L&M Bus Corp. v. Bd. of Educ. of the City Sch. Dist. of N.Y.

• Decision Date: 25 May 2018
• Docket Number: 18-CV-1902 (NGG) (SMG)
• Court: U.S. District Court — Eastern District of New York
• Parties: L&M BUS CORP. et al., Plaintiffs, v. BOARD OF EDUCATION OF THE CITY SCHOOL DISTRICT OF THE CITY OF NEW YORK d/b/a NEW YORK CITY DEPARTMENT OF EDUCATION, Defendant.

L&M BUS CORP. et al., Plaintiffs, v. BOARD OF EDUCATION OF THE CITY SCHOOL DISTRICT OF THE CITY OF NEW YORKd/b/a NEW YORK CITY DEPARTMENT OF EDUCATION, Defendant.

18-CV-1902 (NGG) (SMG)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 25, 2018

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, United States District Judge.

Plaintiffs,¹ 17 bus companies (collectively, "Plaintiffs" or the "Bus Companies"), bring this challenge to the bidding process for a contract with Defendant New York City Department of Education ("Defendant" or the "DOE") to provide school-bus transportation services for children in kindergarten through twelfth grade. Last month, this court denied Plaintiffs' application for a temporary restraining order ("TRO") but reserved judgment on the question of whether a preliminary injunction should issue. (See Apr. 5, 2018, Mem. & Order (the "M&O") (Dkt. 16) at 2.) Having considered the Plaintiffs' motion for a preliminary injunction, the court now DENIES the motion.

I. BACKGROUND

A. Facts

The facts of this case are largely set out in the M&O and are repeated here only to the extent relevant to the instant motion.

As all parties are aware, this case is about the specifications for bid number B3182 ("B3182"), pursuant to which the DOE intends to award contracts for operation of approximately 20 percent of the DOE's school-bus routes for children in kindergarten through twelfth grade.² (See Decl. of Lisa D'Amato ("D'Amato Decl.") (Dkt. 35) ¶ 7.) The routes funded by the DOE provide transportation for public-school students; the routes also cover some private-school students and the DOE additionally "reimburses transportation costs for 46 private schools that contract with private companies to provide school transportation." (See Decl. of Alexandra Robinson ("Robinson Decl.") (Dkt. 36) ¶¶ 4-5.) It bears noting that the DOE is the largest school district in the country, responsible for the education of around one million school-age students, approximately 150,000 of whom use DOE-provided buses to get to school. (See D'Amato Decl. ¶ 14; Nat'l Ctr. for Educ. Statistics, Digest of Education Statistics: Table 215.30, Enrollment, Poverty, and Federal Funds for the 120 Largest School Districts, by Enrollment Size in 2014 (2016), https://nces.ed.gov/programs/digest/d16/tables/dt16_215.30.asp.)

Contractors seeking to bid in B3182 must, among other requirements, agree to abide by the terms of contract Serial B3182 (the "Contract") if they are successful. (Compl. (Dkt. 1) ¶ 40.) According to the Bus Companies, the DOE issued the Contract pursuant to its authority under state law to "approve," N.Y. Educ. Law § 2590-g(1)(g), and "[d]evelop," id. § 2590-h(36), a procurement policy for the school district of the City of New York (the "City"), (Compl. ¶ 41.) The only portion of the Contract under dispute in this matter is Section 4.5, which sets forth a number of employment requirements for winning contractors. (See id. ¶¶ 49-78; AmendmentNo. 2 to the Contract (Dkt. 1 at ECF p.34).)³ Collectively, the contract provisions set forth in Section 4.5 are known as the Employment Protection Provisions (the "EPPs"). (Compl. ¶ 49.) Several provisions of Section 4.5 are especially relevant to this case.

First, Section 4.5.1 mandates the creation of "Experienced School Bus Worker Lists" (the "ESBW Lists") from which the winning contractors and their subcontractors must fill "all positions for drivers and attends who provide services in connection with a School Age Bus Contract awarded pursuant to" B3182 until the relevant ESBW List is exhausted. (Id. ¶¶ 56, 60 (quoting Section 4.5.1).) The Bus Companies claim that Section 4.5.1 would require them to fire all employees who "currently work on routes that are encompassed by the B3182 RFB" and replace them with employees hired from the ESBW Lists. (Id. ¶¶ 61-62.) In addition, the Bus Companies point out that "employees, based on their position on the ESBW Lists, [would] choose their employers," and that contractors would "have no right to refuse to hire an individual as an employee once selected by an individual." (Id. ¶¶ 63-64). On a related note, Section 4.5.4 states that "[n]othing herein shall be interpreted to require any contractor or subcontractor to enter into a collective bargaining agreement with any union, nor shall it prohibit any contractor or subcontractor from entering into a collective bargaining agreement with any union." (Section 4.5.4; see Recommendation of L. Berman in Resp. to Protest ("Berman Rec.") (Dkt. 13-1) at 6.)

