Judge Posner Smacks Around Cabbies For Thinking That Cities Allowing Uber Violates Their 'Property Rights'
from the that's-not-how-this-works dept
It's no secret that cab companies and many cab drivers don't much like Uber and Lyft. Competition is tough. And cabs in most cities have survived thanks to artificial limits on competition through medallions and the like. This has always been a stupid, and frequently corrupt, system. For years, before Uber and Lyft came along, people talked about the ridiculousness of artificially limiting competition in this manner, but it was only once those companies came along that the true ridiculousness was made clear. While some forward looking cabbies have embraced these and similar systems, others have been fighting the new reality, often in fairly ridiculous ways. In Milwaukee and Chicago, cab companies sued those cities, arguing that allowing this type of competition amounted to a Fifth Amendment violation, in the form of "taking private property for public use without just compensation." What private property, you might ask? Well, according to the cab companies, the artificially restricted competition is their property. No, really.The district courts didn't buy it, and now that it's moved up to the 7th Circuit appeals court, Judge Richard Posner isn't buying it either. In the two decisions -- Joe Sanfelipo Cabs v. City of Milwaukee and Illinois Transportation Trade Association v. Chicago, Posner makes quick work of explaining to these folks that the government restricting competition from entering your market isn't a property right that those who benefit from it get to make claims over (though he does, unfortunately, say that patents are a form of property in dismissing the "absurd" claims from the cabbies):
The plaintiffs’ contention that the increased number of permits has taken property away from the plaintiffs without compensation, in violation of the constitutional protection of property, borders on the absurd. Property can take a variety of forms, some of them intangible, such as patents. But a taxi permit confers only a right to operate a taxicab (a right which, in Milwaukee, may be sold). It does not create a right to be an oligopolist, and thus confers no right to exclude others from operating taxis.Posner notes that if there had been an explicit promise not to change regulations, that might have been one thing, but there was not. Similarly, he admits that the taxi permits are property, but that's unrelated to the issuing of more permits:
The taxi permits issued by the Milwaukee city government are property, but have not been “taken,” as they do not confer on the holders a property right in, amounting to control over, all transportation by taxis and taxi substitutes (such as Uber) in Milwaukee.And then he basically says "welcome to a market economy, cabbies":
Undoubtedly by freeing up entry into the taxi business the new ordinance will reduce the revenues of individual taxicab companies; that is simply the normal consequence of replacing a cartelized with a competitive market. But the plaintiffs exaggerate when they predict ruination for themselves. Buses and subways and livery services and other taxi substitutes have not destroyed the taxi business; nor has Uber or Lyft or the private automobile or for that matter the bicycle. Taxicabs will not go the way of the horse and buggy— at least for some time.That's from the case against Milwaukee. The Chicago ruling is pretty similar:
All seven of the plaintiffs’ claims are weak. The first is that allowing the TNPs into the taxi and livery markets has taken away the plaintiffs’ property for a public use without compensating them. A variant of such a claim would have merit had the City confiscated taxi medallions, which are the licenses that authorize the use of an automobile as a taxi. Confiscation of the medallions would amount to confiscation of the taxis: no medallion, no right to own a taxi, ... though the company might be able to convert the vehicle to another use. Anyway the City is not confiscating any taxi medallions; it is merely exposing the taxicab companies to new competition—competition from Uber and the other TNPs.Posner doubles down on just how dumb this argument is by the cab companies:
“Property” does not include a right to be free from competition. A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening. When property consists of a license to operate in a market in a particular way, it does not carry with it a right to be free from competition in that market.
Taxi medallions authorize the owners to own and operate taxis, not to exclude competing transportation services. The plaintiffs in this case cannot exclude competition from buses or trains or bicycles or liveries or chartered sightseeing vehicles or jitney buses or walking; indeed they cannot exclude competition from taxicab newcomers, for the City has reserved the right (which the plaintiffs don’t challenge) to issue additional tax medallions. Why then should the plaintiffs be allowed to exclude competition from Uber? To this question they offer no answer.Perhaps more importantly, though, Posner also shoots down the argument that it's unfair that Uber gets to operate under a different regulatory regime:
All that the City gives taxi‐medallion owners is the right to operate taxicabs in Chicago.... That isn’t a right to exclude competitive providers of transportation.
