Delray Beach WM Contract Extension Analysis. Final

7/28/2019 Delray Beach WM Contract Extension Analysis. Final

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WE I S S SEROTA HELFMANPASTOR IZA CoLE & BoN I SKE , P.L.

MITCHELL BIERMAN, P.A.NINA L. BONISKE, P.A.MITCHELL .J. BURNSTEIN, P.A..JAMIE ALAN COLE, P.A.STEPHEN .J, HELFMAN, P,A.GILBERTO PASTORIZA, P.A.MICHAELS. POPOK, P.A.JOSEPH H, SEROTA, P.A.SUSAN L. TREVARTHEN, P.A.RICHARD JA Y WEISS, P.A.DAVID M. WOLPIN, P.A.

DANIELL, ABBOTTGARY L, BROWN,JONATHAN M. COHENIGNACIO G. DEL VALLE.JEFFREY 0. DECARLOALAN L. GABRIEL

ATTORNEYS AT LAWA PROFESSIONAL LIMITED LIABILITY COMPANY

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MATTHEW H. MANDELANTHONY L. RECIOBRETT ,J. SCHNEIDERCLIFFORD A. SCHULMANABIGAIL WATTS"FITZGERALDLAURA K, WENDELL.JAMES E. WHITE

Louie Chapman, Jr.City ManagerCity of Delray BeachlOONW 1st AvenueDelray Beach, Florida 33444

*o F COUNSEL

June 13, 2013

ADRIAN J, ALVAREZLILLIAN M. ARANGOSARA E. AULISIOSONJA C, DARBYROBE:RT H. DE FLESCOBROOKE P. DOLARARAQUEL ELEJABARRIETACHAD S. FRIEDMANERIC P. HOCKMANHARLENE SILVERN KENNEDY*KAREN LIEBERMAN*JOHANNA M. LUNDGRENMI A R. MARTINALE ID A MARTfNEZ MOLINA*KATHRYN M. MEHAFFEYROBERT A. MEYERS*MATTHEW PEARLJOHN J, QUICK*TIMOTHY M. RAVICH*AMY J , SANTIAGOGAIL D. SEROTA*JONATHAN C. S HAM RESESTRELLITA S, SIB ILAALISON F, SMITHANTHONY C. SOROKAEDUARDO M. SOTO.JOANNA G. THOMSONPETER 0. WALDMAN"SAMUEL I. ZESKIND

RE: Legal Analysis of Requirement of Competitive Process Prior To Extension ofSolid Waste Hauling ContractDear Mr. Chapman:

You have asked this Firm to provide the City of Delray Beach (the "City") with a legalanalysis concerning the City's September 2012 extension of the Solid Waste, Vegetative Wasteand Recycling Collection Franchise Agreement between the City and Waste Management Inc. ofFlorida ("WM"), dated September 20, 2001 (the "Franchise Agreement"). This analysisaddresses whether the extension of the Franchise Agreement violated the competitiveprocurement requirements set forth in Chapter 36 of the City's Code of Ordinances (the"Purchasing Ordinance"), and the City's potential remedies if such a violation exists.SUMMARY

The City's Purchasing Ordinance governs the City's acquisition of contractual servicesand requires the City to use a competitive process1 for the acquisition of contractual services "of$15,000 and up," unless a sole source or emergency exception applies. The Franchise Agreementcontractually binds the City to pay WM for Collection Service charges that are far in excess of$15,000. There was no competitive procurement process used in connection with the September1 The Purchasing Ordinance provides for the following types of competitive procurements for the acquisition ofcontractual services of $15,000 and up: solicitation of bids, solicitation of quotes, the utilization of anothergovernmental agency's contract or a cooperative purchasing group contract.


