Devon Enterprises LLC v. Arlington Independent School District
Filing
53
Memorandum Opinion and Order granting 46 Motion for Summary Judgment filed by Arlington Independent School District: The court ORDERS that defendant's motion for summary judgment be, and is hereby, granted, and that all claims and cause s of action asserted by plaintiff, Devon Enterprises, LLC d/b/a Alliance Bus Charters, against defendant, Arlington Independent School District, be, and are hereby, dismissed with prejudice. (See order for specifics.) (Ordered by Judge John McBryde on 12/11/2012) (mdf)
U.S. DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
IN THE UNITED STATES DISTRICT CURT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
FILED
'--....,
DEC I 12012
CI,ERK, U.S. DISTRICT COURT
DEVON ENTERPRISES, LLC D/B/A
ALLIANCE BUS CHARTERS,
By
§
.
Deputy
§
§
Plaintiff,
§
§
VS.
§
NO. 4:11-CV-671-A
§
ARLINGTON INDEPENDENT SCHOOL
DISTRICT,
§
§
§
Defendant.
I
_I
§
MEMORANDUM OPINION
and
ORDER
Came on for consideration the motion for summary judgment
filed by defendant, Arlington Independent School District, as to
all claims and causes of action brought against it by plaintiff,
Devon Enterprises, LLC d/b/a Alliance Bus Charters.
filed a response, and defendant filed a reply.
Plaintiff
Having considered
all of the parties' filings, as well as the summary judgment
record and applicable legal authorities, the court concludes that
the summary jUdgment motion should be granted.
1.
Plaintiff's Claims
Plaintiff initiated this action by filing its original
complaint on September 22, 2011, alleging that defendant refused
to employ it as an approved bus carrier solely on the basis of
its petition in bankruptcy.
Plaintiff asserted claims and causes
of action against defendant for violations of the Bankruptcy
Code, 11 U.S.C.
§
525(a), and for violations of
Texas Education Code.
§
44.031 of the
Plaintiff sought injunctive relief,
monetary damages, and attorney's fees.
II.
The Motion for Summary Judgment
Defendant contends that it is entitled to summary judgment
on the following grounds:
defendant did not deny plaintiff a
contract for bus service solely on the basis of its bankruptcy;
plaintiff is not entitled to damages; plaintiff's claims are
untimely; defendant's actions did not violate the competitive
bidding provisions of the Texas Education Code; and, plaintiff is
not entitled to injunctive relief.
III.
Undisputed Facts
The following facts are undisputed in the summary judgment
record:
At the time of the events giving rise to this litigation,
plaintiff was a charter bus company providing bus services to
area school districts and others.
Plaintiff was an approved
charter bus carrier for defendant during the school years of
2007-2008, 2008-2009, and 2009-2010.
2
On October 20, 2010,
plaintiff filed a petition in bankruptcy under Chapter 11 of the
united States Bankruptcy Code.
On October 26, 2010, defendant began accepting bids for its
charter bus carrier contract for the 2010-2011 school year (the
"11-45 Bid").
In reviewing plaintiff's submission for the 11-45
Bid, Betty Knox ("Knox"), defendant's then-Director of
Purchasing, noted in plaintiff's submission a printout from the
united states Department of Transportation ("U.S. DOT")
indicating that plaintiff had reported an injury accident during
the previous reporting period.
Shortly after defendant began
accepting submissions on the 11-45 Bid, an employee of a
competing charter bus company sent an email to Knox, to which it
attached documents indicating that plaintiff had filed a petition
in bankruptcy and that plaintiff's authority to operate as a bus
carrier had been suspended by the u.S. DOT in July 2010 and
reinstated in August 2010.
Knox and her supervisor, Anthony
Drollinger ("Drollinger"), defendant's Executive Director of
Finance, discussed these issues.
Defendant's employees were also aware that in December 2009
one of plaintiff's buses had broken down in El Paso, Texas, while
transporting defendant's students from Arlington to Phoenix,
Arizona.
Plaintiff arranged for an unauthorized carrier to drive
defendant's students the remainder of the trip from El Paso to
3
Phoenix.
Knox and Drollinger were also aware of plaintiff's
ongoing difficulty maintaining on file a valid certificate of
insurance, as required for any bus company that contracted to
provide services to defendant.
Knox and Drollinger also discussed the foregoing safety
issues with Cindy Powell ("Powell"), an assistant superintendent.
