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July 9, 1998

MULLER TOURS, INC., Plaintiff, against C. SCOTT VANDERHOEF, as County Executive of the County of Rockland, THE DEPARTMENT OF PUBLIC TRANSPORTATION OF THE COUNTY OF ROCKLAND, DR. JAMES J. YARMUS, as Commissioner of the Department of Public Transportation of the County of Rockland and THE COUNTY OF ROCKLAND, Defendants.

The opinion of the court was delivered by: PARKER


 Plaintiff Muller Tours, Inc., which provides commuter bus transportation between Rockland County and New York City, commenced this action for damages and an injunction that would, among other things, compel the County of Rockland to submit an application to the New York State Department of Transportation on behalf of Muller Tours for State Transportation Operating Assistance Funds ("STOA Funds"). Plaintiff initially applied for interlocutory relief, which the Court denied on January 29, 1998. After expedited discovery, the Court, on March 30 and 31, 1998, conducted a consolidated hearing on Muller's application for injunctive relief and the trial on the merits. The Court's findings of fact and conclusions of law follow.


 1. Plaintiff Muller Tours ("Muller"), a New York corporation with its principal place of business in Brooklyn, New York, is a transportation company that operates various bus lines providing commuter transportation from Rockland County to New York City, as well as various charter service operations.

 2. Rockland County (the "County") is a New York municipal corporation. The County of Rockland Department of Public Transportation (the "DPT") is the public transportation agency for the County and has the primary responsibility for overseeing and maintaining public transportation services within the County.

 3. C. Scott Vanderhoef ("Vanderhoef") is the County Executive of the County, a position to which he was re-elected in November 1997. Dr. James J. Yarmus ("Yarmus") is the Commissioner of the DPT.

 4. The Transportation Law of the State of New York provides for a "state-wide mass transportation operating assistance program . . . for the purpose of making payments toward the operating expenses of public transportation systems." N.Y. Trans. Law § 18-b (McKinney 1994). The purpose of the program is to provide safe, efficient, effective, and continuing public transportation services to the residents of the State of New York and to increase the utilization of mass transit facilities as a means of reducing energy demands, traffic congestion, and air pollution. Id.

 5. Application for STOA funds can only be made by a public transportation system, which would then disburse the funds among the private carriers on whose behalf application was made. The amount of STOA funds that can be paid each year is limited by the annual appropriation levels established by the State legislature.

 6. Within Rockland County, the County and the DPT are the governmental bodies granted the exclusive authority by the State of New York to apply on behalf of carriers providing mass transportation services such as Muller for STOA funds made available under the New York State Transportation Law and applicable regulations. In 1995, 1996, and 1997, Rockland County distributed in excess of $ 5 million in STOA funds each year.

 7. A county has broad discretion in determining whether to sponsor applicants for STOA funds. However, the County remains accountable to the State for the use of STOA funds and may be penalized for failure to comply with the rules and regulations governing use of STOA funds.

 8. One of the criteria for receipt of STOA funds, under the State Department of Transportation regulations, is that the approved transportation services not duplicate already existing services. The State Department of Transportation discourages STOA applications for duplicative services.

 9. STOA assistance has been provided to carriers in the County since the early 1980s. These operators include: (i) Red and Tan Lines, which operated for 50 years before receiving STOA funds; (ii) Shortline Lines, which operated for over 50 years before receiving STOA funds; and (iii) Monsey Trails, which operated for 10 years before receiving STOA funds. These operators have provided satisfactory service to the citizens of the County.

 10. In November 1996, Paul Muller, president of Muller met with the County's Transit Administrator, Michael Gurski, and advised him that Muller was planning to operate commuter service in Rockland County and intended to seek STOA funds to subsidize its service.

 11. Thereafter, Muller submitted a business plan to the County in support of its application for STOA funds. Muller's areas of operations were located primarily in Monsey, and were, in important respects, duplicative of the existing operations of Monsey Trails.

 12. On November 20, 1996, Mr. Gurski advised Muller that the County had not yet made a decision on a course of action and that Muller could begin operations in the County at "[its] own risk" without "any endorsement from the County." Mr. Gurski's letter further stated, "I have not made, nor implied, in any way that you shall or will receive STOA for this service." After receiving this notice, Muller commenced operations in Rockland County in December 1996.

 13. On December 31, 1996, the County advised Muller about various problems with Muller's STOA application. Specifically, Muller had indicated in its application that it had a "satellite" storage maintenance facility under a lease with Leisure Lines in Mahwah, New Jersey. The County learned that this assertion was untrue and informed Muller that this problem had to be rectified. The lack of a storage facility was an important issue to the County, which was concerned that without local storage facilities, Muller would store its buses along public roadways, thereby creating safety hazards

 14. The County also was concerned about the duplicative nature of the services Muller was providing. Notwithstanding Muller's claim that its services were unique, the County determined that Muller's routes directly competed with existing operators, principally Monsey Trails. In addition, the County's analysis indicated that Muller's application appeared to overstate its expected ridership. Thus, the County requested clarification and information from Muller regarding its market surveys and the techniques it used to estimate its ridership figures.

 15. Finally, the County told Muller that after it submitted a new business plan with the information requested, and after Muller had been operating for a substantial period of time without free or heavily discounted fares, the County would re-evaluate Muller's request for STOA funds.

 16. In March 1997 Muller submitted a second business plan. This plan proposed that Muller would operate in three areas: (a) Monsey, (b) Airmont, and (c) the Hamlet. To assist in the evaluation of Muller's second application and help develop written guidelines for future applications, the County retained an independent consultant, Abrams-Cherwony & Associates ("Abrams"). Abrams instructed the County as to what surveys should be conducted to determine if there was a need for Muller's services and what types of information the County should request from Muller to complete its evaluation. In particular, Abrams suggested that the County conduct two ridership surveys in early April. For each survey, Abrams prepared suggested survey forms and explained appropriate survey techniques.

 17. Abrams also suggested that the County request from Muller: (1) daily ridership counts from the inception of service for the routes operated including a separate listing by day of the number of boarding passengers; (2) a copy of Muller's operating authority for providing commuter service in Rockland County; (3) a copy of Muller's operating authority for services in New York City; (4) a copy of Muller's storage facility lease; (5) a copy of Muller's driver training program, including provisions for random drug testing; (6) a copy of Muller's vehicle liability insurance provisions; (7) additional support for Muller's claim that there is no duplication with existing services; (8) passenger survey information indicating the extent to which passengers are new riders, rather than those diverted from existing services; and (9) an income and balance sheet for 1996.

 18. On April 8, 1997, following Abrams' advice, the County asked Muller to submit additional information in support of its STOA application. The April 8 letter stated that this additional information had to be received and incorporated into the analysis of Muller's application before the County could approve or disapprove Muller's request. ...

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