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Federal Judge Gives Green Light To Texas Taxicab Suit

Posted  October 7, 2011

Federal Judge David C. Godbey of the Northern District of Texas has green lighted a suit alleging taxicab companies conspired to monopolize by fixing prices that drivers must pay to operate a taxicab in certain counties in the Dallas-Fort Worth metropolitan area.

The judge denied the defendants’ motion to dismiss the plaintiffs’ complaint in Association of Taxicab Operators USA v. Yellow Checker Cab Company of Dallas/Fort Worth Inc.  Defendants’ motion relied exclusively on immunity afforded under the state action doctrine.  But as Judge Godbey’s decision explained, defendants failed to make the essential showing that “a municipality expressly authorized or actively supervised their mergers or pricing.”

Plaintiffs, led by a trade association of taxicab companies, allege that permit fees defendants charged drivers to operate in the Dallas-Fort Worth area were anticompetitive.  According to plaintiffs, through a variety of entities and agreements, two individuals control over 52 percent of the authorized taxi cabs in the area.  Their lawsuit seeks injunctive relief breaking up the defendants’ grip on the market and monetary damages.

Both parties and the court agreed that California Retail Liquor Dealers Assoc. v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980), sets forth the two-prong test applicable when private actors claim immunity from the antitrust laws under the state action doctrine.  “First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second the policy must be actively supervised by the State itself.”  Id .

Defendants argued they meet the first prong of the Midcal test, citing a Texas state law directing municipalities to “license, control, and otherwise regulate each private passenger vehicles … that provides passenger taxicab transportation services for compensation.”  The statute permits municipal regulation of (1) entry into the taxicab business by controlling the total number of persons providing the service, (2) rates charged, and (3) safety and insurance requirements.  Through this statute, defendants argued, “Texas clearly articulated and affirmatively expressed its policy to regulate taxicabs through its cities.”

But Judge Godbey was unmoved.  While the statute “shows Texas wants municipalities to regulate competition,” he wrote, it “does not authorize private taxicab companies to create monopolies or fix [] fees without municipal approval.”

The court was equally unimpressed with defendants’ argument that they met the second Midcal prong.  To show that the price fixing challenged by plaintiffs is actively supervised by the state, and therefore immune from the antitrust laws under the state action doctrine, defendants cited ordinances giving municipalities the authority to regulate fees.  As Judge Godbey’s decision points out, “mere authorization does not satisfy the active supervision requirement.”  “Defendants,” Judge Godbey continued, “do not claim that a municipality established, reviewed, regulated or monitored the fees.”

Ruling that the complaint, on its face, does not demonstrate that defendants’ actions are shielded under the state action doctrine, Judge Godbey denied defendants’ motion to dismiss.

Tagged in: Antitrust Litigation, Price Fixing,