April 21, 2008
ELIZABETH YELLOW CAB, PLAINTIFF-APPELLANT,
CITY OF ELIZABETH, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-1204-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 18, 2007
Before Judges Fuentes and Grall.
Plaintiff, Elizabeth Yellow Cab Inc. ("Yellow Cab") is a taxicab company that has been operating in the City of Elizabeth (the "City") since 1981. In 2005, the City refused to renew plaintiff's certificate of public convenience and necessity and its permits, which are the requisite authorization documents needed to run a taxicab service within the City. The City based its actions on plaintiff's failure to: (1) maintain its corporate charter in good standing; (2) report outstanding judgments against it; (3) report individual judgments against its individual shareholders; and (4) properly maintain insurance by submitting fraudulent insurance documents.
Plaintiff filed an action in lieu of prerogative writs in the Law Division contesting the City's actions. The trial court ordered the City to appoint an independent hearing officer and thereafter hold an administrative hearing. The hearing officer found that the City's decision to refuse to renew plaintiff's certificate and permits was not arbitrary or capricious, and that the hearing conducted afforded plaintiff sufficient due process.
Acting on plaintiff's appeal, the Law Division affirmed the hearing officer's determination and rejected plaintiff's argument that the ordinance is unconstitutional. Plaintiff now appeals the trial court's decision to this court. We affirm.
The corporation operating under the name Yellow Cab is owned by the Pohida family. Pursuant to Elizabeth, N.J., Code ch. 5.100, § 5.100.020, (2005) any individual or company who wishes to operate a taxicab business in the City of Elizabeth must obtain a city certificate of public convenience and necessity ("certificate") and a taxicab permit. Yellow Cab applied for and received its first certificate in 1981. Thereafter, the City renewed Yellow Cab's certificate each year, until 2005.
On February 10, 2005, Yellow Cab submitted its application for renewal. On March 31, 2005, the chief municipal license inspector, Richard T. Lospinosi, sent Yellow Cab a letter informing it that, effective April 1, 2005, the City would not renew Yellow Cab's certificate and permits. The letter ordered Yellow Cab to immediately cease operating its taxicab business. Lospinosi gave the following four reasons for his decision:
1. The Corporation known as Elizabeth Yellow Cab, Inc. has not been in effect and/or in good standing since March 31, 1994. The charter of the corporation was forfeited for failing to submit annual reports. Said corporation failed to account for and/or provide necessary corporate documentation to the City of Elizabeth when previously requested.
2. There are numerous judgments against the entity known as Elizabeth Yellow Cab, Inc. The applicant has failed to disclose judgments on the application, thus submitting [a] fraudulent application.
3. Since the corporation has not been in good standing since March 31, 1994, the personal judgments against all individuals listed as shareholders should have been reported on the application. The existence of these judgments against the corporation and the individuals listed as shareholders on the application, in addition to the failure to disclose this information, demonstrates financial irresponsibility and unfitness to offer public transportation to the residents of the City of Elizabeth.
4. For the period of September 14, 2003 through September 14, 2004, you provided a fraudulent insurance policy and certificate of insurance to the City of Elizabeth and failed to continuously maintain insurance as required by State and Municipal law.
On April 5, 2005, Yellow Cab filed an order to show cause and a verified complaint in lieu of a prerogative writs, seeking authority to remain in business while it challenged the City's actions. The trial court granted plaintiff's request, ordering the City to permit plaintiff to operate its taxi business until further order of the court. On August 18, 2005, the court ordered the City to appoint a hearing officer for the purpose of affording plaintiff an administrative forum in which to challenge the non-renewal of Yellow Cab's certificate and permits.
The hearing officer, Ruth Moscovitch, presided over two days of hearings, during which a total of three witnesses testified. The City presented the testimony of chief license inspector Lospinoso and Ted Merced, an investigator from the Union County Prosecutor's Office. Wayne Pohida testified on behalf of Yellow Cab.
