MEMORANDUM OF LAW IN SUPPORT OF
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

Preliminary Statement

In November of 1999, the Mayor of the City of New York and the Chairwoman of the Taxi and Limousine Commission announced a new rule.  The rule enacted, which remains in effect, was that taxi drivers accused of service refusals would have their licenses summarily suspended, that their taxicabs would be confiscated, and, that, following a hearing, their licenses would be revoked altogether.  This policy—dubbed “Operation Refusal”—was dictated without the vote of the Taxi and Limousine Commission.  But the City Charter requires a TLC vote.  Without that vote, the rule was illegal and of no force or effect.  Every hack license revoked or suspended under the decree was taken illegally.  This motion is on behalf of several drivers who suffered under this regime and other drivers threatened by it.  It seeks the end of that threat and the return of licenses unlawfully seized.

This memorandum is in support of plaintiffs’ motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.  It seeks to establish that defendants deliberately pursued a policy that had no legal basis and using that policy to deprive plaintiffs of their licenses and livelihoods.  In doing so, defendants, primarily Mayor Rudolph Giuliani and TLC Chair Diane McGrath-McKechnie, took plaintiffs’ property without due process of law in violation of 42 U.S.C. § 1983. 

42 U.S.C. § 1983 creates a private right of action on behalf of individuals against every person who under color of state law subjects another to the "deprivation of any rights privileges, or immunities secured by the Constitution and laws" without due process of law.  To establish a section 1983 violation, the plaintiffs must show that (1) their hack licenses are constitutionally protected property interests; (2) that the defendants acted under color of law and (3) that  they were denied due process of law.  Addickes v. Kress & Co., 398 U.S. 144, 150 (1970). 

As this Court has noted, a taxi driver’s license is a form of property subject to the due process protections of the 14^th Amendment.  Bell v. Burson, 402 U.S. 535, 539 (1971).  The TLC is a government agency, which clearly acted under color of law.  The only question is whether defendants had legal authority for the taking because the Second Circuit, and this Court, have stated, “The infliction of punishment when not authorized by state law is a classic denial of liberty without due process of law.”  Salahuddin v. Coughlin, 781 F.2d 24, 27 n.4 (2d Cir. 1986).   The same is true of property since the "touchstone of due process is protection of the individual against arbitrary action of the government."  Bello v. Walker, 840 F.2d 1124, 1129 (3d Cir.), cert. denied, 488 U.S. 868 (1988).  The statute protects against the unlawful taking of substantive rights as much as it guaranties fair procedures. See Monroe v. Pape, 365 U.S. 167 (1961).   

Operation Refusal, The TLC and the Law

Operation Refusal was announced in response to a complaint by Danny Glover that he, as a black man, was passed over when trying to hail a cab in Manhattan.  This complaint is certainly legitimate and had a factual basis.  Since Glover is a movie star, it got attention in the press, and then in City Hall, where the Mayor was about to run for United States Senate and eager to gain support in the black community and elsewhere. 

The Mayor announced Operation Refusal, an undercover sting operation designed to detect drivers who pass by minorities or refuse service to the outer boroughs.  “We will take your car away from you,” he warned. (Ackman Decl. Exh. 1)  In his November 14 radio address, the Mayor made clear that he was dictating the policy on his own authority: “I have directed the New York City Police Department and the Taxi and Limousine Commission to intensify their existing enforcement…. [A]nd when cabbies don’t stop or otherwise refuse to do their job in compliance with the law, the officers will fine them, suspend their licenses, and take their cabs to a police precinct until it can be picked up.”  (Ackman Decl. Exh. 2)

The problem wasn’t with his motivation—it was that the Mayor also “refuse[d] to do his job in compliance with the law.”  In fact, he, along with TLC Chair Diane McGrath-McKechnie, failed in three distinct ways.  First, they never called for a vote of the commission as is required by the City Charter.  Second, they failed to provide for adequate procedures before suspending the drivers’ licenses.  Indeed, they provided none at all.  Third, they failed to comply with the Administrative Code of the City of New York, which defines the penalties for service refusals (providing for a fine on the first offense and revocation on the third).  Heady with power and ambition for higher office, the Mayor and the Chair ran roughshod over the law, the Charter and the Constitution.  In so doing, defendants deprived taxi drivers, including plaintiffs in this action and in Baig, et al. v. Giuliani et al., 00 Civ. 4117 (RJD), of property without due process of law in violation of 42 U.S.C. § 1983.

