LLC v. Northwestern Connecticut Transit District (2013)

RULING ON PLAINTIFF'S APPLICATION FOR TEMPORARY INJUNCTION (# 100.34) ¹

INTRODUCTION

On June 21, 2013, the plaintiff filed a complaint, alleging in a single count that it is the owner of Certificate of Public Convenience and Necessity No. 3 (“certificate”), that grants it the exclusive right to operate bus service over certain routes.   The plaintiff further alleged that it has a contract (“the contract”) with the defendant.   It argued, at a hearing held on June 27, 2013, that the contract addresses, inter alia, the compensation paid by the defendant to the plaintiff for operating bus service over a route known as the “Candystriper” route.²  The complaint alleges that, despite the existence of the certificate, the defendant is attempting to take over the Candystriper route as of July 1, 2013.   The plaintiff asks this court to temporarily enjoin the defendant from doing so.   The application is granted.

I

PROCEDURAL HISTORY

On June 24, 2013, the defendant filed a motion to dismiss the complaint on the basis that the dispute is subject to a binding arbitration agreement.   The court heard argument on that motion on June 26, 2013 and denied the motion.   Catrini v. Erickson, 113 Conn.App. 195, 197, 966 A.2d 275 (2009) (the existence of an arbitration agreement does not deprive the court of subject matter jurisdiction).   The defendant asked, alternatively, that this court stay this action “until an arbitration has been had in compliance with” an arbitration agreement included in the contract.  General Statutes § 52–409.   However, at this point neither party has sought arbitration, the parties are in disagreement as to whether the complaint alleges issues that are addressed by the contract, and therefore it is not clear that this matter is subject to binding arbitration.³  However, even if this matter were subject to arbitration, this court is nonetheless empowered to issue “such order or decree, issue such process and direct such proceedings as may be necessary to protect the rights of the parties pending the rendering of the award ․” General Statutes § 52–422.

II

FACTUAL HISTORY

The plaintiff has operated the Candystriper route since November 2005.   That route encompasses five bus service routes in Torrington, Litchfield and Winsted.   The plaintiff provides local service to those towns, although the bus drivers are also responsible for traveling as much as three-quarters of a mile off any given route in order to address the needs of disabled individuals who wish to use the plaintiff's services.   The latter requirement is in place in order to comply with the Americans with Disabilities Act, 42 U.S.C. 12131 et seq.  (“ADA”).

The plaintiff has a contract with the defendant, first signed in 2005, which addresses, inter alia, the manner in which the defendant subsidizes the plaintiff with funds and materials.   The defendant provides the plaintiff with insurance and six buses to cover the Candystriper route.   The plaintiff manages the operations on the route, although both the plaintiff and the defendant monitor the bus travel on the route through the use of GPS. No other bus company covers the Candystriper route or follows the schedule that is in place.

III

THE POSITIONS OF THE PARTIESAThe Plaintiff's Position

The plaintiff holds a certificate that, it claims, gives it the exclusive right to operate bus service on the Candystriper route.   It relies on General Statutes § 13b–80 for this proposition.   It argues that the defendant's proposal to take over the Candystriper route is impermissible since the defendant does not hold a certificate of public convenience and necessity, as required by General Statutes § 13b–80.   Indeed, the defendant's executive director testified at the hearing and stated that she was unaware of such certificates until this case was brought.   She is of the view that the right to operate the Candystriper route is governed solely by the contract between the plaintiff and the defendant.

The plaintiff argues that the certificate creates a franchise, giving it exclusive rights, and as such constitutes a property right implicating due process protection.   Since its certificate has never been revoked, the plaintiff claims, its exclusivity rights must be respected.   Although the plaintiff contends that the contract is not relevant to the issues before the court, it has nonetheless noted that, even if the contract were relevant, the defendant has attempted to terminate the contract without complying with the statutory requirements set forth in General Statutes § 7–273e(b).

B

The Defendant's Position

The defendant opposes the application for a temporary restraining order.   It argues that the certificate does not “cover” the Candystriper route.   It argues that the Candystriper route is a “deviated flexible route” and that the plaintiff's certificate only covers “fixed routes.”   It contends that the plaintiff's performance is deficient for three principle reasons, all emanating from a Connecticut Department of Transportation (“CDOT”) audit that found that the plaintiff had deficiencies with regard to maintenance records and wheelchair lift inspection reports, and that drivers were not “calling out regular stops.”

