In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 16‐1008
JOE SANFELIPPO CABS, INC., et al.,
Plaintiffs‐Appellants,
v.
CITY OF MILWAUKEE,
Defendant‐Appellee,
and
JATINDER CHEEMA and SAAD MALIK,
Intervening Defendants‐Appellees.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 2:14‐cv‐01036‐LA — Lynn Adelman, Judge.
____________________
ARGUED SEPTEMBER 19, 2016 — DECIDED OCTOBER 7, 2016
____________________
Before POSNER, WILLIAMS, and SYKES, Circuit Judges.
POSNER, Circuit Judge. The issue presented by this appeal,
as by the similar appeal in Illinois Transportation Trade Associ‐
ation, et al. v. City of Chicago, et al., Nos. 16‐2009, 16‐2077 &
2 No. 16‐1008
16‐2980, also decided today, is whether the Fifth Amend‐
ment’s prohibition against the taking of private property for
public use without just compensation forbids Milwaukee, in
this case, and Chicago, in the parallel case, to allow competi‐
tion with established taxi services in the city, whether from
new taxi companies (in Milwaukee) or from companies that
provide close though not identical substitutes for conven‐
tional taxi services, such as Uber Technologies, Inc. (better
known just as “Uber”) (in Chicago).
The intervenors, who support Milwaukee’s opposition to
the plaintiffs’ claims, obtained taxi permits under a new
Milwaukee ordinance that is the target of the plaintiff‐
appellant taxi companies; they could not have afforded to
buy taxi permits under the old ordinance that the plaintiffs
wish to see reinstated. The district judge dismissed the plain‐
tiffs’ suit on the pleadings, precipitating the appeal and the
filing of a brief in opposition by the intervenors, which need
not be discussed separately however because it differs from
Milwaukee’s brief only in that the intervenors are intensely
suspicious of the City’s bona fides and fear it will revert to
the old ordinance. Suspicion alone can’t support a legal
claim, but the intervenors were the plaintiffs in the state‐
court case that held that the permit cap violated the Wiscon‐
sin constitution, and the district court reasoned that if Mil‐
waukee’s new ordinance was found to be a taking, this
would be in conflict with the state court’s decision. As we’ll
see, there’s no conflict.
From 1992 to 2013, a Milwaukee city ordinance (a com‐
ponent of Wisconsin state law, because Milwaukee’s local
government is part of the state government) limited the
number of taxicab permits in the city to the number in exist‐
No. 16‐1008 3
ence on January 1, 1992, that were renewed. No new permits
would be issued; and although permits could be sold, this
would not increase the number of permits. Since not all taxi‐
cab permits are renewed, the effect of the ordinance was not
only to place a ceiling on the number of permits but also to
lower the ceiling over time by virtue of the nonrenewals; the
number of permits could not increase, because no new per‐
mits could be issued, but it decreased every time a permit
was not renewed. By 2013 the number of permits (equal to
the number of cabs) had diminished from about 370 to about
320, and as a result the price of permits on the open market
(for remember that while no more permits could be issued,
existing permits could be sold) soared as high as $150,000.
(We don’t know what the average price was just after the
1992 ordinance.)
In 2013, after a lawsuit successfully challenged this per‐
mit‐cap ordinance as a violation of the equal protection and
substantive due process clauses of the Wisconsin state con‐
stitution, the City experimented with conducting a lottery
offering as prizes 100 brand‐new taxicab permits to be is‐
sued by the city. The lottery attracted 1700 permit seekers,
which suggested that the market was believed to be under‐
served. There were other indications that as a result of the
1992 ordinance there was a taxi shortage. Milwaukee had in
fact only one taxicab per 1850 city residents, a much lower
ratio than comparable cities. See Bruce Vielmetti, “Cab Driv‐
ers to Sue Milwaukee over Limit on Permits,” Milwaukee
Journal Sentinel, Sept. 26, 2011, archive.jsonline.com/news/
milwaukee/130609278.html.
The City responded to the shortage the following year
(2014) by taking the lid off the number of permits that the
4 No. 16‐1008
city would issue. Now a new permit would be issued to any
qualified applicant. The shortage flagged by the lottery at‐
tracted not only permit applicants, theretofore barred since
1992, but also substitutes for conventional taxicab service,
such as Uber. The combination of new taxi permittees and
taxi substitutes (sometimes called “ridesharing” companies,
more precisely app‐based such companies) such as Uber and
Lyft diminished the profitability of the existing taxi compa‐
nies, which had faced little competition under the ancien ré‐
gime. Indeed that regime had created an oligopoly of taxi
service in Milwaukee. The theory of oligopoly teaches that
the fewer the number of competitors in a market, the less
vigorously they are likely to compete, preferring to share the
profits than to fight with each other. In other words they col‐
lude, though tacitly to avoid attracting the attention of the
antitrust agencies.