In 2004, the Union County Prosecutors Office and the Linden Police Department conducted an investigation of Linden Yellow Cab, owned by Louise, David, Gerald, and Cynthia Pohida. Since the owners of Linden Yellow Cab and Yellow Cab are both members of the Pohida family, Ted Merced from the Union County Prosecutor's Office contacted Lospinoso.
Both Linden Yellow Cab and Yellow Cab obtained their insurance through the agency United Risk Management. The insurance agency is a corporation owned by David and Gerald Pohida. The Prosecutor's Office was concerned about the insurance practices of all three corporations. Merced requested to review insurance documents submitted to the City by Yellow Cab. After reviewing the documents, Merced informed Lospinoso that six insurance certificates submitted by Yellow Cab were signed by unauthorized producers.
The investigation also revealed that both Linden Yellow Cab and plaintiff had misrepresented to their insurance company, New Hampshire, that several of their vehicles were medical vehicles, instead of taxi cabs. This was apparently done because the premium charged for insurance on a medical vehicle is about one third that of insuring a taxicab. Although it is unclear whether Merced contacted Lospinoso in 2004 or 2005, the information prompted Lospinoso's investigation of Yellow Cab.
Louise Pohida and her husband Wayne Pohida filed the first corporate charter for Yellow Cab on October 20, 1981. Robert C. Diorio was Yellow Cab's attorney; he helped Louise and Wayne start the corporation and served as its registered agent. On March 31, 1994, the New Jersey Secretary of State revoked Yellow Cab's corporate charter for failure to file its annual reports.
Wayne Pohida died in 2003; thereafter, two of Louise's sons, Glenn and Wayne Pohida, each acquired a five percent ownership interest in the company. Other members of the Pohida family have served as officers of the corporation, including Gerald and David Pohida. In 2003, David and Gerald were voted out of the corporation following a criminal investigation into their insurance business, United Risk Management.
Wayne claimed, however, that he was unaware that Yellow Cab had its corporate charter revoked, until he received Lospinoso's letter. He testified that Louise assumed their attorney Diorio had renewed Yellow Cab's charter each year. When they discovered the problem, they fired Diorio and hired a new attorney, Michael Campagna. Thereafter, Yellow Cab filed the necessary reports and regained its corporate status on May 16, 2005.
According to Lospinoso's testimony, the City requires that each taxicab company have on file an original insurance policy and a certificate of liability insurance. Initially, after an insurance policy is first purchased or renewed, the actual policy is not available; the companies submit certificates as a "good faith sign," attesting that they "in fact, have insurance in place." When the actual policies are available, usually about thirty to sixty days later, the company must provide the actual policy.
The certificates are filed at least once a year; additional certificates must be filed if there is a change in a vehicle status, such as deleting an old or damaged car and replacing it with a new one. The certificates are not written by the insurance companies themselves; rather, they are written by the agencies that represent them, and signed by licensed producers. The agencies and producers must be licensed with the New Jersey Department of Banking and Insurance.
For several years Yellow Cab obtained its insurance through the agency United Risk Management, the agency owned by David and Gerald Pohida. The only licensed producer for United Risk during the relevant time period was Henry Krauze. In March 2002, Krauze ceased producing for United Risk Management and the agency was no longer eligible to sell, solicit, or negotiate insurance in New Jersey.
Between 2001 and 2003, United Risk Management submitted six certificates on behalf of Yellow Cab that were signed by unlicensed individuals. Only one was signed by Krauze, but it was signed in 2003, after he no longer served as a producer for United Risk. Two were signed by David Pohida, who was not licensed, and two were signed by Cheri Jolley, United Risk's office manager, who was not licensed. Another certificate stated it was signed by William Wolnski, who was a licensed producer. According to the State of New Jersey, Wolnski did not serve as a producer for United Risk, and he would not have been authorized to produce that certificate.
