Monday, January 6, 2014

RTS Landfill Inc. v. Appalachian Waste Systems LLC case brief

RTS Landfill Inc. v. Appalachian Waste Systems LLC case brief summary
598 S.E.2d 798 (2004)

CASE SYNOPSIS
Appellant sanitation company sued appellees, a limited liability company (LLC) and two people who owned the LLC, seeking an order enforcing agreements the parties signed. A Georgia trial court held that a provision in one agreement which gave the sanitation company the right to purchase the LLC and a provision in another agreement which required the LLC to use the company's landfill were invalid, and the sanitation company appealed.

CASE FACTS
A sanitation company sold one of its divisions to an LLC, and signed agreements with the LLC which required the LLC to deliver solid waste under its control to the company's landfill, and also gave the company the right to purchase the LLC for $ 500,000 less than any amount offered by a third party. When a third party offered to purchase a 20 percent interest in the LLC for $ 2.5 million, the LLC informed the company about the offer. However, the company and the LLC reached an impasse after discussing the issue of whether the company would exercise its right of first refusal, and the company filed suit, seeking an order blocking the LLC from selling an interest to the third party and damages for breach of contract.

DISCUSSION

  • The appellate court held that: 
  • (1) the preemptive right granted to the sanitation company was an unreasonable restraint on alienation because it was unlimited in duration and allowed the company to pay $500,000 less than what a third party offered; but 
  • (2) the trial court mischaracterized the provision which required the LLC to use the company's landfill as an exclusive dealing provision and erroneous concluded that it was void as an unreasonable restraint on trade.
CONCLUSION
The appellate court affirmed the trial court's judgment declaring that the preemptive right which the sanitation company received was an unreasonable restraint on alienation, but reversed the trial court's judgment declaring that the provision in the parties' agreements which required the LLC to use the company's landfill was void as an unreasonable restraint on trade, and remanded the case for reconsideration of the latter finding.

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