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Cali Associates v. Borough of Caldwell

August 5, 2009

CALI ASSOCIATES, A NEW JERSEY GENERAL PARTNERSHIP AND LOUGHEED ASSOCIATES, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
v.
THE BOROUGH OF CALDWELL, DEFENDANT, AND THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, BELLEMEAD DEVELOPMENT CORPORATION AND AUTOMATIC DATA PROCESSING, INC., DEFENDANTS-RESPONDENTS/CROSS-APPELLANTS.



On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-848-83E.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 13, 2009

Before Judges Skillman, Graves and Grall.

Following a bench trial on plaintiffs' claim of tortious refusal to deal, the court found defendants liable and awarded plaintiffs damages and interest in the total amount of $1,459,283. Plaintiffs Cali Associates and Lougheed Associates appeal, and defendants Prudential Insurance Company of America, Automatic Data Processing, Inc. (ADP) and Bellemead Development Corporation cross-appeal.

This is the fourth appeal involving this litigation about access to a sewage treatment plant in the Borough of Caldwell which serviced the Borough of Roseland. On each prior appeal, we determined the validity of separate claims and remanded for further proceedings. In Cali Assocs. v. Borough of Caldwell, No. A-5386-90 (App. Div. Dec. 23, 1992) (slip op. at 5-6), we held that the Borough of Caldwell had unlawfully delegated to defendants its responsibility to allocate access and remanded for reconsideration of plaintiffs' antitrust claims. In Cali Assocs. v. Borough of Caldwell, No. A-600-93 (App. Div. Apr. 5, 1995) (slip op. at 5-6), we affirmed a grant of summary judgment in favor of defendants on their antitrust claims and remanded "to enable the trial court to determine damages if any, to which plaintiffs are entitled apart from the antitrust statutes." In Cali Assocs. v. Borough of Caldwell, No. A-466-96 (App. Div. May 21, 1998) (slip op. at 6), we held that the defendants' success on the antitrust claim did not insulate "them from common law liability for a tortious refusal to deal" which must await a "factual determination based on plaintiffs' proofs" of malice at trial. The only claim before the trial court on the final remand was tortious refusal to deal.

In 1979, each one of the parties to this litigation had plans to develop property in Roseland. These were not joint ventures; each party had its own projects in mind. Nonetheless, the parties encountered the same problem - a lack of adequate capacity for treatment of the additional volume of wastewater that their projects would produce.

At that time, Roseland's wastewater was treated in a facility operated by Caldwell, which was already receiving more wastewater than it could treat. The inadequacy of Caldwell's treatment facility had not escaped notice; on January 11, 1979, the New Jersey Department of Environmental Protection (DEP) issued an administrative order directing Caldwell to "cease approving any new sewer extensions to its sewerage system which will or may contribute flow to [its] Treatment Plant." In March 1979, DEP relaxed the restriction to permit extensions that would contribute 2000 or fewer gallons per day (gpd).

During the same period, DEP established an infiltration/influx reduction program to reduce the volume of water treated in Caldwell's facility. As aptly described in plaintiffs' brief, the concept of that program was rather simple. It involved removal of extraneous water from sewer systems serviced by the Caldwell Waste Treatment Plant through efforts by the developers such as pipe replacement, leak repair, manhole cover sealing and the like. For every two gallons per day eliminated, a developer would earn a credit authorizing use of one gallon per day capacity. The potential for success was limited by the volume of influx and infiltration attributable to such defects. Although the concept of this two-for-one infiltration/influx program was simple, implementation required identification of points of entry, a plan for correction, completion of the excavation and repair or construction, confirmation of the gallon-per-day reductions achieved, and ultimately issuance of permits authorizing contribution at a rate of one-half the volume of extraneous water removed from the system.

Prudential planned to build four office buildings on two hundred acres for its own use and estimated a need for a sewerage permit authorizing input of approximately 151,000 gpd. ADP expected it would need authorization for 64,000 gpd to obtain approval for construction of three office buildings for its use on a fifty-acre property it purchased from Bellemead in 1978. Bellemead, a real estate developer, planned to establish a corporate center consisting of eight buildings remaining on its tract after the sale to ADP. Bellemead's engineer estimated that the project would require sewerage permits for 80,000 to 85,000 gpd.

Bellemead and Prudential, proceeding individually, each obtained DEP's early, preliminary approval to participate in this program - respectively, on April 12 and 17, 1979. Prudential promptly acted on its approval.

On May 9, 1979, Caldwell and Prudential reached an agreement under which Prudential would proceed with the necessary work in consultation with an independent engineering firm, Elson T. Killam Associates, Inc. Prudential, at its expense, agreed to provide a preliminary engineering investigation and a proposal for structural improvements from Killam, complete the work and demonstrate the reductions in infiltration/influx achieved. Prudential was obligated to obtain approvals at each stage of the project from the responsible state and local authorities as well as specified insurance coverage for itself and Caldwell and a performance bond. After completing the work to Caldwell's satisfaction, Prudential could not utilize the credits without a permit from DEP.

Prudential agreed to eliminate a minimum of 40,000 gpd, enough to permit Prudential to proceed with a development project that would contribute 20,000 gpd to Caldwell's treatment plant. And, Caldwell agreed to allow Prudential to complete additional improvements under the same terms either on its own or by contracting "with any third party or third parties having need for sewerage capacity in the Caldwell sewerage district." Participating third parties would then become entitled to discharge into the Caldwell system at the same rate with a final approval from DEP. On June 21, 1979, DEP approved ADP's participation with Prudential conditioned on Caldwell's acceptance.

Bellemead pursued a different plan, diversion of wastewater that would otherwise be treated at the Caldwell plant to plants in other municipalities. Bellemead sought and acquired preliminary approval for a two-for-one credit for the volume decreased by its diversionary project.

On April 7, 1980, DEP reported to Caldwell's Mayor on proposals it had approved and its intention to deny future applications requesting participation on the same terms:

As an alternative to eliminating infiltration from the system, Bellemead Corporation has requested capacity in exchange for diverting wastewater from existing wastewater systems within the Caldwell Borough sewer service area (5-Borough district).

The purpose of this letter is to advise you that this type proposal is acceptable to us on an interim basis provided the ratio of diversion to requested capacity is two to one.

The only amount of flow we will approve for treatment at the Caldwell plant with an interim diversion or infiltration elimination proposal is as follows:

1. Bellemead Corporation - 100,000 GPD

(200,000 GPD diverted or average daily

infiltration removed).

2. Prudential Insurance Co. - 20,000 GPD

(40,000 GPD diverted or average daily

infiltration removed).

3. Automatic Data Processing, ...


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