By Matthew Santoni

Law360 (August 26, 2020, 4:11 PM EDT) -- A Pittsburgh-area school district claimed in a lawsuit that its transportation contractor was refusing to work in the upcoming school year unless the district paid for the time students attended classes from home due to the coronavirus pandemic.

The South Allegheny School District filed a lawsuit Tuesday against Sun Coach Lines LLC in Pennsylvania state court, saying the transportation contractor was pushing to get paid for months it didn't actually have students to transport to school, and was refusing to renegotiate or arbitrate the district's costs for the shortened year.

"Defendant's failure to abide by the provisions of the agreement regarding the modification and/or elimination of the bulk rate for school bus transportation services ... and its threatened refusal to provide school bus transportation services for the upcoming school year if the improperly claimed amounts are not paid thwarts the peaceful and orderly procedures negotiated by the parties in the agreement," the motion for a preliminary injunction said.

The school district, which covers the Pittsburgh suburbs of Port Vue, Liberty, Glassport and Lincoln, made claims for breach of contract and sought an injunction and a court declaration that the district was entitled to renegotiate or arbitrate its rates.

South Allegheny's lawsuit said it had a seven-year contract with Sun Coach Lines that runs through 2023, and paid at a "bulk rate" of approximately $1.26 million per year in 10 equal installments. The coronavirus pandemic halted all in-person instruction in mid-March, but the district and Sun Coach Lines were in disagreement over whether the district owed the last three installments in full, the suit said.

In addition, the district informed Sun Coach that it intended to continue "virtual learning" for the first four to six weeks of the 2020-2021 school year, which began Aug. 19, but the bus company said the district still had to pay the full bulk rate for transportation during those weeks even if only a few students were being taken to special education programs or charter schools.

The district said its contract had a clause that allowed it to renegotiate its rates if the number of students being transported decreased by more than 5%, and another clause required mediation or arbitration if the district and the transportation company could not come to an agreement on the new rates. Sun Coach was refusing to negotiate or submit to mediation or arbitration, the district said.

Sun Coach pointed to the state's passage of Act 13 in March, which said districts could get state reimbursement if they kept paying their transportation providers, but South Allegheny said Sun Coach had refused to give proof that it had kept all its drivers and employees on the payroll and hadn't paid for them with a Paycheck Protection Program loan.

"It was not practicable to use taxpayers' monies to pay for a service that was not performed (because of forced closure of the school facilities) or to potentially allow defendant to be paid twice for the same costs (since the school district was forced to assume that defendant's labor costs were reimbursed through the Paycheck Protection Act)," the complaint said.

After more back-and-forth by email, the bus company allegedly refused to provide service for the upcoming school year unless the district paid for the last three months of the prior school year and the first four to six weeks of the current one, the district said. It sought an injunction to prevent the bus company from pulling out of the contract, in part because it was too late to find a new provider.

"Due to the timing of defendant's repudiation or notification that it did not intend to honor its obligation to provide the school bus transportation services… there is no possibility of the school district being able to publicly bid and enter into a contract with another transportation company before the start of the school year," the complaint said.

A similar dispute arose between the adjacent McKeesport Area School District and Pennsylvania Coach Lines, a sister company to Sun Coach Lines, earlier in the month, but attorney Ray Middleman of Eckert Seamans Cherin & Mellott LLC told Law360 on Wednesday that the parties had mostly resolved that case.

Middleman said that despite South Allegheny's concerns, Sun Coach would commit to providing transportation when in-person classes resume, and would figure out how much the district owed in court.

"We've made it very clear that we'll provide service under the existing contract, but we've said we expect to get paid," Middleman said. "If they choose not to start in-person school until October, that's a choice they make; we still have to have buses and drivers available."

He said unless the district could reach a resolution with Sun Coach at a status conference with a judge later in the week, Sun Coach would file a counterclaim against the district for breach of contract and ask the court to interpret how much the district owed and whether the closure triggered the renegotiation and arbitration sections of the contract.

Counsel for the school district declined to comment Wednesday.

South Allegheny is represented by Falco A. Muscante, Steven P. Engel and Peter J. Halsey 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 Stephen Berg.

Update: This article has been updated with a response from the school district's attorneys.

For a reprint of this article, please contact reprints@law360.com.