Chambers Development Co. v. Passaic County Utilities Authority

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit

8-14-1995

Chambers Dev Co v Passaic Cty
Precedential or Non-Precedential:

Docket 94-3475

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 UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

NO. 94-3475
____________

CHAMBERS DEVELOPMENT COMPANY, INC.;
CONEMAUGH TOWNSHIP, SOMERSET COUNTY,
COMMONWEALTH OF PENNSYLVANIA

v.

PASSAIC COUNTY UTILITIES AUTHORITY

Chambers Development Company, Inc.,
Appellant

____________

Appeal from the United States District Court
for the Western District of Pennsylvania
D.C. No. 92-cv-00509J
____________

Argued June 15, 1995
Before: STAPLETON, McKEE, and ROSENN, Circuit Judges
( Opinion Filed August 14, 1995)
____________

MICHAEL R. COLE, ESQUIRE (Argued)
Riker, Danzig, Scherer, Hyland & Perretti
One Speedwell Avenue
Headquarters Plaza
Morristown, NJ 07962-1981
Counsel for Appellant

JONATHAN L. WILLIAMS, ESQUIRE (Argued)
DeCotiis, Fitzpatrick & Gluck
401 Hackensack Avenue
Hackensack, NJ 07601
Counsel for Appellee
____________

OPINION OF THE COURT

ROSENN, Circuit Judge.

1
 This appeal raises an issue of contract interpretation

which has important consequences to the parties and the citizens

of Passaic County, New Jersey. The Passaic County Utilities

Authority (PCUA or the Authority) finds itself confronted with

two written contracts it executed with different parties for the

disposal of solid waste during substantially the same period of

time. Finding the later contract more attractive, PCUA claims

the earlier contract is unenforceable because the New Jersey

Department of Environmental Protection and Energy (DEP) did not

grant the required approval.

Chambers Development Company, Inc. (Chambers), a

Pennsylvania corporation, entered into two interrelated

contracts0 in 1987 with PCUA for Passaic County's waste disposal

over a fifteen year period. On August 5, 1992, the Authority

signed a Memorandum of Understanding (MOU) with Empire Sanitary

Fill, Inc. (Empire), another Pennsylvania corporation, for the

disposal of Passaic County's solid waste for the next fifteen

years. This prompted Chambers to bring this diversity action in

the United States District Court for the Western District of

Pennsylvania seeking an injunction enjoining the Authority, inter

alia, from entering into a waste disposal agreement with Empire

in abrogation of its waste disposal contract with Chambers.

In November 1992, the district court granted Chambers a

permanent injunction, requiring the Authority, unless directed to

0
The parties frequently refer to these contracts as a two-part
contract. The contracts provide that they are to be interpreted
in accordance with the law of New Jersey.

2
the contrary by DEP, to continue operating under the terms and

conditions of its contract with Chambers for waste disposal. The

injunctive order, however, further provided that it should not be

construed to restrict any of the parties in proceeding before DEP

to seek approval or disapproval "of any primary long-term plan

for the disposal of municipal solid waste by the PCUA." In

December 1993, the Authority submitted the Empire MOU to DEP for

approval.0 Ultimately, after a lapse of nine months, DEP

approved Empire as the primary disposal agent for PCUA.

On January 25, 1993, Chambers filed a motion for

summary judgment asserting that the Authority had breached its

contract with Chambers by approving the MOU with Empire and

sought damages. The Authority opposed the motion. The parties

and the court then plunged into a procedural miasma which is

virtually impenetrable. After Chambers filed its summary

judgment motion, the district court referred the matter to a

magistrate judge who issued a report recommending that the

district court grant summary judgment to the Authority "on

plaintiff Chambers' motion for summary judgment," although the

Authority never moved for summary judgment.

On June 29, 1994, the district court issued an order

denying Chambers' motion for summary judgment, entering judgment

on Chambers' claim for damages in favor of the Authority and

0
The Authority petitioned DEP specifically for approval of the
Empire contract. However, it did not do so with the earlier
Chambers contract. As to it, the Authority sought to have DEP
approve Passaic County's Amended Solid Waste Disposal Plan so as
to permit it to implement the Chambers contract.

