A snowplow

A company salty over being left with almost $5 million in unpurchased ice melt for roads can't sue a cooperative of local government bodies in Morris County it contracted with for buying only a fraction of its product.

A split panel of the U.S. Court of Appeals for the Third Circuit affirmed a New Jersey district judge's ruling that the Morris County Cooperative Pricing Council, which awards and executes contracts for products and services so its members can obtain volume discount, was not bound to make the purchases by a contract with plaintiff Mid-American Salt.

Mid-American sued the council and its member townships after several townships decided to buy salt elsewhere at a lower price after Mid-American had taken delivery of $4.8 million in salt from its Moroccan mines, according to the majority opinion written by Judge Thomas Hardiman.

The company brought breach-of-contract claims, but U.S. District Judge Susan Wigenton of the District New Jersey ruled in favor of the defendants and dismissed the case. Mid-American's appeal followed.

Hardiman said that the primary issue on appeal was whether a contract existed between the parties.

"The District Court found such a contract did not exist and we agree. Because the contract lacked a binding promise from the Council or its members to purchase all the salt they required, it was illusory," he said.

The council, formed decades ago by Randolph, Dover, Denville and Roxbury, and now including more than 100 members, according to its website, entered into an agreement to provide Mid-American's bulk salt to its members, according to the decision. However, it argued that it was not bound to purchase any of it, treating it as an options contract, Hardiman said. Mid-American countered that while the contract relieves the council of the obligation to buy from Mid-American, it does not allow its members to buy from competitors.

"Neither the general terms of the contract nor the specific provision Mid-American relies on support its position. Found in bold in the bid specifications, the quantity-variation provision reads: 'There is no obligation to purchase that quantity [referring to the estimates] during the contract period, and the actual quantity purchased by members of the [Council] may vary,'" Hardiman said. "Citing the explicit statement 'that defendants had "no obligation to purchase" during the contract period,' the District Court observed that '[Mid-American's] own pleadings and the unambiguous language of the contract' contradicted Mid-American's contention that there was an implicit promise to purchase certain amounts of salt. We agree."

In a dissenting opinion, Circuit Judge Peter Phipps said that because prices and quantities were named in the parties' agreement, it was enforceable.

"This case hinges on a question of state substantive law: whether a promise to pay for estimated quantities of required materials is enforceable. In interpreting New Jersey law, the majority opinion holds that such a promise does not suffice to form a requirements contract. Instead, the majority opinion conditions the enforceability of a requirements contract on an express promise to purchase—not merely to pay for—requirements. I disagree and believe that when a promise to pay for requirements is accompanied by estimated quantities of required materials, New Jersey law recognizes the formation of a binding requirements contract," Phipps said.

Mid-American is represented by Frederick Damm of Scopelitis Garvin Light Hanson & Feary in Detroit, who did not respond to a request for comment.

Edward Buzak of the Buzak Law Group represents the council and did not respond to a request for comment.