Borough of Princeton v. Bd. of Chosen Freeholders of Mercer

• Decision Date: 23 July 2001
• Parties: BOROUGH OF PRINCETON, a municipal corporation, Plaintiff-Respondent, v. BOARD OF CHOSEN FREEHOLDERS OF THE COUNTY OF MERCER and Mercer County Improvement Authority, Defendants-Appellants, and Waste Management of Pennsylvania, Inc., Defendant-lntervenor-Appellant. American Ref-Fuel Company of Essex County, Plaintiff-Respondent, v. Morris County Municipal Utilities Authority and Waste Management of Pennsylvania, Inc., Defendants-Appellants.
• Court: New Jersey Supreme Court

169 N.J. 135 (N.J. 2001)
777 A.2d 19

BOROUGH OF PRINCETON, a municipal corporation, Plaintiff-Respondent,
v.
BOARD OF CHOSEN FREEHOLDERS OF THE COUNTY OF MERCER
and Mercer County Improvement Authority, Defendants-Appellants,
and
Waste Management of Pennsylvania, Inc., Defendant-lntervenor-Appellant.
American Ref-Fuel Company of Essex County, Plaintiff-Respondent,
v.
Morris County Municipal Utilities Authority and Waste Management of
Pennsylvania, Inc., Defendants-Appellants.

Supreme Court of New Jersey

Argued March 12, 2001
July 23, 2001

Page 20

Copyrighted Material Omitted

Page 21

Sandra T. Ayres, Montclair, argued the cause for appellant Waste Management of Pennsylvania, Inc. (Schwartz, Tobia, Stanziale, Rosensweig & Sedita, attorneys).

Joseph J. Maraziti, Jr., Short Hills, argued the cause for appellant Morris County Municipal Utilities Authority (Maraziti, Falcon & Healey, attorneys; Brent T. Carney and Kimberly A. Kearney, on the briefs).

Page 2

Michael R. Cole argued the cause for appellant Mercer County Improvement Authority and Alfred B. Vuocolo, Jr., Trenton, Mercer County Counsel, argued the cause for appellant Board of Chosen Freeholders of the County of Mercer (DeCotiis, Fitzpatrick, Gluck, Hayden & Cole and Mr. Vuocolo, attorneys; Andrew Bayer and Gregory J. Bevelock, on the briefs).

Lewis P. Goldshore, Plainsboro, argued the cause for respondent Borough of Princeton (Szaferman, Lakind, Blumstein, Watter, Blader, Lehmann & Goldshore, attorneys; Robert J. Cash, on the briefs).

Ross A. Lewin, Princeton, argued the cause for respondent American Ref Fuel Company of Essex County (Windels Marx

Page 22

Lane & Mittendorf, attorneys; Mr. Lewin and Charles M. Fisher, on the briefs).

Leslie Dannin Rosenthal, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (John J. Farmer, Jr., Attorney General of New Jersey, attorney).

The opinion of the Court was delivered by

STEIN, J.

The Local Public Contracts Law (LPCL), N.J.S.A. 40A:11-1 to 50, requires that certain contracts entered into by local public entities be procured through a public bidding process detailed in that statute. The LPCL exempts a number of transactions from the public bidding requirement, including contracts for "real property or any interest therein." N.J.S.A. 40A:11-2(4). In these consolidated appeals, defendants Mercer County (Mercer) and Morris County (Morris) argue that the LPCL did not require them to bid publicly contracts they entered into with defendant-intervenor Waste Management of

Page 3

Pennsylvania, Inc. (Waste Management) for disposal of the counties' solid waste, because the respective contracts granted, in part, easement rights on landfill space owned by Waste Management. The Appellate Division held that both contracts were subject to the LPCL bidding requirements, notwithstanding their purported grants of property rights, because the transactions also required Waste Management to perform services, and, taken as a whole, the "entire thrust" of the contracts were "that of a contract for solid waste disposal." Borough of Princeton v. Board of Chosen Freeholders of Mercer County, 333 N.J.Super. 310, 327, 755 A.2d 637(App.Div.2000). We granted certification, 165 N.J. 676, 762 A.2d 657 (2000), and now affirm.

I

We begin with some brief background. In 1970, the Legislature enacted the Solid Waste Management Act (SWMA), N.J.S.A. 13:1E-1 to -207, and the Solid Waste Utility Control Act (SWUCA), N.J.S.A. 48:13A-1 to -13, in an effort to establish a comprehensive regulatory framework for the disposal of solid waste in New Jersey. See Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic County, 48 F.3d 701, 704-08 (3d Cir.1995) (detailing solid waste disposal system created by SWMA and SWUCA). In accordance with those statutes, the State was divided into twenty-two solid waste management districts, including all twenty-one counties and a "Hackensack-Meadowlands" district. N.J.S.A. 13:1E-20. Each district was assigned the responsibility for developing and implementing a long-term solid waste management plan, subject to approval by the State Department of Environmental Protection (DEP). N.J.S.A. 13:1D-19; 13:1E-20, -24.

