Partial Rights Taxicabs; Assessments; Unconstitutional Delegation of Legislative Power; Substantive Due Process

Germantown Cab Co. v. Philadelphia Parking Auth., 171 A.3d 315 (Pa. Cmwlth. 2017), allocatur granted Apr. 30, 2018, appeal dockets 14 and 15 EAP 2018

In consolidated appeals, Bucks County Services, Inc. (BCS) and Germantown Cab Company (GCC) (collectively, the Companies) appealed to Commonwealth Court from the order of the Court of Common Pleas of Philadelphia County affirming the decision of the Philadelphia Parking Authority (Authority), which upheld the Authority’s annual assessments for fiscal year 2015 imposed upon the Companies pursuant to Section 5707 of the Parking Authorities Law.

The Companies operate partial rights taxicabs, taxicabs that partially operate within the City of Philadelphia. The Authority regulates the operation of taxicabs in Philadelphia, while the PUC regulates all other taxicabs in Pennsylvania. Commonwealth Court summarized the facts and procedural history as follows:

In October 2013, the Authority’s Board approved an annual budget and fee schedule for fiscal year 2015 and submitted them to the Governor and General Assembly for approval. The Authority’s budget estimated total expenses for all three utility groups in the amount of $7,572,123, of which $6,739,189 was allocated to the regulation of taxicabs. After subtracting its projected taxicab revenue from its total taxicab expenses, the Authority identified a shortfall in the taxicab budget in the amount of $2,438,972. This shortfall became the total assessment for taxicabs, as set forth in Section 5707(a)(3) of the Law.

Pursuant to Section 5707(c)(1)(iii) of the Law, the Authority’s Taxicab and Limousine Division (TLD) estimated that 1,674 taxicabs would be in service during fiscal year 2015, which included 1,599 medallion taxicabs and 75 partial rights taxicabs. In reaching its estimate of 75 partial rights taxicabs, the TLD relied upon: (1) the number of taxicabs identified by those partial rights taxicab companies that filed PR–1 forms with the Authority by the March 31 deadline under Section 5707(c)(1)(ii) of the Law; and (2) the Authority’s estimate of taxicabs that would be in service for those partial rights taxicab companies that did not submit a timely PR–1 form to the Authority. The Authority was not, however, required to use the number of taxicabs identified by the partial rights taxicab companies on their PR–1 forms in its estimate. In addition, the Authority did not allocate a specific number of taxicabs from its estimate to each of the partial rights taxicab companies that did not file a timely PR–1 form. Thereafter, the Authority determined that the annual assessment for fiscal year 2015 would be $1,457 per taxicab, which amount was calculated by dividing the total assessment for taxicabs, or $2,438,972, by the number of taxicabs the Authority estimated would be in service for fiscal year 2015, or 1,674.

In August 2014, the Authority provided Appellants and the other partial rights taxicab companies with notices of the assessment pursuant to Section 5707.1(a) of the Law. The notices of assessment: (1) advised Appellants and the other partial rights taxicab companies of the $1,457 per taxicab assessment for fiscal year 2015; (2) set forth the total amount of each of their assessments; and (3) advised them that the assessments must be paid within thirty days. The Authority assessed BCS; Dee Dee Cab, Inc.; MCT Transportation, Inc.; and Concord Coach Limousine, Inc. based upon the number of taxicabs identified on their timely-filed PR–1 forms (BCS twelve taxicabs; Dee Dee Cab, Inc. one taxicab; MCT Transportation, Inc. ten taxicabs; and Concord Coach Limousine, Inc. ten taxicabs). Because GCC failed to file a timely PR–1 form, the Authority estimated GCC’s assessment based upon GCC’s previous filings and assessed GCC for 169 taxicabs. Even though the Authority estimated that only 1,674 taxicabs would be in service during fiscal year 2015 for the purpose of determining the per taxicab assessment of $1,457, the Authority assessed a total of 1,801 taxicabs: 1,599 medallion taxicabs and 202 partial rights taxicabs. The Authority made no adjustment to the $1,457 per taxicab assessment for the increased number of taxicabs that were actually assessed. Any extra money received by the Authority is placed into the Fund and is carried over to the next fiscal year.

