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ANALYSIS OF RECYCLING CONTRACT BETWEEN TBI AND NORTH ANDOVER BOARD OF SELECTMEN • MINTZ LMNoston 'Islington CoH FERms Reston GT �T T�� New York SK LO y JN-ND New Haven POPEO PC LosAngeles London MEMORANDUM ATTORNEY-CLIENT COMMUNICATION PRIVILEGED AND CONFIDENTIAL TO: Robert Ercolini CLIENT: Robert Ercolini FROM: Paul D. Wilson MATTER: Town of North Andover Colleen B. McElhinny DATE: November 12, 2003 RE: Analysis of Recycling Contract Between TBI and the North Andover Board of Selectmen ISSUE PRESENTED One of the tasks you have requested of us is to comment upon the October 20, 2003 agreement ("the Agreement')between Thomson Brothers Industries, Inc. ("PBI"), other Thomson affiliates, and the Board of Selectmen("the Selectmen") of the Town of North Andover ("Town"). You have asked us to comment both on the possible invalidity of the Agreement and on its fairness, substantively, to the Town and its residents.I/ In summary, th Agreemen ets forth certain recycling and other services which will be provided by TBI to the o ' s residents, in the event that TBI is permitted to operate a recycling and trash transfer facility("the Facility") on property in North Andover currently owned and/or controlled by members of the Thomson family("the Site"). The Agreement also provides that the Thomsons will place a deed restriction on the Site which prohibits any other use of the Site for 99 years, so long as they are permitted to use, and continue to use, the Site as a trash transfer facility—in other words,they will abandon their plans for an adult entertainment establishment at the Site. ✓✓�� O�C���';MyvL 6 We are assuming under this analysis that the portions of the Agreement which you faxed to us represent the complete and accurate Agreement which was executed between the parties. On November 6,2003 you faxed to us portions of the executed Agreement,plus a complete,unsigned version,which we have combined together at Tab "A." Some of the pagination is inconsistent between the two versions,leading us to wonder if what we reviewed actually constitutes the Agreement in its final and complete form. V t November 12, 2003 DISCUSSION L IS THIS A VALID CONTRACT ENFORCEABLE BY ALL PARTIES?" A. IS THE AGREEMENT VOID FOR LACK OF CONSIDERATION? At first glance, the Agreement would seem to be wholly one-sided, as the Town has nothing to lose by it—all of the obligations, and all of the rights relinquished, appear to speak only to TBI, et. al. Indeed, it appears that the Agreement may have been characterized in this manner in some of the public discussions surrounding it. However, a closer reading of the Agreement reveals at least one, if not several, affirmative duties and/or relinquishment of a right on the part of the Town, discussed further below. To the extent that there are any ambiguities as to certain provisions and whether they represent an obligation of the Town, they would likely be read as involving a two-way exchange ofpromises because iftkAereement does not impose any o tga tons on t e Town or otherwise require the Town to give u something or do something, the Agreement would be void for ack of consideration. See O Neill v. Queen Ins. Co., 119 N.E. 678, 679(Mass. 1918). It must be presumed that the Selectmen intended the Agreement to be binding upon TBI, and, toa make the Agreement binding, intended to impose obligations on the Town as well. Moreover, the Selectmen's intent to bind the Town is apparent throughout the p` `v 'h vl Agreement, most notably in the following passages: � ttgak 4°"° • "Now, therefore, for good, lawful and valuable consideration, TBI, the Thomsons and the Selectmen agree as follows:" Preamble¶ 8". • "The Town shall [words of obligation] initially propose a form of curbside recycling contract containing such terms and conditions [as described in the Agreement]. . . . If TBI and the Town are unable to agree on a mutually acceptable curbside recycling contract. . . [the parties agree to submit the dispute to arbitration, and the arbitration award] shall be final and binding on all parties, and the parties agree to execute a curbside recycling contract incorporating such decision. . . . " ¶ 1(b). • The parties [including the Town] respectively warrant that . . .this Agreement constitutes legal, valid and binding obligations of each partv, enforceable in accordance with its terms . . . ." ¶ 7(b). The specific obligations undertaken by the Town include: (1) enter into a"free" curbside Tecycl_mg contract with TBI, ¶ 1(b); (2) enter into a fee-based contract for curbside pick-up and _ drop-o o so-called "white goods," which would include refrigerators, stoves, etc. disposed of by town o ces and/or sohoo s, as well as by citizens, ¶ 1(d); and (3) papTBI's_a torney fees, in the event TBI prevails, in any dispute brought in Superior Court under the Agreement, ¶ 3(c). 