The plaintiffs’ contention that the increased number of
permits has taken property away from the plaintiffs without
compensation, in violation of the constitutional protection of
property, borders on the absurd. Property can take a variety
of forms, some of them intangible, such as patents. But a taxi
permit confers only a right to operate a taxicab (a right
which, in Milwaukee, may be sold). It does not create a right
to be an oligopolist, and thus confers no right to exclude
others from operating taxis. An excellent amicus curiae brief
filed by Reason Foundation offers the hypothetical example
of a city government that “issued a license to the first gro‐
cery store or gas station in a growing town. Years later, after
the population had grown, other individuals applied for li‐
censes to create competing grocery stores and gas stations to
better serve the needs of the expanding market. … Ultimate‐
ly, the pressure for additional services might drive the City
No. 16‐1008 5
to issue additional licenses,” thus breaking the monopoly of
the initial, single licensee. “It would be absurd for the in‐
cumbent owners of the sole grocery store and gas station to
assert a property right in the monopoly value of their busi‐
nesses and claim a ‘taking’ for any reduction in secondary
market value due to the newly‐issued licenses, just as it
would be absurd to claim a taking for reduced profits result‐
ing from increased competition.” (The term “primary mar‐
ket” in the preceding sentence refers to the issuance of the
licenses, “secondary market” to the resulting competition
among the licensees, which is to say the taxi companies, in‐
cluding however the app‐based ridesharing companies.)
We might have a different case had the city contractually
obligated itself to freeze taxi permits for 50 years in order to
encourage the taxicab owners to improve their equipment,
work harder, and hire better drivers. But it did not do that.
The no‐new‐permit ordinance of 1992 froze taxi permits (in‐
deed made it inevitable that their number would shrink over
time), but only for as long as the ordinance remained in ef‐
fect—and it could be repealed at any time because it had no
fixed duration. The plaintiffs cite statements by Milwaukee
aldermen that they allege understood the 1992 ordinance to
be creating a property interest in the permits’ value, but oth‐
er aldermen warned that the ordinance could be changed to
the disadvantage of the taxi companies. The companies were
thus on notice that there was no guarantee that the ordi‐
nance would remain in force indefinitely, and they must also
have known that were it repealed they would be faced with
new competition that would threaten their profits.
The city gave them no protection against such an eventu‐
ality. The ordinance gave them no property right, and its re‐
6 No. 16‐1008
peal therefore invaded no right conferred on them by the
Constitution. See Minneapolis Taxi Owners Coalition v. City of
Minneapolis, 572 F.3d 502, 508–09 (8th Cir. 2009); David K.
Suska, “Regulatory Takings and Ridesharing: ‘Just Compen‐
sation’ for Taxi Medallion Owners?” 19 Legislation & Public
Policy 183, 198–201 (2016). Apropos is Holmes’s remark in
his famous opinion in Pennsylvania Coal Co. v. Mahon, 260
U.S. 393, 413 (1922), that “government hardly could go on if
to some extent values incident to property could not be di‐
minished without paying for every such change in the gen‐
eral law.” The taxi permits issued by the Milwaukee city
government are property, but have not been “taken,” as they
do not confer on the holders a property right in, amounting
to control over, all transportation by taxis and taxi substi‐
tutes (such as Uber) in Milwaukee.
Undoubtedly by freeing up entry into the taxi business
the new ordinance will reduce the revenues of individual
taxicab companies; that is simply the normal consequence of
replacing a cartelized with a competitive market. But the
plaintiffs exaggerate when they predict ruination for them‐
selves. Buses and subways and livery services and other taxi
substitutes have not destroyed the taxi business; nor has Ub‐
er or Lyft or the private automobile or for that matter the bi‐
cycle. Taxicabs will not go the way of the horse and buggy—
at least for some time.
We have one more set of issues to discuss, though very
briefly. The plaintiffs’ complaint includes claims under state
law as well as under federal constitutional law, claims thus
within the supplemental jurisdiction of the district court,
which decided to decide them rather than relinquish them to
the Wisconsin state courts, as it could have done. See 28
No. 16‐1008 7
U.S.C. § 1367. The claims are of breach of contract, promisso‐
ry estoppel, and equitable estoppel. The district judge reject‐
ed all three, pointing out that ordinances are not contracts,
let alone perpetual contracts; that there was no promise by
the City never to rescind or amend the 1992 ordinance and
so no contract and no promise, or reason for the taxi compa‐
nies to believe, that the ordinance would continue in perpet‐
uo, unaltered. He was right on all counts.
The parties raise additional issues, but none that has suf‐
ficient merit to require discussion. The judgment of the dis‐
trict court, rejecting the plaintiffs’ claims, is
AFFIRMED.