Second, Section 4.5.2 requires the contractor or subcontractor to pay employees hired from the ESBW Lists "'based upon the highest wage scale pursuant to which such ESBW Hiree was paid for work performed' in connection with a School Age Bus Contract [or] Subcontract since June 30, 2010." (Compl. ¶ 66 (quoting Section 4.5.2).) "Contractors and subcontractorsmay pay a wage higher than previously paid, but not one lower than the employees' prior wages." (Id.) Section 4.5.3 additionally requires that the contractor or subcontractor "contribute at least $1,252.48/month towards health and welfare benefits on behalf of each employee who elects family benefit coverage and $780.77/month for employees who select individual coverage." (Id. ¶ 67.) These amounts are "based on the amount that an employer must contribute for health insurance coverage under" the collective bargaining agreement ("CBA") of Local 1181 of the Amalgamated Transit Union ("Local 1181"). (Id. ¶ 68.) If a contractor can provide health benefits for less than the contractually required amount, the contractor must nevertheless "use the excess funds 'to provide additional or improved health/welfare benefits.'" (Id. ¶ 69 (quoting Second Amended Round 1 Questions & Answers (Dkt. 1 at ECF p.41) ¶ 115).) Section 4.5.4 requires a contractor or subcontractor to contribute to the pension fund or plan in which the hiree most recently participated unless the hiree affirmatively opts out of the prior plan. (Id. ¶ 70.) The contractor or subcontractor's contribution is calculated using "the majority of employees of equivalent seniority in the job function for which the ESBW hiree was hired . . . participating in such Prior Plan." (Id. ¶ 72 (quoting Section 4.5.4).) Section 4.5.4 also requires the contractor or subcontractor to "enter into a participation agreement" with the prior plan which "imposes no greater obligations than those imposed on a majority of the other contributing employees in such Prior Plan." (Section 4.5.4; see Compl. ¶ 73.)

According to the Bus Companies, the EPPs were once standard in DOE bid requests, but the DOE discontinued this practice in 2012 following a ruling by the New York Court of Appeals that the DOE had not met "its burden of establishing that the [EPPs contained in old contracts (the "Old EPPs")] furthered either of the twin goals of the public bidding law: (1) getting the services at the lowest cost or (2) preventing favoritism, improvidence, fraud, orcorruption in the awarding of public contracts." (Compl. ¶ 50 (citing L&M Bus Corp. v. N.Y.C. Dep't of Educ., 950 N.E.2d 915, 920-21 (N.Y. 2011)).) The Bus Companies allege that the DOE has sought to reinsert the EPPs in its bid contracts due to lobbying by Local 1181, which the Bus Companies allege has a friendly relationship with New York City Mayor Bill de Blasio. (Id. ¶¶ 52-53.) They claim that "Local 1181's political efforts appear to have paid off because the [EPPs in new contracts (the "New EPPs")] . . . are substantially similar to the Old EPPs." (Id. ¶ 54; accord id. ¶ 65 ("The Contract also contains provisions that extend beyond what was required by the Old EPPs.").) The Bus Companies maintain that the DOE has inserted the New EPPs in order "to avoid labor strife with Local 1181" and based on the apparent belief that this will allow the Local 1181 Pension Fund (the "Local 1181 Fund") to regain its exemption from pension fund withdrawal liability. (Id. ¶¶ 74-75.)

The DOE claims that it has not "reinstated" the EPPs but instead, faced with the simultaneous expiration of contracts that alternatively do and do not contain the EPPs, is choosing to institute a uniform standard of "new" EPPs. (See Def Mem. of Law in Opp'n to Pl. Mot. ("Def. 1st Opp'n") (Dkt. 12) at 5.) The DOE states that the New EPPs are proper because they "should eliminate labor unrest[,] provide for a stable, high-quality labor force[,] . . . [and] facilitate the pursuit of a solution to pension withdrawal liability." (Mem. Regarding New EPP Provisions in Procurements of New K-12 Bus Contracts ("EPP Mem.") (Dkt. 13-2 at ECF p.2) at 3.)

Local 1181 is not the only union that represents school bus drivers and other employees. The Bus Companies state that, as of June 2017, 97 percent of school-age bus drivers were members of a union, but that "many former Local 1181 members" have joined other unions. (Compl. ¶ 27.) Ten of the Bus Companies are parties to a CBA with a union other than Local1181 (id. ¶ 28); four of the Bus Companies are parties to a CBA with Local 1181 (id. ¶ 29); and three of the Bus Companies are not parties to a CBA with any union (id. ¶ 30).⁴ Each of these CBAs "sets the general terms of employment through provisions that address hiring, firing, wages, and benefits." (Id. ¶ 31.) The Bus Companies claim that many of Local 1181's CBAs require contributions to the Local 1181 Fund and that the fund is "underfunded." (Compl. ¶¶ 38-39.)

B. Procedural History

The Bus Companies filed this action on March 29, 2018. (Compl.) The court held a show-cause hearing regarding the application for a TRO on April 3, 2018, at which counsel for both sides appeared. On April 5, 2018, this court denied the Bus Companies' request for a TRO. (M&O.) Later that day, however, Justice Eileen Rakower of the New York Supreme Court granted the Bus Companies' request for a TRO in a separate Article 78 proceeding challenging the validity of the New EPPs under...