City Ordered to Pay $4.5 Million in 1981 Cab Contract Lawsuit : Taxis: The firm sought legal action after the council refused to renew a pact because of drivers’ strike. Case has been to U.S. Supreme Court twice.

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The city of Los Angeles was ordered Thursday to pay owners of Yellow Cab, once the city’s largest taxicab company, $4.5 million for refusing to allow it to operate unless it settled a strike called by Teamsters union drivers in 1981.

The labyrinthine case, one of the longest in Los Angeles history, began when the Teamsters prevailed on the Los Angeles City Council not to renew a franchise with the company’s corporate parent, Golden State Transit Corp. Yellow Cab, with 363 taxis, subsequently went out of business.

Over the years, the U.S. Supreme Court twice ruled in favor of Yellow Cab, once saying that the city had improperly interfered in a labor dispute and again to say that municipalities that take such action are liable for damages.


Thursday’s verdict in U. S. District Court was solely to decide the amount of damages.

“We’re delighted that after 10 years there is finally a decision that not only were the company’s civil rights violated but that the violation should be compensated by a monetary award,” said Norman Dupont, one of the lawyers for Golden State Transit Corp., which owned Yellow Cab in Los Angeles.

The jury returned its verdict after nearly a month of testimony and about three days of deliberations.

Expert witnesses for the city had contended that Golden State was only entitled to $640,000, while experts called by the company contended that it should receive up to $15 million in damages.

At the time the controversy began, a Teamsters local representing 800 drivers had called a strike against the firm. Eugene Maday, a Las Vegas businessman and president of Golden State, sued the city when the council voted to deny the company’s franchise because of the labor dispute.

In 1986, the Supreme Court ruled that the city had improperly interfered in the bargaining process in violation of the National Labor Relations Act.

Then, in 1989, after the company sought monetary damages from the city, the high court said municipalities taking sides in a labor dispute can be forced to pay for their actions.


The trial over what monetary damages might be owed to the company began May 14. Attorneys for Golden State said the company should get $13 million to $15 million for a decade’s lost earnings.

But attorneys for the city maintain the city owed far less because in early 1981 the firm was losing money and filed for bankruptcy.

“Golden State Transit effectively was dead before the city took the actions in 1981 being complained of,” Alan I. Rothenberg of Latham & Watkins, the firm hired to defend the city, said during the trial.

After the verdict was announced, Rothenberg said he was not terribly disappointed. “We were hired to control the damages and we controlled the damages,” he said. “Given two adverse Supreme Court decisions and some of the pretrial rulings, it could have been a lot worse.”

Still, Rothenberg said, the city would file motions to have the judge overturn the jury’s verdict and to ask for a new trial.

During the trial, Zachary Fasman, one of Golden State’s lawyers, accused the city of collusion with the Teamsters and asked the jury to “send a message to the city fathers (that you must be responsible) when you take the largest cab company in the city and drive it out of business because the Teamsters asked you to.”


At the close of the trial, Maday said he filed the case “for principle.” Although he has been granted the right to put his cabs back on city streets in previous court decisions, he has not said whether he has any intention of re-entering the business. Maday was not immediately available for comment after the verdict.

The jurors were faced with the Herculean task of analyzing a voluminous amount of complicated financial data.

Jury Foreman Jerry Fortunato stressed that the jurors had gone through the exhibits in detail.

He and other jurors said the primary factors in calculating the amount of damages was by figuring how much money Maday had put into the business--$3.5 million--and adding $972,000, the city’s 10-year-old estimate of what he would have made in 1981. This brought them to a total of $4.5 million.

Juror David Seifert said the fact that the company filed for bankruptcy in 1981 prompted the jury to immediately reject the company’s claims that it should be awarded up to $15 million. Such an award would have taken into account projections of profits that would have been made, in theory, during the last 10 years.

In addition, Seifert said, the jurors decided not to award Golden State any damages for potential lost profits for any year beyond 1981 because most of the taxi cab companies in Los Angeles have either “broken even or had very small profits.”