By Daniel Wiessner

ALBANY, N.Y. (Reuters) - The New York City agency that regulates taxis had no right to tell taxi medallion owners they had to purchase a specially designed vehicle made by Nissan Motor Co, a lawyer for an industry trade group told the state's top court on Wednesday.

The Greater New York Taxi Association sued the city in 2013 over its "Taxi of Tomorrow" program, which took effect that year and required the fleet of more than 13,000 cabs to be nearly uniform.

A state judge agreed that the city's Taxi & Limousine Commission had overstepped its authority in requiring purchases of the Nissan after the automaker won a $1 billion 10-year contract. But a mid-level appeals court reversed that last year, calling the plan an appropriate response to the need to update the city's fleet.

Mitchell Berns, an attorney for the taxi association, told the Court of Appeals in Albany on Wednesday that only the city council had the authority to require taxi medallion owners to purchase Nissan's NV200 or any other car, while the commission could only require certain specifications to be met.

Elizabeth Freedman of the City Law Department said the city's fleet of cabs previously had been dominated by single cars, including the checkered cab and Ford Crown Victorias.

“The taxi industry has been historically regulated down to the inch, down to the color of the car," she said.

The seven-judge panel appeared split, with some of the judges saying they were concerned that the Nissan program improperly restricted the rights of taxi owners.

“For 10 years you’re going to make the same car, times are going to change, and maybe people will say they don’t like this car, and (the city) says, ‘Tough,’” Judge Eugene Pigott said to Peter Brennan, a lawyer for Nissan.

Judge Jenny Rivera said the program was not really a monopoly because Nissan had won a competitive bidding process. Chief Judge Jonathan Lippman repeatedly noted that taxi owners could also choose to buy one of three pre-selected hybrid vehicles instead of the Nissan.

Brennan told the court that Nissan spent more than $50 million developing the NV200, which it would not have done without a shot at an exclusive contract.

The Court of Appeals decision is expected by next month.

The case is Greater New York Taxi Association v. New York City Taxi & Limousine Commission, New York State Court of Appeals No. 120.

(Editing by Ted Botha)