Nashville Limos - Background

Litigation Backgrounder

Drive to Freedom:

Nashville’s Sedan Drivers Fight City Effort To Run Them Off the Road

The Issue in a Nutshell

Can government force transportation businesses to charge a minimum price to protect politically connected companies from competition?

That is the question the Institute for Justice (IJ) and its clients seek to answer in federal court with a challenge to Nashville’s new limousine and sedan regulations.

Until 2010, sedan and independent limo services were an affordable alternative to taxicabs.  A trip to the airport only cost $25.  But in June 2010, the Metropolitan County Council passed a series of anti-competitive regulations requested by the Tennessee Livery Association—a trade group formed by expensive limousine companies.  These regulations force sedan and independent limo companies to increase their fares to $45 minimum.

The regulations also prohibit limo and sedan companies from using leased vehicles, require them to dispatch only from their place of business and forbid them from parking or waiting for customers at hotels or bars.  And, in January 2012, companies will have to take all vehicles off the road if they are more than seven years old for a sedan or SUV or more than ten years old for a limousine.

These regulations have nothing to do with public safety.  Nashville could have limited its requirements to those regulations that are designed to genuinely protect the public’s health and safety, such as requiring insured and inspected vehicles, and driver background checks, but instead, Nashville is stooping to economic protectionism to put affordable car services out of business in favor of more expensive services that happen to have more political power.  Many Nashville residents who regularly use limos and sedans will be forced to spend twice as much money for exactly the same service and hard-working sedan drivers will be driven out of business.

On April 20, 2011, the Institute for Justice teamed up with three Nashville entrepreneurs and filed a federal lawsuit in the U.S District Court for the Middle District of Tennessee to vindicate the right of Nashville’s limo and sedan operators to earn an honest living free from excessive government regulation.

With high unemployment and widespread economic uncertainty, this case asks one of the most important questions today:  Can the government restrict someone’s right to earn an honest living just to protect a group of politically favored insiders—in this case members of the Tennessee Livery Association—from competition?

According to the U.S. Constitution, the answer is a resounding “No!”

 

Introduction

Nashville, Tenn., is a vibrant city with a correspondingly vibrant transportation industry.  Until recently, Nashville had no limousine or sedan regulations and consumers benefitted from robust competition between taxicabs and the many limo and sedan services in the metropolitan area.[1] Before the government became involved, a limo or sedan from downtown Nashville to the airport cost just $25—about the same price it costs to take a taxicab—and consumers had the option of whatever transportation alternative best suited their needs.  But in June 2010, the Metropolitan County Council passed a series of regulations that prevent limos, sedans and taxicabs from competing with each other.  Now consumers and sedan entrepreneurs are paying the price.

The new regulations require limo and sedan operators to charge a minimum of $45 per trip.  Additionally, car services (as limos and sedans are collectively called) cannot lease their vehicles but must hold the title; they cannot park or wait at any place of public accommodation, such as a hotel or bar; as of January 2012, they cannot put any vehicle into service if it is more than five years old no matter how well-maintained it is; and, at the same time, they will have to take cars out of service once they are more than seven years old (or ten years old for a limo).[2] As a result, a number of small transportation businesses have already gone out of business, while many others are under a constant threat of being run off the road.

Perhaps not surprisingly, these regulations were written by the expensive limo companies, for the expensive limo companies as a means of using government power to protect themselves from competition.  Nashville’s most expensive limo services formed a trade group, the Tennessee Livery Association (“TennLA”),[3] to push the new regulations into law.  TennLA was so closely involved in the drafting of the regulations, its president claims to have written them:  “Not many organizations get the opportunity to contribute and steer the actual content and wording of pending legislation,” he says.  “It’s a win-win.”[4]

But these regulations are anything but a “win” for Music City’s many car services and their customers.  Car service in Nashville used to be affordable; now it isn’t.  Nashvillians who use limos and sedans are being forced to take taxicabs or spend double for exactly the same service.  These restrictions were designed to put the affordable car services out of business and—unfortunately for consumers and entrepreneurs in Nashville—they’re working.

Now a group of sedan and independent limo operators are fighting back.  With the help of the Institute for Justice, a national public interest law firm that represents entrepreneurs, three transportation entrepreneurs are suing the Metropolitan government and Nashville’s Transportation Licensing Commission in federal court, seeking an injunction to stop the regulations.

The U.S. Constitution protects every American’s right to economic liberty—the right to practice one’s chosen occupation free from unreasonable government regulation.  In Nashville, the government is driving up transportation prices and destroying small businesses merely to help big limo companies drive their competitors off the road.  That is not only unethical, it is unconstitutional.

