Appeals Judges Push Back Against NYC Taxi Drivers’ $2.5 Billion RICO Suit

Federal appeals judges expressed serious hesitation on Friday over a proposal to force New York City to pay potentially billions of dollars to cab drivers who lost money investing in taxi medallions. A three-judge panel for the Second U.S. Circuit Court of Appeals heard oral arguments in a class-action racketeering suit filed by drivers seeking to revive their claims against the city.

The drivers allege that during Mayor Michael Bloomberg’s administration, the city generated more than $850 million by overcharging cabbies for medallions while knowing ride-sharing services like Uber and Lyft would undermine their value. Under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, the drivers are seeking treble damages totaling more than $2.5 billion.

Judges Question Taxpayer Liability for Massive Damages

During the hearing, U.S. Circuit Judge Barrington Parker openly questioned whether local taxpayers should bear the financial burden of a multibillion-dollar judgment. Judge Parker noted that awarding triple damages against a city under the RICO statute would break new legal ground, as no municipality has faced such penalties in the 50-year history of the law.

An attorney for the drivers, Joseph Pace, argued that the city engaged in an unprecedented scheme that used medallion profits to fund public services for local residents. However, Jennifer Lerner of the New York City Law Department countered that treble damages act as punitive measures, citing a 1981 Supreme Court ruling that protects local governments from punitive damages because they ultimately penalize taxpayers rather than individual wrongdoers.

The Collapse of Medallion Values and Long-Term Debt

New York City first created taxi medallions in 1937 to limit the number of operating cabs after the Great Depression. More than 13,500 medallions are currently in circulation. For decades, medallion values steadily increased, hitting peak prices as high as $1 million each in 2014 before sharply declining as ride-sharing services entered the market without needing medallions.

Today, medallion values have dropped to well under $200,000. Drivers originally filed their lawsuit in 2021 in the Eastern District of New York, claiming the New York City Taxi & Limousine Commission misled buyers for 13 years by claiming the permits were safe investments. As a result of the price collapse, many cab drivers remain saddled with significant mortgage debt on their permits.

What This Means for Affected Cab Drivers

For New York City taxi drivers struggling with medallion debt, this appeal represents a critical attempt to recover financial losses through federal court. However, the panel’s skepticism signals that overcoming municipal immunity from punitive damages remains a steep legal hurdle.

Drivers facing debt or considering legal options regarding medallion financing should monitor court dockets for the Second Circuit’s upcoming written decision. Cabbies affected by medallion debt may also want to keep detailed financial records of their original permit purchases, loan agreements, and ongoing mortgage payments.

When Consulting a Lawyer May Help

Navigating complex class-action suits, debt obligations, and federal racketeering claims requires specialized legal knowledge. Taxi drivers dealing with high loan balances or legal disputes over medallion investments may benefit from speaking with a legal professional to evaluate their options.

This article is general information based on Courthouse News Service and court or agency records available at publication time. It is not legal advice; laws and deadlines differ by state and by case. Published November 6, 2026.