3
adopting the magistrate judge's Report and Recommendation as the

opinion of the court. The court then directed the parties to

regard this order as a "final decision." Neither the magistrate

judge nor the district court notified Chambers that they were

considering granting summary judgment against Chambers or

afforded Chambers an opportunity to present pertinent evidence in

opposition to summary judgment.

On July 13, 1994, Chambers moved, pursuant to Fed. R.

Civ. P. 59, to amend the district court's June 29, 1994 judgment

to direct a hearing to determine whether PCUA breached its duty

of good faith performance for its contract with Chambers. The

court denied the motion. Chambers appealed to this court from

the order of the district court denying its motion to amend the

judgment. We vacate and remand.

I.

The waste disposal contracts executed between Chambers

and PCUA in 1987 consisted of a short-term agreement and a long-

term agreement. The short-term agreement covered the period 1987

to 1992, while the long-term agreement stretched from 1992 to

2002. Although we see no such provision in the agreements, and

we are referred to none, it is undisputed that DEP had to approve

the amendment to the Passaic County District Solid Waste

Management Plan designating Chambers as the primary landfill

system for Passaic County's waste disposal before the contract

between Chambers and the Authority became enforceable. N.J.S.A.

13:1E1-29b. The Authority and Chambers performed the short-term

4
contract without incident. The long-term agreement, however, is

at issue in these proceedings.

Several months prior to the December 1, 1992 starting

date of the long-term agreement, the Authority began negotiating

with Empire for the disposal of Passaic County waste. These

negotiations resulted in Empire and the Authority signing the

Memorandum of Understanding on August 5, 1992 providing that

Empire would dispose of Passaic County waste for the next fifteen

years. Chambers' injunctive action followed.

On appeal, Chambers and the Authority both treat the

district court's order denying Chambers' motion for summary

judgment as one granting summary judgment to the Authority on the

breach of contract issue. However, the district court did not

grant summary judgment to the Authority on the contract issue,

although it did enter judgment for the Authority on the question

of damages.0 The magistrate judge's opinion, adopted by the

district court, does not address every aspect of Chambers'

motion. The district court essentially entered summary judgment

on the claim for damages to a non-moving party without addressing

all of the issues raised by Chambers. We will not review an

order denying a motion for summary judgment. See, e.g., Hart v.

Overseas Nat. Airways, Inc., 541 F.2d 386, 394 (3d Cir. 1976).

0
The district court order states that Chambers' "motion for
summary judgment is denied, and judgment on [Chambers'] claim for
damages is entered in favor of the [Authority]."

5
However, we will review the court's order entering judgment for

the Authority on the issue of damages because it is "final."0

II.

The district court provides no explanation or

justification for entering judgment for the Authority on the

damages question. Presumably, the court concluded as a matter of

law that the Authority had not breached its contract with

Chambers and therefore Chambers was not entitled to any damages.

This constitute both procedural0 and substantive error.

A party must perform a legal contract unless that

performance is excused for a valid reason; failure to perform is

a breach. 11 Williston on Contracts § 1290 (3d ed. 1968). The

contract between Chambers and the Authority was a valid contract

when signed in 1987. However, both parties agree that the

contract was subject to approval by DEP of Passaic County's

amended solid waste plan. DEP did not approve Passaic's

0
The district court possessed subject matter jurisdiction
pursuant to 28 U.S.C. section 1332. This court has appellate
jurisdiction over the district court's final order under 28
U.S.C. section 1291.
0
Although authority has developed to allow a court to grant
summary judgment to a non-moving party, see American Flint Glass
Workers Union v. Beaumont Glass Co., No. 94-3307 ((3d Cir. 1995);
Viger v. Commercial Ins. Co., 707 F.2d 769 (3d Cir. 1983), a
judgment cannot be entered without first placing the adversarial
party on notice that the court is considering a sua sponte
summary judgment motion. The court must also provide the party
with an opportunity to present relevant evidence in opposition to
that motion. Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986);
Lutz v. York, 899 F.2d 255, 258 n.5 (3d Cir. 1990). The court
did neither in this case. Moreover, the Authority never
attempted to show that it merited summary judgment because it was
opposing Chambers' motion, not supporting a motion of its own.
Additionally, there are numerous issues of fact which preclude a
grant of summary judgment here. See text infra.

