HI TECH TRANS, LLC v. AVANTI DEMOLITION & CARTING CORP.

(NOTE: The status of this decision is .)
 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4071-07T14071-07T1

HI TECH TRANS, LLC,

Plaintiff-Appellant,

v.

AVANTI DEMOLITION & CARTING

CORP., and VICTOR SANTOS,

Defendants-Respondents,

and

TONY GOMES,

Defendant.

___________________________________

 

Argued: January 14, 2009 - Decided:

Before Judges Axelrad, Parrillo and Lihotz.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-8589-06.

Andrew L. Indeck argued the cause for appellant (Scarinci Hollenbeck, attorneys; Mr. Indeck and David J. Gittines, on the brief).

Gregory F. Kotchick argued the cause for respondents (Durkin & Durkin, LLP, attorneys; M. Murphy Durkin, of counsel; Mr. Kotchick, on the brief).

PER CURIAM

Plaintiff, Hi Tech Trans, LLC (Hi Tech) appeals from summary judgment dismissal of its collection complaint for solid waste dumping fees based on its failure to obtain proper licensing in accordance with state environmental regulations during the term of the agreement. We affirm.

Hi Tech is engaged in the transportation of waste products from various loading terminals to landfills and treatment facilities. On November 6, 2000, it entered into a license agreement with the Canadian Pacific Railroad (CPR) whereby Hi Tech would develop and operate a construction and demolition (C&D) debris bulk waste loading facility at the Oak Island Rail Yard (OIRY) in Newark. By the terms of the agreement, Hi Tech's use of the premises was limited to the transfer of C&D waste products that arrived at the facility by truck and were discharged onto machinery provided by Hi Tech and loaded directly to rail cars operated by CPR for ultimate transport to out-of-state disposal facilities. The agreement required Hi Tech to "obtain all permits or exemptions . . . necessary for the construction, use and operation of the facility" prior to commencement of any operations and to "use the Premises in strict conformance with all applicable rules, regulations and ordinances of federal, state and municipal authorities."

Hi Tech commenced operations at the facility on September l7, 2001. In April 2003, Hi Tech and Avanti Demolition & Carting Corp. (Avanti) entered into an agreement for Avanti to dump its solid waste at the High Tech transload facility for a fee. From April 28 to June 9, 2003, Avanti brought about 2,600 tons of C&D material to the facility. Avanti issued a series of checks to Hi Tech in payment of its outstanding fees but subsequently placed a stop payment order on the checks, leaving a balance due of $258,174.65.

Pursuant to an April l6, 2003 site visit, on or about May 28, 2003, the New Jersey Department of Environmental Protection (NJDEP) issued an Administrative Order citing Hi Tech for violating regulations under the Solid Waste Management Act (SWMA), specifically, operating a solid waste disposal facility without a permit, in violation of N.J.A.C. 7:26-2.8(f), and engaging in the commercial disposal of solid waste without having obtained a Certificate of Public Convenience and Necessity, in violation of N.J.A.C. 7:26H-1.6(a). No penalty was assessed. However, Hi Tech was ordered to cease solid waste operations at the OIRY within twenty days. On June l7, 2003, Hi Tech requested an administrative hearing and sought a stay from the NJDEP pending its resolution. On June 30, 2003, the NJDEP granted Hi Tech emergent relief and transferred the case to the OAL as a contested matter.

On August l3, 2003, the administrative law judge (ALJ) issued an initial decision in which he accepted Hi Tech's argument that it was involved in transportation by railroad because its transfer station located within the OIRY served the railroad in fulfilling its task as a common carrier and was thus subject to the exclusive jurisdiction of the Surface Transportation Board (STB). Dep't. of Envtl. Prot. v. Hi Tech Trans, LLC, OAL Docket No. ESW 05815-03, initial decision, (August l3, 2003); see 49 U.S.C.A. 10501(b) (under the Interstate Commerce Commission Termination Act (ICCTA), the STB has exclusive authority over "transportation by rail carrier" and its regulation of rail carriers preempts state regulation with respect to rail transportation). Accordingly, he recommended the DEP order be dismissed as preempted by federal law. Ibid. The Commissioner reversed, adopting the reasoning of the STB, infra, and concluding that Hi Tech was not a rail carrier, and its relationship with CPR was that of a shipper with a carrier; thus, Hi Tech's facility was not subject to the exclusive authority of the STB and NJDEP's authority was not preempted. Dep't. of Envtl. Prot. v. Hi Tech Trans, LLC, OAL Docket No. ESW 05815-03, final decision, (September 29, 2003). Accordingly, Hi Tech was ordered to immediately cease and desist its operations at the OIRY facility. Ibid. We affirmed NJDEP's final determination. Dep't. of Envtl. Prot. v. Essex County Utilities Authority, No. A-929-03-T3 (App. Div. June 11, 2004). The Supreme Court denied Hi Tech's petition for certification and dismissed its appeal. Dep't. of Envtl. Prot. v. Hi Tech Trans, LLC, 181 N.J. 543 (2004).

