Empty Conveyor / Stoyan_Yotov, ShutterstockReCommunity has filed a federal lawsuit against Ann Arbor, Mich., alleging the City violated and wrongfully terminated the company’s MRF-operating contract.

The company, which operates materials recovery facilities (MRFs) in numerous parts of the U.S., filed the lawsuit on July 27 in U.S. District Court in southern Michigan. It marked the latest chapter in the long-running dispute between Ann Arbor city government and ReCommunity.

ReCommunity alleges in the suit the city ginned up reasons to cancel the contract it had with ReCommunity to operate and manage the city-owned MRF. It did so only after commodities markets decreased and the City began to owe payments to the company under the contract, Recommunity states.

“Rather than honor its obligations, the City manufactured pretextual allegations in an attempt to get out of the contract and refused to make required payments to ReCommunity,” according to the lawsuit.

Stephen K. Postema, Ann Arbor’s city attorney, told Resource Recycling the City would provide a detailed response to the complaint in its federal court answer. “The City does not publicly respond to claims made in litigation,” he said.

In a letter, the City said it was terminating its contract “based on continuing unsafe operations by ReCommunity.” A city official previously said multiple fires had occurred at the facility this year.

ReCommunity has gone public with its dispute with the city, posting the lawsuit, a press release announcing the legal action and a question-and-answer document explaining its position. It argued the federal courts, as opposed to state courts, have jurisdiction in the case because the parties are based in different states.

The City has since re-routed all residential single-stream material elsewhere for sorting. On Aug. 4, the Ann Arbor City Council will consider ratifying emergency purchase orders paying Western Washtenaw Recycling Authority $36,000 and Royal Oak Recycling $42,000 to process recyclable materials. City Council will also consider approving an emergency purchase order paying Waste Management of Michigan $296,000 to evaluate and temporarily operate the MRF and a city transfer station.

Revenue sharing

The city and ReCommunity first entered into a contract to have the company operate the MRF in November 1993. It was amended several times and extended through Sept. 21, 2021.

Under the deal, the trigger price for revenue sharing was $54 per ton. When revenue exceeded the trigger, the money was split between the City and company. Ann Arbor received 80 percent of revenue from the sale of city-sourced materials and 30 percent of revenue from the sale of third-party-sourced materials sorted at the MRF.

Since 2011, the city made $1.8 million from the sale of third-party tonnages and about $1 million from the sale of its own materials, according to ReCommunity.

Under the contract, when net revenue dropped below the trigger price, which happened recently, Ann Arbor was supposed to pay ReCommunity the difference, according to the lawsuit. As of July, the City owes but has failed to pay ReCommunity $183,566 under the contract, the ReCommunity suit states.