In the fall of 2003, Yellow Cab began to obtain insurance certificates through Rovner Insurance agency, instead of United Risk. No one questions the validity of these certificates. The record is clear that despite Yellow Cab's submission of fraudulent insurance certificates, Yellow Cab always had valid insurance policies. Lospinoso learned Yellow Cab had valid policies only after he wrote the suspension letter, refusing to renew Yellow Cab's certificate.
Question fourteen on the annual application to obtain a certificate of operation required Yellow Cab to disclose whether there were any judgments against the business. Specifically, the question reads as follows: "Does the permit owner have any unpaid judgments against him/it? Please list in detail the nature of the transaction giving rise to said judgments [sic]." Yellow Cab's application for 2002 answered "none to my knowledge." Yellow Cabs applications from 2003, 2004, and 2005 answered "No."
A search of outstanding judgments against Yellow Cab indicated that there were seven outstanding judgments against Yellow Cab: (1) a $2320.26 judgment entered on April 11, 1991 (2) $2287.23 judgment entered on July 9, 1993 (3) $2747.07 judgment entered on January 31, 1995, (4) $12,500 judgment entered on November 22, 1996, (5) $50,553.71 judgment entered on July 9, 2003 (6) $20,755.45 judgment entered on March 26, 2004, and (7) $4662.90 judgment entered on February 3, 2005.
Lospinoso testified that the purpose of this inquiry is to "addresses [the company's] business practices, how they handle themselves, how they would deal with the public and the city." Wayne Pohida testified that he was unaware of any judgments against Yellow Cab until he received the letter from Lospinoso.
He testified that he has never personally been served with a civil complaint associated with any of the listed judgments. He speculated that the problem may have been caused by the registered agent for the company, attorney Robert Diorio. After receiving the letter, plaintiff submitted a revised application, detailing the judgments against Yellow Cab. There are also numerous judgments against members of the Pohida family, who were shareholders and officers of Yellow Cab. Wayne also disavowed having any knowledge of any of the individual judgments against him.
Criminal Charges Against David and Gerald Pohida
The City presented evidence demonstrating that David and Gerald Pohida, who were officers of Yellow Cab, are currently incarcerated for various offenses. David Pohida pled guilty to misapplication of entrusted government property and insurance fraud. He was sentenced to four years in state prison and ordered to pay $23,626.97 in restitution. Gerald Pohida was arrested and convicted for two counts of kidnapping, two counts of sexual assault, aggravated sexual assault, criminal sexual contact, and two counts of endangering the welfare of a child. Gerald also pled guilty to theft by deception; he was sentenced to a term of five years in state prison and ordered to pay $63,200 in restitution. Finally, Gerald pled guilty to misapplication of entrusted government property and insurance fraud; he was sentenced to a term of five years in state prison and ordered to pay $11,800 in restitution. Wayne Pohida was indicted for presenting false insurance information; those charges were dismissed.
The hearing officer entered a written decision in favor of the City on March 8, 2006. Addressing Yellow Cab's argument concerning the City's authority to refuse to renew a license to operate a taxi business, the hearing officer found that N.J.S.A. 48:16-10 specifically grants municipalities the "broad power to revoke their consent to operate" taxicabs and "[t]he revocation of consent is not limited as to time; it may come at annual renewal time or any other time the municipality determines there is a problem with the licensee." Although the local ordinance did not create a procedure for non-renewal, N.J.S.A. 52:14B-11 requires a hearing before revocation and renewal and N.J.S.A. 48:16-10 requires a hearing before the City can revoke a license. The hearing held here pursuant to the trial court's order complied with N.J.S.A. 52:14B-9 and N.J.S.A. 52:14B-11.
