for BCUA's contractual 40% share of revenues required to operate the UCRRF and to pay all necessary expenses, including debt service on the municipal bonds issued to finance the UCRRF's construction and operation. See UCUA Br. at 5. BCUA, on the other hand, having no contractual obligation to share these financial burdens, would benefit from the Atlantic Coast II injunction by being able to negotiate lower, competitive rates for the disposal of its waste at another facility.
As a general matter, both contracting parties are equally innocent victims of a state-imposed regulatory regime. So long as a court does not try to specifically enforce the provisions of an Impacted Old Law Contract requiring the delivery of waste to a specific disposal site, there is no particular logic or public policy reason why the economic loss caused by the Atlantic Coast II injunction should be visited totally on one side of the contract -- the recipient of the solid waste stream. Rather, a court should consider the history of negotiations between the parties, the actual contract language, various common law contract doctrines and possibly newly articulated contract principles to determine whether either of the contracting parties may have certain rights against the other. It may be that in particular situations the loss should fall totally on one side or the other or partially on both sides. But whatever the result, it should flow from the particulars of the contractual relationship between the parties and not from the imposition of a blanket rule declaring all Impacted Old Law Contracts null and void.
Resolution of these complex problems is purely a matter of state law that will require creative remedy fashioning by the New Jersey state courts. Applying state law, the state courts must determine how best to allocate the contractual liabilities and economic burdens created by the Atlantic Coast II injunction. We recognize that this may not be an easy task.
Nonetheless, state courts have the entire arsenal of state contract law at their disposal:
1) the doctrine of mutual mistake, see Fisher Dev. Co. v. Boise Cascade Corp., 37 F.3d 104, 111-12 (3d Cir. 1994); D.R. v. East Brunswick Bd. of Educ., 838 F. Supp. 184, 191 (D.N.J. 1993); Bonnco Petrol, Inc. v. Epstein, 115 N.J. 599, 608-09, 560 A.2d 655 (1989); Lampley v. Davis Mach. Corp., 219 N.J. Super. 540, 549-50, 530 A.2d 1254 (App. Div. 1987); Smith v. Cynfax Corp., 261 N.J. Super. 378, 380, 618 A.2d 937 (Law Div. 1992); Arabia v. Zisman, 143 N.J. Super. 168, 362 A.2d 1221 (Ch. Div. 1976) (contract entered into on assumption of the validity of an unconstitutional ordinance was the product of mutual mistake), aff'd, 157 N.J. Super. 335, 384 A.2d 1110 (App. Div. 1978), cert. denied, 78 N.J. 335, 395 A.2d 204 (1978);
2) the doctrine of prevention by governmental regulation or order, see Restatement of Contracts (Second) § 264 (1981), W.R. Grace and Co. v. Local Union 759, 461 U.S. 757, 103 S. Ct. 2177, 76 L. Ed. 2d 298 (1983); Directions, Inc. v. New Prince Concrete Constr., 200 N.J. Super. 639, 644, 491 A.2d 1347, 1349 (App. Div. 1985);
3) the doctrine of supervening impracticability, see Restatement of Contracts (Second) § 261 (1981); W.R. Grace, 461 U.S. 757, 103 S. Ct. 2177, 76 L. Ed. 2d 298; Dworman v. Mayor of Morristown, 370 F. Supp. 1056, 1071 (D.N.J. 1974); Duff v. Trenton Beverage Co., 4 N.J. 595, 605, 73 A.2d 578 (1950); Connell v. Parlavecchio, 255 N.J. Super. 45, 49, 604 A.2d 625 (App. Div.), cert. denied, 130 N.J. 16, 604 A.2d 625, 627 (1992); Directions, Inc., 200 N.J. Super. at 644; Porcelli v. Titus, 108 N.J. Super. 301, 312, 261 A.2d 364, 370 (App. Div. 1969), cert. denied, 55 N.J. 310, 261 A.2d 364 (1970);
