New York Fund for Injured Limo Drivers Wins Surcharge Fight

The New York workers’ compensation fund for black car drivers was within its authority to impose a 2.5% surcharge on noncash tips that passengers paid to drivers, a three-justice panel of the Second Circuit Court of Appeals unanimously ruled on January 2.

The ruling reverses a decision by the U.S. District Court for the Southern District of New York that found the surcharge was illegal, certified the claim as a class action, and indicated that $8.5 million should be returned by the injured drivers’ fund to passengers.

The class action against the New York Black Car Operators’ Injury Compensation Fund was brought by Joseph Kasiotis, a frequent user of livery services (black cars), who argued that the fund was not authorized to impose a surcharge on noncash tips and the fund had been unjustly enriched by the surcharge. Kasiotis argued that while the statute that created the fund allows it to levy a surcharge on black car “services,” a noncash tip is not a payment for services. It is more akin to a gift, he insisted.

The fund argued that the statute establishing it — Article 6-F of the New York Executive Law — authorizes the imposition of the surcharge on noncash tips that it has levied for 20 years and the fund was not unjustly enriched.

When the district court granted summary judgment to Kasiotis, it held that the fund could only impose a surcharge on the cost that passengers pay for their ride, not on their tips.

The federal appeals panel agreed with the fund. It concluded that the plain language of the statute authorizing the fund unambiguously allows it to impose a surcharge on noncash tips and that the district court erred in holding that the fund was unjustly enriched by this practice. The panel ordered the claim dismissed.

In 1999, the New York legislature established the fund as a not-for-profit corporation to provide workers’ comp benefits to the black car drivers in the state. All central dispatch facilities — e.g., qualifying livery and black car operators that dispatch for-hire vehicles — must become members of the fund as a condition of conducting business in the state. Ira Goldstein, executive director of The Black Car Fund, said the ruling affirms that the fund operated in accordance with its founding statute.