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YELLOW CAB CO. v. CITY OF CHICAGO

April 30, 1998

YELLOW CAB COMPANY, Plaintiff,
v.
CITY OF CHICAGO, et al., Defendants.



The opinion of the court was delivered by: WILLIAMS

MEMORANDUM OPINION AND ORDER

 Plaintiff Yellow Cab Company ("Yellow Cab") brought this lawsuit against the City of Chicago ("City") and Caroline O. Shoenberger, Commissioner of the City's Department of Consumer Services ("Commissioner"). In count I, Yellow Cab alleges common law breach of contract. In count II, Yellow Cab alleges impairment of contract in violation of Article I, § 10, Clause 1 of the U.S. Constitution. In count III, Yellow Cab alleges impairment of contract under Article I, § 16 of the Illinois Constitution. Yellow Cab asserts that jurisdiction in this court is proper pursuant to 28 U.S.C. § 1331 because the impairment of contract claim in count II arises under the U.S. Constitution. Yellow Cab therefore alleges that the court may exercise supplemental jurisdiction over counts I and III under 28 U.S.C. § 1367 because those claims form part of the same case or controversy. Defendants move to dismiss all three counts of Yellow Cab's complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, the court grants defendants' motion to dismiss count II and therefore dismisses this suit for lack of subject matter jurisdiction. The court expresses no opinion as to the viability of counts I and III.

 Background

 In April 1987, the City of Chicago and Yellow Cab entered into a settlement agreement in which Yellow Cab and two other named cab companies agreed to drop a lawsuit against the City. In exchange for dropping the lawsuit, the City agreed to enact an ordinance, Municipal Code of Chicago § 28-19. *fn1" (Compl. P 33.) The parties made the settlement agreement contingent on the ordinance, which expressly stated ". . . this ordinance shall operate as a contract between [Yellow Cab] and the city . . ." (Compl. PP 33-34.)

 The underlying dispute between the City and the cab companies concerned a restriction the City attempted to impose governing the assignment of taxicab medallions. (Compl. P 31.) The resulting ordinance addressed not only medallion owners' property rights in the medallions, but also the concentration of medallion ownership. (Compl. PP 36-37.) With respect to the concentration of medallion ownership, the ordinance included the following provisions:

 
(d) Notwithstanding the provisions of Section 28-19(c), Yellow Cab Company . . . shall, . . . subject to the provisions of Section 28-19(e), relinquish and not renew, and relinquish irrevocably any claim of a right to renew, 1,300 licenses, as follows: (1) 400 licenses for and after the year beginning January 1, 1988; (2) 100 licenses for and after the year beginning January 1, 1989; (3) 100 licenses for and after the year beginning January 1, 1990; (4) 100 licenses for and after the year beginning January 1, 1991; (5) 100 licenses for and after the year beginning January 1, 1992; (6) 100 licenses for and after the year beginning January 1, 1993; (7) 100 licenses for and after the year beginning January 1, 1994; (8) 100 licenses for and after the year beginning January 1, 1995; (9) 100 licenses for and after the year beginning January 1, 1996; (10) 100 licenses for and after the year beginning January 1, 1997.
 
However, [Yellow Cab] . . . may choose not to renew licenses sooner than provided herein, but they shall not include in the number not renewed pursuant to this agreement any licenses ineligible for renewal due to their surrender or revocation pursuant to provisions of this chapter or the rules and regulations promulgated by the commissioner of consumer services for the enforcement of this chapter. Furthermore, [Yellow Cab] . . . shall not own in whole or in part, directly or indirectly, or have a security interest in a greater number of licenses in the years specified than as here set forth: 3,248 in 1988; 3,148 in 1989; 3,048 in 1990; 2,948 in 1991; 2,848 in 1992; 2,748 in 1993; 2,648 in 1994; 2,548 in 1995; 2,448 in 1996; and, 2,348 in 1997.
 
