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Daniels v Corrigan: compliance with the law does not establish agency.


This article analyzes the first district's rejection of a plaintiffs assertion that a cab driver was the agent of the cab company. The court found that the driver did not become an agent--and hence, the company did not become liable--simply based on compliance with municipal code regulations.

Addressing an apparent matter of first impression, the first district recently established precedent regarding taxicab affiliation liability where the plaintiff attempted to impute such liability based on the Chicago Municipal Code (the "municipal code" or "code") provisions governing the licensing and operation of taxicabs and taxicab affiliations. (1)

This article provides a brief overview of the Chicago taxicab industry and the municipal code provisions regulating that industry. Next, it analyzes the appellate court's decision in Daniels. Finally, it looks at the potential impact of Darnels in taxicab litigation and other areas.

The Chicago taxicab industry and the municipal code

In the 1990s, the licenses (medallions) necessary to operate a taxicab in Chicago were highly consolidated in a limited number of owners. To increase the number of market participants, the city amended the municipal (code) to provide that "[n]o taxicab affiliation may have more than 25 percent of the total number of city licensed taxicabs as affiliates." (2)

Section 9-1 12 of the code governs the licensing and operation of the nearly 6,700 taxicabs and other public passenger vehicles that service Chicago. These regulations establish the exclusive licensing standards and other requirements for taxicab licensees and affiliations. In addition, the code contains numerous provisions relating to, inter alia, safety, insurance, advertising, and radio dispatch. The overall purpose of these provisions of the code is to ensure the safe and effective operation of the taxicab and livery vehicle fleets in Chicago.

By ordinance, except where the holder of the public license (i.e., medallion) or a family member operates the taxicab, the city requires all holders of public vehicle licenses to be affiliated with a licensed affiliation. (3) The code defines an "Affiliation" as "an association of public passenger vehicle license holders organized and incorporated for the purpose of providing its members with a Chicago business address, telephone number registered to the affiliation, color scheme where applicable, a trade name or emblem where applicable, a two-way radio dispatch system, insurance and the designation of an authorized registered agent." (4)

A taxicab affiliation provides a form of identification for individual taxicabs. For example, an affiliated taxicab must carry the distinctive color and markings associated with its respective affiliation, such as the "Yellow," "Flash" or "Checker" cabs that operate on the streets of Chicago. (5)

An affiliation also helps to ensure that its members comply with various provisions of the code. For example, the code requires that the affiliation provide each taxicab with a working two-way radio dispatch system.

In short, section 9-112, and specifically section 9-112-010(a), of the municipal code provides the framework for the relationship and obligations of affiliations and affiliates vis-a-vis each other and the general public.

The law of agency and the taxicab industry

The first district held that "[t]he test of agency is whether the purported principal has the right to control the manner and method in which the work is carried out by the agent and whether the agent is capable of subjecting the principal to personal liability." (6) In a similar vein, " [t]he doctrine of respondeat superior allows an injured party to hold a principal vicariously liable for the conduct of his or her agent." (7)

The vast majority of case law in this area of tort liability addresses vehicles leased from affiliations or other companies, rather than individually owned and operated vehicles. (8) Against this backdrop, the plaintiff in Daniels asserted that the provisions of the municipal code provided that taxicab affiliations were principals, and were thus responsible for the acts and omissions, of their affiliated taxicabs as a matter of law.

The lawsuit arose out of a car accident between a vehicle driven by plaintiff and a taxicab affiliated with Yellow Cab Affiliation and bearing a medallion previously owned by YellowTwo, LLC. Plaintiff claimed approximately $15 million dollars in damages as a result of the accident. The owner of the taxicab and its driver, however, held the minimum amount of insurance of $350,000, as required by the municipal code.