On June l7, 2003, Hi Tech also filed a petition with the STB, raising substantially the same preemption argument and requesting a declaratory order that its facility was thus not subject to regulation by NJDEP. On August l4, 2003, the STB rejected Hi Tech's argument and denied the petition. Hi Tech Trans, LLC - Petition for Declaratory Order - Newark, NJ, STB Finance Docket No. 34192 (Sub-No. l).

After receiving NJDEP's Administrative Order, Hi Tech additionally filed a complaint and amended complaint in the United States District Court for the District of New Jersey against the NJDEP and its director, claiming it was a rail carrier under 49 U.S.C.A. 10102(5), and seeking a declaration that state regulation of its facility was thus preempted by federal law. On June 16, 2003, the district court dismissed Hi Tech's complaint pursuant to abstention principles. The Third Circuit rejected Hi Tech's preemption claim and affirmed dismissal of its amended complaint. High Tech Trans, LLC v. New Jersey, 382 F.3d 295 (3d Cir. 2004).

On October l6, 2006, Hi Tech filed a complaint against Avanti seeking to collect the outstanding dumping fees. Avanti moved for summary judgment, arguing the underlying agreement between the parties was void ab initio as a matter of public policy and thus unenforceable because of Hi Tech's failure during the term of the agreement to maintain proper licensure as required by the NJDEP. Avanti relied on the SWMA and its regulations and the state and federal court holdings definitively establishing that Hi Tech's facility at the OIRY was subject to NJDEP's permit and licensing requirements. According to Avanti, in entering into the agreement, Hi Tech represented that it possessed all the permits and licenses required under state and federal law for the lawful operation of a transload facility and, as such, was an authorized receiver of Avanti's debris. Avanti claimed that, as reassurance, Hi Tech agreed to indemnify it for any damages it might incur for violations of state and local waste flow regulations. Avanti further claimed that in reliance upon these assurances, it began dumping solid waste at the subject facility. Avanti subsequently learned, however, that Hi Tech had not been properly licensed at any point in the parties' relationship and that Avanti had been made a party to a suit filed by the Essex and Union County Utilities Authorities seeking damages for the delivery of waste to Hi Tech's unlicensed facility. Essex County obtained a $3.5 million judgment against Avanti, which it claimed forced it out of business. Avanti further defended the fraud claim on the grounds that it stopped payment of the checks to off-set the resulting damage from Tech's refusal to honor the indemnification agreement.

In opposition, Hi Tech did not address the illegality of the contract resulting from the lack of NJDEP permits or the public policy issue of enforcing the agreement for dumping at an unlicensed facility. In its brief and at argument, Hi Tech sought denial of summary judgment based on: (1) earlier denials of summary judgment (on other grounds); (2) the inapplicability of the indemnification agreement and resulting lack of legal basis for Avanti to stop payment on the checks; and (3) material issues of fact surrounding the stop payment orders. As to the latter two issues, Hi Tech claimed that after the Essex County Utility litigation commenced, Avanti offered to settle the matter by agreeing to make weekly payments if Hi Tech let it resume dumping, and after Avanti dumped, it stopped payment on the checks. At argument there was no dispute that Hi Tech did not have the proper licensing while operating the OIRY facility. Hi Tech's contention essentially was that, irrespective of the decision of the Third Circuit, Avanti received a benefit for which it should be held responsible.

