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Shakman, Judge Clash Over Differences Between Uber, Lyft, Taxis

By Ted Cox | September 19, 2016 5:23pm
 While dropping off an Uber passenger, Rubel Chowdhury of West Rogers Park gives his rating.
While dropping off an Uber passenger, Rubel Chowdhury of West Rogers Park gives his rating.
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DNAinfo/Tanveer Ali (File)

THE LOOP — A famed Chicago attorney and a U.S. appeals judge clashed Monday over whether Uber and Lyft are taxi firms or an entirely new sort of service.

Arguing before the U.S. Seventh Circuit Court of Appeals, taxi attorney Michael Shakman said, "Uber is not a new service. It's a taxi." He added that cabbies are entitled to equal protection and equal treatment with ride-sharing drivers.

"You think there's nothing new about Uber?" Judge Richard Posner countered. "That's absurd."

The arguments came as the court heard back-to-back appeals cases Monday on whether cabbies in Chicago and Milwaukee are entitled to relief after those cities changed their laws to allow so-called transportation network providers like Uber, Lyft and Sidecar to operate.

 Michael Shakman argued that cabbies deserved to be treated the same as ride-sharing drivers.
Michael Shakman argued that cabbies deserved to be treated the same as ride-sharing drivers.
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DNAinfo/Ted Cox

"It's devastating the taxi industry," Shakman said. According to Shakman, taxi business is down 40-50 percent in Chicago. "They're dying." What's more, taxi medallions have been rendered nearly worthless after cabbies "made large investments" and "staked their livelihood" on them.

He cited the "horrendous advantage" ride-sharing drivers were granted at O'Hare International Airport, where they're allowed to pick up arriving passengers on the less-congested upper departure level, while taxis have to sit in long queues downstairs on the arrival level.

Shakman also pointed to how cabbies are subject to fixed fares and fingerprinting, while ride-sharing drivers are not.

"We want equal treatment," Shakman said.

Posner tried to lure Shakman into a logical trap on that note, pressing him again and again on whether deregulation of taxis, rather than additional regulations on ride sharing, would "satisfy" him.

"It's not a yes-or-no question," Shakman said. "The city can go either way."

When Posner finally forced Shakman to admit that deregulation of taxis would be as effective as additional regulations on ride sharing at addressing inequities, Posner said, "Well, that's a good project for you. Get the city to deregulate taxis."

The three-judge panel also seemed receptive to arguments that cities are entitled to change regulations, even if that comes at the economic disadvantage of some citizens.

"If the regulatory scheme is changed, it's changed," said Judge Diane Sykes, "and that's the essence of legislation."

Posner drew parallels with the damaging effect automobile taxis had on horse-and-carriage rigs 100 years ago.

Shakman tried to cut through those arguments. "The point itself is simple and straightforward," he said. The system Chicago had now created was "fundamentally unfair to the people who have played by the city rules since 1937."

Shakman argued a key distinction between the Chicago and Milwaukee systems. Milwaukee had not set a value on taxi medallions and had allowed them to be sold on a secondary market. Chicago, by contrast, had "generated" the value medallions by auctioning them at up to $360,000 before Uber's arrival earlier this decade, and had charged a 5 percent transfer fee in other sales of medallions.

Institute for Justice attorney Anthony Sanders, arguing in favor of Uber, said, "There's no property interest in excluding someone else from the market" — that in effect cabbies couldn't expect the city governments to protect them forever against any competition.

"It's really creating a cartel, isn't it?" Posner said. "It restricts entry."

That argument appeared to sway the panel on the Milwaukee case, but where Chicago is concerned Shakman argued that it was a cartel that operated like a government-sanctioned utility, entitled to protection because of the limitations the taxi industry had allowed to be placed on itself.

"The city destroyed the central right of the medallion system," Shakman said, that being the exclusive right to operate as taxis. Uber and Lyft, he charged, were basically just "gypsy cabs" the city had suddenly and arbitrarily permitted.

Posner suggested the market dictate the end result, saying, "We usually let consumers decide which product they prefer, unless there's some danger."

As Judge Ann Claire Williams pressed Chicago Law Department attorney Kerrie Maloney Laytin on the distinction to be drawn between taxis being allowed to pick up people hailing them on the street, and ride sharing working exclusively through its apps, the judges appeared to grant that some equal protection under the law may be involved.

The district court decision on the original suit generally ruled against the taxi industry, but sustained its position that equal-protection issues were legitimate.

The appeals court could sway the decision fully one way or the other, or send it back to the original court with new instructions. Shakman said he expected a decision could take just under a month or three to four months.

Shakman, of course, is most famous for suing various city and Cook County governments and Democratic political organizations for political hiring, suits he won in what resulted in the so-called Shakman Decrees setting limits on political hiring in government.

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