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Mr. Louie Chapman, Jr.June 13, 2013Page 2 of9

2012 approval of Amendment No. 5, which provided for an 8 year extension of the FranchiseAgreement. There were no more remaining renewal options available under the competitivelyprocured Franchise Agreement. The sole source and emergency exemptions did not apply.The former City Manager stated at the time that he did not believe the FranchiseAgreement extension needed to comply with the City's competitive procurement requirementbecause the payment relationship of the parties presents a "pass through." However, the City'sPurchasing Ordinance does not exempt "pass through" expenditures from the City's competitiveprocurement requirements. The view that Amendment No. 5 is a "pass through" rather than anexpenditure of City funds, and therefore does not require competition, conflicts with thelanguage of the Franchise Agreement, the Purchasing Ordinance, and Florida law on the properinterpretation of city ordinances and competitive bidding laws. The Florida Supreme Court hasheld that competitive bidding laws should be construed in a manner that avoids theircircumvention and in a manner most favorable to the public. Moreover, even if there was an

exemption for "pass through" expenditures, in this case the City is required to pay WMregardless of whether the City collects from its residents, and thus it is not a "pass through."Accordingly, it is our opinion that the City's Purchasing Ordinance required Amendment No. 5to be competitively procured in a manner authorized by the Purchasing Ordinance.The Florida Supreme Court has long held that contracts entered into by localgovermnents in violation of competitive bidding laws are void and no rights can be acquiredunder them by the contracting party. If the validity ofAmendment No.5 comes before the courtfor a determination, there is a significant chance, based on existing case law, that the court willdeclare Amendment No. 5 void.

History and Background lnformation2In 2001, the City issued Bid No. 2001-021 for Solid Waste, Vegetative Waste andRecycling Collection Services. BPI Waste Systems ofNorth America, Inc. ("BPI") was awardeda 5 year contract to provide solid waste, vegetative waste and recycling collection services("Collection Services") to the City. The Franchise Agreement provided that it was "renewablefor a five year term upon approval of both parties."In 2003, the City and WM entered into Amendment No. 1, dated September 29, 2003,which provided for the City's consent to WM's purchase of certain assets of BPI, including the

2 We have reviewed the following materials in connection with this analysis: (1) the Franchise Agreement; (2)Amendment Nos. I, 2, 3, 4 and 5 to the Franchise Agreement; (3) Chapter 36 of the Code of Ordinances of the Cityof Delray Beach (the "Purchasing Ordinance"); (4) the City's Purchasing Manual, dated December 20, 1991 (the"Purchasing Manual"); (5) the January 3, 2012 Commission Meeting Minutes concerning the Waste ManagementProposal Presentation [Agenda Item 7.C]; (5) the September 20, 2012 City Commission Meeting Minutesconcerning the City Commission's approval of Amendment No.5; (6) City Attorney R. Brian Shutt's legal opinion,dated May 16, 2013; and (7) Contract Oversight Notification 2012-N-002, issued by the Palm Beach County ofInspector General. The undersigned did not review the bid documents from the 200 I Bid (Bid No. 200 1-021) thatresulted in the Franchise Agreement. The City could not locate such records. The State record retention schedule(GS 1-SL) provides that bid records for non-capital projects are only required to be maintained for five years afteraward.

W E I S S S E R O T A H E L F M A NP A S T O R I Z A C O L E & B O N I S K E , P.L.


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assignment of the Franchise Agreement to WM. Amendment No. 1 also amended the Term ofthe Franchise Agreement to "begin on October 1, 2003 and expire on September 30, 2008" andprovide for one five year renewal option upon approval of both parties. Thus, Amendment No. 1provided WM with a five year contract with one five year renewal option. The parties thenentered into Amendment No. 2, which amended the frequency of certain collection services andprovided for the collection ofwaste from public transportation shelter receptacles. In 2008, theCity and WM executed Amendment No. 3 to the Franchise Agreement, which extended the Termof the Franchise Agreement for five years through September 30, 2013, thereby exercising theone renewal option provided for in Amendment No. 1. Thereafter, the parties executedAmendment No.4, which clarified some of the terms and conditions in the Franchise Agreementand addressed certain administrative functions.