The plaintiffs argue that the City has discriminated against them by failing to subject Uber and the other TNPs to the same rules about licensing and fares (remember that taxi fares are set by the City) that the taxi ordinance subjects the plaintiffs to. That is an anticompetitive argument. Its premise is that every new entrant into a market should be forced to comply with every regulation applicable to incumbents in the market with whom the new entrant will be competing.And, later:
Here’s an analogy: Most cities and towns require dogs but not cats to be licensed. There are differences between the animals. Dogs on average are bigger, stronger, and more aggressive than cats, are feared by more people, can give people serious bites, and make a lot of noise outdoors, barking and howling. Feral cats generally are innocuous, and many pet cats are confined indoors. Dog owners, other than those who own cats as well, would like cats to have to be licensed, but do not argue that the failure of government to require that the “competing” animal be licensed deprives the dog owners of a constitutionally protected property right, or alternatively that it subjects them to unconstitutional discrimination. The plaintiffs in the present case have no stronger argument for requiring that Uber and the other TNPs be subjected to the same licensure scheme as the taxi owners. Just as some people prefer cats to dogs, some people prefer Uber to Yellow Cab, Flash Cab, Checker Cab, et al. They prefer one business model to another. The City wants to encourage this competition, rather than stifle it as urged by the plaintiffs, who are taxi owners.
There are enough differences between taxi service and TNP service to justify different regulatory schemes, and the existence of such justification dissolves the plaintiffs’ equal protection claim. Different products or services do not as a matter of constitutional law, and indeed of common sense, always require identical regulatory rules.... If all consumers thought the services were identical and that there was therefore no advantage to having a choice between them, TNPs could never have gotten established in Chicago.There are all sorts of arguments people can make about whether or not companies like Uber and Lyft are good (and I'm a fan of them), but arguing that they're "taking property" away from cab medallion holders is not a legitimate argument.
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Filed Under: car hailing, chicago, competition, medallions, milwaukee, property, property rights, richard posner, ride sharing, taxis
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That no incumbent has the right to hold the public hostage as their property they alone are entitled to fleece.
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Different Rules for Incumbents
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And that, ladies and gentlemen, is free market in all its glory. But of course when it hurts incumbent players suddenly more regulation is needed. *looks at telcos*
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Dogs vs. other animals
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You can't hail Uber or Lyft on the street. You have to pre-schedule, which makes them the same as black car services (limos, etc.), which they DO have to follow the same regulations as in most places.
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Re: Dogs vs. other animals
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Throw that judge out of Appellate.
His analogies make zero sense.
Did he even read City charter clearly defining what local laws are?
I guarantee you - he didn't.
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Restaurants have to meet stringent health standards. Is it fair that if I accidentally drop a cookie on the floor I can still pick it up and give it to my husband to eat but a restaurant employee can't do the same?
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But you're misplacing the blame.
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Re: Re: Dogs vs. other animals
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Re: Re: Re: Dogs vs. other animals
poop is a vital ingredient for gardening...
composted bullpoop or horsepoop is black gold...
if you ate your vegetables, thank some poop...
got poop ? ? ?
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Put down your phone and drive your Taxi.
Aric
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Re: not to exclude competing transportation services.
Taxi medallions in some city's are quite expensive. (like many thousands of dollars) Dilution of the valuation of those medallions is similar to the dilution of the valuation of stock. In fact, medallions are typically bought and sold like traded securities, and LEASED to operators. Which is probably why this suite was brought. We aren't talking about cabbies here, we are talking about medallion investors.
Unless the vested parties authorized the dilution they are experiencing a loss caused by the devaluation. With stock there are terms associated with the purchase of the security, regulated by the SEC to prevent this kind of thing.
Essentially the city sold a security, (the medallion) diluted it, and then declared that it wasn't a security at all. But when you consider the cabbies family is fed as a result of owning that medallion, it certainly is one.
I'm not saying the market shouldn't change. I'm saying the medallion owners got fucked, and should be compensated.
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The same argument could be made for the entertainment industry, and internet providers, VERBATIM (changing taxis for respective industries ofc).
