INTER-REGIONAL DISPOSAL & RECYCLING SERVICES et al. v. THE HOUSING AUTHORITY CITY OF NEWARK, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3756-05T13756-05T1

INTER-REGIONAL DISPOSAL &

RECYCLING SERVICES and

MARC SAVINO,

Plaintiffs-Respondents,

v.

THE HOUSING AUTHORITY OF THE

CITY OF NEWARK, HAROLD LUCAS,

Executive Director, COMMISSIONER

ZINNERFORD SMITH, COMMISSIONER

IDA CLARK, COMMISSIONER GLORIA

CARTWRIGHT, COMMISSIONER FRAN

ADUBATO, COMMISSIONER DONALD

BRADLEY, and COMMISSIONER LYNELL

ROBINSON (in their official

capacity);

Defendants-Respondents,

and

S. COOPER BROTHERS TRUCKING, INC.,

Defendant/Intervenor-Appellant.

 
 

Submitted June 7, 2006 - Decided July 24, 2006

Before Judges Weissbard, Winkelstein,

and Sapp-Peterson.

On appeal from Superior Court of New Jersey,

Law Division, Essex County, L-1392-05.

Connell Foley, attorneys for appellant

(John D. Cromie and Thomas S. Cosma, of counsel;

Mr. Cosma and Michael P. Davis, on the brief).

Roth Horowitz, attorneys for respondents

Inter-Regional Disposal & Recycling Services and Marc Savino (Allan C. Roth, of counsel; Mr. Roth and

Rachel M. Caruso, on the brief).

Oliver Lofton, Deputy Executive Director/Special

Counsel, attorney for respondent Housing Authority

of the City of Newark (Elio R. Mena, on the brief).

PER CURIAM

This appeal involves the interplay of garden-variety contract principles and the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -50 (LPCL). We hold that a public entity that formally rescinds a contract awarded to a bidder under the LPCL can not thereafter simply reinstate the contract. Rather, once terminated, a new contract may only be awarded pursuant to the LPCL.

The facts are straightforward and undisputed. During the summer of 2005, defendant Newark Housing Authority (the Authority) solicited bids under the LPCL seeking a contractor to provide waste disposal services at various sites operated by the Authority. The successful bidder would be responsible for providing roll-off/roll-on dumpster containers and disposal of refuse. On August 30, 2005, defendant-intervenor, S. Cooper Brothers Trucking, Inc. (Cooper) submitted a bid to perform the services for $375 per twenty-yard container. By resolution dated September 22, 2005, the Authority awarded Cooper, the lowest responsible bidder, a one-year contract to furnish and deliver the dumpster containers and provide the waste disposal services (the September 2005 contract).

Cooper performed work pursuant to the September 2005 contract from September until mid-November 2005. By letter dated November 14, 2005, the Authority informed Cooper that, based on a perceived conflict of interest, the September 2005 contract was "hereby rescinded." The perceived conflict arose from the fact that Hope L. Cooper, a part-time attorney for the Authority, was listed as Vice-President of Cooper on Cooper's August 2005 bid documents. On November 18, 2005, Cooper sent a letter to the Authority, objecting to the proposed rescission of its contract. Cooper explained that no conflict of interest existed because Hope had resigned from her position as Vice-President of Cooper in October 2002, nearly three years before Cooper submitted its August 2005 bid. Cooper advised the Authority that the inclusion of Hope's name as Vice-President on the bid documents was the result of "an inadvertent clerical error."

Nonetheless, on November 22, 2005, the Authority passed a formal resolution rescinding the award of the September 2005 contract to Cooper due to the perceived conflict of interest.

The Authority then made an emergency solicitation for bids and awarded a temporary contract to plaintiff Inter-Regional Disposal & Recycling Services (Inter-Regional) for the period November 21, 2005 to February 21, 2006. Notwithstanding, Cooper continued to engage in discussions with the Authority seeking to persuade it that there was no conflict of interest warranting rescission of the contract.

After awarding the emergency contract to Inter-Regional, the Authority publicly re-solicited bids, with a bid opening date of January 24, 2006. Inter-Regional prepared a bid and appeared for the bid opening date, but was informed upon arrival that the bid opening was postponed for one week. Thereafter, by resolution of January 26, 2006, the Authority reinstated Cooper's contract and cancelled the bidding process.

On February 17, 2006, Inter-Regional and its President, Marc Savino, filed a verified complaint against the Authority, seeking to enjoin the Authority from reinstating Cooper's contract based on its August 2005 bid and to require that the Authority re-advertise for bids. Cooper intervened as a defendant by consent and opposed Inter-Regional's application. On February 21, 2006, Judge Lombardi denied Inter-Regional's request for temporary restraints and scheduled a March 20, 2006 return date for the order to show cause.

On March 20, 2006, the judge requested a copy of a December 19, 2005 correspondence, including a certification from Hope Cooper, that Cooper sent to the Authority advancing its argument that no conflict existed. A copy of the letter was hand-delivered to the court that same day.

