City of New York v Transportazumah LLC

[*1] City of New York v Transportazumah LLC 2011 NY Slip Op 50522(U) Decided on March 9, 2011 Supreme Court, New York County Jaffe, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 9, 2011
Supreme Court, New York County

The City of New York, Plaintiff,

against

Transportazumah LLC, Defendant.



401763/10

 

For plaintiff:

June R. Buch, ACC

Michael A. Cardozo

100 Church St., Room 20-097

New York, NY 10007

212-788-0964

For defendant:

Lawrence F. Hughes, Esq.

42-65 Kissena Blvd., Ste. 609

Flushing, NY 11355

917-363-4558

Steve A. Diaz, Esq.

Pro Hac Vice

2300 M St., Ste. 800

Washington, DC 20037

202-416-1633

Barbara Jaffe, J.

By notice of motion dated August 18, 2010, defendant moves pursuant to CPLR 2221(d) and (e) for an order granting it leave to renew and reargue its opposition to plaintiff's motion for a preliminary injunction and, upon reargument, vacating and setting aside the preliminary injunction. Plaintiff opposes.

By notice of motion dated August 23, 2010, plaintiff moves pursuant to CPLR 3212 for an order granting it summary judgment, pursuant to CPLR 3211(a) dismissing defendant's counterclaims and pursuant to CPLR 3211(b) dismissing defendant's affirmative defenses, and granting it a declaratory judgment against defendant. Defendant opposes and, by notice of cross-motion dated September 16, 2010, moves pursuant to CPLR 3211 for an order dismissing plaintiff's complaint, and an order striking two affidavits as inconsistent and unreliable, granting it leave to renew its opposition to plaintiff's motion for a preliminary injunction, and pursuant to [*2]22 NYCRR 130-1 awarding it costs and sanctions against plaintiff and plaintiff's counsel. Plaintiff opposes the motion.

By order to show cause dated September 17, 2010, plaintiff moves pursuant to CPLR 2221(a) for an order staying, vacating or modifying a preliminary conference order and pursuant to CPLR 2201 for an order staying all discovery in this action pending a determination on plaintiff's motion for summary judgment. Defendant opposes.

I. BACKGROUND

A. Undisputed facts

Defendant organizes and transports bus passengers. One group of passengers, the Apple Core Transportation Club (ACT), is comprised of commuters who traveled specific bus routes that had been operated in New York City by the Metropolitan Transportation Authority until the routes were discontinued in June 2010. Thereafter, defendant contracted with Skyliner Travel & Tour Bus Corp. (Skyliner) to charter buses to transport ACT members to destinations in and between Manhattan and Queens. The service "was intended to constitute a replacement bus service" for ACT members, operating during weekday rush hours, between specific stops, and on a fixed schedule. Passengers paid defendant fees for the service. (Affidavit of Joel Anabilah-Azumah, dated July 13, 2010 [Anabilah-Azumah Affid.]).

Visitors to defendant's website may join ACT at no charge by downloading a club pass without having to purchase a ticket or provide any personal information; no account numbers are associated with the passengers or the passes, and the passes can be photocopied for use by anyone. (Affirmation of June R. Buch, ACC, dated Aug. 23, 2010 [Buch Aff.], Exh. B).

Pursuant to defendant's contract with Skyliner, Skyliner provides buses and drivers to defendant in exchange for a fixed fee per bus. (Id.). Defendant does not own, operate, maintain, or insure any of the buses it leases. (Id.). A sample contract between defendant and Skyliner reflects that on June 28, 2010, defendant ordered 13 buses from Skyliner, each with a 56-passenger seating capacity, all scheduled to pick up and drop off passengers for a period between two and half and four hours, and all operating sometime between 6:10 am and 11:15 am or 3:25 pm and 9:40 pm. (Id.). The June 28 itineraries reflect that the buses were to follow either the former City X29 or X90 routes. (Id.).

On its website, defendant designates its routes with the same letters and numbers used for the discontinued bus routes, i.e., X25, X26/X90, X29, X90, and QM22, and lists multiple pickup and discharge points along the routes with numerous daily runs. (Buch Aff., Exh. E).

Defendant is not authorized to operate by the New York State Department of Transportation (NYSDOT), nor has it applied for or received a New York City franchise to operate a bus line. (Affidavit of Anne Koenig, dated July 6, 2010 [Koenig Aff.]). Skyliner, however, has a special or chartered party authority from the NYSDOT pursuant to 17 NYCRR 700 and New York State Transportation Law § 152. (Affidavit of William B. Leonard, dated July 2, 2010).

On June 25, 2010, plaintiff sent defendant a letter demanding that it cease and desist from operating its bus service (Koenig Aff., Exh. E), and by letter dated July 8, 2010, plaintiff filed a complaint against Skyliner with NYSDOT, alleging that it was operating outside of its state charter authority. (Affirmation of Elaine J.S. Chen, ACC, dated Sept. 24, 2010, Exh. B). On or about August 24, 2010, NYSDOT dismissed and closed plaintiff's complaint against Skyliner, [*3]finding that defendant and Skyliner were operating a bus line rather than a charter service, and concluding that City and not NYSDOT has jurisdiction over them. (Id., Exh. E).

