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American Marine Rail NJ, LLC v. City of Bayonne

November 6, 2003

AMERICAN MARINE RAIL NJ, LLC, PLAINTIFF,
v.
THE CITY OF BAYONNE; COUNTY OF HUDSON; HUDSON COUNTY IMPROVEMENT AUTHORITY; AND HUDSON COUNTY EXECUTIVE ROBERT JANISZEWSKI, DEFENDANTS.



The opinion of the court was delivered by: Martini, District Judge

FOR PUBLICATION

OPINION

This matter comes before the Court on defendants' motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. In its second amended complaint, plaintiff American Marine Rail NJ, LLC ("AMR NJ") contends that the conduct of the defendants - the City of Bayonne ("Bayonne"), County of Hudson ("Hudson County"), the Hudson County Improvement Authority ("HCIA"), and former Hudson County Executive Robert Janiszewski ("Janiszewski") - violated the Commerce Clause and the Fifth and Fourteenth Amendments to the United States Constitution. In addition, AMR NJ alleges that Bayonne breached its lease agreement with AMR NJ. For the reasons set forth below, defendants' motions are granted in part and denied in part.

The central issues on summary judgment are: (1) whether the defendants' conduct in denying plaintiff's application for inclusion in Hudson County's Solid Waste Management Plan ("SWMP") violates the dormant Commerce Clause; (2) whether plaintiff has established a protected property interest under the substantive component of the Fourteenth Amendment's due process clause, and if so, whether the conduct of the defendants in denying plaintiff's application for inclusion in the SWMP "shocks the conscience"; (3) whether plaintiff has established an unconstitutional taking under the Fifth Amendment to the United States Constitution; (4) whether defendant City of Bayonne breached its lease with plaintiff; and (5) whether plaintiff can proceed at trial on its claims for lost profits.

The Court finds that material issues of fact preclude summary judgment on the Fourteenth Amendment substantive due process claim and the Commerce Clause claim as to all defendants. The Court grants summary judgment in favor of all defendants on the Fifth Amendment Takings claim. Furthermore, the Court denies defendant Bayonne's motion for summary judgment on the breach of contract claims. Finally, the Court precludes plaintiff from pursuing its claims for lost profits under any of its theories of liability.

FACTUAL BACKGROUND

AMR NJ is a New Jersey limited liability corporation. It was formed to provide transport for residential and office solid waste from New York City to a proposed solid waste transfer facility in Bayonne, New Jersey for shipment by rail to landfill sites in locations outside of New Jersey. Bayonne is a municipal corporation of the State of New Jersey, located in Hudson County. Hudson County, one of twenty-one New Jersey counties, is a solid waste management district. The HCIA is empowered by state statute to formulate and adopt a Solid Waste Management Plan for the district. Janiszewski was the Hudson County Executive at the time of the events in question.

In May of 1996, New York City Mayor Rudolph Giuliani and New York state Governor George Pataki announced that Fresh Kills Landfill, located on Staten Island, would close by January 1, 2002. See Final Environmental Impact Stmt. ("FEIS"), Kobin Cert., Exhibit 1, at p. 1-2. In addition, the Mayor noted that New York City would not open new landfills or reopen landfills or incinerators within its borders. See id. To accommodate these policies, the City needed to develop a new waste management infrastructure. See id. The Fresh Kills Closure Task Force, which was established to achieve the closure deadline, recommended, among other things, the long-term export of waste by barge or rail. See id.

On June 16, 1997, New York City's Department of Sanitation ("NYCDOS") issued a "Request for Proposals to Receive Solid Waste at a Marine Transfer Station Operated by the New York City Department of Sanitation and Dispose of the Solid Waste Received at an Out-of-City Facility" ("RFP"). In connection with the RFP, NYCDOS expected "to execute one or more full service contracts of at least twenty years duration with one or more qualified vendors." RFP, Kobin Cert., Exhibit 3, at p. 1. The RFP noted that any contract entered into with NYCDOS would be structured so that if the funds necessary to continue the contract were not available during any fiscal period, the contract would be automatically canceled. See id. In addition, the RFP stated that contracts would not be awarded solely based on the annual fee proposed, but on the "most advantageous combination of quality and cost." See id. at p. 12. NYCDOS reserved the right, in its sole discretion, to withdraw the RFP or to postpone or cancel the procurement effort at any time. See id.

