bus companies lawsuit to end epp

SCANNED ON 211112013 w

SUPREiME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

In the Matter of the Application of STATEN ISLAND BUS, INC., LONER0 TRANSIT INC., and PIONEER TRANSPORTATION CORP.,

Petitioners,

Index No.

NOTICE OF PETITION

For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,

-against-

THE NEW YORK CITY DEPARTMENT OF EDUCATION,

Respondent. -- PLEASE TAKE NOTICE that upon the annexed Verified Petition, dated February 8,

2013, and the exhibits annexed thereto, the undersigned will move this Court, at the Motion

Support Courtroom, Room 130, at the Cowthouse located at 60 Centre Street, New York, New

York, on the 7th day of March, 2013, at 9:30 o'clock in the forenoon of that day, or as soon

thereafter as counsel may be heard, for an order and judgment, pursuant to Article 78 of the Civil

Practice Law and Rules: (1) declaring that certain "employment protection provisions" set forth

in Petitioners' existing contracts for the transportation of disabled school-age children effective

through the 2014-2015 school year (the ''Existing Contracts") are unlawful and enjoining

Respondent from enforcing them; and (2) enjoining Respondent and its employees and agents

from awarding any contract based on Respondent's pending request for bids for pupil

transportation services, Serial No. B2192, andlor any future solicitation containing similar terms,

until Petitioners' Existing Contracts ae amended or modified to delete such employment

Supreme Court Records OnLine Library - page 1 of 29

protection provisions; and (3) granting Petitioners such other and fwther relief as the Court may

deem just and proper, including the costs, disbursements, and attorneys' fees of this proceeding.

PLEASE TAKE FURTHER NOTICE, that pursuant to CPLJi 7804, an answer and

supporting affidavits, if any, shrrll be served at least five ( 5 ) days prior to the hearing da@ of the

Petition.

Dated: New York, New York February 8,2013

/fdbrad Matetsky

360 Lexington Avenue William D. McCracken

New York 10017

TO: THE NEW YORK CITY DEPARTMENT OF EDUCATION c/o Michael A. Cardozo, Esq. Corporation Counsel of the City of New York New York City Law Department 100 Church Street New York, New York 10007 Attorney for Respondent

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SUPREME COURT OF THE STATE OF NEW YORR COUNTY OF NEW YORK

In the Matter of the Application of STATEN ISLAND BUS, INC., LONER0 TRANSIT INC., and PIONEER TRANSPORTATION CORP.,

Petitioners,

For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,

-against-

F THE NEW YORK CITY DEPARTMENT OF EDUCATION,

fl Respondent.

Index No.

VElUFIED PETITION

Petitioners, Staten Island Bus, Inc., Lon Transportation Corp.

(collectively, "Petitioners"), by and through their attorneys, G d e r & Shore, LLP, as and for

their Petition against Respondent, the New York City Department of Education (the "DOE" or

"Respondent"; also known as the Board of Education of the City School District of the City of

New York), for their Verified Petition pursuant to Article 78 of the Civil Practice Law and Rules,

state and allege as follows:

m A R Y STATEMENT

1. This is a proceeding pursuant to Article 78 of the Civil Practice Law and Rules to

prevent the DOE from enforcing against Petitioners so-called "employment protection

provisions" ("EPPs") of a type that the Court of Appeals has found and the City of New York

(the "City") has conceded are unlawful. Among other negative effects, the EpPs are preventing

and unless terminated will continue to prevent Petitioners from submitting competitive bids in

response to the DOES pending request for bids (the "RFEV) and future bids for pupil


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ansportation services, in a manner that is anticompetitive, arbitrary, capricious, and contrary to

LW. Petitioners seek: (1) a declaration that the employment protection provisions set forth in

'etitioners' existing contracts for the transportation of disabled school-age children effective

wough the 2014-201s school year (the "Existing Contracts") are unlawful; and (2) to enjoin the

bOE from awarding any contract based on the current RFB andor any future solicitations until

etitioners' Existing Contracts are amended or modified to delete the unlawful and

nticompetitive employment protection provisions hereafter described, The RFB is annexed

ereto as Exhibit "A", and a copy of the relevant provisions contained in each of Petitioners'

,xisting Contracts are annexed hereto as Exhibit "E".

2. Petitioners collectively provide a significant percentage of all pupil transportation

)r school-age children in New York City. Bus drivers, mechanics, and matrons represented by

~ c a l 1 18 1 of the Amalgamated Transit Union ("Local 1 18 1 or the "Union") who are employed

y Petitioners and other private bus contractors have engaged in a City-wide strike to protest the

bsence of the employee protection provisions in the pending RFB. The DOE is determined to

ring about cost-saving measures in its RFB and the Union is trying to preserve job security

rotections for its members, even though such provisions are unlawful.

3, The EPP, a provision in every pupil transportation contract for over thirty years,

quires all of the DOE'S transportation contractors to hire their drivers, matrons, and mechanics

om master seniority lists of displaced workers that are maintained and administered by the

IOE itself. The EPPs provide dominant bargaining position to the employees' labor union and

sult in increased labor costs to the bus contractors.

4. The EPP came about &r the last major bus strike by Union members in 1979.

hen, as now, the City had identified significant potential cost savings by removing Union

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members' job security protections, and the workers went on strike as a result. In order to end the

strike, the Union compelled the DOE to establish and maintain master seniority lists from which

bus contractors must hire replacement labor. The: DOE compelled every bus contractor in the

City, including Petitioners, to agree to this employment protection provision, i.e., the EPP, as a

condition for securing bus contracts.