Around November 2, 2010, Knox and Drollinger telephoned Richard
Bastow ("Bastow"), plaintiff's president and owner, to inform him
that they were not going to recommend plaintiff as an approved
vendor for the 11-45 Bid.
Following the telephone conversation,
Bastow asked his bankruptcy attorney, Eric Liepins ("Liepins"),
to send Knox a letter explaining plaintiff's Chapter 11
bankruptcy filing and plaintiff's obligations while operating
during the pendency of the bankruptcy.
On November 4, 2010, Knox sent the following email to
Bastow:
Richard--We would be glad to meet with you face-to-face
to discuss Alliance Bus Charter's bankruptcy. However,
we are moving forward with our recommendation to the
Board of Trustees at their meeting this evening not to
use Alliance Bus Charters at this time. As per our
discussion with you on Tuesday, the slightest risk to
student safety is not negotiable. Additionally, as
stated by Mr. Drollinger, perception of the parents and
the community regarding District contractors is an
important element in our decision making process. We
look forward to working with you again once the
company's financial situation changes.
PI.'s App. at 57.
4
Knox, Drollinger, and Powell did not recommend that
plaintiff be approved as a charter bus provider under the 11-45
Bid, and the Board of Trustees did not include plaintiff on the
list of approved vendors at its meeting on November 4, 2010.
On December 17, 2010, Powell sent the following email to
defendant's then-superintendent, Jerry McCullough ("McCullough"):
I confirmed with Betty Knox that Alliance was the
company that we did not award a bid to for charter bus
services because they are currently in bankruptcy.
Id. at 59.
Defendant began accepting bids for the 2011-2012 school year
in June of 2011.
Plaintiff submitted a bid that showed no
accidents during the previous year.
Nevertheless, to alleviate
concerns about safety that had arisen during the previous bidding
process, defendant requested and checked references for
plaintiff.
No further problems were reported.
Plaintiff was
again recommended to be approved as a provider of charter bus
services for defendant and was included on the final list of
approved bus carriers for the 2011-2012 school year.
Although
the exact date is unclear, as of at least January 2012 plaintiff
was no longer operating as a charter bus company.
5
IV.
Applicable Summary Judgment Principles
Rule 56(a) of the Federal Rules of Civil Procedure provides
that the court shall grant summary judgment on a claim or defense
if there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.
Fed. R. civ.
P. 56(a); Anderson v.' Liberty Lobby, Inc., 477 U.S. 242, 247
(1986).
The movant bears the initial burden of pointing out to
the court that there is no genuine dispute as to any material
fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).
The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim, "since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."
Id. at 323.
Once the movant has carried its burden under Rule 56(a), the
nonmoving party must identify evidence in the record that creates
a genuine dispute as to each of the challenged elements of its
case.
Id. at 324.
See also Fed. R. Civ. P. 56(c)
("A party
asserting that a fact . . . is genuinely disputed must support
the assertion by
the record
citing to particular parts of materials in
.").
If the evidence identified could not lead
a rational trier of fact to find in favor of the nonmoving party
6
as to each essential element of the nonmoving party's case, there
is no genuine dispute for trial and summary judgment is
appropriate.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 597 (1986).
V.
Analysis
A.
No Violation of the Bankruptcy Code
The Bankruptcy Code provides that, except under certain
circumstances not applicable here,
a governmental unit may not deny, revoke, suspend, or
refuse to renew a license, permit, charter, franchise,
or other similar grant to, condition such a grant to,
discriminate with respect to such a grant against, deny
emploYment to, terminate the emploYment of, or
discriminate with respect to emploYment against, a
person that is or has been a debtor under this title or
a bankrupt or a debtor under the Bankruptcy Act . . . ,
solely because such bankrupt or debtor is or has been a
debtor under this title or a bankrupt or debtor under
the Bankruptcy Act, has been insolvent before the
commencement of the case under this title, or during
the case but before the debtor is granted or denied a
discharge, or has not paid a debt that is dischargeable
in the case under this title or that was discharged
under the Bankruptcy Act.
11 U.S.C.
§
525(a).
The Fifth Circuit has adopted a "narrow
construction approach" requiring proof that the alleged
discrimination was caused "solely" by the debtor's bankruptcy.
In re Exquisito Servs., Inc., 823 F.2d 151, 153-54 (5th Cir.
1987).
As noted by the Fifth Circuit, section 525(a) 's
7
"prohibition does not extend so far as to prohibit examination of
the factors surrounding the bankruptcy, the imposition of
financial responsibility rules if they are not imposed only on
former bankrupts, or the examination of prospective financial
condition or managerial ability."