By October 17, 1997, in response to the RFP, NYCDOS received thirteen proposals. See FEIS, at p. 1-19. One of the proposals was submitted by American Marine Rail New York, LLC, ("AMR NY") for an enclosed barge unloading facility ("EBUF") located in the Bronx, New York. *fn1 NYCDOS convened a committee to evaluate the proposals. See NYCDOS Comprehensive Solid Waste Management Plan, February 2001, Kobin Cert., Exhibit 6, at p. 19. In January of 1999, the committee decided to request best and final offers from two companies, Browning Ferris Industries and Waste Management, which were considered "recommended proposers." See id. at p. 24. In addition, the committee requested best and final offers from American Marine Rail and Port Ivory Alliance, which were considered "the highest ranked non-recommended proposers." See id. In response to this request, on March 31, 1999, American Marine Rail, LLC submitted an amended proposal, which included plans for two separate EBUFs - the in-state facility in the Bronx, and a new, additional facility in Bayonne, New Jersey. See American Marine Rail March 31, 1999 Submission, Kobin Cert., Exhibit 8, at p. 7.

In connection with its proposed Bayonne EBUF, on April 1, 1999, AMR NJ and defendant Bayonne entered into a fifty-year lease for a piece of public property located on Ingham Avenue in Bayonne, New Jersey. *fn2 The site, the former Standard Tank locale, was highly contaminated at the time that AMR NJ leased it. The lease permitted AMR NJ to use "the Premises for the purpose of developing and operating a transfer terminal and/or recycling center for waste materials and other bulk materials and cargo . . ., and for no other purpose without the express written consent of the landlord which shall not be unreasonably withheld or delayed." Lease, Kobin Cert., Exhibit 19, at p. 11 § 6(a). Among other things, the lease contained the following cooperation clause:

Tenant, at its expense, shall be solely responsible for obtaining all licenses, permits, certificates or other authorizations which may be required from governmental authorities to provide for the lawful use and occupancy of the Premises. Landlord represents that it will cooperate with the Tenant in connection with Tenant's efforts to obtain all such licenses, permits, certificates or other authorizations.

Id. at p. 12 § 7(b). Bayonne also agreed to "cooperate with the Tenant in working with the New Jersey Department of Environmental Protection with respect to the issue of site remediation." Id. at p. 13 § 7(d).

In order to remediate the leased Bayonne site for the operation of the proposed EBUF, AMR NJ needed to acquire numerous operational and federal permits. See Defendants' Stmt. of Facts, at ¶ 91. Furthermore, AMR NJ needed to complete an environmental site investigation, develop a remediation plan for approval by New Jersey's Department of Environmental Protection ("NJDEP"), and then remediate the site. See id. at ¶ 92. Before NJDEP would issue a solid waste facility permit for the site, AMR NJ was required to attain inclusion in Hudson County's Solid Waste Management Plan. See id. at ¶ 93. In furtherance of this goal, on February 1, 1999, AMR NJ filed an "Application for Inclusion of a Solid Waste Facility or Recycling Center in the Hudson County Solid Waste Management Plan" with the HCIA. See Application, Kobin Cert., Exhibit 32. The application was formatted as a standardized set of inquiries to which AMR NJ also attached an appendix, providing detailed information about the operation of the proposed EBUF, including sections on odor, air pollution, noise, and litter control. See id. at pp. 10-13. By a letter dated April 30, 1999, the HCIA requested additional information from AMR NJ about the proposed facility, and AMR NJ complied with the request. See April 30, 1999 Letter, Kobin Cert., Exhibit 40; July 27, 1999 AMR NJ Response, Kobin Cert., Exhibit 41.

As part of its review of AMR NJ's project, the HCIA contracted with an engineering firm, Paulus Sokolowski and Sartor, and a law firm, DeCotis, Fitzpatrick & Gluck. On October 8, 1999, the HCIA sent notice of a public hearing to be held on October 13, 1999 regarding inclusion of the AMR NJ project in the Hudson County SWMP. Ronald Klempner, one of AMR NJ's principals, and AMR NJ's attorneys attended the public hearing. At the hearing, the legal and engineering findings were presented by the respective firm representatives. Both firms, for various reasons, recommended that the HCIA deny AMR NJ's application. See Transcript of October 13, 1999 HCIA Meeting, DiLascio Cert, Exhibit DD, at pp. 15, 17. Neither Mr. Klempner nor any AMR NJ representative spoke at the hearing.

Throughout the summer of 1999 and prior to the October 13, 1999 HCIA public hearing, opposition to AMR NJ's proposed project developed within the community. The Bayonne Planning Board approved the project at its July 13, 1999 meeting. At that meeting, however, city residents who lived adjacent or near the proposed site expressed concern about the project, and specifically questioned the potential impact on property values, and the noise and pollution that the trains would produce in the neighborhood. See Transcript of Planning Board Meeting, DiLascio Cert., Exhibit II. In addition, at the Planning Board meeting, anti-New York garbage sentiment was expressed by local residents. For example, one Bayonne resident asked the following rhetorical question: "So why are we allowing an outside company with no track record, no history in the City [of Bayonne] to bring garbage into Bayonne and then take it out on the rails?" Id. at p. 155. The resident's own answer was "[l]et New York City take care of its own garbage." Id. Besides attending the planning board meeting and vocalizing their opposition, local residents organized a group called Residents Against Transfer Station (RATS), planned public demonstrations, and circulated petitions against the facility. Robert Janiszewski issued a letter to all "Bayonne Residents" advising them that "the proposed project would not be beneficial to the community of Bayonne or the County of Hudson." Janiszewski Letter, DiLascio Cert., Exhibit Q. This letter acknowledged that Janiszewski previously believed that the project had merit, but upon closer reexamination realized that it raised "serious concerns."

