On October 12, the New York Court of Appeals agreed to hear the appeal in the case of Singh v. City of New York – one of two cases brought by Dan Ackman and Wolf Haldenstein et al. involving Yellow Taxi Medallion auctions in 2013 and 2014. A lower appellate court had essentially dismissed the complaint on the grounds that the TLC had disclaimed reliance on own representations.
The plaintiffs in the case purchased Taxi Medallions in one of three auctions organized by the NYC Taxi & Limousine Commission (TLC), at a time when it was touting investments in taxi medallions as “better than the stock market.”
The plaintiffs later learned that, before the auctions, the TLC had published false information, overstating the prices at which medallions were then trading. Shortly after the auctions ended, the TLC destroyed the market for medallions by permitting the number of vehicles incorrectly categorized as “black cars” to multiply by more than five-fold and let them compete essentially directly with medallion taxis. (The vehicles – put into service primarily by companies like Uber and Lyft – would later be re-categorized as High-Volume For-Hire Vehicles).
As a result, Medallion prices crashed. Sales became rare, and prices obtained in those few sales that did occur went from $1.2 million in the fall of 2013 to less than $800,000 by the end of 2015, and to less than $200,000 by mid-2017.
According to the appeal, prior to the auctions, the entire basis for a yellow taxi medallion’s value had always been that: (i) medallions conferred the exclusive right to offer point-to-point transportation to passengers ready to travel; (ii) legislation capped the number of taxis in operation; and (iii) other for-hire vehicles were limited by law in their operation and in the parts of the market they could serve.
As of January 2014, according to the TLC’s 2014 Taxicab Factbook, there were 13,437 yellow taxi medallions authorized and in operation. At that time, there were also “about 10,000” licensed black cars in operation. These black cars served the corporate market and had to be dispatched from one of 80 base stations in operation at that time.
The 2012 HAIL Act, which authorized the auctions, confirmed that “it shall remain the exclusive right of existing and future [yellow medallion] taxicabs licensed by the TLC as a [yellow medallion] taxicab to pick up passengers via street hail” in the exclusionary zone. Thus, at the time of the auctions, City law segmented the FHV market and supported the investment-backed expectations of medallion buyers.
According to the appeal, in the months leading up to the auctions, the TLC published average-price reports that routinely overstated true medallion transfer values. The TLC also misrepresented the price trend, publishing charts in promotional pamphlets showing constantly rising medallion prices, when in fact medallion prices had begun to decline by late 2013. The TLC also reported average prices for many months in which there were, in fact, no transfers for value from which an average could be computed. This misinformation made the medallions appear to be much more valuable than they really were, and investment in them much less risky. Around the same time, to promote the auctions, the TLC issued a pamphlet that declared in large, bold type that an investment in a medallion is “BETTER THAN THE STOCK MARKET.”
When the TLC held its auctions, the black car fleet was substantially smaller than the medallion taxi fleet, according to the TLC’s 2014 Taxicab Factbook. The months following the auctions, however, saw unprecedented upheaval in the New York City taxi industry, highlighted by the massive growth in the number of black cars affiliated with Uber and Lyft. Thus, the number of black cars increased to nearly 25,000 in 2015. By the time the Amended Complaint was filed, there were 60,000 black cars in operation. By August 2018, there were 100,000 FHVs operating in New York City – more than 80,000 of which were affiliated with Uber and Lyft.
At the same time, the TLC permitted black cars to accept “ehails” (electronic requests for immediate pickup), blurring the lines between the two segments of the industry and allowing e-hail taxis to be “in direct competition” with medallion taxis for the same passengers. The explosive growth of the “black car” fleet was only possible because the TLC disregarded longstanding licensing rules for black cars that were affiliated with Uber, Lyft, and similar companies.
The TLC licensed bases affiliated with Uber even though the owners of affiliated vehicles were neither franchisees nor owners of the bases. And it interpreted the pre-arrangement requirement to permit the use of electronic apps that connected black cars with passengers without any dispatch by any base. This unprecedented and unlawful surge in the number of black cars accepting e-hails undermined the ability of yellow taxis to earn fares and ultimately decimated medallions values.
The plaintiffs’ lawsuit alleges false and deceptive marketing by the TLC and breach of contract.
Source: Dan Ackman Law