Dive Brief:

• The Massachusetts city of New Bedford and ABC Disposal Services are heading to trial over whether China's National Sword import policies qualify as "uncontrollable circumstances" that would allow for the early termination of a recycling contract without default. 
• This comes after a Bristol County Superior Court judge dismissed three of four contested counterclaims filed by ABC in response to a city lawsuit over the company raising prices mid-contract. Among them were claims that New Bedford breached its contract by allowing “unacceptable recyclable set-outs” from residents, a question about its obligation to negotiate a contract revision and whether National Sword qualified as a force majeure event.
• Following the news, both sides claimed victory. “We will continue to defend the interests of taxpayers and residents who depend on trash and recycling services," said Mayor John Mitchell in a statement, while ABC CEO Mike Camara wrote via email, "We are pleased that we’ll finally have our day in court!"

Dive Insight:

New Bedford's 10-year recycling collection contract with ABC runs into 2023, and the two have worked together for years — but that relationship has been upended by China's scrap import policies.

Following a significant increase in pricing for New Bedford, and talk that ABC might stop collecting material if the city didn't consent, New Bedford filed an initial lawsuit in May 2018. ABC came back with six counterclaims, kicking off an ongoing legal process.

Following the ruling, the city has now been cleared of a legal obligation to address contamination as well as any question of whether National Sword should trigger contract renegotiation. The court decided implementing public awareness programs is entirely at the discretion of New Bedford, and delineated the legal distinction between a change in U.S. statutes and the effects of National Sword.

Notably, the judge did not rule on whether the implementation of National Sword constitutes an “uncontrollable circumstance" that would allow ABC to default on its contract. One factor in this decision is that the city and New Bedford have yet to engage in a formal dispute resolution process, as outlined in the contract. By ruling that National Sword doesn't qualify as a force majeure event, the Bristol County judge seemingly limited the opportunities for ABC to make its case on the remaining counterclaim — but the company will have an opportunity to do so in future legal proceedings.

The litigation illustrates a budding point of tension between municipalities and service providers. Following National Sword, providers face real cost increases and barriers to profitability. An inability to export unsorted mixed paper, mixed plastic and other recyclables cuts into profits and can contribute to stockpiling. In turn, many municipalities have been caught off guard by requests to absorb ensuing price increases in a recycling market that has otherwise remained relatively stable for years. 

This has played out in various ways around the country — some municipalities have agreed to increases or service changes; others are stalling until the next contract renewal. Talk of invoking force majeure over National Sword has come up during various corporate earnings calls and other industry circles, but this New Bedford case marks the highest-profile example to date. Lawyers and industry figures alike are watching the results with great interest.

In the meantime, ABC Disposal is required to continue collecting New Bedford's recyclables as usual until the matter is resolved.