Laidlaw, Inc. v. Student Transp. of America, Inc., CIV. 98-2241(WGB).

Decision Date14 September 1998
Docket NumberNo. CIV. 98-2241(WGB).,CIV. 98-2241(WGB).
Citation20 F.Supp.2d 727
PartiesLAIDLAW, INC. and Laidlaw Transit, Inc., Plaintiffs, v. STUDENT TRANSPORTATION OF AMERICA, INC., Denis Gallagher, Robert H. Byrne, John Reddan, John Emberson, John Carey, Peter Pearson, and Thomas Gallagher, Defendants.
CourtU.S. District Court — District of New Jersey

Gregory D. Saputelli, Clare M. Diemer, Obermayer, Rebmann, Maxwell & Hippel, LLP, Haddonfield, NJ, Thomas A. Leonard, William J. Leonard, Mathieu J. Shapiro, Edward B. Ertel, Obermayer, Rebmann, Maxwell & Hippel, LLP, Philadelphia, PA, for Plaintiffs Laidlaw, Inc. and Laidlaw Transit, Inc.

Gerald A. Liloia, Michael R. O'Donnell, Riker, Danzig, Scherer, Hyland & Perretti, LLP, Morristown, NJ, Thomas O. Kuhns, Brian D. Sieve, Ellen T. Ahern, James C. Joslin, Kirkland & Ellis, Chicago, IL, for Defendants Student Transportation of America, Inc., Denis Gallagher, Robert H. Byrne, John Reddan, Peter Pearson, and Thomas Gallagher.


BASSLER, District Judge.

Plaintiffs Laidlaw Transit, Inc. ("Laidlaw") and Laidlaw, Inc. have moved for a preliminary injunction against Defendant Student Transportation of America, Inc. ("STA"), a company that competes directly against Laidlaw, and former Laidlaw executives, Defendants Denis Gallagher ("Gallagher") and Thomas Gallagher, who have left Laidlaw to form STA. Plaintiffs also move for supplemental preliminary injunctive relief against Defendants Robert H. Byrne, former Laidlaw legal counsel, and Defendants John Reddan and Peter Pearson, former Laidlaw executives. The Court has jurisdiction pursuant to 28 U.S.C. § 1332 (diversity). For the reasons set forth below, the Court denies Plaintiffs' request for a preliminary injunction and for supplemental preliminary injunctive relief.


Pursuant to Fed.R.Civ.P. 52(a), the Court makes the following findings of fact:

1. The Parties

a. Laidlaw and Laidlaw, Inc.

1. Laidlaw, Inc. is a corporation organized and existing under the laws of the Nation of Canada with its principal place of business in the Province of Ontario. (Ex. D-9, at 1).

2. Laidlaw, Inc.'s 1997 assets were over $6 billion, which was a 24% increase over its fiscal-year 1996 assets. (Tr. at 4:141.)

3. Laidlaw, Inc. had a 1997 revenue of over $3 billion, which was a 32% increase over fiscal-year 1996 revenue. (Tr. at 4:140-41.)

4. Laidlaw is a corporation organized and existing under the laws of the State of Delaware. (Tr. at 1:50.)

5. Laidlaw is a wholly owned subsidiary of Laidlaw, Inc. Laidlaw is in the transit business, specifically including school bus transportation. (Tr. at 1:49.)

6. Laidlaw is the principal consolidator in the school bus industry in North America. (Tr. at 4:141.)

7. Laidlaw's 1997 revenues were $1.36 billion. (Tr. at 4:142.)

8. Laidlaw's market share of school buses operated by the private sector in North America is 25%. (Tr. at 4:142.)

9. In terms of revenues, Laidlaw is three times larger than Ryder — its next largest competitor in the school bus transportation industry. (Tr. at 2:22.)

b. STA

10. STA currently operates in three states: California, Oregon and Pennsylvania. In September 1998, STA will begin formal operations in New Jersey. (Tr. at 6:41.)

11. STA's total assets are approximately $10 million. (Tr. at 6:41.)

12. STA's current revenues are approximately $13 million. (Tr. at 6:41.)

13. STA currently owns approximately 450 school buses. (Tr. at 6:41.)

14. STA has approximately 400 employees in the school bus business. (Tr. at 6:41.)

15. Since its formation, STA has purchased four companies: (1) Santa Barbara Transportation in Santa Barbara, California; (2) North Bend Transportation in Oregon; (3) Bortner Bus ("Bortner") in western Pennsylvania; and (4) George Ku & Sons ("Ku") in western Pennsylvania. (Tr. at 6:16-17.)

c. The Individual Defendants

i. Gallagher

16. Gallagher is a 1976 graduate of Monmouth College with a B.S. in Business Administration. He has over 20 years of experience in the school bus transportation industry. (Tr. at 5:168-72.)

17. Gallagher is currently the Chairman and CEO of Global Passenger Services ("Global"). (Tr. at 5:166.)

18. Global has two subsidiaries — Travelways, Inc., an entertainment transportation company, which is involved with airlines, cruise lines, tour operators, and theme parks, and STA, which provides student transportation services. (Tr. at 6:12-13.)

ii. Robert Byrne

19. Byrne attended the University of Windsor, Canada, where he received a degree in economics in 1980. Byrne attended Windsor Law School, where he earned an LLB in 1983. He is licensed to practice law in Ontario, Canada. (Tr. at 6:190-92.)

