In June 2010, the Metropolitan County Council, Nashville, Tennessee passed a series of
anti-competitive regulations requested by the Tennessee Livery Association, a trade group formed by expensive limousine companies. These regulations forced sedan and independent limo companies to increase their fares to $45 minimum.

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.

The case culminated in a four day jury trial in January 2013. Unfortunately, the jury returned a verdict in favor of the government upholding Nashville’s laws.

On January 7, 2014, in a major victory for Nashville’s transportation entrepreneurs and customers, the Metropolitan County Council voted 29-3 to reverse its ruling of June 2010 and reduce the city’s $45 minimum price for limousine and sedan service to $9.

Following is the history of this case. - Editor

DRIVE TO FREEDOM:

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

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 sought 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 cost only $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 forced sedan and independent limo companies to increase their fares to $45 minimum.

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

These regulations had nothing to do with public safety. Nashville could have limited its requirements to those regulations that were designed to genuinely protect the public’s health and safety, such as requiring insured and inspected vehicles, and driver background checks. Instead, Nashville stooped to economic protectionism to put affordable car services out of business in favor of more expensive services that happened to have more political power.

Many Nashville residents who regularly use limos and sedans were forced to spend twice as much money for exactly the same service. Hard working sedan drivers were 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 asked 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 from competition. In this case, the politically favored insiders were members of the Tennessee Livery Association?

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 benefited from robust competition between taxicabs and the many limo and sedan services in the metropolitan area.

Before the government became involved, a limo or sedan ride from downtown Nashville to the airport cost just $25, about the same price it costs to take a taxicab. 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 prevented limos, sedans and taxicabs from competing with each other. Now consumers and sedan entrepreneurs are paying the price.

The new regulations required limo and sedan operators to charge a minimum of $45 per trip. Additionally, car services (as limos and sedans are collectively called) could not:

• lease their vehicles but must hold the title;
  
  
• could not park or wait at any place of public accommodation such as a hotel or bar;
  
  
• as of January 2012, they could not put any vehicle into service if it was more than five years old no matter how well maintained it was; and,
  
  
• at the same time, they had to take cars out of service once they were more than seven years old (or ten years old for a limo). As a result, a number of small transportation
  businesses went out of business, while many others were 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”), 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.”

But these regulations were anything but a “win” for Music City’s many car services and their customers. Car service in Nashville used to be affordable. After implementation of the new regulations it was not.

Nashvillians who used limos and sedans were 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 were working.

Then a group of sedan and independent limo operators fought back. With the help of the Institute for Justice, a national public interest law firm that represents entrepreneurs,
three transportation entrepreneurs sued 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 was driving up transportation prices and destroying small businesses merely to help big limo companies drive their competitors off the road. That was not only unethical, it was 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, however, when Nashville’s Metropolitan County Council adopted its first limo and sedan regulations. The new rules required all limos and sedans to charge
a minimum of $45 per trip, 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. The only other cities that impose minimum fares on car services and their customers are:

Houston, Texas, ($70),

Austin, Texas, ($45),

Portland, Ore., (at least 35 percent more than prevailing taxicab rate),

Medford, Ore., ($25),

Atlanta, Ga., ($25),

Little Rock, Ark., ($50 for limos, $30 for sedans and SUVs),

Miami-Dade County, Fla., (at least 3.33 times the hourly taxicab rate), and

Hillsborough County, Fla., ($40).

Although these and most other cities have minimum taxicab fares, taxicabs minimums are typically $4 or less. 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.

TennLA’s members charge a minimum of $45 to $120 an hour for their services. 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. The losers were Nashville’s affordable car services who were being deprived of their competitive advantage over the expensive limousine companies and taxicabs, and their customers who had to pay more for exactly the same service.

Hurting Consumers

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

Mark Sissell personifies the dilemma Nashville consumers soon faced. After spending 16 years as a guitar player for country performer Chris LeDoux, Mark worked 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 had never held a driver’s license, Mark had 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 paid only $18 for the trip from his home to his office which runs about $14 in a taxicab. Under Nashville’s new regulations, Mark had to pay at least $45 for the same trip and exactly the same service. “I just couldn’t afford that every day,” he said.

Mark didn’t understand how the government could prevent a business from offering a fair price to its customers. “I wanted the option of using affordable sedans and I think the people of Nashville wanted that option,” he said. “The city should not have taken 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 stood 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. Eleven 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 had grown from one vehicle to a fleet of 20 vehicles and 15 independent contractors. Metro Livery charged 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 had 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 round trip pricing and served downtown Nashville for just $20 one way. A Limo for You put a halt to all of its operations in Nashville and Davidson County because Limo Jon could not afford to comply with the city’s new regulations. Limo Jon had 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 served 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 could not 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. 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 had instead chosen to do was protect entrenched companies from competition which is not a legitimate use of government power.

After the Civil War, emancipated slaves counted economic liberty as among the most crucial of their new civil rights. To protect entrenched white business men 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.

But in 1873, a divided U.S. Supreme Court read the Privileges or Immunities Clause out of the Constitution by a 5-4 vote. 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 had 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 had nothing to do with government’s legitimate function of protecting the public’s health and safety. It was irrational. And, most of all, it was unconstitutional.

NASHVILLE REPEALS $45 MINIMUM FARE LAW

Affordable Car Services Back On The Road With Reasonable Prices

READ THE NEW LAW

The change in the minimum fare follows a three year legal battle over its constitutionality. A group of local transportation entrepreneurs and the Institute for Justice (IJ) filed a federal lawsuit in 2011 pointing out that the law was literally written by Nashville’s most expensive limousine companies and designed to destroy their affordable competition. The case came to a dramatic conclusion in January 2013 when a jury upheld the law.

LEARN MORE ABOUT THE CASE

“The $45 minimum fare almost destroyed my business,” said Ali Bokhari, a plaintiff in the lawsuit and owner of Metro Livery, a popular car service that charged as little as $25 for trips between downtown Nashville and the airport before the minimum fare went into effect. “We have fought to repeal the minimum fare every day since it passed. After years of struggle, we are pleased to have regained the basic right to charge our customers a reasonable price.”

“Today’s decision is a victory for consumers, entrepreneurs and basic common sense,” said IJ Attorney Wesley Hottot, the lead lawyer in the case against the minimum fare, “but it should not have taken more than three years and a federal lawsuit for Nashville officials to recognize that consumers do not need the government’s protection from prices that are too low, any more than they need the government’s protection from pillows that are too soft.”

The change was prompted by the Nashville Convention and Visitors Bureau (CVB) over concerns that there are now too few private transportation options to meet visitors’ needs. Less than a year ago, however, the CVB incredulously helped defend the $45 minimum fare in court, arguing that it was essential to draw more visitors to the city.

“Unsurprisingly, a law that was written by the city’s expensive limo companies turned out to be no good for anybody except the expensive limo companies,” explained IJ Senior Attorney Robert McNamara. “Nashville’s minimum fare was not the only law of its kind and we are committed to seeing similar laws join Nashville’s where they belong: off the books.”

The Institute for Justice is currently challenging the constitutionality of similar minimum fare laws in Portland, Ore., and Tampa, Fla.

Shira Rawlinson
Communications Coordinator
Institute for Justice

© 2014 TLC Magazine Online, Inc.