Accordingly, the plaintiff attempted to assert several claims against Yellow Cab Affiliation and various other third parties based on the taxicab owners' Chicago-mandated participation in a cab affiliation under the doctrines of agency, respondeat superior, joint venture and similar ilk. Relying on a portion of code section 9-112-390, the plaintiff in Daniels argued that any "indicia of affiliation shall be sufficient to establish the responsibility of the affiliation in the operation of the taxicab." (9) The plaintiff also argued that the actions of the affiliation and others in compliance with the municipal code demonstrated control of the taxicab sufficient to impute tort liability against those third parties.

As an issue of first impression, the appellate court affirmed the circuit court's grant of summary judgment for the affiliation and other defendants, rejecting the plaintiff's assertion that an affiliation's compliance with the code supported a finding of agency. Addressing the issue of liability arising out of an automobile accident involving an individually owned and operated taxicab, the court affirmed that taxicab affiliations and other parties involved in the sale, financing and insuring of taxicabs and medallions may not be held liable for such accidents.

The court, as did the trial court below, found that municipal code "Section 9-112-390 is being taken out of context by plaintiff and does not establish an agency relationship." (10) Moreover, the court affirmed the trial court's finding that the taxicab affiliation's compliance with its legal obligations similarly did not create such a relationship. (11)

Section 9-112-390 does not establish an agency relationship. Applying familiar rules of statutory construction to its analysis of the municipal code, the first district noted that a "'statute should be evaluated as a whole: each provision should be construed in connection with every other section.'" (12) The court, analyzing the code's definition of "affiliation," noted the trial court's finding that the purpose of this definition was "to make certain that a particular affiliation is identified in relation to a taxicab so that city requirements are followed and capable of enforcement." (13)

The court further highlighted that principles of statutory interpretation require that the court review the title or heading of a particular statutory provision in construing the meaning of the provision. (14) From this principle, the court found that the title of section 9-112-390, "License number and driver identification --Display[(15)] ... also militates against plaintiff's interpretation." (16)

The court further observed that "[t]his definition did not provide that the purpose of taxicab affiliations was to serve as the insurer for affiliates who personally own medallions and operate their cabs." (17) The municipal code contains various provisions that require taxicab licensees to obtain insurance and otherwise imposes liability for tortious conduct on those licensees.

For example, the code provides criteria for issuance of a license including, inter alia, the ability to provide a safe and maintained vehicle, the ability to pay for insurance and the ability to satisfy any judgment or awards resulting from the operation of the taxicab. (18) Further, section 9-112-100 describes the city's process for investigating and issuing licenses, which refers to "the financial ability of the applicant to ... pay all judgments and awards which may be rendered for any cause arising out of the operation of a public passenger vehicle during the license period." (19)

The court noted, however, that the code imposes certain obligations upon taxicab affiliations with respect to their affiliates. (20) For example, the affiliation cannot dispatch a taxicab for purposes of providing transportation to a customer unless the vehicle is properly licensed. (21) Taxicab affiliations are also "responsible" for ensuring that dispatch equipment is activated and operating at all times when an affiliated taxicab is in service. (22)

Further, with respect to underserved areas, affiliations "have an affirmative duty to insure compliance ... by the drivers of vehicles with taxicab licenses issued to them or their affiliates." (23) These and other requirements necessary for a taxicab's lawful operation become the "responsibility" of the affiliation when the cab displays its colors, trade name or emblem; however, such responsibility does not create an agency relationship.

The first district found that the Daniels plaintiff's unreasonably broad reading of the code would improperly render other provisions of the code superfluous and meaningless. (24) For example, the city's process for investigating and issuing licenses refers to "the financial ability of the applicant to ... pay all judgments and awards" arising out of the operation of a taxicab. (25)

As the appellate court observed: "If affiliations were, as a matter of law, the principals of their affiliates, the city would not need to investigate the financial ability of licensees to pay judgments or make certain that affiliates--but not the affiliations--have sufficient insurance. Plaintiff's interpretation of section 9-112-390 would render these sections on the financial responsibility of licensees meaningless." (26)