The City Charter and the TLC

The TLC is not an ordinary agency, but a nine-member commission.  The City’s organic law, the City Charter (§ 2300), defines it, saying, “There shall be a New York city taxi and limousine commission the purpose of which shall be the continuance, further development and improvement of taxi and limousine commission service [and] to adopt and establish an overall public transportation policy governing [taxi service].”  The Charter (§ 2301) goes on to define membership of the commission in detail.  There are nine members appointed by the mayor with the advice and consent of the city council.  Five members, one from each borough, are to be recommended for appointment by the councilmen of the respective borough.   Members shall be appointed for seven-year terms, which are staggered, meaning no single term mayor can fundamentally alter the composition of the commission. (Charter § 2301(b)).  Except for the Chair, all the commissioners are unpaid.  (Charter § 2301(c, d)) (For relevant provisions of the City Charter, see Ackman Decl. Exh. 3.)

The Charter declares, “The commission shall have power to act by a majority of its members.” (§ 2301(e)) It goes on to define the commission’s jurisdiction, powers and duties to “include the regulation and supervision of the business and industry of transportation of persons by licensed vehicles.” (§ 2303)  “Such regulation and supervision shall extend to” fares, standards and conditions of service, and “the revocation and suspension of licenses for vehicles,” and “the issuance, revocation, suspension of licenses for drivers, chauffeurs, owners or operators of vehicles...” as well as other matters not at issue here.

Operation Refusal

The Mayor and the Chair announced Operation Refusal on or about November 10, 1999.  It fundamentally changed the law and, according to defendants’ counsel in oral argument of plaintiffs’ preliminary injunction motion, led to more than 150 suspensions or revocations.[1] There has never been any showing that the other six commissioners (there are two vacancies) were consulted.  No vote was taken or recorded[2] despite the Charter requirement.  Instead the Mayor acted alone and directed the TLC, through its Chair, to fundamentally change the law pertaining to service refusals, and to suspend and revoke licenses, although that power belongs to the commission.  He ordered the suspensions be carried out by TLC inspectors or the police right on the street prior to any sort of hearing.  That this summary suspension procedure is unconstitutional was the subject of plaintiffs earlier brief on their preliminary injunction motion and of the Court’s Memorandum & Order dated August 14, 2000.

In his November 14, 1999 radio address, the Mayor said, “I have directed” the police and the TLC, though he has no vote on the TLC.  He said, “[W]hen the cabbies don’t stop… the officers will fine them, suspend their licenses, and take their cabs.”  Not a court, not an administrative law judge, but “the officers.”  While the cab owners could pick up their property the same day or the next, the drivers received no such consideration.  As demonstrated in plaintiffs earlier brief and conceded by counsel for defendants, drivers were  made to wait weeks or months for a substantive hearing. (See Plaintiffs Preliminary Injunction Brief dated June 20, 2000, pp. 5-10, 17-18)  Meanwhile, their licenses were suspended without any proof of wrongdoing.  Nor did they have any chance to present a defense or even give their side of the story.

The TLC then proceeded to seek revocation of the drivers’ licenses in hearings held by the Office of Administrative Trials and Hearings (OATH).  Even where the OATH judges, determined the drivers were guilty of a service refusal they decided—in every case, 13 out of 13 cases—that the law did not authorize the penalty of revocation, and recommended a fine instead.  The OATH judges cited Section 19-507 of the New York City Administrative Code, which governs service refusal and establishes penalties. (For relevant provisions of the City Code, see Ackman Decl. Exh. 4.)  All the OATH judges ruled, in the words of one, “Despite the legitimate policy interests advanced by [the TLC]… the penalties for service refusals are set by law.”  The judge went on to say, “Section 19-507 (b) of the Administrative Code is a particular legal provision and controls here.  It does not permit license revocation for a first-time refusal offense.”  Taxi and Limousine Commission v. Park, Oath Index No. 1014/00. (Ackman Decl. Exh. 5)

Unhappy with the result, the TLC, purportedly based on new regulation, avoided the OATH courts and started bringing Operation Refusal cases in front of its own administrative law judges.  The TLC judges ruled differently.  These judges, upon finding a service refusal, also ruled that the driver had also violated TLC Rule 2-61A2, which prohibits acts “against the best interest of the public.”  These Rule 2-61A2 rulings were not based on any independent assessment of the facts or the law.  The findings were instead dictated by TLC rule. 