In the course of a surrebuttal presentation, the defendant also claimed that its executive director found the plaintiff's receptionists to be unresponsive when she called them with various complaints, such as people smoking on the buses, passengers being stranded, and “mufflers falling off.”

IV

DISCUSSIONAStandard of Review

The purpose of a temporary injunction is to preserve the status quo until final determination of the parties' rights after a hearing on the merits.   See Clinton v. Middlesex Mutual Assurance Co., 37 Conn.App. 269, 270, 655 A.2d 814 (1995), quoting Olcott v. Pendleton, 128 Conn. 292, 295, 22 A.2d 633 (1941).   An application for a temporary injunction can only be granted if the plaintiff establishes irreparable and imminent injury;  lack of an adequate remedy at law;  likelihood of success on the merits;  and that a balancing of the equities favors granting the injunction.  Waterbury Teachers Ass'n. v. Freedom of Information Commission, 230 Conn. 441, 446, 645 A.2d 978 (1994).

In certain circumstances, it is appropriate for a court to order that a bond be posted if the application for a temporary injunction is granted.  General Statutes § 52–472.  “The purpose of the bond is to indemnify the defendants from any damages which they might sustain if the plaintiff failed to prosecute the action to effect” Rustici v. Malloy, 60 Conn.App. 47, 56, 758 A.2d 424, cert. denied, 254 Conn. 952, 762 A.2d 903 (2000).   However, the court has the statutory authority to waive the requirement of a bond.⁴

B

Analysis

The plaintiff's certificate gives it certain exclusive rights.   Those rights are derived from General Statutes § 13b–80 which provides, in relevant part, that “[n]o person, association, limited liability company or corporation shall operate a motor bus without having obtained a certificate from the Department of Transportation or from the Federal Highway Administration pursuant to the Bus Regulatory Reform Act of 1982 ․ specifying the route and certifying that public convenience and necessity require the operation of a motor bus or motor buses over such route.”   The defendant acknowledges, as a general proposition, that such a certificate can give rise to property interests that are protected by the Fourteenth Amendment to the United States Constitution.   The Fourteenth Amendment provides, in relevant part, that no state shall “deprive any person of life, liberty, or property, without due process of law ․” See S & D Maintenance Co., Inc. v. Goldin, 844 F.2d 962, 966 (2d Cir.1988);  Gray Line Bus Co. v. Greater Bridgeport Transit District, 188 Conn. 417, 423, 449 A.2d 1036 (1982).   The court agrees with the parties.   See Dattco, Inc. v. Department of Transportation, Superior Court, judicial district of New Britain, Docket No. CV 106007261 (June 8, 2012, Levine, J.T.R.) [54 Conn. L. Rptr. 139].

General Statutes § 13b–80 identifies, with specificity, the process that must be followed before a certificate can be suspended or revoked.   In this case, the defendant stipulated that the plaintiff properly holds the certificate at issue and also stipulated that the certificate has not been suspended or revoked.

A central dispute between the parties is not whether the certificate gives certain exclusive rights to the plaintiff but whether the certificate gives the plaintiff the exclusive right to operate the Candystriper route that is at issue.   The defendant claims that the plaintiff has operated the Candystriper route for the past eight years pursuant to a contract between the parties.   Surprisingly, the defendant's executive director acknowledged that she was unaware that the plaintiff held a certificate.   She seemed unaware of the nature of such a certificate, and the defendant did not explain how it proposed to operate the Candystriper route, or any route for that matter, without itself possessing the certificate required by General Statutes § 13b–80.

The defendant takes the position that the plaintiff's ability to operate the Candystriper route is governed solely by a contract that exists between the parties.   The plaintiff contends that the contract merely sets terms of service and that its exclusive right to operate the Candystriper route is derived from its certificate.   Both parties agree that it would be difficult, or arguably impossible, for the plaintiff to operate the Candystriper route if the contract were to be terminated.