Report at 6126).
Id. at 154 (citing House
Nor does section 525(a) prevent a government
entity from considering factors such as "future financial
responsibility or ability, and does not prohibit imposition of
requirements such as net capital rules, if applied
nondiscriminatorily."
Id. at 153 (citing Senate Report at 5867).
Plaintiff primarily relies on three sources of evidence it
contends establish defendant's violation of section 525(a):
the
November 2, 2010 email from Knox to Bastow ("Knox Email"); the
December 17, 2010 email from Powell to MCCullough ("Powell
Email")
i
and testimony from Bastow.
As for the Knox Email,
plaintiff directs the court to the final sentence, which reads:
"We look forward to working with you again once the company's
financial situation changes."
Def.'s App. at 89.
Although
plaintiff focuses on this sentence, it cannot be considered in
isolation.
In the same email Knox also indicated that she had
discussed with Bastow defendant's concerns about safety:
"As per
our discussion with you on Tuesday, the slightest risk to student
safety is not negotiable."
Id.
The court cannot simply ignore,
8
as plaintiff apparently has, the indication in the Knox Email
that Knox was concerned about safety issues pertaining to
plaintiff's services.
Nor can the court ignore the evidence of safety issues in
the record.
It is undisputed that plaintiff's submission for the
11-45 Bid included information about an injury accident involving
one of plaintiff's buses during the prior year.
It is also
undisputed that in December 2009, one of plaintiff's buses broke
down in El Paso, Texas, while plaintiff was transporting a group
of defendant's students to Phoenix, Arizona, and that plaintiff
engaged an unauthorized service to transport the students from El
Paso to Phoenix without proper approval from defendant.
Also in
the record is evidence of plaintiff's ongoing problems
maintaining on file a certificate of insurance, as well as
evidence of at least one fire on one of plaintiff's buses.
Plaintiff does not specifically address the safety issues in
its response to the motion for summary judgment, except to assert
that defendant manufactured its concerns over safety as a posthoc justification for its discriminatory actions towards
plaintiff regarding the 11-45 Bid.
The basis of this assertion
appears to be plaintiff's contention that defendant conducted no
real investigation into the incidents, and that it did not
investigate safety issues concerning other vendors.
9
However,
plaintiff has directed the court to no authority requiring that
defendant perform a particular type of investigation before
relying on its knowledge of the safety-related incidents in its
decision-making process.
Nor has plaintiff directed the court to
summary judgment evidence showing that other charter bus vendors
had similar safety problems of which defendant was aware but
chose to ignore.
Defendant's evidence, including the Knox Email
and the affidavits of Drollinger and Knox, shows that defendant
considered these issues in conjunction with plaintiff's
submission for the 11-45 Bid, and the court does not find
contravening evidence in the summary judgment record.
Evidence
that safety concerns played at least some role in defendant's
decision not to recommend plaintiff for the 11-45 Bid defeats
plaintiff's claim that defendant failed to recommend it as a
vendor "solely" because of its bankruptcy.
Nor does Bastow's testimony establish that plaintiff's
bankruptcy was the sole reason plaintiff was not included on the
list of approved vendors under the 11-45 Bid.
Bastow's
deposition testimony tends to establish, as plaintiff contends,
that bankruptcy was a topic of conversation during the November
2, 2010 telephone conversation between Bastow, Knox, and
Drollinger.
However, Bastow's testimony also shows that at least
a portion of the conversation involved Knox and Drollinger's
10
concerns that parents and/or the public would have a perception
that plaintiff's buses were unsafe:
And it's your testimony here today that you never
discussed any of the accidents--the accident, the fire,
or the maintenance issues with Mr. Drollinger or Ms.
Knox in your conversation with them on November 2nd.
Q.
A. No, they never had any conversation with me over
them. They just said "perception of safety."l
Q.
I asked you about the safety issues. And my
question was: Did they tell you that they perceived, or
parents perceived, that your buses were not safe?
A. No. They did not say they perceived my buses
weren't safe. They said the perception of the pUblic.
Q. Are you saying that they were saying to you that
the pUblic would have a perception that the buses
wouldn't be safe because you were bankrupt?
A. I don't know if they used those exact words, but
that's the feeling I got.
PI.'s App. at 117-18, 120.
