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ATLANTIC COAST DEMOLITION & RECYCLING, INC. v. BOA

December 18, 1997

ATLANTIC COAST DEMOLITION AND RECYCLING, INC., et al., Plaintiffs,
v.
BOARD OF CHOSEN FREEHOLDERS OF ATLANTIC COUNTY, et al., Defendants.



The opinion of the court was delivered by: IRENAS

 IRENAS, District Judge:

 Presently before the Court is the application of the Bergen County Utilities Authorities ("BCUA"), one of the defendants in this action, requesting us to exercise our power under the Anti-Injunction Act, 28 U.S.C. § 2283, and the All Writs Act, 28 U.S.C. § 1651, and assume jurisdiction over a state contract dispute between it and the Union County Utilities Authority ("UCUA"), a non-party to this action.

 In Atlantic Coast Demolition & Recycling, Inc. v. Bd. of Chosen Freeholders of Atlantic County ("Atlantic Coast II "), 112 F.3d 652 (3d Cir. 1997), the Third Circuit held that New Jersey's flow control statutes governing the disposal of locally generated waste violated the dormant Commerce Clause. Prior to the decision in Atlantic Coast II, BCUA entered a long term "put or pay" contract to dispose of its waste at a facility operated by UCUA. This contract was negotiated, entered into and approved by the State of New Jersey under the now unconstitutional regulatory scheme which excluded out-of-state facilities from consideration as possible sites for disposal of Bergen County's waste. It is one of many contracts entered into prior to November 10, 1997, the effective date of the Atlantic Coast II injunction, with executory obligations which continue into the future.

 There is no doubt that if the BCUA/UCUA contract was negotiated today under state mandated rules which barred competition from out-of-state entities, such contracts would be unenforceable and in violation of the Atlantic Coast II injunction. BCUA carries this premise one step further and argues that the Atlantic Coast II injunction operates to abrogate the remaining executory portions of the contract and that, as a result, this court should assume jurisdiction over the suit instituted in the Superior Court of New Jersey by UCUA for a declaration of the contract's validity. Because we find that a resolution of this issue requires us to consider both the retroactive application of the Atlantic Coast II injunction to conduct which occurred before the injunction became effective, see James Beam Distilling Co. v. Georgia, 501 U.S. 529, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991); Harper v. Virginia Department of Taxation, 509 U.S. 86, 125 L. Ed. 2d 74, 113 S. Ct. 2510 (1993); Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 131 L. Ed. 2d 820, 115 S. Ct. 1745 (1995), and the possible modification of the remedy provided by the injunction, see Hyde, 514 U.S. at 759, Atlantic Coast II, 112 F.3d at 672, before any state law issue even becomes relevant to the inquiry, and because these decisions respecting the scope and temporal reach of the injunction may affect many other contracts, we will assume jurisdiction in this matter "to protect and effectuate" the Atlantic Coast II injunction. Anti-Injunction Act, 28 U.S.C. § 2283, see All Writs Act, 28 U.S.C. § 165.

 I. BACKGROUND

 A. The Interdistrict Agreement

 In 1990, the UCUA contracted with Ogden Martin Systems of Union, Inc. for the construction and long-term operation of the Union County Resource Recovery Facility ("UCRRF"). The UCRRF was to be located in Rahway, New Jersey. The proposed UCRRF had the capacity to process an amount of waste well in excess of the amount of processible waste currently generated within the boundaries of Union County. Thus, UCUA sought a regional partner to help in constructing and operating the facility and to commit to sending waste to the UCRRF to ensure its operation at capacity.

 At this same time, having decided not to construct its own resource recovery facility, the BCUA sought to enter into an agreement with a regional resource recovery facility in order to meet the disposal needs of Bergen County. BCUA began negotiating for an agreement to utilize the Essex County Resource Recovery Facility. However, these negotiations eventually broke down. BCUA and UCUA then commenced negotiations for Bergen's participation in the UCRRF construction and operation.

