Opinion
NO. 217-2014-CV-00389
08-15-2014
Bitumar USA, Inc. v. New Hampshire Department of Transportation
ORDER
Plaintiff, Bitumar USA, Inc. ("Bitumar"), seeks a preliminary injunction against the Defendant, the New Hampshire Department of Transportation ("the DOT"), requesting the Court to enjoin the DOT from implementing a ban on the use of a certain additive in asphalt in DOT projects. The DOT objects. The Court held a hearing, based upon offers of proof, on July 30 and 31, 2014. For the reasons stated in this Order, the Motion for a Preliminary Injunction is DENIED.
I
For the purposes of this Order, the Court finds the following facts. Bitumar's parent corporation is a Canadian company that specializes in the production of materials used in asphalt blends for road paving and for the roofing industry. In New England, Bitumar has asphalt storage tanks in Rhode Island, Connecticut, and Maine, and the company serves paving contractors in all New England states.
Determinations made upon a preliminary hearing are made for purposes of the preliminary order only and do not constitute findings on the merits. N.H. Dep't of Envtl. Servs. v. Mottolo, 155 N.H. 57, 61 (2007) (citing Spengler v. Porter, 144 N.H. 163, 168 (1999) (Brock, C.J., dissenting)).
Asphalt pavement is a sand and stone aggregate bound together with asphalt cement. Every New England state, including New Hampshire, requires that asphalt pavement meet certain performance grades. New Hampshire requires that any asphalt pavement used in the state meet a performance grade of PG 64-28, which means that the asphalt must adequately perform at temperatures between -28 degrees and 64 degrees Celsius. Approximately 25 years ago, Bitumar's parent corporation began using re-refined engine oil bottoms ("REOB") as an additive in its asphalt production as a means to reach these performance grades.
In June of 2013, Bitumar expanded its operations into New England when it acquired rights to a Rhode Island-based supplier of asphalt for road paving, The Hudson Companies. Before then, REOB was not used extensively in asphalt paving materials in New England, although some REOB asphalt cement was used in New England from deliveries from Bitumar's Canadian plants prior to 2013. Since this acquisition, however, Bitumar's asphalt containing REOB has been used extensively in New Hampshire. For instance, Pike Industries, Inc. ("Pike"), which performs fifty percent of the DOT's paving work, acquires fifty percent of its asphalt from Bitumar. Continental Paving, Inc. ("Continental"), which performs forty eight percent of the DOT's paving work, buys one hundred percent of its asphalt from Bitumar.
The DOT first learned that REOB may be used in some of its paving projects during the spring of 2014. At some point afterwards, experts from all the New England states met to discuss REOB and concluded that not enough was known about REOB. Specifically, there was concern about the durability of asphalt pavement containing REOB.
On June 11, 2014, the DOT notified Bitumar that effective August 1, 2014, all suppliers of asphalt to DOT projects must certify that the asphalt does not contain REOB. The letter further states that this requirement will remain in effect "until there is sufficient research into the effects of these materials on the long-term performance of asphalt pavements for us to make an informed decision on their suitability as a constituent of asphalt binder." (Compl. for Dec. and Inj. Relief, Ex. 2.) The letter explains that the "requirement is being enacted in response to documented incidents of premature failure of pavements that were produced with asphalt containing [REOB]." (Id.) Agencies in Maine, Massachusetts, and Vermont sent Bitumar similar letters effectively banning the use of REOB on the states' departments of transportation projects starting August 1, 2014.
According to the DOT, the REOB ban is justified by a study by Professor Simon Hesp in Ontario, Canada showing that a high concentration of REOB in asphalt, from fifteen to thirty percent, can lead to premature failure of the asphalt. Bitumar has provided affidavits from qualified experts asserting that it adds REOB at no more than an eight percent concentration and points out that even after the Hesp study, Ontario still allows REOB in its asphalt. Additionally, Bitumar states that a study conducted by its REOB supplier, Safety-Kleen, Inc., has shown no adverse effects of REOB on the durability or longevity of asphalt pavement and, in some instances, was found to improve asphalt performance.
