East Ramapo Cent. Sch. Dist. v Student Bus Co., Inc.
Annotate this CaseDecided on November 27, 2019
Supreme Court, Rockland County
East Ramapo Central School District, Plaintiff,
against
Student Bus Company, Inc., Defendant.
034823/2019
Douglas Gerhardt, Esq.
Harris Beach PLLC
Attorneys for Plaintiff
445 Hamilton Avenue, Suite 1206
White Plains, NY 10601
Richard Hamburger,Esq.
Andrew K. Martingale, Esq.
Hamburger, Maxson, Yaffe & McNally, LLP
Attorneys for Defendant
225 Broadhollow Road, Suite 301E
Melville, NY 11747
Paul I. Marx, J.
The following papers numbered 1 to 7 were read on Plaintiff East Ramapo Central School District's ("Plaintiff" or "the District") motion for a preliminary injunction brought by Order to Show Cause against Defendant Student Bus Company, Inc. ("Defendant" or "Student Bus") pursuant to CPLR §§ 6301 and 6401:
Order to Show Cause/Affidavit of Valter Paci with Exhibits A-B/Affirmation of DouglasGerhardt, Esq. with Exhibits A-F 1-3
Memorandum of Law in Support 4
Affidavit of John Ely in Opposition/Exhibits A-I 5
Student Bus Company's Memorandum of Law in Opposition [FN1] 6
Reply Memorandum of Law in Further Support 7
Upon reading the foregoing papers, it is ORDERED that Plaintiff's motion is granted for the reasons set forth below.
DISCUSSION:
Plaintiff moves for an order granting a preliminary injunction "to enjoin and restrain Defendant Student Bus from withholding school bus transportation services contractually required under the parties' Agreement". Plaintiff Memorandum of Law at 1. Plaintiff contends that Defendant is obligated to perform under a four-year, publicly-bid, voter-approved agreement worth more than $20 million, pursuant to which Defendant transported Plaintiff's students to and from its schools (the "Agreement"). Plaintiff asserts that Defendant improperly terminated the Agreement in writing on August 9, 2019, on two days' notice to Plaintiff of its intent to do so. Plaintiff asserts that there is no provision in the Agreement which allowed Defendant to unilaterally terminate and refuse to provide bus services just two weeks before the start of the 2019-2020 school year. Plaintiff contends that it will suffer irreparable harm because approximately 9,000 of its students will be without transportation.
A party seeking a preliminary injunction must demonstrate: (1) a likelihood of success on the merits, (2) irreparable injury absent the preliminary injunction, and (3) a balancing of the equities in the moving party's favor. Zoller v HSBC Mortg. Corp. (USA), 135 AD3d 932, 933 [2nd Dept 2016]; County of Suffolk v Givens, 106 AD3d 943, 944 [2nd Dept 2013] (citing 306 Rutledge, LLC v City of New York, 90 AD3d 1026, 1028 [2nd Dept 2011]); Foy v Umeki, 10 AD3d 604 [2nd Dept 2004]. A preliminary injunction is meant to maintain the status quo during the pendency of the action so that a judgment will not be rendered ineffectual. Givens, supra at 944 (citing Board of Mgrs. of the Britton Condominium v C.H.P.Y. Realty Assoc., 101 AD3d 917, 918; Dixon v Malouf, 61 AD3d 630). "The decision to grant or deny a preliminary injunction lies within the sound discretion of the Supreme Court". Zoller, 135 AD3d at 933 (quoting Matter of Armanida Realty Corp. v Town of Oyster Bay, 126 AD3d 894, 894-895 [2nd Dept 2015]; Doe v Axelrod, 73 NY2d 748, 750 [1988]).
Where the moving party seeks a mandatory injunction to compel the performance of an act, the party must show by "clear and convincing evidence" that each requirement has been met. Zoller, 135 AD3d at 933. It is "an extraordinary and drastic remedy which is rarely granted and then only under unusual circumstances where such relief is essential to maintain the status quo pending trial of the action". Id. (quoting Matos v City of New York, 21 AD3d 936, 937 [2005] [citation omitted]; Village of Westhampton Beach v Cayea, 38 AD3d 760, 762 [2007]; Rosa Hair Stylists v Jaber Food Corp., 218 AD2d 793, 794 [1995]). Moreover, "absent extraordinary [*2]circumstances, a preliminary injunction will not issue where to do so would grant the movant the ultimate relief to which he or she would be entitled in a final judgment". Id. (citing SHS Baisley, LLC v Res Land, Inc., 18 AD3d 727, 728 [2005]; see Board of Mgrs. of Wharfside Condominium v Nehrich, 73 AD3d 822, 824 [2010]).