Bastow's testimony thus shows that
IThis testimony is contradicted by Bastow's testimony later in the deposition following discussion of
the Knox Email:
Q. Isn't it true that in the email Ms. Knox says, "Per our discussion with you on
Tuesday, the slightest risk to student safety is not negotiable"?
Q. And you're not denying that that's what was discussed, are you?
A. I'm not denying that, but there was more than that that originally was discussed
during that same conversation.
Def.'s App. at 39-40.
11
defendant was concerned that the pUblic might perceive
plaintiff's buses to be unsafe.
This testimony supports a
conclusion that safety issues were at least part of the reason
that Knox and Drollinger did not recommend plaintiff to be
included as an approved vendor for the 11-45 Bid, and that the
failure to recommend plaintiff as a vendor was not due "solely"
to plaintiff's bankruptcy.
To bolster its contention that plaintiff's bankruptcy was
the focus of the November 2, 2010 conversation plaintiff relies
on the letter sent to Knox from Liepins, plaintiff's bankruptcy
attorney, at Bastow's request following that conversation.
The
letter explains plaintiff's obligations while in the bankruptcy
process, and tends to show that plaintiff's bankruptcy likely did
enter into the November 2 conversation.
What it does not do,
however, is negate other evidence that safety concerns, or
concerns over the public's
perception of safety, also entered
into defendant's decision not to include plaintiff on the list of
approved vendors for the 11-45 Bid.
Plaintiff must establish
that its bankruptcy was the "sole" reason for its rejection.
The
Liepins letter fails in that regard.
Plaintiff's final piece of evidence is the Powell Email
stating she confirmed that plaintiff "was the company that we did
not award a bid to for charter bus services because they are
12
currently in bankruptcy."
PI.'s App. at 59.
The court considers
the email to be in the nature of a stray remark.
To be probative
of discrimination a comment must do more than mention a protected
class or sUbject.
Rather, it must also bear other indicia of
discrimination, such as proximity in time to the adverse decision
at issue.
See,~,
Auguster v. vermilion Parish Sch. Bd., 249
F.3d 400, 404-05 (5th Cir. 2001)
(considering stray remarks in
the context of emploYment discrimination).
Such temporal
proximity is lacking here.
Powell sent the email to McCullough approximately six weeks
after the conversation between Knox, Drollinger, and Bastow and
six weeks after the Board of Trustees voted on a list of vendors
for the 11-45 Bid that did not include plaintiff.
Lacking
temporal proximity to the decision on the 11-45 Bid, the Powell
Email also cannot be considered reflective of all the
contemporaneous issues discussed between Knox, Drollinger, and
Powell during late October and early November when they
considered whether to include plaintiff on the list submitted to
the Board of Trustees.
Nor did Powell participate in the
telephone conversation between Knox, Drollinger, and Bastow on
November 2, 2010, so the email cannot be considered a timely
reflection of the substance of that conversation.
Finally,
considered in light of other evidence in the record that safety
13
concerns played a role in defendant's decision not to recommend
plaintiff for the 11-45 Bid, the Powell Email does not establish
that defendant failed to recommend plaintiff solely because of
its bankruptcy filing.
Plaintiff would have the court consider all of the foregoing
as "direct evidence of discriminatory motive [that] is
automatically sufficient to defeat a summary jUdgment motion."
PI.'s Resp. to Mot. for Summ. J. at 13.
In support of this
argument plaintiff relies on cases discussing the shifting
evidentiary burdens in emploYment discrimination cases.
See id.
(discussing Wilkerson v. Columbus Separate Sch. Dist., 985 F.2d
815 (5th Cir. 1993), and Brown v. East Miss. Elec. Power Ass'n,
989 F.2d 858 (5th Cir. 1993)).
Such reliance is misplaced.
Plaintiff has directed the court to no Fifth Circuit precedent
applying a burden-shifting analysis to a case under section
525(a) .
Nor does plaintiff's argument about direct evidence carry
the day under section 525(a).
Here, the issue is whether
plaintiff can prove that plaintiff's bankruptcy was the sole
reason for defendant's allegedly discriminatory action.
Exquisito Servs., 823 F.2d at 153-54.
See also Laracuente v.
Chase Manhattan Bank, 891 F.2d 17, 23 (1st Cir. 1989)
under 11 U.S.C.
§
In re
(in case
525(b), rejecting burden-shifting approach and
14
requiring that plaintiff prove she was terminated solely because
of her bankruptcy).
Plaintiff has failed to meet its burden
under section 525(a).
B.
