BALLSTON SPA, N.Y. (CN) - Pollution and cost concerns led the upstate town of Halfmoon to build its own water plant, and now a neighboring town has sued it for millions of dollars, saying Halfmoon is ducking its obligation to buy water on a shared contract.
The Water Commissioners of the Town of Waterford sued the Town of Halfmoon in Saratoga County Supreme Court. Waterford claims that "Halfmoon desired to avoid its obligations to purchase water and pay its agreed share of debt service and other expenditures" under a contract signed in 1981.
Waterford claims Halfmoon breached the 40-year contract, leaving Waterford more than $7.6 million in the hole.
Halfmoon built its own water treatment plant in 2002, to draw water from the Hudson River, as Waterford did.
The towns are neighbors in southern Saratoga County, about 20 miles north of Albany.
On May 14, 2009, Halfmoon wrote that it would no longer buy water under the contract, citing "the risk that the water could be subject to contamination by PCBs," according to the complaint.
The very next day, the country's largest Superfund cleanup began: dredging 40 miles of the upper Hudson River - from near Glens Falls to Troy - to remove polychlorinated biphenyls from the riverbed. The chemical had been discharged for more than 30 years by General Electric.
According to the U.S. Environmental Protection Agency, which is overseeing the work, GE released an estimated 1.3 million pounds of PCBs into the river from its capacitor-manufacturing plants in Hudson Falls and Fort Edward between 1947 and 1977.
Once widely used as a coolant in transformers, capacitors and electric motors, PCBs are a suspected carcinogen.
The dredging began in 2009, halted for evaluation and study in 2010, then resumed in 2011. The work is conducted around the clock in the spring and fall; it is expected to be completed in 2017 or 2018.
In addition to the PCB risk, the complaint states, the Halfmoon letter also cited the water agency's decision to not take water from the Hudson during dredging, but to buy it instead from the city of Troy, which pumps water from the man-made Tomhannock Reservoir.
That was allowed by the 1981 contract, according to the complaint, and had occurred "periodically" over the years.
The contract, which was to run through 2021, billed Halfmoon monthly for water. The charge was based on consumption - metered use plus a 25 percent surcharge - and a supplemental charge that covered debt service and capital improvements. According to the complaint, Halfmoon's past and future supplemental charges under the contract come to more than $1.9 million.
The contract specified that when the agency had to buy outside water to supply Halfmoon, that cost would be passed along too.
The contract was amended four times over the years, the last time in 1995, committing Halfmoon to buying at least 27 million gallons of water a quarter.
Although there was talk of buying out the contract, Halfmoon rejected that in a September letter to the agency, according to the complaint. The letter indicated that Halfmoon would not pay any charges that accrued after May 14, 2009.
The agency and town did consent to a tolling agreement, though. Minutes from Halfmoon Town Board meetings show that resolutions authorizing the agreement were passed every six months through May this year.
Each resolution pointed to the town being served with a notice of claim for the alleged breach of contract, but noted that both sides recognized they "would benefit from delaying proceeding with the lawsuit" since each was awaiting the outcome of lawsuits pending against GE.
The complaint against Halfmoon alleges that the Waterford agency "has suffered and will suffer damages, including past and future lost consumption charges (lost revenue from the sale of water to defendant); lost supplemental charges (lost funds for defendant's share of debt service); and loss of all other amounts and obligations as set forth in the agreement and amendments thereto."
It estimates "past and future damages resulting from the aforesaid acts and omissions by defendant" at more than $7.6 million.
"To date, defendant Halfmoon has failed, neglected and/or refused to pay plaintiff its damages or any part thereof," the complaint states.
Waterford seek damages plus interest for unjust enrichment and breach of implied covenant of good faith and fair dealing.
It is represented by James Peluso with Dreyer Boyajian in Albany.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.