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Now the brokers have amassed a lot of medallions aka plates, and there are only so many brokers in a city that belong to each cab company they contract to. The brokers depending on the amount of cars they have and plates to match get huge discounts on their fleet and liability insure because they are doing a bulk business, it is the same with auto parts, leases, buying vehicles etc.
Now the brokers always always pressure and lobby to keep the number of medallions low ( ie the number of cabs on the street ) to the taxi authority that governs them in the city they are operating in. The lowers the number of cabs on the street are, the more demand they have for their cabs and the better ratio that those cabs are kept occupied by paying fares in a shift ( most brokers rent their cabs out for 3 - 8 hour shifts per day or for 2 - 12 hour shifts per day. )
The brokers will lease the cab per month or per week to each driver depending on the shift (ie: 8 or 12 hour days ) Now if these cabs are busy the drivers make a good buck but the broker make an excellent return. You have to remember if a driver is renting that cab for a 5 day a week 8 hour shift, then the driver pays them his $1000.00 a week for his 8 hour shift. Now if you have 3 guys renting that cab for a grand a week that's 3 k a week in your pocket and that's on top of other little ways they gouge the renter ( ie: any damages, to the body of the cab, any windshield damage, any interior damage, dispatch fees, fuel fees repair surcharges etc )
The broker know that the local city taxi authority is always wanting to get more cabs on the road to service the need of people who need cabs, but the brokers aren't necessarily interested in seeing that happen. The more demand for service, the more your limited fleet of cabs makes due to their being more consumers needing your service than cabs that can provide it. They don't care if joe consumer has to wait an hour for a cab, cause they know they will still get the business. Keep demand high for cabs but keep the inventory of cabs on the street low.
Now the brokers have the drivers at a disadvantage as well her, because they keep the medallions and rent out the cabs to the drivers they therefore can justify raising the rates of the rent of the cab to the drivers as they feel the need. They know that the drivers will be hard pressed to go elsewhere due to the the fact there are limited amount of cabs out there to rent. So they can control how much the driver will pay in rent to them and raise it at will, and if a driver protests, they are simply told to take it or go and rent elsewhere.
Now that Uber and other ride services are coming along, it is the cab companies and the brokers that own the cabs/plates/medallion that are crying because they dont and cant control the demand for cab service now that joe consumer has other options, that means they can not lock in the prices increases you normally see going up so much per mile over time. Those rates are set by the taxi can authority in that various city, but those rate increases on fares are pushed by the cab companies and brokers who claim costs of fuel, repairs, insurance, liability etc etc etc as excuses of why the rates the consumer need to go up.
Meanwhile those increases are passed on to joe consumer in the form of rate increases you pay to go from A to B in a cab ride. Now the driver can make good money if they hustle and provide decent service, but if you rent the cab for the shift that week and your not really busy that week or if your ill and you not making much cash, the broker doesn't give a toot. They flat out want their money for the rent, if you can't pay, then they move on to the next driver and your SOL. Why can they do that, because that limited number of cars and medallion keeps supply low and demand high, and that goes for drivers too.
The reason cab companies and brokers are crying and threatening to sue is because most of the drivers now can drive their own leased cars or personal vehicles that meet Uber standards, and can do this at a way lesser cost then renting from one of the brokers and keep more of the profit in their own pockets then what they would have left over if they had to pay a broker for rent plus expenses per shift.
It also lets the drivers that are operating for Uber set their own hours and if they want to partner up with someone share the expenses of the car for way cheaper than what they would be getting under the system of renting from the broker. The plates and medallions are still worth a lot of money, these brokers have owned plates and medallion for years and years, they didn't just pony up a million each time to buy a plate or medallion so don't be fooled by that. The medallions increased in price due to the fact that the number of cabs have purposely been kept low for years and years with only nominal increases.
Go to a taxi authority meeting in your city when they are contemplating seeking to put more cabs on the road and increasing the plates, and watch the brokers and the cabs companies complain how it will hurt their business and revenues and some may go out of business and how insurance and liability coverage will go up... it;s always the same song and dance , then they will ask for a price increase for the rate the consumer pays and of course they will settle for a minimum amount of cars to be added. all while keeping demand high and the amount of cars in service low.
