Oct 7, 2020

Rideshare class action by taxi operators against City of Toronto denied certification

Eisenberg v. Toronto (City), 2019 ONSC 7312 (CanLII)

In Eisenberg et al v City of Toronto, the Ontario Superior Court of Justice (the Court) dismissed a certification motion brought by taxicab plate owners and holders affected by the operation of rideshare services in the City of Toronto (the City). The plaintiffs alleged that members of the proposed class action had suffered economic loss due to the City’s regulation and enforcement of its taxicab license scheme.

This decision comes after the Court’s certification of a similar class action started by taxicab plate owners and holders against the City of Ottawa in Metro Taxi Ltd. v City of Ottawa. Eisenberg highlights the importance of considering whether a reasonable cause of action is alleged, and provides helpful commentary on the liability of municipalities in enacting and enforcing bylaws and/or regulatory schemes.

Proposed class action and factual background

The proposed class included approximately 5,000 taxicab plate owners or holders. Before July 2016, taxicab owners had to comply with provisions of the Toronto Municipal Code requiring them to obtain a license and stick it on their vehicle. The plaintiffs alleged that the City’s regulation of taxi services maintained a longstanding status quo that, among other things, created a market value for holding a taxi plate that was based, in part, on the scarcity of licenses and the requirement to obtain a license.

In 2014, rideshare services began allowing drivers without a taxi license to transport passengers in Toronto, contrary to the provisions of the Toronto Municipal Code. The City’s attempt to prohibit the services from operating in Toronto without a taxicab license was unsuccessful, which led to a specific legislative amendment to obligate the services to be licensed and dispatch only licensed taxis. The rideshare service continued to operate in Toronto.

Ultimately, in July 2016, the City amended portions of the Toronto Municipal Code to allow rideshare services to operate legally in Toronto. The amendments converted some forms of taxi plates into other forms of plates. The plaintiffs alleged that these amendments, and permitting the service to operate in Toronto outside of the previous status quo, reduced the value of taxicab plates by approximately $310,000 each. The plaintiffs alleged the City was:

  • negligent in enforcing provisions of the Toronto Municipal Code that prohibited the service’s operation in the City prior to July 14, 2016;
  • negligent in enforcing the amended provisions of the Toronto Municipal Code; and
  • negligent in adopting the amendments to the Toronto Municipal Code, which revised the taxicab license scheme that had been in place for a long period of time.
  • Certification criteria

    The City contested certification, submitting that the proposed class action:

    • (a) did not disclose a cause of action;
    • (b) the claims did not raise common issues; and
    • (c) was not the preferable procedure to resolve any common issues.

    The City did not dispute that there was an identifiable class or that there was an appropriate representative plaintiff.

    Although satisfied that there were common issues and that a class action would be the preferable procedure to resolve common issues, the Court departed from its Metro Taxi decision, finding that the cause of action criterion had not been satisfied. The certification motion was dismissed.

    No cause of action

    While the Eisenberg case would seem, at first blush, to be similar to the Metro Taxi case, one important difference explains the different results in the two cases. In Eisenberg, the City of Toronto took the position that there was no valid cause of action on the basis that the City did not owe the class a duty of care when enacting and enforcing bylaws. In Metro Taxi, the City of Ottawa conceded that the pleadings disclosed a valid cause of action (including negligence). As a result, the Court in Eisenberg had to decide for the first time whether the City owed a duty of care to taxicab license holders when enacting a bylaw.

    Duty of care when enacting bylaws

    The plaintiffs’ key argument on certification was that the City had been negligent in enacting bylaws relevant to ridesharing services and enforcing its own bylaws. As noted above, the City argued that it did not owe a duty of care to the proposed class. While the Court recognized that the plaintiffs’ claims fell into an existing category of negligence claims for pure economic loss, namely liability of public authorities, upon review of the statutory scheme the court concluded that the City did not owe a duty.

    With respect to the first duty of care alleged, relating to enactment of the City’s bylaw, the court disagreed with the plaintiff’s assertion that the City had been exercising its business powers and held that the City had been acting in its legislative capacity. While the Court noted that the plaintiffs and class members may have been adversely affected by the enactment of the bylaw and suffered economic loss, it concluded that a municipality could not be liable for negligence with respect to its legislative activities, relying on the Supreme Court of Canada’s decision in Welbridge Holdings Ltd. v Greater Winnipeg.

    With respect to the second duty of care alleged, relating to the City’s alleged failure to enforce its bylaws, the Court held that there was no duty on a municipality to enforce a bylaw that it enacted in the exercise of a discretionary power. The Court noted that this portion of the plaintiffs’ negligence claim for pure economic loss fell into a category where a public authority is regulating in the public interest and therefore had not undertaken a private duty of care.

    Takeaway

    This case highlights the importance of carefully considering whether a proposed class action discloses a valid cause of action, even where similar cases have previously been certified. In Eisenberg, the City’s decision to argue the cause of action criterion created a very different result from Metro Taxi, where the City of Ottawa had conceded that the plaintiffs alleged a valid cause of action.

    The case also reviews the law with respect to duties owed, or not owed, by municipalities when enacting, amending and enforcing bylaws. While a municipality’s enactment or enforcement of a bylaw may ultimately cause harm to citizens, the court has reaffirmed that the focus of legislative activity is the public interest and that a municipality’s legislative activities are protected from civil liability.