L&M Bus Corp. et al v. Board of Education of the City School District of the City of New York

Filing 56

MEMORANDUM & ORDER: Plaintiffs' motion for a preliminary injunction (Dkt. 1) is DENIED. So Ordered by Judge Nicholas G. Garaufis on 5/25/2018. (Panek, Gabriel)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORI(

---------------------------------------------------------------X
L&M BUS CORP. et al.,
Plaintiffs,
MEMORANDUM & ORDER

-against-

18-CV-1902 (NGG) (SMG)

BOARD OF EDUCATION OF THE CITY SCHOOL
DISTRICT OF THE CITY OF NEW YORK d/b/a NEW
YORK CITY DEPARTMENT OF EDUCATION,
Defendant.

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

BACKGROUND

A.

Facts

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

1 Plaintiffs are L&M Bus Corp.; B&F Skilled Inc.; Happy Child Transportations LLC; Happy Day Transit Inc.;
Iridium Services Corp.; Penny Transportation, Inc.; Selby Transportation Corp.; Smart Pick, Inc.; GVC Ltd.; Lessel
Transportation Corp.; Mar-Can Transport Co.; Phillip Bus Corp.; 21st Avenue Transportation, Co.; Y &M Transit
Corp.; Van Trans LLC; Alina Services Corp.; and Montauk Student Transport LLC.

I

As all parties are aware, this case is about the specifications for bid number B3182
("B3 l 82"), pursuant to which the DOE intends to award contracts for operation of approximately
20 percent of the DOE's school-bus routes for children in kindergarten through twelfth grade. 2
(See Deel. of Lisa D' Amato ("D' Amato Deel.") (Dkt. 35) 17.) The routes funded by the DOE
provide transportation for public-school students; the routes also cover some private-school
students and the DOE additionally "reimburses transportation costs for 46 private schools that
contract with private companies to provide school transportation." (See Deel. of Alexandra
Robinson ("Robinson Deel.") (Dkt. 36) 114-5.) It bears noting that the DOE is the largest
school district in the country, responsible for the education of around one million school-age
students, approximately 150,000 of whom use DOE-provided buses to get to school. (See
D' Amato Deel. 114; Nat'! Ctr. for Educ. Statistics, Digest of Education Statistics: Table 215.30,
Enrollment, Poverty, and Federal Funds for the 120 Largest School Districts, by Enrollment Size
in 2014 (2016), https://nces.ed.gov/programs/digest/dl6/tables/dtl6 215.30.asp.)
Contractors seeking to bid in B3182 must, among other requirements, agree to abide by
the terms of contract Serial B3182 (the "Contract") if they are successful. (Comp!. (Dkt. 1)

1 40.)

According to the Bus Companies, the DOE issued the Contract pursuant to its authority

under state law to "approve," N.Y. Educ. Law§ 2590-g(l)(g), and "[d]evelop," id. § 2590-h(36),
a procurement policy for the school district of the City of New York (the "City"). (Comp!. 141.)
The only portion of the Contract under dispute in this matter is Section 4.5, which sets forth a
number of employment requirements for winning contractors. (See id. 11 49-78; Amendment

2

For convenience, the court refers to this student population as "school-age."

2

No. 2 to the Contract (Dkt. 1 at ECF p.34).) 3 Collectively, the contract provisions set forth in
Section 4.5 are known as the Employment Protection Provisions (the "EPPs"). (Comp!.

,r 49.)

Several provisions of Section 4.5 are especially relevant to this case.
First, Section 4.5.1 mandates the creation of"Experienced School Bus Worker Lists" (the
"ESBW Lists") from which the winning contractors and their subcontractors must fill "all
positions for drivers and attends who provide services in connection with a School Age Bus
Contract awarded pursuant to" B3182 until the relevant ESBW List is exhausted. (Id.

,r,r 56, 60

(quoting Section 4.5.1).) The Bus Companies claim that Section 4.5.1 would require them to fire
all employees who "currently work on routes that are encompassed by the B3182 RFB" and
replace them with employees hired from the ESBW Lists. (Id.

,r,r 61-62.)

In addition, the Bus

Companies point out that "employees, based on their position on the ESBW Lists, [would]
choose their employers," and that contractors would "have no right to refuse to hire an individual
as an employee once selected by an individual." (Id.

,r,r 63-64).

On a related note, Section 4.5.4

states that "[n]othing herein shall be interpreted to require any contractor or subcontractor to
enter into a collective bargaining agreement with any union, nor shall it prohibit any contractor
or subcontractor from entering into a collective bargaining agreement with any union." (Section
4.5.4; see Recommendation ofL. Berman in Resp. to Protest ("Berman Rec.") (Dkt. 13-1) at 6.)
,

Second, Section 4.5.2 requires the contractor or subcontractor to pay employees hired
from the ESBW Lists "'based upon the highest wage scale pursuant to which such ESBW Hiree
was paid for work performed' in connection with a School Age Bus Contract [or] Subcontract
since June 30, 201 O." (Comp!. ,r 66 (quoting Section 4.5.2).) "Contractors and subcontractors

The full text of Section 4.5 is set forth in the second amendment to the Contract, with the exception of the deletion
of one paragraph as noted in the third amendment to the Contract. (Amendment No. 3 to the Contract (Dk:t. I at
ECF p.40).) Accordingly, all citations to Section 4.5 refer to the paragraph as contained in the second amendment.

3

3

may pay a wage higher than previously paid, but not one lower than the employees' prior
wages." (Id.) Section 4.5.3 additionally requires that the contractor or subcontractor "contribute
at least $1,252.48/month towards health and welfare benefits on behalf of each employee who
elects family benefit coverage and $780. 77 /month for employees who select individual
coverage." (Id.

,r 67.)

These amounts are "based on the amount that an employer must

contribute for health insurance coverage under" the collective bargaining agreement ("CBA") of
Local 1181 of the Amalgamated Transit Union ("Local 1181"). (Id.

,r 68.)

If a contractor can

provide health benefits for less than the contractually required amount, the contractor must
neve1iheless "use the excess funds 'to provide additional or improved health/welfare benefits."'

Oil ,r 69 (quoting Second Amended Round 1 Questions & Answers (Dkt.

1 at ECF p.41) ,r 115).)

Section 4.5.4 requires a contractor or subcontractor to contribute to the pension fund or plan in
which the hiree most recently patiicipated unless the hiree affirmatively opts out of the prior
plan. (Id.

,r 70.)

The contractor or subcontractor's contribution is calculated using "the majority

of employees of equivalent seniority in the job function for which the ESBW hiree was hired ...
participating in such Prior Plan." (Id.

,r 72 (quoting Section 4.5.4).)

Section 4.5.4 also requires

the contractor or subcontractor to "enter into a participation agreement" with the prior plan
which "imposes no greater obligations that1 those imposed on a majority of the other contributing
employees in such Prior Plan." (Section 4.5.4; see Comp!.

,r 73.)

