Acme Bus Corp. v. E. Meadow Union Free Sch. Dist. (In re Baumann & Sons Buses)

In re BAUMANN & SONS BUSES, INC., et al., Debtors. ^[1]

ACME BUS CORP., Plaintiff, v. EAST MEADOW UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. FREEPORT UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. MERRICK UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. NORTH BELLMORE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. PLAINEDGE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. PORT WASHINGTON UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. ROCKVILLE CENTRE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. SEAFORD UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. SOUTH HUNTINGTON UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. BALDWIN UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. THREE VILLAGE CENTRAL SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. UNIONDALE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. WESTBURY UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. BELLMORE-MERRICK CENTRAL HIGH SCHOOL DISTRICT, Defendant.

BAUMANN & SONS BUSES, INC. Plaintiff, v. NORTHPORT-EAST NORTHPORT UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. BALDWIN UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. BELLMORE-MERRICK CENTRAL HIGH SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. EAST MEADOW UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. FREEPORT UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. UNIONDALE UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. HERRICKS UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. ROSLYN UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. HEWLETT-WOODMERE UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. MERRICK UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. NORTH BELLMORE UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. NORTH MERRICK UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. PORT WASHINGTON UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. ROCKVILLE CENTRE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. MALVERNE UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. LONG BEACH CITY SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. NORTH SHORE UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN BUS COMPANY, INC., Plaintiff, v. MALVERNE UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. LEVITTOWN UNION FREE SCHOOL DISTRICT, Defendant.

BAUMANN & SONS BUSES, INC., Plaintiff, v. COMMACK UNION FREE SCHOOL DISTRICT, Defendant.

ACME BUS CORP., Plaintiff, v. COMMACK UNION FREE SCHOOL DISTRICT, Defendant.

No. 20-72121 (REG)

Adv. Pro. Nos. 20-08182, 20-08185, 20-08187, 20-08190, 20-08191, 20-08192, 20-08194, 20-08195, 20-08197, 20-08198, 20-08199, 20-08200, 20-08207, 20-08210, 20-08211, 20-08214, 20-08216, 20-08217, 20-08224, 20-08225, 20-08228, 20-08229, 20-08230, 20-08232, 20-08235, 20-08236, 20-08237, 20-08238, 20-08242, 20-08244, 20-08246, 20-08247, 21-08010, 21-08011, 21-08012

United States Bankruptcy Court, E.D. New York

January 4, 2022

Chapter 11

MEMORANDUM DECISION DENYING MOTIONS TO DISMISS

Robert E. Grossman, United States Bankruptcy Judge

Before the Court are forty-six (46) motions to dismiss, ^[2] pursuant to Federal Rule of Civil Procedure 12(b)(6), made by thirty-one (31) school districts on Long Island represented by six (6) separate law firms (collectively, the school district defendants are referred to herein as the "Districts" or the "Defendants").^[3] The Plaintiff/Debtors are school bus companies which assert claims for breach of contract and/or unjust enrichment stemming from the Defendants' failure to compensate the Debtors for being ready willing and able to perform under their contracts during a period of time when all of the Districts were directed by Order of the Governor of New York to cease all in-person learning due to the COVID-19 pandemic. From approximately March 16, 2020 through the end of the school year, students were not permitted to attend school in person and all classes were conducted remotely. Consequently school bus companies, such as the Debtors, that were contractually obligated to transport students were no longer permitted to perform the services required under the contracts.

The Debtors' only source of revenue was derived from the contracts they had executed with each of the Defendants. When in-person learning was suspended, the Districts ceased payments to the Debtors leaving the Debtors with no revenue to support their operations. Clearly, the Debtors were damaged by the loss of revenue. These facts are, for the most part, not in

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dispute. The only issue before the Court at this time is whether the Debtors have alleged plausible claims for relief against the Defendants based on the argument that the Defendants are liable as a matter of law for the economic damages suffered by the Debtors resulting from the demise of their business.