Appellants did not pay their assessments for fiscal year 2015. As a result of GCC’s failure to pay the assessment, the Authority placed GCC out of service. Thereafter, GCC amended its PR–1 form, filed the PR–1 form with the Authority, and paid an assessment based on the twenty-five taxicabs that it had identified on its amended PR–1 form. The Authority, however, did not act on the amended PR–1 form or recalculate GCC’s assessment, because the Authority took the position that if it were to accept amended PR–1 forms after the per taxicab assessment had already been calculated, it may not receive sufficient funds to cover the shortfall in its budgeted expenses.

…

On August 22, 2014, Appellants filed with the Authority a Petition for Relief pursuant to Section 5707.1 of the Law (Petition), wherein they challenged their assessments on the basis that they were excessive, unreasonable, erroneous, unlawful, unconstitutional, against the public interest, and otherwise invalid. A hearing on Appellants’ Petition was held before a TLD Hearing Officer (Hearing Officer) on November 21, 2014. Thereafter, on January 15, 2015, the Hearing Officer issued a recommended decision, denying Appellants’ Petition. In so doing, the Hearing Officer noted that he did not have jurisdiction to decide the constitutional challenge because such issues were pending before this Court in Germantown Cab Company v. Philadelphia Parking Authority, docket number 586 M.D. 2014. In the event that it was later determined that he should have done so, however, the Hearing Officer addressed Appellants’ constitutional issues and concluded that Sections 5707, 5707.1, 5708, and 5710 were constitutional. Appellants filed Exceptions to the Hearing Officer’s recommended decision on January 30, 2015. On September 22, 2015, the Authority issued a decision and order, affirming the recommended decision of the Hearing Officer. Appellants appealed the Authority’s decision and order to common pleas. On November 2, 2016, following oral argument, common pleas issued an opinion and order denying Appellants’ appeal and affirming the decision of the Authority. Appellants then appealed to this Court.

Slip Op. at 10-14 (internal citations to the record omitted).

Substantive Due Process

On appeal, BCS argued that common pleas erred in concluding that BCS did not have a property interest in the performance of taxicab operations within the City that is protected by the due process clauses of the United States and Pennsylvania Constitutions. GCC argued that Section 5707(c) of the Law violates GCC’s substantive due process rights because it is unclear and vague and does not adequately define which partial rights taxicabs must be listed on the PR–1 form and which partial rights taxicabs are subject to the payment of the annual assessment. In response, the Authority argued that BCS and GCC have failed to establish that their substantive due process rights were violated because: (1) there is no fundamental right to provide call or demand taxicab service in the City; and (2) Section 5707(c) of the Law serves a legitimate governmental objective of regulating taxicab service in the City.

In a single-judge opinion by Judge Brobson, the court held that section 5707(c) is facially unconstitutional because the assessment scheme lacks any real and substantial relation to the goal of regulating taxicab service, violating the substantive due process rights of partial rights taxicabs. The court noted that while the number of medallion taxicabs (taxicabs authorized to operate on a citywide basis) that will be in service within the City is finite and known, the same is not true of partial rights taxicabs. While Section 5707(c)(1)(iii) provides that the Authority must arrive at an “estimate” of the total number of partial rights taxicabs in service for purposes of the assessment and provides for annual reporting of estimates by partial rights taxicab providers, Section 5707 provides no guidance on how partial rights taxicab companies or the Authority are to arrive at these estimates and provides no mechanism to reconcile at the end of the fiscal year the estimates with actuals, resulting in “a mechanism to funnel millions of dollars into a government agency from the private sector without any mechanism to ensure fairness, consistency, or accuracy.” Slip Op. at 21.

