In December 2003 the towns of New Hartford and Barkhamsted sued CRRA over the Enron matter. In February 2006 the other 68 Mid-Connecticut Project towns were added to the list of plaintiffs. The suit started trial on November 13, 2006. On June 19, 2007, a Superior Court judge ordered CRRA to pay those towns $35.8 million.
Here are some questions and answers about the suit:
What is your reaction to the judge’s June 19, 2007, ruling ordering CRRA to pay Mid-Connecticut Project towns $35.8 million?
On June 28, 2007, the CRRA Board of Directors voted to appeal the ruling.
Why will you appeal?
The ruling contains a number of errors of fact and law we believe will be overturned on appeal. Here are three issues we believe give us strong grounds for appeal:
First, the judge ruled that CRRA was not harmed by the Enron bankruptcy. Not only is that not true, but that ruling left unchallenged would hurt our position in the remaining Enron-related litigation. We must appeal to overturn that language and recover every dollar possible from the $220 million we lost to Enron.
Second, in his ruling, the judge dismissed the mandate of Public Act 02-46, the 2002 legislation that created a new CRRA and gave very specific charges to our new board of directors, most notably "mitigation of the impact of the [Enron] transaction on municipalities." Had we done nothing but raise disposal fees to cover the funds lost in the Enron matter, disposal fees would be approaching $90 a ton; instead they’re $69 – and that’s a dollar less than they were three years ago. We did what the Legislature told us to do, and nobody should be penalized for following a legislative mandate.
Third, the judge’s earlier ruling on class certification – which made all 70 Mid-Connecticut Project towns plaintiffs regardless of whether they wanted to join the case – was wrong.
have other legal grounds as well.
Towns’ disposal fees went up because of the Enron loss. Don’t they deserve to get some money back?
We all agree that the towns were hurt by Enron but we have carried out the charge given to us by the Legislature when we were re-constituted in 2002 by Public Act 02-46. Our new board set out a very clear plan under that legislation: stabilize the agency and its finances (including project disposal fees), pay down debt and, when cash became available, distribute funds to the towns. We had finally reached a position where we were able to begin distributing cash back to the towns and, in fact, our board voted in January to distribute $14.8 million from Enron-related settlements. Ironically, their lawyer objected to our making these distributions.
But $14.8 million wouldn’t make up for all the increased disposal fees the towns paid, would it?
The judge ruled that the towns have paid about $28.9 million in increased disposal fees due to the Enron loss. We tried to return $14.8 million from Enron-related legal settlements in January, but the plaintiffs’ lawyer objected to our doing so. With other Enron-related settlements that we anticipate, additional improvments in operations and increased revenues from other sources, including power sales, we expect to distribute more than $35 million to the towns before the end of the Project in 2012.. Our way the towns would get the whole benefit of CRRA’s recovery,. The plaintiffs’ way the towns get that money – minus a multi-million-dollar chunk for the lawyers’ contingency fees – while forcing us to raise disposal fees in upcoming years. That’s why this result is not in the towns’ best interests.
What else will this ruling mean to the towns?
Our operations will continue and the garbage and recyclables will continue to flow as they always have.
How long do you expect an appeal to take?
Our lawyers have informed us that an appeal could be decided by the fall of 2008 or could last into the spring of 2009.
What if you lose your appeal?
We believe we will prevail on appeal. Let’s keep in mind what the first judge who presided over this case wrote in 2005: “The net effect of [CRRA’s] approach has been to reduce costs, keep the project secure, mitigate the need for future tip fee increases, and at least preserve the possibility of rebates to the towns.” Furthermore, the June 19, 2007,ruling stated, “Under the new Board’s stewardship CRRA has been returned to financial and operational stability.” In other words, our new board and management team have acted in the towns’ best interests.
Why didn’t you settle out of court?
It was certainly not for lack of trying. We negotiated for weeks and even participated in court-sponsored mediation, all to no avail. Their lawyers told us they plan to sue again at the end of the Project but without a global peace agreement, there was no point in settling this case. More importantly, our board carried out the Legislature’s assignment as spelled out in Public Act 02-46. No person or agency should be penalized for fulfilling a legislative mandate.
What did the towns want you to do?
They wanted us to give them the cash we’ve saved up for paying off our bonds and for future expenses like major turbine maintenance, closing the Hartford landfill and siting a new ash landfill (which the Project will need as soon as the Hartford landfill closes in 2008), but giving away that money would impact our ability to do business and our bond rating. CRRA is self-funded. In fact, the judge, in his June 19, 2007, ruling, wrote, “any claims for a trust on monies held as a surplus by CRRA would impede the every day operations of the company. The accounts are held for legitimate business purposes to benefit the Mid-Conn Project.” Every dollar we spend on operations, capital improvements and debt service is a dollar we have to take in through power sales, recycled commodities sales and the disposal fee (which in FY 2006 was about 62 percent of the project’s revenue). Depleting our capital funds and other reserves now means we’d have to charge still-higher disposal fees later. In simpler terms: Money paid out to the towns as a result of this lawsuit may well mean higher disposal fees in the years to come. The towns sued themselves.
Didn’t the towns understand they were suing themselves?
For many, many months we have been unable to fully tell our side of the story, because the judge barred us from talking to the towns – our customers – so we haven’t been able to fully explain the business decisions we made and our efforts to protect their interests.