6
amendment for its long-term waste disposal designating Chambers'

landfill system for the 1992-2002 period. Rather, it approved

the designation of Chambers as a component of Passaic County's

contingency waste disposal plan.0

Chambers first contends that DEP's contingent approval

of the plan made them the exclusive out-of-state disposal

facility for Passaic County waste, subject only to the

development of in-state alternatives. It points to the following

passages from the various DEP approval memoranda to support its

argument.
The New Jersey Advisory Council on Solid
Waste Management commented that although
Passaic County has secured disposal space,
the county remains wholly dependant on out-
of-state disposal. [DEP] specifically
addresses this comment by approving the
interim arrangements for out-of state
disposal and authorizing modified approval of
the longer term arrangement as an integral
component of Passaic County's solid waste
contingency plan. June 24, 1987
Certification.

However, [DEP] is unable to approve the
[Chambers] arrangement as the primary
landfilling system for the disposal of
[waste]. N.J.S.A. 13:1E-21(b)3 places a
legal obligation on each district to plan for
sufficient available suitable in-county
disposal sites. . . . the division maintains
that the only solution to the long-term
disposal needs of Passaic County is the
development of in-county facilities or to
secure interdistrict agreement with other New
Jersey counties. In light of these factors,
and the extent that Passaic County has failed

0
DEP stated that: "In place of approving the primary long-term
use of the [Chambers] arrangement, [DEP] has modified the
amendment to reflect approval of the long-term use of these
facilities as a component of Passaic County's Contingency Plan."

7
 to meet its planning obligations pursuant to
N.J.S.A. 13:1E-21(b)3, [DEP] cannot approve
primary dependance upon out-of-state residual
disposal capacity for the period 1993 to
2002. June 24, 1987 Certification.

[W]ithin forty-five days of the date of this
certification, Passaic County is directed to
submit the remainder of its solid waste
contingency plan in plan amendment form for
state level review . . . . More
specifically, the remainder of the plan
should address in-county residual landfill
development, the development of interdistrict
agreements on an interim/emergency basis, and
the identification of alternate landfilling
options. June 24, 1987 Certification.

Chambers also refers to the following DEP memoranda:

As such, Passaic County currently has no
disposal plan in place and the long-term use
of out-of-state disposal was authorized only
within the context of contingency plan backup
use as stated within [DEP's] September 1,
1987 certification. April 1, 1992
Certification.

The Continued failure on the part of the
County to enter into a regional in-state
disposal agreement or to identify and develop
in-county capacity is a serious plan
deficiency. . . . April 1, 1992
Certification.

Conversely, the Authority maintains that DEP's

contingent approval of the plan amendment permitted it to replace

Chambers with any waste disposal alternatives. In support, it

also cites the following DEP memoranda:
[T]he remainder of the plan should address
in-county residual landfill development, the
development of interdistrict agreements on an
interim/emergency basis, and the

8
 identification of alternate landfilling
options. June 24, 1987 Certification.0

The remaining Long Term Agreement was merely
a contingent arrangement which, for [DEP]
purposes, never took effect. October 7, 1993
Certification.

[DEP] has consistently maintained the
position that the second phase of the
Chambers Agreement was approved for
contingency purposes only, . . . . Judge
Smith recognized the ability of [DEP] to
abrogate a portion of the Chambers agreement,
should more acceptable alternatives be
presented, although noting that at the time
the Memorandum Order was issued, [DEP] had
not yet taken any action to supplant the
contingent portion of the Chambers agreement.
. . . [DEP] is now taking that step by
approving, in modified form, an agreement
which better suits the needs of the public
and the goals of [DEP]. October 7, 1993
Certification.

These extensive quotations provide support for both

parties' contentions regarding the scope of DEP's contingent plan

approval, but they do not resolve the issue before the court

pertaining to the enforceability of the Chambers long-term

agreement. The district court never addressed this issue.

