WASTE MANAGEMENT OF NEW JERSEY INC v. MERCER COUNTY IMPROVEMENT AUTHORITY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

A-2312-12T4

WASTE MANAGEMENT OF NEW JERSEY,

INC.,

Plaintiff-Appellant,

v.

MERCER COUNTY IMPROVEMENT AUTHORITY,

Defendant-Respondent,

and

REPUBLIC SERVICES OF NEW JERSEY, L.L.C.,

Defendant/Intervenor-Respondent.

_______________________________________

REPUBLIC SERVICES OF NEW JERSEY, L.L.C.,

Plaintiff-Appellant,

v.

MERCER COUNTY IMPROVEMENT AUTHORITY,

Defendant-Respondent,

and

WASTE MANAGEMENT OF NEW JERSEY,

INC.,

Defendant/Intervenor-Respondent.

________________________________________________

November 18, 2014

Argued March 26, 2014 Decided

Before Judges Waugh, Nugent and Accurso.

On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket

Nos. L-2487-12 and L-2605-12.

Sandra T. Ayres argued the cause for Waste Management of New Jersey, Inc., appellant in Docket No. A-2287-12 and respondent in Docket No. A-2312-12 (Scarinci & Hollenbeck, LLC, attorneys; Ms. Ayres, of counsel and on the briefs).

Ross A. Lewin argued the cause for Republic Services of New Jersey, LLC, respondent in Docket No. A-2287-12 and appellant in Docket No. A-2312-12 (Drinker Biddle & Reath, LLP, attorneys; Mr. Lewin, of counsel and on the briefs; Matthew S. Barndt, on the briefs).

Andrew L. Watson argued the cause for Mercer County Improvement Authority, respondent in both appeals (Pellettieri, Rabstein & Altman, attorneys; Mr. Watson, on the briefs; Elyse Herman, on the brief in Docket No. A-2312-12).

The opinion of the court was delivered by

ACCURSO, J.A.D.

These appeals arise out of a competitive bidding dispute under the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -51. The Mercer County Improvement Authority solicited bids in 2012 for a solid waste services contract. The Authority received three bids, each of which it rejected as non-conforming. The low bidder, Republic Services of New Jersey, L.L.C., and the next lowest bidder, Waste Management of New Jersey, Inc., filed separate suits challenging the rejection of their bids. The Law Division affirmed the Authority's rejection of both bids and dismissed the complaints with prejudice. We heard argument on the bidders' appeals of those final orders back-to-back and we now address both in this opinion. We affirm the rejection of Waste Management's bid but reverse rejection of Republic's for the reasons that follow.

The essential facts are undisputed. The Authority by public notice sought sealed bids for a multi-year contract to operate Mercer County's solid waste transfer station and transport and dispose of all acceptable waste generated in the County.1 Pertinent to these appeals, the bid specifications required bidders to submit an ownership disclosure statement and an opinion of bidder's counsel regarding enforceability of the solid waste services agreement to be executed by the Authority and the successful bidder.

When the bids were opened, Republic was the low bidder at $367.99 per ton. Waste Management submitted the second lowest bid of $379.87 per ton.2 After a letter from Republic about Waste Management's failure to disclose its ownership, the Authority rejected Waste Management's bid on that basis. Specifically, the Authority concluded Waste Management "certifi[ed] to inaccurate information as [its ownership disclosure statement] omitted Capital World Investors, which owns 10% of [Waste Management's] parent company, Waste Management, Inc." The Authority rejected Republic's bid because the Authority concluded that the opinion submitted by Republic's counsel "substantially and materially changed" the bid's form of opinion regarding enforceability of the solid waste services agreement. Following rejection of the bids, the Authority resolved to rebid the contract.

Waste Management filed its prerogative writs challenge to the Authority's actions in the Law Division and Republic shortly followed with its own suit. The Law Division granted Republic's motion to intervene in Waste Management's suit and Waste Management's motion to intervene in Republic's suit and considered both matters together.

Waste Management argued that its ownership disclosure statement was not inaccurate because it was only required to disclose record owners and not beneficial owners of its parent's stock. Noting that a bidder's failure to disclose its 10% stockholders is a fatal defect under the public bidding laws, the judge determined that disclosure of only record owners would defeat the legislative purpose of promoting integrity in public bidding. Only by requiring disclosure of beneficial owners of a corporate bidder could a public entity ensure its awareness of individuals and entities that could influence or control the bidder. Finding such disclosure essential to fair competitive bidding, especially in the highly regulated area of solid waste disposal, the judge affirmed the Authority's rejection of Waste Management's bid.

The judge also affirmed the Authority's rejection of Republic's bid. While observing that the bid specifications permitted a bidder to submit certain opinions of counsel in substantially the form set forth in the specifications, the judge noted that the form of opinion regarding enforceability of the solid waste services agreement was not among them. The bid form consisted of a two-paragraph letter from bidder's counsel attesting to the bidder's power and authority to enter into the solid waste services agreement and the enforceability of that agreement against the bidder.

In place of that two-paragraph letter, Republic's counsel submitted a three-page letter which the Authority concluded made material changes to the bid form and expressly stated that certain unidentified provisions of the solid waste services agreement "are or may be unenforceable." The judge agreed that the added language "change[d] the thrust of the opinion" and "suggested . . . that the agreement may be unenforceable." While noting that it may be "a stretch" to posit that other waste haulers might "have submitted bids had they thought they could qualify the opinion letter," the judge determined that doubts as to the materiality of a deviation should be resolved "on the side of strictness." See George Harms Constr. Co. v. Borough of Lincoln Park, 161 N.J. Super. 367, 375 (Law Div. 1978).