2/ We are also assuming under this analysis that the Agreement properly joins all necessary parties and entities,and also adequately describes all of the lands at issue in this matter. s/ Emphasis added. The Agreement contains no italicization,bold letters,or underlining,thus all such formatting is added here for emphasis. 2 i November 12, 2003 The "white goods" and attorney fees provisions impose direct financial obligations on the Town. The "free" curbside recycling provision may constitute an indirect and hidden expenditure by the Town because the recycled materials may have an economic value, either now or in the future, and thus their removal by TBI without any fee paid to the Town could be detrimental to the Town. B. DOES THE TOWN'S INABILITY TO TERMINATE THE CONTRACT, AND THE LACK OF ANY AUTOMATIC TERMINATION EVENT, RUN AFOUL OF THE RULE AGAINST PERPETUAL CONTRACTS? The obligations stated in the Agreement are in effect "[f]or so long that TBI is permitted to operate and is operating the Facility as described herein and the Town zoning by-laws governing the use of the Site remain unchanged." 11. Thus, the Agreement has no automatic termination date, and as it is binding upon all parties' successors and assigns, could continue in perpetuity.4/ A contract which is not certain to eventually terminate, either after a certain term or upon the happening of an event which is reasonably certain to occur"sooner or later,"may be held to be invalid as containing an indefinite term. See, e.g. Phelps v. Shawprint, 103 N.E.2d 687, 689-90 p� (Mass. 1952) (listing contracts whose termination could reasonably be predicted and thus were upheld). Rather than voiding the contract for the lack of any defined duration and termination, a court could read into the contract a`reasonable" duration, although what duration would be "reasonable" under the contract is hard to predict. Althou h TBI may terminate the Agreement �yh simpl b ceasing to operate the Facility even if it does receive al necessary permits, the Town 0� appears unable to terminate t e Agreemen in any_(proper)way. The Town could terminate the Agreement by exercising any rights it may have, if any, to revoke TBI's permission to operate the Facility, and may be able to terminate the Agreement (but not TBI's grandfathered use)by changing the zoning by-laws governing the Site; however, either move would appear to be an improper use of the permitting and/or zoning powers. C. HAVE THE SELECTMEN USURPED THE AUTHORITY OF THE BOARD OF HEALTH BY ENTERING INTO THIS CONTRACT? Although portrayed as an Agreement setting forth benefits to be provided to the Town by TBI, the Agreement reads much like the conditions which would be set forth in a permit to operate the Facility. Local permitting of the Facility is the responsibility of the North Andover Board of Health, however, and the Board of Selectmen are not given any authority over such permitting. See, generally, 310 CMR 16.00 (regarding site assignment for solid waste facilities). Indeed, the Agreement purports to acknowledge, in several places, the Board of Health's sole right to accept or reject an application for the Facility, and attempts to dispel any impression created by the.Agreement of the Selectmen's support for such a Facility. See Preamble¶¶4, 5, 6, 7; numbered¶ 10. 4/ The deed restriction does have a termination date—99 years—but the deed restriction is only one obligation involved,and specifically involves the Thomsons and their families'properties. 11(a)..That termination date does not apply to the rest of the Agreement. 3 IR November 12, 2003 Notwithstanding these numerous disclaimers and acknowledgements in the Agreement, however, the Selectmen have effectively and practically trespassed into the Board of Health's area of responsibility by includin such substantive detail in the Apreement that it appears an "advisory" of sorts tot e Board of Health. Faced with an application from TBI, which is 1 e y to mirror the terms of the Agreement, and given the Agreement as well, the Board of Health may very well view the permit as a fait accompli and is likely to feel that it has little discretion to reject the permit application. Indeed, the Agreement specifically invites the Board of Health to incorporate the Agreement into any future conditional permit. 