ECF No. 7). The Court accordingly set a briefing schedule that concluded on January 19 and held a hearing on January 24.

         II. Standard of Review

         With the Court having declined to grant the plaintiffs' motion for a temporary restraining order ex parte-and instead having directed briefing and held a hearing-the Court will evaluate the plaintiffs' motion as one for a preliminary injunction. See Fed.R.Civ.P. 65. Plaintiffs seeking preliminary equitable relief bear the burden of showing (1) that they are likely to succeed on the merits of their claim; (2) that they are likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in their favor; and (4) that an injunction is in the public interest. Winter v. Nat. Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). The D.C. Circuit has suggested that the failure to establish a likelihood of success on the merits categorically forecloses preliminary relief. Sherley v. Sebelius, 644 F.3d 388, 393 (D.C. Cir. 2011). Similarly, an absence of irreparable injury is fatal to a plaintiff's motion. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006).

         III. ...

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