### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 16

‐ 1008

J OE S ANFELIPPO C ABS

, I NC

., et al.

, Plaintiffs

‐ Appellants

,

v.

C ITY OF M ILWAUKEE

, Defendant

‐ Appellee

, and

J ATINDER C HEEMA and S AAD M ALIK

,

Intervening Defendants

‐ Appellees.

____________________

Appeal from the United States District Court for the

Eastern District of Wisconsin.

No. 2:14

‐ cv

‐ 01036

‐ LA

— Lynn Adelman

, Judge

.

____________________

A RGUED S EPTEMBER 19, 2016

— D ECIDED O CTOBER 7, 2016

____________________

Before P OSNER

, W ILLIAMS

, and S YKES

, Circuit Judges

.

P OSNER

, Circuit Judge

. The issue presented by this appeal,

as by the similar appeal in Illinois Transportation Trade Associ

‐

ation

, et al. v. City of Chicago

, et al.

, Nos. 16

‐ 2009, 16

‐ 2077 &2 No. 16

‐ 1008

16

‐ 2980, also decided today, is whether the Fifth Amend

‐

ment’s prohibition against the taking of private property for

public use without just compensation forbids Milwaukee, in

this case, and Chicago, in the parallel case, to allow competi

‐

tion with established taxi services in the city, whether from

new taxi companies (in Milwaukee) or from companies that

provide close though not identical substitutes for conven

‐

tional taxi services, such as Uber Technologies, Inc. (better

known just as “Uber”) (in Chicago).

The intervenors, who support Milwaukee’s opposition to

the plaintiffs’ claims, obtained taxi permits under a new

Milwaukee ordinance that is the target of the plaintiff

‐ appellant taxi companies; they could not have afforded to

buy taxi permits under the old ordinance that the plaintiffs

wish to see reinstated. The district judge dismissed the plain

‐

tiffs’ suit on the pleadings, precipitating the appeal and the

filing of a brief in opposition by the intervenors, which need

not be discussed separately however because it differs from

Milwaukee’s brief only in that the intervenors are intensely

suspicious of the City’s bona fides and fear it will revert to

the old ordinance. Suspicion alone can’t support a legal

claim, but the intervenors were the plaintiffs in the state

‐

court case that held that the permit cap violated the Wiscon

‐

sin constitution, and the district court reasoned that if Mil

‐

waukee’s new ordinance was found to be a taking, this

would be in conflict with the state court’s decision. As we’ll

see, there’s no conflict.

From 1992 to 2013, a Milwaukee city ordinance (a com

‐

ponent of Wisconsin state law, because Milwaukee’s local

government is part of the state government) limited the

number of taxicab permits in the city to the number in exist

‐No. 16

‐ 1008 3

ence on January 1, 1992, that were renewed. No new permits

would be issued; and although permits could be sold, this

would not increase the number of permits. Since not all taxi

‐

cab permits are renewed, the effect of the ordinance was not

only to place a ceiling on the number of permits but also to

lower the ceiling over time by virtue of the nonrenewals; the

number of permits could not increase, because no new per

‐

mits could be issued, but it decreased every time a permit

was not renewed. By 2013 the number of permits (equal to

the number of cabs) had diminished from about 370 to about

320, and as a result the price of permits on the open market

(for remember that while no more permits could be issued,

existing permits could be sold) soared as high as $150,000.

(We don’t know what the average price was just after the

1992 ordinance.)

In 2013, after a lawsuit successfully challenged this per

‐

mit

‐ cap ordinance as a violation of the equal protection and

substantive due process clauses of the Wisconsin state con

‐

stitution, the City experimented with conducting a lottery

offering as prizes 100 brand

‐ new taxicab permits to be is

‐

sued by the city. The lottery attracted 1700 permit seekers,

which suggested that the market was believed to be under

‐

served. There were other indications that as a result of the

1992 ordinance there was a taxi shortage. Milwaukee had in

fact only one taxicab per 1850 city residents, a much lower

ratio than comparable cities. See Bruce Vielmetti, “Cab Driv

‐

ers to Sue Milwaukee over Limit on Permits,” Milwaukee

Journal Sentinel

, Sept. 26, 2011, archive.jsonline.com/news/

milwaukee/130609278.html.