Plaintiff's Exhibit 4 includes a copy of a version of the certificate issued to the plaintiff's predecessor in interest, The E.J. Kelley Company (“Kelley”), in 1943.   That certificate specifically identifies the routes covered by the certificate in, inter alia, Torrington, Milford and Danbury.   The certificate was amended multiple times over the years, with the most recent amendment ⁵ in the exhibit dated June 27, 1968.   That amendment identifies the routes that are covered by the certificate, including routes in Torrington, Winsted, and Litchfield.   The parties agree that the Candystriper route traverses certain specified streets in the latter three towns.⁶  Plaintiff's Exhibit 5 includes a letter from the defendant's executive director, written on September 12, 2005, and indicating the defendant's acceptance of the plaintiff as the company that would run the Candystriper route formerly run by Kelley.   Plaintiff's Exhibit 6 establishes that, as a part of the plaintiff's acquisition of Kelley, the plaintiff acquired “CT Bus Permit # 3.”   Plaintiff's Exhibit 11 is the specific system schedule for the Candystriper route, making clear that it covers streets in Torrington, Winsted and Litchfield.

The defendant's principal argument that the plaintiff's certificate does not cover the Candystriper route is based upon Defendant's Exhibit D, a decision by the Administrative Law Unit of the CDOT issued on November 3, 2005, as a part of the transfer of assets from Kelley to the plaintiff.   The defendant relies on language in an introduction to that decision that states, in summary fashion and in relevant part, as follows:  “The Kelley Transit Company Inc ․ is the holder of Motorbus Certificate 3 which is authorized to operate motor vehicles in motor bus service on fixed routes ․ The defendant argues that the Candystriper route is not a “fixed route,” and bases that argument on a single fact:  in order to comply with the ADA, bus drivers on the Candystriper route are permitted to deviate from the fixed route by up to three-quarters of a mile for the specific purpose of transporting passengers who have disabilities.   This, the defendant argues, converts the Candystriper route to a “deviated flexible route.”

The defendant's argument defies common sense.   The plaintiff's authority to operate in the Torrington, Winsted and Litchfield towns is derived from its certificate.   The defendant has not demonstrated that anyone else has the authority to provide fixed service (or, as the defendant would have it, “deviated flexible service”) in those towns.   At this stage of the proceedings, the court concludes that plaintiff's exhibits 4 and 12, which specify the plaintiff's operating rights under the certificate, demonstrate that the certificate covers at least the bulk of the Candystriper route.   The court also notes that the defendant has not provided any authority for the proposition that the “fixed route” referred to in the introduction to the CDOT decision is a phrase that necessarily excludes the Candystriper route.

The court also agrees with the plaintiff, at this stage of the proceedings, that the contract between the parties governs terms of service and has no bearing on the exclusive rights that the defendant proposes to take from the plaintiff.⁷  Even if the contract were at issue, the defendant has failed to respect the plaintiff's due process rights that are protected by General Statutes § 7–273e(b).  That section provides that when a transit district is of the view that a holder of a transit service franchise is incapable of continuing to offer satisfactory service, a hearing is required in order to assess the validity of such a view.   The defendant acknowledged that it has not taken the steps required by General Statutes § 7–273e(b).

Based on the foregoing findings, the court concludes that the plaintiff has established by a preponderance of the evidence that it has no adequate remedy at law.   The plaintiff has also established by a preponderance of the evidence that it will suffer irreparable harm if the contract is terminated because the rights conferred by the certificate will be taken without due process of law.   Mitchell v. Cuomo, 748 F.2d 804, 806 (2d Cir.1984).   The court also recognizes that if the plaintiff is prevented from operating the Candystriper route, and there is no evidence that any other entity holds a certificate permitting it to operate the Candystriper route, then the route may be shut down, depriving the public, including the disabled individuals it is intended to serve, from having access to public transportation.

The foregoing analysis of the issues presented compels the conclusion, at this stage of the proceedings, that the plaintiff is likely to prevail on the merits of its claim.   If the defendant believes that the certificate should be suspended or revoked, or if the defendant believes that the contract should be terminated, there are statutory requirements that it must follow in order to effect such results and it is clear that the defendant has not met those requirements.

Finally, in balancing the equities, the court is mindful of the defendant's concerns that the plaintiff's service has not met the defendant's standards.   The court, in the course of ordering a temporary injunction, must fashion relief that is compatible with the equities of the case.  Castonguay v. Plourde, 46 Conn.App. 251, 267, 699 A.2d 226, cert. denied, 243 Conn. 931, 701 A.2d 660 (1997).   The defendant claimed that there were three principle reasons for seeking to terminate the contract.   A CDOT audit faulted the plaintiff's record keeping regarding maintenance and faulted the plaintiff's record keeping regarding wheelchair lift inspections.   Finally, some bus drivers were not calling out the stops before arriving at them.   The defendant acknowledged at the hearing that, as far as its executive director knows, the latter concerns have been addressed.   Nonetheless, she testified that the issues raised in the CDOT audit have caused the executive director to lose confidence in the plaintiff's ability to perform in the future.