After the judge dismissed both suits, the Authority rebid the contract. Both Republic and Waste Management submitted new bids. In the rebid, Waste Management was the low bidder, dropping its bid price to a level below Republic's initial bid. The Authority awarded the contract to Waste Management and it has continued to operate the County's transfer station without interruption.3

The Law Division resolved these cases on the merits on the parties' cross-motions for final declaratory and injunctive relief. Like the trial judge, we address the legal issues before us on an undisputed record. Accordingly, we review the judge's construction of the meaning of statutes and the common law de novo, without deference to any interpretive conclusions we believe mistaken. Nicholas v. Mynster, 213 N.J. 463, 478 (2013); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Because this dispute arises in the context of a publicly-bid contract, we approach our task mindful that the

[b]idding statutes are for the benefit of the taxpayers and are construed as nearly as possible with sole reference to the public good. Their objects are to guard against favoritism, improvidence, extravagance and corruption; their aim is to secure for the public the benefits of unfettered competition. To achieve these purposes all bidding practices which are capable of being used to further corrupt ends or which are likely to affect adversely the bidding process are prohibited, and all awards made or contracts entered into where any such practice may have played a part, will be set aside. This is so even though it is evident that in fact there was no corruption or any actual adverse effect upon the bidding process.

[Terminal Constr. Corp. v. Atl. Cnty. Sewerage Auth., 67 N.J. 403, 409-10 (1975).]

With those principles clearly in view, we turn first to Waste Management's appeal.

Waste Management: A-2287-12

N.J.S.A. 52:25-24.2, the bidders disclosure statute, prohibits the State or any county, municipality, school district or other board, commission or authority exercising governmental functions from awarding any contract paid from public funds to any bidder organized as a corporation unless the corporation submits "a statement setting forth the names and addresses of all stockholders . . . who own 10% or more of its stock, of any class." The statute further provides that "[i]f one or more such stockholder . . . is itself a corporation . . . , the stockholders holding 10% or more of that corporation's stock

. . . shall also be listed." N.J.S.A. 52:25-24.2. The statute mandates that "[t]he disclosure shall be continued until names and addresses of every noncorporate stockholder . . . exceeding the 10% ownership criteria established in this act, has been listed." Ibid. A corporation's disclosure statement must proceed or accompany its bid. Ibid.

The bidders disclosure statute is not limited to municipalities and counties operating under the strictures of the Local Public Contracts Law. The Legislature deemed it to apply to any contract, agreement for the performance of any work, or the furnishing of any materials or supplies paid with or out of any public funds by the State as well as any county, municipality, school district, their subsidiaries and agencies, and any authority, board or commission exercising governmental functions. N.J.S.A. 52:25-24.2. We know of none exempted. The Local Public Contracts Law makes a bidder's failure to submit the statement of corporate ownership "a fatal defect that shall render the bid proposal unresponsive and that cannot be cured by the governing body." N.J.S.A. 40A:11-23.2c; George Harms Constr. Co., supra, 161 N.J. Super. at 372-73.

The Authority incorporated the requirements of N.J.S.A. 52:25-24.2 into its bid specifications as Form A-4, "Ownership Disclosure Statement." In its Form A-4 disclosure, Waste Management identified itself as a wholly-owned subsidiary of Waste Management Holdings, Inc., a wholly-owned subsidiary of Waste Management, Inc. Waste Management further stated that "Waste Management, Inc., is publicly traded on the New York Stock Exchange and does not have any stockholders that own 10% or more of its stock." (Emphasis added). Waste Management submitted its Form A-4 disclosure with its bid on August 21, 2012.

It is undisputed that on August 9, 2012, Capital World Investors, a division of Capital Research and Management Company, itself a wholly owned subsidiary of the Capital Group Companies, Inc., a large institutional investor,4 informed the Securities and Exchange Commission (SEC) that it had "sole dispositive power" over 46,393,106 shares of Waste Management, Inc. (WMI). Specifically, Capital World's SEC filing stated

Capital World Investors is deemed to be the beneficial owner[5] of 46,393,106 shares or 10% of the 463,557,830 shares believed to be outstanding as a result of [Capital Research and Management Company] acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.

Republic sent Capital World's SEC filing to the Authority after the bid opening and directed the Authority to the SEC's website. Using that information, the Authority learned that WMI, in its own proxy statement filed with the SEC in March 2012, disclosed that Capital World is "known to us to beneficially own more than 5% of our Common Stock" based on Capital World's SEC filings from February 2012. Specifically, WMI disclosed that Capital World "beneficially owned" 42,936,400 shares, or 9.3% of the company "as a result of acting as investment adviser to various investment companies." The Authority rejected Waste Management's bid based on it having certified inaccurately on its Form A-4 that its parent, WMI, did not have any stockholders owning 10% or more of its stock and its failure to reveal Capital World's 10% interest in its parent.

We first address, and reject, Waste Management's argument that the Law Division erred in allowing Republic to intervene in Waste Management's challenge to the Authority's rejection of Waste Management's bid. No discussion of this point is necessary here. R. 2:11-3(e)(1)(E). We are satisfied, as was the Law Division, that Republic's interest in preserving its right to rebid the contract in the event its bid was determined to be properly rejected was sufficient to allow its intervention as of right under R. 4:33-1. See Schlumberger Indus., Inc. v. Borough of Avalon, 252 N.J. Super. 202, 204 (App. Div. 1991), certif. denied, 130 N.J. 8, 611 (1992) (rejecting similar argument against intervention in competitive bidding dispute under the Local Public Contracts Law).

