Does China Sword Trigger a Force Majeure Clause?

An April 2015 NW&RA/SWANA Joint Advisory presciently counselled “allowances for changes in the contract over time due to circumstances such as: acts of God, changes in market conditions (including but not limited to lack of commercially reasonable market availability for processed recyclables . . . and changes in law . . .). ”  Similarly, the MassDEP’s 1997 recycling Contract Template contains optional language requiring the hauler to provide “alternative recycling services and compensation to the municipality” if the contractor fails to accept recyclables because of facility or service failures “not resulting from a force majeure event.” Likewise, a municipal recycling collection/processing contract that we negotiated for a hauler in 2013 had a robust force majeure clause that excused defaults based upon “acts of government or regulatory authorities”. .  . “which substantially affect, impact or impede the Contractor’s or the Town’s operations.”

Whether you are a municipality or commercial customer reaping the benefits, or a hauler or processor whose contract is upside down, it behooves you to look into the possibility that the China Sword standard excuses performance of the contract as a force majeure event, change in law or perhaps under the contract doctrines of impossibility or frustration of purpose.

Without going into great legal detail, the bottom line is that a broadly drafted force majeure clause such as the one quoted above may excuse a hauler or processor from performance of its contract.  Under the example above, as an official standard of the Chinese Ministry of Environmental Protection, the China Sword standard is an act “of government or regulatory authorit[y]” that should qualify as a force majeure event.  If the new standard “substantially affect(s), impact(s) or impede(s) the Contractor’s operations,” the contractor’s failure to perform should be excused.  Alternatively, parties to longer term contracts may have a separate change in law clause that will require them to adjust or renegotiate price.

Absent either of these types of clauses, the parties may need to rely upon legal theories of impossibility or frustration of purpose to justify a renegotiation. However, it is worth noting that the Massachusetts courts do not favor these contract defenses where the issue is simply a change in price.  For example, in a construction dispute involving a spike in the price of steel, Judge Gordon of the Superior Court found no excuse for performance and noted that “unchanging prices and other cost-impacting conditions cannot realistically be considered implied assumptions of contracts at the time of execution, and, therefore, performance will not be excused under the doctrine of frustration of purpose merely because prices have fluctuated.”  Fargo Management LLC v. City of Worcester, Memorandum of Decision and Order on Summary Judgment, C.A. No. 2012-1028C (Worc. 2014).

For questions, call or email Tom Mackie.

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Appeals Court Clarifies “Common Scheme” Restrictions

Earlier this month, the Appeals Court decided Berger v. 2 Wyndcliff, LLC, a dispute over conflicting interpretations of how to extend so called “common scheme” restrictions on land use.  G.L. c. 184, §. 27.  The restriction in this case originated in 1980 when a property owner executed an agreement of “protective covenants and easements” for the benefit of future owners in conjunction with subdividing her property.  The agreement restricted development (among other things, only one single-family dwelling was allowed per lot), and was to run with the land and bind the parties for 30 years from the date of recording.  These were common scheme restrictions that applied to four or more contiguous parcels.

Future owners later amended the agreement, with one amendment by two-thirds of the owners purportedly allowing extensions of the restrictions beyond 30 years.  Neighbors ultimately sued each other, disputing whether these restrictions were extended or had expired in 2010.  The Appeals Court held that, because the instrument originally creating the restriction did not allow extensions, any such amendment violated G.L. c. 184, § 27(b).  That law allows common scheme restrictions to be extended beyond 30 years for 20 years at a time under certain conditions, including that the imposing instrument allowed for extensions.  Other (non-common scheme) restrictions may be extended without regard to the language of the original instrument imposing the restriction.

In deciding an issue not reached by the Land Court below, this case highlights a difference between common scheme restrictions and non-common scheme restrictions.  The judge below had concluded that the amendments made the restrictions unlimited as to time and, thus, they expired 30 years from their creation.  See G.L. c. 184, §. 23. He did not reach the issue of whether these parties to common scheme restrictions had properly changed the restrictions’ duration.  In the seminal 2001 case Stop & Shop  v. Urstadt Biddle Properties, the SJC held that parties (two abutting commercial landowners) to a land use restriction agreement could remove a fifty-year prohibition on certain uses.  Removing the time limit made this restriction “unlimited as to time,” invoking G.L. c. 184, §23 and putting the property in a situation where the restriction expired in 30 years.  But that was not a common scheme restriction, to which we now know that slightly different rules apply.

