CRRA ordered to pay $35.8 million to towns

A state Supreme Court judge ruled last Thursday, Sept. 27, that the Connecticut Resources Recovery Authority must pay out a $35.8 million judgment (rendered in June by a lower court judge) on a lawsuit filed by scores of member towns.

The high court determined that the trash authority cannot withhold payment of the judgment pending an appeal, but at the same time the court agreed to hear the appeal at a later date.

CRRA Spokesman Paul Nonnenmacher said the authority has asked the state Supreme Court to reconsider the order to pay until it has heard the appeal. But representatives from the towns who are trying to recover the money insist they have been owed the funds for too long and that CRRA should pay up immediately.

"Those 70 towns have lost significant amounts of money and they are entitled to be compensated," said David Golub, the Stamford attorney representing the member towns of CRRA’s Mid Connecticut Project. "[The authority] should pay out those funds without delay."

Golub said Monday the Supreme Court agreed late last week to let CRRA ask it to reconsider the order to pay before the appeal is decided. Those papers were expected to be filed by mid-day yesterday.

A decision is expected by Tuesday, Oct. 9. If the high court declines to reconsider the request, a schedule of payment will be developed. Payments to towns would be prorated based on how much waste material each sends to CRRA. The plaintiffs would receive what’s left of the $35.8 million, minus legal fees.

In the June 19 decision, Waterbury Superior Court Judge Dennis G. Eveleigh said the $220 million loan from CRRA was illegal, and maintained that the authority benefitted from "unjust enrichment" in raising its rates to cover losses from the unsecured loan to the now-bankrupt Enron Corp. in 2000.

The suit further claimed that the authority unfairly increased its trash-collection or tipping fees by 40 percent to compensate for receiving no payments from Enron, thereby penalizing the plaintiff towns for CRRA’s ill-considered deal with the Texas energy trading giant.

The class action suit against the quasi-public solid waste disposal and recycling organization involves 70 municipalities in the authority’s Mid Connecticut Project, including the Northwest Corner towns of Salisbury, Sharon, North Canaan, Falls Village, Cornwall and Norfolk.

Initiated in January 2004 by the town of New Hartford, the suit sought to get back for the towns at least a portion of the $111 million CRRA recovered from Enron after the company declared bankruptcy in the wake of one of the worst corporate scandals in U.S. history. The authority used those recovered funds to pay down its debt.

Nonnenmacher said since then CRRA has recovered an additional $39 million, bringing the total up to about $150 million. In addition, Nonnenmacher said the authority has additional legal actions pending in Houston against banks involved in the Enron loan that could recover an additional $60 million to $70 million.

The CRRA board voted unanimously Jan. 25 to distribute $14.8 million to the towns after reaching a $23.8 million settlement with law firms, including Hawkins Delafield & Wood, the Manhattan firm that represented Enron. The decision to distribute those funds was put on hold pending the outcome of the Waterbury trial.

CRRA has long contended that a large judgment would only raise tipping fees for its member towns.

"If we pay it out now, that puts a hole in our finances," Nonnenmacher said, adding, "and guess where that’s going to come from? We’ve got to fill it from somewhere."

If CRRA is forced to pay, it’s unclear how much money Northwest Corner towns such as Salisbury and Sharon would recover if the Waterbury court decision holds, but under the January decision by CRRA to distribute $14.8 million to the 70 member towns, almost $86,000 would have been split proportionately between Salisbury and Sharon, which have jointly operated a transfer station since 1975. Therefore, the two towns’ share would presumably be substantially larger with a $35.8 million award.