Sometime in 2010, plaintiff issued Requests for Proposals for two new bus franchises after the passage of an authorizing resolution. (Koenig Aff., Exhs. A, B). The proposals required applicants to submit information related to their qualifications, experience, background, and integrity, including information about the safety and reliability of their vehicles, and to fill out a Vendor Information System Questionnaire which requires information about the integrity and responsibility of the applicant and the applicant's principal. (Id., Exhs. C, D). During the past few years, plaintiff granted two new bus franchises pursuant to similar Requests for Proposals. (Id.).

B. Plaintiff's investigation

On June 28, 2010, Joseph Hock, a supervising inspector of the Highway Inspection Quality Assurance (HIQA) Unit of the City Department of Transportation (NYCDOT) received a copy of defendant's bus route schedule and stop list, and went to a City X90 bus stop on Water Street, where he observed a sign which read "TransportAzumah X90 Bus Stop." (Affidavit of Joseph Hock, dated Aug. 18, 2010, Exhs. A, B). At 4:50 pm, he boarded the bus, which had a capacity of approximately 60 people, and observed 15 to 20 passengers. At some point during the ride, a passenger collected $5.50 cash fare from each passenger; Hock was never asked whether he was a member of ACT nor was he asked to show a copy of an ACT bus pass. (Id.).

The next day, Hock went to a stop on the X25 route, where he observed defendant's sign, "TransportAzumah X25 Bus Stop," and someone offered him an ACT bus pass. (Id., Exhs. C, D). He also saw a bus operating on the X90 route; "Skyliner" was printed on its side. (Id., Exh. I).

On July 6, 2010, Hock visited defendant's website where he downloaded an ACT pass without joining ACT. (Id.).

II. PERTINENT PROCEDURAL BACKGROUND

On or about July 6, 2010, plaintiff commenced the instant action seeking a permanent injunction against defendant barring it from operating a public bus line or route within New York City in violation of section 6-202 of the Administrative Code of the City of New York, which provides that "[i]t shall be unlawful for any omnibus route or routes for public use . . . to be operated in or upon any street within the city until and unless a franchise or right therefor shall be obtained from the board of estimate in like manner as, and subject to the limitations and conditions relating to, franchises or rights provided and imposed by the charter and the code." (Buch Aff., Exh. A). Plaintiff alleges that since June 28, 2010, defendant has operated full-size coach buses along set routes and on a set schedule, picking up and dropping off passengers at designated stops, and obtaining cash fares on board. (Id.). Plaintiff contends that defendant's operation is unauthorized as it has no City franchise, nor is it an authorized charter bus service, and that it is a threat to public safety. (Id.). By order to show cause signed on July 6, 2010, another justice of this court granted plaintiff a temporary restraining order, and after a hearing on July 15, 2010, a preliminary injunction issued prohibiting defendant from operating any bus line or route for public use within the City without a franchise.

On or about July 28, 2010, defendant served its answer and counterclaims, alleging as [*4]affirmative defenses that the complaint fails to state a cause of action, that plaintiff failed to join NYSDOT and Skyliner as necessary parties, that plaintiff failed to exhaust administrative remedies, that NYSDOT has primary jurisdiction over plaintiff's claims, that the action is barred by plaintiff's commencement of multiple actions and/or by plaintiff's unclean hands, that plaintiff has engaged in selective enforcement in violation of defendant's rights, that Administrative Code § 6-202 is unconstitutional, and that compliance with it is impossible. (Buch Aff., Exh. B). As counterclaims, defendant argues that plaintiff interfered with its contract with Skyliner and unlawfully deprived it of its civil rights, and that plaintiff was not entitled to a preliminary injunction. (Id.).

III. MOTIONS FOR SUMMARY JUDGMENT AND TO DISMISS

A. Is defendant's bus service a bus line?

Plaintiff argues that the undisputed facts establish that defendant is operating a bus line for which a franchise is required, that defendant does not have a franchise, and that defendant and not Skyliner operates the bus line. (Plaintiff's Memo. of Law, dated Aug. 23, 2010 [Plaintiff's Aug. Memo.]). Defendant alleges that Skyliner is operating the bus service, and that, in any event, it is a charter bus service and not a bus line. Defendant characterizes itself as a transportation broker. (Defendant's Memo. Of Law, dated Sept. 16, 2010 [Defendant's Sept. Memo.]).

New York Transportation Law § 2(3) defines a bus line as a "common carrier of passengers by motor vehicle that is usually characterized by the use of vehicles having a seating capacity of greater than twenty passengers; by multiple pickup and discharge points along designated routes; and by no prearrangements or reservations by passengers." (See also 17 NYCRR 700.1[a] [adopting definition of bus line set forth in Transportation Law § 2(3)]). A common carrier is defined as "any person that transports passengers by motor vehicle for compensation by providing service for the general public on an individual fare basis over regular or irregular routes," including a bus line.