This result is logical — common scheme restrictions apply to a group of neighbors, who may have had limited or no bargaining power when acquiring their properties.  The initial developer sets the common scheme restrictions, giving those coming into possession notice of the unique qualities and restrictions of the neighborhood.  In contrast, it is more equitable for two abutters (such as the owners of one burdened and one benefited parcel) to freely bargain for and enforce lengthy, non-common scheme land use restrictions.  As the Appeals Court stated, “the mechanism for the extension of restrictive covenants cannot be added by a later vote of less than one hundred percent of all property owners in the common scheme.”  It should be easier for two neighbors to agree on land use than it would be for the four or more neighbors in a common scheme.

For questions, call or email Gail Magenau Hire.

 

EEA EIPAS Puts Environmental Compliance Online

Yesterday, the Executive Office of Energy and Environment (“EEA”) launched the first phase of its Energy and Environmental Information and Public Access System (“EIPAS”). EIPAS currently provides two portals: ePLACE  provides citizens access to information on EEA and agency permit applications and final decisions, as well as to submit and view public comments on permit applications; whereas, the Data Portal contains MassDEP permit, inspection, facility and enforcement data.  According to the release, EEA will update data daily, a tall but very helpful order.

Currently, EIPAS covers online permitting for DCR, MDAR, and MassDEP including virtually all MassDEP air quality permits. So far there are no mandatory regulations requiring online filing. Other types of MassDEP permits, such as solid waste permits, are not yet ready for electronic submittal. The site indicates that it hosts applications submitted online since May 5, 2017, but so far there are no entries.
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MassDEP is Calling RCC Permit Applications

If you are operating a recycling or composting facility under a Determination of Need (DON) and have not updated your permitted status, time is up.  The final deadline to bring a DON facility into compliance with the 2012 recycling/composting regulations was May 23, 2017.  If you have not filed papers with MassDEP yet, you need to act now.

Owners of DON facilities have one of three options: certify that the facility is exempt under 310 CMR 16.03, certify that the facility qualifies for a “General Permit” under 310 CMR 16.04 or apply for a site specific “Recycling Composting and Conversion” (RCC) Permit under 310 CMR 16.05.

The requirements to qualify for a General Permit are stricter than those that applied to a DON.  Consequently, you may find that your DON facility now requires a site specific RCC permit. For example, to qualify for a recycling facility General Permit the owner/operator shall “ensure that the operation handles recyclable materials and residuals only within a handling area, containers or trucks that are sufficiently enclosed and covered to prevent a public nuisance.” We understand that the Department interprets this to mean that all asphalt, brick and concrete recycling operations must be enclosed to qualify for a General Permit, which was not a DON requirement under the old regulations.

Due to the stricter General Permit criteria, and the dramatic consequences of filing a false or incorrect “Certification” with the MassDEP, we are advising clients to consult with us before filing a Certification to come into compliance.

For questions, call or email Tom Mackie.

MassDEP to Open 2020-2030 Solid Waste Master Planning

This summer the MassDEP Solid Waste Advisory Committee will begin reviewing “Pathway to Zero Waste,” the 2010-2020 Solid Waste Master Plan. While it may seem early for the Committee to start the process for a 2020 plan, this is a notoriously slow process.  The MassDEP did not issue the 2010-2020 Master Plan until April of 2013, so starting three years before 2020 seems about right.

Although the Department has not set an agenda, the focus should be on raising the flattened waste reduction curve and responsibly managing the waste that is generated.  Environmental groups will continue to advocate “zero waste,” pushing for more waste bans and better enforcement of existing bans. Meanwhile, they will continue to actively oppose expansions of existing disposal or new facilities by drumming up fears of public health and environment harm.

The solid waste industry has openly embraced economically viable zero waste solutions (while quietly investing in waste export rail infrastructure). Industry skepticism is fueled by the economic realities of a protracted soft market for recyclables, relatively low local disposal pricing and high profile siting battles.  The wisdom of continued reliance on waste export as opposed to lifting the moratorium on new municipal solid waste combustion capacity will be front and center on the industry agenda.

For questions, call or email Tom Mackie a newly appointed member of the Solid Waste Advisory Committee.

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2017 EPA Construction General Permit

The August 2016 Newsletter summarized the 2012 CPG for stormwater discharges from construction sites disturbing one or more acres of land.  The CPG included requirements for using 2009 technology-based effluent limitation guidelines and new source performance standards for the construction and development industry (C&D Rule), non-numerical effluent limits for erosion and sediment controls, soil stabilization, dewatering and Stormwater Pollution Prevention Plans (SWPPPs).  The article also previewed the draft 2017 CPG.