4) the doctrine of supervening frustration, see Restatement of Contracts (Second) § 265 (1981); General Elec. Capital Corp. v. Charleston, 1989 U.S. Dist. LEXIS 6521, 1989 WL 9363, at *5 (E.D. Pa. 1989), order aff'd, 898 F.2d 140 (3d Cir. 1990); Seitz v. Mark-O-Lite Sign Contractors, Inc., 210 N.J. Super. 646, 510 A.2d 319, 322 (1986); Republic Factors v. Carteret Work Uniforms, 24 N.J. 525, 133 A.2d 6, 10-11 (1957); A-Leet Leasing Corp. v. Kingshead Corp., 150 N.J. Super. 384, 397, 375 A.2d 1208 (App. Div. 1977), cert. denied, 75 N.J. 528, 384 A.2d 508 (1977); Porcelli, 108 N.J. Super. at 313; Model Vending, Inc. v. Stanisci, 74 N.J. Super. 12, 16, 180 A.2d 393, 395 (App. Div. 1962); Adams v. Jersey Cent. Power & Light Co., 36 N.J. Super. 53, 69, 114 A.2d 776 (Law Div. 1955), aff'd 21 N.J. 8, 120 A.2d 737 (1956); Edwards v. Leopoldi, 20 N.J. Super. 43, 54, 89 A.2d 264, 270 (App. Div. 1952), cert. denied. 10 N.J. 347, 91 A.2d 671 (1952); and
5) the principle that contracts against public policy may be void, see W.R. Grace, 461 U.S. at 766; Hurd v. Hodge, 334 U.S. 24, 34-35, 92 L. Ed. 1187, 68 S. Ct. 847 (1948); Vasquez v. Glassboro Serv. Ass'n. Inc., 83 N.J. 86, 98-101, 415 A.2d 1156 (1980); Lehigh Valley R. Co. v. United Lead Co., 102 N.J.L. 545, 133 A. 290 (1926) (citing Public Serv. Elec. Co. v. Public Util. Comm'rs, 87 N.J.L. 128, 93 A. 707 (1915), aff'd, 88 N.J.L. 603, 96 A. 1013 (1916); Saxon Constr. v. Masterclean, 273 N.J. Super. 231, 236, 641 A.2d 1056 (App. Div.), cert. denied, 137 N.J. 314, 645 A.2d 142 (1994); Driscoll v. Burlington-Bristol Bridge Co., 10 N.J. Super. 545, 575, 77 A.2d 255 (Ch. Div.1950), modified on other grounds, 8 N.J. 433, 86 A.2d 201, cert. denied, 344 U.S. 838 (1952).
Although parties who contract in highly regulated environments are on notice that the law may change against their interest, see Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 227, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986), it does not necessarily follow that the entire burden of that change should be visited upon any one party absent contractual provisions specifically allocating the risk of a change in law. For example, contracts are void as against public policy or because of supervening frustration of purpose only where the offending portion of the contract is so central to the contract that it cannot be severed from the whole. See, e.g., Hurd v. Hodge, 334 U.S. at 35; International Tracers of America, Inc. v. Rinier, 139 N.J. Super. 573, 354 A.2d 683, (App. Div. 1976). Courts consistently have held that contracts should be construed in ways that preserve the legality and validity of the agreements that the parties have freely entered into, even where portions of the contracts may subsequently become void because of government orders. See Ryan v. Brown Motors, Inc., 132 N.J.L. 154, 39 A.2d 70 (E & A 1944) (employment contract of general manager and secretary of car dealership was not rendered void by orders of the federal government limiting the opportunities for transactions concerning the sales of motor vehicles); Proprietors Realty Co. v. Wohltmann, 95 N.J.L. 303, 112 A. 410 (1921) (lessee not discharged from liability to pay rent pursuant to terms of lease of premises "to be used and occupied as a cafe and for no other purpose whatsoever" merely because he was subsequently deprived of their use for the sale of intoxicating liquors as a result of the Eighteenth Amendment).