According to the Bus Companies, the EPPs were once standard in DOE bid requests, but
the DOE discontinued this practice in 2012 following a ruling by the New York Court of
Appeals that the DOE had not met "its burden of establishing that the [EPPs contained in old
contracts (the "OldEPPs")] furthered either of the twin goals of the public bidding law: (1)
getting the services at the lowest cost or (2) preventing favoritism, improvidence, fraud, or

4

conuption in the awarding of public contracts." (Comp!. 'if 50 (citing L&M Bus Corp. v. N.Y.C.
Dep't of Educ., 950 N.E.2d 915, 920-21 (N.Y. 2011)).) The Bus Companies allege that the DOE
has sought to reinsert the EPPs in its bid contracts due to lobbying by Local 1181, which the Bus
Companies allege has a friendly relationship with New York City Mayor Bill de Blasio. CM,

,r,r 52-53.)

They claim that "Local 1181 's political efforts appear to have paid off because the

[EPPs in new contracts (the "New EPPs")] ... are substantially similar to the Old EPPs." (Id.

,r 54; accord id. ,r 65 ("The Contract also contains provisions that extend beyond what was
required by the Old EPPs.").) The Bus Companies maintain that the DOE has inserted the New
EPPs in order "to avoid labor strife with Local 1181" and based on the apparent belief that this
will allow the Local 1181 Pension Fund (the "Local 1181 Fund") to regain its exemption from
pension fund withdrawal liability. (Id.

,r,r 74-75.)

The DOE claims that it has not "reinstated" the EPPs but instead, faced with the
simultaneous expiration of contracts that alternatively do and do not contain the EPPs, is
choosing to institute a uniform standard of"new" EPPs. (See DefMem. of Law in Opp'n to Pl.
Mot. ("Def. !st Opp'n") (Dkt. 12) at 5.) The DOE states that the New EPPs are proper because
they "should eliminate labor umest[,] provide for a stable, high-quality labor force[,] ... [ and]
facilitate the pursuit of a solution to pension withdrawal liability." (Mem. Regarding New EPP
Provisions in Procurements of New K-12 Bus Contracts ("EPP Mem.") (Dkt. 13-2 at ECF p.2)
at 3.)
Local 1181 is not the only union that represents school bus drivers and other employees.
The Bus Companies state that, as of June 2017, 97 percent of school-age bus drivers were
members of a union, but that "many former Local 1181 members" have joined other unions.
(Comp!.

,r 27.)

Ten of the Bus Companies are parties to a CBA with a union other than Local

5

1181 (icl ,r 28); four of the Bus Companies are parties to a CEA with Local 1181 (id. ,r 29); and
three of the Bus Companies are not parties to a CEA with any union (id. ,r 30). 4 Each of these
CBAs "sets the general tenns of employment through provisions that address hiring, firing,
wages, and benefits." (Id. ,r 31.) The Bus Companies claim that many of Local 1181 's CBAs
require contributions to the Local 1181 Fund and that the fund is "underfunded." (Comp!.

,r,r 38-

39.)

B.

Procedural History

The Bus Companies filed this action on March 29, 2018. (Comp!.) The court held a
show-cause hearing regarding the application for a TRO on April 3, 2018, at which counsel for
both sides appeared. On April 5, 2018, this comt denied the Bus Companies' request for a TRO.
(M&O.) Later that day, however, Justice Eileen Rakower of the New York Supreme Court
granted the Bus Companies' request for a TRO in a separate Article 78 proceeding challenging
the validity of the New EPPs under state law (the "State Court Action"). (Order, L&M Bus Co.
v. Bd. of Educ., No. 152673/2018 (N.Y. Sup. Ct. Apr. 5, 2018) (the "State Court Order") (Dkt.
17-1).) The DOE appealed from Justice Rakower's decision to the New York Supreme Court,
Appellate Division, which has not yet issued a decision. As of yet, the TRO issued in the State
Court Action remains in place.
At the April 3, 2018, hearing, the court granted the DOE leave to file a supplement to its
memorandum in opposition to the Bus Companies' motion and granted the Bus Companies leave
to file a reply. (Apr. 3, 2018, Min. Entry.) Subsequently, the court granted non-parties Reliant
Transportation, Inc. ("Reliant"); Local 1181; and International Brotherhood of Teamsters, Local

Plaintiffs Happy Day Transit, Inc., Iridium Services Corp., and Alina Services Corp. are currently not parties to a
CBA with any union and accordingly only assert claims under the Employee Retirement Income Security Act
("ERISA"). (Comp!. 1! 30.)

4

6

553 ("Local 553") leave to participate in the case as amici. (Apr. 12, 2018, M&O (Dkt. 28);
Apr. 16, 2018, Order.) The court also granted the DOE leave to respond to Local 553's amicus
brief. (Apr. 16, 2018, Order.) The court therefore has the following papers before it: The Bus
Companies' initial memorandum oflaw in support of their motion (Mem. of Law in Supp. of
Mot. for TRO and Prelim. Inj. ("Mem.") (Dkt. 3)) and reply brief (Reply in Supp. of Mot. for
Prelirn. Inj. ("Reply") (Dkt. 53)); the DOE's initial brief in opposition (Def. 1st Opp'n),
supplemental brief in opposition (Def. Suppl. Opp'n (Dkt. 33)), and response to Local 553 's
amicus brief (Mem. in Opp'n to Local 553 Amicus Br. ("Resp. to Local 553 Br.") (Dkt. 50)); an
amicus briefs in support of the Bus Companies by Local 553 (Mem. of Law of Local 553 as
Amicus Curiae ("Local 553 Br.") (Dlct. 43)); and amicus briefs in support of the DOE by Reliant
(Mem. of Law of Reliant as Amicus Curiae ("Reliant Br.") (Dlct. 38)) and Local 1181 (Mem. of
Law of Local 1181 as Amicus Curiae ("Local 1181 Br.") (Dkt. 40)).

II.

LEGAL STANDARD
"[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be

granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v.
Armstrong. 520 U.S. 968,972 (1997) (per curiam) (emphasis omitted) (quoting I IA Charles A.
Wright et al., Federal Practice and Procedure§ 2948, at 130 (2d ed. 1995)). A party seeking a
preliminary injunction "must generally show a likelihood of success on the merits, a likelihood
of irreparable harm in the absence of preliminary relief, that the balance of equities tips in the
party's favor, and that an injunction is in the public interest." ACLU v. Clapper, 804 F.3d 617,
622 (2d Cir. 2015) (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). 5

5

The Second Circuit has, at times, formulated this standard differently. For example, a party seeking a preliminary

injunction may demonstrate the existence of "a serious question going to the merits to make them a fair ground for

trial, with a balance of hardships tipping decidedly in [its] favor," rather than a likelihood of success on the merits.
Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 35 (2d Cir. 2010); see

7

III.

DISCUSSION
After applying all four preliminary injunction factors, the court denies the Bus

Companies' motion for a preliminary injunction. First, the Bus Companies are still unable to
meet the irreparable-harm requirement. Second, even if they could meet that requirement, the
court is not convinced that they have shown a likelihood of success on the merits at trial.
Finally, the balance of equities and the public interest at stake also resolve themselves in the
DOE's favor.

A.