Treating the matter as ripe for summary judgment, Judge Lombardi rendered a bench opinion on March 24, 2006. He ruled that the Authority could not reinstate the September 2005 contract with Cooper, reasoning that the November 22, 2005 rescission constituted a rejection of all bids received in August 2005 by the Authority and, thus, the Authority could not reinstate the award to Cooper by its resolution of January 26, 2006. Final judgment was entered enjoining Cooper from performing further work under the contract and denying Cooper's application for a stay of the final judgment pending appeal. In addition, the judge ordered the Authority to re-advertise bids for the work and to solicit emergency bids to ensure that disposal services were provided pending the completion of the public bidding process.

Following entry of final judgment, Cooper sought an emergent stay pending appeal from us. We declined to entertain the application, deeming it non-emergent. Cooper immediately moved before the Supreme Court, seeking a stay pending appeal and requesting acceleration of the appeal. On March 29, 2006, the Court denied Cooper's application, but directed us to consider its application for a stay pending appeal on an accelerated basis. We denied the stay but ordered acceleration of the appeal.

On appeal, Cooper argues that there was no legal impediment to the Authority's reinstatement of its contract without any change in its terms or conditions. As part of that argument, it contends that the initial contract was not infected with a conflict of interest prohibited by the Local Government Ethics Law (LGEL), N.J.S.A. 40A:9-22.2(a), that the reinstatement of the contract did not violate the LPCL and, concerning the January 24, 2006 re-solicitation of bids, the Authority was free to cancel the receipt of bids "at any time and for any reason or for no reason." Inter-Regional argues that once the Authority terminated the contract, it could not be reinstated; rather, the public body was constrained to award any new contract pursuant to the LPCL; and the Authority's postponement of the January 24, 2006 bid opening date without proper advance notice violated N.J.S.A. 40A:11-23.

At the outset, we have no need to address whether the Authority properly rescinded Cooper's contract, that is, whether there was in fact a disqualifying conflict of interest. Whether the Authority acted properly and what possible remedies Cooper may have if it did not, are matters left between Cooper and the Authority. See, e.g., K.L. Conwell Corp. v. City of Albuquerque, 802 P.2d 634, 639 (N.M. 1990). In addition, in view of our disposition, we have no reason to address the circumstances surrounding the January 24, 2006 bid opening postponement, the purpose of which was to allow the Authority time to rescind its November 22, 2005 resolution, and whether that action itself violated the LPCL.

While calling the November 22, 2005 action a "rescission," the Authority's resolution is more properly viewed as a termination. While a rescission does terminate a contract, it does so by mutual agreement. See County of Morris v. Fauver, 153 N.J. 80, 96-97 (1997); Gillette v. Cashion, 21 N.J. Super. 511, 516 (App. Div. 1952). The Restatement refers to such an action as an "Agreement of Rescission." Restatement (Second) of Contracts, 283; see also id. at 148. The use of the "term 'agreement of rescission' is used in [the] Restatement to avoid confusion with the word 'rescission' which courts sometimes use to refer to the exercise by one party of a power of avoidance [under Restatement, supra, 7]." Restatement, supra, Comment to 283. "An agreement of rescission differs from a 'termination, which 'occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach' and from a 'cancellation,' which 'occurs when either party puts an end to the contract for breach by the other.'" Ibid. (quoting Uniform Commercial Code 2-106 [N.J.S.A. 12A:2-106]). Here, there was no termination by mutual consent. Rather, the Authority acted on November 22, 2005 based on its perception that the law, i.e., the LGEL, compelled such action. As a result, under the Restatement terminology, a "termination" took place.

Of course, if the contract was between private individuals who had rescinded it by mutual consent, it could "be renewed by express agreement or by acts evidencing such an intention," so long as it was "reinstated in exactly the same terms as were present before it was voided." Gillette, supra, 21 N.J. Super. at 516. Thus, if this were a purely private matter, the description applied to the November 22, 2005 resolution would not be of great import; the parties could, as they did, agree to its reinstatement on exactly the same terms.

However, this is not a private matter but implicates the important public policy concerns reflected in the LPCL. Rules governing private contracts do not govern in this circumstance. We agree with Inter-Regional that once the Authority passed its "rescission" resolution, the contract was ended, whether rightly or wrongly. At that point, there was no contract in place.

Because public bidding laws "'exist for the benefit of taxpayers,'" Borough of Princeton v. Bd. of Chosen Freeholders of Mercer County, 169 N.J. 135, 159 (2001) (quoting Nat'l Waste Recycling, Inc. v. Middlesex County Improvement Auth., 150 N.J. 209, 220 (1997)), they should be strictly construed and "'rigidly adhered to by the court.'" Id. at 160 (quoting Kurman v. City of Newark, 124 N.J. Super. 89, 94 (App. Div.), certif. denied, 63 N.J. 563 (1973)). Although the Authority followed the strict bidding procedures for the emergency interim contract, which was awarded to Inter-Regional, and began to follow the bidding procedures for awarding a longer-term contract by advertising for bids with a due date of January 24, 2006, it then reinstated Cooper's contract based on its August 2005 bid without completing the requisite bidding process.

