Wallen et al v. St. Louis Metropolitan Taxicab Commission et al

Filing 73

OPINION MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that Defendants Metropolitan Taxicab Commission of Metropolitan St. Louis, Asfaw, Hamilton, McNutt, and Rudawskys Motion to Dismiss or, in the Alternative, A Judgment on the Pleadings, [Doc. No. #39 ], is DENIED.IT IS FURTHER ORDERED that Defendants St. Louis County and Yellow Cab Company, Best Transportation, Inc., Best Black Car, LLC, and Best Sedan Services, LLCs Motion to Dismiss, [Doc. No. #41 ], is GRANTED. IT IS FURTHER ORDERED that Gateway Taxi Management Company, d/b/a Laclede Cab Companys Motion to Dismiss, [Doc. No. #45 ], is GRANTED. IT IS FURTHER ORDERED that Plaintiff is given 14 days from the date of this Opinion, Memorandum and Order to file an Amended Complaint consistent with the rulings herein.. Signed by District Judge Henry Edward Autrey on 10/6/16. (KJS)

Case: 4:15-cv-01432-HEA Doc. #: 73 Filed: 10/06/16 Page: 1 of 12 PageID #: 443

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
MARSHA ROBYN WALLEN, et al.,
Plaintiffs,
vs.
ST. LOUIS METROPOLITAN TAXICAB
COMMISSION, et al.,
Defendants.

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) Case No: 4:15CV1432 HEA
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OPINION, MEMORANDUM AND ORDER
This matter is before the Court on Defendants Metropolitan Taxicab
Commission of Metropolitan St. Louis, (MTC), Asfaw, Hamilton, McNutt , and
Rudawsky’s Motion to Dismiss or, in the Alternative, A Judgment on the
Pleadings, [Doc. No. 39], Defendants St. Louis County and Yellow Cab Company,
Best Transportation, Inc., Best Black Car, LLC, and Best Sedan Services, LLC’s
Motion to Dismiss, [Doc. No. 41] and Gateway Taxi Management Company, d/b/a
Laclede Cab Company’s Motion to Dismiss, [Doc. No. 45], (Collectively, the Taxi
Defendants). Plaintiffs oppose the motions. For the reasons set forth below, the
MTC and Individual Defendant’s Motion is denied. The Taxi Defendants’
Motions are granted.
Facts and Background

