I made two observations coming out of Grand Central Station during my morning commute last week. First, the city really stinks after a string of oppressively hot and humid summer days. Second, there appears to be a temporary taxi stand, perhaps occasioned by the ongoing construction of the new One Vanderbilt building, just outside the south entrance of Grand Central Terminal on 42nd Street under the Park Avenue Viaduct.
This latter observation was rather rudely forced upon me when the precarious position of one such cab nearly caused me to traverse its front-end Bo and Luke Duke style. The site of the mangled NYC taxi medallion fastened to the cab’s dented hood was a striking metaphor for the current state of the taxi industry given the increasing popularity of ride-sharing services like Uber and Lyft.
The plight of the cabbie was on display in a recent decision from the Honorable O. Peter Sherwood of the Manhattan Commercial Division in a case called Capital One Equip. v Deus, in which the cabbie-defendants, after defaulting on a promissory note representing more than $400,000 borrowed to purchase a taxi medallion, attempted to rest on the traditional contractual defense of impracticability or impossibility of performance in a summary proceeding under CPLR 3213.
The essence of Defendants’ claim was that “due to the economic change in the medallion and taxi industry of New York by ride sharing applications like Uber and Lyft, there is an impossible hurdle for the defendants to overcome, making the repayment of the loan impossible.”
Readers may recall from their law-school hornbook days that the impossibility defense contemplates truly unexpected circumstances. As the plaintiff-lender in the Deus case put it, “the impossibility defense . . . only excuses a party’s contractual performance where there has been destruction or obstruction by God, a superior force, or by law.”
The cabbies, however, likened their situation to the kind of critical condition contemplated by the traditional defense, describing the industry as being “on life support with little to no chance for a reversal of its current dire situation.”
“At the heart of the problems facing the NYC Taxi industry,” cried the cabbies, “is the emergence of companies such as Uber and Lyft which are exempt from the regulatory framework burdening the medallion owners.” As a result, “ridership in New York City yellow taxi cabs has dropped almost 30%” and “NYC taxi medallions, which were selling for in excess of $1,000,000 as recently as 2013, have plummeted in market value” – all of which has led to a “collapse of unprecedented proportions.”
A creative argument to be sure, but the court wasn’t buying it. Citing New York case law going back to the late 1960’s, the court ultimately held for the plaintiff-lender, finding that “performance of a contract is not excused where impossibility or difficulty of performance is occasioned only by financial difficulty or economic hardship. Economic hardship alone cannot excuse performance; the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract.”
Coming on the heels of several driver suicides in recent months, the Deus decision is just more bad news for the NYC taxi industry. While market forces created by the advent of ride-sharing services may not be “superior” enough to satisfy the impossibility defense, one thing’s for sure: it’s a difficult time to be a taxi driver in New York City.
**UPDATE** Perhaps the cabbies are seeing a little light after all. Around the time this post was published last week, news broke that the New York City Council had tugged the reigns of the Uber/Lyft ride-sharing industry by passing minimum-wage requirements for drivers, as well as a one-year freeze on the licensing of participating vehicles in the city. The first-of-their-kind bills, particularly the cap on e-hail cars, was driven in large part by increased problems related to city-street congestion. Today, Mayor de Blasio signed the bills into law.