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612 Associates, L.L.C v. North Bergen Municipal Utilities Authority


March 9, 2011


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3946-07.

Per curiam.


January 21, 2009 September 30, 2009

Argued December 10, 2008 - Decided Remanded by Supreme Court Remanded to Law Division March 5, 2010 Resubmitted February 24, 2011 - Decided Before Judges Cuff, Fisher and Baxter.

This appeal originated with the question of which of two sewerage authorities was entitled to payment of the sewerage connection fee in a circumstance where the housing development that generates the effluent is directly connected to one sewerage authority's collection lines, but the effluent is ultimately treated by the other. We held that the two sewerage authorities should share a non-duplicative connection fee that would be apportioned equitably between the two. 612 Assocs., L.L.C. v. N. Bergen Mun. Utils. Auth., 404 N.J. Super. 531, 540-41 (App. Div. 2009).

Thereafter, one of the parties, North Hudson Regional Sewer Authority (NHRSA), successfully petitioned for certification. 612 Assocs. v. N. Hudson Reg'l Sewer Auth., 199 N.J. 540 (2009). By order of September 30, 2009, the Court summarily remanded to this court for reconsideration of our earlier disposition in light of information added to the record by the Court's orders of June 1, 2009 and September 24, 2009. The order of remand specifically authorized us to remand the matter to the Law Division to make findings of fact if we deemed it advisable to do so.

Before describing the information added to the record by the Supreme Court, we pause to briefly describe the record as it existed at the time of argument before us in December 2008. Plaintiff 612 Associates, L.L.C. constructed a fifty-two unit condominium development in Union City ("the project"). 612 Assocs., supra, 404 N.J. Super. at 533. Plaintiff sought to connect the project to a sewerage treatment system, and because the project was located in Union City, plaintiff was required to directly connect its sewage disposal system to the sewer lines of defendant NHRSA. Id. at 533-34. However, because of the project's elevation, effluent flows only 300 feet through NHRSA's lines before reaching defendant North Bergen Municipal Utility Authority's (NBMUA) sewer lines, where it ultimately travels to, and is treated by, NBMUA's facility. Id. at 534.

Because NHRSA and NBMUA both asserted the right to collect a connection fee from plaintiff, and plaintiff was unwilling to pay a duplicate fee, plaintiff filed an interpleader action and ultimately deposited the $153,655 connection fee into an escrow account pending the determination of the dispute. Ibid.

Construing N.J.S.A. 40:14A-8(b) and N.J.S.A. 40:14B-22, we held that a user such as plaintiff, which has an indirect connection to NBMUA's waste treatment system, must pay a non-duplicative connection fee to NBMUA for that indirect connection in addition to the connection fee owed to NHRSA, with which it has a direct connection. Id. at 540-41. We remanded to the Law Division for a hearing to determine the fair apportionment between NHRSA and NBMUA. Id. at 541.

As we have noted, before the remand proceedings commenced in the Law Division, NHRSA sought, and was granted, certification. The Court granted leave to both NHRSA and NBMUA to supplement the record with certifications from their respective executive directors. Those certifications presented an issue not raised in the Law Division or before us, whether NBMUA, in a 1992 agreement with NHRSA, had waived its right to share in the sewer connection fees.

By order of March 5, 2010, we remanded the matter to the Law Division for an evidentiary hearing on the allegations contained in the supplemental information. We also directed the Law Division to resolve the apportionment issue that we addressed in our opinion, ibid., but which was never resolved because of the intervening motions before the Supreme Court.

Pursuant to our March 5, 2010 remand order, the Law Division conducted an evidentiary hearing on August 23, 2010, during which the judge heard the testimony of Patricia Bartoli, the chief financial officer of NBMUA; Frank Pestana, executive director of NBMUA; Frederick Pocci, executive director and chief engineer of NHRSA; and Jeffrey Enright, a consultant whose employer, N.W. Financial Group, serves as the financial advisor to NHRSA.

On the subject of whether, as NHRSA contended, NBMUA had earlier waived its right to share in the connection fees whenever it had only an indirect connection, Judge Mary Costello considered Pocci's testimony. He explained that in 1992, a proposed "Billing Agreement" was drafted, which would have created a "blended rate" that would be charged to customers whenever the effluent flow from any of the participating towns was treated by more than one sewage treatment plant. Notably, Pocci's earlier certification to the Supreme Court had asserted that the unsigned 1992 Billing Agreement afforded NHRSA the "exclusive right" to collect a connection fee from new users in the affected area of Union City. According to his certification, even though there was never a signed agreement, "the North Bergen MUA has never received any connection fee from these users, nor has the North Hudson [R]SA ever agreed to permit it to do so." As is evident, Pocci's trial testimony fell far short of the assertions contained in his certification.