 

Driving Up the Cost of Car Service

In Nashville, car service is not just for rich people.  If someone of modest means prefers to take a limo or sedan rather than a taxi and to pay a little more for superior service, they can.  Because of all the competition in Nashville’s transportation market, car service has been affordable for decades.  The many advantages of Nashville’s car services over taxicabs and expensive limos include:

  1. Clean, luxurious vehicles;
  2. Prearranged services that are highly reliable;
  3. Drivers that are well-dressed and professional; combined with
  4. A price competitive with taxicabs—just $20 to $25 for service in central Nashville.

 

This all changed last year, however, when Nashville’s Metropolitan County Council adopted its first limo and sedan regulations.[5] The new rules require all limos and sedans to charge a minimum of $45 per trip,[6] inflating consumers’ cost by 80 to 125 percent and destroying car services’ advantage over taxicabs and expensive limos.

Nationwide, minimum fares for limos and sedans are rare.[7] The only other cities that impose minimum fares on car services and their customers are Houston, Texas, ($70),[8] Austin, Texas, ($45),[9] Portland, Ore., (at least 35 percent more than prevailing taxicab rate),[10] Medford, Ore., ($25),[11] Atlanta, Ga., ($25),[12] Little Rock, Ark., ($50 for limos, $30 for sedans and SUVs),[13] Miami-Dade County, Fla., (at least 3.33 times the hourly taxicab rate)[14] and Hillsborough County, Fla., ($40).[15] Although these and most other cities have minimum taxicab fares, taxicabs minimums are typically $4 or less.[16] By contrast, the much higher fare minimums for limos and sedans place their services out of reach of all but the wealthiest consumers.

So who gave Nashville the idea of imposing a minimum fare on the limo and sedan market?  It was the city’s most expensive limo companies, which formed a trade group called the Tennessee Livery Association (“TennLA”) to protect its profits from competition.[17] TennLA’s members charge a minimum of $45 to $120 an hour for their services.[18] Members worked closely with Nashville on its new rules; TennLA’s president even called the rules “a win-win” for the association’s members and city officials.[19] The losers are Nashville’s affordable car services, who are being deprived of their competitive advantage over the expensive limousine companies and taxicabs, and their customers, who have to pay more for exactly the same service.

 

Hurting Consumers

Before the $45 minimum fare, car service in Nashville was affordable; now it is not.  The result is that many transportation companies are in danger of disappearing from Nashville’s streets.  That would hurt consumers by limiting their choice and also damage the city’s broader economy by eliminating transportation options and driving up prices.

Mark Sissell personifies the dilemma Nashville consumers will soon face.  After spending 16 years as a guitar player for country performer Chris LeDoux, Mark now works with an artist management company in downtown Nashville.  As a professional musician, Mark spent a lot of time on the road.  But because he is visually impaired and has never held a driver’s license, Mark has to rely on publicly available transportation to get around town.

Mark prefers to use sedans because they provide far superior service to a cab at about the same price.  “The cars are always clean and on time, and the drivers are better than cabdrivers,” he said.

Mark pays only $18 for the trip from his home to his office, which runs about $14 in a taxicab.  Under Nashville’s new regulations, Mark will have to pay at least $45 for the same trip and exactly the same service.  “I just can’t afford that every day,” he said.

Mark doesn’t understand how the government can prevent a business from offering a fair price to its customers.  “I want the option of using affordable sedans and I think the people of Nashville want that option,” he said.  “The city should not take the affordable option away from us.”

Safe, affordable transportation is an essential part of every community’s economic health.  Transportation businesses put people to work and take people to work.  The healthier a city is, the more likely it is to have a robust transportation network with multiple consumer alternatives.  This is especially important for people like Mark, who must rely on economical and reliable transportation to move them around.

 

The Plaintiffs

Three sedan and independent limousine business owners are now standing up to Nashville and to the Tennessee Livery Association’s effort to put them out of business.  On April 20, 2011, they joined with the Institute for Justice and filed a federal lawsuit in the U.S District Court for the Middle District of Tennessee to vindicate their right to earn an honest living free from excessive government regulation.

Ali Bokhari is the owner of Metro Livery, the largest limo and sedan service in Nashville and Davidson County.  Ali moved to the United States from Pakistan in 2000 to attend the University of California, Berkeley.  Nine years ago, he moved to Nashville and began driving a taxicab.  Just three years later, Ali started Metro Livery, setting his sights on competing directly with taxicabs on price while offering a superior level of service.  In just six years of operation, Ali’s business has grown from one vehicle to a fleet of 20 vehicles and 15 independent contractors.  Metro Livery charges an average of just $25 in central Nashville.

