In the event of civil war, a labor strike, an earthquake or electrical storm, the city of St. Paul could put its residential trash collection contract on hold — at least for a time.
In fact, the residential contract signed by the city and 11 private trash hauling companies in November 2017 spells out a number of scenarios in which either side would “not be held responsible for … acts … beyond the party’s reasonable control.”
The so-called “force majeure” — French for “greater force” — clause addresses what is sometimes referred to as acts of God. These are events that could delay, but not necessarily cancel, the five-year contract mid-stream without contract penalties for either side.
The question is would the outcome of St. Paul’s Nov. 5 ballot referendum count?
Some legal experts say a “No” vote at the ballot might still trigger the clause, though not without heavy legal pushback.
Others aren’t convinced.
“There’s no clear, easy way out for the city in that ‘force majeure’ clause,” said Carol Chomsky, a contract law professor at the University of Minnesota.
A “No” vote would repeal Ordinance 18-39 — the city’s nine-page legal rules surrounding trash collection. But Chomsky noted the ordinance appears to be largely focused on billing and regulations. If the contract itself is not built upon the ordinance, then the city could not legally sever its agreement with the six remaining haulers.
Even if a majority of voters vote “No,” the city “may not have particularly strong ground to pull out of the contract,” Chomsky said. “If the majority of the voters want them out of the contract, that’s a message to them, but can they do that without being responsible for a contract breach and damages?”
That’s a bit of a legal pickle. Whatever happens, trash haulers probably won’t give up the remaining four years in a $27 million-per-year contract without a fight.
“I think probably the city could get out of (the contract) on the ‘force majeure’ clause, but that’s not to say there wouldn’t be a lot of litigation,” said Henry Blair, a law professor at Mitchell-Hamline School of Law who specializes in contract law. “There’s something like $100 million on the line.
Blair added that the question of the force majeure’s clause applicability will be front and center.
“(The outcomes) are not foregone conclusions,” Blair said. “Litigators could make something of that. A legitimate fight could be had.”
A ‘YES’ OR ‘NO’ VOTE ON TRASH
Critics of the city’s five-year contract have repeatedly pointed to the document’s “force majeure” clause as a rationale to vote “No” in November.
They say knocking down the city council’s Ordinance 18-39, which helped create the new trash collection system a year ago for 1-to-4 unit residential buildings, will allow the city to cancel the contract entirely. The outcome of the referendum could be used as a “force majeure” defense.
St. Paul Mayor Melvin Carter and City Attorney Lyndsey Olson have taken a different tack.
They’ve maintained that they can simply cancel the $27 million in funding for trash collection from bills mailed directly to customers by their respective haulers and move the same burden over to property taxes. The result would split the bill among many more taxpaying entities, dropping prices for residents of 1-to-4 unit buildings.
Property taxes for everyone else would go up.
In that case, the overall 2020 tax levy would rise $27 million — or 17 percent — due to trash collection alone.
After conferring with the city attorney’s office, Peter Leggett, a spokesman for the mayor’s office, emailed the following written statement on Thursday: “Under a scenario where the ordinance is repealed, unless directed otherwise by the Supreme Court, the city will continue to operate under the terms of the contract. The force majeure language in the contract does not provide any certainty around the viability of the contract in the context of a referendum.”
Much revolves around the interpretation of the “force majeure” clause, which specifically mentions events caused by “legislative, judicial or executive acts.”
While both Ramsey County District Court Judge Leonardo Castro and later the Minnesota Supreme Court ordered the city to allow the trash collection question onto the November ballot, the ballot process is not necessarily based on the courts at all.
It’s based on the city’s own charter, which allows residents to challenge city council decisions if they obtain enough signatures.
On the other hand, Judge Castro, in his order last May, called the charter-driven ballot process both legislative and judicial in its general nature, a characterization that attorneys for the city took issue with.
Ward 3 candidate Patricia Hartmann, an attorney running for city council in Highland Park and Mac-Groveland, agrees with the judge.
In her campaign website, she argues that “Castro pointed out in his May 30 ruling that upheld our right to a referendum, a ballot vote against the City Ordinance 18-39 constitutes a legislative event.”
Chomsky, the University of Minnesota professor, isn’t as convinced.
“If the repeal of the ordinance does not prevent the city from performing, the ‘force majeure’ clause could not be invoked to cancel the contract,” Chomsky said. “There’s so many ‘ifs’ because there’s a lot we don’t know.”
HOW WOULD THE CITY PAY HAULERS FROM JANUARY THROUGH MAY?
There’s also language in the clause that seems to indicate contract delays are just that — delays.
Leggett, the mayor’s spokesman, noted that “the contract language states that if performance under the contract is prevented by acts or events beyond the party’s reasonable control, the time period is only for the actual amount of time the party is delayed.”
In other words, a referendum vote might slow but not stop the contract.
“The clause seems to say once the unforeseeable event has passed, the contract would pick back up again,” said Blair, the Mitchell-Hamline professor. “That’s a harder question.”
While untangling the impact of the clause may be a bit of a sticky wicket, that’s not the only legal question.
If the “No” votes prevail but the Carter administration moves $27 million in garbage collection costs onto property taxes next year, how will the city pay the haulers through May? Ramsey County collects property taxes in May and October.
“The city cannot pre-pay a vendor, per state law,” said financial analyst Peter Butler, one of the plaintiffs who has sued the city over the trash collection program. “I doubt Highland Sanitation and Gene’s Sanitation can survive two months, with their largest customer paying after services are rendered.”
For Butler, there’s an even more fundamental question.
A “No” vote in November would clearly be a vote against the new system of trash collection in St. Paul.
How can the city fund and maintain that system once the underlying legal ordinance has been shot down?
Legal experts say there’s a common legal term that describes government actions that attempt to go beyond their underlying legal authority — “ultra vires.”
“The city cannot regulate trash collection without an ordinance, even if the city is paying the bill,” Butler said.
Blair has some doubts that’s true, but he said he needed more time to review the ordinance language before weighing in. It, too, represents a legal area ripe for litigation.
“The ultra vires question is really important,” Blair said. “I think it presents an interesting problem.”