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East Penn Sanitation, Inc. v. Grinnell Haulers

September 26, 1996

EAST PENN SANITATION, INC., PLAINTIFF-RESPONDENT,
v.
GRINNELL HAULERS, INC., SUSSEX COUNTY MUNICIPAL UTILITIES AUTHORITY, AND PETER COFRANCESCO, JR., DEFENDANTS-APPELLANTS.



On appeal from Superior Court of New Jersey, Law Division, Sussex County.

Approved for Publication September 26, 1996. As Amended February 5, 1997.

Before Judges Petrella, Skillman and P.g. Levy. The opinion of the court was delivered by Skillman, J.A.D.

The opinion of the court was delivered by: Skillman

The opinion of the court was delivered by SKILLMAN, J.A.D.

These are consolidated appeals from a judgment memorializing a jury verdict awarding plaintiff $1,875,000 in compensatory damages for tortious interference with contract and breach of contract.

In the spring of 1987 defendant Sussex County Municipal Utilities Authority (SCMUA) entered into a contract with plaintiff East Penn Sanitation, Inc. for the disposal of solid waste collected in Sussex County. This contract was entered into without competitive bidding because of a garbage crisis resulting from the closing of a landfill. The contract provided for separate methods of waste disposal during different "phases" of performance thereunder. In Phase I plaintiff agreed to receive waste collected in Sussex County at a transfer station located in Pennsylvania pending completion of construction of the Sussex County transfer station. Although the parties originally contemplated that Phase I would last no more than twelve weeks, the anticipated commencement of operations of the Sussex County transfer station was delayed for a substantial period of time, which resulted in numerous amendments to the contract that eventually extended the end of Phase I to July 15, 1988. In Phase II, which was scheduled to last for a term of twelve months, plaintiff agreed to transport waste from the Sussex County transfer station to a final disposal site. When plaintiff entered into this contract, it was not licensed by either the Department of Environmental Protection (DEP) or the Board of Public Utilities (BPU).

On November 4, 1987, defendant Peter Cofrancesco, Jr., President of defendant Grinnell Haulers, Inc. (Grinnell), informed the SCMUA's commissioners in a closed executive session that he was interested in transporting waste from the Sussex County transfer station at lower rates than would be charged by plaintiff. By letter dated November 17, 1987, the SCMUA Chairman, John Carroll, informed the County Freeholder Director that, in response to proposals from several trucking and disposal companies, SCMUA counsel Edward Buzak had considered the legal ramifications of negotiating with another hauler and had concluded that the SCMUA's contract with plaintiff was valid. Consequently, the SCMUA could not withdraw from the contract without incurring a risk of suit. Buzak also concluded that, absent an emergency, public bidding would be required before a contract could be awarded to another party.

In late November of 1987, a freeholder sent a memo to Carroll which asserted that plaintiff would have to obtain licenses from both the DEP and BPU in order to perform Phase II of the contract, and that members of the DeLorenzo family, who were plaintiff's principals, were barred from doing business in New Jersey. After receiving this memo, the SCMUA directed Buzak to determine whether plaintiff was licensed by the DEP and BPU, and if not, whether this would prevent plaintiff from performing its obligations under the contract. Based on conversations with representatives of the DEP and BPU, Buzak discovered that although neither plaintiff nor its principals were barred from doing business in New Jersey, they in fact lacked both a BPU certificate of public convenience and necessity and a DEP solid waste registration. Buzak reported these findings to the SCMUA and also expressed the opinion that because of the history of alleged environmental violations at High Point Sanitation, a landfill owned by the DeLorenzos, "it would be very difficult, if not impossible, for [plaintiff] to obtain either of those licenses." Based on his conversations with BPU and DEP representatives, Buzak also advised the SCMUA that plaintiff could complete performance under the contract by subcontracting the hauling part of the work to a licensed hauler.

Thereafter, Grinnell and Cofrancesco continued to communicate with SCMUA and Sussex County officials regarding Grinnell's interest in hauling waste from the Sussex County transfer station to a disposal site. These defendants also questioned plaintiff's qualifications to perform Phase II of the contract in light of its lack of licensure by either the DEP or BPU. In addition, Grinnell sent a letter to the BPU objecting to the SCMUA's application for a solid waste franchise based on plaintiff's lack of a certificate of public convenience and necessity. These communications, which are the basis of plaintiff's tortious interference claims against Grinnell and Cofrancesco, are discussed in section III of this opinion.

At a meeting with Buzak in early March of 1988, the BPU's representatives expressed doubt as to whether plaintiff could perform Phase II by subcontracting with a licensed hauler. Around this same time, the DEP took the position that plaintiff needed an approved registration before it could subcontract or assign the contract.

After learning of these changes in position on the part of the DEP and BPU, the SCMUA authorized the filing of a declaratory judgment action to determine whether plaintiff had the legal authority to perform Phase II and also authorized the solicitation of bids for a new contract for the work plaintiff was scheduled to perform under Phase II. This solicitation notified potential bidders that the SCMUA's acceptance of any bid would be contingent upon the outcome of the declaratory judgment action. Grinnell submitted the low bid in response to this solicitation.