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Plaintiffs brought this action alleging violations of the Sherman Act, 15
U.S.C. § 1, by Defendants in Defendants attempt to prohibit Uber and those using
the uberX product from operating in the City and County of St. Louis, Missouri.
Plaintiffs claim that riders, drivers and Uber, a Transportation Network Company,
(TNC) are prohibited by the actions of Defendants from competing in the St. Louis
market for-hire transportation. Plaintiffs claim to bring this antitrust action to put
“an end to the anticompetitive conduct of Defendant MTC and several of its
commissioners (the “Commissioner Defendants”), many of whom are active
market participants in the very market that the MTC regulates.” According to
Plaintiffs, acting under the control of these market-participant members, the MTC,
which is vested with the authority to regulate vehicles for hire, their drivers, and
vehicle-for-hire companies in the City of St. Louis and St. Louis County, has
abused its authority in order to stifle competition.
Defendant MTC and the individual commissioners move to dismiss based on
immunity from suit. The Taxi Defendants move to dismiss move based on a
failure to state a claim under a theory of respondeat superior, and immunity.
Legal Standard
The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim
is to test the legal sufficiency of a complaint so as to eliminate those actions
“which are fatally flawed in their legal premises and deigned to fail, thereby
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sparing litigants the burden of unnecessary pretrial and trial activity.” Young v.
City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (citing Neitzke v. Williams,
490 U.S. 319, 326-27 (1989)). “To survive a motion to dismiss, a claim must be
facially plausible, meaning that the ‘factual content...allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.’ ” Cole
v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). The Court must “accept the allegations contained
in the complaint as true and draw all reasonable inferences in favor of the
nonmoving party.” Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir.
2005)). However, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements,” will not pass muster. Iqbal, 556 U.S. at
678.
Discussion
Immunity-MTC
“Every contract, combination in the form of a trust or otherwise, or
conspiracy, in restraint of trade” is illegal under § 1 of the Sherman Act. 15 U.S.C.
§ 1. Section 1 is not read literally, but rather prohibits only “unreasonable”
restraints of trade. Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006) (emphasis in
original) (citations omitted). Thus, courts “presumptively appl[y] the rule of reason
analysis, under which antitrust plaintiffs must demonstrate that a particular contract
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or combination is in fact unreasonable and anticompetitive before it will be found
unlawful.” Id.
The antitrust laws do not, however, bar sovereign states from imposing
market restraints “as an act of government.” Parker v. Brown, 317 U.S. 341, 352
(1943). Because cities, towns, and other political subdivisions are not themselves
sovereign, the Supreme Court has made clear that Parker does not apply directly to
them. See Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370, (1991);
Lafayette v. La. Power & Light Co., 435 U.S. 389, 411–13 (1978) (plurality
opinion). Rather, substate governmental entities receive immunity from antitrust
scrutiny only when they act “pursuant to state policy to displace competition with
regulation or monopoly public service.” Lafayette, 435 U.S. at 413. This rule is
designed to preserve to the States “their freedom ... to use their municipalities to
administer state regulatory policies free of the inhibitions of the federal antitrust
laws without at the same time permitting purely parochial interests to disrupt the
Nation's free-market goals.” Id. at 415–16.
The Supreme Court addressed antitrust immunity for substate governmental
entities in FTC v. Phoebe Putney Health Sys. Inc., –––U.S. ––––, 133 S.Ct. 1003
(2013). In Phoebe, the Supreme Court reiterated that “immunity will only attach to
the activities of local governmental entities if they are undertaken pursuant to a
‘clearly articulated and affirmatively expressed’ state policy to displace
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competition.” Phoebe, 133 S.Ct. at 1011 (quoting Cmty. Commc'ns Co. v.
Boulder, 455 U.S. 40, 52 (1982)). The “clear articulation” test requires that the
anticompetitive effect of the challenged action be a “foreseeable result” of what the
state authorized. Id. Mere state-law authorization to act is insufficient to establish
state action immunity; “the substate governmental entity must also show that it has
been delegated authority to act or regulate anticompetitively.” Phoebe, 133 S.Ct. at
1012 (citing Omni, 499 U.S. at 372)
The Court has acknowledged that it would be “unrealistic” to “require state
legislatures to explicitly authorize specific anticompetitive effects before state
action immunity could apply” because “‘[n]o legislature can be expected to catalog
all of the anticipated effects' of a statute delegating authority to a substate
governmental entity.” Phoebe, 133 S.Ct. at 1012 (emphasis added) (quoting Hallie,
471 U.S. at 43). “Instead, we have approached the clear-articulation inquiry more
practically, but without diluting the ultimate requirement that the State must have
affirmatively contemplated the displacement of competition such that the
challenged anticompetitive effects can be attributed to the ‘state itself.’” Id. at
1013 (quoting Parker, 317 U.S. at 352). “[A] state policy to displace federal
antitrust law [is] sufficiently expressed where the displacement of competition [is]
the inherent, logical, or ordinary result of the exercise of authority delegated by the
state legislature.” Phoebe, 133 S.Ct. at 1012–13. “In that scenario, the State must
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have foreseen and implicitly endorsed the anticompetitive effects as consistent
