The City Council last year voted to end San Diego's restrictions on permits after receiving reports that the $3,000 documents were being traded for as much as $140,000, resulting in more difficult working conditions for drivers. The MTS is the agency implementing the change.
The city had issued only 993 permits.
Supporters of the taxi drivers, who pushed for the lid to be lifted, said 89 percent of them did not own permits. They said the system had forced them to drive for dangerously long periods and discouraged them from reporting damage to vehicles.
Permit holders asked Judge Ronald Prager for a temporary restraining order to stop the MTS from issuing new permits. The San Diego Transportation Association contended the action by the City Council should have gone through an environmental review.
The judge disagreed, but will listen to oral arguments from both sides Tuesday at the San Diego Hall of Justice.