On the other hand, a contract carrier is defined as "any person that transports passengers by motor vehicle for compensation, in chartered party or special party service, or by providing service under a continuing agreement calling for the exclusive use of vehicles by a person or persons." (NY Transportation Law § 2[7], [9]). A chartered party is: a group of persons who, pursuant to a common purpose and under a single contract and at a fixed charge, have acquired exclusive use of a passenger-carrying motor vehicle to travel together as a group to a specific destination or for a particular itinerary, either agreed upon in advance or modified by the chartered group after having left the place of origin. Carriers shall not transport chartered parties between the same points or along the same routes so frequently as to constitute bus line, van service or sightseeing service.

(17 NYCRR 700.1[i]).

The undisputed facts demonstrate that defendant's service is a bus line as defined by Transportation Law § 2(3) and17 NYCRR 700.1(a), using "vehicles having a seating capacity of greater than twenty passengers; by multiple pickup and discharge points along designated routes; and by no prearrangements or reservations by passengers." (See eg Surface Transp. Corp. of NY v Reservoir Bus Lines, Inc., 271 AD 556 [1st Dept 1946] [finding that defendant was operating [*5]omnibus line by transporting passengers from apartments to subway station and making stops at thirteen regular bus stops along route on fixed schedule]; Palmer v Royal Cadillac Serv., Inc., 171 Misc 575 [Sup Ct, New York County 1939] [finding that defendants' operation of cars by following route paralleling railroad's route, charging fixed fares, maintaining passenger terminals, and selling tickets constituted a bus line for which franchise was needed]).

Indeed, defendant concedes that its service was meant to replace or replicate the bus lines and routes previously run by the Metropolitan Transportation Authority and that it follows the same routes and stops. And the fact that ACT members are asked to download a pass prior to boarding does not constitute a pre-arrangement or reservation as the passes are undated and not personalized, and plaintiff's investigation discloses that anyone may board, with or without a pass.

Defendant's service also comes within the definition of a common carrier, "any person that transports passengers by motor vehicle for compensation by providing service for the general public on an individual fare basis over regular or irregular routes." That defendant attempted to limit its service to those who downloaded ACT passes does not mean that its service was not open to the general public. Rather, plaintiff's investigation revealed that anyone could board without a pass, and it is undisputed that anyone able to download or obtain a pass could board.

Thus, in Surface Transp. Corp. of NY, where the defendant had entered into written contracts with owners of apartment houses in a certain area to provide bus service to their tenants between their homes and a subway station, the court rejected the defendant's denial that it was a common carrier operating for the use and convenience of the public, finding that: [t]he fact that defendant carries only tenants of the landlords with whom it has contracted or with whom it may hereafter contract is not a sufficient limitation to remove the public character of its service. The rule is well-established that an operation need not be open to all to make it a public use . . .

(271 AD at 560; see also Public Serv. Commn. v Grand Cent. Cadillac Renting Corp., 273 AD 595 [1st Dept 1948] [finding that company was common carrier providing omnibus service as service was between fixed termini, on regular schedule, and for a set fare per trip, and served public, even though it was offered only to airline passengers and guests; "respondent serves the public in that the public is admitted, without discrimination, to the extent that it has the fare and the inclination to travel by airplane."]; Public Serv. Commn. v Columbo, 118 NYS2d 873 [Sup Ct, Kings County 1952] [finding that defendants operated omnibus lines as they transported schoolchildren along regular route on regular schedule with set fare, and rejecting defendants' argument that they were not common carriers as they only transported students]; cf Public Serv. Commn. v Blue Bus Serv. Co., Inc., 207 Misc 710 [Sup Ct, Albany County 1955] [finding that defendant's bus service was not common carrier as it did not hold service out to public or solicit fares]).

Morever, defendant's operation does not come within the definition of a charter as set forth in 17 NYCRR 700.1(i). ACT is not a group of persons that has acquired exclusive use of a motor vehicle under a single contract and at a fixed charge. Rather, defendant has acquired use of Skyliner's buses and a passenger has no contract with either defendant or Skyliner, and does not pay Skyliner a fixed charge but instead pays defendant a fare per ride. (Compare Matter of [*6]Rockland Tr. Corp. v Public Serv. Commn. of State of NY, 29 Misc 2d 909 [Sup Ct, Albany County 1961] [upholding determination that bus service was chartered party service and not omnibus bus line where each commuter group contracted with bus company at fixed amount per month paid in advance and members of group paid their assessments per month without regard to number of bus rides taken by them]). Absent an application process or membership terms, ACT has no members or membership list, nor does it charge a membership fee. The passengers do not travel together as a group to a specific destination and there is no particular itinerary as each passenger boards and disembarks at different stops. Even if defendant came within the definition of a chartered party, as it transported the passengers "between the same points or along the same routes" on a daily basis, such transportation constitutes a bus line. (17 NYCRR 700.1[i]).