This rule was announced in a memorandum from Lisa Rana, the TLC’s chief administrative law judge, to All Administrative Law Judges: “Please be advised that, upon a finding of a refusal, the Commission’s policy requires that both the Rule 2-50B and the Rule 2-61A2 violations be sustained.” (Ackman Decl. Exh. 7).   Rana’s decree found its way into the rulings of the TLC judges.  In John Padberg’s case, for example, the judge’s language mirrored that of the chief judge: “With regard to the Rule 2-61A2 violation, it is the policy of the Commission that a finding of a service refusal is sufficient to establish that the respondent acted against the best interest of the public. Accordingly, I find and conclude that Respondent is guilty of violating Rule 2-61A2.”

This method of justice makes a mockery of the words “find and conclude.”  The TLC judges found nothing and concluded nothing with regard to 2-61A2, the rule that the Mayor and the Chair now rely as authorizing revocation.  The judges were following orders.

The TLC Chair was not satisfied, however, and urged the OATH judges to follow TLC rule also.  In a letter to Chief OATH Judge Rose Rubin, McGrath-McKechnie urged the OATH judges to “reconsider” their penalty determinations (a fine in all cases) on the strength of a decision by a single TLC judge in a case called TLC v. Yourish.  “The ALJ in the Yourish case,” McGrath-McKechnie wrote, “decided that, based on her findings of fact a separate charge of a 2-61(A)(2) violation was sustained…. The ALJ noted that service refusals, as a matter of public policy, violate the public trust and constitute an act against the best interest of the public.”  (Ackman Decl. Exh. 8)

McGrath-McKechnie failed to say that there were no findings of fact on Rule 2-61A2.  It was all a subject of administrative decree.  Judge Rubin, of course, rejected McGrath-McKechnie’s advice, calling it “most unorthodox” and “misplaced.”  Even if the suggestion were properly made, “the arguments addressed [to the TLC judge in Yourish] were also made to the presiding OATH Administrative Law Judges, considered by them and rejected.” (Ackman Decl. Exh. 9)

Judge Rubin also noted, as is the case, that OATH judges, like TLC judges, are empowered only to make recommendations to the commission, including McGrath-McKechnie.  The commission is then free to accept, reject or modify that recommendation.

The commission’s freedom on that score had two consequences.  The first was that the drivers who were tried before OATH remained suspended, even though the OATH judges said a fine was the only lawful penalty.  The second was that the full commission would—albeit months later—get to rule on Operation Refusal cases, and on the Mayor’s rule in the process.   In the interim, however, TLC judges would routinely recommend license revocation for those drivers, such as Padberg and Mulugheta Sultan, a plaintiff in Baig.  

On July 25, 2000, the full TLC commission met to decide the fate of eight taxi drivers who had been tried by OATH judges.   Plaintiffs’ counsel obtained a transcript of the hearing through a Freedom of Information Law request.[3]  In each case, TLC prosecutors argued that the driver’s license should be revoked.  In every case but one, however, the commission rejected that argument, and accepted the cabbies’ arguments that TLC rules do not authorize revocation for a first refusal offense. (The one exception was a case in which the driver did not appear and was deemed in default.)  In each case the commissioners accepted the decisions of the OATH judges and rejected the pleas of TLC lawyers.   In no case (except the default) did the Commission vote to revoke the driver’s license.  Indeed in each case, McGrath-McKechnie was the sole vote in favor of revocation.  (Ackman Decl. Exh. 10)

The tenor of the commission meeting is evident from one exchange between McGrath-McKechnie and Commissioner Alberto Torres.  The Chair was responding to the legal arguments of a lawyer named Michael Spevack representing a driver named Young Kang:

McGrath-McKechnie: [W]e believe we are clearly within our authority and we have gone through this ad nauseum with the Corp. Counsel that we are in our authority to revoke and I would like to know if there is a motion on the–

TORRES: No, no, I have questions… First of all with all due respect, I believe Madam Chair is speaking for herself.  I don’t know if she’s speaking for the other commissioners, but she’s not speaking for me when she says,‘we.’ I presume this is supposed to be the TLC. (Transcript pp. 30-31)

These votes and this exchange demonstrate that the TLC never authorized the penalty scheme of Operation Refusal and actively opposed it when given its first chance to do so.