The court did consider DEP's contingent plan approval

sufficient to justify enforcing the Chambers contract in the

absence of DEP approval of some other plan.0 The court, however,

0
Chambers emphasizes the full text of this passage, while the
Authority looks only to the last clause.
0
The court stated in its November 20, 1992 Memorandum that:
"Because use of the Chambers' landfill is approved as a
contingency, and because [DEP] has approved no other plan for
disposal of solid waste in the 1992-2002 period, the PCUA is
obligated both under its Long-Term Agreement and under New Jersey
state law to continue to use Chambers' landfills."

9
did not resolve specifically whether DEP's original approval in

1987 made Chambers the exclusive out-of-state waste disposal

company for Passaic County waste after December 1, 1992, should

PCUA fail to develop in-state waste disposal facilities. Nor did

it address whether the Authority could seek a DEP order

authorizing it to use an alternative out-of-state waste disposal

facility without violating its contract with Chambers.0

Chambers next claims that the Authority itself acted as

if it expected Chambers' landfills to accept Passaic County waste

for the "long-term" period of the agreement. Chambers maintains

that the Authority commissioned reports to determine whether

Chambers had the capacity to fulfill its obligations to the

Authority for the entire period of the long-term agreement. For

example, the July 1991 Alaimo Capacity and Monitory Report of the

Chambers' landfills commissioned by the Authority, treats the

Chambers agreement as providing for disposal of Passaic County

waste for the duration of the long-term agreement. Chambers

argues that this report demonstrates that the Authority expected

to use Chambers for waste disposal after the short-term contract

expired. The Authority does not address this issue on appeal.

Additionally, neither party discusses the complaint

filed by the Authority on September 9, 1992, in the Superior

0
DEP has deferred to the courts for resolution of this issue. In
its October 7, 1993 Certification, DEP specifically notes that:
"Chambers has filed a damages claim in the Western District of
Pennsylvania. [Thus], it is in a position to be made whole if
the approval of the Empire Agreement is ruled an event under the
Chambers contract which entitles Chambers to its contractual
damages." October, 7, 1993 Certification.

10
Court of New Jersey Law Division, but the complaint lends further

support to Chambers' arguments. In the action against Chambers,

Empire, and DEP, the Authority noted that on June 14, 1987,

Passaic County adopted a plan amendment which called for reliance

upon the Chambers agreements as the County's primary landfill

disposal system from December 1, 1987, through the year 2002. The

complaint also alleged that due to changes in market conditions,

"the PCUA has now determined that it can save its citizens and

ratepayers substantial sums of money after 1992" by entering into

the MOU with Empire.

The Authority, therefore, brought an action for a

declaratory judgment declaring, inter alia, (1) that PCUA is not

liable to Chambers for failure to perform under the License

Agreements after 1992 if such performance is due to existence of

a later-approved primary disposal alternative; (2) declaring that

PCUA may terminate its License Agreements with Chambers upon

payment of exclusive recovery damages in accordance with section

9.3 of the contract; and (3) restraining Chambers from

interfering with PCUA's obligation to secure contractual

arrangements to provide safe, adequate, and economical services

to its ratepayers and citizens. This complaint suggests that the

Authority believed that its contract with Chambers was

enforceable.

Finally, Chambers contends that the Authority violated

the covenant of good faith and fair dealing by entering into the

Empire contract and submitting it to DEP for approval and that

this precludes entering summary judgment in the Authority's

11
favor.0 Under New Jersey law, every contract contains a covenant

of good faith and fair dealing which provides that "neither party

shall do anything which will have the effect of destroying or

injuring the right of the other party to receive the fruits of

the contract . . . ." Bak-A-Lum Corp. of America v. Alcoa Bldg.

Products, Inc., 351 A.2d 349, 352 (N.J. 1976) (citations omitted,

quotation omitted). The Authority does not dispute this.

However, the magistrate judge considered only whether

the implied covenant of good faith obligated the Authority to

"repeatedly resubmit" the Chambers plan to DEP for approval. He

completely ignored the district court's injunction which provided

that the Authority "shall continue operating under the terms and

conditions of the Long-Term Agreement" in its waste disposal

unless directed to the contrary by a valid DEP order.