Following oral argument on March l4, 2008, Judge Cifelli granted Avanti's motion for summary judgment, dismissing Hi Tech's complaint with prejudice. The court found the contract was illegal, and hence void ab initio, because during its term Hi Tech was unlicensed and operating its facility in violation of state law. Thus, as Hi Tech did not have the legal authority to engage in solid waste disposal at the OIRY, the court concluded its contract with Avanti was unenforceable as a matter of law. In support of its ruling, the court cited the following cases: Naimo v. La Fianza, 146 N.J. Super. 362, 368, 372 (App. Div. l976) (noting "[i]t is well established that illegal contracts are unenforceable" and "[a]ny contract made in consideration of an act forbidden by law or against public policy is unenforceable and the illegality of the contract will constitute a good defense at law as well as in equity"); Marx v. Jaffe, 92 N.J. Super. 143, 146 (App. Div.) (citing the established rule that "the law will not assist either party to an illegal contract" but "will leave them where it finds them"; if the contract is executory, it will not enforce it), certif. denied, 48 N.J. 140 (1966); and Paley v. Barton Sav. and Loan Ass'n, 82 N.J. Super. 75, 82 (App. Div.) (same), certif. denied, 41 N.J. 602 (1964). The court entered an order, and this appeal ensued.

On appeal, Hi Tech argues the contract with Avanti was neither illegal nor contrary to public policy and accordingly should be enforced, thereby obligating Avanti for the outstanding dumping fees. Hi Tech emphasizes that "merely to call a contract illegal is not to state the effects of such illegality [but rather] [i]n each case the legislative intent must be sought." Marx, supra, 92 N.J. Super. at 146. Although recognizing the legislative intent to regulate solid waste disposal in New Jersey and require permitting by NJDEP, Hi Tech submits that the State and its environmental agencies have expressly acknowledged that in the context of rail transload facilities, such permitting requirements can be and are often preempted by the ICCTA. According to Hi Tech, in determining "illegality," the trial court should have considered as factors the highly sensitive nature of the federal preemption issues surrounding the regulation of rail transload facilities, the uncertain and evolving state of this field of the law, and Hi Tech's good faith reliance on federal preemption at the time the contract was performed.

Hi Tech maintains that during the period encompassing performance of the agreement with Avanti, it operated the transload facility under a well-founded belief that it was subject to the exclusive federal jurisdiction of the STB and was exempt from NJDEP solid waste permitting requirements. Hi Tech cites as a basis for its justifiable reliance: a May 3, 2000 informal STB staff opinion to Hi Tech that its proposed project fell within the Board's jurisdiction; NJDEP's knowledge it was operating the facility since September 2001; and NJDEP's February 21, 2003 notification of a "Railroad Proposal Stakeholder Meeting" to discuss regulatory proposals to address partial federal preemptions of solid waste transfer facilities under the ICCTA and solicit comments that was sent to its legal department.

Hi Tech further contends that at the time of its contract with Avanti, the issue of whether it was subject to state licensure was debatable and there was no agency or court ruling contrary to its position that its facility was under the exclusive jurisdiction of the STB. Nor had any proceeding to resolve the issue been initiated or threatened; even the NJDEP notice of violation was not issued until after the bulk of the contract had been performed and its enforcement was sua sponte stayed by the agency. Thus, as no authority had declared that Hi Tech was subject to and operating in violation of New Jersey permitting requirements at the time the Avanti-Hi Tech agreement was performed, Hi Tech submits it cannot be said it was acting contrary to the law or public policy of New Jersey.

According to Hi Tech, in making its "illegality" determination, the trial court also failed to evaluate public policy and public benefit factors, such as Hi Tech's high quality of performance and the benefit it provided by transferring debris out of state, see Accountemps Div. of Robert Half of Phila., Inc. v. Birch Tree Group, Ltd., 115 N.J. 614, 626-27 (1989) ("Accountemps II"), as well as NJDEP's decision not to assess any penalties against it for the licensing violations. Instead, Hi Tech urges the trial court improperly utilized the Third Circuit's ruling on preemption exclusively and retroactively to determine that the previously completed performance of the agreement was "illegal" and void ab initio, even though that decision was rendered more than a year after the last truckload of Avanti waste was transferred through the Hi Tech facility. Moreover, it contends the Third Circuit did not rule that Hi Tech's facility or its contracts with customers were illegal; it only determined that Hi Tech's facility as then configured was not preempted by federal law from complying with state and local permitting requirements. Accordingly, Hi Tech urges us to apply the "equitable balancing test" employed by the United States Supreme Court to determine whether to apply a decision retroactively, N.J. Election Law Enforcement Comm'n. v. Citizens, 107 N.J. 380, 389 (1987), giving due regard to "considerations of fairness and justice, related to reasonable surprise and prejudice to those affected[,]" id. at 388 (quoting Oxford Consumer Disc. Co. v. Stefanelli, 104 N.J. Super. 512, 520 (App. Div. 1969)). Hi Tech submits the trial court's decision to invalidate this contract solely based on this after-the-fact conclusion of the Third Circuit produces a substantial inequitable result by absolving Avanti of any obligation to pay for services properly rendered while imposing an extreme monetary hardship on Hi Tech, which incurred expenses for maintaining its transload facility.