Based on this adverse action by all the New England states, Bitumar requested courts in Vermont, Maine, Massachusetts, and New Hampshire to enjoin the states' respective departments of transportation from implementing the REOB bans. On offers of proof from the parties, this Court learned that before a hearing was held on the matter, the Massachusetts Department of Transportation agreed to temporarily suspend the REOB ban pending further study and testing. The Vermont Superior Court held a hearing and granted Bitumar's request for a preliminary injunction based on its argument that it was denied due process. See Bitumar USA, Inc. v. Vermont Agency of Transp., Vt. Super. Ct., Docket No. 449-7-14 Wncv (July 31, 2014). However, the Maine Business and Consumer Court held a hearing and denied Bitumar's request for a preliminary injunction, and the ban in Maine presumably went into effect on August 1, 2014. See Bitumar USA, Inc. v. Maine Department of Transp., Me. Business and Consumer Ct., Docket No. BCD-CV-14-050 (Aug. 1, 2014).
II
An injunction is an extraordinary remedy. Injunctive relief will not be granted unless the party seeking an injunction shows that there is an immediate danger of irreparable harm, there is no adequate remedy at law, and it is likely to succeed on the merits. N.H. Dep't of Envtl. Servs. v. Mottolo, 155 N.H. at 63. Moreover, the court must consider whether the grant of an injunction would be in the public interest. See UniFirst Corp. v. City of Nashua, 130 N.H. 11, 13-14 (1987). "It is within the trial court's sound discretion to grant an injunction after consideration of the facts and established principles of equity." Mottolo, 155 N.H. at 63. Under New Hampshire law, the Court must first consider whether or not Bitumar is likely to succeed on the merits of its claim.
A
Bitumar relies on RSA 541-A: 24 which provides:
The validity or applicability of a rule may be determined in an action for declaratory judgment in the Merrimack County Superior Court if it is alleged that the rule, or its threatened application, interferes with or impairs, or threatens to interfere with or impair the legal rights or privileges of the plaintiff.
It asserts that it is likely to succeed on the merits because the DOT's adoption of the regulation banning the use of REOB in asphalt was procedurally defective. It first asserts that since the DOT did not follow proper rulemaking procedures as prescribed by the Administrative Procedure Act ("APA"), the ban on REOB is ineffective. Alternatively, Bitumar asserts that the ban of REOB is arbitrary, unreasonable, and impairs Bitumar's legal rights and privileges. However, both arguments ultimately rest on the premise that the DOT's decision to ban the use of REOB is a rule, the validity of which may be examined by a court in accordance with RSA 541-A:24.
Bitumar's principle argument is that the REOB ban is a "rule" under the New Hampshire Administrative Procedure Act ("APA") and that prior to its promulgation, the DOT was required to follow the rulemaking procedures set out in the APA. Since the DOT did not do so when it enacted the REOB ban, Bitumar contends that the ban is not valid. The DOT contends that by statute, it has discretion to approve or disapprove materials used in state highway projects. Further, the DOT argues that the REOB ban is not a rule but instead is a purchasing decision.
The APA mandates that, "[e]xcept for interim or emergency rules, an agency shall adopt a rule by" a series of certain procedures, including giving notice of the proposed rule, holding a hearing, and receiving comments. RSA 541-A:3 (2007). "No agency rule is valid or effective . . . unless it has been filed as required by [the APA]." RSA 541-A:22 (2007). A "rule" is defined as a
regulation, standard, form . . . or other statement of general applicabilityRSA 541-A:1 (Supp. 2013).
adopted by an agency to (a) implement, interpret, or make specific a statute enforced or administered by such agency or (b) prescribe or interpret an agency policy, procedure or practice requirement binding on persons outside the agency, whether members of the general public of personnel of other agencies.
Here, in banning REOB, the DOT announced by letter, "NHDOT has determined that all suppliers of PG binder must certify that the PG binder supplied for use on [DOT] projects does not contain [REOB]." (Compl. for Decl. and Inj. Relief Ex. 2.). By the express language of this announcement, the REOB ban only applies to asphalt that is supplied for use on DOT projects. See (id.) Bitumar, or any other supplier of asphalt, may still sell asphalt containing REOB to any other asphalt consumer in the State.
