Friday, January 25, 2013

Metro's Price-fixing on trial: Report from the Courtroom

Daniel Horwitz
by Daniel Horwitz

[Author’s note: After discovering that absolutely no one in the media is covering this trial, I wrote all of this up fairly quickly based on my notes at 2:00AM in order to get it out as soon as possible.  I have not had a chance to edit it or review it, so please forgive me for any typos, run-on sentences or incomplete thoughts, which I promise to fix at some point later on.]

Sitting in attendance for day two of the trial between several low-cost limousine companies and the Metro Transportation Licensing Commission (MTLC), I’m happy to report what I thought was a very strong day for the plaintiffs. 

To provide a general summary of what this trial is about, the three plaintiffs in this case –represented by the extraordinarily successful libertarian public interest firm the Institute for Justice – have sued the MTLC over the following four provisions of Metro’s livery ordinance (No. BL2010–685):

(1) The “minimum fare” provision that requires that limousine and sedan service operators charge a minimum of $45.00 per trip;

(2) The “prohibition on leasing” provision that requires that limousine and sedan service operators hold title to their vehicles;

(3) The “dispatch restriction” that requires that operators dispatch vehicles only from their place of business; and

(4) The “vehicle age requirement” that requires that operators take sedans and SUVs out of service if they are more than seven years old, take limos out of service if they are more than ten years old, and refrain from placing any new vehicle in service if it is more than five years old.

I should note that only the minimum fare provision, dispatch restriction and vehicle age requirements were mentioned today, so it’s possible that #2 was dropped at some point between the filings submitted last month and the start of trial without my noticing.  In any case, the plaintiffs have alleged that each of the above provisions violates their constitutional rights under (1) the Due Process clause of the 14th Amendment, (2) the Equal Protection clause of the 14th Amendment, and (3) the Privileges or Immunities clause of the 14th Amendment.  As such, the plaintiffs claim, each of these regulations must be struck down as unconstitutional.  The plaintiffs’ latter claim concerning the Privileges or Immunities clause is, unfortunately, foreclosed by a Supreme Court decision handed down in the late 1800s, but the Institute for Justice and other proponents of economic liberty remain hopeful that the current Supreme Court will eventually decide to reexamine the issue.  It is not, however, going to be a successful claim for relief at this point in this particular case.  

In order to win, the plaintiffs in this case must prove that the regulations above fail what is known as “rational basis review.”  Basically, this means that they bear the burden of proving that these laws do not bear a rational relation to any conceivably legitimate government interest.  The MTLC has asserted that nine separate government interests are advanced by its regulations, so the plaintiffs must therefore disprove, by a preponderance of the evidence, that there is a rational connection between each of the laws above and any of the government’s nine stated purposes.  Those rooting for a favorable outcome for the plaintiffs in this case (and I count myself among them) should not be naïve about just how difficult this burden is to overcome; though the Institute for Justice has been uncannily successful in its recent “economic liberty” lawsuits, victories in cases like these are virtually unheard of.  The fact that this is a jury trial is likely to help the plaintiffs (judges applying the law correctly generally find that the standard in a case like this is all but impossible for plaintiffs to meet), but it’s important to remember that Judge Sharp can always overturn the jury’s verdict. 

Extremely helpful to the plaintiffs in this particular case, however, is the controlling 2002 decision that the Sixth Circuit reached in Craigmiles v. Giles, 312 F.3d 220, 224 (6th Cir. 2002) (also won by the Institute for Justice), which stands for the general proposition that pure economic protectionism is insufficient to provide the rational basis necessary to justify a law under the 14th Amendment.  Though in my own humble opinion (and according to Judge Sharp, the Tenth Circuit and several others) the Craigmiles decision was constitutionally suspect, the case is nonetheless controlling here in the Middle District, and as such it prevents the MTLC from being able to argue that the above regulations may be justified on the basis that they protect more expensive limo companies from competition.  For what it’s worth, I’ve believed for some time that the Tennessee case Consumers Gasoline Stations v. City of Pulaski, 200 Tenn. 480, 292 S.W.2d 735 (1956), stands for a similar anti-protectionism rationale under the Tennessee Constitution, and I hope very much that somebody develops this argument one day.