The trial court in the declaratory judgment action concluded that plaintiff did not need to obtain a certificate of public convenience and necessity from the BPU in order to perform Phase II *fn1 but that it did need to obtain a registration statement and solid waste transporters' license from the DEP. The court also concluded that plaintiff could not circumvent these requirements by subcontracting or assigning the contract to another party. However, the court further determined that plaintiff should be afforded a reasonable opportunity to obtain a registration and license from the DEP. Accordingly, the court ordered plaintiff to submit an application to the DEP no later than May 23, 1988. The court ordered the SCMUA to "cooperate to the extent possible in facilitating approval of [plaintiff's] application." The declaratory judgment also provided that "in the event that the NJDEP disapproves [plaintiff's] application," the SCMUA shall be excused from performance of Phase II of the Contract. The judgment further provided that if the DEP failed to take "final action" by June 30, 1988, the parties should return to the court on July 1, 1988 "for further Disposition."

Plaintiff apparently submitted a timely application with the DEP, and at plaintiff's request, the SCMUA's Executive Director submitted a letter indicating that its experience with plaintiff had been "satisfactory." However, the SCMUA's representatives also sent several other letters to the DEP which plaintiff alleges were in violation of the SCMUA's obligation to "cooperate" with plaintiff's application. These communications are one of the grounds of plaintiff's claims against the SCMUA and are discussed in greater detail in section II of this opinion.

Since it ordinarily takes more than a year for the DEP to process an application for permanent registration, plaintiff applied for both temporary and permanent registrations. On June 29, 1988, the DEP denied plaintiff's application for temporary registration, concluding that plaintiff had failed to show, as required by N.J.A.C. 7:26-16.5(c), that a temporary registration was "necessary to prevent or ameliorate a hazard to the public health, safety, or the environment; to prevent economic hardship to a public body, or otherwise serve[] some interest of the general public." The DEP also indicated that it would continue to process plaintiff's application for a permanent registration. Plaintiff did not appeal the DEP's denial of its application for temporary registration.

A week later, plaintiff asked the SCMUA to consent to the assignment of its rights and obligations under Phase II of the contract to Polumbo Carting Company (Polumbo), which was a hauler licensed by the DEP. Plaintiff asserted that the SCMUA was authorized to give such consent in accordance with a consent order the trial court had entered on June 28, 1988, staying the part of the declaratory judgment which determined that plaintiff could not perform Phase II by an assignment to a licensed hauler.

On July 6, 1988, the SCMUA adopted a resolution refusing to consent to the assignment based on concerns as to whether the assignment would satisfy DEP registration requirements. This administrative action is one of the grounds of plaintiff's breach of contract claim against the SCMUA and is discussed in greater detail in section II of this opinion. At the same meeting, the SCMUA voted to award Grinnell the contract to transport waste from the Sussex County transfer station.

On July 8, 1988, the trial court in the declaratory judgment action entered a further order which provided that the SCMUA could "carry out Phase II of the Contract by use of a party other than [plaintiff], and [the SCMUA] shall have no liability to [plaintiff] or otherwise under Phase II of the Contract." However, the order further provided that "nothing in this judgment shall be construed to preclude [plaintiff] from filing an action against the or others for conduct subsequent to the May 14, 1988 Judgment."

Plaintiff appealed from the part of the May 14, 1988 judgment which declared that it had to be licensed by the DEP in order to assign its interest in Phase II of the contract to a licensed hauler. The SCMUA appealed from the part of the July 8, 1988 order which preserved plaintiff's right to pursue an action for money damages for the SCMUA's conduct subsequent to May 14, 1988. We consolidated the appeals and affirmed the challenged portions of the declaratory judgment and post judgment order in an unreported opinion. Sussex County Municipal Utilities Auth. v. East Penn Sanitation, Inc., A-5082-87T2, A-6253-87T2 (decided March 22, 1989).

The present action was commenced by a complaint filed by Polumbo, the hauler to which plaintiff attempted to assign the contract with the SCMUA, against Grinnell and the SCMUA. Plaintiff, which was brought into the action by the SCMUA's third party complaint, subsequently filed counterclaims and cross claims against the SCMUA and Grinnell. After the trial court dismissed Polumbo's complaint, leaving only plaintiff's claims for adjudication, plaintiff filed an amended complaint which added Cofrancesco as a defendant. *fn2

In this amended complaint, plaintiff alleged that the SCMUA had tortiously interfered with its contractual relations and breached the contract by "undermining, sabotaging, and poisoning" plaintiff's application to the DEP for a temporary registration and license and by refusing to consent to plaintiff's request to assign its rights and obligations under Phase II. Plaintiff also alleged that Grinnell and Cofrancesco had tortiously interfered with its contractual relations by pressuring the SCMUA to breach the contract.

After a twenty-six day trial, a jury found that Grinnell and Cofrancesco had tortiously interfered with plaintiff's contractual relations with the SCMUA, and that the SCMUA had tortiously interfered with plaintiff's economic advantage and had breached the covenant of good faith and fair dealing implied in its contract with plaintiff. The jury awarded $1,875,000 in damages, allocating 35% to Grinnell, 20% to Cofrancesco and 20% to the SCMUA for tortious interference, and additional 25% to the SCMUA for breach of contract. The court denied defendants' motions for a judgment notwithstanding the verdict or, alternatively, for a new trial and entered a judgment memorializing the jury verdict. Since plaintiff ...


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