Worcester Creameries Corp. v. City of New YorkWorcester Creameries Corp. v. City of New York
Michael A. Cardozo, Corporation Counsel, New York City (Alan Beckoff of counsel), for appellants.
Young, Sommer, L.L.C., Albany (Kevin M. Young of counsel), for respondents.
OPINION OF THE COURT
Lahtinen, J.
This appeal presents issues regarding the extent to which defendant City of New York is obligated to pay costs incurred by owners of private watershed water treatment plants (hereinafter WWTPs) for the expense of complying with regulations that apply only in the New York City Watershed and exceed all state and federal regulations. Plaintiffs contend that, under the 1997 Watershed Memorandum of Agreement (hereinafter the Watershed MOA) and related agreements, the City and defendant New York City Department of Environmental Protection (hereinafter DEP) are obligated to pay for all regulatory upgrades for private WWTPs that were in existence in November 1995 for so long as the City‘s Watershed regulations exceed the requirements of state or federal law. Plaintiffs further assert that
In the 1980s, federal legislation and ensuing regulations by the Environmental Protection Agency (hereinafter EPA) required that public water systems supplied by surface waters either install filtration or achieve various strict water quality controls within the Watershed. While the City elected to filter water from the East-of-Hudson portion of the Watershed, filtration would have been extremely expensive (reportedly billions of dollars to install and millions annually to operate) for the 90% of the water that comes from the West-of-Hudson section. Accordingly, the City sought approval from the EPA for a water quality protection program. To obtain approval, further Watershed regulations, which exceeded any existing state or federal regulations, were necessary. The Coalition of Watershed Towns resisted the imposition of extensive regulations due, in part, to the potential adverse economic consequences of further regulations on Watershed residents (see generally Finnegan, New York City‘s Watershed Agreement: A Lesson in Sharing Responsibility, 14 Pace Envtl L Rev 577 [1997] [noting the historical tension between water consumers and Watershed residents in balancing their conflicting interests]).
Extended negotiations involving, among others, the state, the City, EPA and the Coalition resulted in the implementation of the Watershed MOA in January 1997 and, as relevant here, the related Upgrade Program Agreement and Model Operation and Maintenance Agreement (hereinafter O & M Agreement). One of the issues addressed by the Watershed MOA was upgrades to all WWTPs—public and private—in order to bring them into compliance with the Watershed regulations designed to avoid a filtration requirement for the West-of-Hudson system. The City agreed to pay all costs for such upgrades (which was significantly less than installing filtration) to the extent required to comply
Plaintiff Worcester Creameries Corporation, a long-established Delaware County milk-processing facility, owns a private WWTP which, as of November 1995, had a flow of 36,000 gallons per day. In 1998, Worcester entered into an upgrade contract with EFC to provide for upgrading its WWTP to comply with the Watershed regulations, with funding coming from the City. Thereafter, in February 2002, Worcester satisfied applicable regulatory requirements resulting in the Department of Environmental Conservation issuing a permit allowing an increase of Worcester‘s WWTP discharge flow to 51,000 gallons per day provided an additional infiltration pond were installed. Worcester and the City disagreed over whether, under the relevant agreements, the City‘s obligation to pay for upgrade costs was tied to flows allowed in November 1995 and also whether the City‘s obligation to pay operation and maintenance costs of a private WWTP was limited to 30 years. Although they executed an operation and maintenance agreement in September 2004, the parties reserved their rights to litigate the disputed issues within two years.
In September 2006, plaintiffs commenced this action seeking, among other things, a declaratory judgment that under the Watershed MOA (and related agreements) the City was required to pay all costs incurred to keep WWTPs in compliance with the Watershed regulations and that the obligation continued so long as costs were necessitated by Watershed regulations that imposed conditions beyond those required by state or federal regulations. Plaintiffs further asserted that
We turn first to the arguments regarding interpretation of the relevant agreements. Defendants assert that, with regard to private WWTPs, the Watershed MOA does not obligate the City to pay the capital, operational and maintenance costs for regulatory upgrades beyond 30 years, and also that the City is not
A primary intent of the Watershed MOA is set forth in one of the opening paragraphs of the agreement, which states:
“[T]he Parties recognize that the goals of drinking water protection and economic vitality within Watershed communities are not inconsistent and it is the intention of the Parties to enter into a new era of partnership to cooperate in the development and implementation of a Watershed protection program that maintains and enhances the quality of the New York City drinking water supply system and the economic vitality and social character of the Watershed communities.”