19. D. DID THE SELECTMEN HAVE AUTHORITY UNDER THE TOWN CHARTER AND/OR BYLAWS TO F TK INTOT ONTRACT? The"white goods" contr 1 involves a enditure of Town funds as a result of which the Agreeme must be approved y Town ee mg, ei er t oug an annual budget item or a specific warrant. See Town Charter, 2 e understand that there was no such approval. The Selectmen have also promised, in the event of a dispute under the Agreement, to pay all of TBI's attorney fees should TBI prevail. ¶ 3(c). The Selectmen might argue that this figure could be allotted to the Town's general budget for legal fees, and thus not require additional Town Meeting approval. Whether this could be done properly under the Town charter and by- laws is beyond the scope of this analysis. In addition, the Selectmen have bargained away, for free, the Town's recyclables, see¶ 1(b), which may have some economic value, either now or at some point in the future. However, as such an agreement does not involve the expenditure of Town funds (simply the loss of potential Town income) it does not appear to require Town Meeting approval. E. DOES THE CONTRACT VIOLATE PUBLIC BIDDING STATUTES? S The Town is bound to enter into a fee-based "white goods" collection contract, which AGI includes not only fees charged to the town residents, but will also involve fees charged to the ,�15 04b Town for any white goods to be disposed of by the Town—thus, all refrigerators, stoves, C'M 9 microwaves, etc. in Town offices, schools and other facilities will be assessed a fee for disposal. U)\ �Sl Contracts for collection and disposal of recyclables and solid waste appear to be exempt from then (? state public bidding statutes, see M.G.L. ch. 30B § I(b)(30), and we are not aware of any Town �C2% by-laws requiring a public bid on such contracts. However, there is no prohibition on such public bidding, either, and opening up a long-term service contract such as this to competitive bidding would provide greater assurance that the Agreement is economically fair to the Town. Moreover, not only has this Agreement not been subject to open bidding, the Agreement provides that the fees must be increased—again without public bidding—and by the Selectmen, not Town Meeting, to reflect any increase in TBI's "actual costs," however those are defined (and which may include administrative costs not directly related to white goods). 4 November 12, 2003 II. ASSUMING THIS CONTRACT IS VALID, IS IT A GOOD DEAL FOR THE TOWN OF NORTH ANDOVER? A. THE CONTRACT GIVES TBI DISCRETION TO TERMINATE THE CONTRACT AND/OR MANIPULATE ITS OBLIGATIONS THEREUNDER As noted above, TBI's obligations under the contract — including the deed restriction —are only binding "[f]or so long that TBI [which includes its successors and assigns] is permitted to operate and is operating the Facility as described herein and the Town zoning by- laws governing the use of the Site remain unchanged." 11. • Thus, if TBI (or its successors or assigns) decide to stop operating the facility, TBI's obligations are terminated. • If TBI is permitted to open a facility but not exactly "as described herein" ("a solid waste recycling and transfer facility for up to 650 tons per day," Preamble¶ 2), TBI's obligations are terminated. • If the Town zoning by-laws governing the Site change in any way, even if the change does not impinge upon TBI's use of the Site—or, indeed, even if the change broadens the range of possible uses of the Site—the agreement is terminated. B. THE CONTRACT LEAVES TOO MANY AMBIGUITIES AND UNANSWERED QUESTIONS, THE ANSWERS TO WHICH MAY PROVE COSTLY TO THE TOWN The lack of any indemnification clauses, references to liability insurance coverage, workers' compensation coverage, or employee background checks, are all problematic. This Agreement will have TBI employees going into neighborhoods, going to schools at all levels, and going onto Town property. This Agreement involves activities that pose a risk of accidents )� to the public, especially children, risk of injury to TBI employees, and a risk of criminal activity kA by TBI employees. None of these risks are addressed in this Agreement in any way. In addition, there is no provision for the Town's approval of TBI's successors/assigns ("The terms and conditions of this Agreement are fully transferable to any successor or assignee of TBI to operate a transfer station on the Site"), ¶ 5, and thus even if TBI is qualified and financially able to perform under this Agreement (a fact on which we cannot comment), there is no guarantee that any future operators of the Site will be so qualified. C. THE TERMS OF THE CONTRACT REVEAL THAT TBI IS USING THE THREAT OF OPENING"ROCKETS" IN AN EXTORTIONATE MANNER Pursuant