Irreparable Harm

As with a TRO, "' [i]neparable harm is the single most important prerequisite for the
issuance of a preliminary injunction."' Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d
Cir. 2005) (quoting Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 227,233 (2d Cir. 1999)).
(See M&O at 5.) "To satisfy the ineparable harm requirement, Plaintiffs must demonstrate that
absent a [TRO] they will suffer an injury that is neither remote nor speculative, but actual and
imminent, and one that cannot be remedied if a court waits until the end of trial to resolve the
harm." Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007). The
alleged injury must be "so serious that 'a monetary award cannot be adequate compensation.'"
Estee Lauder Cos. v. Batra, 430 F. Supp. 2d 158, 174 (S.D.N.Y. 2006) (quoting Citibank, N.A. v.
Citytmst, 756 F.2d 273, 275 (2d Cir. 1985)).
This court previously denied the Bus Companies' application for a TRO because they had
"not alleged any sufficiently irreparable immediate harms at [that] stage of the litigation."

also id. at 35-38 (holding that this "serious questions" standard snrvives Winter and other Supreme Conrt cases
applying a "likelihood of success on the merits" standard). The Second Circuit's "serious questions" standard does
not apply, however, "[w]hen ... a preliminary injunction will affect government action taken in the public interest
pnrsuant to a statute or regulatory scheme," Friends of the East Hampton Airport, Inc. v. Town of East Hampton,
841 F.3d 133, 143 (2d Cir. 2016) (internal quotation marks and citation omitted), as is the case here. In addition, all
parties agree that the "likelihood of success on the merits" standard applies here. (See Mem. at 11; 2d Opp'n at 7.)

8

(M&O at 6.) 6 Because the Bidding Process remains enjoined and the bids for B3182 have not
yet been made available to the public, the court reincorporates its previous findings as to the
likelihood that the Bus Companies would suffer irreparable harm absent an injunction. In order
for the Bus Companies to obtain a preliminary injunction, they continue to bear the burden of
convincing the court that irreparable harm will come about merely from the conclusion of the
bidding process. 7
In their reply brief, the Bus Companies put fmih three arguments in support of their claim
of irreparable harm. First, they argue that they are being forced into a "Robson's choice"
regarding "whether to submit a bid at all," and that the risk of harm from either choice is
"irreparable harm that can only be prevented through a preliminary injunction." (Reply at 3-5.)
Second, they argue that they will be irreparably harmed by the public disclosure of bids. (Id.
at 5-6.) This second argument was raised at oral argument on the TRO request, but the comi had
not had the benefit of written briefing until now. Third, the Bus Companies argue that the
forthcoming issuance of "letters of intent to the lowest responsible bidders who are likely to be
awarded routes" constitutes irreparable harm because winning and losing bidders might rely on
the letters, which could end up backfiring "if Section 4.5 is found impermissible and the routes
are rebid." (Id. at 6-7 .) Although only the second argument was raised before the Bus

Meanwhile, the New York Supreme Court granted the Bus Companies' application for a TRO in the State Action,
in part because of "the Honorable Carol Edmead's fmding of irreparable harm in her September 5, 2008[,] decision
in L&M." (Apr. 5, 2018, State Court Decision & Order (Dkt. 17-1) at 2.) As best as this court can tell, however,
that September 5, 2008, decision stated that the challengers in that decision~who sought to invalidate the Old
EPPs~ failed to demonstrate that they would be irreparably harmed without temporary relief, while finding that it
was "the students, their parents, and the DOE" who would be irreparably harmed by issuance of a TRO. L & M Bus
Corp. v. N.Y.C. Dep't of Educ., No. 104001, 2008 WL 4559881, at *5 (N.Y. Sup. Ct. Sept. 5, 2008).
6

While the bidding process for B3182 remains enjoined pursuant to the State Court Order, and thus there is no
irreparable harm at this time, the court recognizes that the TRO issued by Justice Rakower could be dissolved at any
moment. (See Reply at 3 n.2.) The court's consideration of irreparable harm thus really turns on the question of
whether irreparable harm would befall the Bus Companies if the TRO in the State Court Action were lifted. Cf.
Batalla Vidal v. Nielsen, 279 F. Supp. 3d 401,435 (E.D.N.Y. 2018).

7

9

Companies submitted their reply brief, the court will deal with all three arguments for the
reasons that follow. Cf., e.g., Ernigra Grp. v. Fragomen, Del Rey, Bernsen & Loewy, LLP, 612
F. Supp. 2d 330,349 (S.D.N.Y. 2009) ("[A] moving party will not be heard to advance anew
argument for the fast time in its reply brief .... ").

I.

"Hobson' s Choice"

The Bus Companies first argue that they are being forced into an untenable "Robson's
choice": bid, and risk exposure to multiple sources of liability; or refuse to bid, and risk being
forced to go out of business. (Reply at 3-4.) This argument necessarily incorporates their
original claims-rejected by this court in the M&O-that bidding on the contract might expose
the Bus Companies to "legal liability" and "loss of goodwill." (Mem. at 25-26; see M&O at 78.) Thus, the court will consider the Bus Companies' arguments, even without a formal response
by the DOE.
As the court has already stated, the risk of harm from legal liability is too speculative
when "the Bidding Process remains open [and] none of the Bus Companies have been awarded,
let alone submitted a bid for, a bus contract under B3 l 82." (M&O at 7.) In their reply brief, the
Bus Companies attempt to present evidence that winning bidders face sufficiently imminent legal
liability. The Bus Companies claim that winning bidders "risk entering into a contract that
exposes them to withdrawal liability when the contract is ultimately rebid because Section 4.5 is
ruled invalid through this litigation" (Reply at 4), but the court rejects this argument because
Section 4.5 is unlikely to be invalidated in this litigation. (See infra Section III(B).) The Bus
Companies also claim that they risk "liability from their unions due to breaches of CBAs that
have conflicting terms with Section 4.5" and "litigation from the union to which [a unionized
Bus Company] is party to a CBA if its reconstituted Section 4.5 workforce moves to decertify

10

that union." (Reply at 4 & n.3.) The court cannot find irreparable hann based on vague
assertions that "Section 4.5 ... would ... require [a Bus Company] to breach its CBA now in
effect" (see Deel. of David Franco (Dkt. 53-2) ,i 10) or that "[a Bus Company's] new employees
may ... move to decertify [their union]" (ilL ,i 9). Like with the Bus Companies' assertions of
future legal liability, the court cannot enjoin a contract based on speculations of future conflict
without any concrete basis for the hanns' supposed innninence.
2.