With regard to regulatory upgrades, section 141 of the Watershed MOA provides, in pertinent part:
“(a) Subject to, and in accordance with, the terms and conditions of this paragraph, the City agrees to pay for the costs of designing, permitting, constructing and installing all Regulatory Upgrades (as hereinafter defined) required by WWTPs (both public and private) in operation or permitted and under construction as of November 2, 1995 (‘Existing WWTPs‘) ... As used in this paragraph only, the
term ‘Regulatory Upgrades’ shall mean equipment and methods of operation which are required solely by the Watershed Regulations and not because of any provision of federal or [s]tate law, regulation or enforceable standard otherwise applicable to a WWTP . . . “(b) The City further agrees to pay the annual costs of operating and maintaining such Regulatory Upgrades consistent with the terms set forth in the model agreement appended hereto as Attachment WW.”
The referenced Model O & M Agreement states in section 1.02:
“B. This Agreement shall expire, unless sooner terminated pursuant to Article 10 of this Agreement, thirty (30) years after the Commencement Date. For so long as the City continues to have any obligation to pay for the O & M of a Regulatory Upgrade pursuant to subparagraphs 141 (b) and (c) of the Watershed MOA, this Agreement shall be extended every thirty (30) years for an additional period of thirty (30) years.”
The term “Regulatory Upgrades” in section 141 of the Watershed MOA is surrounded by language exhibiting an intent that such term was meant to be construed expansively. The term is preceded by the word “all” and the ensuing definition of “Regulatory Upgrades” is broadly phrased to include “equipment and methods of operation which are required solely by the Watershed Regulations and not because of any provision of federal or [s]tate law.” The term “Regulatory Upgrades” is further explicitly made applicable to “both public and private” WWTPs, with no distinction between the two. The lumping together of public and private WWTPs with no limitation or distinction is telling since it is undisputed that, by the time the Watershed MOA was executed, the City had acknowledged its obligation pursuant to
The language of the Model O & M Agreement (which was incorporated into the Watershed MOA) does not establish the interpretation urged by the City. The City‘s argument that the 30-year term contained therein was intended to reflect the useful life of replacement equipment provided during the initial upgrade is not supported by any specific language. The argument is also undercut, in part, by the fact that the same provision of the Model O & M Agreement applies to public WWTPs, for which the City acknowledges its ongoing obligation. The interpretation advanced by plaintiffs does not, as characterized by the City, create an obligation “in perpetuity.” The obligation is, instead, tied to Watershed regulations for so long as those regulations exceed requirements of state or federal law.
While details of the City‘s ongoing responsibility regarding public WWTPs are contained in sections 142 and 143 of the Watershed MOA, the fact that such details are not separately spelled out for private WWTPs does not dispositively reveal that a more restricted obligation applies to private WWTPs. Prior to the Watershed MOA, the City had litigated the extent of its responsibilities under
Under the Watershed MOA, the Watershed regulations that exceed state and federal law are linked to an ongoing obligation to both public and private WWTPs. As a benefit to the City, the Watershed regulations serve to save the City millions (and perhaps billions) of dollars since costly filtration is being avoided. And, at the same time, a quality water supply is ensured. However, the expressed intent of the Watershed MOA included not only a quality water supply system for the City, but also economic vitality for the communities in the Watershed. The interpretation urged by the City would significantly stymie the economic component of the agreement. The plain language of the agreement and the expressed intent set forth
We do, however, find persuasive defendants’ argument regarding the statutory construction of
Spain, J.P., Kane, Malone Jr. and Stein, JJ., concur.
Ordered that the order is modified, on the law, without costs, by reversing so much thereof as granted plaintiffs’ motion and denied defendants’ motion as to the fourth, fifth and sixth causes of action; plaintiffs’ motion denied and defendants’ motion granted as to said causes of action, and said causes of action dismissed; and, as so modified, affirmed.