Thus, state courts should consider whether the sole or primary purpose of an Impacted Old Law Contract was to provide for the delivery of in-state solid waste to an in-state facility as designated in N.J.A.C 7:26-6.5. Although many contracts may fit this description, others may not. UCUA has claimed that the purpose of their contract with BCUA was to create a regional partnership for the construction and operation of a resource recovery facility to serve the long term needs of both Union and Bergen Counties. UCUA Br. at 26-27. Thus, it claims that the Atlantic Coast II injunction does not interfere with the parties' partnership goals of "sharing financial risks" and preserving "the economies of scale inherent in larger facilities." McEnroe Order at 14-15, Exh. A to UCUA Compl. A state court analyzing such an argument will have to carefully examine the language of the contract and the evidence of the parties' intent to determine the extent to which the Atlantic Coast II injunction frustrated their contractual goals.
State courts should also consider whether or not the parties specifically allocated the risk of the invalidation of flow control through the inclusion of a force majeure clause or similar clause. The UCUA/BCUA Agreement included a force majeure clause which UCUA and Ogden argue allocates the risk of Atlantic Coast II 's invalidation of flow control to BCUA. Section 5.07 of the Agreement provides that "Uncontrollable Circumstances" will not excuse BCUA's payment obligation. Agreement at 28-29. "Uncontrollable Circumstances" are defined as including a "Change in Law." Agreement, Section 1.01, at 6 and 8.
State courts analyzing this and similar force majeure clauses must determine whether the parties intended to allocate the risk of flow control being declared invalid when they agreed to such clause.
Many challenges to the legality of waste flow control systems were instituted well before the execution of the Interdistrict Agreement and other solid waste management districts' agreements. See, e.g., Philadelphia v. New Jersey, 437 U.S. 617, 57 L. Ed. 2d 475, 98 S. Ct. 2531 (1978); Harvey & Harvey, Inc. v. Delaware Solid Waste Auth., 600 F. Supp. 1369 (D. Del. 1985); J. Filiberto Sanitation, Inc. v. State of New Jersey, 857 F.2d 913 (3d Cir. 1988), overruled by Atlantic Coast Demolition & Recycling, Inc. v. Bd. of Freeholders of Atlantic County, 48 F.3d 701 (3d Cir. 1995); Town of Clarkstown v. C & A Carbone, Inc., 587 N.Y.S.2d 681, 182 A.D.2d 213 (1992), rev'd, 511 U.S. 383, 128 L. Ed. 2d 399, 114 S. Ct. 1677 (1994). Legal scholars were also debating the constitutionality of flow control laws throughout the 1990s. See, e.g., Harper, Note, "Waste Transport: Commerce Clause Restrictions and Free Market Incentives," 24 Akron L. Rev. 681 (Spring 1991); McKistry and Brown, "A Checklist for Legally Enforcebale Obligations to Use Disposal Services," C816 ALI-ABA 289 (October 1993); McKistry and Brown, "A Checklist for Legally Enforcebale Obligations to Use Disposal Services," C659 ALI-ABA 377 (January 1992); Suhroff, "Solid Waste Flow Control and the Commerce Clause: Circumventing Carbone," 7 Alb. L-J Sci. & Tech. 185, 188-189 (1996); Turner, "The Flow Control of Solid Waste and the Commerce Clause: Carbone and its Progeny," 7 Vill. Envtl. L.J. 203 (1996).
Contracting entities may very well have been aware of the possibility that New Jersey's policy of self-sufficiency would be held constitutionally invalid. Where they did not specifically contractually allocate that risk, a court must weigh the legal consequences of this absence. See, e.g. United States v. Winstar Corp., 518 U.S. 839, 116 S. Ct. 2432, 2469, 135 L. Ed. 2d 964 (1996); Dworman, 370 F. Supp. at 1071; Schiff v. Schiff, 116 N.J. Super. 546, 561, 283 A.2d 131 (App. Div. 1971); Edwards v. Leopoldi, 20 N.J. Super. at 53; Newark v. North Jersey Water Supply Comm'n., 106 N.J. Super. 88, 254 A.2d 313 (Ch. Div. 1968), aff'd., 54 N.J. 258, 255 A.2d 193 (1969); Model Vending Inc., 74 N.J. Super. at 16; Lincoln Bus Co. v. Jersey Mut. Cas. Ins. Co., 112 N.J. Eq. 527, 164 A. 867 (Ch. Div. 1933).