Public Disclosure of Bids

In the M&O, the court stated that the Bus Companies' allegation of competitive
disadvantage from the public revelation of bids was their "strongest argument for why injunctive
relief is uniquely proper before the close of the Bidding Process," and noted the irony that this
argument had not been made in the Bus Companies' moving papers. (M&O at 9-10.) While the
court rejected that allegation ofhann at the TRO stage, it remained open to persuasion regarding
the ineparability of this harm. The Bus Companies have now fleshed out this line of argument in
their briefing, claiming that, "[i]n the event of a rebid with Section 4.5 removed," bus operators
that bid on B3182 would be at a "significant" disadvantage relative to new bidders because
a company that did not previously bid will be able to determine the
price it needs to submit to be competitive and which routes may be
easier to win by looking at who and how many companies bid on
certain routes against whom it will likely be bidding, and the
capacity and overhead costs of its competitors.
(Reply at 5.) Additionally, the Bus Companies claim that new bidders would "have the element
of surprise on their side" because "rebidders [would] not know which new companies are
planning to submit bids or their bidding strategy." ([cl at 5-6.) These possibilities, the Bus
Companies posit, would amount to an uneven "playing field if the contract is rebid." ([cl at 6.)
The only case the Bus Companies point to in support of their claim is RhinoCorps Ltd. v.
United States, 87 Fed. Cl. 673 (2009), in which the Court of Federal Claims found irreparable

11

harm based on the fact that the federal government, in deciding not to renew a contract with the
plaintiff, had seemingly "pre-judged" the plaintiff to be "incapable of satisfying its
requirements" under the bid solicitation. See id. at 678-79. The plaintiffs lost "opportunity to
compete for a contract on a level playing field" did not come from the disclosure of the
plaintiffs bidding terms, but rather from the fact that the government had allegedly determined,
prior to the bidding, that the plaintiff would not be able to meet the requirements. See id. at 679.
That case is thus nothing like this one.
While the Bus Companies quibble with the DO E's-and the court's-use of Parts
Distributors, LLC v. City ofNewYork, No. 03-CV-2772 (LTS), 2003 WL 21437054 (S.D.N.Y.
June 23, 2003), "to establish that the public disclosure of bids cannot amount to irreparable
harm," that case is more similar to the situation before the cmut. (See Reply at 6; cf. M&O at 9;
Def. Suppl. Opp'n at 9.) In that case, much like the current one, the risk of harm stemmed from
the disclosure of bidding terms and how the public nature of that information might harm the
plaintiff. Pmis Distributors, 2003 WL 21437054, at *7. As discussed in the M&O, the court is
concerned that finding ineparable harm from the disclosure of bidding te1ms based only the
remote possibility of an eventual rebid could hamstring government bodies and other actors who
need flexibility in their ability to put contracts out to bid. (See M&O at 9 (citing Sys.
Application & Techs., Inc. v. United States, 100 Fed. Cl. 687, 721 n.23 (2011)).) Cf. M.
Steinthal & Co. v. Seamans, 455 F.2d 1289, 1303 (D.C. Cir. 1971) ("It would be intolerable for
any frustrated bidder 'to render uncertain for a prolonged period of time government contracts
which are vital to the functions performed by the sovereign.'" (quoting Blackhawk Heating &
Plumbing Co. v. Driver, 433 F.2d 1137, 1141 (D.C. Cir. 1970))). Courts should deny the
government such flexibility only where a rebid puts previous bidders at an obviously

12

unnecessary disadvantage, see Sheridan Corp. v. United States, 95 Fed. CL 141, 155 (2010)
(enjoining rebid found to be arbitrary and capricious), something that is not the case here. The
court sees no reason to upset its previous finding that the Bus Companies can establish no
irreparable harm from the mere disclosure of bidding terms at this stage.
3.

Letters of Intent

Finally, the Bus Companies state that both winning and losing bidders will be harmed by
acting in reliance on whether or not they receive "letters of intent [issued] to the lowest
responsible bidders who are likely to be awarded routes" even though their actions would be for
naught "if Section 4.5 is found impermissible and the routes are rebid." (Reply at 6-7.) As with
the Bus Companies' first argument, the court rejects this claim of iITeparable haim because the
court does not believe it is likely that Section 4.5 will, through the course oflitigation, be found
impermissible, necessitating rebidding of the routes.

*

*

*

By a rough count, the court has now denied the Bus Companies' allegations of
irreparable harm on nine different grounds. (See M&O at 6-1 0; supra Section III(A).) In the
M&O, the court allowed that the Bus Companies' "[then-]current allegations of harm [could]
become sufficient to sustain their action at a future point in time." (M&O at 10.) Without
movement in the bidding process, that future point in time has still not come. Because the Bus
Companies have still not alleged imminently irreparable harm that will come about as a result of
the continuation of the bidding process for B3182, the court cannot grant the Bus Companies'
motion for a preliminary injunction. Although a failme to establish irreparable harm usually
renders consideration of the other preliminary-injunction factors unnecessary, cf., e.g., T-Mobile
Ne. LLC v. Riverhead Water Dist., No. 15-CV-6310 (SJF), 2016 WL 373968, at *3 (E.D.N.Y.

13

Jan. 29, 2016), the court will address the other three factors, in part because a pmtion of the
above analysis turns on the Bus Companies' inability to establish a likelihood of success on the
merits.
B.

Likelihood of Success

In order to establish a likelihood of success on the merits, a plaintiff "need not show that
success is an absolute certainty [but rather] need only make a showing that the probability of his
prevailing is better than fifty percent." Eng v. Smith, 849 F.2d 80, 82 (2d Cir. 1988). "Where a
plaintiff seeks a preliminary injunction and asse1is multiple claims upon which the relief may be
granted, the plaintiff need only establish a likelihood of success on the merits on one of the
claims." Eve of Milady v. Impression Bridal, Inc., 957 F. Supp. 484, 487 (S.D.N.Y. 1997).
The Bus Companies argue that Section 4.5 is preempted by both the NLRA and the
Employee Retirement Income Security Act ("ERISA"). The DOE disagrees with the Bus
Companies' claims of preemption, and additionally argues that the preemption question is beside
the point because the DOE promulgated B3182 in its capacity as a participant in the market for
bus-contracting services. The court concludes that the bidding process here is not preempted by
the NLRA or ERIS A because of the market-participant exception, and thus that the Bus
Companies have not established a likelihood of success on the merits.
1.

NLRA Preemption

a.

Legal Overview
1.

Preemption Doctrine

The Supremacy Clause of the United States Constitution "'secures federal rights by
according them priority whenever they come in conflict with state law."' Rondout Elec., Inc. v.
N.Y. State Dep't of Labor, 335 F.3d 162, 166 (2d Cir. 2003) (alteration adopted) (quoting

14

Golden State Transit Co1:p. v. City of Los Angeles (Golden State II), 493 U.S. 103, 107 (1989)).
Thus, while "[t]he NLRA does not contain an express preemption provision," courts have
identified "implicit limits [that Congress has placed] on the permissible scope of state regulation
touching upon labor-management relations." Concerned Home Care Providers, Inc. v. Cuomo,
783 F.3d 77, 84 (2d Cir. 2015) (quotation marks omitted).
One f01m of implied preemption under the NLRA, !mown as Garmon preemption, forbids
"state regulation that either prohibits conduct subject to the regulatory jurisdiction of the NLRB
under section 8 of the NLRA or facilitates conduct prohibited by section 7 of the NLRA."
Rondout, 335 F.3d at 167 n.1 (citing San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236,
244-47 (1959)). Garmon preemption "is intended to preclude state interference with the National
Labor Relations Board's interpretation and active enforcement of the 'integrated scheme of
regulation' established by the NLRA." Golden State Transit Corp. v. City of Los Angeles
(Golden State I), 475 U.S. 608,613 (1986) (quoting Wis. Dep't of Indus. v. Gould, Inc., 475
U.S. 282, 289 (1986)). The other form ofNLRA preemption, known as Machinists preemption,
"forbids states and localities from intruding upon 'the [labor-management] bargaining process."'
Concerned Home Care Providers, 783 F.3d at 84 (alteration in original) (quoting Lodge 76, Int'l
Ass'n of Machinists & Aerospace Workers, AFL-CIO v. Wis. Emp't Relations Comm'n
(Machinists), 427 U.S. 132, 149 (1976)). Under Machinists, the states must leave "aspects of the
bargaining process" that are not covered by Sections 7 and 8 of the NLRA-that is, everything
other than "the right to organize and engage in other forms of protected concerted action, and
identify fo1ms of urtfair labor practices"-'"to be controlled by the free play of economic
forces."' Id. (quoting Machinists, 427 U.S. at 140).