Hi Tech alternatively argues that even if its agreement with Avanti were found to be illegal, it nonetheless should be enforced on equitable grounds. As aforestated, Hi Tech contends it acted in good faith reliance on the unsettled law and did not obtain a permit; however, it performed the contract as agreed upon and disposed of approximately 2,600 tons of C&D waste for Avanti. In contrast, it submits that Avanti acted fraudulently by inducing Hi Tech to allow it to continue to use the facility with promises of payment while all along intending to issue bad checks or issue stop payments on the checks. Since the parties were not equally at fault, Hi Tech urges that Avanti should not be unjustly enriched by being permitted to assert five years after the fact that it entered into an "illegal contract" as a means to avoid enforcement of the $258,174.65 outstanding balance for the dumping fees. See Lowenschuss v. Resorts Int'l, Inc., 181 F.3d 505, 512-13 (3d Cir. 1999) (recognizing the power of New Jersey courts to apply an equitable exception to the general rule of non-enforcement of "illegal contracts" when the parties are not in pari delicto).

Hi Tech relies on Accountemps II in further support of its argument that the equities should not compel it to forfeit its dumping fees. That case involved a New Jersey music publishing company that refused to pay an out-of-state employment agency, Accountemps, its placement fee because the agency was not licensed to do business in New Jersey under the Private Employment Agency Act, N.J.S.A. 34:8-24 to -42. Accountemps II, supra, 115 N.J. at 616-18. The agency sued and was granted summary judgment by the trial court, concluding the Act did not expressly prohibit the enforcement of contracts entered into by unlicensed agencies and it would be "sound policy" not to permit the licensing statute "to operate in what the court feels would be a disproportionate severity." Id. at 618. We reversed, holding the Act applied to out-of-state agencies and the agency's failure to comply with the Act's licensing requirements barred enforcement of the contract, reasoning it was contrary to public policy for an unlicensed employment agency to permanently place employees in New Jersey. Accountemps Div. of Robert Half of Phila., Inc. v. Birch Tree Group, Ltd., 224 N.J. Super. 163, 166 (App. Div. 1988), rev'd, Accountemps II, supra, 115 N.J. at 614.

The Supreme Court reversed, holding the Act applied to out-of-state agencies conducting business in New Jersey but determined the ruling should be applied prospectively and Accountemps should not be required to forfeit its fee. Accountemps II, supra, 115 N.J. at 627-28. Though recognizing the consistent public policy in our state precluding enforcement of a contract entered into in violation of a licensing statute, the Court noted circumstances where such result is not always appropriate:

The [licensing] statute may be clearly for protection against fraud or incompetence; but in very many cases the statute breaker is neither fraudulent nor incompetent. He may have rendered excellent service or delivered goods of the highest quality, his non-compliance with the statute seems nearly harmless, and the real defrauder seems to be the defendant who is enriching himself at the plaintiff's expense. Although many courts yearn for the mechanically applicable rule, they have not made one in the present instance. Justice requires that the penalty should fit the crime; and justice and sound policy do not always require the enforcement of the licensing statutes by large forfeitures going not to the state but to the repudiating defendant.

[Id. at 626-27 (internal citations omitted).]

The Court was satisfied a forfeiture of the fee by the unlicensed agency was not warranted in this case because its ruling decided an issue of first impression; the Act did not clearly indicate whether out-of-state agencies were subject to its provision and New Jersey courts had not previously had occasion to decide the issue. Id. at 627-28.

Hi Tech argues that like Accountemps, it fulfilled its end of the bargain by disposing of Avanti's waste, and should not have to forfeit its fee due to the lack of clarity in the licensing statute. Hi Tech reiterates it had a good faith belief its operation of the facility was subject to federal preemption, no penalty or fine was assessed against it by the NJDEP although the issue was ultimately decided against it, and it is continuing to operate a reorganized version of the transload facility at the OIRY.