The absence of a vote cannot be brushed aside under New York law.  Indeed state law defines with great care what constitutes a majority of a commission such as the TLC and indicates what vote is adequate for that commission to act.  Section 41 of the General Construction Law provides, “Whenever three or more public officers are given any power or authority … a majority of the whole number of such persons or officers … shall constitute a quorum and not less than a majority of the whole number may perform and exercise such power authority or duty.”  In other words, for the TLC to act, it must have five votes.  Without five votes, the TLC has no power to act.  See Town of Smithtown v. Howell, 31 N.Y. 2d 365, 339 N.Y.S. 2d 949 (1972).

Here the TLC did not have five votes—it never had any votes.  If it had voted, the evidence suggests it would not have gained five votes, perhaps not more than one.  Of course, the Mayor ordered Operation Refusal without seeking a vote so we will never know. 

The Statutory Framework that Governs Operation Refusal

The New York City Taxi and Limousine Commission derives its authority from three sources: the City Charter, the New York City Administrative Code, and the Rules of the City of New York.   The Charter, as noted above, requires that the Commission—not the Mayor and not the Chair acting alone—establish rules for taxi drivers and the taxi industry.  Moreover, when a rule, enacted by the commission (or any agency) conflicts with the Charter or the Administrative Code, statutes enacted by the City Council, and not any rule passed by the TLC itself, must govern.  This is the situation here.

Section 19-503 of the Administrative Code grants the commission rulemaking authority.  “The commission shall promulgate such rules and regulations as are necessary….” (§ 19-503(a)).  However, “No rule or regulation promulgated subsequent to the effective date of this local law may be inconsistent with or supercede any provision of this local law….” (§ 19-503(b))  Section 19-503 provides that any rule inconsistent with the Code “is of no legal force and effect.”  That an agency rule or regulation cannot supersede legislation is, of course, a bedrock principal of administrative law. NLRB v. Hearst Publications, Inc., 322 U.S. 111, 131 (1944); Pittston Steverdoring Corp v. Dellaventura, 544 F.2d 35, 38 (2d Cir. 1976). 

The statutes enacted by the City Council governing service refusals are quite clear—more so than the regulations passed by the TLC.   The Administrative Code, § 19-507-- entitled Mandatory Penalties-- establishes the law against service refusals.  In subsection (b) it provides the penalty for violating that law: a $200-to-$350 fine for the first offense; a $350-to-$500 fine and possible suspension on the second offense; and revocation for a third offense within a thirty-six month period.   This penalty scheme for refusals was carefully calibrated by the City Council, and cannot be altered by TLC rule. 

Indeed, until the Mayor acted, the TLC recognized the primacy of the Code and adhered to it in its rules.  The penalty scheme stated in § 19-507 was also embodied in Section 2-50 and Section 2-87 of the TLC regulations, also known as the Taxicab Driver Rules.  These provisions defined the violation and set forth the penalties exactly as set forth in the Code.

In 1999, the Council passed another provision, Section 19-512.1, which also pertains to the revocation of taxicab licenses.  It provides, “The commission may, for good cause shown relating to a threat to the public health or safety and prior to giving notice and an opportunity for a hearing, suspend a taxicab or for-hire vehicle license issued pursuant to this chapter.” (emphasis added)   Even this provision does not permit revocation or suspension for threats to “welfare” or “the public interest”—and at oral argument of the preliminary injunction motion, the Court indicated that service refusals do not implicate public health or safety, just “welfare.”   The statute goes on to provide for revocation after notice and opportunity for a hearing.  If the Council intended this new rule to alter the Mandatory Penalty scheme in Section 19-507, it surely would have said so.