5 . The DOE has now taken the position that the Court of Appeals' decision requires

it to stop demanding these costly employment protections in new contracts for pupil

transportation. More specifically, in December 2012, the DOE issued the RFB for 1,100 special-

education bus routes (Exhibit "A' hemo). For the first time in more than thirty years, the DOES

specifications for new routes did not include EPPs.

6. Because the RFB does not include protections for current members of the Union,

the Union called a strike against all of the school bus contractors in the City of New York,

including Petitioners, which began January 16, 2013 and is ongoing as of the filing of this

Petition.

7. City officials have taken the position that the DOE'S hands are tied - the Court of

Appeals has ruled that EPPs are illegal, and so the DOE can no longer include them in school

bus contracts. Indeed, in their public comments, City officials have stated they cannot enforce

the EPPs. For example, shortly before the strike, Mayor Bloomberg commented:

A strike would not only be totally unfair to children and families, it would be totally misguided - because the city cannot legally offer what the union is demanding. Have you ever heard of a strike where one side is demanding


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8, However, the DOE has taken a much different position - an arbitrary and

capricious position and one contrary to law - with respect to the EPPs still contained in

Petitioners' Existing Contracts. With respect to these EPPs, the DOE has not sought to remove

them or declare them "illegal." On the contrary, the DOE has stated to Petitioners that it "does

not intend to seek to amend existing school bus transportation contracts so as to delete EPP

provisions." (See Exhibit I'D" hereto).

9. In other words, for new bidders without an existing contract with the DOE, City

officials from the Mayor on down assert that EPP provisions are unlawful, while for established

bus contractors with existing contracts with the DOE, continued enforcement of the EPF

rovisions is apparently business as usual.

10. The DOE'S contradictory and arbitrary demands will have immediate negative

nsequences for Petitioners and the competitive bidding process if this Court does not

&nene. Petitioners are qualified and experienced pupil transportation contractors that wish to

id on the pending RFB. As a famal matter, Petitioners are permitted to bid for the 1,100 pupil

nsportation routes that the DOE has put out for bids and will be permitted to bid on the

itional routes that advisedly will be bid in the upcoming months. However, according to the

E, Petitioners remain bound by the admittedly unlawful EPPs contained in Petitioners'

isting Contracts - which include the proviso that such EPPs apply to ull the bus drivers,

cs, and matrons for pupil trmsportation routes that Petitioners operated at the time the

Contracts were awarded os well as all workers for routes that Petitioners might be

thereafter, including the routes covered by the pending RFB, (See Exhibit "€3" at pp.

In calculating their impending bids on the routes to be awarded, Petitioners will

have to include the inflated labor casts created by the EPP provisions.

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11. By contrast, other bidders that do not currently provide pupil transportation

services to the DOE, and therefore are not parties to any Existing Contracts are no& bound by the

EPP and will be able to propose bids predicated upon the substantially lower labor costs dictated

by the free market without the artificial and unlawful constraint of the EPP.

12. Thus, in the absence of relief from this Court, experienced New York City school-

bus contractors such as Petitioners, which are bound by the unlawful EPP provisions of the

Existing Contracts that, by their terms, would apply to drivers, matrons, and mechanics required

for the routes now being bid will be deprived from effectively competing in the current RFB,

whereas new entrants to the market, which are not parties to any Existing Contracts and thus are

not bound by any EPP clause, will have the benefit of competing without the constraints of the

EPP. As discussed herein, if contracts are awarded based upon the RPB or similar solicitations,

e latter category of bidders wil l be able to submit bids predicated on labor costs that are

less than the labor casts that Petitioners would be required to incorporate.

13, Petitioners' inability to compete fairly with the new bidders for these routes is not,

\ h wever, the result of legitimate competitive factors such as more efficient operations,

nomies of scale, willingness to accept a lower profit margin, or the like. Rather, the sole

on that Petitioners will be unable to submit competitive bids - and will have to charge the i E for artificially inflated labor costs in the unlikely event they were to be awarded any routes

new RFEI - is that the DOE refuses to delete the EPPs from the Existing Contracts, even

the Court of Appeals has held such provisions in pupil transportation contracts to be

and even though the Mayor of the City of New Yark and the Chancellor of the DOE

havd repeatedly stated that the Court's holding applies to School-Age Contracts such as those

in the Existing Contracts and the RFB.

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14. In addition, the DOE has indicated that it intends in the near future to submit

additional bus routes to competitive bidding without including EPPs in those bid specifications,

thereby further prejudicing Petitioners' ability to bid for new bus routes and compounding the

ongoing and prejudicial effects of the unlawful EPP provisions in the Existing Contracts.

15. This situation reflects a clear violation of the competitive bidding statutes, the

case law interpreting them and the public policy underlying them, which is to secure services for

public entities such as the DOE at the lowest possible cost by ensuring fair and equal treatment

to all bidders. Because the EPP provisions are unlawful, anti-competitive, and contrary to the

public interest, these provisions should be immediately deleted from all of the DOE'S pupil

transportation contracts. It is arbitrary and improper for the DOE to bid and award a series of

new contracts under which, in effect, some potential bidders such as the Petitioners are bound by

the high-cost EPP requirements while other bidders are not,

THE PARTIES

16. The Petitioners are school bus operating companies that have contracted with the

DOE for decades to provide bus transportation services for both general education and special

education pupils throughout the City (together, the "School-Age Contracts"). The Existing

Contracts are special education contracts held by Petitioners which run through the 2014-2015

school year. Each of Petitioners' Existing Contracts contain the employment protection

orovisions discussed herein. (See Exhibit "B" hereto).