Richard Jonathan Simpkins (who goes by “Limo Jon”) is the owner of A Limo For You, a one-man limo service that he operated in Nashville from 1999 until June 2010, when the city’s new regulations went into effect.  Limo Jon has lived in Nashville since 1966 and has been driving limos for more than a decade.  He says he was inspired to run his business as Cornelius Vanderbilt ran his—“by beating everyone on price.”  The traditional business model in the limo industry is hourly pricing, which seems unfair to consumers who use only part of an hour.  So Limo Jon introduced roundtrip pricing and served downtown Nashville for just $20 one-way.  A Limo for You recently put a halt to all of its operations in Nashville and Davidson County because Limo Jon cannot afford to comply with the city’s new regulations.  Limo Jon has been forced to take a job at a local Nissan manufacturing plant in order to supplement his income.

Al VanPliet is the sole proprietor of Southern Hospitality Limousine, which primarily serves middle-income individuals who need rides for weddings, proms and other celebrations.  The company consists of two limos and Al is the only driver.  Southern Hospitality charges an average of $20 in central Nashville.  Since the city’s new regulations went into effect, business has dropped off precipitously because most of Al’s customers cannot afford to pay the new minimum $45 fare.

 

The Defendants

The defendants in this case are the Metropolitan Government of Nashville and Davidson County, Tennessee and its Transportation Licensing Commission.

 

Legal Claims:  The Right to Earn an Honest Living

Nashville cannot constitutionally drive entrepreneurs out of business merely to protect politically influential businesses from competition.  The plaintiffs in this case, like all Americans, have a right to economic liberty—the right to earn an honest living free from unreasonable government regulation.  The Fourteenth Amendment to the U.S. Constitution protects that right.[20] Under its Due Process Clause, the government may only limit a person’s economic liberty when there is some “rational basis” for the restriction.  To demonstrate that rational basis, the government must show a reasonable connection between the restriction in question and some legitimate public purpose.  Imposing laws designed to protect the riding public is one thing, and a minimal amount of regulation could accomplish just that.  But what Nashville has instead chosen to do is protect entrenched companies from competition, which is not a legitimate use of government power.[21]

After the Civil War, emancipated slaves counted economic liberty as among the most crucial of their new civil rights.  To protect entrenched white businessmen from competition, however, Southern governments soon suppressed economic opportunities for their newest citizens by heavily regulating entry into trades and business.  The national government tried to curtail these abuses by enacting the Civil Rights Act of 1866 and the Fourteenth Amendment to the U.S. Constitution, both of which sought to protect the economic liberty of all Americans by forbidding states from abridging the “privileges or immunities” of American citizenship.[22]

But in the 1873, a divided U.S. Supreme Court read the Privileges or Immunities Clause out of the Constitution by a 5-4 vote.[23] That decision gave states carte blanche to enact shameful Jim Crow-era laws restricting economic opportunities for black Americans.  In addition to oppressing their black citizens, the states also used their now-unchecked regulatory power to protect all sorts of entrenched interests and interfere in otherwise honest enterprise.

How bad has the problem grown?  One need look no further than the city of Nashville’s effort to use its police power to provide economic protection to politically powerful limo and sedan businesses by forcing their competitors to charge a $45 minimum fare.  The cost to take a limo or sedan should be left to operators and their customers—not to the government.  This restriction has nothing to do with government’s legitimate function of protecting the public’s health and safety.  It is irrational.  And, most of all, it is unconstitutional.

 

Litigation Team

The lead attorney in this case is Institute for Justice Staff Attorney Wesley Hottot.  He is joined in the litigation by Senior Attorney Steve Simpson and Staff Attorney Bob McNamara.  Wesley, Steve and Bob have litigated cases involving economic liberty, freedom of speech and property rights in state and federal courts across the country.  Local counsel for the case is G. Kerry Haymaker of Nashville law firm Haymaker & Heroux, P.C.

 

The Institute for Justice:  A History of Protecting Economic Liberty

The Institute for Justice is a public interest law firm that advances a rule of law under which individuals can control their destinies as free and responsible members of society.  Through litigation, communication, outreach and strategic research, IJ secures protection for individual liberty and extends the benefits of freedom to those whose full enjoyment of their rights has been denied by the government.

The Institute for Justice is headquartered in Arlington, Va., and has state chapters in Arizona, Minnesota, Texas and Washington, as well as the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School.