15

ii.

The Market-Participant Exception

"A major limitation on the labor law preemption doctrines is the principle that state
conduct will not be preempted if the state's actions are proprietary, rather than regulatory."
Healthcare Ass'n ofN.Y. State v. Pataki, 471 F.3d 87, 107 (2d Cir. 2006) (citing Bldg. & Constr.
Trades Council v. Assoc. Builders & Contractors (Boston Harbor), 507 U.S. 218, 226-30
(1993)). This exception to NLRA preemption is known as the "market-participant exception,"
and permits a state to act in "'pursu[it of] its purely proprietary interests, and where analogous
private conduct would be permitted."' Id. (quoting Boston Harbor, 507 U.S. at 231-22). Where
the state is acting as a market participant, its actions "are not regulation and so are not normally
subject to preemption analysis at all." Bldg. Indus. Elec. Contractors Ass'n v. City of New York
(BIECA), 678 F.3d 184, 188 (2d Cir. 2012).

In determining whether challenged government action falls within the market-participant
exception, that courts must answer two questions:
First, does the challenged action essentially reflect the entity's own
interest in its efficient procurement of needed goods and services, as
measured by comparison with the typical behavior of private parties
in similar circumstances? Second, does the narrow scope of the
challenged action defeat an inference that its primary goal was to
encourage a general policy rather than address a specific proprietary
problem?
Healthcare Ass'n, 47 F.3d at 109 (quoting Cardinal Towing & Auto Repair, Inc. v. City of
Bedford, 180 F.3d 686,693 (5th Cir. 1999)). These questions "seek to isolate a class of
government interactions with the market that are so narrowly focused, and so in keeping with the
ordinary behavior of private parties, that a regulatory impulse can be safely ruled out." Cardinal
Towing, 180 F.3d at 693.
"[W]hen a court assesses whether a governmental policy has a regulatory purpose, it
looks primarily to the objective purpose clear on the face of the enactment, not to allegations
16

about individual officials' motivations in adopting the policy." BIECA, 678 F.3d at 191. Thus,
"where a permissible purpose is apparent," the court may not "search for an impermissible
motive" "because federal preemption doctrine evaluates what legislation does, not why
legislators voted for it or what political coalition led to its enactment." Id. ( alteration adopted)
(quotation marks omitted). Additionally, consideration of whether the challenged action has a
"narrow scope" essentially boils down to whether it "governs the parties' behavior on the
specific project or projects in the contract rather than on unrelated matters to which the state
might not even be a party." Id. at 189 n.2. The Second Circuit has rejected attempts to
reformulate this inquiry into one centered on the net effect of the challenged action, clarifying
that '"narrow' refers to the range and type of covered conduct, not to the number of covered
projects." Id. As with the question of objective purpose, the inquiry into the action's "scope" is
intended to discern whether the government body acted with "regulatory rather than proprietary
intent." Id.

b.

Application

The Bus Companies contend that the New EPPs are preempted by the NLRA because
"Section 4.5 causes Plaintiffs to breach collectively bargained[-]for rights and existing CBAs,
which constitute unfair labor practices under the NLRA." (Mem. at 12.) They state that the
DOE cannot claim protection as a market participant because "Section 4.5 ... includes terms that
no reasonable private contractor would ever consider" and because "the DOE has made it clear
that it intends to apply Section 4.5 to every school busing contract in the future." (Reply at 1011.) In response, the DOE maintains that it is acting "in the role of a purchaser of school bus
transportation services," rather than as a regulator. (Def. Suppl. Opp'n at 14.) The court agrees

17

that the DOE is acting as a market pmticipant, and so its actions in soliciting bids under B3182
are not subject to a preemption challenge uuder the NLRA.
I.

Objective Purpose

The comt begins its analysis of the market-participant exception by exainining the
objective purpose of Section 4.5. It is clear on the face of Section 4.5 that the DOE had a
neutral, non-regulatory purpose for inserting the New EPPs. Section 4.5 does not mention Local
1181 or any other union. (See generally Section 4.5.) If there is any text in Section 4.5 itself that
evinces a particular purpose, it is to be found in the title, which communicates an intent by the
DOE to "protect[]" "employee[s]." (See id.) Even if the "face of the enactment" includes the
various documents published by the DOE throughout the bidding process, nothing in those
documents contradicts the DOE's claim that it included the New EPPs to "facilitate labor peace,
minimize the threat of withdrawal liability assessments that might deter prospective bidders, and
attract and preserve a qualified and stable workforce." (See Def. Suppl. Opp'n at 14.) These
stated concerns are not post hoc rationales invented for litigation, but have been clear on the face
of the record since the beginning of the Bidding Process. (See EPP Mem. at 14 (listing the
benefits of bidding out contracts with New EPPs); see also Berman Rec. at 6 (discussing various
justifications for the EPPs).) The court finds that all three of these concerns are valid interests
for the DOE to hold as a market participant.
Even looking beyond the face of Section 4.5, the comt still concludes that the DOE's
behavior in inserting the New EPPs reflects its "interest in the efficient procurement of goods
and services, as measured by comparison to typical private market behavior." See Johnson v.
Rancho Santiago Cmty. College Dist., 623 F.3d 1011, 1024 (9th Cir. 2010). Plainly put, the
DOE has a procurement-related need to contract with private bus operators for the provision of

18

citywide school-bus operations. In the course of securing these contracts, the DOE has chosen to
institute certain terms that it believes will result in better contractual outcomes. The Bus
Companies do not argue that the DOE does not have a legitimate procurement-related need to
contract for these routes, but rather argue that the DOE's reasons for instituting the EPPs are
pretext for its desired regulation of the busing industry.
The Bus Companies enumerate a litany of complaints reflecting their belief that "the
DOE does not credibly connect its action with its goals." (Reply at 9; see Mem. at 13-17.) First,
regarding the DOE's claim of labor peace, the Bus Companies opine that "while Section 4.5 may
placate Local 1181, the DOE fails to address the fact that Section 4.5 may cause a strike from
one of the many other unions in the industry." (Reply at 9.) The Bus Companies misconstrue
what the DOE has said. While the EPP Memorandum-a 2017 document in which Erin Lester,
Special Assistant to Deputy Chancellor Elizabeth A. Rose, recommended that the DOE include
the New EPPs in new solicitations for school bus contracts-lists a number of Local 1181-led
strikes as evidence of the history oflabor strife in the school bus industry, it does not say that
Section 4.5 is intended only to placate Local 1181. (See EPP Mem. at 4-7.) If the Bus
Companies are correct that Local 1181 used to represent around 80 percent of"School Age bus
drivers and attendants who drove New York City routes" but its representational share has
precipitously declined over the past two decades (Mem. at 5), it stands to reason that (I) this is
perhaps why many of the past strikes only involved Local 1181, and (2) the DOE's concerns
about future strikes are even less tied to Local 1181 than they would have been in the past.
While a government body cannot immunize every action with a claim of "labor peace," such a
rationale plainly holds up in the instant context. See Airline Serv. Providers Ass'n v. L.A. World