17. Petitioner Staten Island Bus, Inc. is a New York corporation with its principal

Glace of business located in Staten Island, New York.

18. Petitioner Loner0 Transit Inc. is a New York corporation with its principal place

of business located in Brooklyn, New York.

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19. Petitioner Pioneer Transportation COT. is a New York corporation with its

principal place of business located in Staten Island, New York.

20. Respondent DOE is an agency of the City of New York, located at 52 Chambers

Street. New York, New York 1OOO7, and is responsible for operating the New York City public

school system. The DOE hereafter may be referred to the "Board" or the "BOE" where context

so requires.

JUEfsDICTION AND VENUE

21. This Court has jurisdiction over this proceeding pursuant to Article VI of the New

York State Constitution and Sections 3001 and 7801 of the Civil Practice Law and Rules.

22. Venue is proper in the County of New York pursuant to CPLR 504(3) because,

inter alia, Respondent is located in this County and it is the County within the City of New York

in which Petitioners' causes of action arose.

STATEMENT OF FACTS

many

A. The DOE Fights The 1979 Strike

23. The DOE (along with its predecessor the BOE) has fa rs contracted

with private bus companies, including Petitioners, to provide bus transportation to school-aged

children attending public schools. As set forth above, these School-Age Contracts include

general education contracts for the general population of school-age children and special

education contracts for disabled school-age children.'

24- In 1979, the Board and City officials perceived that the school bus transportation

system was in crisis. Among other things, 77% of the school bus routes were controlled by one

company, the Board had ceased competitive bidding, and the existing School-Age Contracts

As discussed below, certain other contracts for Pre-K and Early Intervention Program ("EI") transportation services were separately administered by tk Department of Transportation and were not the subject of the 1979 strike discussed herein,

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27, In the ensuing bidding, new private bus companies submitted bids and were

awarded routes by the Board at the expcnse of other private bus companies that had previously

3eld the rights. Employees of these latter companies (represented by Local IlSl), concerned

with the threat of immediate loss of jobs and future erosion of job security (because the new non-

vbionized bus companies had bid less for the school bus routes than their employers), began a

wildcat strike on February 15, 1979, which brought school bus transportation within New York

contained what were seen as overly generous job security provisions for the bus drivers,

mechanics, and matrons.

25. The Chancellor, Frank J. Macchiarola, and other City officials argued that the

combination of no bidding and guaranteed wages made school busing much more costly than it

would be with more competition. Chancellor Macchiarola was quoted in The New York Times

explaining that the BOE could save millions of dollars a year if the School-Age Contracts could

be changed:

The City's School Chancellor, Frank J. Macchiarola, views the negotiations as the centerpiece of his overhaul of the board's system of awarding $75 million in bus contracts.

He calls the current contract "a rip off' and estimates that the revised system would save the city as much as $10 million a year.

("City's School-Bus Dispute Issues", The N a u York Times, February 25, 1979, included with

Exhibit "C" annexed hereto).

26, In early 1979 the Board announced that it would accept bids on certain school bus

routes, with service to commence that September. These new bid specifications did not include

provisions providing the bus workers parity with the wages and benefits of drivers for the Transit

Authority, as the prior contracts had provided.

ity to a halt. I 8


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28. The strike continued for three months before being resolved in May 1979 by a

settlement between the BOE and Local 1181 negotiated before the Honorable Milton Mollen,

then the Presiding Justice of the Appellate Division, Second Department (subsequently lcnown as

the "Mollen Agreement").

29. It was generally agteed by the press and observers that the Board had been routed

by the Union under the terms of the Mollen Agreement. For example, The New York Times

quoted one negotiator pointing out k t the Board had actually gotten less than what it had stated

out with before the strike:

[The agreement hammered out for the Amalgamated Transit Union, locals 1181- 1061, its 3,000 members and the Board of Education, was remarkably similar to the key items on the bargaining table before talks broke off in February, setting in motion one of the longest strikes against the nation's largest public school system.

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"This was the most unnecessary strike in the history of the city's labor relations," said Theodore W. Kheel, the veteran labor mediator (and, under its contract, the union's permanent arbitrator). Mr. Kheel, whose offer to serve as mediator had been rejected by Mayor Koch early in the walkout, contended that the "Board of Education ran uphill for the length of the strike and wound up behind the starting line." Job security, the main sticking point, was the issue in February as well as in May and a settlement hinged on its resolution.

("Why Did the School Bus Strike Take So Long?", The New York Times, May 13,1979, included I ;w'th Exhibit "C" annexed hereto) (emphasis added).

)I 30, The centerpiece of the Mollen Agreement was a requirement that the

(pecifications for the 1979 School-Age contracts (the "1979 Contracts") include employee

pec t ion provisions - the EPPs that are at the center of the current labor dispute.

31. Simply stated, the EPPs provide that senior experienced personnel cannot be

laced by cheaper labor, though the provisions themselves are lengthy, complex, and detailed.

illustrate, below is an excerpt from thc 1979 Contract for special education pupils requiring

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I the BOE to establish, maintain, and enforce master seniority lists from which the bus companies

1 are required to hire employees:

There shall be established two industry-wide Master Seniority Lists. One list shall be composed of all operators (drivers), mechanics and dispatchers and the other list shall be composed of escorts (matrons-attendants) who were employed as of February 9, 1979 under a contract between their employers and the Board for the transportation of school children in the City of New York, who are furloughed or become unemployed as a result of loss of contract or any part thereof by their employers, or as the result of a reduction in service directed by the Board during the term of the contract, in accordance with their date of entry into the industry, All operators (drivers), mechaaics, dispatchers and escorts (matrons-attendants) on the Master Seniority Lists who participated in the Division 1181 A.T.U.-New York Employees Pension Fund and Plan as of February 9, 1979 and who do not exercise their option to withdraw from the Fund and Plan shall continue to participate in such Pension Plan.