Defendant asserts that Plaintiff breached the provision of the parties' Agreement, as amended by a written settlement agreement executed by the parties on February 28, 2019, which required that "[e]very effort shall be made to ensure future payments shall be made within 30 days of invoicing." Affidavit of John Ely in Opposition, Exhibit B at p 2, ¶ 5. Specifically, Defendant contended that Plaintiff breached the Agreement as amended by failing to pay valid invoices Defendant submitted to it within 30 days of invoicing. Defendant treated Plaintiff's failure to make payment within 30 days as a breach and terminated the Agreement. Proceeding upon the claimed validity of its action, Defendant extended an offer to Plaintiff to provide the same services to the school district under an "emergency contract". Defendant initially offered different rates than those provided in the Agreement, and then, after this action was filed, it offered the same terms and conditions set forth in the Agreement. Defendant relies principally upon Awards.com v Kinko's, Inc., 42 AD3d 178 [2nd Dept 2007] to support its contention that the 30-day payment term was material and Plaintiff's failure to adhere to it constituted a breach.
Plaintiff counters that it did not breach the parties' Agreement, despite its failure to submit payment within 30 days, because the Agreement, as amended, merely called for Plaintiff's "best efforts" to make payment within 30 days. Plaintiff argues that Awards.com is distinguishable because it involved a requirement for payment by a date certain each month with no grace period. By contrast, the parties' Agreement contained no such definite date by which payment was to be made. The Agreement, as amended, simply required Plaintiff to make "every effort" to pay within 30 days of invoicing. Plaintiff asserts that it was unable to submit payment of the outstanding balance within 30 days of invoicing because it needed to determine how much to deduct from the payment for the gas benefits Defendant had already received under the Agreement.[FN2] Plaintiff also argues that it has substantially performed under the Agreement, because the outstanding amount, relative to the entire contract amount, was less than 1% — and that its breach, if there was one, was not material. Plaintiff argues further that Defendant breached the Agreement by its ineffectual attempt to unilaterally terminate and its refusal to perform unless ordered by the Court. Plaintiff contends that, due to the significant disruption that would befall the school district's operations from termination of the Agreement, it does not permit unilateral cancellation.
Plaintiff argues that it is entitled to provide a lesser quantum of proof to establish the elements for a preliminary injunction because denial of its application would disturb the status quo and render any judgment ineffectual. Id. at 4 (citing Masjid Usman, Inc. v Beech 140, LLC, 68 AD3d 942, 943 [2nd Dept 2009]). Defendant argues that Plaintiff cannot claim the benefit of this principle because it seeks to overturn the status quo by forcing Defendant to comply with a validly terminated agreement.
The parties disagree as to what constitutes the status quo—whether it consists of Defendant providing transportation services under the Agreement or whether it consists of [*3]Defendant's post-termination freedom from its prior obligations under the Agreement. What constitutes the status quo is not only relevant to determining whether preliminary injunctive relief should be awarded, it is the central issue in this case. If Defendant validly terminated the Agreement, it was not required to provide further services to Plaintiff and preliminary injunctive relief would not be warranted. If, on the other hand, Defendant did not validly terminate the Agreement, then Defendant must comply with the Agreement by continuing to provide bus service to the District, the ultimate relief Plaintiff seeks. The Agreement was in place for more than four years, having been extended by mutual consent, until Defendant sought to terminate it on August 9, 2019, two weeks before the start of the 2019-2020 school year. Therefore, the Court views the status quo as the provision of transportation services by Defendant until the question of the validity of Defendant's termination is resolved.
Nonetheless, the nature of the relief sought by Plaintiff dictates a higher level of proof to warrant preliminary injunctive relief, because unlike the circumstances in Masjid Usman, Plaintiff seeks to compel action rather than to prohibit action. Plaintiff attempts to cast the relief it seeks in prohibitory terms by phrasing its request as seeking to enjoin Defendant "from refusing to provide school bus transportation services for the District ". Order to Show Cause. Plaintiff's inartful attempt to recast the relief in prohibitory terms is not availing. Where a party seeks to compel action, the type of injunction sought is mandatory rather than prohibitive. A mandatory injunction requires a higher degree of proof.