Similarly, defendant's service does not constitute a charter bus as defined by the New York City Traffic Rules and Regulations (34 RCNY 4-01[b][I]) as "a bus engaging in a specific or special trip in the nature of an excursion or outing, for which it has been hired or otherwise engaged by oral or written contract for the exclusive use of the charterer." Defendant's buses were not engaged in specific or special trips in the nature of an excursion or outing but operated daily by picking up and dropping off passengers at different designated stops. Thus, defendant has failed to show that there any disputed facts as to whether its service is a bus line or route. (See De Matteis v McGolrick Realty Co., 259 NY 452 [1932] [finding that defendant was operating unauthorized omnibus line where it contracted with realty company to transport company's employees every day of week at set hours for fee]).

B. Is defendant operating a bus line?

Pursuant to Administrative Code § 6-202, it is unlawful to operate a bus line or route within the City without a franchise, and an operator is defined as "the person, firm or corporation who has control or directs the operation of a motor vehicle as owner, lessee or otherwise." (17 NYCRR 720.1[m]). This provision does not require that an operator own or lease the motor vehicle, and in any event, there is no dispute that defendant leased Skyliner's buses and was thus, an operator.

Moreover, the evidence also reflects that defendant controls or directs the operation of the buses used by Skyliner to transport alleged ACT passengers. Defendant organized ACT, established the bus routes and schedules, leased the buses, and collected and retained the fares. Thus, as the operation is controlled by defendant, and Skyliner merely supplies the buses and drivers, defendant has not shown that it is not operating a bus line or route within the City.

Although Skyliner is physically operating the buses, the focus of Administrative Code§ 6-202 is on the unauthorized operation of a bus line, not on the unauthorized operation of buses. Thus, whether or not defendant is the actual operator, or driver, of the buses is irrelevant. (See eg Klinkenstein v Third Ave. Ry. Co., 246 NY 327 [1927] ["The plaintiff's bus was not illegally in the street. The illegality did not consist in operating [a] bus, as the vehicle had been properly licensed and the chauffeur duly authorized to operate it. The illegality consisted, not in the operation and the use of the streets, but in the carrying of passengers for hire; it was the use to which the vehicle was put, and not the vehicle itself, which was unauthorized upon the streets of New York."]).

C. Is a franchise required?

Defendant argues that only NYSDOT has jurisdiction over its bus service as section 6-[*7]202 of the Administrative Code was never adopted by City, and that even if it had been, defendant is operating a charter bus service, not a bus line, which is regulated only by NYSDOT. It also contends that plaintiff failed to plead the elements of Administrative Code § 6-202 as it did not allege that defendant failed to obtain a franchise from the Board of Estimate, and that in any event, the voting structure of the Board of Estimate was found unconstitutional by the Supreme Court in 1989. Defendant thus contends that it is impossible for an entity to obtain a franchise pursuant to Administrative Code § 6-202 and that the section is unconstitutional absent any authority given to a City agency to grant franchises. (Defendant's Sept. Memo.).

Pursuant to Transportation Law § 80(5), in any city with a population of over one million, the NYSDOT has no jurisdiction over the regulation of any common carrier of passengers by motor vehicle when the common carrier is operated wholly within the boundaries of such city and when the city has adopted an ordinance, local law, or charter to regulate or franchise such operations. Similarly, pursuant to section 151(9) of the Transportation Law, the NYSDOT has no authority to grant a permit or certificate to any bus line "operating wholly within any city having regulatory control or jurisdiction over bus line operations."

The City has adopted a charter to franchise certain operations as set forth in Section 363 of Chapter 14 of the New York City Charter: An initial determination of the need for franchises of a particular type shall be made by the head of the agency designated by the mayor as having the primary expertise and responsibility in the policy area covered by that type of franchise. Upon making such a determination, such agency, with the advice of the corporation counsel and such other agencies as the mayor shall determine, shall prepare a proposed authorizing resolution for that type of franchise and shall submit such proposed authorizing resolution to the mayor . . . The mayor may submit such a proposed authorizing resolution to the council. Promptly upon submission to the council, the text of any such authorizing resolution shall be published in the City Record. Within ninety days of receiving such a proposed resolution, the council or a committee of the council shall hold a public hearing on such resolution. The council may approve, approve with modifications or disapprove such resolution by majority vote . . . Pursuant to an authorizing resolution adopted by the council, the responsible agency may issue one or more requests for proposals or other solicitations of proposals . . . The selection of a franchisee shall be in accordance with the provisions of the authorizing resolution covering franchises of the type involved. Each such selection and each franchise agreement shall be subject to the review and approval of the franchise and concession review committee pursuant to sections three hundredseventy-one, three hundred seventy-two and three hundred seventy-three.