Any existing contractor or individual who conducted business as a sole proprietor, or as a member of a partnership or who held a controlling interest in a corporation that performed service pursuant to contract expiring in June, 1979 (contractor) shall give priority in employment in September, 1979 or thereafter an the basis of positiorn on the Master Senionry List of any additional or replacement operators, mechanics end dispatchers beyond those performing service as of February 9, 1979 consistent with the number of employees required by the specifications of the Contract expiring June, 1979 for the number of vehicles providing service to the Board as of February 9, 1979 to individuals from the Master Seniority List until such list is exhausted.

* * + In addition to any other remedies provided in the contract between the Board and the contractor, such as default andlor termination, if the contractor is found to be in violation of the foregoing employee protection provisions, then the Director of the Bureau of Pupil Transportation, within thirty (30) days of written notice shall withhold the appropriate mounts from the first payment thereafter due to the contractor and pay it directly to the Division 1181 A.T.U.-New York Employees Pension Fund for the benefit of the employees effected and to the appropriate welfare Fund for the benefit of the employees affected.

In the event any contractor willfully fails to comply, the Board of Education shall act to cancel such contractor's contract; provided, however) that the Board shall not be required to act so as to cause a disruption of service.

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(Exhibit "E" annexed hereto at pp. 33-36) (emphasis added). The language of the EPP set forth

in the 1979 Contract is substantially the same as the EPP set forth in the Existing Contract.

(Compare Exhibit "B" at pp. 26-30).

32. The contracts were then bid (or rebid) pursuant to the newly inserted employment

protection provisions. For those contractors who had previously bid on, and been awarded, new

bus routes, the BOE required those contractors to amend the basic contract under which bids had

been taken and accepted to add the. new employment protection provisions, or drop out.

33. Many of these new bus contractors had successfully bid far the new routes

predicated on less expensive non-union labor. However, the Board's requirement that the EPPs

be retroactively inserted into the bus contracts meant that these bus companies effectively would

have to pay substantially more than their originally anticipated labor costs if they wished to keep

their new bus routes. Many bus companies as a result dropped out at the bidding stage or ceased

operating when they could not operate profitably. The entire bus industry was quicMy unionized

in the wake of the 1979 Contracts.

I 34, For more than thirty years the DOE has negotiated extensions of the contracts

ursuant to Section 305, subdivision 14 of the Education Law rather than putting them up for

id. Bids for s ~ m e additional services held in or about 1986 and 1995 included the same EPP

mvisions as in the 1979 contracts. Each time the contracts were rebid, the new pricing

s bstantially increased. r 1 35. Although the DOE from time to time periodically threatened to re-open the EPP

and solicit new bids, for more than thirty years the DOE did nothing ta foster

or generate cost savings through controlling labor costs. On the contrary, the DOE

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bound the bus companies to the EPP, which resulted in superior bargaining leverage to the Union

in negotiating wage and benefit increases with the bus contractors.

B. * . The Court Of Aai~eals Iss uw The L&M Bus Corn. W s Ion

36. The status quo in the New York City school bus transportation industry was

finally upset in 2011 by the Court of Appeals' decision in L&A4 Bus Corp., which, among other

things, held EPPs to be illegal.

37. The L&M Bus COT. decision arose in connection with disputes involving

contracts for Pre-K and E1 @arly Intervention) pupil transportation services, which historically

had been a separate set of contracts from the School-Age Contracts.

38. Beginning in the late 1980s, the City began offering he-K and E1 pupil

transportation. The City had the Department of Transportation, rather than the DOE, administer

these separate Re-K and E1 contracts. The Pre-K and E1 contracts were procured by competitive

bidding, without employment provisions and without strikes. Neither Local 1181 nor any other

union dominated pupil transportation administered by the DOT,

39. In or about ulo6 the administration of the Pre-K and E1 contracts was transferred

from the DOT to the DOE. When it came time to rebid these contracts, Local 1181 demanded

that the DOE include employee protection provisions in the Pre-K and E1 transportation

contracts to be solicited. The DOE acquiesced to the Union's demand, and thus the bid

specifications for the new PR-K and E1 @ansportation contracts contained EPPs identical to

those contained in the School-Age Contracts.

40. The DOE'S bid specifications were challenged by the petitioners in L&M Bus

Cop. The DOE, as respondent, defended the legality of the provisions. The Supreme Court,

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New York County, found that the EPPs were unlawful and must be deleted from the

specifications, holding that:

DOE'S authority and discretion to award bus transportation contracts and determine bid specifications is not absolute; the award must not violate state bidding laws. Therefore, that the EPPs do not expressly exclude any of the petitioners from bidding, does not mean that the EPPs are not anti-competitive; the effect of the EPPs inhibit competition that fosters the ability to obtain quaIity services at the best possible price.

L M Bus Corp. v New Yo& Cig Dept. of Educ., 21 Misc. 3d 1111(A), 873 N.Y.S.2d 512, at

*143 (Sup. Ct. N.Y. Co. Sept. 5 , 2008) ( m e a d , J.). This holding was affirmed by the

Appellate Division, First Department, in LgdM Bus Corp. v. New York City Dept. of Educ., 71

A.D.3d 127,892 N.Y.S.2d 60 (1st Dep't 2009).