Plaintiff has satisfied the higher burden and has shown by clear and convincing evidence that it has met all of the elements required to secure a preliminary injunction in this case. First, Plaintiff has demonstrated a likelihood of success on the merits of its cause of action for specific performance of the Agreement. Plaintiff has shown that it exercised its best efforts to submit full payment to Defendant.[FN3] As Defendant knows, Plaintiff must meet stringent verification requirements of invoiced amounts prior to making any payment of taxpayer dollars under its contracts. In this case, the amount due to Defendant of $152,751.19 was subject to an offset for the cost of the gas that Plaintiff provided to Defendant under the Agreement. In short, Defendant was not entitled to the full invoiced amount and Plaintiff needed to determine how much to deduct from the invoiced amount prior to submitting payment. The parties' Agreement, as amended, merely called for Plaintiff to make "every effort". Therefore, Awards.com, which required payment by a date certain each month, is clearly distinguishable from this case. Here, the Agreement contained no definite date by which payment was to be made.
Second, Plaintiff has shown that it will suffer irreparable injury absent the preliminary injunction, because it does not have its own buses or vans to transport the students who are provided transportation services under the Agreement. Defendant provides transportation services to a significant number of Plaintiff's students, for whom Plaintiff could not readily secure replacement transportation prior to the start, or even now for the remainder, of the current school year. Defendant's offer of an "emergency" contract at the same rates does not negate Plaintiff's claim of harm. As Defendant has been aware for more than two decades of providing [*4]transportation service to Plaintiff, a school district cannot act with the alacrity Defendant desires. Defendant created "emergency" conditions for the District by terminating the Agreement two weeks before the start of the school year. Defendant should not be allowed to profit from it. The harm in this case is heavily weighted toward Plaintiff and cannot be recompensed for the uncertainty and disruption to the District's operations.
Third, a balancing of the equities in this case clearly favors Plaintiff. If injunctive relief is not granted, Plaintiff will have to scramble to find replacement bus service within the next couple of months. Defendant has received all of the money to which it was entitled. It need only continue to provide bus service, as agreed, until the Agreement ends on June 30, 2021, unless it can negotiate an earlier end date after the 2019-2020 school year is completed.[FN4] Defendant has put Plaintiff in the difficult position of having to seek bus service for a substantial number of students—approximately 9,000 of them—in the middle of a school year when other companies which provide transportation services to schools have already committed their buses and vans. That leaves the District in a position where it is either unlikely to find a company to provide bus service to finish out the school year or to take a short-term contract at undesirable rates. After more than 20 years contracting with the District, Defendant now seeks to hold it hostage and is using the students and the District's legal obligation to provide them with transportation as leverage.
Plaintiff has also shown that extraordinary circumstances warrant it obtaining the ultimate relief it seeks on an interim basis, due to the disruption to school operations that would result from the loss of bus service during the school year and the taxpayer dollars that are at stake.
Accordingly, Plaintiff's motion for a preliminary injunction is granted.
The foregoing constitutes the Decision and Order of this Court.
Dated: November 27, 2019
E N T E R
New City, New York
_________________________
HON. PAUL I. MARX, J.S.C. Footnotes
Footnote 1:Defendant submitted further opposition to the motion by letter to the Court dated September 24, 2019 from defense counsel, Richard Hamburger, Esq., along with two exhibits labeled "A" and "B". Counsel did not seek or obtain permission from the Court to submit further briefing on the motion and supplemental opposition is not permitted under CPLR §2214. Moreover, the Court does not permit litigation by letter. Consequently, the Court has not considered Defendant's submission.
Footnote 2: In an effort by the District to control costs, the District allows Defendant to fuel its vehicles at the District's gas pumps, with credit to be given to the District against the contract price.
Footnote 3: Plaintiff paid Defendant $125,115.23 (the outstanding balance of $152,751.19 minus over $20,000 of gas credits due to the District) by check dated August 27, 2019. (NYSCEF Doc Nos. 27 and 28).
Footnote 4: Defendant claims that an injunction will likely extend past the expiration date of the Agreement before the case goes to trial. Defendant overlooks that the action is for declaratory judgment, which can be disposed of expeditiously by motion.
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