Moreover, neither the district court nor the magistrate

judge addressed the Authority's possible bad faith by

affirmatively entering into a contract with Empire and actively

seeking DEP approval for that contract.0 Whether the Authority

violated the covenant of good faith and fair dealing by entering

0
Chambers also argues that the 1993 DEP approval of the Empire
contract does not justify the Authority's breach because DEP did
not accord Chambers sufficient process. We reject this argument.
DEP is a state administrative agency which is not a party to this
action. Moreover, under New Jersey law, Chambers could have
appealed the DEP decision to the Appellate Division of the New
Jersey Superior Court. N.J. Ct. R. 2:2-3.
0
Affirmatively attempting to avoid the terms of a contract
appears to be a violation of the covenant of good faith in New
Jersey. Cf. Leadership Real Estate v. Harper, 638 A.2d 173, 191
(N.J.Super. 1993); Nolan v. Control Data Corp., 579 A.2d 1252,
1257-62 (N.J.Super. 1990); Bak-A-Lum Corp. of America, 351 A.2d
at 352.

12
into the waste disposal contract with Empire, or by seeking DEP

approval for it, is critical to the resolution of the Chambers

contract claim and the related request for damages.

The district court commented in its memorandum order

that had there been evidence in the record to support Chambers'

counsel's assertion that the Authority as late as 1992 indicated

that the contract would be performed on a long-term basis, it

would have found that New Jersey precedent "required a hearing

into whether the PCUA breached a duty of good faith performance

of its contract with Chambers." The court concluded after

reviewing the record that whether PCUA breached its duty of good

faith to Chambers "is purely one of law, which the magistrate

judge adequately analyzed."

As we pointed out above, the magistrate judge did not

adequately analyze all of the issues raised by Chambers.

Additionally, there is considerable evidence of record which

warrants an evidentiary hearing and precludes a disposition of

this appeal as a simple question of law. Passaic County on June

24, 1987, amended its approved district solid waste management

plan to include the Chambers landfill system as the primary

landfill for the disposal of the County's solid waste. As we

have already noted, the amendment was rejected and modified in

part with respect to the waste disposal for the period 1992 to

2002. DEP thereupon "modified the amendment to reflect approval

of the long-term use of these facilities as a component of

Passaic County's Contingency Plan." DEP never nullified the

Chambers contract. The 1987 directive dealt with the Authority's

13
waste disposal plan and its certification addressed the plan. Any

effort to change, modify, or rescind that contract remained the

responsibility of the parties. Apparently, the contract remained

unchanged.

Therefore, the obligation to comply with DEP's

instruction regarding long-term waste disposal remained with

PCUA. Judge Stapleton, in his concurrence, believes that on this

record the Authority, had it filed a motion, would have been

entitled to summary judgment. We do not decide the merits of the

underlying dispute, however, because there are unresolved

material issues of fact regarding the Authority's obligations

under the Chambers unaltered and unrescinded long-term agreement

which can only be resolved by an evidentiary hearing. Besides,

on a motion for summary judgment Chambers would have been

entitled to the benefit of all inferences.