 On October 24, 1991, the BCUA and UCUA entered into a Memorandum of Understanding ("MOU") which evidenced intent of the parties to enter into an interdistrict agreement under which the UCUA would provide certain services for the processing of solid waste generated within Bergen County and, in return, the BCUA would join the UCUA in its efforts to construct and operate the UCRRF.

 The MOU contained a "put or pay" provision which read:

 
The fees payable by the BCUA are an unconditional obligation and shall be payable by the BCUA whether or not the BCUA actually meets its delivery obligations of the minimum tonnage specified in Article 1.

 In April 1993, the UCUA and BCUA entered into the Interdistrict Agreement which effectuated the terms of the MOU. The Interdistrict Agreement was amended on August 25, 1993. The Amended and Restated Interdistrict Agreement ("Agreement") superceded and replaced the MOU and the April agreement. The Agreement is the subject of pending litigation in the Union County Superior Court.

 
The payment obligation of the BCUA . . . shall be an unconditional obligation to pay and shall continue and not be interrupted during any period that the UCUA's payment obligations continue to be payable and the BCUA shall not be relieved of such payment obligations for any reason, including, but not limited to, any Uncontrollable Circumstance, any failure of the Facility to operate or any failure of the BCUA to deliver Bergen Processible Waste to the Facility.

 The Agreement defines "Uncontrollable Circumstance" as Any act, event or condition having a material adverse effect upon the rights or obligations of either party hereunder if such act, event, or condition is beyond the reasonable control of the parties to this Agreement and is relied upon thereon as justification for failure to perform any obligation set forth herein or to comply with any condition required of the respective parties pursuant to this agreement. Such acts, events or conditions shall include, but not be limited to the following: . . . any Change in Law . . . .

 Change in Law is defined as:

 
[A] change in any Applicable Law, including, but not limited to: (a) the adoption, promulgation, issuance, modification or change in administrative or judicial interpretation of any Applicable Law; (b) the order or judgment of any federal, state or local court, administrative agency or governmental officer or body; and (c) the denial of an application for, delay in review, issuance or renewal of, or suspension, termination, interruption, imposition of a new condition in connection with the renewal or failure of renewal of any governmental permit, license, consent, authorization or approval.

 Section 7.03 of the Agreement states:

 
The parties hereto acknowledge that notwithstanding any Uncontrollable Circumstance, all payment obligations shall continue to be performed, including but not limited to those payments which may be attributable to amounts due on Facility Bonds.

 B. The Atlantic Coast Decision

 Nearly a year and a half ago, we held that New Jersey's flow control laws, which require waste management districts to contract with designated waste facilities for disposal of locally generated waste, were unconstitutional. Atlantic Coast II, 931 F. Supp. 341 (D.N.J. 1996). We found that New Jersey's policy of self-sufficiency, which favors the designation of in-state waste facilities over those located out-of-state, violated the dormant Commerce Clause of the United States Constitution. Upon finding New Jersey's flow control laws unconstitutional, we granted a permanent injunction against the enforcement of flow control. However, because we believed that our injunction would cause serious disruption and financial harm to the state and citizens of New Jersey, we issued a two-year post appeal stay of the permanent injunction. BCUA was a party to this matter but UCUA was not.

 On May 1, 1997, the Third Circuit affirmed our holding that New Jersey's policy of self-sufficiency violated the dormant Commerce Clause. Atlantic Coast II, 112 F.3d 652 (3d Cir. 1997). However, the Third Circuit reversed our two-year post appeal stay, finding that we had erred in delaying the injunction of an unconstitutional law. Thus, the Court ordered that the injunction of the enforcement of New Jersey's waste flow directives, N.J.A.C. 7:26-6.5, would become effective upon the "denial of petitions for certiorari by the Supreme Court of the United States." Id. at 673. As a result ...


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