At the City's January 3, 2012, Commission Meeting, WM made a presentation thatincluded a proposal to extend the Franchise Agreement for five years with mutually agreed uponfive year renewal options thereafter. The City Commission discussed WM' s proposal anddirected staff to work with WM on modifications to their proposal. After City staff met withWM to negotiate proposal modifications, City staff sent a Memorandum to the City Connnissionthat outlined a revised proposal ("Amendment No. 5") to extend the Franchise Agreement for anadditional eight years through September 20, 2021, with an unspecified number of five yearrenewal options thereafter, exercisable upon approval of both parties. Amendment No. 5 wasthen placed on a City Commission agenda.

On February 21, 2012, the Palm Beach County Office of Inspector General (the "OIG")submitted a Draft Contract Oversight Notification to the City Manager recommending that theCity procure a solid waste franchise agreement through full and open competition "since it hasnot been competitively bid for over 10 years." The former City Manager provided a response tothe OIG, dated February 27, 2012, which provided in part:

In the case of the solid waste collection franchise agreement, the money collectedby the City for garbage service is passed through to the City garbage hauler ....Therefore, as the funds that were paid to WM, in accordance with the franchiseagreement were a pass-through from the residents of the City, the City was notexpending funds that would trigger the requirements of Section 36.02.Following the City Manager's response, the OIG issued Contract Oversight Notification2012-N-002, dated March 1, 2012 (the "OIG Contract Oversight Notification"). The OIGContract Oversight Notification states that the "the distinction the City is maldng to exempt this

procurement from the competitive requirements of the Procurement Ordinance does not appearto have a sound basis." The OIG renewed its recommendation to open the contract up tocompetition and maintained that the Purchasing Ordinance and Policy Manual required the solidwaste collection services to be competitively procured. Thereafter, at the City's September 20,2012 Commission Meeting, the City Commission approved Amendment No. 5 by a 3-2 vote.The City and WM then executed Amendment No.5, dated September 27, 2012, which extendedthe Term for eight (8) years with an expiration date of September 30, 2021 and provided for 5year renewal options available upon approval by the parties.

W E I S S S E R O T A H E L F M A NP A S T O R I Z A C O L E & B O N I S K E , P . L .


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Mr. Louie Chapman, Jr.June 13,2013Page 4 of9

ANALYSISI. The extension of the Franchise Agreement violated the Purchasing Ordinance.The City's acquisition of goods and services is governed by state law, the PurchasingOrdinance and the administrative procedures set forth in the City's Purchasing Manual. There isno specific state law that requires the City to competitively procure a Collection ServicesContract3. Therefore, the provisions in the City's Purchasing Ordinance control the City'sprocurement of such collection services. Section 36.02 of the Purchasing Ordinance states:Whenever the City shall seek to acquire personal property, supplies, orcontractual services, the following procedures shall be implemented:***(D) [Acquisitions of $15,000.00 and up.] For acquisitions of fifteen thousanddollars ($15,000.00) and up, purchases shall be made by the PurchasingSupervisor after the Commission has reviewed and awarded the bid/quote.Bids/quotes shall be secured in the manner prescribed in subsection (E) of thisSection.(E) Conditions for Securing Formal Bids/Quotes. The Purchasing Supervisor shalleither:(1) Solicit competitive bids/quotes in a formal written manner from at least three(3) different sources of supply when available; or(2) Utilize a purchasing contract established by a local, state or federalgovernmental agency or cooperative purchasing group. (Emphasis supplied)Section 10.05 of the City Code defines "shall" to mean that the act referred to ismandatory. Thus, the use of the word "shall" in the first sentence of City Code Section 36.02above should be interpreted as imposing a mandatory obligation to implement a competitiveprocurement "whenever the City shall seek to acquire ... contractual services .. .of $15,000 andup." There was no competitive process used in connection with the 8 year term extension andrenewals of the Collection Services provided for in Amendment No. 5. Although there was acompetitive process for the Collection Services back in 2001 for the original FranchiseAgreement, there were no remaining renewals under the terms of the Franchise Agreement forthe parties to exercise. Amendment No. 5 is clearly not another governmental agencies' orcooperative purchasing group's contract so the piggyback process of Section 36.02(E)(2) was notutilized. Therefore, the City did not utilize a competitive process for procuring the servicesprovided for in Amendment No. 5.Section 36.01 of the City Code requires that the "details of all City purchasing shall beperformed in accordance with the latest current revision of a standard practice instruction asissued by the City Manager." Section V of the Purchasing Manual provides in pertinent part:

