North Jersey District Water Supply Commission (Commission) is a public agency organized and functioning under N.J.S.A. 58:5-1 et seq. It created and operates a water system known as the Ramapo-Wanaque System, with a reservoir and facility located in Wanaque, New Jersey, with aqueducts serving water to Newark, Clifton, Paterson, Passaic, Bloomfield, Glen Ridge, Kearney, Montclair and Bayonne.
This action is brought by plaintiffs K.S.B. Technical Sales Corp. (K.S.B.) and Sieglinde Fazio, a taxpayer, against the Commission to restrain it from receiving, evaluating or accepting any bids in connection with Contract W-76, Wanaque Filtration Plant, or awarding any contract which contains a "Buy American" specification. Intervention has been permitted on behalf of the State of New Jersey and two bidders, Terminal Construction Corporation (Terminal) and Briscoe/Courter/Conduit, a joint venture (Briscoe).
On February 9, 1977 the Commission caused to be advertised an invitation to bid on Contract W-76. Bids were returnable at 11 A.M., Wednesday, April 13, 1977, at the office of the Commission, at which time they were to be opened. Included in the specifications are requirements for the water pumps needed in this project.
K.S.B. is a New York corporation which imports and distributes water-pumping equipment made in and exported from foreign countries. K.S.B. is a wholly-owned subsidiary of Klein Schanzlin Becker AG, a West German manufacturer of pumps and pumping equipment. K.S.B. obtained a copy of the specifications for Contract W-76 with a view towards submitting bids for the pumps to be used on the project to a number of general contractors who proposed to bid in connection with the project.
On April 4, 1977, nine days prior to the date on which the bids were to be opened, an addendum to the contract specifications was sent to all prospective bidders. Item 9 of this addendum included, for the first time, a specification that only products manufactured in the United States, wherever available, be used in the project, citing as authority N.J.S.A. 40A:11-18. Such a provision is commonly known as a "Buy American" specification.
On April 11, 1977 K.S.B. instituted an action against the Commission in the United States District Court for the District of New Jersey seeking to restrain the Commission's bidding process due to the alleged invalidity of the "Buy American" specification. As a result of those proceedings a consent order, dated April 13, 1977, appointed a conservator to collect the bids for the Commission and hold them unopened until further order of the court. It also ordered the Commission to send a mailgram, on April 13, 1977, to all persons and entities who purchased plans and specifications for Contract W-76, reading:
ADVERTISEMENT FOR SUPPLEMENTAL BIDS WANAQUE FILTER PLANT
A COURT ACTION HAS BEEN INSTITUTED IN WHICH THE CONSTITUTIONALITY OF THE 'BUY AMERICAN' (N.J.S. 40A:11-18) REQUIREMENT OF ADDENDUM NO. 1 TO SPECIFICATIONS FOR CONTRACT W-76, WANAQUE FILTER PLANT HAS BEEN CHALLENGED. THIS MAY AFFECT THE VALIDITY OF BID PROPOSALS SUBMITTED ON APRIL 13, 1977.
ALL BIDS SUBMITTED ON APRIL 13, 1977, HAVE AND SHALL BE HELD, UNOPENED, BY THE DESIGNEE OF THE COURT UNTIL FURTHER ORDER OF THE COURT WHICH IS EXPECTED SHORTLY.
ACCORDINGLY, YOU ARE INVITED TO SUBMIT A BID (OR IF YOU HAVE HERETOFORE SUBMITTED A BID, THEN AN ALTERNATE BID) BASED ON THE USE OF PRODUCTS REGARDLESS OF WHETHER OR NOT MANUFACTURED IN THE UNITED STATES.
FURTHER, THE SUBMISSION OF AN ALTERNATE BID HAVING A DIFFERENT MANUFACTURER THAN IS NAMED IN AN ORIGINAL BID SHALL NOT BE DEEMED TO VIOLATE
THE REQUIREMENT OF ADDENDUM NO. 1 THAT ONLY ONE MANUFACTURER IS TO BE LISTED FOR EACH ITEM.
ALL BIDS IN RESPONSE TO THIS FURTHER NOTICE SHALL BE SEALED AND WILL BE RECEIVED BY THE NORTH JERSEY DISTRICT WATER SUPPLY COMMISSION IN ITS OFFICE IN WANAQUE, NEW JERSEY 07065 UNTIL 11:00 A.M. LOCAL TIME ON FRIDAY, APRIL 22, 1977, AND WILL ALSO BE HELD, UNOPENED, BY THE DESIGNEE OF THE COURT UNTIL FURTHER ORDER OF THE COURT.
This mailgram was sent as directed and only the six original bidders submitted further bids, which bids were also impounded by the conservator.
At the conclusion of the hearing before the United States District Court, Judge Meanor invoked the doctrine of abstention to give the state courts an opportunity to resolve the unsettled question of state law raised by this litigation. R.R. Comm. of Texas v. Pullman Co. , 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941). On April 20, 1977 K.S.B. initiated the present action by order to show cause.
Plaintiff sought a declaration that N.J.S.A. 40A:11-18 is unconstitutional; a declaration that N.J.S.A. 52:32-1 et seq. and N.J.S.A. 52:33-1 et seq. are unconstitutional; to declare N.J.S.A. 40A:11-18, 52:32-1, et seq. and 52:33-1 et seq. inapplicable to any bidding proposal published by the Commission; that N.J.S.A. 40A:11-18, 52:32-1 et seq. and 52:33-1 et seq. contravene public policy, and restraining the Commission from receiving, opening, evaluating or awarding a contract containing the Buy American specification and striking that provision from the contract. At a hearing conducted at the time of the filing of the order to show cause and complaint, the Commission was temporarily restrained from opening, evaluating or awarding a contract in response to any bidder's proposal.
Due to the urgent public need and the $40,000,000 expense involved in this filtration plant project, and the undisputed factual posture of the case, counsel requested and the court granted an expedited hearing, which was conducted
on April 28, 1977. Decision was rendered ...