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BUSTOP SHELTERS, INC. v. CONVENIENCE & SAFETY CORP

September 10, 1981

BUSTOP SHELTERS, INC., Plaintiff,
v.
CONVENIENCE & SAFETY CORPORATION, Saul Steinberg, Henry Silverman, Jack E. Bronston, Rosenman, Colin, Freund, Lewis & Cohen, Harrison J. Goldin, Jay Wells, Richard Wells, Jr., and the City of New York, Defendants



The opinion of the court was delivered by: GOETTEL

This antitrust action (with pendent state law claims) concerns the much publicized, much litigated, and much investigated competition for the bus stop shelter franchise in New York City. A brief outline of the facts and the previous litigations will suffice for the purpose of deciding the instant motions to dismiss.

Facts

In 1974, the plaintiff, BusTop Shelters, Inc. ("BusTop"), approached New York City Officials with a proposal for the building and maintaining of bus stop shelters on City sidewalks by BusTop. The proposed flat-topped glass and steel shelters were to be enclosed on two or three sides, serving as protection for the waiting bus passengers and as a source of advertising revenues for the owners. After lengthy negotiations, in 1975, the New York City Board of Estimate *fn1" awarded BusTop a three-year experimental franchise to build and maintain hundreds of shelters on City sidewalks in Manhattan and the Bronx *fn2" in exchange for payment to the City of a percentage of the advertising revenues earned.

 During the next three years, BusTop built and operated approximately 500 shelters, *fn3" apparently with surprising success in terms of acceptance by advertisers and by the public. In the hope of securing a long-term franchise at the end of the three-year period, BusTop began to search for additional capital. Among those with whom investment in BusTop was discussed were defendants Saul Steinberg and Henry Silverman.

 Meanwhile, BusTop continued to press the City for the award of the long-term franchise. In October 1977, the Board of Estimate preliminarily approved the franchise. Thereafter, final approval was postponed, the City having been approached by other possible applicants for the franchise. In May 1978, the Board of Estimate directed the Bureau of Franchises to issue a Request For Proposals opening up the bidding for the franchise. Four proposals were submitted, including one from BusTop, and the Board of Estimate accepted one of them not BusTop's proposal, but that of defendant Convenience & Safety Corporation ("C&S"), a corporation formed in 1977 by Saul Steinberg and Henry Silverman. *fn4"

 BusTop's interim franchise expired in September 1978. In November, the Board of Estimate directed BusTop either to convey the existing shelters to the City or to remove the shelters and restore the sidewalks to their original condition, as provided for in the interim franchise. *fn5" BusTop refused to comply. By that time, the litigation and the investigations *fn6" had already begun, and they have continued to the present time.

 Previous State Litigation

 The first litigation was an Article 78 proceeding brought by BusTop in New York State Supreme Court for review of the action of the Board of Estimate in directing the issuance of the Request For Proposals. BusTop alleged that the terms of the Request For Proposals included "extraordinary requirements" that were drafted by the Comptroller's Office so as to eliminate BusTop from the competition for the franchise and to "construct a sweetheart contract for a competitor ... of BusTop" C&S. On October 17, 1978, Justice Ascione dismissed the petition, ruling that there was a reasonable basis for the Board of Estimate's actions and that the petitioner had failed to show that there was any arbitrary and capricious action on the part of the Board. See BusTop Shelters, Inc. v. City of New York, 99 Misc.2d 198, 415 N.Y.S.2d 726 (Sup.Ct.N.Y. County 1978).

 The second action was brought by BusTop against the City of New York and Harrison J. Goldin, Comptroller of the City of New York. This time, BusTop sought equitable relief granting it the twenty-year franchise it asserted it deserved, on the grounds of, inter alia, an alleged "fiduciary relationship" between it and the City and alleged wrongdoing by Goldin in inducing the Board of Estimate to fail to complete its agreement with BusTop for a long-term franchise. On April 2, 1979, Justice Stecher dismissed the action, finding that BusTop failed to allege facts demonstrating arbitrariness or an abuse of discretion, that BusTop had no rights to a long-term franchise, and that Goldin was not personally liable for his discretionary acts as Comptroller. See BusTop Shelters, Inc. v. City of New York, Nos. 41946/78 & 14424/78 (Sup.Ct. N.Y. County Apr. 2, 1979).

 The third action was brought by New York City against BusTop, seeking to exercise its option under the interim franchise to buy the existing shelters or have BusTop remove them. C&S intervened in that action as a plaintiff, and BusTop eventually asserted seventeen affirmative defenses and two counterclaims. After two hearings and two opinions on the City's motions for preliminary injunctions and BusTop's motion to dismiss, Justice Kassal granted the motions of the City and C&S for summary judgment in a twenty-two-page opinion issued on September 3, 1980. Justice Kassal rejected all of BusTop's affirmative defenses except the one that alleged violations of the antitrust laws. While noting that two New York State Supreme Court justices had previously found the allegations of conspiracy included in the antitrust charges "not supported by the facts" and that "BusTop has not established any additional facts of such a conspiracy at this time," Justice Kassal did not reach the merits of the antitrust issue and dismissed without prejudice BusTop's counterclaims, which also consisted of allegations of antitrust violations. See City of New York v. BusTop Shelters, Inc., No. 40366/79 (Sup.Ct. N.Y. County Sept. 3, 1980). Justice Kassal's granting of summary judgment was affirmed by the Appellate Division, First Department, and the Court of Appeals denied leave to appeal.

 The Complaint

 In October 1980, after it had pressed its claims without success in all three state actions, BusTop brought the instant action in federal court. BusTop's complaint lists six causes of action, alleging: 1) violations of section 1 of the Sherman Act, 15 U.S.C. § 1; 2) violations of section 2 of the Sherman Act, 15 U.S.C. § 2; 3) violations of New York State's antitrust statute, the Donnelly Act, N.Y. Gen.Bus.Law § 340 et seq.; 4) fraud in BusTop's being deprived of independent legal representation; 5) fraud and breach of fiduciary duty; and 6) negligence.

 The factual allegations of the defendants' wrongdoing that BusTop makes in support of its claims may be outlined as follows:

 1) Defendant Jack E. Bronston, a partner in defendant law firm Rosenman, Colin, Freund, Lewis & Cohen ("the Rosenman firm"), wrote a letter to defendant Richard Wells, Jr., Executive Assistant to Comptroller Harrison J. Goldin, stating that approval of BusTop's long-term franchise " "would not appear to be in the public interest.' " ("The letter indicated familiarity with information furnished by BusTop to the Rosenman Firm as counsel for the new investors in BusTop," but was written on time charged to C&S, whom Bronston was ...


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