3 However, the Florida Legislature has expressed clear intent that public procurement be fair and open tocompetition. See Section 287.001, Fla. Stat.

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With the exceptions of emergency and sole source purchases, purchase ordersshould not be issued without sufficient competition being solicited from vendors.The reasons for this requirement are threefold:1. It assures the City of the best of several competitive prices andproducts.2. It promotes competition for the City's business and increases the City'ssources of supply.3. It negates criticism of preferential treatment for favored vendors.

Consistent with City Code Section 36.02 and 36.08 (Emergency Purchases), the City'sPurchasing Manual r e ~ u i r e s a competitive process for City purchases, except for emergency andsole source purchases. There are multiple industry participants that provide collection servicessimilar to those provided by WM under the Franchise Agreement. Thus, the purchase does notqualify for a sole source exception under the City Code. Moreover, none of the agendadocuments or public meeting minutes indicates that the City viewed Amendment No 5 as a solesource purchase. Likewise, there is no information in the public record that suggests the Cityviewed the 8 year contract extension as an emergency purchase, or that the City complied withthe requirements to effectuate an emergency purchase. Therefore, the Purchasing Ordinanceexceptions did not apply to Amendment No. 5.In his response to the OIG's Contract Recommendation, the former City Manager statedthat because the "funds that were paid to WM ... were a pass-through from the residents of theCity, the City was not expending funds that would trigger the requirements of Section 36.02"The suggestion is that the City does not expend City funds because the City does not pay WasteManagement monies other than what was billed to the customer by the City. There is no

language in the Purchasing Ordinance or Purchasing Manual addressing this "pass through"concept. There is some legal support for the concept that where there is no expenditure of cityfunds, competitive bidding requirements do not apply, but the scope of that authority is limited tothe lease of city owned property where no city funds are expended for improvements on theproperty5. There is no judicial decision or Attorney General Opinions that support expanding thescope of this exception to the acquisition of services. Further, under the Franchise Agreement,the City, rather than the residents, is obligated to pay the Collection Service charges to WM. TheCity's contractual obligation is not contingent upon the City billing and collecting service feesfrom its residents. The City bears the financial risk if a residential customer fails to pay thegarbage collection fee charged by the City. Thus, the Franchise Agreement, as amended,requires the City to expend City funds. Further, Florida law on the proper interpretation of cityordinances and competitive procurement laws does not support this interpretation.

4 Note: Some municipalities have adopted a best interest exception to their procurement ordinances, which permits agoveming body to waive competitive bidding requirements (except when required by state law) upon a supermajority or unanimous vote, and a specific finding that the competition waiver is in the best interest of the city. TheCity does not have a best interest exception.5 See Mahoney v. Givens 64 So. 2d 926 (Fla. 1953).

WE I S S SEROTA HELFMANPASTORIZA COLE & BON ISKE , P .L .