It's all gamesmanship. I drove for 4 years at night and on weekends while in school during the day.The brokers are still making bank, they just aren't making what they are used to and the drivers who rent their cabs now can get a better deal on rents they pay for their shift. If the cab driver were really loving the way the brokers and companies treat them and they thought what they were paying for rent and other fees were fair, do you really think they'd be running off to drive for Uber?
Broker and cab co's have been using the supply and demand issues of the amount of cabs on the street and the business for them against the consumer and the drivers for years, and it wont change. All Uber is doing is giving the drivers a choice and consumers another option, the brokers and cab companies can compete, they are just loathe to give up even a nickel when they have been making bank for so long and had the drivers at their mercy
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Re: Dogs vs. other animals
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Re: Re: not to exclude competing transportation services.
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In all seriousness, these lawsuits are just wasting time. Ubers end game is driverless. At that point, there will be no cabbies, just cabs. Of course, the manufacturer of those self driving cars will be made in a lights out manufacturing plant (no people in the factory) so those folks will be out of jobs too.
The next campaign won't be "Buy American Made" it will be "Buy Human Made"
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Posner rocks
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Most of the people driving a Taxi may not even own the Medallion, but a rich person who owns many of them. If you don't like it, you are free to dump that taxi and get on board UBER yourself!! Who's stopping you?
The free market will balance out also. If there's to many UBER drivers and you can't make money, some will stop doing it, making things better for everyone left. If there's a big demand, prices go up, people want to then start driving for UBER. So it works both ways. The whole medallion thing is dumb and very limiting. Just another scam for a city to make money from.
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Competition is tough in the taxi business?
In New York City the price of medallions hit a $1M each. The net present value of the profit from operating a single cab was worth that much. That's profitable.
It's an excellent economic case study in profit capture. The medallions were unarguably fairly priced at the time. The market was established, active, and very well understood. There were both large-scale medallion holders that had access to investment fund, and individual drivers that obsessed over the dollar-by-dollar economics of becoming a owner.
The artificial limit and nature of the market concentrated all of the profit into that single artifice. That makes it trivial to accurately observe the profit.
A huge downside of the medallion 'ownership' system is that it transfers all of the wealth to the people leaving the system. People that got medallions for a nominal fee long ago retire to Florida on their windfall. People entering the system go deeply into debt for the artifice, funding that retirement, rather than making a capital investment into equipment or facilities. With a on-the-edge debt, a medallion purchaser wants to maximize the return and runs the cab 24 hours a day, which results in lots of wasted no-fare hours for low-paid drivers.
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Then you should have no problem providing evidence of your claim.
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As the article and the judge stated, no, it isn't. Any other cab drivers should have to buy a medallion too.
However, bus drivers, limo drivers, Uber drivers, etc. shouldn't have to buy a medallion, because they're not taxi drivers. The medallions are there to regulate taxi service, not transportation -- they're there, because years of experience showed that they were necessary for taxi drivers and passenger safety.
Instead of medallions, Uber and Lyft drivers have registered accounts with Uber and Lyft that make them MORE accountable than that taxi medallion ever could -- and they take a cut of every fare, instead of a fixed rate purchase.
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Re: Re: Re: Re: Dogs vs. other animals
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So medallion owners played the tulip bulb craze game, and now they are losing. I don't want to hear them cry about how unfair this is any more than the buggy whip makers cried about the the invention of cars.
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Re: Dogs vs. other animals
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Re: Re: not to exclude competing transportation services.
Just not a valid one.
With stock there are terms associated with the purchase of the security, regulated by the SEC to prevent this kind of thing.
For one thing, it's not a security. For another, the SEC does not guarantee stocks against losses from competition in the market. To claim it does is dishonest.
Essentially the city sold a security,
Umm, no they didn't. Repeatedly lying about it won't make it true either.
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basically, they are suing because the medallions are gradually becoming like buggy whips... obsolete.
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Re: Re: not to exclude competing transportation services.
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How is a medallion a security?
That statement is very wrong.
The details differ, but medallions are usually permits issued for a nominal fee. That fee is generally considered an administrative fee, rather than a tax, sale, bond or investment.
Where medallions are transferable, the market for buying and selling them makes them appear superficially similar to a security, but that doesn't make them a security. They aren't a financial instrument. They don't represent ownership in a corporation. They don't represent a creditor relationship. They aren't an option to buy or sell.