Moreover, as the city was clearly capable of doing based on the language of section 9-112-100, if it wanted section 9-112-390 to apply to the payment of judgments arising out of the operation of taxicabs, not to mention the creation of an agency relationship, it clearly could have done so. (27)

In sum, the appellate court found that nothing in section 9-112-390 may reasonably be construed as establishing an agency relationship between city-licensed affiliations and their affiliates, much less financial responsibility on the part of affiliations for the operations of thousands of affiliate-owned and -operated taxicabs. Thus, the first district "concludejd] that section 9-112-390 of the Chicago Municipal Code did not make [the medallion owner] the agent of the Yellow Cab Affiliation 'as a matter of law.'" (28)

Compliance with other code provisions does not create an agency relationship. Turning to the more traditional factors applicable to the agency analysis, the appellate court held that the affiliation's observance of its statutory duties likewise did not create an agency relationship.

As noted above, the right to control the manner and methods in which work is performed by an agent is often the harbinger of establishing a principal-agent relationship. (29) The appellate court further noted that no one factor is determinative as to whether an agency relationship exists; rather, the court must analyze such factors as '"right to control the manner in which the work is done, the method of payment, the right to discharge, the skill required in the work to be done, and who provides the tools, material, or equipment.'" (30)

In addition to the specific factual scenario and agreements governing the relationship between the taxicab at issue and the affiliation in Daniels, the appellate court reviewed various provisions of the code the plaintiff argued demonstrated control of the taxicab by the affiliation--and rejected each in turn.

Noting that the taxicab at issue was owned by a third party, rather than leased from an affiliation, the appellate court distinguished the case in Daniels from leased cab cases. (31) The court then proceeded to analyze certain provisions of the code governing the taxicab-affiliation relationship and held that compliance with these provisions did not make the affiliation the principal of the taxicab. The first district relied on several provisions of the municipal code in reaching its holding.

For example, the code requires that individual taxicabs carry a minimum of $350,000 in insurance. The appellate court held that an affiliation's facilitation of the purchase of such insurance, even from a preferred insurer, could not constitute the control necessary to establish an agency relationship. Specifically, the court found that one of the stated purposes of an affiliation was to provide affiliates with insurance and "[t]he affiliation, by facilitating affiliates' purchase of the minimum amount of insurance required by section 9-112-220, was simply complying with this law." (32)

The court also noted that the code requires affiliates to be associated with a licensed affiliation, that the affiliation ensure each affiliate has functioning radio equipment, and that the affiliation serve as the registered agent for the affiliate. (33) In each of these instances, as well as with other provisions of the code, the appellate court found that the affiliation was simply complying with its legal obligations; actions insufficient to establish an agency relationship.

The court also recounted its analysis of the Illinois School Code and the principles of agency with respect to the teacher-student relationship in Knapp v Hill. In Knapp, the court noted that it was "faced with the somewhat unique situation where the 'control' necessary to support the creation of a principal-agent relationship is the same 'control' implicit in the nature and the undertaking of the education process." (34)

The Knapp court recognized that the "control" aspect of plaintiff's agency claim was grounded in the nature of the education process as reflected in the Illinois School Code. (35) Similarly, in Daniels, the court found that the vast majority of factors cited by plaintiff in support of his agency allegations merely reflect the nature of the affiliation-affiliate relationship created by the municipal code. For example, the court noted that plaintiff conceded that the code required that the driver join an affiliation, and required that the affiliation, inter alia, ensure that the taxicab had working radio dispatch equipment and a registered agent. (36)

Applying these principles, the court held that none of the corporate defendants exercised the requisite control over the taxicab at issue to establish an agency relationship. (37)


Although the primary impact of the Daniels decision will be felt in taxicab and livery vehicle litigation, the decision may be relevant to other areas as well.

Especially for the personal injury or tort plaintiff and counsel, but in other contexts as well, the ownership of the taxicab and medallion are of utmost importance in evaluating potential defendants and other responsible parties. Defense counsel must similarly be aware of ownership of the taxicab in order to protect affiliations and other relevant third parties from impermissible attempts to assign liability.

