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American Cab, LLC v. Sunline Services Group, No. CV-12-5552-GW (C.D. Cal. Apr. 1, 2013).

On April 1, 2013, the United States District Court for the Central District of California granted summary judgment in favor of two municipally created entities, finding that the challenged conduct was protected by the state action doctrine. The plaintiff, American Cab, was a private company providing taxi service to the general public in the Coachella Valley. The defendants were Sunline Services Group (SSG) and Sunline Transportation Agency (STA). Each was a joint power authority created by Riverside County and nine cities in the Coachella Valley. SSG regulated taxi franchises operating in the Valley. It had exclusive authority to determine the number of taxicab permits and the discretion to grant or deny permit applications. STA, meanwhile, provided bus and other forms of public transportation in the Valley. STA offered a Dial-A-Ride program for disabled individuals; it also administered a taxi voucher program for disabled or elderly citizens, under which the federal government paid half the fare. Sharing the same principal office, STA and SSG were each administered by a board of directors; both boards had the same members. American Cab sued SSG and STA, alleging that they violated Section 1 of the Sherman Act by conspiring to adopt and enforce rules that unreasonably restrained competition in the Coachella Valley transportation market. Specifically, American Cab challenged rules: (1) setting taxi rates at arbitrarily high levels; (2) limiting the number of taxicab permits issued; (3) restricting advertising on taxis; (4) prohibiting taxis from competing with the Dial-A-Ride and other programs for the disabled; (5) denying taxicabs direct access to customers at large events; and (6) prohibiting taxi companies from offering preferential or exclusive service rights to businesses or public transportation facilities. American Cab alleged that these rules were enacted to drive customers to STA as a less expensive alternative, and inhibited American Cab from competing with STA for customers, especially disabled customers. On summary judgment, the district court dismissed the case. The court held that SSG and STAs conduct was immune from antitrust liability under Parker v. Brown. The court cited the Ninth Circuits 1984 holding that California had a clearly and affirmatively expressed state policy which allows municipalities to displace competition in the taxicab industry, Golden State Transit Corp. v. Los Angeles, 726 F.2d 1430, 1434 (9th Cir. 1984). It found nothing in subsequent Supreme Court decisions, including Phoebe Putney, that undermined this holding. Nor did the court find any changes to Californias legislative framework that mandated a different conclusion. The court identified a number of authorities that, taken together, articulated Californias policy to displace competition in the taxicab industry. The court began by citing the California constitutions declaration that taxis and their owners were public utilities subject to state control. It then pointed to statutes that: (a) required each taxicab operator to obtain a certificate of public convenience and necessity; (b) set forth the methods a cab may use to compute customer charges; and (c) directed cities and counties to regulate taxi business by (among other things) establishing rates. The court disagreed with American Cabs contention that the California legislature could not reasonably foresee that a local government might use this regulatory power to impair the ability of taxicabs to compete with public transportation. The court reasoned that the anticompetitive effects of Californias taxicab regulation scheme logically result from statutes authorizing local governmental entities to establish, for example, rates for the provision of taxicab transportation service.
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The court concluded the challenged regulations were issued pursuant to the broad statutory authorization afforded to SSG and STA by the state legislature, and that SSG and STA acted pursuant to a clearly articulated and affirmatively expressed state policy to displace competition in the taxicab industry. Consequently, the court held, the defendants conduct was exempt from liability under the Sherman Act, and the court entered judgment in favor of the defendants.

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