PITTSBURGH – A school bus company has maintained claims that a West Mifflin school district breached the contract between the two parties, despite the fact that the plaintiff met all of its obligations to the district and did so in spite of a shortage of available drivers.
Sun Coach Lines, LLC of McKeesport first filed suit in the Allegheny County Court of Common Pleas on Nov. 15 versus West Mifflin Area School District, of West Mifflin.
“Sun Coach provides school bus transportation for Pennsylvania school districts and their students throughout the Western and Central Pennsylvania regions, including WMASD. Sun Coach provides school bus transportation for WMASD pursuant to a Transportation Agreement entered into by the parties as of July 1, 2016 and terminating June 30, 2026,” the suit said.
“The Transportation Agreement is a bulk rate or ‘Requirements’ contract whereby Sun Coach was to provide all transportation needs for the WMASD for a set yearly fee. Bulk rate or ‘Requirements’ contracts are risk assessment based contracts where the carrier is pressed to be as efficient as possible and use the least number of buses to transport students. The greater the number of buses required, the less profitable the fixed price contract becomes. There have been few, if any, problems in the business relationship between Sun Coach and WMASD under the Transportation Agreement.”
The suit added that Paragraph 20 of the Transportation Agreement provides that “in the event of unusual circumstances, such as changes in state or federal taxes, laws or specifications, increased insurance or surety premiums or any other condition which causes any of the Contractor’s operating costs hereunder to increase at a rate in excess of any negotiated escalation increases, then the parties shall determine a reasonable and just amount to cover such increase.”
Furthermore, the suit continued that since 2021, there has been a well-documented regional and national shortage of school bus drivers, the defendant was aware of the shortage and despite the shortage, the plaintiff has continued to provide all of its required services per the agreement with the defendant.
“However, to combat this shortage and to maintain the drivers who operate for the benefit of WMASD, Sun Coach has had to raise the hourly rate paid to its drivers from $21/hour to $29/hour. This was undertaken to match the rates being paid by school districts in other local areas. Despite no adjustment in the amount paid by WMASD, Sun Coach has paid the WMASD drivers $29/hour since Aug. 23, 2021 (the first quarter of the 2021-2022 school year), for a total additional expense of $283,522.68 for the 2021-2022 school year. Sun Coach has continued its increased pay levels for its drivers for the 2022-2023 school year, and in doing so has successfully managed to keep its drivers servicing the WMASD contract. Sun Coach’s total additional expense for the 2022-2023 school year is $348,635.94, for a total additional expense of $632,158.65,” the suit stated.
“Accordingly, counsel for Sun Coach and then-solicitor for WMASD had informal and productive discussions throughout 2022 regarding adjusting the Transportation Agreement pursuant to Paragraph 20 of that Agreement in order to address the additional costs incurred by Sun Coach to combat the driver shortage. Sun Coach reduced its request to writing on Oct. 17, 2022. On that date, Sun Coach learned that the solicitor at WMASD had changed, and the new solicitor, Andrews & Price, responded in writing via email on Nov. 10, 2022. In that email, the solicitor for WMASD indicated that WMASD categorically refused to pay any portion of the additional expenses incurred by Sun Coach during the 2021-2022 school year, despite the fact that WMASD previously indicated a willingness to do so, and Sun Coach relied on that promise in continuing to negotiate in good faith into the 2022-2023 school year. WMASD also informed Sun Coach on Nov. 10, 2022 that it ‘would be willing to have discussions toward paying an amount approximating the 2022-2023 request of $348,635.94, but would require the parties’ contract to terminate at the end of 2022-2023 to do so.”
The suit argued that the well-publicized bus driver shortage is plainly an “Industry Change” and/or “unusual circumstance” that requires the parties to “determine a reasonable and just amount” to cover Sun Coach’s increased operating costs under Paragraph 20 of the parties’ Transportation Agreement, and that by refusing to comply with Paragraph 20 of the Transportation Agreement, WMASD is blatantly and in bad faith breaching the Transportation Agreement.
WMASD filed preliminary objections in the case on Dec. 9, arguing that the suit’s count for unjust enrichment should be thrown out for lack of sufficiency in the pleading.
The defendants countered that because Sun Coach has not pled any other theory of contract except the express contract, it cannot proceed on a claim of unjust enrichment.
In response, the plaintiffs submitted an opposition brief to the objections on Dec. 28, which countered them and sought their overruling by the presiding judge.
“Defendant’s sole objection seeks to dismiss Sun Coach’s ‘unjust enrichment’ claim with prejudice. Detrimental to defendant’s preliminary objections is that there is no claim for unjust enrichment in the complaint. Instead, there are claims for breach of contract and promissory estoppel. A claim for promissory estoppel requires different elements than a claim for unjust enrichment and, therefore, is not interchangeable. Because defendant’s preliminary objections are for a non-existing claim, the objections should be overruled as moot,” the brief stated.