Waste Management argues that its disclosure of its parent's ownership was not inaccurate under N.J.S.A. 52:25-24.2, as Capital World is not a record owner of any WMI stock.6 Despite the fact that "stockholder" is not defined in the statute, Waste Management contends that the Law Division disregarded "controlling State law indicating that owner of record is the meaning of the term stockholder as used in the Disclosure Statement" resulting in "an unjustifiable judicial expansion of the obligations the Legislature required corporate bidders to meet for public bidding purposes." We reject both the hyperbole and the argument.

The very capable Law Division judge engaged in a sensible and straightforward analysis applying the law to the facts presented. Acknowledging that "stockholder" is not defined in the bidders disclosure statute, the judge looked to other statutes for a plain meaning of the term. After a review of several statutes established that the Legislature has defined "stockholder" to mean record owner or to include holder or beneficial owner depending on the issue addressed,7 the judge looked to the Legislature's purpose in enacting the disclosure statute, exactly as required. See Burns v. Belafsky, 166 N.J. 466, 473 (2001) (describing the steps a court is to undertake in accomplishing the primary task to effectuate the legislative intent in light of the language used and the objects sought to be achieved).

In George Harms, supra, 161 N.J. Super. at 372, the court held that in enacting N.J.S.A. 52:25-24.2, the Legislature

expressed its clear purpose to ensure that all members of a governing body and the public be made aware of the real parties in interest with whom they are asked to contract. Thus the public, as well as public officials, can identify any real or potential conflicts of interest arising out of the awarding of public contracts, or can

identify those bidders who lack the requisite responsibility.

[(Citing Assembly Bill 22, Statement of Purpose (1976).]

Relying on that well-established authority, the judge determined that the statute "is aimed to promote transparency and ensures that the individuals and entities that have influence and control or could have influence and control over a corporate bidder be identified so that the agency [could identify] conflict[s] of interest." The judge concluded that those policies support a reading of "stockholder" as including beneficial owners. Relying on Capital World's and WMI's SEC filings that Capital World was a beneficial owner of 10% of WMI's stock, the judge upheld the Authority's rejection of Waste Management's bid.8

We find no flaw in the judge's reasoning or conclusion. It is undisputed that at the time Waste Management filed its Form A-4 disclosure certifying that the publicly-traded WMI "does not have any stockholders that own 10% or more of its stock," Capital World "had sole dispositive power" over 46,393,106 shares or 10% of the 463,557,830 outstanding shares of that entity.9 Waste Management acknowledges, as it must, that this information was readily available to it through the SEC filings of Capital World and WMI. The proposition that the Legislature intended to define "stockholder" in a manner that would allow a bidder to evade disclosure of an individual or entity with the power to control the decision to hold or sell 10% or more of the shares of the bidder or its parent is not sustainable in light of the acknowledged purpose of the statute. Given that the information as to this control of the ownership of its corporate parent was readily available to Waste Management, we have no hesitation in concluding that the Authority correctly rejected its bid based on the inaccuracy of its Form A-4 disclosure.

Our holding disposes of Waste Management's appeal. We add the following only to acknowledge its request for a "precedential resolution" of the "correct construction of the term 'stockholder' as used in the disclosure statute" for guidance in future procurements, and why we decline the invitation.

We acknowledge, as did the Law Division, that the parties have raised a number of interesting issues about a bidder's ability to discover all 10% owners in its chain of ownership in all circumstances given the changes in the capital markets and the advent of large institutional investors, some of which are privately held. They have included in their appendices articles explaining the vast changes that have taken place in the transfer of registered securities since the mid-1970s, when the bidders disclosure statute was enacted.10 These articles trace the demise of paper stock certificates and the rise of the indirect holding system for securities settlement. The parties appear to agree that because certificated shares in the hands of the Depository Trust Company, the entity that maintains the central electronic book-entry system that tracks trades, are registered in the name of its nominee, Cede & Co., it may well be that a company listed on the New York Stock Exchange will have only one registered shareholder, Cede & Company.

Although this history is undoubtedly interesting, we think this case a particularly poor vehicle for resolution of some of the far-ranging issues the parties have raised. First and most important, we need not reach these issues in order to resolve the appeal. Neither plaintiff argued that it had any difficulty accessing information regarding the 10% owners in their respective ownership chains. Second, the record is inadequate to properly frame or resolve the issues the parties identify.

While Waste Management insists that the disclosure statute can only extend to record owners, it has not disclosed WMI's shareholders of record. Before the Law Division, Waste Management offered only a limited certification of WMI's corporate secretary. The secretary did not certify, as Waste Management had, that WMI "does not have any stockholders that own 10% or more of its stock." Instead, the secretary states her "understanding that Defendant Mercer County Improvement Authority has made the statement that Capital World Investors owns 10% of WMI" and that WMI's stockholder register "shows that Capital World Investors . . . is not the record holder of any shares of WMI stock."

