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Sudler v. Environmental Disposal Corp.

Decided: July 15, 1987.

SAMUEL SUDLER AND DAVID S. STEINER, APPELLANTS,
v.
ENVIRONMENTAL DISPOSAL CORPORATION AND HILLS DEVELOPMENT COMPANY, RESPONDENTS. SAMUEL SUDLER AND DAVID S. STEINER, RESPONDENTS, V. ENVIRONMENTAL DISPOSAL CORPORATION, THE HILLS DEVELOPMENT COMPANY, JOHN KERWIN AND NEIL CALLAHAN, APPELLANTS



On appeal from Board of Public Utilities (A-2808-86T8) and Superior Court of New Jersey, Law Division, Somerset County (A-2953-86T5).

Brody, Long and D'Annunzio. The opinion of the court was delivered by Brody, J.A.D.

Brody

[219 NJSuper Page 55] We consolidated these two appeals: one from a determination by the Board of Public Utility Commissioners (the Board), the other from interlocutory orders entered in the Law Division in a related action. The fundamental dispute in both proceedings is whether Environmental Disposal Corporation (EDC), franchised by the Board to operate a sewage disposal plant servicing a portion of Bedminster Township, lawfully denied Samuel Sudler and David Steiner (Sudler) access to the sewerage system that connects with the plant. Sudler is the developer of a proposed 162-unit residential development on 14 acres. EDC bases its denial on a prior allocation of its remaining capacity to the Hills

Development Co. (Hills), developer of 1,000 residential units and a proposed additional 4,200 residential units on 1,700 acres. Sudler petitioned the Board for relief from EDC's denial and sued EDC and Hills in the Law Division for monopolistic conduct and unlawful conspiracy to restrain trade, both in violation of the New Jersey Antitrust Act (N.J.S.A. 56:9-1 et seq.), and for malicious interference with Sudler's reasonable economic expectations.

We first consider the proceedings before the Board, which dismissed Sudler's petition. The following picture emerges from uncontroverted evidence in the record, the Board's findings and its policy determinations.

Access to sewage disposal is of prime importance to a developer. As a matter of policy, the Board encourages the construction of private sewage disposal plants to relieve the serious shortage of housing in the State. Raising capital is a major obstacle to constructing a plant to service an extensive area of future development because in the early phases of development there are too few users to pay the capital cost of the plant, and borrowed capital is not readily available until success of the development is assured. Thus the builder itself must often finance the plant's construction and subsidize its initial operations. That happened here.

Hills formed EDC to construct and operate a plant having capacity that was adequate to meet the needs of its proposed development and, to satisfy the demands of Bedminster, the needs of nearby properties lying outside the development. Hills and EDC agreed that the bulk of the plant's capacity, 800,000 gallons a day of treated wastewater, would be reserved for Hills' needs during the several years that it would take to complete its development. In return, Hills agreed to guarantee financing of the plant's construction and to subsidize its operation until revenues made it self-sufficient. EDC's undertaking, including its agreement with Hills, was approved by the Board

on July 29, 1981, when it awarded EDC a public utility sewerage franchise.

Meanwhile, as the result of Mount Laurel litigation, Bedminster amended its zoning ordinance to increase the number of residential units that could be built within EDC's franchise area.*fn1 As a result of the new ordinance, Hills substantially increased the number of residential units it planned to construct. Also, other properties within the area of EDC's franchise became profitable to develop. EDC thereupon formulated plans to double its plant capacity thereby accommodating Hills' increased needs and the needs of other developers, such as Sudler, who may find it profitable to build within the franchise area. We were advised at oral argument that the New Jersey Department of Environmental Protection has just approved those plans which include building an extension to the plant.

Sudler agreed to purchase its property by a contract dated April 2, 1982. Three months later it requested EDC to allocate it sewerage capacity. Almost two years later, March 15, 1984, EDC turned down the request on the ground that "[t]he treatment capacity of EDC's existing plant is obligated." In December 1984, Sudler petitioned the Board to order EDC to reserve 41,000 gallons a day for its planned development. The Board dismissed the petition on March 8, 1985, but in the same order approved an agreement between EDC and Pluckemin Plaza, a proposed office building development, whereby EDC reallocated 22,000 gallons a day of Hills' 800,000 to Pluckemin.

Three months later Sudler closed title on its property. After Sudler had improved its standing by acquiring title to the property and obtaining preliminary site plan approval from the municipality subject to access to EDC's sewerage system, the

Board entered an order on December 10, 1985, granting Sudler's motion to reconsider its petition.

The Board referred the matter to the Office of Administrative Law for a hearing. An Administrative Law Judge (ALJ) recommended allocation to Sudler of 30,380 gallons a day provided that Sudler will be ready to tie into EDC's sewerage system within two years. The Board adopted the initial decision of the ALJ by a 2-1 vote on October 17, 1986. Sudler's victory was short-lived. The Board granted EDC's motion to reconsider and on February 5, 1987, it reversed itself by a 2-1 vote. Sudler now appeals that decision.

In arriving at its final determination, the Board recognized that in view of the limited capacity of EDC's present plant compared to the future needs of Hills, of Sudler and of other developers within the franchise area, there will not be enough capacity for everyone until EDC builds the plant extension. Therefore until the extension has been constructed, assuring one developer access to the sewerage system effectively denies access to others. Thus whoever is given an allocation of the plant's limited capacity receives a preference ...


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