with its policy goals.” Id. at 1013.
More recently, the Supreme Court has had occasion to again address Parker
immunity in North Carolina State Board of Dental Examiners v. Federal Trade
Commission, 135 S.Ct 1101 (2015).
Parker immunity requires that the anticompetitive conduct of
nonsovereign actors, especially those authorized by the State to regulate
their own profession, result from procedures that suffice to make it the
State's own. See Goldfarb, supra, at 790, 95 S.Ct. 2004; see also 1A P.
Areeda & H. Hovencamp, Antitrust Law ¶ 226, p. 180 (4th ed. 2013)
(Areeda & Hovencamp). The question is not whether the challenged conduct
is efficient, well-functioning, or wise. See Ticor, supra, at 634–635, 112
S.Ct. 2169. Rather, it is “whether anticompetitive conduct engaged in by
[nonsovereign actors] should be deemed state action and thus shielded from
the antitrust laws.” Patrick v. Burget, 486 U.S. 94, 100, 108 S.Ct. 1658, 100
L.Ed.2d 83 (1988).
To answer this question, the Court applies the two-part test set forth in
California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S.
97, 100 S.Ct. 937, 63 L.Ed.2d 233, a case arising from California's
delegation of price-fixing authority to wine merchants. Under Midcal, “[a]
state law or regulatory scheme cannot be the basis for antitrust immunity
unless, first, the State has articulated a clear policy to allow the
anticompetitive conduct, and second, the State provides active supervision of
[the] anticompetitive conduct.” Ticor, supra, at 631, 112 S.Ct. 2169 (citing
Midcal, supra, at 105, 100 S.Ct. 937).
Midcal 's clear articulation requirement is satisfied “where the
displacement of competition [is] the inherent, logical, or ordinary result of
the exercise of authority delegated by the state legislature. In that scenario,
the State must have foreseen and implicitly endorsed the anticompetitive
effects as consistent with its policy goals.” Phoebe Putney, 568 U.S., at –––,
133 S.Ct., at 1013. The active supervision requirement demands, inter alia,
“that state officials have and exercise power to review particular
anticompetitive acts of private parties and disapprove those that fail to
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accord with state policy.” Patrick, supra, 486 U.S., at 101, 108 S.Ct. 1658.
The two requirements set forth in Midcal provide a proper analytical
framework to resolve the ultimate question whether an anticompetitive
policy is indeed the policy of a State. The first requirement—clear
articulation—rarely will achieve that goal by itself, for a policy may satisfy
this test yet still be defined at so high a level of generality as to leave open
critical questions about how and to what extent the market should be
regulated. See Ticor, supra, at 636–637, 112 S.Ct. 2169. Entities purporting
to act under state authority might diverge from the State's considered
definition of the public good. The resulting asymmetry between a state
policy and its implementation can invite private self-dealing. The second
Midcal requirement—active supervision—seeks to avoid this harm by
requiring the State to review and approve interstitial policies made by the
entity claiming immunity.
Midcal 's supervision rule “stems from the recognition that ‘[w]here a
private party is engaging in anticompetitive activity, there is a real danger
that he is acting to further his own interests, rather than the governmental
interests of the State.’ ” Patrick, supra, at 100, 108 S.Ct. 1658. Concern
about the private incentives of active market participants animates Midcal ' s
supervision mandate, which demands “realistic assurance that a private
party's anticompetitive conduct promotes state policy, rather than merely the
party's individual interests.” Patrick, supra, at 101, 108 S.Ct. 1658.
Id., 135 S. Ct. at 1111–12.
The authority afforded the MTC by the Missouri legislature is expressed in
RSMo. Section 67.1804:
For the regional taxicab district, there is hereby established a "Regional
Taxicab Commission", which shall be a body politic and corporate vested
with all the powers expressly granted to it herein and created for the public
purposes of recognizing taxicab service as a public transportation system,
improving the quality of the system, and exercising primary authority over
the provision of licensing, control and regulations of taxicab services within
the district.
RSMo. Section 67.1808(8) empowers the MTC to:
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Adopt a taxicab code to license and regulate taxicab companies and
individual taxicabs within the district consistent with existing ordinances,
and to provide for the enforcement of such code for the purpose of
improving the quality of taxicab service within the district.
The MTC was established in order to
[L]icense, supervise, and regulate any person who engages in the business of
transporting passengers in commerce, wholly within the regional taxicab
district established in section 67.1802, in any motor vehicle designed or used
to transport not more than eight passengers, including the driver.
RSMo. Section 67.1809.1
Defendant MTC has the authority to implement internally the powers which
it has been granted. RSMo. Section 67.1810.1.
The MTC is authorized to
a. [S]tudy and take into account rate and fee structures as well as the
number of existing taxicab licenses within the district in considering new
applications for such licenses.” RSMo. Section 67.1818;
b. “[E]xercis[e] primary authority over the provision of licensing, control
and regulations of taxicab services within the district…” RSMo. Section
67.1804;
c. “[L]icense, supervise, and regulate any person who engages in the
business of transporting passengers in commerce, wholly within the regional
taxicab district.” RSMo. Section 67.1809.1; and
d. Enact a Taxicab Code that is “…relating to taxicab issues such as
licensing, regulation, inspection, and enforcement…” RSMo. Section
67.1812.
Although the MTC argues that these detailed enumerations of the MTC’s
powers and authority give rise to a clear articulation of a policy to allow