Republic insists that WMI's shareholder list, like that of most publicly traded companies listed on the New York Stock Exchange, likely lists Cede & Co. as holding more than 10% of its shares, thus requiring rejection of Waste Management's bid even under its proffered definition of shareholder. In its reply brief and at oral argument, Waste Management insists that listing Cede in an ownership disclosure statement would be "meaningless" as it is only a nominee and not the actual owner of any stock despite its presence on a company's shareholder list.11

Besides convincing us that the definition Waste Management urges would make it doubtful that any public entity could be assured that it would know anything about the 10% owners in a corporate bidder's ownership chain, either record owners or beneficial owners, this dispute makes obvious that the factual record is wholly inadequate to decide anything more than the narrow issue presented in this case. Scholarly articles are a poor substitute for facts. Bearing in mind that the bidders disclosure statute applies far more broadly than the Local Public Contracts Law, the record is simply inadequate to assure us that any of the problems the parties raise actually exist or that "guidance" is necessary.

Having resolved that the Authority properly rejected Waste Management's bid, we turn to Republic's challenge.

Republic: A-2312-12

The issue presented on this appeal is whether the opinion of bidder's counsel regarding enforceability of the solid waste services agreement to be executed by the Authority and the successful bidder Form A-16 submitted by Republic materially deviated from the bid specifications. Applying the two-prong test developed by Judge Pressler in Township of River Vale v. R.J. Longo Construction Co., 127 N.J. Super. 207, 216 (Law Div. 1974), and adopted by the Supreme Court in Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307, 315 (1994), we do not conclude that the defect, if there was one, was material.

Form A-16 of the bid specifications required the following text on bidder's counsel's letterhead

I have acted as counsel to [NAME OF BIDDER], a [corporation] [partnership] [other business entity], duly organized and existing under the laws of the State of __________ (the "Company"), with respect to certain matters in connection with an "Agreement to Provide Solid Waste Services for Acceptable Waste," dated __________, by and between the Mercer County Improvement Authority and [NAME OF BIDDER] (the "Agreement"). Certain terms that are used herein as defined terms shall have, unless defined herein or unless the context clearly requires otherwise, the meanings that are assigned to such terms in the Agreement.

The Company has full corporate power and authority to execute and deliver the Agreement and to perform its obligations thereunder. The Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights or remedies generally or by the application of general equitable principles.

Although the bid specifications specifically permit a bidder to submit other opinions of counsel, such as Form A-14 ("Form of Opinion of Bank Counsel Regarding Letter of Credit") and Form A-15 ("Form of Opinion of Bidder's Counsel Regarding Letter of Credit"), "in substantially the form set forth in the Bid Specifications," for the opinion of counsel regarding enforceability of the Agreement, the specifications state only that the opinion is to be included "as set forth in Form A-16."

A review of Form A-16 reveals that in it the Authority sought three legal opinions from bidder's counsel. First, that the bidder "has full corporate power and authority to execute and deliver the Agreement and to perform its obligations thereunder." Second, that "[t]he Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company." And third, the "remedies" or "enforceability" opinion, that the Agreement is "enforceable against the Company in accordance with its terms, except to the extent that the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights or remedies generally or by the application of general equitable principles."

Republic's counsel did not provide its opinion in the format of Form A-16. Instead, it provided its opinion in the format of a customary third-party opinion letter of counsel. The letter opened by noting that counsel had acted as special counsel to Republic in connection with the Agreement, and that Republic had asked it to render certain opinions regarding that Agreement to the Authority. Counsel then proceeded to advise the Authority of the documents counsel had reviewed for purpose of its opinion, to explain that the opinion was limited to the laws of New Jersey and to detail the assumptions on which the opinion was based.

Next, counsel explained that "[t]he opinions hereinafter expressed are specifically subject to the following additional assumptions, exceptions and qualifications." The letter specified five such "assumptions, exceptions and qualifications." We focus only on the ones at issue here and quote them in full.

(c) Our opinion as to the validity and enforceability of the Agreement is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, receivership, moratorium and similar laws affecting creditor's rights generally, principles of equity and to the equitable discretion of courts, whether in proceedings at law or in equity.

(d) The availability and enforceability of particular remedies, and the enforceability of particular provisions or waivers in the Agreement may be limited by equitable principles and federal bankruptcy law.

(e) We express no opinion as to the availability of the remedy of specific performance. Furthermore, certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable in whole or in part, but the inclusion of such provisions does not substantially interfere with the practical realization of the benefits intended to be conferred by the Agreement, except for the consequences of any procedural delay that may result therefrom.

Finally, "[b]ased upon and subject to the foregoing," counsel expressed its opinion that

1. [Republic] has the full limited liability company power and authority to execute and deliver the Agreement and to perform its obligations thereunder.

2. The Agreement has been duly authorized, executed and delivered by [Republic] and, upon execution of the Agreement by the Authority, will be the legal, valid and binding obligation of [Republic], enforceable against it in accordance with its terms.

We begin our analysis by rejecting the Authority and Waste Management's arguments that Republic's challenge is actually one to the bid specifications and thus time-barred and that Republic's bid was properly rejected because it modified Form A-16.

There appears no basis for the argument that Republic's suit challenging the rejection of its bid is actually a challenge to the bid specifications and thus untimely. Challenges to the bid specifications must be brought no later than three days prior to the bid opening. N.J.S.A. 40A:11-13. Republic, however, is not challenging the bid specifications. It claims that its bid materially complies with all bid specifications, including Form A-16. This case is thus unlike Saturn Construction Co. v. Board of Chosen Freeholders, 181 N.J. Super. 403, 408 (App. Div. 1981), in which the plaintiff's only basis for stating that it was the lowest bidder was by interpreting the specifications to allow the county to award a contract by ignoring a mandatory bid item. As Republic's claim that it is the lowest responsible bidder does not depend on the Authority waiving any mandatory bid item, but instead relies on its bid being materially conforming, we reject this argument.