The long-term agreement contained no express provision

requiring that it be subject to approval of DEP. The contract,

however, could not be implemented unless DEP approved the amended

county plan. Not having approved the Authority's plan in toto,

DEP's 1987 enigmatic contingency certification relating to the

long-term waste disposal left the meaning of the Chambers long-

term contract susceptible to more than one interpretation. Did

the certification mean that the Chambers contract would be

effective in all its terms in the event PCUA failed to develop

in-state waste disposal options? Or did it mean the

certification effectively rendered the long-term agreement a

nullity permitting it to be replaced at the will and whimsy of

14
the Authority? This ambiguity creates questions of fact

susceptible to more than one meaning which preclude summary

judgment. Therefore, extrinsic evidence that objectively will

illuminate its meaning, especially the conduct of the parties,

will be helpful. In 1987, the Authority submitted its solid

waste plan to DEP for amendment as required by state statute so

that DEP could determine whether the contract conformed to the

amended plan. DEP rejected the plan amendment (not the

contract), not because of the intrinsic provisions of the

contract, but because the amendment did not provide for in-county

waste disposal facilities after the expiration of the Chambers

short-term agreement.0

The concurrence states (typescript at 2) that the

Authority "at the DEP's direction, took a fresh look at the

0
New Jersey, under its Solid Waste Management Act (Act),
established a statutory framework within which all solid waste
collection, disposal, and utilization activity in the state could
be controlled. In re Long-Term Out-of-State Waste Disposal
Agreement etc., 568 A.2d 547, 549 (N.J. Super.), cert. denied,
583 A.2d 337 (1990); N.J.S.A. 13:1E-2(b)(1). "It sought to
regulate such activity by means of a comprehensive state and
regional planning program." 568 A.2d at 549. To accomplish this
goal, each of the counties in the state was required to develop a
solid waste management plan. Passaic County developed such a
plan and apparently created the Authority to implement it. The
Act directed DEP to review each county's waste disposal plan
according to statewide objectives, criteria, and standards and to
approve, modify, or reject each county plan.

In 1975, New Jersey amended the Act in an effort to ensure that
all contracts relating to solid waste disposal conformed to the
applicable solid waste disposal plan. The Act provided that any
contract entered into after the effective date of the Act must
conform to the applicable provisions "of the approved solid waste
management plan of the relevant solid waste management district
or unless such contract is approved by the Commissioner."
N.J.S.A. 13:1E-29b.

15
available options" in 1992. We can see nothing in DEP's 1987

certification of the Authority's plan amendment that amounted to

a directive permitting it to take a fresh look at options in

1992. The 1987 directive rejected the district plan's

designation of Chambers for waste disposal during the long-term

period, but modified the plan to include Chambers as a component

of the Authority's contingency plan. It also directed Passaic

County within forty-five days of the date of certification to

submit for state level review its plan, inter alia, for inter-

district agreements on an interim emergency basis "and the

identification of alternative landfilling options."

During the forty-five day period or the five-year

period following the execution of the long-term agreement, the

Authority did nothing to rescind, modify, or alter its agreement

with Chambers. However, just prior to the expiration of the

short-term agreement, it negotiated a long-term agreement with

Empire because "PCUA has now determined that it can save its

citizens and rate payers substantial sums of money after 1992."0

Did the Authority's passivity over the five years evince an

acquiescence in the Chambers long-term agreement?0

0
The concurrence attaches some significance to DEP's 1993
approval of the Empire contract. This approval had no effect on
the Authority's obligations under the Chambers long-term
contract. DEP's approval of the Empire contract signifies only
that the Empire contract conforms to the New Jersey waste
disposal plan.
0
The 1987 certification instructed the Authority to renegotiate
any contracts to bring them into conformity with DEP's
modifications to Passaic County's solid waste disposal plan
within 90 days. The Authority apparently did not renegotiate the
Chambers agreement.

16
 Praiseworthy as the Authority's desire to save money

may be, it cannot justify the breach of a valid and enforceable

contract. The sanctity of a contract is a fundamental concept of

our entire legal structure. Freedom of contract includes the

freedom to make a bad bargain. "It is a fundamental principle of

contract law, therefore, that, wise or not, a deal is a deal."

Morta v. Korea Ins. Corp., 840 F.2d 1452, 1460 (9th Cir. 1988)

(quoting United Food & Commercial Workers Union v. Lucky Stores,

Inc., 806 F.2d 1385, 1386 (9th Cir. 1986)). Were this not the

law, no one, including a municipality or authority would be able

to enter into any long-term contract.

On remand, the district court should first determine

the effect of the 1987 DEP certification on the Chambers long-

term agreement. In connection, it should ascertain whether the

Authority evinced an understanding that the Chambers long-term

agreement was still binding by commissioning the 1991 Alaimo

report and other similar reports. It should also determine as a

fact the Authority's purpose in filing its complaint in the New

Jersey State Court and whether it supported Chambers' contention

that it and the Authority knew they had a binding contract in

place, subject only to the Authority's compliance with the DEP

certification. Finally, the court must factually determine

whether the Authority was attempting to disengage itself from

obligations under its long-term contract with Chambers because in

1992 it could secure a contract with Empire at better prices and

whether it violated the covenant of good faith and fair dealing

in so doing.

17
 III.

The district court entered summary judgment as a matter

of law against Chambers with respect to its claim for breach of

good faith and damages without conducting an evidentiary hearing

with respect to a number of material issues of fact. The court

also impermissibly entered summary judgment for the Authority on

the damages question. The court's order adopting the Report and

Recommendation of the magistrate judge must therefore be vacated.

The court's judgment in favor of the defendant on Chambers' claim

for damages will also be vacated. The case will be remanded to

the district court for further proceedings consistent with this

opinion, with the privilege to Chambers to amend its complaint to

enable it to present the case in its current status.

Costs taxed to the Authority.

18
19
CHAMBERS DEVELOPMENT COMPANY, INC., ET AL. v.

PASSAIC COUNTY UTILITIES AUTHORITY,

No. 94-3475

STAPLETON, Circuit Judge, concurring:

I agree that the district court improperly entered summary judgment for a

which had not moved for it and, accordingly, that a remand is required. I take a v

this case materially different from that of my colleagues, however.

The parties agree, as they must, that the short and long term agreements

them were conditioned on DEP approval. The Authority can effectively commit itself

respect to solid waste disposal only if and to the extent that it is authorized by

DEP.0 The short term agreement was approved by the DEP. The long term agreement wa

rejected. The DEP did, however, approve the Authority's performance of its long te
agreement with Chambers as a part of a contingency or "back up" plan0 and ordered th

Authority to formulate and propose an alternative, primary plan. Performance by th

Authority of the long term agreement was thus approved only in the absence of an ap

0
N.J.S.A. 13:1E-29b.
0
The DEP approved "the designation of the Chambers Development Company, Inc. land
system in Pennsylvania and other states as a component of Passaic County's continge
plan for the disposal of ash, by-pass, and non-processable waste associated with th
operation of the [then contemplated] Passaic County resource recovery facility for
time the facility is operational until the year 2002." App. at BA 24. The resourc
recovery facility was never constructed.

20
alternative plan, or stated conversely, the DEP did not sanction performance of the

term agreement when an alternative plan suitable to the DEP was in operation.0

Contrary to Chambers' assertion, the DEP's directive to the Authority to

formulate an alternative, more acceptable, plan did not limit the Authority to

consideration of waste disposal programs involving solely in-state disposal sites.

is apparent both from the text of the DEP's certification and from the fact that th

subsequently approved a long term plan involving out-of-state waste disposal by Emp

When the Authority, at the DEP's direction, took a fresh look at the avai

options, it found an alternative approach that it considered more in keeping with t

interest of its constituents and that it hoped would be acceptable to the DEP. As

directed, it filed a petition with the DEP for approval of a long term solid waste

management plan. This plan involved, inter alia, a proposed agreement to send 600-

tons per day of Passaic County's waste to the Bergen County Utilities Authority, an

interdistrict Agreement with Union County for Passaic's bulky wastes, and a 15 year

0
The district court, in its November 1992 decision, correctly read the DEP's 1987
certification in this way. Its November 20, 1992, injunction read:

Unless and until directed to the contrary by a valid certification of
the New Jersey Department of Environmental Protection and Energy, the
PCUA shall continue operating under the terms and conditions of the
Long-Term Agreement for the Grant and Acquisition of a License for Ash
Residue Waste Disposal. Provided, however, that nothing in this Order
shall be construed as restricting any proceeding by any party before
the NJDEPE seeking approval or disapproval of any primary long-term
plan for the disposal of municipal solid waste by the PCUA.

App. at BA 33 (emphasis supplied).
0
Thus, the November 20, 1992, injunction made it clear that, despite the long ter
agreement and the 1987 DEP certification, "any party" was free to seek DEP approval
any primary long term plan." App. at BA 33 (emphasis supplied).

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disposal contract with Empire. The Empire contract called for out-of-state disposa

site much closer to Passaic County than Chambers' disposal sites and for significan

lower disposal rates. As Chambers acknowledges, the DEP, at least at this point, w

responsible for considering the economic as well as the environmental aspects of di

plans.

The DEP did not give immediate, unconditional approval to the Authority's

term plan. However, on October 7, 1993, it did approve the Empire Agreement for an

initial term of two years with a possible renewal for three years. With respect to

and other aspects of the plan, the DEP ordered that further data and analysis be su

and that the Authority continue to seek in-state disposal capacity.

It is difficult for me to see how Chambers can complain in this context.

knew that the long term agreement was subject to DEP approval. It further knew fro

day of the 1987 certification that it would have no enforceable right to the Author

waste if the Authority could come up with a means of disposal that the DEP found

preferable to the arrangement with it. If Chambers did not like its position after
1987 certification and felt, understandably, that the approved contingent arrangeme

fundamentally different from the arrangement to which it had agreed, I am confident

no court would have held it bound to the restructured agreement.

I find it even more difficult to understand how Chambers can fault the

Authority. The Authority submitted the long term agreement to the DEP and pursued

good faith. When its application was rejected and it was ordered to submit an alter

primary plan, it did so. While Chambers argues that the DEP's limited approval of

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Empire agreement was inconsistent with its 1987 certification, that complaint is ab

DEP, not the Authority.

In my view, the district court correctly concluded on the basis of the cu

record that the Authority breached no covenant of the long term agreement, express

implied, and that no amount of purported "reliance by Chambers can . . . remove the

Commission's power to certify another solid waste plan." App. at BA 31.

I find unpersuasive the argument that the Authority breached an implied d

good faith by proposing an operator of an out-of-state site other than Chambers in

alternative primary plan. As the magistrate judge explained, the purpose of New Je

"good faith covenant" rule is not to impose a duty beyond the original intent of th

parties, but rather to prevent a party from taking action which frustrates that int

The rule is intended to preserve for a party only "the fruits of the contract."

Associated Group Life, Inc. v. Catholic War Veterans of U.S., 293 A.2d 382, 384 (N.

1972). If the Authority, for example, had failed to submit the long term contract

DEP for approval or had prosecuted an application for approval in a manner that cau
rejection, the Authority would have breached its covenant of good faith.0 It is
0
Chambers relies heavily on Illustration 4 of Restatement (Second) of Contracts §
(1979):

A contracts to sell and B to buy A's rights as one of three
lessees under a mining lease in Indian Lands. The contract states
that it is "subject only to approval by the Secretary of the
Interior," which is required by statute. B files a request for
approval but A fails to support B's request by giving necessary
cooperation. Approval is denied and A cannot convey his rights. B
has a claim against A for total breach of contract. A's breach of his
duty of good faith and fair dealing contributed materially to the non-
occurrence of the condition, approval by the Secretary of the
Interior, excusing it.

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undisputed here, however, that the Authority submitted the long term agreement to t

and was not responsible for its rejection. To the extent Chambers' complains about

Authority, it complains of the Authority's conduct in response to the rejection of

long term agreement. But, as the magistrate judge correctly noted, there is no ind

in this record that the parties, "when they negotiated the Long-Term Agreement in 1

had any meeting of the minds concerning the action that they would take if the [DEP

rejected the agreement as the primary plan and accepted it as a contingent plan onl

App. at BA 11. Thus, the conduct of the Authority relied upon by Chambers as a bre

the covenant of good faith did not frustrate the intent of the parties at the time

contracting.

On this record, I believe the Authority, had it filed a motion, would hav

entitled to summary judgment. It did not so move, however, and Chambers accordingl

no obligation to build a record in opposition to the Authority's theory of the case

therefore concur in the court's judgment remanding this case for further proceeding

0
Chambers litigated its motion primarily on the theory that the legal effect of t
term agreement and the 1987 DEP certification was to make it the exclusive supplier
out-of-state disposal services for the 15 years of the contract. It tendered no ev
if any there be, regarding a mutual expectation of what would occur in the event th
rejected their arrangement as presented.

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