The predecessor sections to this section of the charter have been applied to City's authority to issue franchises to common carriers including bus lines. (See e.g. Loos v City of New York, 257 AD 219 [2d Dept 1939]; City of New York v Bee Line, Inc., 246 AD 28 [1st Dept 1935], affd 271 NY 595 [1936] [Charter gave City power to grant franchises to parties to run omnibuses]; Huff v Is. Transp. Co., Inc., 227 AD 745 [2d Dept 1929]; Brooklyn City R.R. Co. v Whalen, 191 AD 737 [2d Dept 1920], affd 229 NY 570 [City may not operate bus line unless granted franchise pursuant to charter]; Application of North Shore Bus Co., 75 NYS2d 372 [Sup Ct, Queens County 1947]; 42d St., Manhattanville & St. Nicholas Ave. Ry. Co. v [*8]Comprehensive Omnibus Corp., 155 Misc 878 [Sup Ct, New York County 1935], affd 245 AD 711 [1st Dept 1935]).

Plaintiff has also adopted an ordinance or local law to regulate the operation of such common carriers as set forth in New York City Traffic Rules and Regulations § 4-10(a)(1), which prohibits the operation of a bus on any street in the City for which a franchise is required. Thus, even if plaintiff never adopted Administrative Code § 6-202, NYSDOT has no jurisdiction over the regulation of common carriers within the City as plaintiff had adopted both a charter and a local law or ordinance that regulates or franchises common carriers. (Matter of New York City Tr. Auth. v Pierrot, 144 AD2d 814 [3d Dept 1988] [operation of bus service totally within the City is under City's jurisdiction]; Matter of Toniann's Limousine Serv., Ltd. v New York State Dept. of Transp., 132 AD2d 86 [3d Dept 1987] [recognizing that NYSDOT did not have jurisdiction over regulation of common carriers operated solely within City as City had adopted such regulations for bus lines operating entirely within it]; People v Schuster, 83 Misc 2d 871 [Crim Ct, Bronx County 1975] [City has exclusive jurisdiction over regulation of bus lines within it, and any person operating bus line exclusively within City must obtain franchise]). And as defendant is a common carrier operating a bus line (see supra III.A., B), plaintiff and not NYSDOT has jurisdiction here over defendant.

Moreover, section 363 of the Charter was added in 1989 in response to the Supreme Court's decision in Bd. of Estimate in City of New York v Morris, 489 US 688 (1989), finding that the Board of Estimate was unconstitutional (New York City Charter § 363, Historical Notes), which resulted, through the 1989 General Election, in a repeal of the section of the Charter establishing the Board of Estimate (New York City Charter Ch. 3, Refs & Annos; 1152[e]). The authority of the Board of Estimate was transferred to the appropriate City agency pursuant to section 1152[e] of the Charter, which provides that after September 1, 1990: the powers and responsibilities of the board of estimate, set forth in any state or local law, that are not otherwise devolved by the terms of such law, upon another body, agency or officer shall devolve upon the body, agency or officer of the city charged with comparable and related powers and responsibilities under this charter, consistent with the purposes and intent of this charter, provided specifically that the council shall succeed to the powers and responsibilities exercised by the board of estimate pursuant to article sixteen of the general municipal law.

Thus, in order for an entity to obtain a franchise to operate a bus line within the City, it must do so pursuant to the procedures set forth in the Charter, notwithstanding that Administrative Code § 6-202 was not amended to delete the reference to the Board of Estimate. In an analogous case, the issue before the court in Council of the City of NY v Giuliani was whether the power to determine whether a health facility or real property owned by the Health and Hospitals Corporation (HHC) could be sold, leased or transferred had been transferred from the Board of Estimate upon its abolition to the New York City Council. (183 Misc 2d 799 [Sup Ct, Queens County 1999]). The regulation at issue there, as pertinent here, did not permit HHC's disposal of property without the consent of the Board of Estimate, and the court decided that the Board of Estimate's approval power had devolved onto the City Council after the Board's abolition, citing New York City Charter 1152(e). Thus, the court determined that the City [*9]Council had the power to approve or disapprove of HHC's attempted transfer of property notwithstanding that the regulation had not been amended to delete the reference to the Board of Estimate.

Consequently, defendant has not established that Administrative Code § 6-202 is unconstitutional merely because it mentions the Board of Estimate or that the City has no ability or authority to grant a franchise except through the Board of Estimate. (See also Matter of Council of City of NY v Public Serv. Commn. of State of NY, 99 NY2d 64 [2002] [observing that after abolition of Board of Estimate, 1989 amendments to Charter created new statutory scheme for City approval of franchises as set forth in Charter 363). Finally, defendant's allegation that it is impossible to obtain a franchise to operate a new bus route is belied by plaintiff's approval of two new bus routes in 2010 in accordance with the procedures set forth in the Charter.

Thus, petitioner has established its entitlement to an injunction permanently prohibiting defendant from operating its bus line within New York City.

