Pa. School District, Bus Co. Make Deal In Virus Contract Row

By Matthew Santoni
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Law360 (February 2, 2021, 6:12 PM EST) -- Most students in a Pittsburgh-area school district will keep learning remotely while the district fights with its bus contractor over how much it had to pay for months when most students were taught from home, but the contractor will resume transporting students with special needs under an interim agreement reached in Pennsylvania state court Tuesday.

After an acrimonious hearing on an emergency injunction petition from the South Allegheny School District, Sun Coach Lines agreed to resume busing some students if the district paid a daily rate, and the two sides would go back to mediation in an attempt to resolve whether the district was obligated to pay its "bulk rate" contract in full for the months when the pandemic led it to keep students at home.

The district agreed to pay $315.21 per bus per day — the same daily rate paid by the Pittsburgh Public School District — while the parties went back to the table for the underlying lawsuit. Allegheny County Court of Common Pleas Judge John T. McVay Jr. didn't rule on the request for an injunction, saying he would schedule a hearing for late February or early March in case there was no agreement in mediation.

"This would be an interim payment, without prejudice to the underlying contract," said Ray Middleman of Eckert Seamans Cherin & Mellott LLC, representing the bus contractor. "You can't conflate the bulk rate with the pay-for-services rate."

Sun Coach had called off its contract with the district Friday, leading the district to cancel its plans to return elementary students to school Monday and file an emergency petition seeking to make the contractor come back. The district also had to scramble to find alternative transportation for some special-needs students, whom it is legally required to help get to their schools, said Steven P. Engel of Maiello Brungo & Maiello LLP, representing South Allegheny.

South Allegheny, which covers the Pittsburgh suburbs of Port Vue, Liberty, Glassport and Lincoln, had sued Sun Coach in August, claiming their contract allowed them to renegotiate their rates if the number of students being transported changed more than 5% from the start of the contract or if bus services were discontinued for any reason. Engel claimed Sun Coach had repeatedly threatened to back out of providing buses altogether for the 2020-2021 school year, using the students in a "game of chicken," but finally "pulled the trigger" at the last minute late last week and unilaterally terminated the contract.

Sun Coach had countered that the contract had split a yearly, bulk-rate-discounted fee across 10 months, so the district couldn't unilaterally skip or reduce payments for months that it didn't use the buses. It maintained that the conditions for renegotiation hadn't been met, and interpreted the contract's renegotiation triggers as referring to total enrollment — which stayed within the 5% window despite the shift to online school — and a total cessation of transportation services, which had continued for some students, like those in special education programs.

In seeking the injunction, Engel had argued the district's students would suffer irreparable harm — both the special-needs students who wouldn't get the in-school services they needed, and the other students who might be falling behind without in-person instruction. If Sun Coach agreed to mediation and arbitration, it was only facing a potential reduction or delay in its payments, he said.

"The erring needs to be on the side of protecting our youth, Your Honor, not on the amount of money being paid or the delay in that payment," he argued Tuesday.

Middleman objected to Engel trying to claim, without an expert's backup, that in-person learning was any better for students than remote learning, but Judge McVay said he was most concerned about the special-needs students and focused on getting them back to school in his compromise order.

Middleman also said his client was suffering irreparable harm from the district's refusal to pay in full, arguing it still had to have bus drivers, dispatchers and mechanics on staff "at the district's beck and call" in case the district decided to resume in-person learning. He said Sun Coach could go out of business if the district didn't eventually pay the $800,000-plus bill in full, instead of trying to pay based on dividing its normal payment by the normal number of bus runs, then extrapolating that to pay for each bus run it used under the pandemic restrictions.

He compared the bulk-rate, "risk-allocation" contract with the district to a restaurant with an unlimited salad bar for $15, where the owners and the customers are both trying to get the advantage.

"The restaurant is desperately hoping you're not going to eat $15 worth of stuff from the salad bar, and you're desperately hoping you can get more than $15 worth," Middleman said. "The school district has gone to the salad bar and has only taken a fruit cup, then gone to the cashier and said it doesn't want to pay the $15. ... In risk-allocation contracts, everybody knows what the deal is up front."

South Allegheny is represented by Falco A. Muscante and Steven P. Engel of Maiello Brungo & Maiello LLP.

Sun Coach Lines is represented by Ray F. Middleman of Eckert Seamans Cherin & Mellott LLC.

The case is South Allegheny School District v. Sun Coach Lines LLC, case number GD-20-009112, in the Court of Common Pleas of Allegheny County, Pennsylvania.

--Editing by Marygrace Murphy.

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