Taxi cabs are a topic near and dear to the hearts of many New Yorkers. It perhaps surprises no one that the business is far more complex than getting people from the Lower East Side to the Upper West Side – it is subject to a labyrinthine system of rules and regulations that must be successfully navigated.
A taxi medallion in its broadest sense is simply a permit to operate a taxi issued by the government. Mayor LaGuardia signed the 1937 Haas Act, ushering in the era of medallion taxis in New York City, a system that remains in place today. Medallions are typically worth hundreds of thousands of dollars and leased via secondary markets.
Leases are Contracts
Leases are contracts and may be breached just like any other contract. In the case of Pervaiz v. Queens Medallion Leasing Mr. Pervaiz, a taxi cab driver and the plaintiff, sued his medallion leasing company for breach of contract, specifically for breach of the leasing arrangement between them.
Allegations and TLC
The City of New York Taxi and Limousine Commission (TLC) serves a regulatory function with regard to taxis. One of the things it does is create a price cap, or maximum amount that may be charged under a medallion lease, of $800 per week. In this case, the plaintiff and defendant signed a lease that charged more than this amount! Plaintiff’s first and second causes of action (legal claims) allege that in overcharging him, the defendant breached the lease agreement.
Unenforceability and Breach
The Appellate Division of the Supreme Court of NY, first department ruled that the lease agreement was unenforceable. An unenforceable contract is one that is valid, as long as both sides perform their respective obligations, but if one side breaches their end of the deal the court may not grant a remedy to the other party. In this case, the court reasoned, the medallion lease agreement, on its face, violated the TLC’s price cap regulations. Thus the arrangement was fine so long as both sides honored it, but this violation rendered it unenforceable. Consequently, the plaintiff could not recover damages from the defendant even if the defendant had breached the contract. The court further ruled that in this case the defendant had not actually breached the terms of the lease.
End Runs Around the TLC Regulations
The court further discussed plaintiff’s breach of contract causes of action as an attempt to ‘circumvent the absence of a private right of action.’ What do they mean? Simply put, the TLC regulations are a comprehensive legislative scheme that create their own, internal methods for resolving conflicts. For instance, taxi drivers and medallion owners have ways to settle disputes before the Taxi and Limousine Commission without involving the courts. In fact, it is quite common for such regulatory schemes to NOT grant the right to go to court (a ‘private cause of action’) unless other avenues are exhausted. Here the court felt that the plaintiff was trying to end around the internal dispute resolution methods by claiming the excessive prices amounted to a breach of contract. It is important to note that courts are particularly unsympathetic to what they feel are attempts to circumvent legislation limiting private rights of action – for the understandable reason that civil court dockets are already jam-packed with cases and that the backlog for a trial can be years in some jurisdictions.
If you are involved in a business dispute it is important to retain an experienced attorney who understands how the regulations of New York may potentially affect breach of contract claims. Please do not hesitate to contact our office for a consultation.