L.A. Denial of Taxicab Franchise Held Illegal

The Supreme Court, restricting municipal involvement in private labor disputes, ruled Tuesday that the City of Los Angeles improperly withheld permission for a taxi company to operate in the city until the firm settled a strike by its drivers.

In an 8-1 decision, the justices said the city’s action destroyed the “balance of power” that Congress established under federal labor law governing collective bargaining.

“A city cannot condition a franchise renewal in a way that intrudes into the collective-bargaining process,” Justice Harry A. Blackmun wrote for the court.

The decision was a victory for the Golden State Transit Corp., formerly operating as Yellow Cab, in an arduous, five-year battle with the city.

Money Damages

An attorney for the firm, Donald Flexner of Washington, said the company will return to federal district court to seek money damages and a court order granting a new franchise to enable the company to resume operations.

“We’re very pleased,” Flexner said. “The court made it perfectly clear the city was acting unlawfully and we intend to vigorously pursue our claims.”

Assistant City Atty. John F. Haggerty said the city’s next move would be up to the City Council--but he did not rule out the possibility of a settlement in the dispute.

The case had drawn considerable attention from state and local officials concerned about the effect that a ruling would have on the countless licensing and contracting decisions that possibly could affect bargaining between labor and management.

But attorneys said Tuesday it appeared that such actions would not be affected by the ruling unless there was evidence that a governmental entity actually sought to tip the balance in the collective bargaining process.

No Serious Obstacle Seen

“I don’t think it presents a serious obstacle to decisions made in furtherance of traditional municipal functions, so long as there is no intent to affect a labor dispute,” said Benna Ruth Solomon of the State and Local Legal Center, which represented the National League of Cities and other governmental groups as a friend of the court in the case.

Similarly, Haggerty observed: “I don’t see any bad results generally. It’s not too often someone comes before the city seeking a franchise at the same time they happen to be involved in a strike.”

Golden State, operating a 400-cab fleet that at the time was the largest of 13 taxi firms in Los Angeles, had sought renewal of its franchise in 1980. But in February, 1981, members of Local 572 of the International Brotherhood of Teamsters struck the company, halting its operations. Union leaders argued before the City Council against renewal of the franchise because of the labor dispute. The company urged the council to stay out of the dispute and reissue the franchise.

The council decided not to renew the franchise but several members and some city officials said the issue would be reopened if the labor dispute were settled. After the franchise expired in March, the company filed suit in federal court, charging that the city had improperly interfered in the bargaining process in violation of the National Labor Relations Act.

A federal district court found that the city had denied the company an essential weapon in the bargaining process--the ability to wait out a strike--and issued a preliminary injunction to preserve the firm’s franchise. But the U.S. 9th Circuit Court of Appeals in San Francisco overturned the injunction and later ruled that the city’s actions were not aimed directly at affecting the outcome of the labor dispute and thus did not conflict with the NLRA.

The Supreme Court reversed the appeals court (Golden State v. City of Los Angeles, 84-1644), saying that the bargaining process was “thwarted” when the city imposed conditions for franchise renewal.

“Our holding does not require a city to renew or to refuse to renew any particular franchise,” Blackmun wrote. But, he added, the City Council, in imposing a settlement condition, “destroyed the balance of power designed by Congress, and frustrated Congress’ decision to leave open the use of economic weapons (in collective bargaining).”

Justice William H. Rehnquist, the lone dissenter, criticized the “extraordinary breadth” of the court’s holding and said he doubted Congress, in enacting federal labor law, had intended to preempt such actions by cities.

Rehnquist noted there was nothing in the record of the case indicating that the city was not concerned about transportation in the city, rather than the labor dispute, when it took its action.