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The Florida Supreme Court in City ofMiami v. Kayfeti outlined the standard of reviewfor city ordinances, stating as follows:In construing the validity of the ordinance in question we must: (1) assume that avalid ordinance was intended ... (2) construe the ordinance to be legal, if possibleto do so, and strive to so construe it as to give reasonable effect to its provisions.(Emphasis supplied).The Florida Supreme Court has also held that competitive bidding laws are enacted forthe protection of the public7, and should be construed in a manner to avoid their circumvention.8Statutes enacted for the public's benefit should be interpreted in a manner most favorable to thepublic.9The term extension set forth in Amendment No. 5 is a multimillion dollar commitment

over a minimum 8 year term. If the validity of Amendment No.5 is upheld, Amendment No.5may be the City's single largest dollar value contract for services. If the former City Manager'sinterpretation is accepted, then the City could presumably circumvent the competitiveprocurement requirement for every purchase the City makes, unless the purchase is prohibited bystate law. After all, nearly all of the City's revenues come from taxes or user fees collected fromCity residents, which are then used by the City to provide various services to its residents.Further, the unspecified number of 5 year renewal terms provided for in Amendment No. 5would permit the parties to repeatedly renew the Agreement every five years, without everhaving to go through another competitive process for Collection Services.Accordingly, it is our opinion, based on a reasonable interpretation of PurchasingOrdinance Section 36.02 construed in a manner most favorable to the public and giving

reasonable effect to its provisions, that the City's Purchasing Ordinance required the CollectionServices to be competitively procured and that Amendment No. 5 violated the City's PurchasingOrdinance. 10

6 See City ofMiami v. Kayfetz, 92 So.2d 798 (Fla.l957)7 See Hotel China & Glassware Co. v. Board ofPublic Instruction ofAlachua County, 130 So.2d 78 (Fla. 1st DCA1961), cited in Marriott Corporation v. Metropolitan Dade County, 383 So.2d 662 (Fla. 3d DCA 1980),8 See Wester v. Belote I03 Fla. 976, 138 So. 721 (Fia.l931 ); Miami Marinas Association, Inc. v. The City ofMiami408 So. 2d 615 (Fla. 3d DCA 1981).9 See Board ofPublic Instruction ofBroward County v. Doran, 224 So.2d 693 (Fla.1969).10 Recognizing that the "pass through" interpretation could be challenged, the City Attorney protected the City bynegotiating an indemnification clause in Amendment No. 5 that requires WM to indemnify, defend and holdhannless the City regarding any "claim, lawsuit or other cause of action that may be filed against the City as a resultof the City extending the term of the Franchise Agreement", with a cap of one million dollars. The indemnificationclause also recognizes that a court may detennine that the extension of the Franchise Agreement violates a statute orlaw, by providing that WM shall voluntarily amend any portion of the Franchise Agreement, as necessary to complywith the Court order.

WE I S S SEROTA HELFMANPASTORIZA COLE & BONI SKE , P.L,


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II. City Contracts Entered Into In Violation Of Competitive Procurement Lawsare Void.The Florida Supreme Court has long held that contracts entered into by localgovernments in violation of competitive procurement laws are void, and no rights can beacquired under them by the contracting party.ll The Florida Supreme Court has also held that agovernmental contract made in violation of a charter requirement that the contract be awarded tothe lowest responsible bidder is void. 12 Florida's Fourth District Court of Appeals, which hasjurisdiction over Palm Beach County, has consistently held that a contract must comply withCity ordinances in order for it to be valid. 13Where competitive bidding statutes exist, public officers charged with theresponsibility of letting contracts ... are without power to reserve ... the right tomake exceptions, releases, and modifications in the contract after it is let, whichwill afford opportunity for favoritism, whether any favoritism is actually intended. d 14or practtce or not.In order to be valid, Amendment No. 5 needed to comply with the competitiveprocurement requirements in the City's Purchasing Ordinance. Amendment No. 5 violatedSection 36.02 of the City's Purchasing Ordinance. Therefore, the City's public officials and staffdid not have the power to enter into Amendment No. 5.Proponents of the validity and enforceability of Amendment No. 5 may argue that theCity is estopped (prevented) from using the failure to comply with the City's competitive biddingrequirements to deny the enforceability of a contract. For example, WM may claim the City isestopped because it relied on the City's actions in entering into Amendment No. 5, and partial