D. Defendant's affirmative defenses and counterclaims

1. Primary jurisdiction

Plaintiff argues that even if NYSDOT has primary jurisdiction over this matter, NYSDOT has discretion to decide whether to act, and that Transportation Law § 145(7) permits plaintiff to seek injunctive relief against an unauthorized bus service. (Plaintiff's Aug. Memo.). Defendant asserts that NYSDOT has primary jurisdiction as it is the agency that deals with matters arising out of the Transportation Law, including the classification of carriers, and that plaintiff's commencement of multiple actions may lead to inconsistent decisions and disparate results. (Defendant's Sept. Memo.).

As herein decided (see supra III.A., B), defendant is operating an unauthorized bus line within the City. Consequently, NYSDOT has no jurisdiction here, (Transportation Law § 80[5]).

Decisions finding that NYSDOT has primary jurisdiction addressed the classification of intrastate carriers, an issue not pertinent here as defendant's bus service is operated wholly within the City. (See eg Albany-Binghamton Express, Inc. v Borden, Inc., 192 AD2d 887 [3d Dept 1993] [classification of intrastate carriers is matter in which NYSDOT must be involved pursuant to Transportation Law]; Matter of Rockland Tr. Corp., 29 Misc 2d at 909 [upholding respondent's determination that bus company was charter bus service rather than omnibus line; company operated buses intrastate]). And implicit in decisions holding that a party was operating a bus route or line or as a common carrier is the court's authority to so hold. (See cases cited supra. II.A.).

Moreover, pursuant to sections 145(6) and (7) of the Transportation Law, plaintiff may bring an action to restrain anyone providing transportation within the state when such transportation requires a franchise from City, and the court has jurisdiction to grant plaintiff an injunction against such person. (See Bogart v Walker, 231 AD 499 [2d Dept 1931] [granting injunction prohibiting operation of buses for which franchises had not been granted]; see eg Bee Line, 246 AD at 34 [City "concededly has the power and the duty to prosecute companies which illegally run buses for hire, and can summarily stop their operation"]; see also Clark v City of New York, 176 Misc 893 [Sup Ct, Queens County 1941], affd 262 AD 855 [2d Dept] [as plaintiff bus company was operating buses within City without franchise, City could not be restrained from interfering with company's business]). There is thus no merit to defendant's defense that [*10]NYSDOT has primary jurisdiction over the issues raised in this action.

In any event, as NYSDOT has concluded that City and not it has jurisdiction over defendant and has closed plaintiff's complaint, this defense is moot.

2. Exhaustion of remedies

Plaintiff denies that it was required to exhaust any administrative remedies in light of its right to seek a court injunction and absent any administrative proceeding to which it is or must be a party. (Plaintiff's Aug. Memo.). Defendant argues that plaintiff must first await the outcome of NYSDOT's determination of plaintiff's complaint against Skyliner before proceeding here. (Defendant's Sept. Memo.).

As plaintiff's complaint to the NYSDOT sought only the revocation of Skyliner's state certificate of authority, plaintiff may proceed here against defendant on the issue of whether defendant is required to obtain a franchise. In any event, as NYSDOT has decided plaintiff's complaint against Skyliner, there is no other pending proceeding or administrative remedy to be exhausted.

3. Necessary parties

As City has jurisdiction over the issue of regulation of bus services within it, plaintiff argues that NYSDOT is not a necessary party and will not be affected by any judgment in this action. Nor is Skyliner a necessary party as plaintiff may obtain the relief sought without its joinder and it too will not be affected by any judgment here. (Plaintiff's Aug. Memo.). Defendant maintains that Skyliner is a necessary party as it operates the bus service, and that NYSDOT is a necessary party as its authority to regulate bus services is in question. (Defendant's Sept. Memo.).

As plaintiff does not allege that Skyliner was required to obtain a franchise or that it is operating illegally, it is not a necessary party to this action which seeks only to enjoin defendant from operating an unauthorized bus line, and it has been determined that defendant and not Skyliner operates the bus line at issue. (See eg Klinkenstein, 246 NY at 327 [1927] [focus is not on operation of bus but use of bus to carry passengers for hire]).

Moreover, as defendant's bus line operates wholly within the City and NYSDOT has conceded it has no jurisdiction over it, NYSDOT is not a necessary party. City of New York v Long Is. Airports Limousine Serv. Corp. is not apposite as there, the defendant's service transported passengers from other counties into the City, and the issue before the Court was whether the City's cancellation of the defendant's franchise meant that NYSDOT was required to revoke its issuance of a certificate of public service and necessity issued to the defendant. (48 NY2d 469 [1979]). Thus, NYSDOT was a necessary party as a resolution of the matter required a determination as to NYSDOT's rights and powers. My determination that defendant was required to obtain a franchise from the City prior to operating its bus line in no way implicates NYSDOT's powers or rights.

4. Right to contract

Plaintiff argues that defendant's alleged right to contract need not be scrutinized under a due process or equal protection analysis but as to whether it is rationally based, and that plaintiff's regulation of bus services is reasonably related to the legitimate government objectives of regulating traffic and public streets and protecting public safety. (Plaintiff's Aug. Memo.).