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Re: Re: not to exclude competing transportation services.
Yes, medallions had considerable market value - before. But they were never real property in the first place. They were only tokens of political corruption.
Medallion values were based on continuing to bamboozle the public. For a while, it worked, but nobody should have counted on the status quo lasting forever. The risk was *always* there that eventually the public would wise up. It's finally happened.
No property rights have been violated. Medallion owners took a gamble on a corrupt system and lost - that's all.
If you want the law to protect your property rights, invest in something honest.
When slavery was abolished, some said slaveowners should be compensated for their loss. The slaveowners had a stronger argument than taxi medallion owners do now - slaves were, legally, legitimate property.
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Welcome to the real world, snowflake!
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Re: Re: not to exclude competing transportation services.
If the medallion owners had a claim for damages due to dilution, their claim would be against the city government that sold them the medallions. Uber and Lyft and their drivers were never party to any agreement to preserve the market value of those medallions, so there's no basis for a claim. At best the medallion owners can try to claim that Uber and Lyft drivers are operating taxis without medallions, and the judge clearly outlined the reasons that that claim fails.
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Re: Re: Re: not to exclude competing transportation services.
Umm, wasn't it?
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Re: You're all unclear on the concept.
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Posner buys Uber's snake oil.
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Re: Re: Re: Re: Re: Dogs vs. other animals
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Re: Re: not to exclude competing transportation services.
Say the government decides it wants to expand housing, and creates a new neighbourhood of, say 1000 acres.
So, they decide to leave 200 acres as parkland/empty space within it, and sell the other 800 acres in 1/4 acre blocks, with the area mostly zoned for low-density housing (i.e. houses, townhouses, maybe some terrace/patio houses, and the odd small set of apartments, say 2 stories with a half-dozen flats/condo's), and some small shops etc.
So, 10 or 15 years later, they decide to remove the 200 acres of parks and empty spaces, and sell them in 2-10 acre lots for high-density, tenement-style housing. Highrise, low-cost apartment living. Ugly 10, 20 or more story buildings full of low-cost apartmentsand condo's. Increasing the population density 10-fold in a matter of 5-10 years.
Watch the land values in the area plummet. Overnight a 20%, if not 50%, devaluation in existing properties.
Do the government owe anything to the existing property owners who bought on the belief (but not contractual guarantee) that they'd be living in a low-density area with 1/5 of the space being open parklands?
Yeah, good luck with that.
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Re: Re: not to exclude competing transportation services.
Fuck them. Bloody parasites.
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Competition is not a Fifth Amendment violation
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WHAT CABBIES DON'T KNOW, IS HURTING THEM
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In Canada... for example!... the Regulation of Trade and Commerce comes under Section 91., Subsection 2, of the Act of 1867, of the Constitution of Canada (the Canada Act 1982, being a further Canadian Constitutional framework!)!... Section 91.-- in total!-- bestowing powers on the House of Commons, re 29 Subsections of Federally delegated powers!
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Unfortunately, though, Provincial and Municipal authorities have TAKEN IT UPON THEMSELVES to Regulate Trade and Commerce (with a wink, nod, and a handshake!)!... and!... WITH NO CONSTITUTIONAL PROVISION WITHIN THE ACT OF 1867, AND NO AMENDMENT TO THE ACT OF 1867, THAT WOULD AFFORD A L-E-G-A-L D-O-W-N-L-O-A-D OF THE C-O-N-S-T-I-T-U-T-I-O-N-A-L-L-Y P-R-O-T-E-C-T-E-D F-E-D-E-R-A-L R-E-S-E-R-V-E O-F P-O-W-E-R-S UNDER SECTION 91., TO A LESSER LEVEL OF AUTHORITY (E.G., A PROVINCIAL, REGIONAL, OR MUNICIPAL LEVEL OF GOVERNANCE!)!
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And thus!... this has meant, that everyone (and the pet cat!) can simply Regulate Trade and Commerce at whim!... and regardless of any BINDING Constitutional Expression (save, by an Amendment to the Constitution of Canada, through its Amending Formula!) to the contrary!
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But!... and the cited provision notwithstanding!... it makes N-O S-E-N-S-E W-H-A-T-S-O-E-V-E-R, for cabbies to be "forking over" all this cash, to some "nebulous civil servant and/ or politician"!... and, for-- God knows!-- what!
