Court Opinion

ID: 3047116
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:20:39.533876+00
Date Added: 2024-06-11T11:49:12.325293
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 08-1239
                                  ___________

Minneapolis Taxi Owners               *
Coalition, Inc.,                      *
                                      *
            Plaintiff–Appellant,      *
                                      * Appeal from the United States
      v.                              * District Court for the
                                      * District of Minnesota.
City of Minneapolis,                  *
                                      *
            Defendant–Appellee,       *
                                      *
A New Star Limousine                  *
and Taxi Service,                     *
                                      *
            Intervenor–Appellee.      *
                                 ___________

                            Submitted: November 13, 2008
                               Filed: July 14, 2009
                                ___________

Before MELLOY, BOWMAN, and SMITH, Circuit Judges.
                         ___________

MELLOY, Circuit Judge.

      In 2006, the City of Minneapolis (the “City”) amended its taxicab ordinance
to uncap the number of transferable taxicab licenses it issues, thereby opening a
previously restricted market. The Minneapolis Taxi Owners Coalition (the
“Coalition”), a group comprising holders of approximately seventy-five transferable
taxicab licenses, sued the City, asserting federal and state constitutional violations,
including violations of the Coalition’s members’ rights to just compensation and due
process. Before trial, A New Star Limousine and Taxi Service (“New Star”)
intervened and filed a motion to dismiss for failure to state a claim. The district
court1 granted the motion and dismissed the case. The Coalition appeals. We affirm.

                                            I.

        The members of the Coalition hold transferable taxicab licenses issued by the
City. Although originally purchased from the City for a relatively small fee (roughly
$500), the transferable licenses sold on the secondary market for as much as $19,000
to $25,000. The City required administrative approval of all such license transfers,
but it routinely granted the required approval.

       Before the enactment of the ordinance amendments at issue, section 341.270(a)
of the Minneapolis Code of Ordinances required that the city council conduct a
hearing at least once every twenty-four months “to consider whether public
convenience and necessity warrant additional licenses.” Minneapolis, Minn., Code
of Ordinances tit. 13, art. II, ch. 341, § 341.270 (1995) (repealed 2006). In
determining whether additional licenses were warranted, section 341.270(a) required
the city council to consider:

      the level and quality of service being provided by existing taxicab
      operators; whether additional competition would improve the level and
      quality of service or the degree of innovation in delivery of services; the
      impact upon the safety of vehicular and pedestrian traffic; the impact on
      traffic congestion and pollution; the available taxicab stand capacity; the

      1
       The Honorable James M. Rosenbaum, United States District Judge for the
District of Minnesota, adopting the Report and Recommendation of the Honorable
Franklin L. Noel, United States Magistrate Judge for the District of Minnesota.

                                      -2-
      public need and demand for service; the impact on existing taxicab
      operators; and such other factors as the city council may deem relevant.

Id. A designated city council committee held open “public convenience and
necessity” hearings on May 17, 2006, and June 7, 2006, to gather relevant
information. Evidence presented at the hearings included general testimony both in
favor of and against issuance of additional licenses; testimony that Coalition members
would suffer an economic loss by such an increase; evidence that there was
inadequate business for current taxicab operators; evidence of complaints regarding
the level and quality of current service; economist testimony that removing the cap
on licenses would increase jobs and the level of service provided; testimony that there
was an untapped market for bilingual drivers, particularly for the Hispanic
community; evidence that the number of wheelchair-accessible vehicles may have
been insufficient; and evidence that a number of taxicabs were operating without
licenses.

       After the hearing, the City’s Department of Licenses and Consumer Services
Division submitted a “follow-up document” to the committee, stating that there was
insufficient availability of taxicabs, especially wheelchair-accessible taxicabs and,
during peak hours, taxicabs generally. The submission discussed two possible plans.
“Plan A” did not increase the number of licenses, with the advantage that current
license holders would retain substantial value in their licenses. “Plan B” increased
the number of licenses by forty-five every year until 2010, when the cap would be
completely lifted. This plan required that new “licensed service companies” dedicate
at least 10% of their fleets to wheelchair-accessible vehicles and at least 10% to
“alternative-fuel and/or fuel-efficient vehicles.” Plan B also required that existing
licensed service companies dedicate at least 5% of their fleets to wheelchair-
accessible vehicles and at least 5% to alternative-fuel and/or fuel-efficient vehicles
by 2007, with the minimums increased to 10% by 2008. Plan B’s perceived
advantages included spurring better-quality service through the use of increased

                                         -3-
numbers of wheelchair-accessible vehicles and fuel-efficient vehicles. Its
acknowledged disadvantages included the likely diminishing of the “monetary value”
of existing taxicab licenses “to zero.”