Though Hi Tech's arguments may, at first, have some visceral appeal, upon a thorough analysis of the record we are not persuaded the facts of this case warrant a deviation from the longstanding principle that failure to comply with the licensing requirement generally renders a contract unenforceable. We are satisfied the dumping fee agreement Avanti sued upon was void ab initio as a matter of law and public policy and wholly unenforceable.

The Third Circuit set forth the following description of New Jersey's regulatory scheme pertaining to solid waste:

New Jersey has established a comprehensive statutory scheme for regulating solid waste disposal based upon a legitimate determination that "disposal and utilization of solid waste is a matter of grave concern . . . and . . . that the health, safety and welfare of the people of [New Jersey] require efficient and reasonable solid waste collection and disposal service or efficient utilization of such waste." N.J.S.A. 13:1E-2(a).

[Hi Tech, supra, 382 F.3d at 297.]

The collection, transportation, transfer, processing, disposal, and utilization of solid waste and the operation of solid waste facilities is regulated in New Jersey under the auspices of the NJDEP pursuant to the SWMA and corresponding regulations. N.J.S.A. 13:1E-1 to -99.47; N.J.A.C. 7:26-1.1 to -17.26. Based on the NJDEP's site visit on April l6, 2003, it determined that Hi Tech was operating a transfer station and that OIRY was a solid waste facility. N.J.A.C. 7:26-1.4; Hi Tech, supra, 382 F.3d at 298, 300. The NJDEP thus found that Hi Tech violated our state's environmental regulatory scheme, which prohibits "construction or operation of a solid waste facility without first obtaining a [Solid Waste Facility] Permit unless exempt pursuant to N.J.A.C. 7:26-1.1, -1.7, or -l.8," N.J.A.C. 7:26-2.8(f), and operation of a solid waste disposal facility without first obtaining a certificate of public necessity and convenience, N.J.S.A. 48:13A-6, N.J.A.C. 7:26H-1.6(a).

Hi Tech continues to assert as justification for enforcement of the contract the unsettled, evolving law and its good faith. We first observe that Hi Tech was expressly obligated under the November 6, 2000 license agreement with CPR to "obtain all permits or exemptions . . . necessary for the construction, use and operation for the facility" prior to commencing operations and to use the facility "in strict conformance with all applicable rules, regulations and ordinances of federal, state and municipal authorities." Hi Tech did not. Hi Tech was aware it was planning to operate some type of solid waste facility in New Jersey that was presumptively subject to NJDEP regulation. It also knew at that time it had not obtained status as a rail carrier from the STB, having filed a Notice of Exemption in accordance with 49 C.F.R. 1150.32 pertaining to 64l miles of CPR rail track, which it withdrew on July l7, 2000. Hi Tech, supra, 382 F.3d at 305; STB, supra, p.4. Nevertheless, Hi Tech claims it had a good faith belief its facility would be preempted from NJDEP regulation under the "transportation by rail carriers" provision of the ICCTA. Hi Tech chose, however, not to seek a formal declaration from the STB that it was within the federal agency's exclusive jurisdiction before it commenced operation of its OIRY facility without state permits, doing so only after it was charged with the licensing violations by the NJDEP. Yet Hi Tech represented to Avanti in April 2003 that it was an authorized receiver of the customer's debris. It did so at its peril.

The STB summarized Hi Tech's actions in the following manner, which clearly indicates a lack of diligence in addressing the preemption issue:

In presenting the facts in this proceeding, Hi Tech has "muddied the waters" by seeking and receiving multiple informal staff opinions under various hypothetical factual situations favorable to Hi Tech and then using them or parts of them to its advantage. In addition to the four informal staff opinions, Hi Tech has also filed, and then withdrawn, a notice of exemption to obtain common carrier authority, filed two formal petitions for declaratory orders, filed the emergency petition, and filed, and withdrawn, a petition for clarification seeking a determination of whether it is a rail carrier under section 10102(5). This decision addresses the latest in that series of filings. . . .

[STB, supra, pp. 2-3.]

We also observe that Hi Tech did not inform the Third Circuit of the declaratory proceedings it instituted before the STB or the STB's decision. Rather, that information and document were provided by the NJDEP, a fact noted with displeasure by the court. Hi Tech, supra, 382 F.3d at 310 n.20.