41. The DOE appealed to the Court of Appeals, which on June 14, 201 1 issued its

L W Bus Corp. decision and affirmed the lower court rulings in all relevant respects, concluding

that EPPs are atypical bid specifications that have anticompetitive consequences, such as inviting

cost-inflation and discouraging new bidders from attempting to compete with long-term contract

holders. Accordingly, the Court of Appeals held the EPPs to be unlawful.

42. The Court of Appeals identified the DOE'S anticompetitive and cost-inflating

administration of the School-Age Contracts as the central basis for its holding:

Appellants fail to refute the facially anticompetitive features of the EPPs, which tend to invite cost-inflation and discourage new bidders from attempting to compete with the long-term contract holders. As the Appellate Division noted,

"[tlhe EPP provisions at issue raise the prospect that a vendor will be required to assume a competing contractor's labor costs, requiring that the vendor's bid reflect not only the known expense of compensating its own employees but also the unknown and potentially much greater expense of compensating a competitor's employees" (71 A.D.3d at 134,892 N.Y.S.2d 60).

Even if a new bidder can ascertain the pay scale of the existing contractor, the bidder does not know how many of the predecessor's employees will need to be

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retained or the salaries of the individual employees, which vary by seniority and other factors. h these circumstances, prudent bidders might inflate their bids to cover the contingency of having to pay unspecified salaries for a large number of a predecessor's work force, and the small-scale operations that currently hold the PreKEI contracts might avoid the contest altogether for fear of losing the gamble.

A brief look at the history of New York City's public busing contracts since 1979 suggests that, in practice, the EPPs have had anticompetitive md cost-inflating effects. The existence of EPPs has resulted in the School-Age transportation contracts being p & m d by the same companies with roughly the same employees, year a@r year. By contrast, Re-WE1 transportation, which lacks EPPs, has proceeded with competitive bidding by a variety of small-scale companies, without serious reports of corruption or labor disruption, and without threats from the unions to strike or pressure to introduce EPPs. In short, the introduction of EPPs to the Re-K/EI bid specifications might eliminate the cost- saving, pro-competition advantages Pre-K/EI busing has enjoyed . , . .

L & M Bus C o p , 17 N.Y.3d at 158-59,927 N.Y.S.2d at 317 (emphasis added).

C. The DOE Adonts the Xn&M Bus Corn. Holding

43. The DOE, as the losing party in L&M Bus Corp., had for three years defended the

EPP provisions in court. In addition, the DOE had assisted in drafting legislation that would

have mandated the use of EPPs in the Pre-WE1 contracts, thereby mooting the L&M Bus Corp.

litigation. In fact, at the time of the Court of Appeals' decision, that legislation had passed both

houses of the New Yark State Legislature and was awaiting the Governor's signature.

44. However, once the Court of Appeals issued its ruling in June 201 1, the City

accepted the Court's holding and requested that the Governor veto the pending bill. The bill did

not become law.

45, The DOE'S actions were described in a July 19,201 1 The New York Times article

titled "City Asking Cuomo to Veto a Measure It Helped Write":

For the last three years, lawyers for the Bloomberg administration have argued in court alongside transportation union lawyers for the extension of unusual job protections for school bus drivers and other employees that can amount to lifetime job guarantees. But now that unlikely alliance is heading toward an abrupt end.

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* * * As a secondary strategy, the city also helped to fashion a bill in Albany in 2007 that would allow it to incorporate the job protections into preschool busing contracts without court approval. That bill, in a slightly different form, was finally passed in late June.

But now, numerous court sessions and untold tax dollars later, the city has determined that its own arguments were unconvincing and has changed tactics. In a letter to Cov. Andrew M. Cuomo last week, the city cited the court's conclusion that the protections were costly and anticompetitive, and formally asked him to veto the bill the city had helped to write.

* * * Julie Wood, a spokeswoman for Mayor Michael R. Bloomberg, insisted last week that the city had not reversed course. She said that an earlier strike threat by the union had forced the city into defending the protections in court, but that a strike no longer seemed imminent.

In fact, Ms. Wood said, the city had never really wanted the protections. "I think there's a difference between being forced into arguing one-half of a lawsuit and fighting for something," she said.

(See Exhibit "C" annexed hereto).

D. The DOE Issues A New Request for Bids Removing the EPPs, LeaGln eToTheStrike

46. The DOE announced in December 2012 that it would solicit competitive bids for

certain School-Age Contracts, and in doing so, remove the EPPs from the bid solicitations. The

RFB involved in this case (Exhibit "A" annexed hereto) was for the transportation of 22,500

children in kindergarten through 12th grade who have special needs and require special

transportation. Responsive bids are due from interested contractors on February 11, 2013,

following which the contracts, in the absence of intervention by this Court, would be awarded.

47. The Union had warned for years that if the DOE ever took action to remove the

EPPs, its employees would strike, just as they had in 1979, even though the DOE is not a direct

party to the Union contracts. Thus, the Union immediately responded to the RFB by calling for a

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strike against Petitioners and 0th school bus contractors, which began on January 16,2013 and

is ongoing as of the filing of this Petition. Among other things, the Union has claimed that the

removal of the EPP provisions threatens their members' job security, and that replacing senior

bus employees with less experienced new workers would constitute a danger to public safety

48. In their public statements about the strike, City and DOE officials have relied

heavily on L&M Bus Corp.'s holding that the EPP provisions are anticompetitive and unlawful.

For example, on the eve of the strike, the Chancellor of the DOE, Dennis M. Wdcott, stated as

follows:

"This is a strike against our children," Walcott said, ''If is illegal as fur as what they're asking us to do and they are hurting our most vulnerable children and it is totally unacceptable."

The strike talk began after the city put its bus contracts out to bid for the first time in more than 33 years as part of a cost-saving measure.