“Sun Coach’s complaint alleges that WMASD promised Sun Coach that it would negotiate the resolution of Sun Coach’s increased expenses in good faith despite having no intentions to do so. Relying on WMASD’s representations, Sun Coach continued to operate and service the WMASD for the 2022-2023 school year. In accepting all factual allegations as true and gleaning all reasonable inferences from the complaint in favor of the non-moving party, it is reasonable for this Court to infer Sun Coach would have ceased operations if WMSAD had not insisted on continued negotiations which WMSAD had no intention of following through on. Because of WMSAD’s representations, Sun Coach’s operating expenses continued to accrue and it is operating at a loss due to the increased driver cost. Sun Coach has adequately pleaded its claim for promissory estoppel to surpass the preliminary objection stage.”
On Feb. 2, Allegheny County Court of Common Pleas Judge Alan D. Hertzberg overruled the defense’s preliminary objections.
“Upon consideration of the preliminary objections filed by defendant West Mifflin Area School District, the response filed by plaintiff and after oral argument, it is hereby ordered that defendant’s preliminary objections are overruled,” Hertzberg said.
On Feb. 22, WMASD filed an answer and new matter in the case, denying the plaintiff’s allegations as conclusions of law to which no response was required.
“Plaintiff has failed to state a claim for which relief may be granted. Plaintiff’s claims are barred by failure of consideration. Plaintiff’s claims are barred by estoppel. Plaintiff is not entitled to the damages it seeks because there were no unusual circumstances which caused plaintiff’s operating costs to increase at a rate in excess of the negotiated escalation prices. Plaintiff is not entitled to the damages it seeks because it cannot establish that there is a shortage of school bus drivers in Allegheny County,” the answer’s new matter stated, in part.
“Plaintiff is not entitled to the damages it seeks because the rate that it is currently paying its bus drivers is neither reasonable nor in line with rates being paid to other bus drivers in Allegheny County. Plaintiff is not entitled to the damages it seeks because plaintiff failed and/or refused to negotiate reasonably and in good faith with respect to plaintiff’s requested increase in the negotiated escalation prices. Plaintiff’s claim for promissory estoppel should be dismissed because plaintiff fails to plead any facts other than an express contract between the parties. A claim for promissory estoppel arises from a quasi-contract. A quasi-contract imposes a duty, not as a result of any agreement, whether express or implied, but in spite of the absence of an agreement, when one party receives unjust enrichment at the expense of another. A cause of action for promissory estoppel arises only when a transaction is not subject to a written or express contract. While a claim asserting a breach of contract may be pleaded alternatively with the claim of promissory estoppel, the claims raised in the separate counts of the complaint must allege that there is not an express contract.”
The District added that the complaint “includes references to alleged settlement discussions made outside of the agreed upon written contract, violating the Parole Evidence Rule and Pennsylvania Rule of Evidence 408” and “to the extent it may be revealed through the pleadings, discovery or at the time of trial, the District reserves its right to raise the defense of any applicable statute of limitations or laches.”
UPDATE
On March 14, the plaintiff replied to the defendant’s answer and new matter, denying most of the material as conclusions of law to which no official response was required.
“The unusual circumstances that entitle Sun Coach to damages include the COVID-19 pandemic and a well-publicized and generally known regional and national bus driver shortage. As Sun Coach alleged, and as set forth in its complaint, there has been a well-publicized and generally known regional and national bus driver shortage since at least 2021. The District has had actual and/or constructive knowledge of this shortage,” the reply stated, in part.
“The rates Sun Coach pays to its bus drivers are reasonable, consistent, and fair. Sun Coach has negotiated reasonably and in good faith in all respects, including with respect to its requested increase in the negotiated escalation prices. Sun Coach has pled sufficient facts to state a viable claim for promissory estoppel. Moreover, by order dated Feb. 2, 2023, the Court has already rejected the District’s assertion that Sun Coach’s promissory estoppel claim should be dismissed for failure to plead any facts other than an express contract between the parties.”
According to the plaintiff, the District caused Sun Coach’s damages.
“Moreover, the terms of the West Mifflin Transportation Agreement unambiguously required the District to compensate Sun Coach for increased operating costs that were caused by circumstances outside of Sun Coach’s and/or the District’s control,” the reply continued.
For counts of breach of contract and unjust enrichment/promissory estoppel, the plaintiff is seeking damages exceeding $50,000 and costs and expenses of this litigation, along with such other relief as the Court deems just and proper.
The plaintiff is represented by Ray F. Middleman and Shane D. Valenzi of Whiteford Taylor & Preston and Beverly A. Block and George C. Thompson, all in Pittsburgh.
The defendant is represented by Joseph W. Cavrich and Casey P. Rankin of Andrews & Price, also in Pittsburgh.
Allegheny County Court of Common Pleas case GD-22-014026
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com