In short, whether suing or defending a lawsuit arising out of the operation of a taxicab, the fact that the taxicab is leased from an affiliation or other third party or independently owned and operated may well be dispositive of liability and recovery.

The Daniels decision also has obvious implications outside the context of taxicab litigation. For any industry regulated by municipal ordinance or other statutory provisions, e.g., construction, infrastructure, schools, etc., the decision makes clear that compliance with legal requirements may not serve as a basis for imputation of a principal-agent relationship.

In sum, in the absence of a specific provision establishing such liability, the courts must analyze the parties' relationship under the traditional test of agency while noting the sometimes special nature of relationships created by legislative fiat.

(1.) Daniels v Corrigan,, 382 Ill App 3d 66, 886 Nh.2d 1 193 (1st D 2008), appeal denied, 228 Ill 2d 531, 889 NE2d 1115 (2008). Although outside the scope of this article, the first district's opinion also appears to be the first appellate decision on the substance of recently amended Supreme Court Rule 274 governing second or successive motions for reconsideration. That rule states that "[a] party may make only one postjudgment motion directed at a judgment order that is otherwise final." 210 Ill 2d R274. While prior decisions addressed the retroactivity of this amendment and the tolling of the time for appeal, the Daniels opinion addressed the substance of Rule 274, noting that the second motion for reconsideration improperly raised new issues but that the circuit court did not abuse its discretion in addressing the merits of that motion. Daniels at 71, 886 NE2d at 1201.

(2.) Chicago Municipal Code [section]9-112-230(b).

(3.) Id [section]9-112-080(b)7.

(4.) Id [section]9-112 010(a).

(5.) For example, [section]9-112-390 of the code requires that such taxicabs carry "the affiliation's color scheme, trade name or emblem and telephone number." Notably, the code allows for the use of taxicabs in intrastate commerce subject to compliance with the Illinois Commerce Commission and Illinois Commercial Transportation Law. Code [section]9-112-470.

(6.) Knapp v Hill, 276 Ill App 3d 376, 380, 657 NE2d 1068, 1071 (1st D 1995).

(7.) Daniels at 75, 886 NE2d at 1203-04.

(8.) See, for example, Davila v Yellow Cab Co, 333 Ill App 3d 592, 776 NE2d 720 (1st D 2002).

(9.) Daniels at 72, 886 NE2d at 1201.

(10.) Id at 72-74, 886 NE2d at 1202-03 ("We agree with the trial court that plaintiff took section 9-112-390 out of context"). See also Daniels v Corrigan (Trial Order), No 01 L 9115, 2006 WL 5962863, at *2-3 (holding "that [section]9-112-390 does not establish an agency relationship between an affiliated taxicab and an affiliation").

(11.) Daniels at 75-80, 886 NE2d at 1204-08.

(12.) Id, quoting Bonaguro v County Officers Electoral Board, 158 Ill 2d 391, 397, 634 NE2d 712, 714 (1994).

(13.) Daniels at 72-73, 886 NE2d at 1202. See also Daniels (Trial Order), 2006 WL 5962863, at *4.

(14.) Daniels at 73, 886 NE2d at 1202 ('"Interpreting a statute as a whole means interpreting a specific provision in the context of other parts of the statute, including the heading under which the provision appears."' Citation omitted).

(15.) Chicago Municipal Code [section]9-112-390 (emphasis in original).

(16.) Daniels at 73, 886 NE2d at 1202.

(17.) Id. See also Daniels v Corrigan, No 01 L 9115, 2005 WL 6175028, at *2.

(18.) Chicago Municipal Code [section]9-112-090(a).

(19.) Id, [section]9-112-100 (emphasis added). See also [section]9-112-240 ("Every licensee shall pay each judgment or award for loss or damage in the operation or use of a public passenger vehicle rendered against the licensee." (Emphasis added)).