19

Airports, 873 F.3d 1074, 1080 (9th Cir. 2017) (approving oflabor peace as a proprietary goal),
petition for cert. filed, No. 17-1183 (U.S. Feb. 23, 2018).
Second, the Bus Companies strenuously object to the DOE's asserted desire to "minimize
the threat of withdrawal liability assessments that might deter prospective bidders," claiming that
Section 4.5 "does just the opposite by requiring employers to contribute to pension funds that
they otherwise have no involvement with, nor are required to contribute to pursuant to a CBA."
(Reply at 9.) As with labor peace, this concern is one that the DOE supports with a reasonable,
stated rationale. (See EPP Mem. at 15; see also id. at 10-11 (discussing the history of pension
withdrawal liability issues); Mem. Regarding Withdrawal Liability Demands from Local 1181
Pension Fund and Related Litigation (Dkt. 13-2 at ECF p.20).) The Bus Companies fault the
DOE for not providing "assurances that the [Pension Benefit Guaranty Corporation ("PBGC")] is
willing to reinstate the exemption for the Local 1181 Fund or provide a similar exemption to
other pension funds" (Reply at 9), but the DOE (a city agency) cannot be expected to speak on
behalf of the PBGC (a federal agency). Additionally, the DOE claims that "Local 1181 provides
no indication in its amicus submission that it is even interested in restoring the exemption" (gt),
but Local 1181 did say in its amicus brief that inclusion of the EPPs "makes it likely that the
withdrawal liability exemption will be restored, thus alleviating prospective bidders' concerns"
(Local 1181 Br. at 12). In the end, while the Bus Companies' arguments regarding the uncertain
nature of future immunity from withdrawal liability are well talcen, the court cannot say that the
DOE has not made a credible claim that it is promulgating the EPPs to alleviate pension
withdrawal liability and to make bidding more attractive to prospective contractors. Finally, the
Bus Companies claim that the DOE has "no basis [for its belief] that Section 4.5 will actually
bring new drivers to the industry." (Reply at 9.) The Bus Companies conjecture that prospective

20

drivers will be dissuaded from becoming school-bus drivers lest they be stuck with "the last pick
of their employer until they amass enough years of experience to choose the employer they
want," but provide no evidentiary support for this assertion. (Id.) Rather, if the Bus Companies
are correct that the EPPs will raise the floor for wages and benefits (see id. at 4 n.5), it seems just
as likely that the EPPs will attract new drivers. (See EPP Mem. at 15-16.)
More broadly, the Bus Companies argue that the DOE's behavior is insufficiently similar
to that of "private parties in similar circumstances." (See Mem. at 17.) Because the abovediscussed tem1s, in the opinion of the Bus Companies, "are clearly not market terms and are
atypical of agreements among private parties," the DOE must therefore be "acting as a regulator
rather than a market participant with respect to the provisions of Section 4.5." (IQ, at 17-18.)
Reliant challenges this premise, claiming, contra its fellow bus operators, that "the hiring, wage
and benefit components of the EPPs are common features of project labor agreements." (Reliant
Br. at 2.) In suppmi of its contention that the EPPs are intended to "ensure the uninterrupted
provision of quality bus services," Reliant points to a "series of debilitating and costly events"
that resulted from the removal of the Old EPPs in 2012, "including a five-week strike by [Local
1181 ], lawsuits and significant withdrawal liability exposure to the City and bus vendors." (Id.
at 13-14.) Thus, "any private party would" impose contractual terms necessary "to avoid
consequences as disruptive and costly as those." (Id. at 14.) While the Bus Companies' reply
briefresponds to various ofReliant's defenses regarding Machinists preemption (see Reply
at 12-13), it does not effectively respond to Reliant's argument that the EPPs are within the range
of"typical behavior of private parties in similar circumstances," Healthcare Ass'n, 47 F.3d
at 109. The court agrees with Reliant that the New EPPs reflect typical market behavior by the
DOE, even if the Bus Companies would prefer different contractual terms.

21

At the end of the day, the Bus Companies' reason for bringing this lawsuit seems clear:
their belief that "Section 4.5 is merely a thinly veiled attempt to support [Local 1181]." (Reply
at 2.) But even if"political favoritism" was a "motivating factor" in the DOE's decision-making
process, that alone cannot transform the Contract into a preemptible "regulation[]." See BIECA,
678 F.3d at 192. This argument is doomed by the lack ofrecord evidence proving that the
DOE's stated rationale for incorporating the New EPPs into the Contract is pretext.
11.

Narrowness of Scope

Challengers to a govermnent action may also defeat the govermnent' s claim of market
pmiicipation by pointing to the action's insufficiently "narrow" "scope." See BIECA, 678 F.3d
at 189 ("[A] state law or contract with profound effects outside the state's market interest in the
transaction [may] be preempted."). The Bus Companies are unable to satisfy this prong.
B3182 is a solicitation for bids on a five-year contract concerning the provision of
school-bus transportation for "children with disabilities and others in [k]indergarten through
[g]rade 12." (D' Amato Deel. 15.) The DOE attests that the number of routes included in the
expiring contracts constitute approximately 20 percent of all of the routes currently operating
under DOE contracts for school-age children. (Id. 17.) An additional 18 percent of routes are
operated under contracts set to expire June 30, 2019, and the remaining 62 percent of routes are
operated under contracts expiring June 30, 2018, but that the DOE intends to extend for an
additional term.

M 118-9.)

These numbers do not include contracts for the transportation of

"younger children," which are "entirely separate" from the contracts at issue in this case. (See
id. 113.) These numbers also do not include routes located outside ofNew York City.
The Bus Companies point to the scope of Section 4.5-and the resulting, supposedly
"broad impact" it will have-as evidence ofDOE's participation in the marketplace for bus

22

services as a regulator, not proprietor. (See Reply at 11.) They contrast this case with Boston
Harbor, claiming that the market-participant exception applied there because "'the challenged
action ... was specifically tailored to one particular job, the Boston Harbor cleanup project,"'
while "the DOE has made clear that it intends to apply Section 4.5 to every school busing
contract in the future." (Icl (quoting Boston Harbor, 507 U.S. at 232).) But the Bus Companies'
misunderstand what it means for a contract to have a "narrow" scope. It does not mean that the
contract must only relate to one discrete project. If that were the case, no government body
could ever procure services for use on a variety of separate but related projects, as is the case
with bus routes.
The operative question, as made clear by the Second Circuit in BIECA, is whether the
contract "governs the parties' behavior on the specific project or projects in the contract rather
than on unrelated matters to which the state might not even be a party." 679 F.3d at 189 n.2
(emphasis added). In order to answer this question, a comparison with Cardinal Towing is
instructive. See BIECA, 679 F.3d at 189 n.2 (citing with approval Cardinal Towing's reasons
for "finding a regulation narrow in scope"). That case concerned the system used by the City of
Bedford, Texas, for calling tow trucks to deal with abandoned or disabled vehicles on public
streets~what the court will refer to as "non-consensual City police tows." Cardinal Towing,
180 F.3d at 688. Bedford had previously used a rotation system whereby the non-consensual
City police tows would be carried out by one of a number of local towing companies based on a
rotation system. Id. at 688-89. "For a number ofreasons," Bedford later passed a law setting
forth a bidding process, along with specified bidding criteria, to select a single company to
handle all of Bedford's non-consensual City police tows. Id. at 689. In finding that this
ordinance had a sufficiently narrow scope, the Fifth Circuit focused on a number of factors.