       The committee recommended to the City that it increase the number of taxicab
licenses pursuant to Plan B:

      The Committee, upon weighing the received evidence and while
      recognizing that the issuance of additional licenses could likely produce
      a negative initial impact on existing operators, finds that such
      prospective impact is outweighed by the potential to (1) improve the
      level and quality of taxicab service to citizens and visitors in
      Minneapolis through a more open and free market structure as has been
      accomplished in other jurisdictions, thereby positioning Minneapolis as
      a more viable destination for entertainment, business, convention and
      other beneficial economic pursuits, and (2) pursue innovations in
      delivery of taxicab service in the areas of environmental sustainability
      while addressing underserved communities including the disabled,
      bilingual and non-English speaking populations.

In October 2006, the City revised the city ordinance code to lift the cap on licenses
per Plan B. See Minneapolis, Minn., Code of Ordinances tit. 13, art. II, ch. 341
(2006).

       In March 2007, the Coalition sued the City in Minnesota state court, arguing
that the new ordinance reduced the value of the existing licenses to zero. Relying on
the U.S. and Minnesota Constitutions, the Coalition claimed that (1) the City deprived
Coalition members of their property interests without just compensation; (2) the City
deprived Coalition members of their business licenses without due process; (3) the
wheelchair-accessibility and fuel-efficiency requirements constituted an
unconstitutional exaction; and (4) Coalition members were denied equal protection
because the ordinance was amended, in part, to better serve the Hispanic community.

                                         -4-
      The City removed the case to the district court because the complaint asserted
federal constitutional claims. See 28 U.S.C. § 1441(c). In May 2007, New Star
moved to intervene, and the district court granted the motion. In June 2007, New Star
moved to dismiss the Coalition’s complaint under Federal Rule of Civil Procedure
Rule 12(b)(6) for failure to state a claim.

       In October 2007, a magistrate judge recommended granting the motion to
dismiss, concluding that (1) Coalition members did not have a protectable property
interest in the secondary-market value of their licenses and that therefore the
Coalition had no takings claim; (2) the Coalition’s due process claim similarly failed
because the City did not deprive Coalition members of any property; (3) the Coalition
did not have standing to bring an unconstitutional-exaction claim based on the taxicab
fleet requirements because the requirements applied to licensed service companies,
not taxicab license holders; and (4) the equal protection claim failed because the
ordinance survived “rational basis” scrutiny. In December 2007, the district court
adopted the magistrate judge’s recommendation and granted New Star’s motion to
dismiss. The Coalition appeals and repeats its takings, due process, and
unconstitutional-exaction arguments before this court.2

                                           II.

      We review de novo the grant of a motion to dismiss for failure to state a claim
under Rule 12(b)(6), accepting the facts as alleged in the complaint and granting all

      2
       The Coalition does not pursue its equal protection claim on appeal, and that
claim is therefore waived. Fair v. Norris, 480 F.3d 865, 869 (8th Cir. 2007). The
inclusion of a footnote hinting at a request for additional discovery to support
unalleged facts based on “at least a suspicion” of improper motives is inadequate to
preserve the claim. See Fed. R. App. P. 28(a)(9)(A) (requiring an appellant’s brief
to “contain . . . appellant’s contentions and the reasons for them, with citations to the
authorities and parts of the record on which the appellant relies”).

                                          -5-
reasonable inferences in favor of the Coalition as the non-moving party.
Neighborhood Enters., Inc. v. City of St. Louis, 540 F.3d 882, 884–85 (8th Cir.
2008).