Defendant maintains that plaintiff has interfered with its contract with Skyliner by instituting this action, thus violating its right to contract. (Defendant's Sept. Memo.). [*11]

As the issue here is whether defendant is required to obtain a franchise and not whether it has the right to contract with Skyliner, as plaintiff is not seeking to nullify or interfere with defendant's contract with Skyliner but only to prohibit defendant from operating a bus line without a franchise, and as I have found that plaintiff is entitled to an injunction prohibiting defendant from operating its bus line without a franchise (see supra III.C), defendant has failed to establish that plaintiff violated its right to contract. (See Bee Line, Inc. v La Guardia, 244 AD 151 [2d Dept 1935] [as plaintiff bus company was operating buses within City without franchise, City could not be restrained from interfering with company's business]; Clark, 176 Misc at 893 [same]).

Moreover, defendant has not demonstrated that plaintiff's commencement of this action was not in furtherance of the reasonable exercise of its police power or bears no reasonable relationship with its interest in regulating traffic and protecting public safety. (See Rochester Gas and Elec. Corp. v Pub. Serv. Commn. of State of NY, 71 NY2d 313, 322 [1988] ["[T]he Constitution does not guarantee citizens the unrestricted privilege of conducting or engaging in business as they please. The State may, in the reasonable exercise of its police power, condition or restrict private businesses or prohibit the operation of some businesses entirely to further its policies."]; Ricketts v City of New York, 181 Misc 2d 838 [Sup Ct, New York County 1999] [City's authority to limit franchises for commuter van services did not interfere with plaintiffs' right to contract as it had rational relationship to City's interest in regulating traffic on public streets]; see also Grossman v Baumgartner, 17 NY2d 345 [1966] [regulation requiring tattoos to be performed only by licensed physicians not unconstitutional even though it would result in discontinuance of defendant's business]; College Barn, Inc. v State, 60 Misc 2d 715 [Sup Ct, Albany County 1969], affd 25 NY2d 657 [legislation making it unlawful to sell alcohol on certain premises without license did not violate premises operator's rights even though it impaired or imposed control on business]; People v Windsor Madison Corp., 12 Misc 2d 446 [City Magistrate's Ct, Borough of Manhattan 1958] [statute requiring license to conduct certain type of sale did not interfere with defendant's right to sell goods]).

5. Due process

Plaintiff contends that defendant did not plead or establish that plaintiff deprived it of a constitutionally-protected interest as its cease and desist letter did not independently compel or prevent defendant from operating its bus line. (Plaintiff's Aug. Memo.). Defendant argues that plaintiff's cease and desist letter violated its due process rights as it did not provide him with notice and a hearing prior to its issuance. (Defendant's Sept. Memo.).

As the letter sets forth only a warning, is not self-executing, provides no penalties for noncompliance, and does not compel or prevent any acts by defendant, its issuance has no impact on defendant's due process rights. (See eg Mathews v Eldridge, 424 US 319 [1976] [procedural due process claim arises when there has been official action taken against party]).

6. Selective enforcement

Plaintiff alleges that defendant has failed to establish that plaintiff selectively enforced its requirement for a franchise absent any allegation or proof that plaintiff treated other companies differently based on impermissible considerations or that plaintiff treated it differently from other similarly-situated parties. (Plaintiff's Aug. Memo.). Defendants contend that there exist triable issues as to whether plaintiff is selectively enforcing its regulations. (Defendant's Sept. Memo.). [*12]

A violation of equal protection occurs where "first, a person (compared with others similarly situated) is selectively treated and second, such treatment is based on impermissible considerations such as race, religion, intent to inhibit or punish the exercise of constitutional rights, or malicious or bad faith intent to injure a person." (Bower Assocs. v Town of Pleasant Val., 2 NY3d 617, 631 [2004]). Even if similarly-situated persons are treated differently, there is no equal protection violation absent proof of an impermissible motive. (Id.).

As all of defendant's allegations concerning other bus companies are based solely on speculation, and absent any proof that the other companies operated like defendant, defendant has not established that it was impermissibly selectively treated by plaintiff. (See Matter of Mimassi v Town of Whitestone Zoning Bd. of Appeals, 67 AD3d 1454 [4th Dept 2009] [petitioner's vague allegations that other property owners violated zoning code and did not receive same penalty as petitioner insufficient to show intentional discrimination]; W.O.R.C. Realty Corp. v Carr, 207 AD2d 781 [2d Dept 1994] [defendant failed to produce evidence aside from conclusory allegations to support claim that plaintiffs had selectively enforced town building regulations]; Matter of Cannon v Urlacher, 155 AD2d 906 [4th Dept 1989] [vague and conclusory allegations that others had committed crimes and not been subjected to penalty as severe as that imposed on petitioner insufficient to show selective enforcement]). Defendant has also failed to establish a legal ground for taking judicial notice of the documents it submits.