At a hearing held on October 28, 2021, the Court denied all forty-six (46) motions to dismiss ^[4] and indicated that the reasons for the ruling would follow in a written decision to the extent the Court's reasoning was not already stated on the record at the hearing.

The following constitutes the Court's reasons for its decision to deny the motions to dismiss. As the focus of any Rule 12(b)(6) motion to dismiss should be the allegations of the complaint, the Court's analysis will begin there.

ALLEGATIONS OF THE COMPLAINTS

Relevant to these motions, the complaints allege each of the Defendants had a contract ^[5] with one or both of the Plaintiff/Debtors to provide student transportation services for the 2019/2020 school year. (Compl. ¶ 19). ^[6]

On March 16, 2020, the Governor of New York ("Governor") issued an executive order requiring the closure of schools state-wide and directing that students be educated via remote instruction through April 1, 2020. (Compl. ¶ 37). The Governor issued a further executive order on March 27, 2020 continuing the state-wide closure through April 15, 2020. (Compl. ¶ 38). By

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executive order dated April 7, 2020, the closure was further extended through April 29, 2020. (Compl. ¶ 39). By executive order dated April 16, 2020, the closure was extended yet again, through May 15, 2020 (Compl. ¶ 40). By executive order dated May 7, 2020, the closure period was extended through the remainder of the school year (Compl ¶ 41). The period of time from March 16, 2020 through the end of the school year is referred to herein as the "COVID Closure Period."

As of March 16, 2020, the Districts directed the Debtors not to transport students (Compl. ¶ 23). The Debtors remained ready, willing and able to continue to provide transportation services pursuant to the contract "until it was required to cease all operations" (Compl. ¶¶ 24, 44) and "continued to provide contractually required services to the School District" including, for example by fulfilling maintenance requirements, complying with NYS Department of Transportation certification requirements, and personnel, safety and insurance requirements (Compl. ¶ 25). The Debtors "incurred substantial costs to remain ready to re-commence transportation." (Compl. ¶ 45). The complaints allege that the Debtors performed under the contract which was for the entire school year and which contained no provision authorizing the Districts to suspend services without compensation (Compl. ¶¶ 29-30). Notwithstanding demand for payment under the contract, the Districts have not made payments for contracted services during the COVID Closure Period, which is a breach of the contract (Compl. ¶¶ 31-32).

On the breach of contract claims, the Debtors' claim expectancy damages equal to "the full [contract] price for the unpaid period less any savings achieved by [the Debtors] as a result of having mitigated its damages, plus interest from June 30, 2020" (Compl. ¶ 33). On or about September 2, 2020, the Debtors presented the Boards of Education of the Districts with notices

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of claim seeking damages for breach of the transportation contracts due to the Districts' nonpayment. ^[7]

With respect to the unjust enrichment claims, the complaints allege that the Districts failed to pay the Debtors even though the Districts budgeted and raised the funds required to pay the Debtors (Compl. ¶ 46). The Districts knowingly received the benefit of the Debtors' efforts and were enriched as a result (Compl. ¶ 47). The Districts received CARES Act grants which were intended to be used by its recipients to, among other things, pay their "contractors during the period of any disruptions or closures related to coronavirus." (Compl. ¶ 48). The Districts' budgets for the 2019-2020 school year were fully funded and it was "practicable" for the Districts to pay the Debtors for the contracted transportation services (Compl. ¶ 50). It is against equity and good conscience to permit the districts to refuse payment to the Debtors altogether (Compl. ¶ 51).

The complaints allege that this Court has jurisdiction over the adversary proceedings pursuant to 28 U.S.C. §§ 157 and 1334 (Compl. ¶ 12).

DISCUSSION

I. Subject matter jurisdiction

Pursuant to 28 U.S.C. § 1334(a), district courts have "original and exclusive jurisdiction of all cases under ...