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anticompetitive conduct, a close analysis of the MTC’s authority establishes just
the opposite. The establishment of the MTC demonstrates that the contemplation
was that its purpose was to regulate and oversee vehicles for hire to ensure public
safety standards and maintain the integrity of the public transportation system.
Rather than being exclusionary, i.e. allowing a policy of anticompetition, the
statutory framework provides a means for ensuring the vehicle for hire industry is
properly licensed, that the rates and fee structures are regulated and the individual
drivers are properly screened. None of the statutory authority gives any indication
that the legislature intended to adopt a policy of anticompetition through the
creation of the MTC. Indeed, it was “created for the public purposes of
recognizing taxicab service as a public transportation system, improving the
quality of the system, and exercising primary authority over the provision of
licensing, control and regulations of taxicab services within the district.” RSMo.
Section 67.1804. The displacement of competition is not the logical result of the
statutory framework, rather, the logical result is providing a public transportation
system that is safe and efficient. As such, the state has not clearly articulated a
policy of allowing anticompetitive conduct. The MTC is therefore not entitled to
Parker immunity. Accordingly, the Motion to Dismiss based on this immunity
must be denied.
County Cab, Best Transportation and Laclede Cab
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Defendants County Cab, Best Transportation and Laclede Cab (the Taxi
Defendants), seek dismissal arguing that the Complaint fails to allege any actions
taken by these defendants that would give rise to participation in a conspiracy to
force Plaintiffs out of the taxi cab market in violation of the Sherman Act.
Plaintiffs respond by arguing that the motion must fail because of the numerous
allegations of the actions taken by the owners and managers of the Taxi Defendant
who serve on the MTC in their “capacity as representatives of their respective
companies.”
Defendants correctly argue that this theory, i.e. that the business entities are
responsible for the actions of their owners and managers, is not alleged in the
Complaint. Plaintiffs are attempting to impute liability of the individual
commissioners to the companies which they own and/or manage. The Complaint,
however, does not set forth any allegations that the individual commissioners were
acting on behalf of their companies when they took the alleged improper actions.
Moreover, this type of claim cannot be inferred from the allegations in the
Complaint. There are no allegations that the individuals on the Commission were
acting within the course and scope of their employment such that the companies
would be vicariously liable for the actions. Cent. Trust & Inv. Co. v. Signalpoint
Asset Mgmt., LLC, 422 S.W.3d 312, 323 (Mo. 2014)(en banc). The Complaint
contains no agency allegations which would give rise to a claim against the Taxi
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Defendants for the actions of the individuals. Accordingly, the Complaint fails to
state a cause of action against the Taxi Defendants.
Conclusion
The MTC is not entitled to immunity because the State has failed to clearly
articulate a policy of anticompetitive conduct. The motion to dismiss based on
such immunity is not well taken.
In that the Complaint fails to allege actions taken by the Taxi Defendants
which would give rise to a cause of action under the Sherman Act, their motion is
meritorious. No agency relationship has been alleged with regard to the individual
Commissioners and the companies they allegedly own and/or manage, therefore,
Plaintiffs cannot claim the Taxi Defendants are vicariously liable for the actions of
their employees.
Accordingly,
IT IS HEREBY ORDERED that Defendants Metropolitan Taxicab
Commission of Metropolitan St. Louis, Asfaw, Hamilton, McNutt , and
Rudawsky’s Motion to Dismiss or, in the Alternative, A Judgment on the
Pleadings, [Doc. No. 39], is DENIED.
IT IS FURTHER ORDERED that Defendants St. Louis County and
Yellow Cab Company, Best Transportation, Inc., Best Black Car, LLC, and Best
Sedan Services, LLC’s Motion to Dismiss, [Doc. No. 41], is GRANTED.
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IT IS FURTHER ORDERED that Gateway Taxi Management Company,
d/b/a Laclede Cab Company’s Motion to Dismiss, [Doc. No. 45], is GRANTED.
IT IS FURTHER ORDERED that Plaintiff is given 14 days from the date
of this Opinion, Memorandum and Order to file an Amended Complaint consistent
with the rulings herein.
Dated this 30th day of September, 2016.

_______________________________
HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE

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