23

First, the court pointed to the fact that the ordinance did not affect all tows (private tows and
situations in which the vehicle owner was available to request a towing company were
unaffected), but only one type of tow. Id. at 694. Second, the court found that the bid
specifications set forth in the ordinance "looked only to the bidder's dealings with the City." Id.
Finally, the court focused on the fact that the specifications only applied to "a single contract for
police tows," not "all City contracts going forward." Id. These factors led the court to conclude
that the action had a limited scope that "decisively foreclose[ d] an inference that the City sought
to change the tow truck industry as a whole, let alone influence society at large." Id.
Applying these considerations to Section 4.5 and B3182 makes it clear that the DOE has
promulgated the Contract in its proprietary capacity. Much like the towing ordinance, B3182
covers school-aged bus routes; it does not cover bus routes for pre-kindergarten students, nor
does it preclude private schools from entering into separate busing agreements. (Cf. D' Amato
Deel. 1 13; Robinson Deel. 1 6.) Additionally, the Section 4.5 requirements pertain only to the
Bus Companies' employment practices in their school-age bus contracts with the DOE. Relevant
to this point, the Bus Companies claim that "Section 4.5 amounts to a regulation over an entire
industry" because "there are no legitimate alternatives for New York City school bus
contractors" (Reply at 11 ), meaning that bus operators who currently contract for DOE schoolage bus routes are arguably bound to those routes based on various logistical realities (see Deel.
of Agostino Vona (Dkt. 53-1) 118-12). But a government contract is not necessarily "broad"
simply because an actor who has acted in reliance on past versions of that contract no longer
wants to bid on it. Cf. BIECA, 678 F.3d at 189 ("BIECA is free to renegotiate its CBA with
Local 363 and its other signatory unions. BIECA is equally free to decline work on City PLA
projects and continue to work under its existing CBAs on other private projects, or on City

24

projects not covered by the PLAs."). Finally, while the Bus Companies claim that the DOE
"intends to apply Section 4.5 to every school busing contract in the future," as discussed above,
there is nothing that prevents the DOE from instituting uniform procurement standards for the
school-age bus routes. The Bus Companies' assertion on this point does not establish that either
the DOE or the City plans to insert the EPPs into "all City contracts going forward." (Cf. Def.
Response at 17 ("The current RFB has absolutely no impact on any of the multitudes of other
vendor and service provider contracts DOE put out for bid or enters into multiple other areas of
its broad educational mission throughout New York City.").) Based on the record before it, the
court concludes that Section 4.5 is narrow with regard to the "range and type of covered
conduct" such that the market-participant exception applies. See BIECA, 678 F.3d at 189 n.2.
iii.

Applicability of Similar Cases

The Bus Companies attempt to distinguish BIECA as "materially different" from the
instant situation because that case, like Boston Harbor, concerned a project-labor agreement
("PLA"), not a more "permanent" contract. (See Reply at 11-12; see also Apr. 3, 2018, Hrg.
Tr. 35:24-36:5 (stating that both Boston Harbor and BIECA found that the government was
acting as a market participant because of the "amendment to the NLRA which, in the
construction industry, allowed private employers to enter into [PLAs]").) Of course, nothing in
the text of either BIECA or Boston Harbor explicitly limits those cases to matters involving
PLAs in the construction industry. It is therefore not surprising that courts in this circuit have
used both of these cases to analyze questions of the market-participant exception in a variety of
contexts, including longer-term actions than project-labor agreements. See, e.g., N.Y. Bankers
Ass'n v. City of New York, 119 F. Supp. 3d 158, 183 (S.D.N.Y. 2015) (using BIECA to analyze
whether the market-participant exception applies to a banking statute); George v. Richter, No.

25

11-CV-8648 (PGG), 2014 WL 1666448, at *12-13 (S.D.N.Y. Apr. 25, 2014) (applying "the
Boston Harbor exception" to the City's involvement in a collective-bargaining process). (See
also Def. Suppl. Opp'nat 15-17.)
Cases in which various courts have found the market-participant exception to be
inapplicable do not alter the court's conclusion. The main case on which the Bus Companies
rely (see Mem. at 19), Van-Go Transport Co. v. New York City Board of Education, 53 F. Supp.
2d 278 (E.D.N.Y. 1999), concerned the refusal by the DOE's Office of Pupil Transportation
("OPT") to "conditionally approve employees 'to act as strike breakers,"' the first instance in
which the DOE had rejected a contractor's request for such a "conditional certification[]." Id.
at 281. Following this refusal, the DOE "enunciated by letter a policy limiting to 20 percent the
percentage of an OPT contractor's workforce that could be conditionally certified." Id. The
district court found that the DOE's "policy ofrefusing to conditionally certify replacements for
striking workers" was not undertaken in its proprietary capacity because "the policy at issue
extended beyond the parties to a single contract" and was "applied equally to all OPT
contractors." Id. at 284,288. The DOE's policy in Van-Go differs from Section 4.5 in two
crucial respects: the limitation on conditional certification in that case was imposed to further
clear public-policy goals, and any legitimate concerns put forth by the BOE were found to have
been post hoc "pretext"; and the policy was applied to "every contract [the BOE] negotiated with
its OPT contractors." See id. at 288-289, 293-94 (emphasis added). Neither such qualification
applies to B3182, which, as discussed above, meets muster under both Cardinal Towing prongs.
Similarly, when the district court in New York Bankers found that the Responsible Banking Act
("RBA") was not subject to the market-participant exception, it stated that the face of the law
"unambiguously [sought] to advance general societal goals and encourage a general policy" of

26

regulating banks, 119 F. Supp. 3d at 184, and that the RBA sought to impose conditions on
"transactions taking place among other private participants dealing in financial markets far afield
from municipal deposit-taking," i.e. in a sphere wholly unrelated to the City's role as bank
customer, id. at 186-87. No evidence before the court suggests that the DOE is making publc
policy under guise of market behavior, or that the DOE is not acting within a sphere in which it
has a proprietary interest.

c.

Conclusion

Based on a thorough review of the scope and substance of Section 4.5, the comt
concludes that the DOE' s actions in putting B3182 out to bid are consistent with its actions as a
participant in the market for school-busing services. Because actions taken by governrnent
bodies acting within their capacity as market participants are not subject to preemption, the comt
does not reach the question of whether Section 4.5 is preempted by the NLRA under Garmon or
Machinists.
2.

ERlSA Preemption

a.

