A state judge froze the assets of Boston’s largest taxi fleet owner Thursday, ruling that cabdrivers have a “reasonable likelihood” of winning a class-action lawsuit that accuses Edward J. Tutunjian and smaller fleet owners of wrongly treating cabbies as independent contractors instead of as employees, costing drivers hundreds of millions in unpaid wages.
The ruling, which could foreshadow a transformation of the city’s billion-dollar taxi industry, came after Suffolk Superior Court Judge Linda E. Giles said at a hearing Tuesday that the court may well decide the suit for the drivers on summary judgment, making a trial unnecessary.
The suit asks the court to designate as a class thousands of drivers who have paid fees of about $100 a shift to lease cabs from three fleet owners since March 2006. Given the enormous potential damages at stake, Giles granted a motion to freeze the assets of Tutunjian, the king of Boston’s cab industry and the focus of a recent Spotlight Team series on the exploitation of drivers by fleet owners.
Tutunjian owns Boston Cab, by far the largest fleet in Boston. His corporations own 372 taxi medallions — one in five of the city’s 1,825 — each with a market value of about $600,000. His business empire is worth about a quarter-billion dollars and includes parking lots and garages near Fenway Park, Back Bay apartment buildings, a business making loans at high interest rates to aspiring taxi owners, and several vineyards in Chile.
Shannon Liss-Riordan, the Boston lawyer representing four cabdrivers named in the suit, said the order will not interfere with Tutunjian’s businesses but will prevent him from selling or transferring his assets pending the outcome of the case.
“We want the cabdrivers to keep working, but we don’t want to face the risk of the assets being dissipated while we proceed with this case,’’ she said. Liss-Riordan said she expects the judge to rule on motions seeking summary judgment and certification of a class within a year.
EJT Management, which oversees Tutunjian’s taxi companies, said in a statement late Thursday that it was “extremely disappointed’’ in the judge’s decision. “We are confident that drivers are properly classified as independent contractors and strongly believe that any contrary decision would result in a loss of income, hours, and flexibility for cabdrivers.’’
The statement also noted that the judge told both sides after she issued the order that she wants to hold a follow-up hearing shortly, which “suggests that the issue may be reconsidered.’’
Tutunjian figured prominently in the Spotlight series, which documented the many ways in which some taxi fleet owners take advantage of drivers. The report found that many cabdrivers feel pressured to pay Tutunjian’s staff small bribes to get keys to Boston Cab taxis they lease. Drivers are also pressed to buy gasoline at above-market prices from Tutunjian’s gas pump at his mammoth Kilmarnock Street garage. And they face frequent demands that they cover phantom shortfalls in shift payments — demands they cannot dispute because the cab firm seldom provides the legally required receipts, the Globe reported.
Two months after the Spotlight series ran, Internal Revenue Service agents and other federal agents and local police officers, armed with a search warrant, raided the garage on May 31. The IRS agents had their guns drawn, according to a cabdriver who witnessed the raid, and left with boxes of records.
A spokesman for US Attorney Carmen M. Ortiz said the US District Court search warrant was sealed and that prosecutors were not releasing any information. The Spotlight Team had reported that federal authorities began investigating operations at Boston Cab last year. Boston Police Commissioner Edward F. Davis told the Globe that he had alerted federal authorities about potential criminal activities at the Kilmarnock Street garage.
Dot Joyce, a spokeswoman for Mayor Thomas M. Menino, declined to comment Thursday on the judge’s order.
On the first business day after the police raid, Liss-Riordan filed an emergency motion asking the judge to forbid Tutunjian from transferring any assets. The motion said cabdrivers want to ensure that “thousands of working-class drivers, most of whom are immigrants — will be able to collect the tremendous debt of back wages they expect to be awarded.’’
The cabdrivers’ lawsuit alleges that cab owners have been breaking Massachusetts wage law with impunity for years. Owners have been misclassifying drivers as independent contractors — and charging leasing fees — instead of treating drivers as employees entitled to minimum wage, overtime, and benefits, according to the complaint.
In Tuesday’s court hearing, a lawyer for Tutunjian, Daniel J. Wood of Wrentham, argued that the plaintiffs have no likelihood for success in their claim, noting that the city has authorized taxi owners to treat drivers as independent contractors since the 1970s.
He said that freezing Tutunjian’s assets would hamper his client’s taxi business. And he dismissed concerns that Tutunjian might transfer or hide his assets in spite of the recent federal raid.
“When federal agents swoop down with guns drawn, it’s not a good sign,’’ she said.
She added, “I think there’s a likelihood that [Liss-Riordan’s] going to prove her case.’’
If Giles or another state judge ultimately decides the case for the plaintiffs, it would upend Boston’s taxi industry and the business model that has been used for decades.
For many years, Boston cabdrivers were classified as employees of their taxi companies, with owners and drivers splitting the daily meter receipts and drivers keeping their tips. At some companies, drivers received an array of benefits and protections, including subsidized health care coverage, paid vacations, pensions, and worker’s compensation.
But in the 1970s, taxi fleets in Boston and other cities in the US gradually stopped hiring drivers as employees. Boston’s police commissioner — who oversees taxi regulation — lifted a decades-old ban on medallion owners leasing cabs to independent contractors.
Today, behind the wheel of about half of Boston’s cabs are so-called shift drivers, who own neither the car nor its medallion, or license. The shift drivers pay to work: a fixed fee of about $100 due every 12-hour shift, not including gas and, in numerous cases, improper charges and illegal payoffs.
For the owners, the business model has generated a steady stream of money, much of it in cash. For each cab an owner rents for two shifts a day, 300 days a year, he earns about $60,000 annually, regardless of how many fares the driver picks up.
Meanwhile, many drivers say they struggle to make a living after paying their shift fees and expenses, and sometimes end up making less than minimum wage.
Donna Blythe-Shaw, an organizer for the United Steelworkers and the Boston Taxi Drivers Association’s representative, said the judge’s order and comments hold out the promise of a “sea change’’ in the taxi industry.
“Pay for work will someday be a thing of the past like indentured servants and sharecroppers,’’ she said.
In addition to Boston Cab, the cabdrivers are suing USA Taxi in Dorchester and the Independent Taxi Operators Association. George Summers owns USA Taxi and has 36 medallions, while John Byda has nine medallions in the Independent Taxi Operators Association, said Liss-Riordan.
Summers declined to comment Thursday through a manager. Byda could not be reached for comment.
If a judge does decide for the cabdrivers on summary judgment, the ruling would almost certainly be appealed to the state Supreme Judicial Court.
Prompted by the Spotlight report on abuses in the cab industry, the city has hired Nelson\Nygaard Consulting Associates Inc. in Boston to examine its taxi operations. The contract is expected to exceed $25,000. The report is due in a few months.