L.A. Loses Taxi Case in High Court : Law: City Council’s cancellation of cab franchise violated firm’s rights, justices rule. The decision could cost the city $15 million or more.

The Supreme Court, in a ruling that could cost the city of Los Angeles $15 million or more, said Tuesday that cities and counties that take sides in a labor dispute can be forced to pay damages for their actions.

On a 6-3 vote, the high court said the Los Angeles City Council violated the rights of the Yellow Cab Co. by canceling its franchise in 1981 during a strike by union drivers.

The long-running case now returns to a federal judge in Los Angeles to determine the damages due the owner of the now-defunct taxi company.

Washington attorney Zachary D. Fasman, who represented the taxi company, said he will seek at least $15 million in damages from the city. “We think we can show that the value of that business was very substantial . . . at least that much,” he said.

But John Haggerty, Los Angeles assistant city attorney, said he believes the damage remedy should be much less. “This was a company that was losing money,” he said.

Fasman said the decision “underlines the basic notion that municipalities should not intrude into labor disputes.”

Fasman added, “A work stoppage in the city may be politically unpopular, but this decision gives the city officials a powerful incentive to let the parties work out an agreement on their own.”

The ruling also marks a modest expansion of the venerable Civil Rights Act of 1871, also known as Ku Klux Klan Act. But the beneficiary in this case was a business, not a classic civil rights victim.

The 1871 law allows damage suits against officials who “under the color of any statute” deprive another person of “any rights, privileges or immunities secured by the Constitution and laws.”

In the Los Angeles case, the court concluded that the National Labor Relations Act gave employers, as well as employees, a “right” to be free from government interference in collective bargaining.

Because the Los Angeles City Council violated that right, the court said, the taxi company is entitled to damages under the 1871 law.

In the past, the Supreme Court has been reluctant to create such rights unless they are clearly stated by Congress. Although the plaintiff in this case was an employer, the court’s ruling would apply equally to unions.

The dissenters--Chief Justice William H. Rehnquist and Justices Anthony M. Kennedy and Sandra Day O’Connor--said that the taxi company should be given back its franchise, but should not be entitled to damages under the civil rights laws.

The case began in February, 1981, when the Teamsters Union struck the Yellow Cab Co., owned by the Golden State Transit Corp.

With about 400 taxis, Yellow Cab was then the city’s largest taxi company, but its owner, Las Vegas businessman Eugene Maday, said the company was losing $1 million a year. Maday had outraged union drivers by refusing to pay their medical insurance. The union retaliated by urging the city to block the renewal of Yellow Cab’s franchise.

On March 23, 1981, the City Council voted against the franchise extension, an action Maday blamed on “political muscle at City Hall.” Soon after, Yellow Cab went out of business. Since then, the dispute has been in the courts.

Tuesday’s decision marks the second time in four years that the Supreme Court has overruled the federal appeals court in California and awarded a victory to the taxi company.

In 1986, the justices said the Los Angeles City Council violated federal labor law by refusing to extend the taxi company’s franchise. The U.S. 9th Circuit Court of Appeals earlier had ruled that the city’s action had not violated the law.

The case went back to Judge A. Andrew Hauk, who ruled that the taxi company should get its franchise back, but was not entitled to damages. The 9th Circuit upheld the ruling last year.

Lawyers for the company appealed again, saying they were left with a hollow victory because Yellow Cab had gone out of business.

Justice John Paul Stevens, writing for the court, said in the case (Golden State Transit vs. City of Los Angeles, 88-840) that the 1871 civil rights act “must be broadly construed” to remedy violations of federal laws, as well as the Constitution.