At the HCIA public hearing, Janiszewski, as well as individuals who resided in the vicinity of the proposed facility, spoke out against inclusion of the project in the SWMP. Among other things, Janiszweski stated that "New York City's challenge should not become New Jersey's problem or Bayonne's burden." October 13, 1999 Transcript, DiLascio Cert., Exhibit DD, at p. 25. Bayonne residents expressed similar sentiments, such as "New York City should take care of their [sic] own garbage." Id. at p. 50. At the close of the hearing, Chairman John Shinnick moved to introduce a resolution recommending to the Hudson County Board of Chosen Freeholders that inclusion of AMR NJ's application in the Hudson County SWMP be denied. See id. at p. 60. That evening, the motion was unanimously approved. On October 28, 1999, the Board of Chosen Freeholders unanimously accepted the HCIA recommendation.

Approximately two months prior to the HCIA public hearing, on August 18, 1999, the Bayonne City Council adopted a resolution authorizing the Mayor and the City to negotiate with AMR NJ for termination of the Lease. See Resolution 99-08-18-001, DiLascio Cert., Exhibit CC. This resolution was announced and read by Bayonne Mayor Joseph Doria at the City Council meeting. According to plaintiff, it learned of Bayonne's decision earlier that day. By a letter dated November 3, 1999, AMR NJ stated that Bayonne's conduct "made it impossible for AMR NJ to perform" on its leasehold obligations, that AMR NJ "is no longer pursuing the Bayonne project," and that "the leasehold is abandoned." See DiLascio Cert., Exhibit GG.

New York City's 2001 final waste management plan for replacing the Fresh Kills landfill included negotiating a twenty- year contract with Browning Ferris Industries for the development of an EBUF in Linden, New Jersey. The subsequent administration of Mayor Bloomberg abandoned this plan in its entirety. New York City eventually decided not to rely on out-of-state processing and containerization in any respect. On July 31, 2002, Mayor Bloomberg announced that his administration was discontinuing the prior administration's plan to use a marine-to-rail transfer station in Linden, New Jersey. New York City had decided to utilize and upgrade its existing waste transfer stations, reasoning that this approach was more cost effective and environmentally sound than sending its waste out of state. See Corvo Cert., Exhibit 1.

DISCUSSION

A. Summary Judgment Standard

Summary judgment may be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Celetox Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue of material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a motion for summary judgment, a Court must construe the facts and inferences in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, only disputes over those facts "that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Once the moving party has carried its initial burden of demonstrating the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. No issue for trial exists unless the nonmoving party can adduce sufficient evidence favoring it such that a reasonable jury could return a verdict in that party's favor. Anderson, 477 U.S. at 249.

B. Commerce Clause Violation

Plaintiff's Commerce Clause claims in counts one and two of the second amended complaint are based on the following allegations: (1) that the standards defendants implemented to evaluate plaintiff's project were applied in a manner which had the effect of discriminating against interstate commerce; and (2) that the requirements for SWMP inclusion that defendants applied to AMR NJ were motivated by the intent to discriminate against interstate commerce. In other words, AMR NJ argues that the HCIA decision discriminated against interstate commerce in both its purpose and effect. Notably, AMR NJ does not challenge the constitutionality of the state statute (the Solid Waste Management Act), any regulations or any local ordinances. *fn3 Indeed, the Act does not differentiate between in-state and out-of-state generated waste, and thus, on its face, the Act does not discriminate against interstate commerce.

The United States Constitution provides that "[t]he Congress shall have Power . . . [t]o regulate Commerce . . . among the several States." U.S. Const., art. I, § 8, cl. 3. Although the Commerce Clause is an affirmative grant to Congress, the courts have interpreted the Commerce Clause to contain a "negative" aspect. This doctrine, referred to as the "dormant" Commerce Clause, limits a state's power to regulate interstate commerce in the absence of authority from the Congress. In essence, the dormant Commerce Clause "prohibits economic protectionism - that is, regulatory measures designed to benefit in-state economic interests by burdening out-of- state competitors." New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 273 (1988). The dormant Commerce Clause thus forbids state or local regulations that "impose commercial barriers or discriminate against an article of ...


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