The City responded to the shortage the following year

(2014) by taking the lid off the number of permits that the4 No. 16

‐ 1008

city would issue. Now a new permit would be issued to any

qualified applicant. The shortage flagged by the lottery at

‐

tracted not only permit applicants, theretofore barred since

1992, but also substitutes for conventional taxicab service,

such as Uber. The combination of new taxi permittees and

taxi substitutes (sometimes called “ridesharing” companies,

more precisely app

‐ based such companies) such as Uber and

Lyft diminished the profitability of the existing taxi compa

‐

nies, which had faced little competition under the ancien ré

‐ gime. Indeed that regime had created an oligopoly of taxi

service in Milwaukee. The theory of oligopoly teaches that

the fewer the number of competitors in a market, the less

vigorously they are likely to compete, preferring to share the

profits than to fight with each other. In other words they col

‐

lude, though tacitly to avoid attracting the attention of the

antitrust agencies.

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. An excellent amicus curiae brief

filed by Reason Foundation offers the hypothetical example

of a city government that “issued a license to the first gro

‐

cery store or gas station in a growing town. Years later, after

the population had grown, other individuals applied for li

‐

censes to create competing grocery stores and gas stations to

better serve the needs of the expanding market.

... Ultimate

‐ ly, the pressure for additional services might drive the CityNo. 16

‐ 1008 5

to issue additional licenses,” thus breaking the monopoly of

the initial, single licensee. “It would be absurd for the in

‐

cumbent owners of the sole grocery store and gas station to

assert a property right in the monopoly value of their busi

‐

nesses and claim a ‘taking’ for any reduction in secondary

market value due to the newly

‐ issued licenses, just as it

would be absurd to claim a taking for reduced profits result

‐ ing from increased competition.” (The term “primary mar

‐

ket” in the preceding sentence refers to the issuance of the

licenses, “secondary market” to the resulting competition

among the licensees, which is to say the taxi companies, in

‐ cluding however the app

‐ based ridesharing companies.)

We might have a different case had the city contractually

obligated itself to freeze taxi permits for 50 years in order to

encourage the taxicab owners to improve their equipment,

work harder, and hire better drivers. But it did not do that.

The no

‐ new

‐ permit ordinance of 1992 froze taxi permits (in

‐

deed made it inevitable that their number would shrink over

time), but only for as long as the ordinance remained in ef

‐

fect—and it could be repealed at any time because it had no

fixed duration. The plaintiffs cite statements by Milwaukee

aldermen that they allege understood the 1992 ordinance to

be creating a property interest in the permits’ value, but oth

‐

er aldermen warned that the ordinance could be changed to

the disadvantage of the taxi companies. The companies were

thus on notice that there was no guarantee that the ordi

‐

nance would remain in force indefinitely, and they must also

have known that were it repealed they would be faced with

new competition that would threaten their profits.

The city gave them no protection against such an eventu

‐ ality. The ordinance gave them no property right, and its re

‐6 No. 16

‐ 1008

peal therefore invaded no right conferred on them by the

Constitution. See Minneapolis Taxi Owners Coalition v. City of

Minneapolis

, 572 F.3d 502, 508–09 (8th Cir. 2009); David K.

Suska, “Regulatory Takings and Ridesharing: ‘Just Compen

‐

sation’ for Taxi Medallion Owners?” 19 Legislation & Public

Policy 183, 198–201 (2016). Apropos is Holmes’s remark in

his famous opinion in Pennsylvania Coal Co. v. Mahon

, 260

U.S. 393, 413 (1922), that “government hardly could go on if

to some extent values incident to property could not be di

‐

minished without paying for every such change in the gen

‐

eral law.” 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 substi

‐

tutes (such as Uber) in Milwaukee.

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 them

‐

selves. Buses and subways and livery services and other taxi

substitutes have not destroyed the taxi business; nor has Ub

‐

er or Lyft or the private automobile or for that matter the bi

‐ cycle. Taxicabs will not go the way of the horse and buggy—

at least for some time.

We have one more set of issues to discuss, though very

briefly. The plaintiffs’ complaint includes claims under state

law as well as under federal constitutional law, claims thus

within the supplemental jurisdiction of the district court,

which decided to decide them rather than relinquish them to

the Wisconsin state courts, as it could have done. See 28No. 16

‐ 1008 7

U.S.C. § 1367. The claims are of breach of contract, promisso

‐

ry estoppel, and equitable estoppel. The district judge reject

‐

ed all three, pointing out that ordinances are not contracts,

let alone perpetual contracts; that there was no promise by

the City never to rescind or amend the 1992 ordinance and

so no contract and no promise, or reason for the taxi compa

‐

nies to believe, that the ordinance would continue in perpet

‐

uo

, unaltered. He was right on all counts.

The parties raise additional issues, but none that has suf

‐

ficient merit to require discussion. The judgment of the dis

‐

trict court, rejecting the plaintiffs’ claims, is

A FFIRMED

.