The law is well settled that, notwithstanding a reservation in the bid documents allowing the bidding authority to reject a bid for any non-conformity, a bidding authority may only reject a bid that is materially defective.12 See Bryan Constr. Co. v. Bd. of Trs., 31 N.J. Super. 200, 206 (App. Div. 1954) ("Mere irregularity of a bid will not justify its rejection by a municipal body charged with a duty of awarding a contract to the lowest bidder. . . . [F]ailure to technically comply with the form required will not defeat the right of the lowest bidder, to have the contract, if, after the bids are opened, it appears there has been a substantial compliance with the requirements.") (quoting Faist v. City of Hoboken, 72 N.J.L. 361 (Sup. Ct. 1905)); Palamar Constr., Inc. v. Pennsauken, 196 N.J. Super. 241, 257 (App. Div. 1983) ("While this policy [of inviting competition by placing all bidders on an equal footing] dictates that only bids which comply with the specifications and instructions are acceptable, it also dictates, lest the primary purpose of achieving economy be unnecessarily frustrated, that minor irregularities and immaterial variances in the form of the bid not be permitted to result in its invalidation.") (quoting River Vale v. R.J. Constr. Co., 127 N.J. Super. 207, 215-16 (Law Div. 1974)).

Here, for example, Republic altered the Form A-16 language which reads, "[t]he Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms" to read "[t]he Agreement has been duly authorized, executed and delivered by [Republic] and, upon execution of the Agreement by the Authority, will be the legal, valid and binding obligation of [Republic], enforceable against it in accordance with its terms." (Emphasis added). The alteration was to correct an obvious misstatement of law, that is that the Agreement would be enforceable against Republic before the Authority executed it. No one could seriously argue that this specific noncompliance constitutes a material deviation from the specifications or that a bidding authority could reject a bid solely on this basis. As Judge Pressler noted in River Vale, "where the irregularity is not substantial, it may well be the duty as well as the right of the municipality to waive it." River Vale, supra, 127 N.J. Super. at 222.

Accordingly, that Republic changed the words of the opinion letter of Form A-16 is not dispositive; our focus, like the Law Division's, is on whether Republic's counsel changed their meaning. We are satisfied, as was the Law Division, that Republic without question provided the first two of the three opinions the Authority sought, that Republic had full power and authority to execute and deliver the Agreement and to perform its obligations thereunder, and that the Agreement Republic had authorized, executed and delivered would, upon execution by the Authority, result in a legal, valid and binding obligation of Republic. The question is whether Republic's counsel provided the "remedies" or "enforceability" opinion the Authority sought with regard to the enforceability of the Agreement against Republic.13

The Authority required bidder's counsel to opine that the Agreement would be enforceable against the bidder in accordance with its terms, "except to the extent that the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights or remedies generally or by the application of general equitable principles." Although in a different form, Republic's counsel's qualifications (c), that its opinion as to "the validity and enforceability" of the Agreement is "subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, receivership, moratorium and similar laws affecting creditor's rights generally, principles of equity and to the equitable discretion of courts" and (d), that the "availability and enforceability of particular remedies, and the enforceability of particular provisions or waivers in the Agreement may be limited by equitable principles and federal bankruptcy law" would appear substantively equivalent to the Authority's permitted qualification of the opinion as limited by "standard" exceptions for bankruptcy and insolvency law and general equitable principles. See Sterba, supra, 3.16 at 79-86.

The heart of the dispute centers on Republic's counsel's qualification (e), that

certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable in whole or in part, but the inclusion of such provisions does not substantially interfere with the practical realization of the benefits intended to be conferred by the Agreement, except for the consequences of any procedural delay that may result therefrom.

Republic claims that the additional language is designed to, and does, provide greater assurance to the Authority that notwithstanding counsel's qualification of the enforceability of any particular provision, those provisions will not interfere substantially with the Authority's realization of the benefit of its bargain, except as to any procedural delay as might result. The Authority claims that by inserting the language "that the Agreement is or may be unenforceable," Republic "substantially and materially changed the form opinion letter" of the bid specifications by depriving the Authority of the "assurance that the Agreement will be fulfilled." We disagree.

Treatises and articles on third-party opinion letters explain that "practical realization" opinions developed in response to lawyers needing to qualify opinions regarding enforceability of agreements in order to render the opinions not misleading to the recipient. Sterba, supra, at 5.7 at 200-01; Kurt E. Anderson, New Jersey Commercial Loan Opinion Letters: The Remedies Opinion, Asset-Based Secured Transactions Opinions & Related Exceptions, Qualifications & Assumptions, 25 Seton Hall L. Rev. 141, 152 (1994). An opinion stating generally that certain rights, remedies and waivers contained in an agreement may be unenforceable, while not misleading, limits its utility to the recipient. The recipient, understanding that certain provisions may be unenforceable perhaps because of insolvency laws or equitable principles, may still wish assurance that the more important provisions of the agreement will be enforceable in order that it may realize its benefits. Anderson, supra, 25 Seton Hall L. Rev. at 152. That tension apparently resulted in the development of an additional statement to the effect that such laws and judicial decisions do not make the agreement legally inadequate for the practical realization of the principal benefits intended to be provided thereby. Ibid.

The general qualification to enforceability of all provisions of loan documents, qualified by the comfort language that a lender will nonetheless be afforded the 'practical realization' of the 'material' or 'principal' benefits of the loan instruments, has been viewed by many to be the optimum compromise for dealing with problems raised by an enforceability opinion request. It avoids the necessity of a lengthy and possibly incomplete listing of caveats to enforcement, while giving a lender comfort that the essential rights and remedies included in the loan document will be available. Indeed, language to this effect has become standard in many enforceability opinions and is generally acceptable to most lenders.

