Bay Colony Railroad Corporation v. Town of Yarmouth
23 N.E.3d 908
Mass.2015Background
- 1989: Yarmouth contracted with Bay Colony Railroad to transport municipal solid waste by rail from the town transfer station to SEMASS waste-to-energy facility. Bay Colony operated on state-leased rail lines.
- Late 2007: Commonwealth terminated Bay Colony’s rail lease effective Dec. 31, 2007, preventing rail service to SEMASS.
- Contract §9 allowed Bay Colony, if it lost the lease, to either assign the contract to the new rail operator or continue performance "by other modes of transportation" (e.g., truck).
- Town refused Bay Colony’s election to truck and instead began using the successor rail operator; Bay Colony sued for declaratory relief and breach of contract. A judge declared Bay Colony had the right to assign or use alternate modes; a jury later found the town breached and awarded $800,000.
- On appeal the town argued (1) state statute G. L. c. 160, § 70A barred Bay Colony from trucking because it no longer provided rail service in the area (preemption issue); (2) the town’s DEP permit prohibited long-term trucking and the town had no obligation to seek a permit modification; and (3) the contract had already terminated with the expiration of the town’s SEMASS waste agreement.
Issues
| Issue | Plaintiff's Argument (Bay Colony) | Defendant's Argument (Town of Yarmouth) | Held |
|---|---|---|---|
| Whether 49 U.S.C. §14501(c)(1) (federal trucking preemption) preempts enforcement of G. L. c. 160, § 70A (railroad-owned truck restriction) | §70A cannot be enforced against Bay Colony because the Federal Aviation Administration Authorization Act (preemption clause) bars state laws related to motor carrier price, route, or service | §70A prohibits railroad-owned trucks from operating where the railroad does not serve by rail; waste is not "property" for preemption purposes and local waste regulation should be preserved | The federal preemption clause applies; §70A enforcement against Bay Colony is preempted because the statute regulates motor carrier routes/services and here relates to transportation of collected waste as property |
| Whether the town’s DEP permit barred Bay Colony from trucking and whether town had to seek permit modification under the implied covenant of good faith and fair dealing | Bay Colony argued §9 allowed trucking and the town had a duty under the implied covenant to seek a permit modification (and that DEP likely would have granted it) | Town argued contract did not require it to seek DEP modification and the permit made long-term trucking illegal, so town could refuse without breaching | Jury could reasonably find town breached the implied covenant by not making a good-faith effort to obtain a permit modification; evidence supported that DEP modification was feasible, so permit did not legally prevent Bay Colony’s performance |
| Whether the contract had terminated before the breach when the SEMASS waste agreement allegedly expired | Bay Colony argued the contract’s term tracked the SEMASS agreement including lawful extensions and remained in force in 2008 | Town argued statutory limits on municipal waste contracts meant the SEMASS agreement (and thus Bay Colony contract) expired earlier | Sufficient evidence supported that the town validly exercised a contractual extension before any expiration, so the Bay Colony contract remained in effect at the time of breach |
Key Cases Cited
- Dan's City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769 (2013) (discussing congressional purpose of federal preemption of state trucking regulation)
- Rowe v. New Hampshire Motor Transp. Ass'n, 552 U.S. 364 (2008) (state laws having a connection with carrier rates, routes, or services can be preempted)
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992) (broad preemption language for carrier rates/routes/services)
- AGG Enters. v. Washington County, 281 F.3d 1324 (9th Cir. 2002) (interpreting "property" under federal preemption to exclude some curbside garbage collection)
- ACE Property & Cas. Ins. Co. v. Commissioner of Revenue, 437 Mass. 241 (2002) (preemption inquiry centers on congressional intent)
- T.W. Nickerson, Inc. v. Fleet Nat. Bank, 456 Mass. 562 (2010) (recognizing implied covenant of good faith and fair dealing)
- Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451 (1991) (explaining scope of implied covenant of good faith and fair dealing)