HACKS EYE $2.5B
Suit blames city for dive in medallion values
A new class action lawsuit says a decade of negligence and corruption by city officials destroyed the value of yellow-taxi medallions, and demands $2.5 billion in restitution.
The suit alleges a yearslong scheme in which the city “artificially” inflated yellow-cab medallion prices it sold to cabbies at auction by lying about their value.
From 2004 to 2014, the medallion sales netted city coffers $855 million, the suit says.
But the city then created competition for the yellow cabs by allowing Uber and Lyft to operate tens of thousands of for-hire vehicles in the city.
That tanked medallion prices — and all the while, the city did nothing to help yellow-taxi drivers who were put financially under water, the lawsuit says.
“There was a scheme to large-scale fraudulent artificially inflate medallion values and drive up the prices,” said lawyer Jon Norinsberg, who represents the cabbies. “It’d be one thing if the medallion prices rose through natural market conditions. But between 2004 and 2014 they skyrocketed as a result of fraudulent manipulation by the TLC and the City of New York.”
The suit as filed names two medallion owners as plaintiffs — but the lawyers behind it expect thousands of cabbies will join the case. Neither the city nor the Taxi & Limousine Commission immediately responded to a request for comment on the lawsuit.
The city’s taxi medallion program launched in 1937 to rein in the growing number of cabs on city streets. The number of medallions — which gave yellow cabs the exclusive right to respond to street hails — was fixed for decades at 11,787.
That changed in 1996, when then-Mayor Rudy Giuliani began auctioning new medallions. The program continued under Mayor Mike Bloomberg, and the number of medallions on the street grew to 13,500. Cabbies saw the medallions as a good investment, and their selling prices exceeded $1 million by 2013.
But their values fell to less than $150,000 in the following years as e-hail companies like Uber and Lyft were permitted to operate for-hire vehicles that do not require medallions in the city.
The suit alleges city officials were warned in 2011 the medallion market would collapse by TLC staffer Gary Roth, who wrote a memo made public in 2019 saying that “if the price of medallions dropped significantly, it could force recent medallion buyers under water.”
Despite Roth’s findings, the TLC continued to auction off new medallions for sky-high prices, the suit says.
The suit also alleges that former TLC officials Matt Daus and David Yaasky met in September 2012 to hatch a plan to allow Uber and Lyft to put an unlimited number of cars on city streets in what “would prove to be the coup de grace for the New York yellow-taxi industry.”
It also claims that city officials deliberately lied when they advertised medallions as airtight investments, and did nothing to stop bid-rigging by taxi medallion owner Evgeny Friedman.
Norinsberg said federal racketeering law means medallion owners are owed three times the $855 million in revenue the city earned through medallion sales from 2004 to 2014.
The suit follows Attorney General Letitia James’ decision in February to back off from plans to file a $810 million lawsuit that would have accused the city of fraudulently inflating medallion values. Norinsberg said his team plans to “finish the job” James started.