Thomas Zummo v. City of Chicago

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted March 13, 2020*
Decided March 17, 2020
Before
FRANK H. EASTERBROOK, Circuit Judge
ILANA DIAMOND ROVNER, Circuit Judge
AMY C. BARRETT, Circuit Judge
No. 18‐3531
THOMAS A. ZUMMO, Appeal from the United States District
Plaintiff‐Appellant, Court for the Northern District of Illinois,
Eastern Division.
v.
No. 17 C 9006
CITY OF CHICAGO,
Defendant‐Appellee. Edmond E. Chang,
Judge.
ORDER
When Thomas Zummo last renewed his taxi medallion with the City of Chicago,
he expected limited competition from other drivers seeking passengers. But in 2014,
when the City enacted regulations for ride‐share companies such as Uber and Lyft, it
permitted many more drivers to enter the market for passengers. Zummo has now sued
the City, contending that by failing to protect his investment in his taxi medallion, the
* We have agreed to decide this case without oral argument because the briefs
and record adequately present the facts and legal arguments, and oral argument would
not significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 18‐3531 Page 2
City denied him due process, restrained his trade, and committed fraud. The district
court correctly dismissed the complaint for failure to state a claim, so we affirm.
According to his complaint, for over 30 years Zummo worked as a licensed taxi
driver. About 20 years ago, he purchased a taxi medallion, which allowed him to
operate his car as a taxi. See Municipal Code of Chicago, Ill. § 9‐112‐020. At that time,
the City capped the number of taxi medallions at 7,000 and limousine licenses at 3,000.
In 2014 the City enacted new regulations for ride‐share companies, creating a “two‐tier”
system in which the licensing, safety, and insurance requirements for ride‐share
companies differ from those imposed on taxis. See MCC § 9‐115‐010 to ‐250. As a result,
the for‐hire transportation market has ballooned to include over 200,000 new drivers,
plunging the value of Zummo’s taxi medallion by over $200,000 and intensifying
competition for passengers. After Zummo’s medallion and chauffeur’s license expired
by 2017, he did not renew them—he could not because he was delinquent on his water
bill. See MCC §§ 9‐104‐050, 9‐112‐160; see also id. § 4‐4‐150. The City later cited Zummo
for soliciting a taxi fare without a license and other unlawful practices. Id. §§ 9‐104‐
020(a), 9‐112‐020(a), 9‐112‐150, 9‐112‐260, 9‐112‐390. It also impounded his car and fined
him. Zummo has contested these actions in ongoing administrative proceedings.
We understand Zummo’s appeal to challenge the dismissal of his complaint
insofar as it advanced three legal theories about the City’s “two‐tier” regulatory scheme
for taxis and ride‐share providers: (1) it violates his rights under the substantive
component of the due process clause, 42 U.S.C. § 1983; (2) it constitutes a “restraint of
trade” under the Sherman Antitrust Act, 15 U.S.C. §§ 1 to 7; and (3) it reflects statutory
and common law fraud. (We do not discuss other legal theories that Zummo raised in
the district court but has not developed on appeal. These concern his impounded car,
his fines, his water bill, an unspecified agreement, and promissory estoppel.)
We first address Zummo’s claim about due process. The district court dismissed
this claim because, it explained, Zummo’s interest in his taxi medallion does not require
the government to shield him from market forces. See Ill. Transport. Trade Ass’n v. City of
Chicago, 839 F.3d 594, 596 (7th Cir. 2016). Zummo responds that the City’s regulatory
scheme offends substantive due process by shrinking the value of his taxi medallion.
But before we can even look at the loss in the medallion’s value, Zummo must show
that he had a cognizable property interest in the value of his medallion—“[i]ntrusion
upon a cognizable property interest is a threshold prerequisite to a substantive due
process claim.” Khan v. Bland, 630 F.3d 519, 535 (7th Cir. 2010).
No. 18‐3531 Page 3
Zummo has no such property interest. “Taxi medallions authorize the owners to
own and operate taxis, not to exclude competing transportation services.” Ill. Transport.