On the other hand, some contracting parties may have foreseen the possibility that flow control would be invalidated and may have specifically provided for the contractual obligations of the parties if that event should occur. It is not uncommon for contracts to contain clauses that specify that each party is excused from failures in the performance of any act by reason of certain enumerated uncontrollable circumstances. Where the parties have defined uncontrollable circumstances by language that might include the entry of a federal injunction such as the one in Atlantic Coast II, the parties may be totally excused from all duties and obligations arising under the contract. If the language is ambiguous, the court will have to determine what the parties intended to include as an uncontrollable circumstance that might excuse performance.
Doctrines of quasi-contract (also known as contracts implied in law), contracts implied in fact and joint venture may, in particular circumstances, be available to assist a state court in equitably allocating the economic burdens created by Atlantic Coast II. See, e.g., Wanaque Borough Sewerage Auth. of West Milford v. West Milford, 144 N.J. 564, 677 A.2d 747 (1996); In Re Saint Barnabas Med. Ctr. v. Essex County, 111 N.J. 67, 543 A.2d 34 (1988); St. Paul Fire & Marine Ins. Co. v. Indemnity Ins. Co. of North America, 32 N.J. 17, 22-23, 158 A.2d 825 (1960); Hudson City Elec. Co. v. Jersey City Incinerator Auth., 17 N.J. 297, 307, 111 A.2d 385 (1955); Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 108, 219 A.2d 332 (App. Div. 1966); Shapiro v. Solomon, 42 N.J. Super. 377, 383, 126 A.2d 654 (App. Div. 1956).
In short, there are a wide variety of state law doctrines which might be applied in interpreting and fashioning remedies with respect to Impacted Old Law Contracts which would equitably allocate the economic loss caused by the Atlantic Coast II injunction without running afoul of the injunction itself. It is probably fair to say that every such contract is different in its negotiating history, language, intent, and operation. While each shares the common characteristic that they can no longer dictate the flow of the waste stream as originally contemplated, it does not follow that all rights or obligations which arise from it have been swept away. We see no reason why the state courts might not fashion contractual remedies under Impacted Old Law Contracts which do not transgress the full sweep of the Atlantic Coast II injunction.
C. Modification of the Injunction To Provide Relief From the Retroactive Application of Atlantic Coast II Is Not Necessary
In our December 18, 1997 Opinion, we explained at length the rule of retroactivity as set forth in the Beam-Harper-Hyde trilogy and explored the circumstances under which a court may fashion a remedy allowing other than pure retroactive application of a prior decision. See Atlantic Coast II, 1997 U.S. Dist. LEXIS 20129, 988 F. Supp. 486, 1997 WL 780909, at *6-8 (D.N.J. 1997). As we noted, the rule of retroactivity generally requires a court to retroactively apply a judicial decision "'whether the litigants actually relied on an old rule or how they would suffer from retroactive application of a new one.'" Id. at *7 (quoting Harper v. Virginia Dep't of Taxation, 509 U.S. 86, 95 n.9, 125 L. Ed. 2d 74, 113 S. Ct. 2510 (1993)). A court may depart from the norm of retroactive application at the remedial stage under only the most compelling circumstances:
[A court may find] (1) [an] alternative way of curing the constitutional violation, (2) [a] previously existing, independent legal basis (having nothing to do with retroactivity) for denying relief, or (3) . . . a well-established legal rule that trumps the new rule of law, which general rule reflects both reliance interests and other significant policy justifications, or (4) a principle of retroactivity itself.