Furthermore, Hi Tech has not established a case that at the time of the Avanti contract, based on an objective set of facts, it is even arguable that its facility at OIRY was exempt from New Jersey licensure. That Hi Tech operated the facility for a year and a half before NJDEP performed the inspection of the site and operations that revealed Hi Tech was unlawfully operating an SWF without the requisite state permits and certificates merely indicates lax governmental regulation and enforcement. The issue of whether Hi Tech was subject to state licensure at the time of the Avanti contract was complicated, unsettled, and debatable only because Hi Tech decided it was so. It is undisputed that Hi Tech was not certified as a rail carrier. Nevertheless, Hi Tech claimed it was subject to the exclusive jurisdiction of the STB because its facility fell under the ICCTA's definitions of "transportation" and "railroad." It argued the proper test of whether its facility is considered "transportation by rail carrier" is whether it is integrally related to interstate rail service, and there is essentially no legal distinction between a transloading facility operated by a noncarrier licensee and one operated by a rail carrier. Only the ALJ found this argument persuasive. The opinions of the state and federal agencies and courts do not reflect in any way that Hi Tech's claim involved unsettled law, was a novel issue or a case of first impression, or even consisted of anything other than a creative argument.

The STB noted that "[a] careful analysis of Hi Tech's actual operations . . . leads to the conclusion that its truck-to-rail operations do not fall within the Board's exclusive jurisdiction over rail transportation." STB, supra, p. 3. The NJDEP Commissioner stated in his final decision, which we affirmed and the Supreme Court denied certification:

The STB dismissed [Hi Tech's argument] in the following words:

By Hi Tech's reasoning, any third party or noncarrier that even remotely supports or uses rail carriers would come within the statutory meaning of transportation by rail carrier. . . .

The facts of this case establish that Hi Tech's relationship with CP is that of a shipper with a carrier. Hi Tech brings cargo and loads it onto rail cars, and CP . . . hauls it to a destination designated by Hi Tech. . . . CP disclaims any agency or employment relationship with Hi Tech and, under the License Agreement, the parties all but eliminate CP's involvement in the operation of the transloading facility and its responsibility for it. . . . Thus, CP's level of involvement with Hi Tech's transloading operation at its Oak Island Yard is minimal and insufficient to make Hi Tech's activities an integral part of CP's provision of transportation by rail carrier.

In sum, Hi Tech's activities at its transloading facilities at [OIRY] and related activities are not part of "transportation by rail carrier" as defined under 49 U.S.C.[A. ] 10501(a). Hi Tech is merely using CP's property to transload cargo. Thus, the Board does not have jurisdiction over those activities, and [statutory] preemption does not apply to the state and local regulations at issue here. . . .

I find the reasoning of the STB to be persuasive. Hi Tech is not a rail carrier, and its relationship to CP is that of a shipper. . . . [T]o extend the preemption doctrine to include Hi Tech, under these facts, would mean that any shipper could avoid regulation simply by placing its facilities alongside a rail line. Companies dealing in toxic or hazardous materials could thus evade state and local permitting and regulatory requirements essential to protect the public health and welfare. As the STB has made perfectly clear, that is not the law.

[DEP Final Decision, supra, pp. 7-8 (internal citations omitted) (emphasis added).]

The Third Circuit stated:

[T]he most cursory analysis of Hi Tech's operations reveals that its facility does not involve "transportation by rail carrier." The most it involves is transportation "to rail carrier."

. . . .

The mere fact that the CPR ultimately uses rail cars to transport the C&D debris Hi Tech loads does not morph Hi Tech's activities into "transportation by rail carrier." Indeed, if Hi Tech's reasoning is accepted, any nonrail carrier's operations would come under the exclusive jurisdiction of the STB if, at some point in a chain of distribution, it handles products that are eventually shipped by rail by a railcarrier. . . . Congress [did not] intend[] the exclusive jurisdiction of the STB to sweep that broadly . . . .

[Hi Tech, supra, 382 F.3d at 308-09.]

Hi Tech's argument regarding retroactivity is also misguided. Contrary to Hi Tech's contention, it was not the Third Circuit Court's decision in 2004 that rendered Hi Tech's actions illegal. The illegality was the fact that Hi Tech was operating its facility without permits as required by state law from its commencement of operations in September 2001 throughout the entire period of its relationship with Avanti (April to June 2003). The decision of the Third Circuit, in context with the September 2003 decision of the NJDEP, upheld by our court, and the August 14, 2003 decision of the STB, simply affirmed that such operation was indeed illegal.