"New York City pays $1.1 billion a year for busing -- an average of $6,900 per student, more than any other school district in the country," Walcott said.

The ATU wants job protections for some workers, but both Walcott and Bloomberg said they cannot fill that request, as the state Court of Appeals previously struck down such measures in bus contracts in 201 1.

"The Employee Protection Provisions, the EPPs that the union is asking for us to include in the bid, wcls struck down by the highest court in New York State, the New York State Court of Appeals," the chancellor said.

("Schools Chancellor Calls Bus Drivers' Strike Irresponsible, Illegal", www.ny1 .corn, January

13,2012, included with Exhibit "CI annexed hereto) (emphasis added).

49. Mayor Bloomberg has repeatedly characterized the exclusion of the EPPs from

future contracts as being non-negotiable because such provisions are against the law. For

example:

The city, [Mayor Bloomberg] said, would be holding firm. It is seeking new bids from bus companies that rutl some of the city's routes, without the traditional job

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protection guarantees for union members that have been in past contracts. The Bloomberg administration argues that a recent court ruling [ L W B u s Corp.] has found that the city c m o t offer the guarantees sought by the union.

"We couldn't change our mind and cave if we wanted to," Mr. Bloomberg said.

("New York School Bus Drivers Go On Strike", The New York Times, January 16, 2023,

included with Exhibit "C" annexed hereto).

50. In fact, the DOE has indicated that it intends in the near future to submit

addition& bus routes to competitive bidding without including EPPs in those bid specifications,

thereby further prejudicing Petitioners' ability to bid for new bus routes and compounding the

ongoing and prejudicial effects of the unlawful EPP provisions in the Existing Contracts.

51, The DOE, however, has taken a far different position with respect to Petitioners'

Existing Contracts, each of which run through 2015 and still contain the unlawful EPP

provisions.

D. The DOE Refuses To Amend Or Modify the Existing School-Ape Contracts To Remove the Unlawful EPP ]provisions

52. Despite City officials' numerous public statements that EPPs are illegal and barred

by the L&M Bus Cop . ruling, the DOE has taken the position that the Petitioners are bound until

2015 by these same provisions in their Existing Contracts, which will have the effect of

preventing Petitioners, who are among the largest and most experienced providers of pupil

transportation in the City, from bidding on the new bus routes, and has directly refused requests

by Petitioners to delete such provisions from the Existing Contracts because they are now known

to be unlawful and anti-comptitive.

53. In fact, the DOE on January 9,2013 advised a representative of Petitioners that it

has decided that it "does not intend to seek to amend existing school bus transportation contracts

so as to delete EPP provisions." (Exhibit "D" hereto).

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54. Petitioners l m e d of the DOE's decision only after the RFB had been announced

and it became clear that the currently pending bid solicitations did not include EPPs.

55. On January 4,2013, and again on January 9,2013, a representative of Petitioners

wrote to counsel for the DOE, requesting that the Existing Contracts be amended or modified to

remove the unlawful EPPs, so that the bus contractors could submit competitive bids for the new

bus routes:

Our clients, whose contracts with the DOE run through 2015, have previously requested your position on an amendment to eliminate the EPP provisions from their contracts in order for them to competitively bid the current RFB. We would appreciate a respnse at your earliest convenience, and no later than Monday January 14.

(Exhibit "D" hereto).

56. Counsel for the DOE responded on January 9,2013:

In response to your q u e s t , DOE does not intend to seek to amnd existing school bus trumportation contracts $0 as to delete EPP provisions.

In addition, please note that DOE does not read the EPP provisions in the existing school bus contracts as applying to the new contracts that will not contain EPPs,

(Id.) (emphasis added).

57. Petitioners' good faith efforts since January 9, 2013 to persuade the DOE to

reconsider its position set forth above have been unsuccessful.

E. The DOE's Actions Haw Created an Uneven Plavin~ Field

58. If the bus contractors are handcuffed to the EPPs contained in their Existing

Contracts, which run through 2015, they cannot effectively compete for new bids on a level

playing field against contractors who are not bound by the currently pending bid solicitations.

59. As long as the Existing Contracts are in effect, Petitioners are still required to hire

from the master seniority list, and so there is no opportunity to reduce labor costs, The plain

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language of the Existing Contract, in relevant part, provides that "[a]ny existing

contractor, . . shall give priority in employment in September 2010 or thereafter on the basis of

position on the Master Seniority List. . I .":

Any existing contractor or individual who conducted business as a sole proprietor, or as a member of a partnership or who held a controlling interest in a corporation that performed service pursuant to contract expiring in June 2010 ("existing contractor") shall give prwtity in emplaymnt in September 2010 or thereafrer on the basis ofposition ma the Master Seniority List of any additional or replacement operators, mechanics and dispatchers beyond those performing service as of June 30,2010 consistent with the number of employees required by the specifications of the contract expiring June 2010 for the number of vehicles providing service to the Board as of June 30,2010 to individuals from the Master Seniority List until such list is exhausted.

(Exhibit "B" at p. 26) (emphasis added).

60. As can be seen from the foregoing language in the Existing Contracts, the DOE'S

position that "the EPP provisions in the existing school bus contracts [do not apply] to the new

contracts that will not contain EPPs" @chibit "D) is incorrect.

61. Until the Existing Contracts expire in 2015, the EPP provisions require that the

Petitioners must hire from the master eniority lists, which precludes the possibility of bidding

with reduced labor cost projections. In contrast, new contractors not bound by prior contracts

with the DOE are free to hire any labor they wish at the lowest possible price.