[Sterba, supra, 5.7.]

While the commentators would appear to support Republic's argument that its counsel's inclusion of a practical realization clause did not further qualify counsel's opinion that the Agreement was enforceable against Republic in accordance with its terms, subject to the standard qualifications the Authority allowed for bankruptcy and the application of general equitable principles included in (c) and (d), we do not rely on these authorities. Instead, we look to the plain meaning of the words themselves.

The qualification in (e) expressing no opinion on the remedy of specific performance and further stating that "certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable in whole or in part," clearly relates to, and reiterates, the qualification in (d), which it follows, that "[t]he availability and enforceability of particular remedies, and the enforceability of particular provisions or waivers in the Agreement may be limited by equitable principles and federal bankruptcy law." The Authority and the trial court focused on Republic's counsel's statement in (e) that "certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable." But the sentence did not end there. The full sentence reads

Furthermore, certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable in whole or in part, but the inclusion of such provisions does not substantially interfere with the practical realization of the benefits intended to be conferred by the Agreement, except for the consequences of any procedural delay that may result therefrom. [Emphasis added.]

We cannot agree with the trial court that Republic's counsel's inclusion of that sentence "changed the thrust of the opinion" by suggesting that the Agreement may be unenforceable. In our view, the sentence, read in its entirety and in the context in which it was made, does not suggest that the Agreement is unenforceable, but the opposite. It offers the opinion that the Agreement is enforceable by the Authority and that the inability to enforce "certain remedial, waiver, and other provisions" may cost the Authority time but not the benefits it expects to realize from the Agreement. Frankly, we think the sentence cannot be read any other way. Accordingly, we do not find that the opinion of counsel Republic included in its bid differed in substance from the one the Authority included in Form A-16.

Applying the test for materiality reinforces our view.

In determining whether a bidder's non-compliance with specifications is material, and thus non-waivable, a court must evaluate the specific non-compliance under River Vale's two-part test

[F]irst, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.

[Meadowbrook, supra, 138 N.J. at 315 (citations and internal quotation marks omitted).]

We are unaware of any case involving the rejection of a competitive bid based on the opinion of bidder's counsel as to the enforceability of the contract. That is not surprising to us.

The first two opinions the Authority required from bidders' counsel, that the bidder had full power and authority to execute and deliver the Agreement and to perform its obligations thereunder and that the bidder had properly authorized, executed and delivered the Agreement so as to make it its valid and binding obligation, are largely redundant of the bidder's own representations, and, to a certain extent are proved by documents, such as a certificate of incorporation and corporate resolutions, certain of which are required to be attached to the bid.

These opinions are typically provided by counsel for the party to whom they relate for the obvious reason that the information is more readily available to that lawyer. Sterba, supra, 5.7 at 194. By requiring counsel for the bidder to provide its opinion on these points, the contracting unit satisfies its obligation of due diligence that the bidder is duly organized and has properly authorized and executed the contract without having to research such issues itself. See Anderson, supra, 25 Seton Hall L. Rev. at 143.

As to the third required opinion, the enforceability opinion, the contracting unit obviously does not require the opinion of bidders' counsel as to the enforceability of the contract to satisfy itself as to its validity. It has its own lawyers who drafted the contract and provided it advice on its validity and enforceability. The traditional purpose of an opinion letter as to the enforceability of the contract is to procure a fair and objective opinion on the agreement's enforceability in the courts of the jurisdiction. While Waste Management contends that the purpose is to estop the party giving it from claiming the agreement is unenforceable in the event of the party's breach, there appears little support for such a statement. "It is . . . difficult to imagine a court imputing the actions or omissions of the [contracting party's] counsel to his or her client in a subsequent action to enforce or enjoin enforcement" of the contract. Sterba, supra, 5.7 at 196. We agree with that view.

Republic's letter, while noting that certain remedial, waiver, and other provisions of the Agreement are or may be unenforceable, goes on to say that the inclusion of such provisions "does not substantially interfere with the practical realization of the benefits intended to be conferred by the Agreement." As the Authority expressly allows bidders' counsel to qualify their opinions as to the enforceability of the Agreement in light of the insolvency laws and the application of general equitable principles, we fail to see that the additional language further qualifies the opinion or vitiates any estoppel effected by counsel's statement that the Agreement, upon execution by the Authority, "will be the legal, valid and binding obligation of [Republic], enforceable against it in accordance with its terms."14

Having considered the purpose of the opinion in the bid, we have no hesitation in concluding that the absence of an opinion of bidder's counsel regarding enforceability of the Agreement would deprive the Authority of its assurance that the contract will be entered into and performed according to its specified requirements. Cf. Hillside v. Sternin, 25 N.J. 317, 324 (1957) (finding failure to supply any form of security in light of bid requirement of certified check deposit to be material noncompliance).

Here, of course, Republic did not omit an opinion of bidder's counsel as to the enforceability of the Agreement. It provided an opinion different in form but not in substance from the one required by the specifications for bids. Accordingly, this case is like River Vale in which the court found no material deviation in a bidder's proffer of a bid bond in place of the certified check required in the bid specifications. River Vale, supra, 127 N.J. Super. at 218. Because we conclude that Republic's opinion of counsel provided the Authority with the same, and perhaps better, assurance it sought in Form A-16 that the Agreement was enforceable in accordance with its terms, "except to the extent that the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights or remedies generally or by the application of general equitable principles" Republic's submission of that opinion in place of the one specified in Form A-16 does not "deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements." Meadowbrook, supra, 138 N.J. at 315 (citations and internal quotation marks omitted).