to 14, TBI promises to file an application for site assignment for the Facility within 30 days of local approval of any other proposed use for the Site, i.e., the adult entertainment establishment. This raises the question as to why TBI has not agreed to apply for site assignment within 30 days of execution of this Agreement, and the answer appears to be that TBI does not want to apply for site assignment for the Facility until it has a really big sword to 5 November 12, 2003 hold over the Town's head, i.e., "it's either the strip club or the dump." This way they can force through a possibly inadequate site assignment application. See also¶6 (promising to drop the prior lawsuit appealing the denial of the adult entertainment special permit application). D. SPECIFIC SUBSTANTIVE ISSUES WITH THE CONTRACT A few specific issues to be taken with respect to the Agreement: • We are unable to comment whether$20,000 per year is a sufficient sum to pay for the costs of having a qualified expert monitor the Facility's operations. • We cannot comment here on whether the provision of free curbside recycling and fee-based white-goods pickup and disposal is a good one, from an economic standpoint. Indeed, the use of public bidding and competition obviates the need for such comment—the bidding process itself usually results in the most economically favorable arrangement. It is clear, however, that the perpetual nature of this Agreement makes it likely that, at some point in the future,the Agreement could become quite unfavorable to the Town, with no room for re-negotiation or termination. • The lack of specific liquidated damages or automatic penalty clauses for TBI's non-performance under the Agreement is problematic, particularly with respect to¶¶ 1(h) and 1(0)—there is no specific penalty provided for TBI's failure to adequately enforce trucking routes or TBI's failure to adequately enforce bans on certain prohibited materials, and thus TBI's incentive to perform under these provisions cannot be adequately gauged. • The Agreement involves the Selectmen on a level which is more appropriately left to the Town Manager and the Board of Health, as the Selectmen are not to be involved in the day-to-day functioning of the Town. Town Charter Ch. 3 § 3-2-3. • TBI is not likely to bring suit under this Agreement, as most of the obligations are imposed upon TBI; the Town is the more likely party to seek relief. However, the attorney fee provision of¶3(c) is likely to have a chilling effect on the Town's exercise of its rights under this Agreement: if the Town does not prevail in court, the Town must pay TBI's attorney fees. There is no way for the Town to be able to set a budget with respect to paying another party's attorney fees, as such an expense is completely in TBI's control. • The Agreement states that it "sets forth the . . . benefits that TBI will provide to the Town of North Andover. . . ." Preamble¶4; see also Preamble¶ 5 ("The purpose of this Agreement is to agree upon certain terms that will benefit the Town of North Andover should a proposed facility obtain all necessary environmental and other permits.") This acknowledgement could be leveraged by TBI in getting its permit approved by the Board of Health. LIT 14289830 6 Barbara Poremba From: Barbara Poremba Sent: Monday, May 24, 2010 7:06 PM To: 'Beth Rennard' Cc: Gayle Sullivan; Kemith Leblanc; Larissa Lucas; Marc Salinas; Martin Fair; Martin Fair; David Greenbaum; Mayor Subject: RE: Independent Counsel Thank you Beth, Will he contact me or do I contact him? If so,could you please forward me his information? Many thanks, Barb From: Beth Rennard [mailto:BRennard@Salem.com] Sent: Saturday, May 22, 2010 7:01 PM To: Barbara Poremba Cc: Gayle Sullivan; Kemith Leblanc; Larissa Lucas; Marc Salinas; Martin Fair; Martin Fair; David Greenbaum; Mayor Subject: RE: Independent Counsel Dr. Porumba, I suggest that this Case be handled by Atty Jerry Parisella. He is the p/t Asst City Solicitor and an atty with the firm of Alexander and Femino. From: Barbara Poremba [mailto:bporemba@salemstate.edu] Sent: Fri 5/21/2010 2:29 PM To: Beth Rennard Cc: Gayle Sullivan; Kemith Leblanc; Larissa Lucas; Marc Salinas; Martin Fair; Martin Fair; David Greenbaum; Mayor Subject: Independent Counsel Dear Ms Rennard, At the May 11, 2010 meeting,the BOH discussed the status of the transfer station appeal. Given a potential conflict of interest,the Board of Health requests that the city provide independent counsel to represent the board in the appeal process. If you require a more formal petition,please advise. Sincerely, Dr. Barbara Poremba Chairperson, Salem BOH t