## Facts

- RTS Landfill, Inc. (formerly Sanifill of Georgia, Inc.) sold its Starr Sanitation operating division to Appalachian Waste Systems, LLC, owned by Gerald and Sheryl Proctor.
- The parties executed an Asset Purchase Agreement and a separate Disposal Agreement.
- The Asset Purchase Agreement included a “Seller’s Right of First Refusal and Repurchase Option” allowing RTS, upon Appalachian’s receipt of a bona fide third-party offer for assets or membership interests, to buy on the same general terms but at a price equal to the offer minus $500,000.
- The clause required Appalachian to give written notice and a copy of the offer; RTS had 30 days to elect to purchase, with closing within 30 days after election.
- The right contained no express termination date.
- The Disposal Agreement required Appalachian to deliver all nonhazardous solid waste under its control to RTS’s Pine Bluff Landfill for a stated term later extended through 2008, and provided for automatic termination upon the sale of Appalachian’s interests or assets.
- Appalachian notified RTS that a third party offered $2.5 million for a 20% membership interest; RTS claimed the notice was insufficient and sued to enjoin the sale and recover for breach.
- Appalachian and the Proctors counterclaimed for declaratory and injunctive relief, asserting the repurchase/right-of-first-refusal clause was invalid and that RTS could not enforce the Disposal Agreement to restrict a sale.
- The trial court declared the repurchase/right-of-first-refusal provision unenforceable and granted Appalachian declaratory and injunctive relief limiting enforcement of both the repurchase/right-of-first-refusal provision and the Disposal Agreement.

## Issues

1. Whether an indefinite preemptive right allowing RTS to purchase at $500,000 less than any bona fide third-party offer is void as an unreasonable restraint on alienation.
2. Whether Appalachian was entitled to declaratory and injunctive relief concerning the Disposal Agreement, including whether a justiciable controversy existed and whether the contract was invalid as a restraint on alienation.

## Decision

- The court affirmed the ruling that the discounted repurchase/right-of-first-refusal provision was unenforceable as an unreasonable restraint on alienation.
- The court reversed the grant of declaratory relief concerning the Disposal Agreement because Appalachian was not entitled to such relief on the record presented.
- The case was remanded for further proceedings consistent with these rulings.

## Legal Principles

- Contract provisions that materially and unreasonably restrict an owner’s ability to transfer property interests may be void as restraints on alienation.
- A “right of first refusal” operating as an indefinite, substantial discount option can function as a penalty on transfer and may be unenforceable when its restrictive effect is disproportionate to any demonstrated purpose.
- Declaratory judgment requires an actual, present controversy over legal rights; it may not be used to obtain an advisory ruling.
- A contract’s limited duration and termination-upon-sale provisions may weigh against characterizing it as an unlawful restraint on alienation, absent a developed factual basis establishing invalidity.

## Conclusion

The court held that the indefinite, $500,000-discount repurchase/right-of-first-refusal provision was an unreasonable restraint on alienation and therefore unenforceable, but it rejected declaratory relief invalidating the separate waste-disposal contract on the record before it.


RTS Landfill, Inc. v. Appalachian Waste Sys., LLC, 267 Ga. App. 56, 598 S.E.2d 798 (Ga. Ct. App. 2004)