The "Billing Agreement" was never signed by either of the proposed participants, NBMUA or the Hoboken-Union City-Weehawken Sewage Authority (HUCWSA), which was the predecessor of NHRSA. Nor did NHRSA ever adopt a resolution authorizing participation in the "Billing Agreement."

On cross-examination, Pocci conceded that the proposed "Billing Agreement" was intended to address the ongoing user fees, not the one-time sewer connection fees that are the subject of this appeal.

In a comprehensive and well-reasoned written opinion of October 4, 2010, Judge Costello considered NHRSA's argument that the "Billing Agreement" was a contract in which NBMUA waived its right to share in connection fees from users in the area covered by NHRSA. She rejected NHRSA's argument, reasoning:

It is abundantly clear from the record that NBMUA at no time entered into a contractual agreement with NHSA or its predecessor entity in which NBMUA waived any rights to share in sewer connection fees. The document offered in evidence as NH-5 is entitled "Billing Agreement." It is unsigned. The proposed agreement involves different parties than those in the case at bar, specifically, the predecessor to NHSA then known as Hoboken Union City Weehawken Sewerage Authority or "HUCWSA." The proposed agreement makes specific reference to another document called a "Service Agreement" which makes HUCWSA responsible for the "treatment, purification and disposal" of sewage originating in Union City, Hoboken and Weehawken. Further, the stated intent in the "Billing Agreement" is to "memorialize a procedure by which HUCWSA may pay NBMUA for treatment. . . ." Nowhere in the "Billing Agreement" does it mention anything about sewer connection fees. The "Billing Agreement" appears to relate solely to the treatment of effluent and has nothing whatsoever to do with one-time sewer connection fees like those at issue in this case.

To the extent this "Billing Agreement" had been offered to suggest that there was a contract and NBMUA waived any rights to share in sewer connection fees, it is deficient. None of the testimony offered by Mr. Pocci regarding the document served to persuade otherwise. As such, the Court finds that no such contract ever existed and NBMUA never waived any rights to share in sewer connection fees.

Judge Costello then proceeded to an analysis of the second issue presented by our remand order, namely, whether there had been any instances in the past when a Union City user had paid a connection fee to NBMUA even though its direct connection was to NHRSA. The judge began by noting that "this area of Union City accounts for only 1% of the entire city area." From Pestana's testimony, the judge found that there had been two instances in 2003, and one instance in 1989, when a user had remitted a sewer connection fee to NBMUA even though the user's direct connection was to NHRSA. The judge found that in light of the small geographic area, and the practical difficulties NBMUA experienced in learning of such indirect connections, it was not surprising that only three such prior instances were known. Nonetheless, according to the judge, it was "clear that NBMUA has been collecting sewer connection fees from users in Union City when they were on notice of such connections."

Last, having concluded that NBMUA had not waived its right to a connection fee from Union City users, and that there was precedent for NBMUA receiving a connection fee in such circumstances, the judge addressed the remaining question of how the connection fee should be apportioned between NHRSA and NBMUA. We need not discuss in detail the judge's careful and thoughtful approach to that issue as it is outside the scope of the Supreme Court's September 30, 2009 remand. Suffice it to say, after considering the testimony of all four witnesses, the judge held that NHRSA should receive 27.1 percent of the $153,655 held in escrow, $41,641, and NBMUA should receive the remaining 72.9 percent, $112,014. The judge signed a confirming order on October 4, 2010.

Having considered the record on remand and Judge Costello's written opinion, we hold there is no reason to reconsider the conclusion we reached in our 2009 published opinion that the connection fee should be equitably apportioned between the two sewage authorities. As is abundantly clear from Judge Costello's opinion, and from Pocci's testimony, the "Billing Agreement" upon which NHRSA relies to support its waiver argument was never executed by the parties, and never advanced beyond the initial draft. Moreover, the "Billing Agreement" did not pertain to connection fees, but instead purported to address a wholly different subject, user fees.

Consequently, we discern no reason to reconsider the apportionment conclusion we reached in our 2009 opinion.

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