V

CONCLUSION

For all of the foregoing reasons, the court finds that the plaintiff has established by a preponderance of the evidence that a temporary injunction ought to issue.   A temporary injunction shall be and is issued preventing and enjoining the defendant and those acting on its behalf or under its authority from operating any bus service over the transportation route known as the Candystriper route located in Winsted, Litchfield and Torrington, Connecticut, which has been operated by the plaintiff pursuant to its certificate since 2005.   During the pendency of the temporary injunction, the plaintiff will take all necessary steps to ensure that the issues identified in the CDOT audit are, and will in the future continue to be, fully addressed.   The court finds that, for good cause shown, the plaintiff is not required to post a bond.   Further, the parties will file simultaneous briefs thirty days from the date of this order, addressing with specificity the question of whether there are any Candystriper route assignments that are not authorized by the plaintiff's certificate.   Thereafter, the parties will request a status conference for the purpose of determining what, if any, further hearings are necessary regarding the foregoing issue.   This order will remain in full force and effect until such time as a hearing is held on the plaintiff's application for a permanent injunction or until further order of this court.

So ordered.

BY THE COURT,

John A. Danaher III

FOOTNOTES

FN1. The plaintiff applied for an ex parte temporary injunction on June 21, 2013.   However, the court declined to address the application on an ex parte basis..  FN1. The plaintiff applied for an ex parte temporary injunction on June 21, 2013.   However, the court declined to address the application on an ex parte basis.

FN2. The Candystriper route actually includes five separate routes.   References in this opinion to the “Candystriper route” are intended to refer to all five routes within the Candystriper route..  FN2. The Candystriper route actually includes five separate routes.   References in this opinion to the “Candystriper route” are intended to refer to all five routes within the Candystriper route.

FN3. At this stage of the proceedings, no party has applied for an order directing the parties to proceed with arbitration.  General Statutes § 52–409..  FN3. At this stage of the proceedings, no party has applied for an order directing the parties to proceed with arbitration.  General Statutes § 52–409.

FN4. General Statutes § 52–472 provides, in relevant part, that “a bond need not be required when, for good cause shown, the court or a judge is of the opinion that temporary injunction ought to issue without bond.”.  FN4. General Statutes § 52–472 provides, in relevant part, that “a bond need not be required when, for good cause shown, the court or a judge is of the opinion that temporary injunction ought to issue without bond.”

FN5. Although it is not specifically identified as such, the 1968 amendment appears to be the tenth amendment to the original certificate issued on August 4, 1925..  FN5. Although it is not specifically identified as such, the 1968 amendment appears to be the tenth amendment to the original certificate issued on August 4, 1925.

FN6. See also Plaintiff's Exhibit 12 which brought additional street routes under the authority of (what is now) the plaintiff's certificate..  FN6. See also Plaintiff's Exhibit 12 which brought additional street routes under the authority of (what is now) the plaintiff's certificate.

FN7. In view of this conclusion, the court sees no basis, at this stage of the proceedings, to conclude that the issues presented in the complaint must be resolved pursuant to the arbitration agreement set forth in the contract.   Since the certificate guarantees exclusive rights to operate, and the contract merely sets terms of service, finding that this matter must be the subject of arbitration smacks of the tail wagging the dog.   In any case, the issue of arbitrability does not prevent the court from ordering the relief requested for two reasons.   First, no party has sought arbitration.   See n.2, supra.   Second, even if the issues presented are to be addressed in arbitration in the future, this court still retains the authority to issue a temporary restraining order.  General Statutes § 52–422..  FN7. In view of this conclusion, the court sees no basis, at this stage of the proceedings, to conclude that the issues presented in the complaint must be resolved pursuant to the arbitration agreement set forth in the contract.   Since the certificate guarantees exclusive rights to operate, and the contract merely sets terms of service, finding that this matter must be the subject of arbitration smacks of the tail wagging the dog.   In any case, the issue of arbitrability does not prevent the court from ordering the relief requested for two reasons.   First, no party has sought arbitration.   See n.2, supra.   Second, even if the issues presented are to be addressed in arbitration in the future, this court still retains the authority to issue a temporary restraining order.  General Statutes § 52–422.

Danaher, John A., J.