Under Elizabeth, N.J., Code ch. 5.100, § 5.100.050A the chief license inspector has a duty to determine if the licensee is "fit willing and able" to provide public transportation and to "conform to the provisions of this chapter and the rules promulgated by the license inspector." Additionally, under § 5.100.050B, the chief license inspector "shall take into consideration . . . the good character, satisfactory experience and responsibility of the applicant." The four reasons given by Lospinoso for not renewing Yellow Cab's license demonstrated the licensee's "gross irresponsibility" in running the corporation. These four reasons were (1) failing to maintain the corporate charter in good standing (2) failure to report outstanding judgments (3) failure to report individual judgments and (4) the submission of fraudulent insurance documents.
As additional examples of irresponsibility, the hearing officer cited Yellow Cab misidentifying and insuring its vehicles as medical vehicles and the criminal convictions of Gerald and David Pohida, who served as officers of Yellow Cab. Against this evidential backdrop, the City's decision not to renew Yellow Cab's licenses was not arbitrary, capricious, or contrary to law.
On appeal to the Law Division, Judge Anzaldi considered and rejected plaintiff's argument that the taxi ordinance is "vague, overbroad, unconstitutional and subject to selective enforcement." He concluded that the ordinance contains identifiable standards about when the chief license inspector can refuse to renew a license. He also found there was a substantial relationship between the ordinance and the "public health, safety, morals or general welfare." The ordinance protects taxicab riders by requiring proof of insurance, checking driving records of prospective drivers, and ensuring the applicant is financially responsible.
Judge Anzaldi also rejected plaintiff's argument that the Licensing Inspector's decision was "arbitrary, capricious, unreasonable and contrary to law."
This court finds that the decision was not arbitrary, capricious, or unreasonable. The lapse of the corporate charter for a ten year period and the accrual of thousands of dollars of outstanding judgments against the applicant at the very least shows the applicant's irresponsibility. The submission of a fraudulent insurance certificate and failure to truthfully report outstanding judgments further support the decision. The operation of an uninsured taxicab endangers the public's health and safety in the event there is an accident and an injured passenger is uncompensated through insurance proceeds. Additionally, the outstanding judgments against the applicant make it apparent that if a rider were to sue for damages, that award would most likely go unsatisfied.
In short, looking at all the evidence before them, the Chief License Inspector and the hearing officer could reasonably conclude that the applicant's [sic] were unfit to operate taxicabs in the City of Elizabeth. The evidence before them was replete with reasons for denying applicant's renewal. This court finds that the decisions by the Chief License Inspector and the hearing officer were not arbitrary, capricious, unreasonable or contrary to law and said decisions are herein affirmed.
We are in complete agreement with Judge Anzaldi's analysis and ultimate conclusion. The City has broad authority, granted under N.J.S.A. 48:16-10 and N.J.S.A. 40:52-2, to revoke a license it grants to a taxicab service. The City provided guidance for the exercise of this authority in Elizabeth, N.J. Code ch. 5.100, § 5.100.090.
Although the drafters of the ordinance did not expressly state when the City could refuse to renew a certificate, as opposed to revoking a certificate, the "court should interpret the enactment 'consonant with the intent of the draftsman 'had he anticipated the situation at hand.'" Hudson County v. Jersey City, 153 N.J. 254, 266 (1998) (quoting AMN, Inc. v. Twp. of S. Brunswick Rent Leveling Bd., 93 N.J. 518, 525 (1983); Matlack v. Burlington County Bd. of Chosen Freeholders, 194 N.J. Super. 359, 361 (App. Div.), certif. denied, 99 N.J. 191 (1984)). The purpose of the City's ordinance is to regulate taxicabs and ensure services are provided by competent and responsible companies. Section 5.100.090 seeks to remove substandard services from the City's streets.
It is clear that the drafters intended to authorize the City to remove irresponsible taxicab services whenever the City determines there is a problem with the licensee; regardless of whether it is at the time of renewal or earlier. If the drafters had considered whether the City could refuse to renew a certificate, they likely would have found that the identical reasons which justify the revocation of a certificate also would permit the city to refuse to renew a certificate.
Plaintiff's remaining arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
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