Likewise, defendant offers no evidence that plaintiff's action against it is impermissibly motivated. (See Matter of Sour Mtn. Realty, Inc. v New York State Dept. of Envtl. Conservation, 260 AD2d 920 [3d Dept 1999], lv denied 93 NY2d 815 [petitioner made no factual showing that respondent's enforcement of environmental review process was based deliberately on impermissible factors]; Matter of Feigman v Klepak, 62 AD2d 816, 819 [1st Dept 1978] [plaintiff did not meet heavy burden of establishing intentional discrimination so as to support equal protection claim; "[o]ne must prove more than mere nonenforcement against other violators"]).

7. Tortious interference with contract

As a claim for tortious interference with contract sounds in tort, plaintiff contends that defendant was required but failed to serve it with a notice of claim, and that in any event, plaintiff may not be held liable for performing a discretionary act such as enforcing a regulation or statute, and that defendant failed to allege the existence of any contract with which plaintiff allegedly interfered as its contracts with Skyliner ended before plaintiff commenced the instant action. (Plaintiff's Aug. Memo.).

Defendant asserts that it was unable to file a notice of claim as it is statutorily required to assert its counterclaim within 30 days of plaintiff's complaint, and that in any event, City has notice of its counterclaims and has already investigated them. (Defendant's Sept. Memo.).

Defendant's counterclaim for tortious interference with contract is likewise barred by its failure to file a notice of claim. (Montana v City of Watervliet, 47 AD3d 1106 [3d Dept 2008] [tortious interference claim subject to notice of claim requirement]; City of New York v 611 W. 152nd St., Inc., 273 AD2d 125 [1st Dept 2000] [failure to comply with notice of claim requirement necessitated dismissal of tortious interference with contract counterclaim]; City of New York v Kashau, 133 AD2d 205 [2d Dept 1987] [dismissing counterclaim as respondent failed to file notice of claim timely]).

Even assuming that a notice of claim is not required, the counterclaim is meritless for the [*13]same reasons that defendant's affirmative defense based on the right to contract is meritless. (See supra, II.D.4). Moreover, a public officer may not be held liable for tortious interference when he or she issues a discretionary determination during the course of his or her official duties, and defendant has not alleged or proven otherwise. (Montana, 47 AD3d at 1110 [tortious interference claim properly dismissed as plaintiff failed to offer proof that city's zoning officer's sending of letter to third party in which it advised that city would not issue permit for renovations, resulting in third party ceasing to pay rent to plaintiff and vacating premises, was not done in furtherance of officer's official duties]; 4430 N. Bailey, Inc. v Town of Amherst, 9 AD3d 853 [4th Dept 2004] [defendant not liable where it notified third party with whom plaintiff had contracted that it could not conduct business at premises as it was in violation of zoning ordinance and party thereafter vacated plaintiff's premises]).

8. Unclean hands

Plaintiff denies that defendant established its defense of unclean hands absent proof of any immoral or unconscionable conduct by plaintiff, or that it constitutes a valid defense against governmental action. (Plaintiff's Aug. Memo.). Defendant alleges that its defense arises from plaintiff's simultaneous commencement of the instant action and the NYSDOT complaint. (Defendant's Sept. Memo.).

Plaintiff's commencement of the instant action and its filing of a complaint with the NYSDOT against Skyliner reflect nothing immoral or unconscionable. (55 NY Jur 2d, Equity§ 110 [2011] [party's hands not unclean when it has exercised lawful authority or power]; cf Citibank, N.A. v Am. Banana Co., Inc., 50 AD3d 593 [1st Dept 2008] [unclean hands shown by proof that party was guilty of immoral or unconscionable conduct]).

9. Counterclaim related to preliminary injunction

Plaintiff argues that defendant is not entitled to damages relating to the preliminary injunction until and unless it is vacated. (Plaintiff's Aug. Memo.). Defendant contends that as the injunction was erroneously granted, it is entitled to damages. (Defendant's Sept. Memo.).

This decision implicitly acknowledges that the preliminary injunction was properly granted.

IV. REMAINING MOTIONS AND ISSUES

In light of the foregoing, there is no need to consider defendant's motion to renew and reargue or any of the other issues raised by the parties. And plaintiff's motion to stay discovery is denied as moot.

V. CONCLUSION

Accordingly, it is hereby

ORDERED, that defendant's motion to renew and reargue is denied; it is further

ORDERED, that plaintiff's motion for summary judgment is granted in its entirety; it is further

ORDERED, that defendant's cross-motion to dismiss and other relief is denied in its entirety; it is further

ORDERED, that plaintiff's motion for a stay is denied; it is further

ORDERED and DECLARED, that defendant is in violation of Administrative Code 6-202; and it is further

ORDERED and DECLARED, that defendant is enjoined permanently from operating its [*14]bus service within the City of New York without obtaining a franchise.

ENTER:

_______________________________Barbara Jaffe, JSC

DATED:March 9, 2011

New York, New York