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San Francisco's Promises To Taxi Industry To Face Scrutiny In Lawsuit

SAN FRANCISCO (CBS SF) -- Promises made by the city of San Francisco to its taxi industry will be the central question in a lawsuit filed by this week by a credit union which provided loans to taxi drivers seeking the once-coveted permits known as medallions.

San Francisco's acting mayor avoided specifics while responding Thursday to the $28 million lawsuit by the San Francisco Credit Union, claiming damages suffered through its taxi medallion loans. The lawsuit accuses the city of allowing ride-hailing firms to cripple the taxi business, rendering the medallion investment worthless and leaving the credit union holding the bag on loans.

ALSO READ: Credit Union Sues San Francisco Over Taxi Driver Loans

"It's San Francisco, and when we have these emerging technologies that come and disrupt existing industries, we need to be mindful of what the impacts are," said acting Mayor Mark Farrell. "Here, obviously on taxi drivers."

So how might the San Francisco city attorney's office handle this case? Chances are they'll try to have a lot of it tossed out by pointing to a critical moment in 2013. That's when the California Public Utilities Commission asserted its control over companies like Lyft and Uber, and cities like San Francisco said there was simply nothing they could do.

The San Francisco Municipal Transportation Agency has long said it wanted to further regulate transportation networking companies (TNCs) but did not have the authority.  "They can say, 'after September 2013, the California constitution prevents us us from regulating these things,'" said Veena Dubal, Associate Professor of Law at UC Hastings. "But they have a whole year of explanation that they're going to have to make up for, for why they didn't do anything in that time period."

Dubal notes the medallion program was rolled out before the CPUC ruling of 2013. As for the other component to this lawsuit, the city's agreement with its medallion lending partner, Dubal says those questions may well stand apart from regulatory authority. "And they continued to make promises about reigning in the industry and ensuring that these medallions were profitable," said Dubal. "And they just didn't do anything."

Credit union CEO Jonathan Oliver made that very complaint in an exclusive on-camera interview with KPIX, saying "the assurances [the city] gave us, in both writing and verbally, lead us to believe that that they would guarantee these [medallions] to be valued at $250,000."

So it's ongoing litigation and the city is reluctant to speak in details, but there is one group of people that is more than happy to talk about this lawsuit. "This lawsuit, I approve 100 percent," said taxi driver and medallion owner Juan Magnoli. For him, this lawsuit is about more than regulatory history.

"Yeah, it's the mistakes that the city made in the past, but now we are suffering for that," said Magnoli. "A quarter of a million dollars, and it's worthless."



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