EPA has issued the 2017 CPG, effective February 16, 2017.  All existing sites under the 2012 CGP must update SWPPPs and file a new Notice of Intent by May 17, 2017.  The new CPG adds to the 2014 CPG.  It covers demolition sites, sets new C&D non-numeric effluent limits, requires self-inspections, corrective actions, training, and electronic reporting.  There are mandatory stabilization measures based on the size of the disturbance and requirements for erosion controls based on design specifications.  Developers and property owners must recognize that having a multi-binder generic SWPPP on the shelf in the construction trailer is not enough to comply with the CGP.  The document must be tailored to fit the site; the contractor needs to designate the SWPPP as the project erosion “bible,” and train its staff and subcontractors to consult the bible when erosion events occur.

Gold nugget tip:  Designate an Environmental Monitor who checks the predicted rainfall every day and the erosion and sedimentation controls before and after the storm event, and has authority to direct needed repairs.

High Court Declares MassDEP Deficient in Regulating Greenhouse Gases

Yesterday, in Kain v. Department of Environmental Protection the Supreme Judicial Court declared that the MassDEP had failed to properly implement the requirements of the Global Warming Solutions Act. Specifically, the Court found that the department is required “to promulgate regulations that address multiple sources or categories of sources of greenhouse gas emissions, impose a limit on emissions that may be released, limit the aggregate emissions released from each group of regulated sources or category of sources, set emissions limits for each year, and set limits that decline on an annual basis.”

The Court found that although the MassDEP’s Regional Greenhouse Gas (“RGGI”), low emission vehicle (“LEV”) and sulfur hexafluoride leak regulations were “important to the overall scheme of reducing greenhouse gas emissions over time, they do not fulfill the specific requirements of” the Global Warming Solutions Act.

It remains to be seen how the MassDEP and the legislature will react to the decision. Will the MassDEP begin a whole new round of regulatory initiatives mandating greenhouse gas emissions reductions over a wide array of sources or will the legislature reconsider the economic and environmental impact of a the mandate of the Global Warming Solutions Act?  Which ever way the Administration and legislature eventually choose to go, this case opens up a whole new spectrum of issues for project proponents, opponents and regulators.  At a time where the MassDEP’s budget is continuing to shrink, has lost many senior staffers to early retirement and is proposing to take on the NPDES permitting program, one wonders how it will take on the herculean task of regulating greenhouse gas emissions across a broad array of sources.  One saving grace in the decision, on which the Department may hang its hat, is the Court’s observation that “there is nothing in the statutory language to indicate that the department must regulate every source of emissions in the Commonwealth” and that “the department has discretion to select what sources of emissions it will regulate . . .”

If you would like to discuss any of these observations, please do not hesitate to contact us.

For questions, call or email Tom Mackie.

Status of MassDEP Regulatory Review Under EO 562

Shortly after his inauguration, Governor Baker ordered all state agencies to review “each and every regulation” against an ambitious set of criteria to “reduce the number, length, and complexity of regulations, leaving only those that are essential to the public good.” Executive Order: 562 “To Reduce Regulatory Burden” required that each Agency shall sunset all its regulations on or before March 31, 2016.

Despite this opportunity, the regulated community submitted only a handful of written requests for regulatory changes to the EOEEA (which administers over 125 environmental regulations). Thus, it is not surprising that MassDEP’s Preliminary Regulatory Recommendations apply to only 19 of the 64 regulations it administers.
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It’s Time to Restore the Promise of the Permit Session.

In the September 14, 2015 issue of Massachusetts Lawyers Weekly, Tom and Peter provide their opinion on recent judicial efforts to undermine the legislature’s intent in passing the Permit Session Statute. With this issue poised to go to the Supreme Judicial Court, this is a good time to restore the promise of the Permit Session.

False Claims Act – Be Warned

Although Charlie Baker sent business a friendly message with his Executive Order suspending new regulations, Attorney General Maura Healey and her staff of Assistant AGs in the Environmental Protection Division are not so charitable.  Yesterday, four senior AAGs presented on the use of the False Claims Act against environmental violators. The False Claims Act is a “very strong tool” and they are “anxious to use it.”  In translation, “watch out” if you are engaged in business with the government and unfortunate enough to get into a related environmental beef that is referred to the AG.

The AG’s Office is increasingly using False Claims allegations to soften up environmental enforcement targets with additional investigative tools, increased penalties and the specter of triple damages (i.e. disgorgement of up to 3X any economic benefit).  Liability can be established if a defendant makes a “false statement” to the government (or any of a host of other related parties like government contractors and subcontractors) that results in an underpayment to or overpayment from the government.
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