Bitumar relies principally upon Bel Air Assocs. v. N.H. Dep't of Health & Human Servs., 154 N.H. 228, 233 (2006) in which the Court held that creation of a so-called "capital cost cap" and "budget neutrality factor" were rules within the meaning of the APA, and were invalid because they were not enacted pursuant to the APA. The Court stated broadly that "where an agency's efforts to effect a substantive change is binding on persons outside the agency, the agency's policy constitutes a rule that must be promulgated pursuant to the APA." Id. However, Bel Air Associates is distinguishable from the instant case, because the capital cost and budget neutrality factor both applied to a procedure—the manner in which providers of nursing home services would be paid pursuant to contract with the State. Similarly, the other cases relied upon by Bitumar also involved some contractual or other relationship with the State and relate to the procedures involved in that relationship. For example, in In re City of Manchester, 149 N.H. 283, 287-88 (2003), the Court held that a Public Employee Labor Relations Board policy concerning payment for transcripts was not enforceable for failure to follow the rulemaking procedure of the APA. The rule only applied to those engaged in a transaction with the State defined by law, those seeking certification as a bargaining unit. Id. In Appeal of Nolan, 134 N.H. 723, 727-28 (1991), the Court held that personnel rules concerning labor classifications, which related to the amount of money paid to State employees, were subject to rulemaking procedures under the APA. In Asmussen v. Commissioner, N.H. Dep't of Safety, 145 N.H. 578, 592-93 (2000), the rule in question involved procedures applicable to those engaged in adversarial proceedings with the Department of Safety.
The contrast to the instant case is stark. Bitumar has no contract with the State of New Hampshire. In fact, Bitumar is not engaged in any legally cognizable transaction with it. It is merely a supplier to other entities that may bid on State projects. The regulation at issue here is merely a specification of the materials to be used on such a project. It is one of the many contract specifications set forth in a lengthy document, produced as an exhibit by the DOT called "Standard Specifications for Road and Bridge Construction." Courts have generally held that procedures governing administrative rulemaking are not applicable to specifications of materials promulgated by the State Departments of Transportation.
Illustrative is Dep't of Transp. v. Blackhawk Quarry Co. of Fla., Inc., 528 So.2d 447, 450 (5th DCA 1988) in which the court held that specifications for acceptable material as part of the State's comprehensive standards for road and bridge construction did not constitute a "rule" within the meaning of the Florida Administrative Procedure Act. As in New Hampshire, the Florida courts had interpreted what constitutes a rule broadly:
[A]ny agency statement is a rule if it "purports in and of itself to create certain rights and adversely affect others," [citation omitted], or serves "by [its] own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law" [citation omitted]Balsam v. Dep't of Health and Rehabilitative Servs., 452 So.2d 976, 977-78 (1st DCA 1984) (citation omitted).
While recognizing that by announcing criteria which will determine entitlement to participation in State projects, the standard creates certain rights and adversely affect others, the court reasoned that this alone does not make the standard a rule. It stated:
[S]ection 915 simply sets out specifications for acceptable coquina material as part of the comprehensive standards for state road and bridge construction. It is more in the nature of a contract term between the contractor and DOT as opposed to a rule. (citation omitted). This provision has at most an indirect effect on [plaintiff].Blackhawk Quarry Co. of Florida, Inc., 528 So.2d at 450.
Similar results have been reached in other courts. For example, in Alabama Dep't of Transp. v. Blue Ridge Sand and Gravel, Inc., 718 So.2d 27, 29 (Ala. 1998), the court held that a specific gravity specification for asphalt was not a rule, requiring promulgation pursuant to the Alabama administrative procedure act in which a rule was defined as "[e]ach agency regulation, standard or statement of general applicability that implements, interprets, or prescribes law or policy, or that describes the organization, procedure, or practice requirements of any agency" the court reasoned that a contract specification is "simply a term that may be incorporated into a contract between the Department and some other party." Id.; see also Greenfield Constr. Co., Inc. v. Michigan Dep't of State Highways, 261 N.W.2d 718 (Mich. 1978) (Michigan Standard Specifications for Highway Construction are not rules under the Michigan Administrative Procedure Act, which defined a rule as "an agency regulation, statement, standard, policy, ruling or instruction of general applicability, which implements or applies law enforced or administered by the agency, for which prescribes the organization, procedure or practice of the agency"); Abari Construction Co. v. Illinois, 59 Ill. Ct. Cl. 316, 318 (2007) (limitation period imposed by specifications to contract is not a rule subject to the Illinois Administrative Procedure Act).
A similar conclusion was recently reached by the Business and Consumer Court in Maine on Bitumar's motion for a preliminary injunction which sought to prohibit the Maine Department of Transportation from implementing its REOB ban. In addition to approving the reasoning of other courts that have held that a state highway agency's contract specifications are not subject to rulemaking requirements, the court noted that Maine law authorizes the Maine Department of Transportation to "adopt its own standard contract specifications as part of its full power in the procurement or letting of all contracts to construct, or demolish or maintain transportation infrastructure." Bitumar USA, Inc. v. Maine Department of Transp., Me. Business and Consumer Ct., Docket No. BCD-CV-14-050 (Aug. 1, 2014).