performance has already occurred. However, the Florida Supreme Court has long held that"persons contracting with a municipality must at their peril inquire into the power of amunicipality, and of its officers, to make the contract contemplated." 15 The Florida SupremeCourt has also held that, "estoppel cannot be applied against a governmental entity to accomplishan illegal result. 16 In Ramsey v. City ofKissimmee, an engineer purported to enter into a contractwith the city to perform engineering services. The contract was not entered into in the mannerprescribed by the city's charter and ordinances, and therefore the Court determined that thecontract was unenforceable. Though the engineer presented several arguments in favor of11 See Wester at 724; See also Harris v. School Bd. ofDuval County, 921 So. 2d 725 (Fla. I" DCA 2006); MayesPrinting Co. v. Flowers, !54 So. 2d 859 (Fla.!" DCA 1963); Armco Drainage & Metal Products, Inc. v. PinellasCounty, 137 So. 2d 234 (Fla. 2"' DCA 1962).12 See Robert G. Lassiter & Co. v. Taylor 128 So. 14 (1930)13 See Hollywoodv. Witt 789 So. 2d 1130 (Fla. 4'DCA 2001); Palm Beach County Health Care Dist. v. EvergladesMem'l Hasp., Inc., 658 So.2d 577 (Fla. 4th DCA 1995) (agreements entered into by public bodies which fail tocomply with statutory requirements are void); Town of Indian River Shores v. Coli, 378 So.2d 53 (Fla. 4th DCA1979)(refusing to enforce an alleged employment contract offered by the mayor of a municipality, where anordinance required that contracts had to be authorized by the entire town council).14 See Wester at 724.15 See Ramsey v. City ofKissimmee, 139 Fla. 107 (Fla. 1939).16 See Branca v, City ofMiramar 634 So. 2d 604 (Fla. 1994)

WE I S S SEROTA HELFMANPASTORIZA COLE & BON ISKE , P.L.


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enforcing the contract, including that the city had ratified the contract by making a partialpayment, the Court concluded that the engineer could not recover under the contract.In Accela, Inc. v. Sarasota Count/ 7, software vendors filed suit challenging the county'saward of a software contract to a competitor without seeking competitive bids. After the Countyentered into the contract, the plaintiffs filed suit seeking a declaratory judgment that theagreements were void and an injunction to prevent the county and the competitor fromperforming the agreements. On appeal, the Second DCA ruled that the county "acted arbitrarilywhen it violated the terms of the piggyback provision of its code in entering into the threeagreements. The agreements must therefore be void and of no effectY The Second DCAgranted declaratory and injunctive relief to the plaintiffs notwithstanding the fact that the countyexecuted a contract with the plaintiffs competitor.The Alabama Supreme Court has ruled specifically on local government solid waste

service contract cases under facts very similar to the City's circumstances. Although Alabamalaw is not controlling in Florida, the similarity of the circumstances presented in those cases mayrender the Alabama Supreme Court's reasoning and rulings persuasive. For example, inMaintenance, Inc. v. Houston County19 , a local government solicited a contract for the collectionand disposal of solid wastes. Maintenance Inc. ("Maintenance") was the low bidder andMaintenance and Houston County entered into a contract for the disposal of solid waste. Thecontract expired four years from the date of award, with the County's option to cancel thecontract at the end of any 12-month period with 90 days' notice. Prior to the expiration of the 4year contract, Maintenance duly notified the County of its desire to renegotiate an extension ofthe contract, and both parties subsequently entered into negotiations. Thereafter, the partiesexecuted a second contract for garbage collection services. Unlike the 4 year contract betweenthe parties, the second contract was not procured on a competitive bid basis and the originalcontract did not contain a renegotiation clause. Maintenance received payment for itsperformance under the second contract until the County terminated the contract without anyallegations of inadequate performance on the part of Maintenance. At the time of cancellation,Maintenance was ready, willing, and able to perform its remaining services under the contract.Maintenance sued the County, alleging breach of contract. In defense, the County asserted thatthe contract was void because it did not comply with the competitive bid law, and Maintenancemade an estoppel argument. The Alabama Supreme Court found the Contract void for violatingthe applicable competitive bidding law, and held that where the contract between the solid wastedisposal corporation and county was void for noncompliance with the bid law, the principal ofestoppel could not be utilized to create the contract anew?0