      A. Takings

       The Coalition argues that removing the cap on the number of taxicab licenses
is a taking of private property requiring just compensation under the Fifth
Amendment to the U.S. Constitution. See U.S. Const. amend V.3 The Coalition does
not contend that the City revoked or somehow vitiated existing licenses or that
opening the market destroyed the ability of the license holders to use their licenses
to do business. The Coalition only contends—and the City does not contest—that
removing the cap on the number of licenses destroyed the market value of the
licenses. The elimination of the market value of the taxicab licenses, however, can
be considered a taking under the Fifth Amendment only if there is a protected
property interest in that market value. See Lucas v. S.C. Coastal Council, 505 U.S.
1003, 1030 (1992). Property interests “are created and their dimensions are defined
by existing rules or understandings.” Bd. of Regents of State Colls. v. Roth, 408 U.S.
564, 577 (1972).

       Those “existing rules” include relevant state law, id., and the Coalition relies
on several Minnesota cases to argue that the holder of a license does have a property
interest in that license. See State v. Saugen, 169 N.W.2d 37, 41 (Minn. 1969)
(holding that “[a liquor-]license was assignable and transferable and as such can be
construed as a property right rather than a privilege”); CUP Foods, Inc. v. City of
Minneapolis, 633 N.W.2d 557, 562–63 (Minn. Ct. App. 2001) (finding a property

      3
       We note that, although the Coalition argued both state and federal takings
claims before the district court, it argues only its federal claim on appeal.

                                         -6-
interest in a realtor’s business license); Bird v. Dep’t of Pub. Safety, 375 N.W.2d 36,
42–43 (Minn. Ct. App 1985) (finding a property interest in an automobile dealer’s
license); see also Boonstra v. City of Chicago, 574 N.E.2d 689, 694 (Ill. App. Ct.
1991) (holding that “a taxicab license and its assignability is a constitutionally
protected property interest”).4 CUP Foods and Bird are inapposite to the Coalition’s
claims, however, because both cases address the complete revocation of the licenses
at issue. See CUP Foods, 633 N.W.2d at 562; Bird, 375 N.W.2d at 39. Saugen is
similarly inapplicable.

       In Saugen, the Supreme Court of Minnesota considered the property right in
a liquor license to include the going-concern value of the business where the state had
taken the property on which the licensee’s business had been located and the licensee
was unable to transfer his license to a new location. Saugen, 169 N.W.2d at 39. The
court noted that the state’s actions had “effectively destroyed [the licence holder’s]

      4
        In Boonstra, the Illinois Appellate Court determined that by “summarily
precluding those persons already having an assignable interest in taxicab licenses
from being able to assign their property interests, the City of Chicago’s action
constituted a taking of property without due process and without just compensation.”
574 N.E.2d at 695. In effect, “the City of Chicago created for its citizens a public
market place for the assignment of its taxicab licenses. Thus, the taxicab licenses in
reality became more than just mere personal permits . . . .” Id. at 694. In Boonstra,
the City of Chicago totally prohibited all assignment of the licenses, and given the
death of the license holder, was akin to a revocation. Id. at 691–92. In the present
case, however, licensees are still able to use their licenses and assign their licenses
to others. The economic effect is harder to distinguish: under either regulation,
licensees are no longer able to transfer their licenses for the significant sums of
money they once were. To the extent Boonstra would establish a compensable
property right in a regulation-created market value, then, we must decline the
invitation to follow the decision of the Illinois Appellate Court. See Movers
Warehouse, Inc. v. City of Little Canada, 71 F.3d 716, 719–20 (8th Cir. 1995) (“[T]he
property right must arise as a matter of state law; most of the cases cited by [the
plaintiff] do not deal with Minnesota law and are thus inapplicable.”).

                                         -7-
valid and unrevoked ability to engage in the liquor business” and that there was “no
problem [in that case] with a speculated [going-concern] loss because the going-
concern value ha[d] been stipulated.” Id. at 46. In the present case, however, the
Coalition does not argue that its licensee–members are no longer able to continue
their businesses as operating enterprises. Here, the licensed taxicab businesses “will
continue to operate as a going concern, even if profits are somewhat reduced.” City
of Minneapolis v. Schutt, 256 N.W.2d 260, 263 (Minn. 1977). Saugen cannot be
interpreted to establish a property interest different from the interest at issue in that
case. Even were we to construe the Coalition’s argument as claiming that the market
value of a license was representative of the going-concern value of the licensed
business, the market value of the license—especially given the existence of the
artificially restricted market—was, at best, an incomplete and imperfect assessment
of that going-concern value. A property interest cannot be extended to the going-
concern value of a licensed business where that going-concern value is merely
speculative. Saugen, 169 N.W.2d at 46; see Schutt, 256 N.W.2d at 262–63 (limiting
Saugen to its facts). The Coalition is unable to point to any Minnesota law
establishing the property interest the Coalition argues has been taken.