In any case, with that primer, here’s how the day played out:

Before the jury was brought in, there were a handful of motions made regarding whether certain witnesses could testify.  The plaintiffs won the first two of these motions over the MTLC’s objections, with Judge Sharp ruling that the witnesses “barely get over the bar, but do get over the bar of relevance.”  (Author’s note: only relevant evidence is admissible at a trial, and pursuant to Federal Rule of Evidence 401, evidence is considered relevant only if it has “any tendency to make a fact [of consequence in determining the action] more or less probable[.]”)   A third witness on the plaintiff’s witness list was prohibited from testifying, however.  The witness was apparently going to testify as to the protectionist intent of the lobbying group that drafted the regulations (hereafter, TennLA), but Judge Sharp responded that it is only Metro’s intent that matters, and thus that “the motivation of [TennLA] has nothing to do with whether the Metro Council had a protectionist motive.”  Though the plaintiffs’ attorneys countered – persuasively, in my view – that the drafters of the legislation “had protectionist purposes, and therefore it’s more likely that Metro’s purpose was protectionist,” the witness was nonetheless disallowed.  Two reasons for this ruling that Judge Sharp alluded to were that the witness’s testimony (1) could potentially confuse the jury, and (2) could be seen as being needlessly cumulative since TennLA’s representative, who testified yesterday, apparently did not come across as credible and was consistently evasive on this point.  Since, pursuant to Federal Rule of Evidence 403, relevant evidence may be excluded if its value is substantially outweighed by the danger of issues like these and others, Judge Sharp’s ruling on this point was soundly within his discretion. 

Witness 1: Richard “Limo John” Simpkins

The first witness of the day was Richard “Limo John” Simpkins: former sole proprietor and owner-operator of “Limo for You.”  Dressed in a flashy business suit that his attorney initially mistook for a tuxedo, Mr. Simpkins testified that after holding several uninspiring jobs, he decided he wanted to become self-employed and thus opened a limo company twelve years ago “to make a go of it.”  Drawing inspiration from Cornelius Vanderbilt’s ferry business model, he explained, his goal was to become the low-cost provider in Nashville’s livery market, and to be “very disruptive to the marketplace” by giving customers better deals on fares on both roundtrip and short-trip pricing.  According to Mr. Simpkins, before the recent regulations $20 limo rides made up 80% of his business.  After the $45 minimum fare requirement was enacted, however, Mr. Simpkins claimed he was forced to shut his doors.  Furthermore, Mr. Simpkins noted, his business model depended on a simplified, low-cost dispatch system that is no longer legal today due to the new “dispatch restriction.”  Operating a single white super-stretch Lincoln Town Car which he described as the only true “classic limousine,” Mr. Simpkins testified, he was able run his businesses using nothing more than a calendar and a cell phone. 

On cross-examination, the MTLC touched on several points.  First, they noted, Mr. Simpkins had been kept informed throughout the development of the new livery regulations.  I’m still not quite sure what the point of this line of questioning was, but in any case Mr. Simpkins responded that he had voiced his objections so vociferously that the former director of the MTLC “told me if I opened my mouth again I'd be thrown out.”  Next, the MTLC’s attorney hammered Mr. Simpkins on whether his business model aimed to compete with taxicabs.  (Author’s note: the state is asserting that helping consumers differentiate between taxi and livery services and helping the transportation industry as a whole provide rational bases for the regulations.)  True to form, Mr. Simpkins delivered a line that earned a chuckle from the jury: “I want to compete with taxis, airplanes, and everyone else involved in the transportation business!” he exclaimed.  “I just want to go back to being Limo John.”

Witness 2: Mark Sissel

The second witness of the day was Mark Sissel, a longtime customer of Metro Livery who painted a vivid and personal picture of the way that the new regulations had affected him.  Mr. Sissel explained that he works at an artist management company three miles away from his home, and doesn't have a driver’s license due to his eyesight.  As such, he often uses a car service to get to work and other places (but not always, since he sometimes walks, bikes, or works from home). 

Mr. Sissel’s account of how he ended up as a customer of Metro Livery was worth smiling about.  He had been accustomed to taking a cab to work, he said, and one day he called Metro Livery mistakenly believing that they were a cab company.  To his delight, he stepped out of his home that morning to find a polished black Lincoln Town Car with a driver wearing a suit waiting for him.  This “was exceptional” Mr. Sissel noted, beaming from ear to ear.  “Cabs are just means of getting from A to B,” he continued.  But “Metro Livery gave me a sense of dignity.  They treat me like a VIP.  They take care of my son in Franklin when I’m not there, and wait for him to get safely into his apartment.  They make me feel like somebody special.”   