Additionally, Judge Brobson noted that Section 5707(c) of the Law fails to take into consideration the obvious differences between medallion taxicabs and partial rights taxicabs:

It assesses medallion taxicabs, which by law are always “in service” within the City and have the most expansive operating rights and broadest service territory, the same amount as partial rights taxicabs, which are fleet-authorized and have an operating territory that consists of areas outside of the City and, unlike medallion taxicabs, only designated portions of the City. This is arbitrary, unreasonable, and irrational. Medallion taxicabs and partial rights taxicabs may be providing the same service to the customers that they serve within the City (point-to-point transportation), but medallion taxicabs undeniably enjoy broader service rights within the City. Imposing a per taxicab assessment on a fleet of partial rights taxicabs without any confirmation that each partial rights taxicab within such fleet could or did operate within the City on the same level as a medallion taxicab is arbitrary and unreasonable. In crafting a reasonable assessment scheme, in addition to correcting the deficiencies noted above, the General Assembly must take into consideration that partial rights taxicabs are fleet-authorized and have restricted “in service” territories. Otherwise, partial rights taxicabs are potentially responsible for more than their proportionate share of the costs of taxicab regulation within the City.

Slip Op. at 21-22. For these reasons, Judge Brobson found Section 5707 facially unconstitutional as violative of the Companies’ substantive due process rights.

Unconstitutional Delegation of Legislative Power

BCS additionally argued that Section 5707 represents an unconstitutional delegation of legislative power to the Authority because (1) the General Assembly failed to set any definite standards, policies, or limitations on the Authority’s power to set its budget or the amount and subject of its annual expenditures; (2) submission of the Authority’s budget to the Governor and General Assembly pursuant to the appropriations process does not remedy the unlawful delegation of legislative power found by this Court in MCT Transportation; (3) Section 5707 of the Law grants the Authority unlimited discretion on how to allocate its expenses among the three utility groups; and (4) Section 5707 of the Law grants the Authority unlimited discretion in formulating its annual fee schedule. Slip Op. at 24. The Authority responded that there was no unlawful delegation of legislative power to the Authority because the Authority’s budget request is reviewed by the Governor’s office and ultimately approved by the General Assembly.

Noting that Section 5707 was amended subsequent to a previous Commonwealth Court decision in MCT, Judge Brobson found:

The language “necessary for the administration and enforcement of this chapter” contained in Section 5707(a)(1), relative to the Authority’s budget, and in Section 5710(a), relative to the Authority’s fee schedule, provides no more standards, guidance, instructions, or limits than the “necessary to advance the purposes of this chapter” language of former Section 5707(b). As stated by this Court in MCT Transportation, it is for the General Assembly to decide what is necessary, not the Authority. The General Assembly must establish a standard for the Authority to apply in establishing its budget and fee schedule. It is not sufficient that the General Assembly reviews and approves the budget and fee schedule after the fact, because there is no way to know what standards have been applied by the Authority in the formulation of the budget and fee schedule.

Slip Op., at 26.

Based on this reasoning, the court held Section 5707(c) to be an unconstitutional delegation of legislative power because the General Assembly failed to establish any standards that direct, guide or restrain the Authority’s exercise of discretion in formulating its budget and fee schedule or direct the Authority on how costs and expenses should be allocated among utility groups.

The Pennsylvania Supreme Court granted allocatur on the following issues:

(1) Whether the Commonwealth Court erred as a matter of law by holding 53 Pa.C.S. § 5707(c) facially unconstitutional?

a. Whether the Commonwealth Court erred as a matter of law by holding that the assessment method set forth in 53 Pa.C.S. § 5707(c) violates Respondents’ rights to substantive due process?

b. Whether the Commonwealth Court erred as a matter of law by holding that the assessment method set forth in 53 Pa.C.S. § 5707(c) is arbitrary and unreasonable and lacks any real and substantial relation to the goal of regulating taxicab service in Philadelphia for the benefit of the public?

c. Whether the Commonwealth Court erred as a matter of law by holding that the issuance of certificates of public convenience to Respondents is akin to the issuance of a license to practice a profession, and therefore, Respondents have a protected property interest in the performance of taxicab operations in Philadelphia?

(2) Whether the Commonwealth Court erred as a matter of law by holding 53 Pa.C.S. § 5707 as an unconstitutional delegation of legislative power?

a. Whether the Commonwealth Court erred as a matter of law by holding that the General Assembly has failed to establish any standards that direct, guide or restrain the Authority’s exercise of discretion in formulating its budget and fee schedule or direct the Authority on how costs and expenses should be allocated among utility groups?

For more information, contact Kevin McKeon or Dennis Whitaker.