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New York Court of Appeals to Hear Auction Fraud Case

Posted by Daniel Ackman | Oct 13, 2021 | 0 Comments

On October 12, 2021, the New York Court of Appeals agreed to hear the appeal in Singh v. City of New York, one of two cases brought by Dan Ackman and Wolf Haldenstein et al. concerning the TLC auctions of medallions in 2013 and 2014. A lower appellate court had essentially dismissed the complaint on the ground that the TLC had disclaimed reliance on the TLC's representations. 

The plaintiffs in the case purchased taxi medallions in one of three auctions organized by the City of New York  and its Taxi & Limousine Commission (“TLC”), at a time when the TLC was touting investments in taxi medallions as “better than the stock market.” The plaintiffs later learned that, before the auctions, the TLC had published false information, overstating the prices at which medallions were then trading. Shortly after the auctions ended, the TLC destroyed the market for medallions by permitting the number of so-called black cars to multiply by more than five-fold and to let them compete essentially directly with medallion taxis. Medallion prices crashed. Sales became rare, and prices obtained in those few sales that did occur went from $1.2 million in the fall of 2013 to less than $800,000 by the end of 2015, and to less than $200,000 by mid-2017.

Prior to the Auctions, the entire basis for a yellow taxi medallion's value had always been that: (i) medallions conferred the exclusive right to offer point-to-point transportation to passengers ready to travel; (ii) legislation capped the number of taxis in operation; and (iii) other for-hire vehicles were limited by law in their operation and in the parts of the market they could serve. As of January 2014, according to the TLC's 2014 Taxicab Factbook, there were 13,437 yellow taxi medallions authorized and in operation. At that time, there were also “about 10,000” licensed black cars in operation. These black cars served the corporate market and had to be dispatched from one of 80 base stations in operation at that time. 

The 2012 HAIL Act, which authorized the Auctions, confirmed that “it shall remain the exclusive right of existing and future [yellow medallion] taxicabs licensed by the TLC as a [yellow medallion] taxicab to pick up passengers via street hail” in the exclusionary zone. Thus, at the time of the Auctions, City law segmented the FHV market and supported the investment-backed expectations of medallion buyers.

The TLC'S Deceptive Pre-Auction Statements In the months leading up to the Auctions, the TLC published average-price reports that routinely overstated the true transfer values.  Apart from reporting exaggerated prices, the TLC also misrepresented the price trend.The TLC published charts in promotional pamphlets showing constantly rising medallion prices, when in fact medallion prices had begun to decline by late 2013. The TLC also reported average prices for many months in which there were, in fact, no transfers for value from which an average could be computed. This misinformation made the medallions appear to be much more valuable than they really were, and investment in them much less risky. Around the same time, to promote the Auctions, the TLC issued a pamphlet that declared in large, bold type that  an investment in a medallion is “BETTER THAN THE STOCK MARKET.” 

When the TLC held its Auctions, the black car fleet was substantially smaller than the medallion taxi fleet and, according to the TLC's 2014 Taxicab Factbook, numbered “about 10,000” vehicles. The months following the Auctions, however, saw unprecedented upheaval in the New York City taxi industry, highlighted by the massive growth in the number of black cars affiliated with Uber and Lyft. Thus, the number of black cars increased to nearly 25,000 in 2015. By the time the Amended Complaint was filed, there were 60,000 black cars in operation. By August 2018, there were 100,000 FHV's operating in New York City, more than 80,000 of which were affiliated with Uber and Lyft.5 At the same time, the TLC permitted black cars to accept “ehails” (electronic requests for immediate pickup), blurring the lines between the two types of taxis and allowing these e-hail taxis to be “in direct competition” with medallion taxis for the same passengers.The explosive growth of the black car fleet was only possible because the TLC disregarded longstanding licensing rules for black cars affiliated with Uber, Lyft, and similar companies. The TLC licensed bases affiliated with Uber even though the owners of affiliated vehicles were neither franchisees nor owners of the bases.  And, it interpreted the pre-arrangement requirement to permit the use of electronic apps that connected black cars with passengers without any dispatch by any base.  

This unprecedented and unlawful surge in the number of black cars accepting e-hails undermined the ability of yellow taxis to earn fares and ultimately decimated medallions values. The plaintiffs' lawsuit alleges false and deceptive marketing by the TLC and breach of contract.

About the Author

Daniel Ackman

D​​an Ackman focuses on civil rights, administrative and constitutional class action litigation. Perhaps best known for representing New York City's taxi drivers in a series of civil rights class action lawsuits, Ackman's cases have resulted in a half dozen City practices being declared unconstitutional.


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