## Facts

- Chicago regulates traditional taxicabs and livery services through extensive requirements covering licensing, fares, insurance, and driver/vehicle qualifications.
- Transportation Network Providers (TNPs), including Uber and Lyft, entered the for-hire transportation market using app-based dispatch and payment systems and related consumer-facing features (e.g., ratings and pickup estimates).
- Chicago adopted a separate regulatory framework for TNPs that was generally less burdensome than the taxi/livery regime.
- Taxi and livery interests (including medallion holders and related businesses) alleged the City’s regulatory choices reduced the economic value of taxi medallions and harmed their businesses.
- Plaintiffs asserted federal constitutional claims under the Takings Clause (as applied through the Fourteenth Amendment) and the Equal Protection Clause.
- The district court declined to dismiss the equal protection claim at the pleading stage, reasoning the City might have unlawfully imposed heavier regulatory burdens on taxis than on TNPs.
- The City appealed the interlocutory order to the Seventh Circuit.

## Issues

1. Whether taxi medallions confer a constitutionally protected property interest in freedom from competition, such that authorizing and regulating TNPs amounts to an uncompensated taking.
2. Whether Chicago’s decision to regulate taxis more heavily than TNPs violates equal protection under rational-basis review.

## Decision

- The Seventh Circuit reversed the district court and directed dismissal of the constitutional claims.
- The court held the Takings Clause claim failed because a taxi medallion is a license to operate, not a property right to exclude competitors or to preserve a favorable regulatory environment.
- The court held the Equal Protection claim failed because differential regulation of taxis and TNPs had a rational basis, given differences in service models and the City’s legitimate interest in encouraging competition and responding to new technologies.

## Legal Principles

- A government-issued license to operate in a regulated market does not create a property right to be free from competition or to continuation of a regulatory regime that benefits incumbents.
- Economic loss resulting from government authorization of new competitors, without appropriation or direct invasion of property, is not a compensable taking.
- Under rational-basis review, a city may treat different business models differently if the classification is not arbitrary and is reasonably related to legitimate governmental interests.
- Features and operational differences between services (including methods of dispatch, payment systems, and consumer safety/quality mechanisms) can supply a rational basis for distinct regulatory approaches.

## Conclusion

The Seventh Circuit held that Chicago’s regulatory accommodation of TNPs neither took taxi medallion holders’ property nor denied equal protection, because medallions do not guarantee protection from competition and the City had rational reasons to regulate app-based services differently from traditional taxis.


Illinois Transportation Trade Ass'n v. City of Chicago, 839 F.3d 594 (7th Cir. 2016)