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To conclude... once cabbies (and their "representatives"!) begin to realize that these have been P-L-A-Y-E-D-- A-N-D, F-O-R D-E-C-A-D-E-S!-- then the "shoe will have been dropped", the "gloves donned", and the "jaws jarred"! And, I'm sure the courts, then, will have a different tale to tell! And there will be a L-O-T of stuff to be scraped-- as a result!-- from numerous "fans"!
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Please!... no emails!
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Re: Re: You're all unclear on the concept.
Decades ago I was a cabbie. Our biggest problem was the incessant demand by the taxi owners and companies to keep increasing fares because they weren't making money.
For every 5% increase in fares, we lost 6% of our customer base. Over the next six months we might (if all went well) get back 5 of that 6%. The longer term result was a decrease in patronage so less jobs over the number of vehicles. The actual drivers recognised that if the fares were to actually drop, we would make more money by more people then choosing to take taxis. The flag fall was the money spinner, the more of those an hour you could get the better off you were.
Customers want a better quality of service, clean cars, known fares, pleasant and knowledgeable drivers. If they get this from the TNCs and not from the taxi fraternity, then bad luck taxi fraternity, it deserves what it gets.
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PPP
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Property
This lawsuit seems to me to be a natural result of the intellectual corruption inherent in reifying government granted monopolies as property, seen in the phrase "intellectual property".
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Re: Property
When the opportunity to make money is treated as an actual property right, it's time to take the thing around the back and shoot it in the head.
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Re: Re: Re: not to exclude competing transportation services.
Ff the loss was incurred via fraud, then yes they should be compensated. And if you're familiar with what actually happened, yes it was clearly fraud, and most of the people who got screwed SHOULD have been compensated.
Which would have been significantly easier, had criminal charges been brought. But bankers are above Federal law in the United States.
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Re: Re: Re: not to exclude competing transportation services.
Certainly they don't guarantee anything. The law never does.
But they do criminally prosecute cases of fraud, after which civil courts provide a basis for persuing restitution. If the medallions were stock, it would be crime to do what the city of Chicago did. This particular type of crime is the entire reason the SEC exists.
The city sold something at a market value, and then manipulated the terms of sale ex post facto. This sort of thing happens all the time in contract law, across all kinds of markets. And if you were familiar with the UCC at all, you would know that.
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Re: Re: Re: not to exclude competing transportation services.
Issuance of stock is strictly regulated. When and how stock is diluted is subject to disclosure regulations. Failing to disclose pending dilution of a security is a deceptive, and thereby fraud.
You can split hair all you want. If you put a sign on the front door that says you sell diamonds, and somebody walks in and buys a glass ring, the fact that you never specifically said "it's a fucking piece of glass dumbass" doesn't mean your business practices weren't deceptive.
Fraud doesn't stop being fraud because it is institutionalized. (or does it?) You can wrap it up any way you want. They sold something at value A, manipulated the terms of sale ex post facto, and the value plummeted. End of story.
"but! but! but!"
Nope. Value was appropriated by means of deception, and with premeditation. Everything before, and after that is window dressing. And if the cabbies protested or rioted I would support them.
That isn't to say that I don't also support Uber drivers. The Uber drivers didn't rob the cabbies. The City of Chicago did.
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Re: Re: Re: Re: not to exclude competing transportation services.
Medallions *aren't* stock. Get over it.
And if you were familiar with the UCC at all, you would know that.
So the courts just don't know the law like you do, huh?
Yeah, right.
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Re: Re: Re: Re: not to exclude competing transportation services.
It isn't fraud if it's legal. So you made a bad investment. Live with it.
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Strategic error
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The people, not the courts
However, the court’s decision doesn’t say that it is fair. It says that it is not so obviously and fundamentally unfair that it would be proper to override the decisions of democratically-elected municipal governments acting on behalf of the citizens of Milwaukee and Chicago. Neither has it said that those cities cannot implement regulations that create greater parity between novel and traditional providers, if they can be convinced to do so.
All this says is that the fairness argument has to be made to the people of these cities, and their representatives; the decision lies with them, not the courts.
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WT?
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Judge Posner
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