        The Coalition also relies on the Federal Circuit’s decision in Members of the
Peanut Quota Holders Ass’n for the proposition that a license to participate in a
controlled market is a property interest in the restricted nature of that market, such
that the City cannot, without just compensation, reduce the market value of the
taxicab licenses by increasing their number. See Members of the Peanut Quota
Holders Ass’n v. United States, 421 F.3d 1323, 1334 (Fed. Cir. 2005) (“A property
right accrues when the government has seen fit to take a limited resource and secure
it for the benefit of an individual or a predetermined group of individuals.”). The
Peanut Quota Holders decision distinguished between peanut quota allotments, which
include a property right, and certain fishing licenses, which do not. Id. at 1333–34.
The quotas “guaranteed a minimum price,” and “[o]nce a particular quota had been
awarded, the granting of further quotas did not dilute that allotment.” Id. at 1334.

                                          -8-
The taxicab licensees, with no equivalent guaranteed minimum, cannot be said to
share this concreteness of value. Even before the ordinance amendment, the taxicab
licenses were similar to the fishing licenses in Peanut Quota Holders in that “[e]ach
additional license dilute[d] the value of the previously issued licenses” because the
limited resource was subject to increased competition with each additional license.
Id. at 1333–34; see Jackson Sawmill Co., Inc. v. United States, 580 F.2d 302, 306–07
(8th Cir. 1978) (“[T]here is no property right or vested interest in a continuing flow
of traffic.”). The taxicab licenses themselves do not carry an inherent property
interest guaranteeing the economic benefits of using the taxicab license.

       More broadly, the “existing rules or understandings” that define the dimensions
of the property interest indicate that the taxicab licenses were not understood to
provide an unalterable monopoly over the Minneapolis taxicab market. See Rogers
Truck Line, Inc. v. United States, 14 Cl. Ct. 108, 111 (1987) (holding that a
commercial-carrier license “did not give plaintiffs a constitutionally protected
freedom from competition”). Property ownership is not without inherent limitation.
In the case of real property, compensation is not required where the limitation already
“inhere[s] in the title itself, in the restrictions that background principles of the State’s
law of property and nuisance already place upon land ownership.” Lucas, 505 U.S.
at 1029. “And in the case of personal property, by reason of the State’s traditionally
high degree of control over commercial dealings, [a property owner] ought to be
aware of the possibility that new regulation might even render his property
economically worthless . . . .” Id. at 1027–28. This inherent limitation is especially
present in highly regulated markets. Mitchell Arms, Inc. v. United States, 7 F.3d 212,
216 (Fed. Cir. 1993) (stating that an enforceable property interest “cannot arise in an
area voluntarily entered into and one which, from the start, is subject to pervasive
Government control,” because the government’s retention of discretion over that area
means that the individual “cannot be said to possess the right to exclude” (internal
quotations, citation, and emphasis omitted)). The general expectation of regulatory
change is no less present where the value of the property interest is derived from the

                                            -9-
regulation itself. See Peanut Quota Holders, 421 F.3d at 1334 (stating that “[quota
holders] have no legally protected right against the government’s making changes in
the underlying program and no right to compensation for the loss in value resulting
from those changes” and that “[q]uotas are property, but they are a form of property
that is subject to alteration or elimination by changes in the government program that
gave them value”).

       The “public convenience and necessity” hearings required by the ordinance do
not change the understanding that the license to participate in the highly regulated
taxicab market is subject to regulatory change. Contrary to the Coalition’s
contention, the City retained the discretion to alter the number of licenses, and “[s]o
long as the government retains the discretion to determine the total number of
licenses issued, the number of market entrants is indeterminate.” Id. The ordinance
expressly contemplated increases in the number of taxicab licenses. It did not limit
the City’s discretion to issue additional licenses. In determining whether to issue
additional licenses, the ordinance allowed the City to consider any factors it deemed
relevant, and it did not establish any minimum standards that would dictate the City’s
decision either for or against the issuance of additional licenses.