17 See Accela, Inc. v. Sarasota County, 993 So. 2d !035(Fla. 2nd DCA 2008)18 !d. at I 04419 See Maintenance, Inc. v. Houston County, 438 So.2d 741 (Ala.l983)20 Similarly, in Ex Parte Ballew, Ballew Sanitation filed an action to recover damages against the Town ofPrinceville for a breach of contract. The sole issue before the Alabama Supreme Court was whether Princevillecould be equitably stopped from using the competitive bid law as a defense to the enforcement of a contract that wasnot submitted for competitive bids. The Alabama Supreme Comt held that doctrine of estoppel did not preclude theCity's defense of noncompliance with the competitive bid law in an action for breach of contract, and that the

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In this case, WM does not have a viable claim for estoppel because such an estoppelclaim would require the court to affirm the validity of an act that violated the PurchasingOrdinance. Further, the law impresses upon WM the knowledge of the extent of the powers ofthe City's officials. WM was responsible to determine the authority of a municipality, and of itsofficers, to enter into the contemplated contract. Moreover, at the time the City and WMexecuted Amendment No. 5, WM was well aware of the OIG Contract Oversight Notification,which stated that "the City's own Purchasing Ordinance and Policy Manual requires this serviceto be competitively procured." The indemnification provision that the City and WM negotiatedalso recognized that a court might determine that the extension of the Franchise Agreementviolated a statue or law. Thus, WM was on notice that the City did not have the power to enterinto Amendment No. 5. Amendment No. 5 is void for failure to comply with the City'sprocurement requirements. Applicable Florida case law and persuasive out-of state case lawstrongly suggest that there is a significant chance that a court would declare Amendment No. 5void.

POTENTIAL REMEDIESThe City has two primary options for addressing the Purchasing Ordinance violation: (1)file a declaratory judgment action to ask a court to determine whether Amendment No. 5 is void,or (2) send a notice to WM stating that Amendment No. 5 is void (likely resulting in a lawsuit byWM). If the City files a declaratory judgment action, WM could be permitted to continueperformance of Collection Services while the City seeks a judicial determination as to thevalidity ofAmendment No. 5. This option minimizes the risk of damages that could be soughtagainst the City.In the alternative, the City can send a letter to WM declaring Amendment No. 5 to bevoid. Most likely, WM would then file a lawsuit seeking damages resulting from thetermination. The City would defend by asserting that Amendment No. 5 is void.21Please let me know if you have any additional questions or concerns. ~ . .

estoppel argument could be made only against city officials who merely failed to follow formalities of contractexecution.21 Under paragraph 5 ofAmendment No. 2 to the Franchise Agreement, the terms of which were incorporated intoAmendment No. 5, WM is required to notify the City within 30 days of an action WM believes gives rise to a claimor lawsuit it may file based upon a breach or default by the City. WM shall then have 90 days to file a legal actionin court against the City or it shall forever be barred fiom doing so. However, note that the Franchise Agreement21provides that "WM shall not attempt to sue and shall not sue, for any claim or cause of action if the City Solid WasteCollection franchise agreement is not renewed or otherwise extended." This language may provide the City with anadditional defense to such a lawsuit from WM.

WE I S S SEROTA HELFMAN

Delray Beach WM Contract Extension Analysis. Final

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