Cooper is correct that contracting public entities may exercise their "principled business judgment" in conformance with the LPCL and its underlying policies and that such exercises are entitled to deference under an abuse of discretion standard. Serenity Contracting Group, Inc. v. Borough of Fort Lee, 306 N.J. Super. 151, 157 (App. Div. 1997), certif. denied, 153 N.J. 214 (1998). However, that does not mean that a public entity can terminate a contract, re-advertise for bids, wait for the new bidders to appear with their bids, and then reinstate the contract it had terminated. The Court has explained that the purpose underlying the LPCL is to "secure for the public the benefits of unfettered competition." Terminal Constr. Corp. v. Atlantic County Sewerage Auth., 67 N.J. 403, 410 (1975). The competitive bidding laws "accomplish that purpose by promoting competition on an equal footing and guarding against 'favoritism, improvidence, extravagance and corruption.'" Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 313 (1994) (quoting Twp. of Hillside v. Sternin, 25 N.J. 317, 322 (1957)).

In finding that the Authority's decision to postpone the re-bidding on the bid due date and to reinstate Cooper's contract before the new due date did not comport with the policies behind the LPCL, Judge Lombardi explained:

[The Authority] advertised the bids. They said nothing before January 24. January 24, the parties came to present their bids and to have their bids opened.

. . . .

[T]hey were presented with the two people. They knew who the two bidders were. Now, whether they were opening it up to additional bidders, they certainly didn't do it by advertising. And if they just thought that we could not open to these two bidders, they knew who the bidders were.

Now, knowing who the bidders were and knowing that they had more time to open those groups, the Housing Authority Commission was faced with making a choice. They could now accept the first -- and knowing what the price was and knowing it was S. Cooper and S. Cooper being somebody who had a -- or they could, in essence, take their chances and open those two bids and see if they're lower or higher than the earlier bid that was bid August 30 or see if S. Cooper was going to get it or Inter-Regional.

Now, they also have experience with Inter-Regional because Inter-Regional by that time for several months had been the emergency contractor. So they had history of both parties' performance. They knew who these bids were, and . . . the intent was to open it up and see if they got more bids and simply delay opening it on these two bidders.

Now, being faced with that, it did create a situation where the Court will find that it is arbitrary. . . . [I]t shows a situation where there may have been favoritism, corruption, non-competitiveness.

. . . .

But the situation in such is, knowing the performance of one contractor, knowing the performance of the other contractors, knowing that these two contractors are the only bidders and that they had a choice, and knowing that the bid could be higher or lower, they basically said, hey, let's go with a sure thing. We know it's 375. Let's go with Cooper, again, and let's say that this original bid was okay back on April 30 and let's give him the bid and let's not open these bids . . .

. . . .

Being faced with that sort of choice, I think it created a situation where it was arbitrary, a situation where, perhaps, other than awarding it to the most responsible bidder, there may have been a situation where they're weighing things other than who is the most responsible bidder.

We agree with the trial judge's reasoning in this regard. The Authority's actions in waiting for the new bidders to arrive before announcing a bid postponement and then reconsidering Cooper's September 2005 contract did not comport with the purpose of the LPCL to promote unfettered competition and guard against favoritism or corruption. By sending the bidders away and reevaluating whether to reinstate Cooper's contract, the Authority was able to weigh factors such as the performances of Inter-Regional, which had been providing services under the emergency contract, and Cooper, which had provided services for two months under the September 2005 contract, and to speculate on the bid amounts, as it knew what Inter-Regional had bid for the interim contract and knew the exact amount of Cooper's August 2005 bid. This did not leave all bidders on equal footing and, thus, violated the spirit and purpose of the LPCL.

The Authority's decision to rescind Cooper's contract and then to reinstate it two months later without another public bidding process was inconsistent with the bidding procedures outlined in the LPCL, which are afforded strict construction. Moreover, the manner in which the contract was reinstated two days after the new bidders appeared for the bidding due date failed to comport with the policies underlying the LPCL. As a result, the reinstatement was of no effect.

Affirmed.

 

Hope L. Cooper is the daughter of Sonnie L. Cooper, the President and sole-shareholder of Cooper.

Inter-Regional had not been a bidder on the original contract. Under the interim contract, Inter-Regional provided refuse disposal services for $399 per twenty-yard container.

The record is unclear as to the identity of any other potential bidders.

After the entry of final judgment, the Authority solicited emergency bids for a contract with a duration of up to four months. Cooper submitted a bid, but was advised on April 3, 2006 that it was not the low bidder. Inter-Regional was awarded the emergency bid at a price of $339.90 per twenty-yard container and is currently providing waste disposal services to the Authority.

(continued)

(continued)

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A-3756-05T1

July 24, 2006