       The Coalition does not allege a taking of the taxicab licenses or of the ability
to engage in the licensed activity; rather, the Coalition’s takings claim is limited to
“the ability to realize an expectation in the ultimate market disposition of the
[licenses].” Mitchell Arms, 7 F.3d at 217. “This ‘collateral interest’ incident to . . .
ownership . . . is not property protected by the Fifth Amendment.” Id. Even if there
is a property interest in a particular license, “a takings claim cannot be supported by
asserting ownership in a property interest that is different and more expansive than
the one actually possessed.” Rogers, 14 Cl. Ct. at 114. We therefore hold that any
property interest that the taxicab-license holders’ may possess does not extend to the
market value of the taxicab licenses derived through the closed nature of the City’s
taxicab market. Without such a property interest, their takings claim necessarily fails.

                                         -10-
      B. Due Process

        The Coalition also argues that the City’s new ordinance violates its members’
due process rights under the Fourteenth Amendment to the U.S. Constitution and
Article I of the Minnesota Constitution. See U.S. Const. amend. XIV; Minn. Const.,
Art. I, § 7. The due process protection provided under the Minnesota Constitution
is “identical” to the protection provided by the U.S. Constitution. Sartori v.
Harnischfeger Corp., 432 N.W.2d 448, 453 (Minn. 1988).

       “The possession of a protected life, liberty, or property interest is a condition
precedent to invoking the government’s obligation to provide due process of law.”
Stauch v. City of Columbia Heights, 212 F.3d 425, 429 (8th Cir. 2000). A municipal
ordinance may create a protected property interest “by establishing procedural
requirements that impose substantive limitations on the exercise of official
discretion.” Id. at 429–30 (finding a property interest in the renewal of a rental
license derived from a municipal ordinance licensing scheme that required renewal
be granted upon satisfaction of objective criteria). Here, however, the ordinance’s
hearing requirement does not curtail the City’s discretion in such a way as to create
a protected property interest for the purposes of due process. See Movers Warehouse
Inc. v. City of Little Canada, 71 F.3d 716, 720 (8th Cir. 1995) (finding no property
interest in the renewal of a bingo-hall license where “state law place[d] no substantive
limitations on the discretion of the licensing authority”).

       As discussed above, the taxicab licensees do not have protected property
interests in the market value of their licenses. As such, the ordinance does not
implicate the holders’ property interests or, it follows, their due process rights.

                                         -11-
      C. Unconstitutional Exaction

        The Coalition further argues that the amended ordinance’s application of new
wheelchair-accessibility and fuel-efficiency standards is an unconstitutional exaction.
See Dolan v. City of Tigard, 512 U.S. 374 (1994) (holding that the government could
not, without just compensation, condition the approval of a building permit on the
grant of a public easement when the condition had no essential nexus to the
government’s interest in the development). The ordinance provision requiring
wheelchair-accessible and alternative-fuel vehicles, however, applies to licensed
service companies rather than to individual licensees. In its complaint, the Coalition
states that its members hold fully transferrable taxicab licenses; the Coalition does not
allege that any of its members are, or are affiliated with, licensed service companies.

       The Coalition now argues that because licensed service companies are
necessarily made up of, and closely related to, individual taxicab licensees, the
licensees will inevitably be injured by the change in the ordinance and therefore have
standing, but the Coalition’s deductive reasoning can take its argument only so far.
While it may be true that an ordinance applied to licensed service companies
necessarily affects the license holders affiliated with those companies, the Coalition
has not alleged that any of its member–licensees are in fact affiliated with any
licensed service company.

       Because the Coalition’s complaint does not allege a relationship between its
member–licensees and the affected licensed service companies, we agree with the
district court that the Coalition cannot show “injury in fact” and therefore does not
have standing with respect to its unconstitutional-exaction claim. See Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992).

                                          -12-
                               III.

For the foregoing reasons, we affirm the judgment of the district court.

               ______________________________

                               -13-