Turning to the second criterion, the submission of Republic's opinion of counsel in lieu of the form opinion specified in Form A-16 as it may affect the common standard of competition, we can discern no affect. There is no support in fact or law for the Authority's claim that Republic "could unilaterally cancel or fail to abide by the Agreement because of its claim that all or some of the provisions in the Agreement may be unenforceable." Although the trial judge acknowledged that it may be "a stretch" to posit that other waste haulers might "have submitted bids had they thought they could qualify the opinion letter," the judge determined that such was in "the realm of possibility" and that doubts as to the materiality of a deviation should be resolved "on the side of strictness."

The purpose of competitive bidding is to secure the benefits of unfettered and fair competition for the taxpayers. Meadowbrook, supra, 138 N.J. at 313. The objects of the bidding statutes "are to guard against favoritism, improvidence, extravagance and corruption." Terminal Constr., supra, 67 N.J. at 410. In our view, those dangers inhere in the wrongful rejection of a responsive bid every bit as much as when a contracting authority accepts one that is materially defective. As Judge Pressler noted in River Vale, "where the irregularity is not substantial, it may well be the duty as well as the right of the municipality to waive it." River Vale, supra, 127 N.J. Super. at 222. Erring on the side of strictness when it results in the rejection of a substantially conforming bid frustrates the purposes of the public bidding laws.

Consider what occurred here. The Authority was forced to reject Waste Management's bid for what was a fatal defect under N.J.S.A. 40A:11-23.2c. Rejecting Republic's bid allowed the Authority to rebid the contract.15 When it did so, Waste Management, having the benefit of Republic's earlier bid for the same contract, dropped its bid price to a level below Republic's initial bid. If the Authority's rejection of Republic's bid was for a reason other than a material deviation from the specifications, the opportunity for, or at least the appearance of, favoritism or corruption is obvious.

While the Authority points out that the lower price of the rebid contract is a benefit for taxpayers, that benefit will be short lived if it occurred at the cost of fair competition.

See Paterson Contracting Co. v. Hackensack, 99 N.J.L. 260 (E. & A. 1923) ("If bids are rejected arbitrarily or capriciously, contractors will not take the time and expend the money necessary to submit proposals. They will infer favoritism. This will result in few bidders and higher bids.").

When the two-prong test for materiality does not demonstrate that waiver of the alleged non-compliance would deprive the contracting unit of its assurance that the contract will be performed as specified or adversely affect competitive bidding, allowing it to reject a non-conforming bid is not in the public interest and violates the public bidding statutes by permitting rejection of the lowest responsible bid. See Bryan, supra, 31 N.J. Super. at 206; Palamar, supra, 196 N.J. Super. at 255.

Because we find that the Authority rejected Republic's bid on the basis of an opinion of counsel that was different in form but not substance from the one specified in the bid and that such nonconformance was not a material defect, we conclude that the Authority's rejection of Republic's bid was arbitrary and must be reversed. See In re Protest of Award of On-Line Games Prod. & Operation Servs. Contract, 279 N.J. Super 566, 590 (App. Div. 1995) (noting the standard of review of whether a bid on a local public contract conforms to specifications is whether the decision was arbitrary, unreasonable or capricious).

The question remains as to whether we should direct entry of an award of the contract to Republic. Intervenor Waste Management argues that counsel for the Authority made representations to the Law Division that having rejected all bids on responsiveness grounds, the Authority has not made the "requisite finding on responsibility issues with respect to [Republic]." The Authority, while not addressing the issue in a point heading, see R. 2:6-2(a)(5), devotes several lines to the topic in its brief. It claims that the Authority "did not complete its responsibility analysis" and that should the trial court's "decision be reversed entirely" as to both Waste Management and Republic the Authority will "still [need to] complete its review of the bid submissions."

We note that the bids were opened on August 21, 2012, and that the Authority did not reject the bids until September 18, almost four weeks later. The Authority provided no information to the Law Division as to what review remained to be done and it has not properly briefed the issue here. Under these circumstances, we conclude a remand to the Authority is unwarranted. We accordingly remand to the Law Division to direct entry of the award of the contract to Republic. We will allow that in the event the Authority concludes that Republic is not a responsible bidder, it may file a declaratory judgment action in the Law Division for a declaration that it may decline to execute the Agreement on that basis.

The final judgment in A-2287-12 is affirmed. The final judgment in A-2312-12 is reversed and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.

1 Waste Management and its affiliates have been the County's vendor for transportation and disposal of the County's solid waste since 1988, when the Authority entered into a twenty-five year license agreement with Waste Management of Pennsylvania, Inc. The Supreme Court invalidated that agreement in 2001 as having been entered into in violation of the public bidding laws. Borough of Princeton v. Bd. of Chosen Freeholders of the Cnty. of Mercer, 169 N.J. 135, 161 (2001). Thereafter, Waste Management, or its affiliates, won publicly-bid five-year contracts in 2002 and 2007.

2 Plaintiffs and the Authority refer to the bid prices in different ways. The figures in the text represent the aggregate price per ton for transfer, transportation and disposal for all five years of the contract. For year one, Waste Management bid $72.99 per ton for all three services while Republic bid $70 per ton; in year five, Waste Management bid $79.01 per ton while Republic bid $77.29 per ton.