Before the recent regulations, Mr. Sissel testified that he had paid $18 per ride with tip included.  Now, in order to get the same price, he and Metro Livery have to try to exploit a loophole in the minimum fare provision by paying $54 per ride, then taking two rides free.  This arrangement often doesn’t work for him, however, since his schedule is unpredictable and it’s hard to keep track of the “free” rides that are owed.  “I don’t understand why, if someone can create a business model that allows me to work the way I want to in the city I love, then...” he started to say before his testimony was cut short by MTLC’s objection.

Nothing of note was discussed on cross.
Witness 3: David Clegg

If Mr. Sissel’s testimony was your average human interest story, Mr. Clegg’s story was the tear-jerking “All I WantFor Christmas Is You” moment from Love Actually.  I’ve watched several trials in my life, and even tried a few myself, but never have I ever seen an entrance quite like this one. 

According to his testimony, Mr. Clegg is “totally blind” and suffers from “severe rheumatoid arthritis and osteoarthritis.”  Swiveling a black cane out in front of him and wearing dark sunglasses to cover his eyes, Mr. Clegg slowly inched his way into the courtroom with the help of his attorney Wesley Hottot.  The jury, visibly sensitive to his difficulties, hung onto every word of his testimony.  “I can’t hardly walk . . . and there’s no cure,” he began.

After explaining his condition, Mr. Clegg explained that he uses Metro Livery four or five times per month, and maybe more.  Before the minimum fare regulation, he also used to be charged just $25 per trip.  “It’s hard to beat a deal like that,” Mr. Clegg noted.  “With my condition I often need extra help, and [Metro Livery] helps me get in my house and makes sure I’m ok before they leave.”  Now, in an effort to keep him as a customer and comply with the minimum fare requirement, Metro Livery has worked out a deal with Mr. Clegg where he’s charged $50 upfront for a round trip.  “It all amounts to about the same, but it means I have to pay more upfront,” Mr. Clegg explained.  “I liked it the way it was.”
Witness 4: Theresa Anglan

The fourth witness of the day was Theresa Anglan, the manager and principal dispatcher for Metro Livery.  Ms. Anglan has been with the company since its inception, and handles all duties from car inspection to customer complaints to booking.  She also testified that Metro Livery drivers used to spread out throughout the city in order to maximize the speed of service, but that this is no longer possible due to the dispatch restriction’s requirement that limousines only dispatch from their place of business. 

Ms. Anglan’s testimony started out fairly aggressively, then moved quickly to the emotional.  “Many customers are going out to black tie events, the Ryman, or for a nice night on the town, and they don’t want to show up in a dirty, nasty cab” she exclaimed.  “They want a service that opens a door for them and a driver in a suit.”  Customers also used to be charged an average of $22-$25 per ride, she continued.  But “now, we charge them $45.  Some people— they can’t afford that.  We’ve lost almost 50% of our business” she said, appearing to be on the verge of choking up. 

What would happen if the minimum $45 fare rule remains in effect, she was asked?  “I’ve had to cut our employees hours, then cut them again.”  “We’ll keep losing business,” she said, needing a moment to collect herself.  “It used to be so pleasant, so fun to work in our office.  We can’t make a living here anymore.  You can sit there for hours and hours and the phone doesn’t ring.”  Some employees have already had to leave the company for new jobs to make ends meet, and 70% of Metro Livery’s customers also can’t pay in advance or aren’t comfortable with exploiting the loophole in the law, she explained.  “We shouldn’t have to put this on our customers.  Eventually we’re going to have to shut out doors.  I have worked so hard to build this company, earn these customers and keep these customers.”  “It breaks my heart,” she finished actually choking up this time. 

Attorney Jerry Smith of the MTLC handled the cross, which was primarily dominated by both attorney and witness becoming frustrated about Ms. Anglan claiming she didn’t understand the questions she was being asked.  “It’s a yes or no question,” Judge Sharp once interjected, joining in the frustration.  The cross centered on some hearing at which Ms. Anglan had responded to several questions from MTLC Chairwoman Helen Rogers, and at which some individual named Boyd Kinser – a driver of Metro Livery who had also once been a licensed attorney – had appeared.  I can’t say I understood the relevance, though, and I doubt the jury did either. 
Witness 5: Clint Catshod

The fifth witness of the day was Clint Catshod, a current driver for Metro Livery who had once been ticketed for violating the minimum fare ordinance.  Mr. Catshod described a sting operation that MTLC had conducted, and was still visibly perturbed about the experience.  Sometime after the minimum fare regulation went into effect, an MTLC employee apparently called Metro Livery to negotiate a $25 fare, and then halfway through the ride, an MTLC inspector pulled Mr. Catshod over and assessed him a $50 fine. 