In 1997, the United States Court of Appeals for the Third Circuit held unconstitutional, under the dormant Commerce Clause doctrine, elements of the SWMA and SWUCA that imposed heightened requirements on districts that desired to contract with out-of-state operators of solid waste disposal facilities. Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen

Page 4

Freeholders of Atlantic County, 112 F.3d 652, 667 (3d Cir.), cert. denied, 522 U.S. 967, 118 S.Ct. 413, 139 L.Ed.2d 316 (1997), amended, 135 F.3d 891 (3d Cir. 1998) ( Atlantic Coast II). In the wake of that decision, the DEP issued an order in August 1997 requiring all solid waste disposal districts to review their strategies in view of the Atlantic Coast II mandate and, if necessary, adopt plan amendments.

[777 A.2d 23] Mercer and Morris had entered into contracts with Waste Management for long-term solid waste disposal prior to Atlantic Coast II, in 1988 and 1993, respectively.¹ In response to the DEP order, the counties both certified that they were in compliance with Atlantic Coast II, and the present suits were brought following those certifications.

A

Mercer enacted its original solid waste management plan in 1979. The long-term objective of that plan was for the county to be "self-sufficient" in its treatment and disposal of solid waste. Accordingly, the plan proposed the development of both an in-county resource recovery facility for processible waste and a landfill to deposit ash residue and non-processible waste. In the late 1980's, however, Mercer abandoned its intention to develop an in-county landfill, and in 1987 the county entered into negotiations for long-term solid waste disposal services with four specific companies that it believed possessed the capabilities to store the county's waste outflow. Mercer ultimately selected Waste Management, a Pennsylvania corporation, after Waste Management obtained long-term disposal capacity from the Commonwealth of Pennsylvania. Mercer's efforts to develop a resource recovery facility also were abandoned in November 1996, after the county failed to pass a plan amendment that would have authorized a $67 million bond issue to finance the construction of a resource-recovery facility in Hamilton Township. At present, Mercer's solid waste is directed to Waste Management's landfills, apparently without resource-recovery processing, through a transfer station located in Ewing Township.

Page 5

Mercer and Waste Management executed a "License Agreement" on February 17, 1988. The agreement grants to Mercer "all rights, title and interest in an irrevocable, non-exclusive license which shall run with the land," and an attachment to the agreement provides a metes and bounds description of the landfill area, located in Bucks County, Pennsylvania. The agreement requires Waste Management to accept a maximum of 4,500,000 tons of solid municipal waste, and to provide "all necessary services at the Landfill Facilities to receive such Acceptable Waste," including taking all measures required by law to bury, cover or otherwise process the waste. The agreement defines "Landfill Facilities" as the Landfill and all other facilities related thereto, including, without limitation, liners, protective covers, leachate collection and treatment facilities, storm water collection and treatment facilities, erosion and sedimentation control facilities, gas vents, gas collection systems, borrow areas, offices, haul roads, equipment, gear and other tangible property used in connection with the operation of the Landfill.

The agreement provides further that if the "rate of depletion of the remaining capacity" of the landfill could cause Waste Management to default on any of its contractual obligations, Waste Management is required to "mak[e] available to [Mercer]

[777 A.2d 24] additional landfills to which [Mercer] is granted by [Waste Management] license rights identical to such rights granted pursuant to this Agreement in the Landfill, except as to location."

In return, Mercer made an initial payment to Waste Management of $30 million, and agreed to make monthly "service fee purchase payments" equal to $47 per ton of accepted waste plus certain operating costs. The per-ton purchase payments increase for specific types of waste, such as "Baled Waste" and "Special Waste," that are defined in the agreement. The original agreement extended for a period of twenty-five years from the date of the

Page 6

first service fee purchase payment, or until Mercer exhausted its maximum deposit amount of 4,500,000 tons of waste, whichever occurred first.

The agreement was not affected adversely by Atlantic Coast II because Waste Management, as an out-of-state company, had not been disadvantaged by the regulatory scheme invalidated by that decision. Nevertheless, in August 1997 Mercer adopted a resolution recommending certain amendments to its solid waste management plan, including modifications to the Waste Management contract. The proposed amendment, agreed to by Waste Management, authorized modification of the license agreement by reducing its term from twenty-five to nineteen years and reducing Mercer's monthly per-ton service fee purchase payments. Mercer adopted the plan amendment after holding public hearings, and in November 1997 the DEP approved the aspects of the plan amendment that are relevant to this review. The amended license agreement went into effect on November 10, 1997.

In September 1997, plaintiff Borough of Princeton (Princeton) filed a complaint in lieu of prerogative writs in the Law Division against Mercer. Princeton's original complaint alleged that the process undertaken to promulgate the 1997 plan amendment violated procedural requirements set forth in the SWMA. The Law...