3 None of the parties contends that the Authority's award of the rebid contract to Waste Management moots these appeals. Waste Management contends that it is entitled to "the more lucrative contract lost" as a result of the trial court's decision to uphold the Authority's rejection of Waste Management's bid. Republic likewise presses its entitlement to the award of that same contract based on its low bid.

4 Waste Management has included information in its appendix asserting that Capital Group Companies is one of the world's largest investment management organizations having approximately $1 trillion under management.

5 Elsewhere in its filing, Capital World disclaimed beneficial ownership pursuant to 17 C.F.R. 240.13d-4. Under Rule 13d-4, such disclaimer is only for purposes of sections 13(d) or 13(g) of the Securities Exchange Act of 1934 relating to reports and statements by those with more than 5% of some classes of securities and does not contradict Capital World Investor's statement that it has sole dispositive power over more than 10% of Waste Management's shares.

6 That Capital World is not a record owner of WMI is not disputed by any party.

7 Compare the New Jersey Business Corporation Act, N.J.S.A. 14A:1-1 to :18-12, which limits "shareholder" to "one who is a holder of record" of shares in a corporation, "unless the context otherwise requires," N.J.S.A. 14A:1-2.1, with the New Jersey Shareholders' Protection Act, N.J.S.A. 14A:10A-1 to -6, which defines "interested stockholder" to include beneficial owners "directly or indirectly, of 10% or more of the voting power of the outstanding voting stock" and N.J.S.A. 17:9A-355 to -369, governing bank acquisitions, which defines "dissenting stockholder" to include beneficial owners as well as nominees or fiduciaries dissenting on behalf of any beneficial owner.

8 Waste Management's argument that the SEC filings on which the trial court relied do not support a finding that Capital World was the beneficial owner of 10% of WMI's stock despite Capital World's admitted sole dispositive power over the stock and WMI's acknowledgment of same is without sufficient merit to warrant discussion here. R. 2:11-3(e)(1)(E).

9 At WMI's closing price of $34.48 on the date Waste Management submitted its bid, Capital World's 46,393,106 shares had a market value of approximately $1.6 billion.

10 N.J.S.A. 52:25-24.2 became effective on March 8, 1977.

11 As we understand the argument, a company would need not disclose the names of any nominees on its shareholders list which hold 10% of its stock because nominees cannot be actual owners. This would appear a strong argument for understanding "stockholder" to include beneficial owners because they can be actual owners.

12 This principle does not apply in circumstances in which the bidding authority properly rejects all bids because the purposes of the public bidding statute are violated, the bids substantially exceed the authority's cost estimate, or because the municipal body must substantially revise or abandon the project. See Cardell, Inc. v. Twp. of Woodbridge, 115 N.J. Super. 442, 450-51, certif. denied, 60 N.J. 236 (1972). The Authority did not reject the bids on any of these grounds.

13 Although there is no real body of law governing attorney opinions, the meaning of opinion language that an agreement is a "legal, valid, and binding obligation of XYZ company, enforceable in accordance with its terms" has been thoroughly debated by commentators and various specialty bar associations. 1 M. John Sterba, Jr., Drafting Legal Opinion Letters 1.2 at 4, 3.12 at 72 (2d ed. 1992). The California bar views "legal, valid, binding, and enforceable" to encompass the following

1. The parties to the agreement have the legal capacity or power to enter into the agreement.

2. The agreement has been duly authorized, executed and delivered by both parties.

3. An effective contract has been formed under the laws of the applicable jurisdiction. The contract is not invalid in its entirety by reason of a specific statutory prohibition or the "public policy" of the jurisdiction. This does not mean that all provisions of the agreement are effective, such as a covenant to pay interest at a rate in excess of the applicable usury law.

4. Contractual defenses to the entire agreement, such as the statute of frauds, are not available.

5. Some remedy is available if a party to the contract does not comply with its terms generally. This does not mean that specific enforcement is available as a remedy, or that every provision in the agreement, such as the right to accelerate indebtedness in the event of a default, will be upheld by a court.

[Sterba, supra, 3.12 at 73 (quoting Committee on Corporations of the Business Law Section of the State Bar of California, Report of the Committee on Corporations Regarding Legal Opinions in Business Transactions, 14 Pac. L.J. 1001, 1038 (1983)).]

Having canvassed the law review articles on the subject, Sterba concludes

"Enforceable," by general consensus, appears to refer to whether, if a party to an agreement goes to court, the court will use its powers to compel the other party to live up to the provisions of the agreement or will award damages or other appropriate relief. If this is what is meant, it is difficult to know why it is necessary to use the word "enforceable" in an opinion, because if the words "legal," "valid," and "binding" have any meaning, they mean that contracts with any or all of these attributes will be enforced by courts and that contracts without these attributes will not be "enforceable." Or, to put it another way, if it is "legal, valid and binding," how could it not be "enforceable"? From this point of view, "enforceable" is in the litany of "legal, valid, binding, and enforceable" only to make explicit this aspect of the first three terms. The words should probably be understood to mean "legal, valid, and binding and, therefore, enforceable."

[Sterba, supra, 3.16 at 78.]

14 It should be noted with regard to any purpose of estoppel that the bid specifications require the bidder in Form A-1 to expressly confirm the enforceability of the Agreement in essentially the same language included in Form A-16. The Authority does not dispute that Republic properly certified this information in a notarized form.

15 The Authority rejected the bid of the third bidder, Solid Waste Services, because Form A-9, the Bidder Financial Qualifications and Financial Information, was incomplete and Form A-17, the Guarantor Agreement, was not included.