Claim Under the Texas Education Code
As of the date defendant accepted submissions for the 11-45
Bid, section 44.031 of the Texas Education Code provided the
following guidelines for school district contracts:
(b) Except as provided by this subchapter, in
determining to whom to award a contract, the district
shall consider:
(1) the purchase price;
(2) the reputation of the vendor and of the vendor's
goods or services;
(3) the quality of the vendor's goods or services;
(4) the extent to which the goods or services meet the
district's needs;
(5) the vendor's past relationship with the district;
(6) the impact on the ability of the district to comply
with laws and rules relating to historically
underutilized businesses;
(7) the total long-term cost to the district to acquire
the vendor's goods or services; and
(8) any other relevant factor specifically listed in
the request for bids or proposals.
Tex. Educ. Code Ann.
§
44.031(b)
(West 2006).
Although these are
the only factors a school district may consider in awarding a
bid, the district "has the discretion to apply one, some, or all
15
of those criteria," and it may accord them whatever weight or
consideration it chooses.
R.G.V. vending v. Weslaco Indep. Sch.
Dist., 995 S.W.2d 897, 899 (Tex. App.--Corpus Christi 1999, no
pet.)
In his affidavit Drollinger explained that defendant
considered plaintiff's submission for the 11-45 Bid in light of
the section 44.031(b) criteria.
Drollinger concluded that the
company's poor performance, including the breakdown of a bus in
EI Paso that stranded defendant's students, the company's history
of a bus fire, a self-reported injury accident, and difficulties
maintaining certificates of insurance, all implicated section
44.031(b) criteria such as the reputation and quality of the
company's goods and services, the extent to which the goods and
services met defendant's needs, and the company's past history
with the school district.
Because of these factors, Drollinger
did not recommend plaintiff to be an approved bidder for the
2010-2011 school year.
This evidence establishes that defendant
considered the section 44.031(b) criteria in evaluating
plaintiff's submission for the 11-45 Bid.
Plaintiff's response to this argument comprises a single
line in its brief, where plaintiff contends "[als shown herein,
AISD used a criterion to reject Alliance Bus (the bankruptcy),
which is not a permitted criterion under the Texas Education
16
of those criteria," and it may accord them whatever weight or
consideration it chooses.
R.G.V. Vending v. Weslaco Indep. Sch.
Dist., 995 S.W.2d 897, 899 (Tex. App.--Corpus Christi 1999, no
pet.)
In his affidavit Drollinger explained that defendant
considered plaintiff's submission for the 11-45 Bid in light of
the section 44.031(b) criteria.
Drollinger concluded that the
company's poor performance, including the breakdown of a bus in
EI Paso that stranded defendant's students, the company's history
of a bus fire, a self-reported injury accident, and difficulties
maintaining certificates of insurance, all implicated section
44.031(b) criteria such as the reputation and quality of the
company's goods and services, the extent to which the goods and
services met defendant's needs, and the company's past history
with the school district.
Because of these factors, Drollinger
did not recommend plaintiff to be an approved bidder for the
2010-2011 school year.
This evidence establishes that defendant
considered the section 44.031(b) criteria in evaluating
plaintiff's submission for the 11-45 Bid.
Plaintiff's response to this argument is apparently its
contention that "[als shown herein, AISD used a criterion to
reject Alliance Bus (the bankruptcy), which is not a permitted
criterion under the Texas Education Code."
16
PI.'s Resp. to Mot.
for Summ. J. at 20.
Plaintiff directs the court to no evidence
contravening Drollinger's affidavit describing how defendant
applied the section 44.031(b) criteria to plaintiff's submission
for the 11-45 Bid.
Plaintiff must identify evidence in the
record that creates a genuine dispute as to each of the
challenged elements of its case.
Plaintiff's failure to do so
Celotex Corp., 477 U.S. at 324.
warrants summary judgment for
defendant on plaintiff's claim under the Texas Education Code.
* * * *
Given the court's disposition of plaintiff's claims, it need
not reach defendant's arguments in the summary judgment motion
concerning laches or that plaintiff is entitled to no damages.
VI.
Order
Therefore,
The court ORDERS that defendant's motion for summary
judgment be, and is hereby, granted, and that all claims and
causes of action asserted by plaintiff, Devon Enterprises, LLC
d/b/a Alliance Bus Charters, against defendant, Arlington
Independent School District, be, and are hereby, dismissed with
prejudice.
SIGNED December 11, 2012.
17
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