Legal Lode: Evergreen Evasion

Court rejects bid to terminate contract without paying penalty.

To Edward R. Hall, an attorney in Merrillville, Ind., challenging an “evergreen” clause in a waste collection contract seemed like a sure-fire tactic. But, to an Indiana appeals court, it was just another lame excuse not to pay a bill. [Yes, loyal readers, this is the lawyer-gets-his-comeuppance story you've been waiting for.]

In November 2004, Hall signed up with Illiana Disposal & Recycling, a unit of Allied Waste, for trash removal at his law office. The contract provided for an initial three-year term and automatically locked him into renewals for successive three-year periods.

He could break the cycle and terminate the service without a penalty only by so notifying the hauler in writing at least 60 days before the end of a term. Otherwise, if he ended the contract prematurely, he'd have to pay Allied liquidated damages equal to six monthly payments.

Shortly after the initial term expired, Allied sent Hall a “new service agreement” for his review. Word-for-word, it was nearly the same as the previous contract. Hall's assistant phoned Allied to say she wasn't going to sign the new agreement unless the law office got a reduced rate. When, after repeated attempts, she couldn't reach the sales rep, she canceled the Allied service.

Allied responded by letter, explaining to Hall that his extended contract did not expire until November 2011 and that his early termination obligated him to pay the outstanding balance plus $399 in liquidated damages. When it became clear that Hall would not pay, Allied filed an action against him in small claims court.

At trial, Hall contended that the automatic renewal clause in the 2004 contract was unenforceable because it violated a federal consent order signed by Allied in 2000. The order resolved a civil antitrust action brought by the U.S. Department of Justice against Allied and Republic Services.

Among other things, the terms of the order required Allied to offer new contracts to small container customers in several markets, including a portion of Indiana nearly 300 miles from Merrillville. These contracts limited the renewal term to one year, required only 30 days' termination notice, and capped liquidated damages at two times the monthly charge.

Rejecting his defense, the court entered judgment for Allied in the amount of $609, which represented the balance due and liquidated damages. The judge found that Hall had failed to prove that the clause was unconscionable. “[T]he consent decree and the government's position on [the evergreen clause] can have no binding effect on the case at bar,” the court said. “[T]he court would be hard pressed to conclude that this language violates public policy.”

On appeal, Hall again insisted that the federal court order rendered the automatic renewal provision void. Unimpressed, a state appellate panel, by a 2-1 margin, rejected Hall's argument and upheld the lower court's decision.

“Nothing in the consent decree required that Allied change its contracts throughout Indiana,” the majority said. “Moreover, the U.S. Supreme Court has said that an antitrust ‘consent decree is not enforceable … by those who are not parties to it even though they were intended to be benefited by it’ … in a separate unrelated proceeding.”

[Hall v. Allied Waste Services, Inc., 916 N.E.2d 312 (Ind.App. Nov. 5, 2009)]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

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