As in Maine, the statutory structure of the DOT's enabling legislation lends support to the Court's determination that the REOB ban is not a "rule" for purposes of the APA. Under RSA 228:21, the commissioner of the DOT has control over all matters related to the construction of highways built with funds from the state treasury. Specifically, the commissioner has supervision and control over choosing "the method and type of construction and kind and quality of materials to be used." RSA 228:21, I(a) (2009). In addition, the legislature saw fit to specifically enumerate circumstances when the DOT is required to adopt rules pursuant to the APA; such a decision about the type of materials to be used is absent from this list. See RSA 21-L:12 (2012). The specific grant of power in RSA 228:21, contrasted with the absence from the list in RSA 21-L:12, implies that the legislature did not intend that the DOT should be required to decide what types of products it uses on its projects through the rulemaking process. Under these circumstances, the Court believes that the DOT's decision to ban REOB pending study is not a rule within the meaning of the APA, and that Bitumar cannot establish a likelihood of success on the merits of its claim that the ban was improperly enacted.
B
Bitumar argues in the alternative that the REOB ban is arbitrary and clearly unreasonable, because it is not supported by any evidence and there are no known failures of Bitumar's asphalt pavement. It relies on Richardson v. Beatty, 98 N.H. 71, 75 (1953) for the proposition that a court may set aside a regulation which is clearly unreasonable. However, a close reading of the case establishes that the New Hampshire Supreme Court held only that a court may review rules and regulations promulgated by the State Board of Health and set them aside if they are arbitrary or unreasonable. The Court specifically referenced the State Board of Health's statutory authority to "after due investigation, make such regulations as it may deem best to protect the [water] supply against any dangerous contamination." Id. at 74. The critical point is that the New Hampshire Supreme Court believed its authority to review the regulations existed because "whether the regulations adopted were reasonable in light of the facts is a question of law which the plaintiffs are entitled to have judicially determined." Id. at 75. The case does not stand for the proposition that every action taken by the executive branch may be reviewed by the judicial branch. See RSA 541-A:24.
Having determined that the specification in this case is not a rule or regulation, it follows that Richardson is not applicable, and the Court has no authority to review it.
IV
Bitumar has provided the Court with an order of the Vermont Superior Court, Bitumar v. Vermont Agency of Transp., Vt. Super. Ct., No. 449-7-14 Wncv (July 31, 2014). In that case, the court, after a full evidentiary hearing, enjoined the Vermont Agency of Transportation from implementing a ban on REOB. However, the case is not persuasive. The Vermont court found that if the ban on REOB were allowed to go into effect, Bitumar would suffer irreparable harm. However, the court noted that "the standards for the issuance of a preliminary injunction under Vermont law are not crystal clear." Id. at 5. The Vermont court characterized the liability standard for injunctions as "whether Bitumar either has a likelihood of success on the merits or at least is shown sufficient issues making them a fair ground for litigation." Id. at 6. This standard is plainly different from New Hampshire's standard, and, the Court believes, Maine's standard as well. See generally Ingraham v. University of Maine at Orono, 441 A.2d 691, 693 (Me. 1992).
Moreover, apparently in Vermont, Bitumar has made what amounts to a promissory estoppel claim:
Bitumar may well be able to show at trial that it reasonably relied upon AOT's pre-approval in manufacturing a certain amount of its productBitumar v. Vermont Agency of Transp., (supra), at 8.
specifically for Vermont highway projects, that it has a property interest in its contracts with Pike and Whitcomb, and that it is entitled to due process before AOT causes the termination of those contracts. The court concludes that Bitumar is likely to succeed at trial on its claim that once AOT has approved a specific product for a specific paving year it cannot unceremoniously change its mind without providing any process at all to the manufacturer of the approved product.
No such claim has been made in this case.
The Court expresses no opinion as to whether or not such a claim would be viable under New Hampshire law. Compare RESTATEMENT (SECOND) OF CONTRACTS § 90.
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It follows that since Bitumar has not established a likelihood of success on the merits, it is not entitled to injunctive relief. The Motion for a Preliminary Injunction must be and is DENIED.
SO ORDERED.
8/15/14
DATE
s/Richard B. McNamara
Richard B. McNamara,
Presiding Justice
RBM/