62. For any pupil transpartation contractor, labor costs are by far the most significant

@ost variable of a given contractor's revenues. The other costs facing a typical contractor, such as

iuses, fuel, and property, are generally priced at market rates and thus do not offer significant

wnpeti tive pricing opportunities.

63. The EPPs have resulted in increased labor costs for the Petitioners, whose

cmntract revenues are based upon 1979 pricing adjusted only for limited cost of living increases

o decreases. Indeed, City officials have justified the current labor strife by identifying potential

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industry-wide labor cost savings if the EPPs are removed from future contracts. As long as

Petitioners are required to pay mare substantially for their labor, their competitors not subject to

EPPs, Petitioners cannot submit competitive bids for new bus routes.

64. Even if the DOE were correct (which it is not) that the Existing Contracts do not

require Petitioners to hire drivers and escorts born the master seniority lists for routes awarded

under the new RFB, Petitioners would still face significant competitive disadvantages as a result

of being bound by the EPPs for their labor requirements under their existing contracts. Among

other things, the continuation of EPPs in the Existing Contracts provides the Union with

tremendous bargaining leverage against Petitioners, with inevitable increases in labor costs as

compared to contractors not subject to EPPs. As long as the EPPs are in effect, the Petitioners

still must pay top-line rates of an average of $450 per day to their existing work force.

65. In addition, the DOE'S position is based on a false premise that new workers hired

for new routes could be segregated to the new routes. This does not accord with reality. The

RFB applies to routes; the EPP applies to employees. Drivers for a contractor are not hired for a

specific route, but rather become part of the general work force.

66. In fact, drivers participate in a DOE-administered yearly "pick" of routes, based

upon seniority. The New York Times recently described the centrality of the pick in determining

which drivers drive which bus mu&:

Each August, just before the start of school, more than 1,OOO drivers for the Atlantic Express school bus company gather in a lot in the shadow of Citi Field in Flushing, Queens. For the drivers, it is the event of the year, one repeated at lots all over the city, and is known simply as "the pick,"

The drivers inspect slips of paper stapled to hulking plywood boards, each slip detailing another route: Names of children, where to pick them up and when, and whom to contact for emergencies. In order of tenure, the drivers are called in groups of 5 to 10 inside a mammoth depot, where they tsy to sign up for a choice

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route - one that touches a neighborhood or school they prefer or ends at a bus yard near their home.

"It's basically picking your job," said Albert S e m o , 45, an Atlantic driver for the past 13 years who ranked No. 560 among 1,700 drivers at last summer's pick. "The longer you're there, the better chance you have to pick something you want,"I

Each profession has its own customs and quirks, but the culture of the New York City school bus driver is certainly one of the more unusual, one built on odd daily and annual schedules, decades of accumulated work rules and above all a deference to seniority.

("Still on Strike, a Bus Union Sees a Threat to Its Culture." The New York Times, January 27,

2013, included with Exhibit "C" hereto).

67. There is no way that new bus mutes can be segregated to new bus drivers. On the

contrary, if a new bus route is preferred by a senior driver (e.g., "one that touches a

neighborhood or school they prefer or ends at a bus yard near their home"), the senior driver will

select the new route. Thus, senior bus drivers may pick new routes secured by the pending

competitive bidding, and new drivers will end up driving routes secured by the Existing

Contract. In other words, it is impossible to identify in advance which driver will be assigned to

which route.

68. Moreover, even assuming arguendo that Petitioners could hire less expensive

labor for the new routes, their blended driver rates would still be substantially higher than new

competitors not saddled with the EPP legacy costs.

69. In the absence of relief from this Court, experienced New York City school-bus

contractors such as Petitioners, which are bound by the unlawful EPP provisions of the Existing

Contracts that, by their terms, would apply to drivers, matrons, and mechanics required for the

routes now being bid will be deprived from effectively competing in the current RFB, whereas

new entrants to the market, which arc not parties to any Existing Contracts and thus are not

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bound by any EPP clause, will have the benefit of competing without the constraints of the EPP.

As discussed above, if the RFB proceeds as scheduled, the latter category of bidders will be able

to submit bids predicated on labor costs that are substantially less than the labor costs that

Petitioners would be required to incorporate.

70. On a level playing field, without the EPP in their Existing Contracts, Petitioners

would be unshackled fmm their current subservience to Union wage and benefit demands and,

therefore, able to compete at lower pricing for the new RFB. However, as long as the Petitioners

are bound to the EPPs in the Existing Contracts, the Petitioners cannot competitively bid for the

new bus routes. Given these citcamstanes, Petitioners are unlikely to be able to submit

successful bids for the routes about to be awarded - not because of legitimate competitive

factors, but because the DOE refuses b delete the EPPs from the Existing Contracts.

THE DOE'S ENFORCEMENT OF THFJ UNLAWFUL EPP PROVISIONS IS ARBIT@ RY, CA PRICIOUS, AND CONTRARY TO LAW

71. Article 78 of the CPLR authorizes the Court to vacate, annul, or set aside agency

that are arbitrary and capricious, an abuse of discretion, and/or contrary to law.