(20.) Daniels at 73, 886 NE2d at 1202 (noting that responsibilities and duties of affiliations contained in [section]9-112-390 are reflected in other provisions of the code).

(21.) Chicago Municipal Code [section]9-112-230(c).

(22.) Id, [section]9-112-230(e)(l).

(23.) Id, [section] 9-112-215(e).

(24.) Daniels at 73, 886 NE2d at 1202. See also Village of Algonquin v Tiedel, 345 Ill App 3d 229, 233-34, 802 NE2d 418, 422 (2nd D 2003) (rejecting party's interpretation of the Illinois Municipal Code that "focus[ed] exclusively on one section of an entire article and propose[ed] an interpretation that is both out of context and against canons of statutory construction").

(25.) Chicago Municipal Code [section]9-112-100 (emphasis added). See also [section]9-112-240 ("Every licensee shall pay each judgment or award for loss or damage in the operation or use of a public passenger vehicle rendered against the licensee." (Emphasis added)).

(26.) Daniels at 73-74, 886 NE2d at 1203.

(27.) See Village of North Aurora v Anker, 357 Ill App 3d 1049, 1057, 830 NE2d 882, 888-89 (2nd D 2005) (rejecting broad interpretation of ambiguous language in Illinois Vehicle Code). The first district also rebuffed plaintiff's attempt to analogize his case to that in Schedler v Rowley Interstate Trans Co, Inc, 68 Ill 2d 7, 368 NE2d 1287 (1977). The court found Schedler distinguishable. "Not only does it involve a different industry with different policy implications, but the regulations in Schedler specifically required that the lease provide for 'the exclusive possession, control, and use of the equipment, and for the complete assumption of responsibility in respect thereto, by the lessee for the duration of ... [the] lease.'" Daniels at 74, 886 NE2d at 1203, alteration in original, quoting Schedler at 11, 368 NE2d at 1288-89. The court found that the taxicab owner and "not the affiliation, had exclusive possession, control, and use of the cab, and at the time of the accident, the cab and medallion were owned by [the licensee] and leased to [a third party]." Daniels at 74, 886 NE2d at 1203.

(28.) Daniels at 74, 886 NE2d at 1203.

(29.) Knapp at 380, 657 NE2d at 1071.

(30.) Daniels at 75, 886 NE2d at 1204, quoting Yellow Cab Co v Industrial Commission, 238 Ill App 3d 650, 652, 606 NE2d 523, 525 (1st D 1992).

(31.) Daniels at 75, 886 NE2d at 1204, citing Davila, Yellow Cab Co, and Yellow Cab Co v Industrial Commission, 124 Ill App 3d 644, 464 NE2d 1079 (1st D 1984).

(32.) Daniels at 77, 886 NE2d at 1206 (emphasis supplied). Similarly, in recommending that its affiliates purchase insurance from a specific carrier, the appellate court found that the affiliation "was, again, simply acting in conformity with the Code, which requires that insurance be provided by 'solvent and responsible insurers' approved by the commissioner." Id at 78, 886 NE2d at 1206, quoting Chicago Municipal Code [section]9-112-220.

(33.) Daniels at 77-78, 80, 886 NE2d at 1205-06, 1208.

(34.) Knapp at 380, 657 NE2d at 1071.

(35.) Id at 380-81, 657 NE2d at 1071-72.

(36.) Daniels at 77-78, 886 NE2d at 1205-06.

(37.) Id at 80, 886 NE2d at 1208.

Justin Lee Heather is an associate in the litigation department of Skadden. Arps, Slate, Meagher & Flom LLP in Chicago. The 2008 recipient of the ISBA/YLD Young Lawyer of the Year Award (Cook County), he has published widely and is co-editor of the ISBA YLD Newsletter.
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Author:Heather, Justin Lee
Publication:Illinois Bar Journal
Date:Nov 1, 2009
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