It is true that Hi Tech performed a service and Avanti received a benefit. Hi Tech, however, misrepresented to Avanti that it possessed all the permits and licenses required under state and federal law for the lawful operation of a transload facility. Apparently, as a consequence of the delivery of waste to Hi Tech's unlicensed facility, Avanti was joined as a defendant in a suit filed at some point by the Essex and Union County Utilities Authorities, resulting in a $3.5 million judgment. In contrast, though directed to cease its operations at the OIRY after the NJDEP's final determination, which apparently was temporary until Hi Tech and CPR restructured their agreement, the NJDEP did not impose monetary sanctions for Hi Tech's violations, which could have been significant. See N.J.S.A. 13:1E-9a. Thus, this is not a situation where "the real defrauder seems to be the defendant who is enriching himself at the plaintiff's expense." Accountemps II, supra, 115 N.J. 626-27 (internal citation omitted). Nor is Hi-Tech's non-compliance with the licensing statute "nearly harmless," ibid., nor merely a technicality. As the Third Circuit commented,

there is a well-recognized compelling state interest in the DEP's enforcement of its own environmental laws especially as to the uniquely vexing problem of solid waste facilities in a densely populated state that has suffered the scourge of unregulated solid waste facilities for decades.

[Hi Tech, supra, 382 F.3d at 309.]

In summary, the record clearly supports Judge Cifelli's determination that Hi Tech and Avanti's contract was void ab initio as a matter of public policy and thus unenforceable because during the entire time of the dumping Hi Tech was unlicensed and operated its facility and performed solid waste removal services without state regulatory authority. Moreover, enforcement of the contract will not unjustly enrich Avanti.

 
Affirmed.

Hi Tech informed us that it subsequently restructured its relationship with CPR in which its assignee, TLA-Newark, LLC, entered into an agency agreement with CPR to conduct its day-to-day operations at the OIRY which did not require NJDEP licensing but did require its approval for inclusion of the facility in the Essex County District Solid Waste Management Plan.

Hi Tech also named Avanti's principals, Victor Santos and Tony Gomes, as defendants, alleging they committed fraud by deliberately stopping payment on checks after being permitted to dump at Hi Tech's site. We collectively refer to all defendants as "Avanti" in this opinion.

Avanti also argued that Hi Tech failed to establish any basis upon which to pierce the corporate veil or to establish a claim against its principals.

The order is dated February l4, 2008; however, the filed date is March l4, 2008, the date of oral argument. The February date is clearly a clerical error.

The February 21, 2003 DEP notice provides "This proposal may directly impact your clients if they already are or are planning to engage in the transfer of solid waste."

The "equitable balancing test" analysis focuses on three relevant considerations:

First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear precedent on which litigants may have relied, . . . or by deciding an issue of first impression whose resolution was not clearly foreshadowed . . . . Second, it has been stressed that "we must . . . weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation." . . . Finally, we have weighed the inequity imposed by retroactive application, for "[w]here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the 'injustices or hardship' by a holding of nonretroactivity." [N.J. Law Enforcement Comm'n., supra, 107 N.J. at 389 (internal citations omitted).]

According to the STB opinion, between April 2000 and October 2001, Hi Tech sought four informal, non-binding staff opinions relating to the operation of the OIRY facility. In the first three letters, including the May 3, 2000 letter relied on by Hi Tech in this appeal as evidence of its good faith, the Board's Secretary informally opined that, based on Hi Tech's representation that it planned to file for authority to operate as a common carrier, that operation of a transloading facility was generally exempt from state and local environmental and zoning permitting requirements. Hi Tech, however, never obtained common carrier authority from the STB. STB, supra, p. 2.

Hi Tech filed a petition with the STB resulting in a November 20, 2002 decision referenced in the STB decision as Hi Tech I, which addressed the narrow issue of whether local regulation of trucks carrying C&D debris on public roads en route to Hi Tech's truck-to-road transloading facility is preempted by the STU's exclusive jurisdiction over interstate rail transportation. The STU noted that the issues presented in the June l7, 2003 petition were separate and distinct from those decided in Hi Tech I. STB, supra, p. 1.

There is a discrepancy between the Federal Reporter, which contains this information in a footnote, and the Lexis version, which contains it in the body of the opinion.

The record contains no details about the suit. Hi Tech has not given any indication that it was named as a defendant or that a judgment was entered against it.

The record does not reflect whether a further stay was granted pending appellate review of the agency determination.

(continued)

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A-4071-07T1

May 8, 2009