The council intended to restrict, not enhance, the TLC’s power.  This point is made clear by the Historical Note to the law, which states: “[T]he Council finds that certain of the rules promulgated in the past several months by the New York City Taxi and Limousine Commission, such as those that modify the disciplinary measures that may be imposed against taxicab and for-hire vehicle drivers …. are onerous.”  Finally, the Note dictates: “[I]t is the Council’s determination that any rules of the Taxi & Limousine Commission that are inconsistent with any provision of the New York City Charter and Administrative Code of City of New York as enacted by the City Council are superceded and thereby void and of no legal force and effect.” (emphasis added)     

The TLC—or rather the Chair and her administrative apparatus-- has ignored the Code and relied instead on its own rules.  Rather than refer to the specific rules which clearly govern—Rules 2-50B and Rule 2-87—the Mayor, the Chair and their attorneys refer instead to vague, general provisions such as Rule 2-61A2 which proscribes “any willful act of omission or commission which is against the best interest of the public.”[4] (For relevant provisions of the TLC Rules, see Ackman Decl. Exh. 6.)

If the Mayor and the Chair were to rely on Rule 2-61A2 alone, the law and the penalty would be void for vagueness.  See Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939) (“All are entitled to be informed as to what the state commands or forbids.”)  Read without context, Rule 2-61A2 is a catch-all which does not purport to outlaw the conduct in question.  Indeed Rule 2-61A2 is only given meaning by the TLC lawyers themselves when they charge it in conjunction with Rule 2-50B.  This is why the Chair’s policy requires a finding of a 2-61A2 violation after a finding of a 2-87B violation.  TLC lawyers never charge 2-61A2 alone because it acknowledges, as it must, that 2-61A2—or at least the portion of the statute it cites—provides no guidance and outlaws no specific conduct.[5]  Even if Rule 2-61A2 and Rule 2-50B are not read to contradict each other, Rule 2-61A2-- even if it had a statutory basis -- does not provide the agency with independent charging authority.    

Indeed the chief judge of the TLC only finds meaning in Rule 2-61A2 by coupling it with Rule 2-50B.  The facts that give rise to a Rule 2-50B are said, per the chief’s dictat, to also indicate a Rule 2-61A2 violation.  And Rule 2-61A2 was given this meaning not through a judge’s analysis, but by fiat.  This fiat, moreover, came from the Mayor and the Chair, not the commission empowered by the city charter to set policy.

Unlike Rule 2-50B, there is no statutory authority for Rule 2-61A2 as interpreted.  The defendants have relied on § 19-505(l), which says the TLC may suspend licenses for failure to comply with commission rules, but that section does not overrule the specific penalty scheme of § 19-507.  Taken literally, the Chair’s interpretation of Rule 2-61A2 would authorize her to revoke a driver’s license for the violation of any TLC rule—which incorporates all the traffic rules (see TLC Rule 2-21(b)).  Indeed she could revoke a license for the any act she deems in her discretion to be “against the best interests of the public.”  Thus, a driver could find his license revoked for making a turn from the wrong lane, not signaling, or writing a letter in protest of TLC policies.   

Even if Rule 2-61 could arguably apply to service refusals, there is no evidence that the TLC in enacting the rule intended that result.  Construing Rule 2-61 together with Rule 2-50 is more likely to lead to the result that Rule 2-61 applies where Rule 2-50 is not implicated.  There is, moreover, clear evidence that the City Council never intended that any TLC-enacted regulation-- not Rule 2-61, not Rule 2-88-- supercede Section 19-507 of its Administrative Code and its very specific penalty scheme. 

Conclusion

We are left with a naked power grab.  Commissioner McGrath-McKechnie and Mayor Giuliani were presented with a more publicized version of a longstanding complaint.  They reacted in a way that, we assume, they felt best, but which was beyond their power.  It may be that the law should be as the Chair wills it.  Perhaps, TLC inspectors should be able to strip cabbies of their licenses without a hearing.  Maybe they should be able to revoke licenses for a single offense.  But the law is otherwise.  The Mayor, the Chair and her lawyers have no authority to go past it.  The Chair lacks the discretion to ignore it. 

For the reasons stated, this Court should grant plaintiffs’ motion for summary judgment and such other relief as the Court deems just and proper.

Dated: New York, New York
           November 1, 2000

____________________________

Daniel L. Ackman (DA-0103)
201 West 89th St., 15th flr.
New York, New York 10024
(212) 496-2263

BLOCK & MAZARIN
By:__________________________

Brad E. Mazarin (BM-6457)
277 Broadway, suite 301
New York, NY 10007
(212) 227-9008

Attorneys for Plaintiffs

TO:

Jerald Horowitz, Esq.
NYC Corp. Counsel
100 Church Street, Rm 5-189
New York, NY  10007