NYC taxi drivers face pushback from Second Circuit over medallion repayment

One judge was hesitant that the requested $2.5 billion in damages should “come out of all of our pockets,” as New York City taxpayers.MANHATTAN (CN) — Second Circuit judges on Friday were alarmed at the prospect of forcing New York City to pay potentially billions in damages to short-changed cab drivers, who for years have been trying to claw back money they lost investing in taxi medallions.The drivers are seeking to revive a class-action racketeering lawsuit against the city, claiming that during Mayor Michael Bloomberg’s administration, the city made more than $850 million overcharging drivers for medallions. According to the cabbies, the city knew the medallions would soon be worthless due to the arrival of ride-sharing apps like Uber and Lyft, which were allowed to operate in New York City without medallions.The drivers are seeking treble damages — more than $2.5 billion, in this case — under the RICO statute, which the drivers’ attorney Joseph Pace admitted has never been obtained from a city before.“So we would be breaking new ground?” asked U.S. Circuit Judge Barrington Parker. “We would say that the first city in 50 years to be held under a statute — that is not the least bit obscure — would be New York City?”Pace replied that it is “mercifully rare” for cities to engage in RICO schemes at all, explaining the legal novelty of their case.“The scheme at issue is unprecedented,” he argued.Still, Parker was hesitant that New York City taxpayers should have to foot a potentially multibillion-dollar bill to repay the cabbies, who claim then-Mayor Bloomberg artificially inflated the price of medallions to as high as $1 million apiece in 2014. Today, the same medallions generally sell for well under $200,000.“So damages to all your clients are going to come out of all of our pockets, the pockets of everybody who lives in the city?” the George W. Bush appointee asked.Pace, a Manhattan resident himself, said he sympathized with the argument. But ultimately, he claimed it was a “natural consequence” of the city’s nefarious scheme, which funded public services for city residents.“This isn’t the case where taxpayers are just innocent bystanders that are being made to foot the bill for avaricious conduct by some wayward officials,” he said.A landmark 1981 Supreme Court case, City of Newport v. Fact Concerts, established that municipalities are immune from punitive damages since they wind up penalizing taxpayers rather than the wrongdoers. Pace argued that treble damages in this case aren’t necessarily punitive, but instead an incentive for wronged individuals like his cabbies to bring civil RICO claims, as Congress intended.Jennifer Lerner of the New York City Law Department argued otherwise. She told the court Friday that treble damages are indeed punitive since they exceed the losses claimed by the drivers.U.S. Circuit Judge Gerald Lynch, a Barack Obama appointee, and U.S. Circuit Judge William Nardini, a Donald Trump appointee, rounded out the day’s panel. The judges didn’t immediately issue a ruling.New York City first issued taxi medallions in 1937 as a way to limit the number of cabs following the Great Depression. There are more than 13,500 in circulation. Over the years, their value steadily climbed until the arrival of ride share apps in the early 2010s brought uncertainty to the market.The plaintiff drivers filed their suit in 2021 in the Eastern District of New York, claiming the New York City Taxi & Limousine Commission ran a 13-year scheme to defraud medallion purchasers by assuring them the investments were as “good as gold” — despite Uber and Lyft looming. Now, many of the drivers claim they’re saddled with debt as they struggle to pay their mortgages on the badges.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads