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City of Kingston v. Aslan Environmental Services, LLC

Supreme Court of New York, Third Department

January 9, 2020

City of Kingston, Appellant,
v.
Aslan Environmental Services, LLC, Respondent. (And Another Related Action.)

          Calendar Date: October 7, 2019

          Cullen and Dykman LLP, Albany (Christopher E. Buckey of counsel), for appellant.

          The Greenberg Law Firm, Purchase (Bill Greenberg of counsel), for respondent.

          Before: Garry, P.J., Lynch, Mulvey and Devine, JJ.; Pritzker, J., vouched in.

          DEVINE, J.

         Appeal from an order of the Supreme Court (Mott, J.), entered October 3, 2018 in Ulster County, which, among other things, granted defendant's motion for (1) summary judgment dismissing plaintiff's complaint, (2) summary judgment on its complaint and (3) summary judgment dismissing plaintiff's counterclaims.

         Plaintiff operates a wastewater treatment facility (hereinafter WWTF) and requested proposals for sewage sludge drying and pelletizing at it (see General Municipal Law § 120-w). Defendant responded with a proposal to dispose of the sludge by converting it into biosolid pellets that could be used as fertilizer. Plaintiff selected the proposal and, in 2004, entered into a 10-year agreement contemplating that defendant would, as is relevant here, install, operate and maintain sludge drying equipment and at least one turbine generator at the WWTF. The parties amended the agreement in 2005 to extend its duration to 15 years and modify the terms under which plaintiff could purchase the installed equipment and terminate the agreement. The pelletizer entered into operation in 2007 signaling the operational phase from which the term of the agreement was measured and broke down in 2015. Shortly before the necessary repairs were to be made in May 2016, plaintiff advised defendant that it viewed the agreement to be unenforceable and directed defendant to refrain from acting with regard to the equipment at the WWTF.

         The parties' dueling lawsuits regarding their interactions were joined by order of Supreme Court. Plaintiff sought, among other things, declaratory relief and damages and counsel fees for what it deemed to be breaches of the contract by defendant. [1] Defendant asserted a claim for breach of contract, as well as for declaratory and injunctive relief, prompting plaintiff to assert counterclaims that the 2004 contract and 2005 amendments were void and unenforceable. Defendant thereafter moved for relief that included summary judgment granting its claims and dismissing those of plaintiff. Plaintiff cross-moved for, as is relevant here, summary judgment granting its claims and dismissing those of defendant. Supreme Court granted defendant's motion and denied plaintiff's cross motion, determining that the 2004 contract and 2005 amendments thereto were valid and that plaintiff had breached the contract in various respects. Plaintiff appeals.

         We modify. The parties' contract, relating as it does to the processing, disposal or recovery of solid waste at the WWTF, is subject to the procurement provisions of General Municipal Law § 120-w (see General Municipal Law § 120-w [1] [b]; [2]). Those provisions require that "the competitive bidding requirements set forth in General Municipal Law §§ 101 and 103 or, alternatively, ... the 'request for proposals' [hereinafter RFP] procedure set forth in" General Municipal Law § 120-w are followed prior to entering into such a contract (Matter of Trinity Transp. Corp. v Town of Brookhaven, 166 A.D.3d 887, 889 [2018]; see Matter of Ramapo Carting Corp. v Reisman, 192 A.D.2d 922, 923 [1993]). Inasmuch as the procedures are intended to benefit taxpayers rather than "corporate bidders," they are "construed and administered with sole reference to the public interest," with the failure to comply with them leading to severe consequences (Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth., 66 N.Y.2d 144, 148 [1985] [internal quotation marks and citation omitted]; see Chenango Contr., Inc. v Hughes Assoc., 128 A.D.3d 1150, 1151-1152 [2015]). The failure will render the challenged contract void, foreclose recovery by the vendor and entitle the municipality to recover any monies paid under it (see D'Angelo v Cole, 67 N.Y.2d 65, 70 [1986]; S.T. Grand, Inc. v City of New York, 32 N.Y.2d 300, 305 [1973]; Gerzof v Sweeney, 16 N.Y.2d 206, 208-209 [1965]; Albert Elia Bldg. Co. v New York State Urban Dev. Corp., 54 A.D.2d 337, 344 [1976]; Prosper Contr. Corp. v Board of Educ. of City of N.Y., 43 A.D.2d 823, 823 [1974]).