The Institute for Justice has scored numerous victories for entrepreneurs nationwide, including:

  • Craigmiles v. Giles—This IJ lawsuit led a federal court to strike down Tennessee’s casket sales licensing scheme as unconstitutional, a decision that was upheld unanimously by the U.S. Court of Appeals for the Sixth Circuit in 2002 and not appealed by the government.  This marked the first federal appeals court victory for economic liberty since the New Deal.
  • Ricketts v. City of New York—In 1999, IJ helped commuter van operators fight a public bus monopoly that would not allow vans to provide their service in underserved metropolitan neighborhoods in New York City.
  • Jones v. Temmer—In 1995, IJ helped three entrepreneurs overcome Colorado’s protectionist taxicab monopoly to open Denver’s first new cab company in nearly 50 years.  This IJ victory inspired other municipalities to break open their government-sanctioned taxicab monopolies in Indianapolis, Cincinnati and Minneapolis.

 

For more information, please contact:

Shira Rawlinson
Communications Coordinator
Institute for Justice
901 N. Glebe Rd., Suite 900
Arlington, VA 22203
(703) 682-9320 ext. 229
srawlinson@ij.org



[1] The state of Tennessee has a number of commonsense regulations that require limo and sedan businesses to, for example, insure vehicles and randomly drug test their employees.  Tenn. Code § 65-15-128.

[2] Nashville, Tenn. Code of Ordinances §§ 6.74.025, .205, .230., .370, online at http:/library.municode.com (last visited April 18, 2011).  The legislative history of the ordinance is online at http://www.nashville.gov/mc/ordinances/term_2007_2011/bl2010_685.htm (last visited April 18, 2011).

[3] Members of the Tennessee Livery Association include Signature Transportation, Silver Oak Transportation, Matchless Limousine, Adept Limousine, Courtesy Limousine and Lifestyle Limousine.  See www.tennla.com/?pg=contact (last visited April 18, 2011).

[4] Signature Transportation’s Matt Yorke quoted in, “Tennessee Association Forms, Tackles New Ordinance That Defines Limousines,” Limousine Digest, October 2009, p. 60, on file with the Institute for Justice.

[5] See note 1 above.

[6] Nashville, Tenn. Code of Ordinances § 6.74.025.

[7] See generally Robert M. Hardaway, Taxi and Limousines: The Last Bastion of Economic Regulation, 21 Hamline J. Pub. L. & Pol’y 319, 351-60 (2000) (“there is little justification for regulating fare and prices in the limousine industry and few commissions or jurisdictions attempt to do so”).

[8] Houston, Tex. Code of Ordinances § 46-242.

[9] Austin, Tex. City Code § 13-2-203.

[10] Portland, Ore. City Code § 16.40.480.  The rate is currently $50 per Portland, Ore. ARB-LIC-8.35, online at http://www.gettingaroundportland.org/auditor/index.cfm?&a=285720&c=29144 (last visited April 18, 2011).

[11] Medford, Ore. Muni. Code § 8.455.

[12] Atlanta, Ga. Code of Ordinances § 162-133.  Limo services to and from Hartsfield Airport must charge a minimum fare of $50; sedans and vans must charge at least $40 per trip.

[13] Little Rock, Ark. Transp. Code §§ 34-4, 34-43(d)-(e).

[14] Miami-Dade County Code § 31-604(3)

[15] County of Hillsborough, Fla. Code of Laws and Ordinances § 371/2-62.  The rate is currently $40 per http://www.hillsboroughcounty.org/publictransportation/resources/publications/rates/taxilimovanrates.pdf (last visited April 18, 2011).

[16] See generally Mark W. Frankena & Paul A. Pautler, “An Economic Analysis of Taxicab Regulation,” Federal Trade Commission, Bureau of Economics Staff Report (1984), at 99 (“There is virtually unanimous agreement among economists that existing combinations of restrictions on entry into the taxi market, minimum fares, and ride sharing are inefficient and the source of significant welfare loss, including consumer injury.”), online at www.ftc.gov/be/econrpt/233832.pdf (last visited April 18, 2011).

[17] See note 3 above.

[18] See, e.g., www.courtesylimo.com/Specials.php (last visited April 18, 2011).  Estimated pricing information for TennLA members Silver Oak Transportation and Lifestyle Limousine are also available on the companies’ websites.  Most companies, however, request that you contact them directly for actual rates.

[19] See note 4 above.

[20] See Truax v. Raich, 239 U.S. 33 (1915).

[21] See Craigmiles v. Giles, 312 F.3d 220 (6th Cir. 2002).

[22] See, e.g., Clark Neily & Robert McNamara, Getting Beyond Guns: Context for the Coming Debate Over Privileges or Immunities, 14 Tex. Rev. L. & Pol. 16 (2010).

[23] Slaughter-House Cases, 83 U.S. 36 (1873).


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