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Penpac Inc. v. County of Passaic

Superior Court of New Jersey, Appellate Division

December 27, 2013

PENPAC, INC., Plaintiff-Appellant,
COUNTY OF PASSAIC, Defendant-Respondent.


Submitted December 3, 2013.

On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-2635-11.

Nee, Beacham & Gantner, attorneys for appellant (Robert J. Beacham, on the brief).

Lum, Drasco & Positan, L.L.C., attorneys for respondent (Wayne J. Positan, of counsel and on the brief; Noah J. Gold, on the brief).

Before Judges Fisher and Koblitz.


This appeal concerns the liability of Passaic County for one particular debt of the Passaic County Utilities Authority (PCUA or the Authority). Plaintiff Penpac, Inc., a waste management company, holds a judgment against the PCUA for services rendered. Penpac appeals from an October 25, 2012 order granting summary judgment to Passaic County and dismissing Penpac's complaint seeking that the County pay the PCUA's debt of between one and two million dollars.[1] Passaic County agreed to financially assist the Authority in a number of agreements, but refused to pay the PCUA's debt owed to Penpac.

Penpac makes five arguments in opposition to the grant of summary judgment to the County. First, Penpac argues that defendant Passaic County has de facto dissolved the PCUA, and because the Municipal and County Utilities Authority Law (MCUA), N.J.S.A. 40:14B-1 to -69, requires that an authority's debts be paid upon dissolution, the County is now liable for all of the PCUA's debts. Second, Penpac argues that the County has assumed all of the PCUA's liabilities by operating the authority as a shell corporation. Third, Penpac maintains that the County has waived any statutory protection from the debts. Fourth, Penpac posits the County has de facto merged with the PCUA. Finally, Penpac argues that the PCUA's corporate veil should be pierced. The motion judge rejected these arguments and we affirm.

In 1987, the County created the PCUA pursuant to the MCUA, which empowers counties to create entities to provide waste removal services. From 1987 through 1992, Penpac contracted to perform trash and waste transfer services for the PCUA. In October 1992, after the contractual relationship between Penpac and the Authority expired, the PCUA filed an administrative action seeking that Penpac be required to continue rendering waste services. The New Jersey Department of Environmental Protection (DEP) determined that the service relationship between the parties should continue and in 1999 the rate of payment for these services was established by an Administrative Law Judge. Penpac was awarded approximately $8 million in under-recovery from the interim rates previously established by the DEP.

That $8 million dollar award was reduced to $3, 238, 792[2] on July 5, 2000 as a result of the Third Circuit decision that ruled unconstitutional New Jersey's waste flow rules and regulations, Atlantic Coast Demolition & Recycling v. Bd. of Chosen Freeholders of Atlantic Cnty., 112 F.3d 652 (3d Cir. 1997) cert. denied, 552 U.S. 966, 118 S.Ct. 412, 139 L.Ed.2d 316 (1997).

After Penpac successfully obtained a judgment for the first award, it sought mandamus relief, seeking an order requiring the Authority to satisfy the judgment out of monetary assets it held in various bank accounts.

Judge Burrell Ives Humphreys granted mandamus relief, requiring the PCUA to turn over $701, 230.41 from one account and $1, 702, 220.84 from other accounts in addition to all future income from a mortgage.[3] Judgment was then entered on the Remand Award. The PCUA did not fully satisfy the total judgment of $4, 831, 685. Seeking further relief, Penpac filed for mandamus a second time in 2009. In 2010, the PCUA was ordered to formally seek assistance from the County and the New Jersey Local Finance Board (LFB) to help satisfy the outstanding balance owed to Penpac, which the PCUA did to no avail.

Although the County has not paid this debt, it has provided financial support to the PCUA to pay some of the PCUA's other obligations. One agreement allowed the PCUA to pay for its landfill facilities and administrative expenses. Another established a plan for the PCUA to make full payment of two unrelated settlements. To pay for these obligations, the PCUA, ...

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