Legal Overview

Unlike the NLRA, ERlSA does contain an express preemption clause. ERlSA § 514(a)
provides that, subject to certain inapplicable exceptions, "the provisions of [ERlSA] shall
supersede any and all State laws insofar as they may now or hereafter relate to any employee
benefit plan" covered under ERlSA. 29 U.S.C. § 1144(a) [ERlSA § 514(a)]. "State law"
includes "all laws, decisions, rules, regulations, or other State action having the effect oflaw, of
any State"; the term "State" includes "a state, any political subdivisions thereof, or any agency or
instrumentality of either, which purports to regulate, directly or indirectly, the terms and
conditions of employee benefit plans covered by this sub.chapter." ERlSA § 514(c).

27

b.

Application

Deciding whether Section 4.5 is preempted by ERISA requires answering a few
questions. First, is Section 4.5 a state law? Second, even if it would normally be considered a
state law, does it matter that the court has already found that the DOE put B3182 out for bid in
its capacity as a proprietor, not a regulator? The court finds that Section 4.5 is not a state law for
ERISA purposes and that the DOE's actions were undertaken in its capacity as a market
participant, thus preventing the invalidation of Section 4.5 on preemption grounds. 8
State action that falls within the ambit ofERISA must be a "rule[], regulation[], or other .
. . action having the effect of law." ERISA § 514(a). Even before considering the question of
the market-participant exception's applicability, the court is not convinced that B3182 is a state
law. ERISA pointedly does not cover all state actions, but is restricted to action "having the
effect of law." It thus cannot be the case that all state action undertaken "pursuant to local law"
(Mem. at 21) is subject to preemption under ERISA. Cf. Assoc. Gen. Contractors of Am. v.
Metro. Water Dist. (AGC), 159 F.3d 1178, 1183 n.2 (9th Cir. 1998) (rejecting an argument that
"simply because a contract is legal and enforceable it has the effect of law of a state"). Rather,
for an action to have the "effect of law," it must be generally applicable, not limited in scope to a
"discrete project." Minn. Chapter of Assoc. Builders & Contractors, Inc. v. County of St. Louis,
825 F. Supp. 238, 243 (D. Minn. 1993); see AGC, 159 F.3d at 1183 ("The PLAs in question do
reflect the action of [the government body], but they do not reflect anything remotely like rules,
regulations or laws."). The court therefore finds that, even leaving the market-participation
exception aside, B3182-which consists of a contract put out for bid by a government body that

8

The court therefore does not reach what would be the third question in tbis analysis~whether the relevant

provisions in Section 4.5 "relate to" an BRISA-covered employee benefit plan.

28

does not enforce any legal standards on non-parties to the contract~is not a state law for ERISA
purposes.
The conclusion that B3182 is not state law is buttressed by the market-participant
exception, which the court finds equally applicable to ERISA as it is to the NLRA. No comi in
the Second Circuit has ever considered whether the market-participant exception applies to
ERISA; however, the Sixth and Ninth Circuits, as well as some district courts, have found that
"[w]here a state or municipality acts as a proprietor rather than a regulator, it is not subject to
ERISA preemption." Allied Constr. lndus. v. City of Cincinnati, 879 F.3d 215,220 (6th Cir.
2018); see Johnson v. Rancho Santiago Cmty. College Dist., 623 F.3d 1011, 1023-24 (9th Cir.
2010); Lott Constructors, lnc. v. Camden Cty. Bd. of Chosen Freeholders, No. 93-CV-5636,
1994 WL 263851, at *19-20 (D.N.J. Jan. 31, 1994); Minn. Chapter, 825 F. Supp. at 243-44. 9
Application of the market-participant exception in the ERISA context follows naturally
from the law's purpose and text. 1n Boston Harbor, the Court found it appropriate to exempt
state proprietary actions from NLRA preemption because "the NLRA was intended to supplant
state labor regulation, not all legitimate state activity that affects labor." 507 U.S. 218 at 227.
Like the NLRA, "ERISA does not provide any express or implied indication that a state may not
act as a private party would be permitted to with respect to its property." Minn. Chapter, 825 F.
Supp. at 243. Indeed, the text ofERISA explicitly distinguishes between regulatory and nonregulatory activity, much as Boston Harbor does. See id. ("ERISA's defmition of state law
preserves this distinction [between state law and other state action] by only including state action

9

Other courts, including the New York Court of Appeals, have seemed to assume that the market-participant
exception applies in the ERISA context despite the lack of a Supreme Court ruling on this question, while declining
to fmd that various challenged actions fall within that safe harbor. See Assoc. Builders & Contractors Inc. N.J.
Chapter v. City of Jersey City, 836 F.3d 412,417 n.6 (3d Cir. 2016); Utility Contractors Ass'n of New Engl., Inc. v.
City ofFall River, No. 10-CV-10994, 2011 WL 4710875, *8-9 (D. Mass. Oct. 4, 2011); Council of City of New
York v. Bloomberg. 846 N.E.2d 433, 441-42 (N.Y. 2006). No court to consider the question has found that the
market-participant exception does not apply in the ERISA context.

29

has the effect of law."). Thus, ERISA's preemption provision does not apply to "negotiated
contract provisions demanded for certain projects" issued by a government entity "which acts
much like any private party could," while acts taken "in a more general regulatory capacity" are
subject to BRISA preemption. See AGC, 159 F.3d at 1182-83.
The court agrees that the market-participant exception applies in the BRISA context.
Accordingly, the court holds that, because the DOE issued B3182 in its capacity as a proprietor,
B3182 cannot be preempted by BRISA. Consequently, the court need not reach the question of
whether B3182 "relates to" an BRISA-covered benefit plan to reach the conclusion that the
DOE's actions are not preempted.

C.

Balancing the Equities and the Public Interest

Although the court has already stated why the Bus Companies have neither alleged
irreparable harm nor proven that they are likely to succeed on the merits at trial, the court will
briefly consider the final two factors in the preliminary-injunction analysis: whether "the balance
of equities tips in [Plaintiffs'] favor" and whether "an injunction is in the public interest."
Winter, 555 U.S. at 20. To malce this decision, the court "balance[s] the competing claims of
injury and must consider the effect on each party of the granting or withholding of the requested
relief," as well as "the public consequences of employing the extraordinary remedy of
injunction." Id. at 24 (internal quotation marks and citation omitted). "These factors merge
when the Government is the opposing party." Nken v. Holder, 556 U.S. 418,435 (2009).
The court believes that these factors cut significantly in the DOE's favor. While the court
respects the Bus Companies' argument in favor of an injunction, the Bus Companies cannot
escape the fact that court has rejected their assertions of irreparable harm, making it difficult for
them to claim that the balance of hardships tips in their favor. Conversely, the court agrees with

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the DOE that the Bus Companies have downplayed the hardship to the DOE, as well as the
public interest, that would result from further delay to the bidding process for B3182. (See Def.
1st Opp'n at 23-24.) It seems beyond objection that the DOE's interest in the safe and reliable
transportation of schoolchildren is a weighty one, and that the court must seriously consider such
interests before taking steps that could interfere therewith.

IV.

CONCLUSION
For the foregoing reasons, the Bus Companies' motion for a preliminary injunction

(Dkt. 1) is DENIED.

NkitL¼~

SO ORDERED.
Dated: Brooklyn, New York
May.;;:_S-, 2018

United States District Judge

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