(e) Except as provided in subsection 28-19(d), no person shall own in whole or in part, directly or indirectly, or have a security interest in more than 25 percent of the authorized livery licenses or more than 25 percent of the authorized taxicab licenses. No person who owns in whole or in part, directly or indirectly, or has a security interest in more than 25 percent of the authorized livery licenses or more than 1,000 Chicago taxicab licenses shall be eligible to acquire additional license, including by transfer pursuant to Section 28-19(f); provided, however, if [Yellow Cab] choose[s] to relinquish licenses sooner than provided in subsection 28-19(d), [the Company] may acquire additional licenses pursuant to Section 28-19(f), but in no event may the number of licenses [Yellow Cab] hold[s] in any year exceed the number of licenses [the Company] may be entitled to renew pursuant to subsections 28-19(c) and (d) herein.

 (Def.'s Mot. to Dismiss at 2-3.) The settlement agreement also provided, "this ordinance shall constitute the entire agreement between the City and [Yellow Cab], and no warranties, inducements, considerations, promises or other references shall be implied or impressed upon this agreement that are not expressly addressed herein." (Def.'s Mot. to Dismiss at 4.)

 Ten years later, on December 10, 1997, the City enacted the Substitute Ordinance at issue in this lawsuit. (Def.'s Mot. to Dismiss at 1.) The Substitute Ordinance eliminated certain provisions of the 1987 ordinance including section (d) above, which contained the provision permitting Yellow Cab to own 2,348 medallions in 1997. (Def.'s Mot. to Dismiss at 4.) In light of this amendment to the City's municipal code, the City has taken the position that the Substitute Ordinance requires Yellow Cab to reduce the number of medallions it owns to no more than 25% of the total authorized medallions by December 31, 1997, or surrender any medallions over 25% to the City, pursuant to section (e) above. (Compl. P 58.) In response to the City's interpretation of the 1987 agreement and Substitute Ordinance, Yellow Cab sold 647 medallions at a price substantially below market value to comply with the 25% limitation. (Compl. P 59.)

 Yellow Cab then filed its three count complaint in this court. In count I, Yellow Cab claims the City breached the 1987 settlement agreement, which permitted Yellow Cab to retain up to 2,348 taxicab medallions as an exception to the 25% limitation, by enacting the Substitute Ordinance. (Compl. P 58.) In counts II and III, Yellow Cab claims the City impaired Yellow Cab's contractual right to retain up to 2,348 medallions by enacting the Substitute Ordinance. (Compl. PP 63, 67.) Yellow Cab requests monetary damages and an injunction preventing the City from further reducing the number of medallions owned by Yellow Cab and allowing Yellow Cab to own up to 2,348 medallions. (Compl. PP 60, 64, 68.)

 Analysis

 Defendants move to dismiss Yellow Cab's complaint under rule 12(b)(6) of the Federal Rules of Civil Procedure. A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit. Demitropoulos v. Bank One Milwaukee, N.A., 915 F. Supp. 1399, 1406 (N.D. Ill. 1996) (citing Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990)). Therefore, the court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Zinermon v. Burch, 494 U.S. 113, 118, 108 L. Ed. 2d 100, 110 S. Ct. 975 (1990); Colfax Corp. v. Illinois State Toll Highway Auth., 79 F.3d 631, 632 (7th Cir. 1996) (citation omitted). The court will dismiss a claim only if "it appears beyond doubt that [the plaintiff] can prove no set of facts in support of his claim which would entitle him to relief." Colfax, 79 F.3d at 632 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)).

 The City attacks Yellow Cab's complaint on several grounds. The City contends that count I fails to state a legally sufficient claim for breach of contract. The City also argues that counts II and III of Yellow Cab's complaint fail to state claims for impairment of contract under either the Federal or Illinois Constitutions. Because this court's jurisdiction depends on the viability of count II--Yellow Cab's impairment of contract claim arising under the ...


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