         As the party seeking to set aside the contract, it fell upon plaintiff "to demonstrate 'actual' impropriety, unfair dealing or some other violation of statutory requirements" in its award to defendant (Matter of Acme Bus Corp. v Board of Educ. of Roosevelt Union Free School Dist., 91 N.Y.2d 51, 55 [1997], quoting Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth., 66 N.Y.2d at 149). Plaintiff argued that the 2004 agreement was void because, although it was reached following competitive bidding under General Municipal Law §§ 103 and 120-w, the bid specifications were improperly developed in consultation with defendant and designed to ensure that defendant would obtain the contract. [2] It is undisputed that the parties were in negotiations for defendant's services before the specifications were issued. The ensuing specifications may have tended to favor defendant, but that showing did not render them illegal "since a particular product, that is, one marketed by only one manufacturer, may be required in the public interest" (Gerzof v Sweeney, 16 N.Y.2d at 211; see Matter of Construction Contrs. Assn. of Hudson Val. v Board of Trustees, Orange County Community Coll., 192 A.D.2d 265, 267 [1993]). Instead, the essential showing is that the specifications were drafted "to insure the award of the contract to" defendant without regard to the public interest (Gerzof v Sweeney, 16 N.Y.2d at 211; see J.I. Case Co. v Town Bd. of Town of Vienna, 105 A.D.2d 1077, 1077 [1984]; Edenwald Contr. Co. v City of New York, 86 Misc.2d 711, 723-724 [1974], affd on op below 47 A.D.2d 610');">47 A.D.2d 610 [1975]).

         The dissent infers from proof that defendant developed a "new and innovative system," in which biogas collected from the WWTF's digesters power a scaled-down pelletizer suitable for a smaller municipality such as plaintiff, that only one company employs indirect contact drying technology for its pelletizers. Nothing in the record confirms that speculation and, notably, plaintiff did not substantiate it through an affidavit by one with relevant industrial or scientific knowledge. In any event, regardless of the ubiquity of indirect contact drying technology, plaintiff provided nothing to contradict the proof that its use served the public interest because it was safer, more reliable and less likely to generate troublesome odors than other technologies.

         In contrast, defendant produced an affidavit from plaintiff's then-mayor, who stated that the options for sludge treatment had been thoroughly investigated and that the type of equipment offered by defendant would further the public interest by stabilizing plaintiff's sludge disposal costs, providing an environmentally sensitive means for that disposal and decreasing odors emanating from the WWTF that might affect ongoing waterfront development. The then-mayor further averred that the bid documents were prepared by municipal employees and that the specifications included nothing of peculiar benefit to defendant. [3] Defendant's president, a mechanical engineer, confirmed that point and averred that "[n]early any sludge drying pelletizing system on the market" could have satisfied the bid specifications. Plaintiff accordingly failed to meet its burden of showing that the 2004 agreement was void, and defendant demonstrated its entitlement to summary judgment on claims relating to that agreement's validity (see Matter of Blueline Commuter, Inc. v Montgomery County, 126 A.D.3d 1161, 1163-1164 [2015]; compare J.I. Case Co. v Town Bd. of Town of Vienna, 105 A.D.2d at 1077).

         As for the extension of that contract's term and other changes wrought by the 2005 amendments, the parties were free to agree to them so long as the requirements of General Municipal Law § 120-w were satisfied (see General Municipal Law § 120-w [4] [b]). We do not agree with defendant that those changes, and the extension of the contract's duration in particular, were "incidental to the original agreement, such that [plaintiff] was exempt from" the statutory requirement that they be put out to bid or be the subject of an RFP (Matter of Trinity Transp. Corp. v Town of Brookhaven, 166 A.D.3d at 890; see also 1977 Atty Gen [Inf Ops] 85). [4] Inasmuch as no attempt was made to satisfy the procurement provisions of General Municipal Law § 120-w with regard to the 2005 amendments, the amendments are void (see Matter of Trinity Transp. Corp. v Town of Brookhaven, 166 A.D.3d at 890). We cannot say that this case presents the exceedingly rare situation where either laches or equitable estoppel could be invoked to prevent plaintiff, a governmental entity, from attacking the validity of the 2005 amendments to which it had agreed (see Michael R. Gianatasio, PE, P.C. v City of New York, 159 A.D.3d 659, 659 [2018]; A.C. Transp. v Board of Educ. of City of N.Y., 253 A.D.2d 330, 339 [1999], lv denied 93 N.Y.2d 808 [1999]). Thus, Supreme Court should have granted plaintiff's motion to the extent that it sought summary judgment on its counterclaim declaring the 2005 amendments to be void.

         The record leaves no doubt that plaintiff breached the 2004 agreement the terms of which, even in the absence of the 2005 amendments, were in effect at the relevant times most notably by preventing defendant from repairing or maintaining its equipment from 2016 onward. Defendant was therefore entitled, as Supreme Court properly determined, to summary judgment on its breach of contract claims. Plaintiff's remaining contentions, including that ...


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