Trade Ass’n, 839 F.3d at 596; see also Newark Cab Ass’n v. City of Newark, 901 F.3d 146, 154
(3d Cir. 2018) (medallions do not confer “a right to be the exclusive providers of
transportation services”). Because the City has the power to permit more market
entrants, Zummo has no property interest in the medallion’s market value—medallions
do not guarantee an economic benefit or shelter their owners from competition.
See Progressive Credit Union v. City of New York, 889 F.3d 40, 53 (2d Cir. 2018) (no
cognizable property interest in the “market value” of a taxi license, where different
regulations for taxis diminished license’s value); Minneapolis Taxi Owners Coal., Inc.
v. City of Minneapolis, 572 F.3d 502, 508–10 (8th Cir. 2009) (ordinance removing cap on
the number of taxi licenses issued by the city, and thereby decreasing market value of
existing licenses, “does not implicate the holders’ property interests or, it follows, their
due process rights”). Thus his due process claim fails.
Zummo also repeats his argument that the City illegally engaged in “restraint of
trade.” He complains that the City allows ride‐share drivers to “unlawfully pirate[],
roam[], and gam[e] the transportation system.” Construing this as a claim under
Section 1 of the Sherman Antitrust Act, see 15 U.S.C. § 1, the district court correctly
dismissed it because Zummo alleges no agreement or conspiracy between the City and
anyone else, as Section 1 liability requires. Alarm Detection Sys., Inc. v. Vill. of
Schaumburg, 930 F.3d 812, 826–27 (7th Cir. 2019). And the City could not conspire with
itself. See Ziglar v. Abbasi, 137 S. Ct. 1843, 1867 (2017). Because Zummo has alleged only
an “independent, legislative decision” by the City to pass the ride‐share regulations, he
does not state a violation of Section 1. See Alarm Detection Sys., Inc., 930 F.3d at 828.
For completeness, we note that Zummo’s complaint does not allege a violation of
Section 2 of the Sherman Antitrust Act. 15 U.S.C. § 2. That section bars monopolization
through willful, anticompetitive acts that harm consumers. See id. Zummo posits that
ride‐share drivers caused “financial decimation” to taxi drivers, but he does not allege
that consumers have suffered. Nor could he: ride‐share drivers bolster competition by
increasing the number of available for‐hire vehicles and lowering prices. See Phila. Taxi
Ass’n v. Uber Techs., 886 F.3d 332, 340 (3d Cir. 2018). And lower prices, unless predatory,
do not threaten competition. See Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340
(1990). (Predatory prices are set below costs, and Zummo does not allege that the City
enacted its regulations to create such pricing. See Brooke Grp. Ltd. v. Brown & Williamson
Tobacco Corp., 509 U.S. 209, 222–24 (1993).)
No. 18‐3531 Page 4
Finally, Zummo argues that the City committed fraud. He appears to contend
that the City committed common‐law fraud and violated the Illinois Consumer Fraud
and Deceptive Business Practices Act, 815 ILCS 505/2, by regulating ride‐share drivers
differently than it does taxis.
We agree with the district court that neither claim can succeed. Common‐law
fraud requires “a false statement of material fact.” Squires‐Cannon v. Forest Pres. Dist.,
897 F.3d 797, 805 (7th Cir. 2018) (citing Connick v. Suzuki Motor Co., 675 N.E.2d 584, 591
(Ill. 1996)). Similarly, a claim under the Consumer Fraud Act requires “a deceptive act
or practice by the defendant.” Aliano v. Ferriz, 988 N.E.2d 168, 176 (Ill. 2013). Zummo
concedes that the City did not commit “physical or verbal actions of fraud.” That alone
dooms these claims. Zummo responds that the City’s fraud was its “endless
propaganda” (by unnamed persons at unspecified times) that the transportation market
is an “even playing field,” assertions on which he says he relied to continue as a taxi
driver. But because Zummo does not allege who made this assertion, when, to whom,
or in what context, these assertions do not justify a suit for fraud. See FED. R. CIV. P. 9(b);
Connick, 675 N.E.2d at 591; Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737–38
(7th Cir. 2014).
AFFIRMED