To me, the most interesting part of Mr. Catshod’s testimony was the fact that he had been pulled over by an MTLC car equipped with blue lights, and that both the MTLC inspector who had posed as a passenger and the one who pulled him over had flashed official police badges and represented themselves as law enforcement officers.  This, of course, was one of several scandals that wonthe MTLC national headlines last year, as well as a scathingrebuke from Nashville’s Chief of Police Steve Anderson.  MTLC inspectors, of course, are not actually law enforcement personnel, and impersonating a police officer by illegally equipping a car with blue lights, holding oneself out as a law enforcement officer, and flashing a falsified police badge– otherwise known as a “Criminal Impersonation” under TCA§ 39-16-301(b) – is a Class A misdemeanor that carries a sentence up to eleven months, twenty-nine days in prison and a fine of up to $2500.  Despite apparently having engaged in the practice of impersonating police officers for thirty-five years, however, not a single MTLC official was ever charged, presumably because Nashville prefers to waste its resources rotating non-violent drug addicts and homeless people in and out of prison. 
Witness 6: Brian McQuistion

After a break for lunch, the trial resumed again at 1:00PM.  The sixth witness of the day was former MTLC Director Brian McQuistion, who for the sake of full disclosure I have been no fan of and publicly demanded be fired several times last year both in the Tennessean and in this blog.  After recounting how he became MTLC Director, the parties spent the following four hours painstakingly tracing the process by which the livery ordinance was enacted.  Several members of the gallery had to get up to stretch and pace the hall in order to prevent from falling asleep throughout this testimony, and more than a few jurors began to nod off at various points as well.  The highlights of his direct testimony, as far as I could tell, were (1) his reading of the MTLC meeting minutes from August 2009 (“Chair Rogers asked where the minimum $50 fare [later reduced to $45] had originated; the Director responded that this had been a recommendation of [TennLA] during the revision process”), and (2) his testimony that “Bo Mitchell put the minimum fare back in” when it was voted on by the Metro Council, and that this “surprised everyone except TennLA.”  Plaintiffs’ attorneys also spent considerable time getting Director McQuistion to rebut, in part, many of the MTLC’s asserted interests in this case (e.g.— Q: “Do you believe that businesses always make more money when they charge higher prices?”  A: “No”).

On cross, the MTLC retraced all the steps of the ordinance’s drafting process.  Toward the beginning of the cross-examination, I was rather surprised that he was asked whether “other cities had used minimum fares” (he had testified that Nashville’s livery ordinance was based in great part on those used in other cities), to which he promptly responded “no.”  This seems like exactly the sort of evidence that helps the plaintiffs in this case, but quite frankly I didn’t follow the relevance of the rest of the cross-examination, either, and may have completely misunderstood whatever trial strategy the government was pursuing.  Mr. McQuistion did state that many other municipalities have dispatch and vehicle age requirement regulations, though, which does lend credibility to the MTLC’s non-protectionism claim.  Another fun fact— apparently Nashville pays fairly hefty dues for our MTLC commissioner to attend some international conference of transportation regulators every year, and for this we get one of the most dysfunctional, embarrassing and borderline corrupt transportation regulatory bodies that you or mother has ever heard of. 

By 4:00PM – after three hours of testimony from Mr. McQuistion and seven hours of trial – I had to leave.  Something like 12 exhibits detailing the minutiae of the bill’s drafting process had been introduced at this point in his cross examination (with several more to come) though, and I’m relatively certain that nobody was paying attention anymore. 
In any event, I’m looking forward to tomorrow. 

-Daniel Horwitz

I showed up for a while yesterday, just to get a flavor for what was going on to extend moral support ot Ali Bokhari, owner of Metro Livery. I heard Brian McQuistion testify that one to the justifications for the minimum fare for limo companies was to protect the taxi industry and to insure that taxi drivers make a decent wage. Astonishingly, at least to me, he said that this was important or the taxi drivers would resort to criminal activity to earn a living.  That seems pretty paternalistic if not racist and anti-immigrant given the demographic of the taxi drivers.

I am astonished that no local media is covering this trial. Thanks to Daniel Horwitz for this excellent report. Rod


Stumble Upon Toolbar
My Zimbio
Top Stories

No comments:

Post a Comment