20. In 1985, Byrne joined a law firm specializing in taxation, where he stayed for approximately one year. In 1986, he joined the Toronto law firm Morris Rose, where he made partner in late 1989. At Morris Rose, he became involved with transportation clients, advising trucking, courier, and bus companies. (Tr. at 6:192-93.)

21. Byrne's current position is Senior Vice President of Global Passenger Services and Senior Vice President, Legal Affairs for both Travelways and STA. (Tr. at 6:190.)

iii. Peter Pearson

22. Pearson received a B.S. in Marketing from Gannon University in Pennsylvania in 1984. His first job after leaving Gannon was with Federal Express in 1985, where he worked until September of 1991. At the time of his departure from Federal Express, Pearson was a Premium Location Manager. (Tr. at 6:147-49.)

23. Pearson is now employed by STA and Travelways as Vice President of Operations for both companies. (Tr. at 6:147, 156.)

iv. John Reddan

24. Reddan graduated from St. Joseph's College, New Jersey, in 1972. From 1967-1991, Reddan held various jobs in the human resources and labor relations fields. (Tr. at 7:48-50.)

25. Reddan's current position is Vice President of Human Resources for Global Passenger Services. More than 90% of his time is spent on the Travelways business. (Tr. at 7:47.)

v. Thomas Gallagher

26. Thomas Gallagher — Denis's father — is 72 years old and is recovering from quadruple bypass surgery. (Tr. at 6:69.)

27. Thomas Gallagher does no substantive work for STA. Before his surgery, Thomas Gallagher came into the office twice a week for a couple of hours and works on tasks such as bus numbering and license and registrations. (Tr. at 6:70-71.)

2. The 1987 Sale of the Gallaghers' Business

a. Gallagher Enterprises, Inc.

28. From 1977-1979, Gallagher worked as a garage mechanic and bus dispatcher in Neptune, New Jersey for Coast Cities, Inc. ("Coast Cities"), a family business started by his grandfather in 1922. From 1978-1979, he was a bus dispatcher in Neptune. In 1979, he joined the management of Coast Cities, and from 1979 until 1984 he served as a Vice President of Coast Cities responsible for day-to-day operations in New Jersey. In 1984, Gallagher became President and CEO of Coast Cities, and acquired a 10% ownership interest in Gallagher Enterprises, Inc. ("Gallagher Enterprises"), the holding company for Coast Cities and its affiliates. (Tr. at 5:168-72.)

29. Gallagher owned Gallagher Enterprises along with his father, Thomas, and his brother, Doug. Denis and Doug each owned 10% of the shares of the company and Thomas owned the remaining 80%. (Tr. at 5:172.)

30. At the time the Gallaghers sold Gallagher Enterprises in 1987, it, through Coast Cities, had seven locations throughout New Jersey, owned approximately 400 school buses and was operating approximately 350, and was serving between 30 and 40 school districts in approximately 14 of the 21 counties in New Jersey. (Tr. at 5:178-80, 6:73; Ex. P-70.)

31. Gallagher Enterprises did no school bus transportation business outside the state of New Jersey. (Tr. at 5:178-79.)

32. Coast Cities was the largest independent school bus contractor in New Jersey at the time Laidlaw acquired it. (Tr. at 6:74; Ex. P-70.)

b. Negotiations for the Sale of Gallagher Enterprises

33. From 1983 until May 1998, Nick Ferreri served as a consultant to Laidlaw. He worked on between 50 and 100 acquisitions for Laidlaw during this period. (Tr. at 5:141-42.)

34. During the acquisition process, Ferreri would send the vendor with whom he was negotiating: (1) a confidentiality agreement on Laidlaw letterhead that he had signed on behalf of Laidlaw; and (2) a letter from Laidlaw's board of directors confirming that he was authorized to sign the confidentiality agreement on behalf of Laidlaw. Ferreri received the letterhead from Vic Webster, who was president of Laidlaw at the time. (Tr. at 5:144-47.)

35. During the acquisition process, Ferreri was responsible for conducting the initial due diligence for Laidlaw, as well as placing a value on the company to be purchased. (Tr. at 5:148-49.)

36. When Ferreri negotiated acquisitions of school bus companies for Laidlaw, he was Laidlaw's primary negotiator. The Laidlaw attorneys would not become involved until it was time for the parties to sign the letter of intent. (Tr. at 5:145-46.)

37. Ferreri was acting as Laidlaw's authorized agent during the preliminary negotiations for Laidlaw's acquisition of Gallagher Enterprises. (Tr. at 5:151-52.)

c. The 1987 Sales Agreement

38. On October 9, 1987, Laidlaw acquired Gallagher Enterprises (Tr. at 5:172; Ex. P-1.)

39. Laidlaw, Inc.'s subsidiary, Travelways, Inc., was the company that acquired Gallagher Enterprises. Travelways, Inc. later became Laidlaw. (Tr. at 1:53, 59, 4:52.)

40. Travelways, Inc., then Laidlaw, Inc.'s subsidiary, was incorporated in the State of Delaware and was qualified and authorized to do business in New Jersey. (Ex. P-84.)

41. Pursuant to the 1987 Sales Agreement ("Sales Agreement"), Laidlaw acquired the contracts, customers, goodwill and reputation of Gallagher Enterprises and its Coast Cities subsidiaries. (Tr. at 3:169-70, 6:103-04.)

42. The Sales...

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