As I mentioned briefly in an update to yesterday’s post on the Circuit Court ruling overturning certain taxi cab permit requirements in Little Rock, the City of Little Rock plans to challenge the ruling. In a phone interview, Little Rock City Attorney Tom Carpenter disputed Judge David Laser‘s finding that the permit requirements were unconstitutional and said that Laser’s ruling threatened state and local governance.
Quick recap of the dispute: Little Rock law required that applicants for a permit show that “the requirements of public convenience and necessity” could only be met by issuing an additional permit and that the new permit holder’s business wouldn’t harm the existing permit holders’ business. In practice, this meant that pretty much any permit for a competitor to the city’s one existing taxi company, Greater Little Rock Transportation Services, LLC (Yellow Cab), was going to be denied. Ken Leininger, owner of Ken’s Cabs, sued, arguing that this amounted to the enforcement of a monopoly; Judge David Laser agreed yesterday, striking down the requirements as a violation of the state constitution’s anti-monopoly clause.
“We will challenge the ruling,” Carpenter told me yesterday afternoon. Noting that the decision was issued by a special judge sitting in for regular Circuit Court Judge Alice Gray, he said that one possibility was a motion for reconsideration (Laser would then presumably not be sitting); another possibility would be an appeal, which would either go to the Supreme Court or the Court of Appeals.
“It’s hard to believe that this concept is unconstitutional since our state hospitals and several other businesses are guided by that same standard,” Carpenter argued in a phone interview. “It doesn’t really make any sense.” He insisted that the permit rules were not a “monopoly provision” although he admitted that in practice, the city was unlikely to let in new entrants under the rules when Leininger applied.
Carpenter said that after denying him in 2015, the city asked Leininger to apply again but that he did not do so for a 2016 permit or for a 2017 permit. (Leininger disputes this; he said that he was told by Fleet Services, the city agency governing taxi cabs, that the City Board’s decision was final.)
Carpenter said that if Leininger had applied again, he likely would have been granted the permit. “The fact of the matter is the guy kept operating anyway,” Carpenter said. “We stopped tracking him down and fining him because we figured he was going to get a permit.”
The notion that the city would have granted a permit to Leininger if he re-applied seemed strange to me — if the “convenience and necessity” provision had kept him from getting a permit in 2015, what would be different in 2016? Carpenter said that the landscape had changed with the Uber and similar services being allowed in Arkansas. “The ability of the city to say ‘this is what our transportation for hire needs are’ got severely limited,” Carpenter said. In practice, Carpenter argued, this would make the city more open to granting a permit to a new operator like Leininger if he had re-applied.
Attorney Justin Pearson of the Institute for Justice, the libertarian law firm representing Leininger, questioned this characterization, noting that in a public meeting dealing with Leininger’s appeal, Carpenter had explicitly advised the Little Rock City Board of Directors that they were not allowed under their rules to give taxi permits to Leininger or any other company because there was no evidence that Yellow Cab had failed to meet demand for taxis. “It wasn’t based on Uber or the lay of the land, it was based on the fact that the rule left them no choice,” Pearson said. “Unless Yellow Cab failed to meet demand, the rules prohibited the board from giving taxi permits to any other company.” He pointed out that the City’s own briefs filed with the court reiterate this point:
City Attorney Tom Carpenter who was present at the Board meeting explained that the convenience and necessity requirement meant that in order for a new permit to be issued, there must be a need for additional cabs. He said that this could be evidenced in the event that people cannot get a taxicab when needed or if the existing permits are not being honored and taxis are not being properly maintained or operated. Mr. Carpenter clarified that as there were no complaints of this nature against the sole current taxicab permit holder, Plaintiffs failed to demonstrate that there was a need to issue additional permits to another taxi company.
Carpenter claimed that Leininger would somehow have been able to successfully present such evidence in 2016.
Whether or not you buy the logic that Leininger would have gotten a permit if he reapplied, this doesn’t seem like much of a defense of the “convenience and necessity” provision or the rule about not harming existing permit holders. If because of Uber and others, the city no longer has the ability to enact top-down control over “what our transportation-for-hire needs are,” why are they fighting to defend these provisions? For that matter, if they don’t make sense in a post-Uber world, why not just get rid of the provisions altogether (an outcome that Leininger’s attorneys said would be perfectly fine)?
Carpenter said it was about “the authority of local governments.”
“You’ve got a decision out now that a ‘necessary and convenient” provision by definition is a violation of the state constitutional provision on monopolies,” Carpenter said. “Today it applies to taxi cabs. But [Judge Laser] has made a blanket conclusion that this is unconstitutional. If this is just unconstitutional, then it can’t be used for anything in the city and in the state. This needs to go to trial because there are issues — Why didn’t he apply in 2016 and 2017? And why are you depriving the ability of state and local governments to say we don’t need a hospital on every block, we don’t need a bank on every block. That’s just a matter of government, that’s not a matter of Ken’s Cabs.”
Pearson responded that Carpenter was missing the point. “The government is not allowed to create a monopoly,” he said. “What the city attorney is talking about is situations where they have a handful of hospitals and then they have a public ‘convenience and necessity’ requirement for additional hospitals. That’s very different under the Arkansas constitution then when you have one company that has all the permits and you say that no one can compete with them.”
In the end, it’s hard to deny that the taxi permit provisions in question are anti-competitive and helped enable a monopoly. The city’s rules, at least as applied in 2015 in the case at hand, made it essentially impossible for a new entrant to get a taxi permit to compete with Yellow Cab. The cynical interpretation is that these rules are only in place to protect the current stakeholders — the city’s one big cab company. The more generous interpretation is that the city wants to regulate the fleet of private cabs as a kind of public good (this seems to be the crux of Carpenter’s argument — that the “convenience and necessity” provision helps the local government effectively regulate ground transportation in the city).
But Pearson counters that these provisions in particular are unnecessary to fulfill the city’s aim of regulating cabs and accomplish no purpose whatsoever other than benefiting Yellow Cab. “Even without the monopoly rule, Little Rock still has a whole list of requirements that an applicant has to comply with, and that Ken did comply with,” he said. “Little Rock is the only city in the country that has this type of monopoly — every other city in the country is able to do it, I’m confident that Little Rock can do it.”
If the city proceeds with a challenge to yesterday’s ruling, Pearson expressed confidence that the courts will continue to find the provisions a clear violation of the Arkansas constitution.
“Ken has been tying to get taxi permits for over two years and we’ll fight however long we need to fight to vindicate his right to pursue the American dream,” Pearson said. “If the city government needs another court to explain to them that setting up a private monopoly violates the anti-monopoly clause, then that can be arranged.”