72. It is well settled that "[aJrbitSary action is without sound basis in reason and is

taken without regard to the facts." Pel1 v, Board of Educ., 34 N.Y.2d 222,231, 356

.Y.S.'Ld 833, $39 (1974). Where statutory requirements for public contracts have been

an Article 78 proceeding represents one of the available means by which an aggrieved

bidder may challenge the contract award. See, e.g., Amdahl Corp. v. New York State

Ser. Cop., 203 A.D.2d 792, 734, 611 N.Y.S.2d 50, 52 (3rd Dep't 1994);

v. New York State U h Dev. Co., 54 A.D.2d 337,342,388 N.Y.S.2d 462,

4661 (4th Dep't 1376), This principle applies because strict compliance with the bidding laws

acc mplishes two important objectives: "(1) protection of the public fisc by obtaining the best 0:

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work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and I comption in the awarding of public contracts." L W Bus Corp,, 17 N.Y.3d at 156, 927

1 N.Y.S.2d at 315 (internal citation omitted).

73. In this case, despite City officials' numerous public assertions that EPPs are illegal

and barred by the LdiM Bus Corp. d n g , the DOE on January 9, 2013 decided that the

Petitioners are bound by the EPPs in their Existing Contracts. This decision will have the effect

of preventing Petitioners, who are among the largest and most experienced pupil transportation

contractors in the City, from bidding on the new bus routes at competitive rates. Petitioners

respectfully submit that there is no rational basis for the DOE'S inconsistent positions, and it is

1 arbitrary, unfair, capricious, punitive, an abuse of its discretion, and contrary to law for the DOE

to effectively preclude these contractors from participating in the upcoming bidding by refusing

to remove ox amend the unlawful EPPs in Petitioners' Existing Contracts.

A) US 0 ACTION

74. Petitioners repeat and mdlege each of the foregoing allegations as if fully set

rth herein.

1 75. As set forth herein, the Court of Appeals has ruled that EPPs are illegal, and the

has conceded that it can no longer include them in future school bus contracts.

Petitioners have requested that such provisions be deleted from the Existing

they are now hown to be unlawful and anti-competitive.

76. However, despite City officials' numerous public statements that EPPs are illegal

L& Bus Cop. ruling, the DOE has taken the position that the Petitioners are

these same provisions in their Existing Contracts, which will have the effect

of eventing Petitioners, who are among the largest and most experienced providers of pupil 1 23

I ' Supreme Court Records OnLine Library - page 25 of 29

transportation in the City, from bidding on new bus routes, in addition to causing them to

continue to incur higher-hm-tmessary labor costs with respect to the existing bus routes.

77. Accordingly, an actual and justiciable controversy has arisen and now exists

between the parties as to whether the EPPs contained in Petitioners' Existing Contracts are

unlawful and should be delehcd. Such declaratory relief would establish the rights and

obligations of the parties with respect to the matters in dispute.

78. Accordingly, Petitioners request a declaratory judgment declaring or determining

that (1) the employment protection provisions set forth in Petitioners' Existing Contracts are

unlawful; and (2) the Existing Contracts should be amended or modified to delete such unlawful

employment protection provisions.

AS^^ R A SECOND CA USE OF ACTION

79. Petitioners repeat and reallege each of the foregoing allegations as if fully set

forth herein.

80. Under the circumstances set forth herein, the DOE should be prohibited from

enforcing illegal employment protection provisions against Petitioners, thereby preventing

Petitioners from submitting competitive bids in response to the RFI3, in a manner that is

anticompetitive, arbitrary, capricious, and contrary to law. The Petitioners' predicament reflects

a clear violation of the competitive bidding statutes, the case law interpreting them and the public

policy underlying them, which is to secure services for public entities such as the DOE at the

lowest possible cost by ensuring fair and equal treatment to all bidders. If potential bidders

decline to bid, competitiOn will be diminished and bid amounts will be higher than if there were

broad participation, causing irreparable harm to Petitioners and to the general public. It is

arbitrary and improper for the DOE to bid and award a series of new contracts under which, in

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effect, some potential bidders such as the Petitioners are bound by the high-cost EPP

requirements while other bidders are not.

81, Respondent has failed to peaform a duty enjoined upon them by law, and have

proceeded or are about to proceed, without or in excess of their authority.

82. By reason of the foregoing, the Court should enter an order enjoining the DOE

and its employees and agents, including its Executive Director of the Division of Contracts and

Purchasing, from awarding any contracts based on the current F@B and/or MY future

solicitations until Petitioners' Existing Contracts for the transportation of disabled school-age

children effective through the 20142015 school year are amended or modified to delete

unlawful and anticompetitive employment protection provisions herein described.

83, No previous application to any Court has been made for the relief requested

herein.

WHEREFORE, Petitioners respectfully demand judgment:

A. On the First Cause of Action, declaring or determining that (1) the employment

protection provisions set forth in Petitioners' Existing Contracts are unlawful; and (2) the

Existing Contracts should be amended or modified to delete such unlawful employment

protection provisions;

B. On the Second Cause of Action, enjoining DOE and its employees and agents,

including its Executive Director of the Division of Contracts and Purchasing, from awarding any

contracts based on the current RFB andor any future solicitations until Petitioners' Existing

Contracts are amended ar modified to delete unlawful and anticompetitive employment

protection provisions herein described; and

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C. Granting Petitioners such other and further relief as the Court may deem just and

proper, including the costs, disbursements, and attorneys' fees of this proceeding.

Dated: New York, New York February 8,2013

Ira Brad Matetsky William D. McCracken

360 Lexington Avenue New York, New York 10017

Attorneys for Petitioners (212) 922-9250

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VERIF'ICATIQN

STATE OF NEW YORK )

COUNTY OF NEW YORK ) ) ss.:

Domenic F. ciatto, b h g duly sworn, deposes and says:

I am the Chief Executive Officer of Petitioner Staten Island Bus, Inc. I have read the

foregoing Verified Petition. The same is true to my own kuowiedge, except to those matters

stated to be set forth upon information and belief, and as to those matters, I believe them to be

hue.

DOMEMC F. OATTO

NOTARY PUBLIC


bus companies lawsuit to end epp

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