Opinion
No. 2:05-cv-0989-MCE-KJM.
August 25, 2006
MEMORANDUM AND ORDER
Through the present action, Atlas Disposal Industries, LLC ("Atlas") seeks damages from BFI Waste Systems of North America, Inc. ("BFI") resulting from the alleged breach of years two and three of a three year Disposal Service Agreement ("DSA") entered into between the parties in 1999. Preceding this action, Atlas successfully brought suit against BFI seeking damages for breach of the first year of the DSA. Given this previous adjudication regarding year one of the DSA, Atlas now moves for partial summary judgment contending certain issues are barred from consideration in this proceeding based on the doctrine of collateral estoppel. For the reasons set forth below, Atlas's motion is granted in part and denied in part.
Because oral argument will not be of material assistance, the Court orders this matter submitted on the briefs. E.D. Cal. Local Rule 78-230(h).
BACKGROUND
BFI hauls residential, commercial, industrial, and construction waste and materials. Atlas operates a materials recovery facility at which mixed recyclables and waste are sorted and certain recyclable materials are recovered and sold. On March 19, 1999, Atlas and BFI entered into a DSA requiring BFI to deliver an annual minimum of 26,000 tons of source separated commingled recyclables. The DSA provided as follows: "[BFI] agrees to provide commingled CD recyclables (wood, cardboard, metals), source separated wood waste, source separated green waste, and/or other commingled recyclables (including, but not limited to, plastic, fiber, wood, ferrous and non ferrous metal) and/or other recyclable materials (any of foregoing, `Recyclable Material'). Recyclable Materials shall include the type of materials generated by commercial, industrial, governmental, residential and/or institutional customers."The DSA specified BFI's obligations as follows: "[BFI] shall deliver to [Atlas] at [Atlas's] Facility, and [Atlas] shall receive from [BFI], 26,000 tons of Recyclable Materials (the `Minimum Annual Quantity') and not more than 65,000 of Recyclable Materials (the `Maximum Annual Quantity') during each successive year beginning on the date of the Agreement ('Contract Year')." With respect to price, the DSA provided that: "[BFI] agrees to pay [Atlas] Thirty-Two Dollars and Fifty Cents ($32.50) per ton for all Recyclable Materials that [BFI] delivers to [Atlas], except that rates for particular Recyclable Materials specified on Exhibit `A', attached hereto, including clean wood waste, green waste, residential and commercial commingled recyclables, and other source separated recyclable materials are as specified on the Exhibit `A'." The DSA further provided that the $32.50 fee automatically increased three percent (3%) each successive year unless otherwise agreed. Finally, the DSA contained the following Diversion Guarantee: "Through the operation of [Atlas's] facility, [Atlas] shall divert a minimum of eighty percent (80%) of the incoming Recyclable Material delivered to the Facility by [BFI], averaged over each calendar quarter."
In June 2000, Atlas filed suit against BFI in Sacramento Superior Court alleging, inter alia, that BFI breached the terms of the DSA during the first year of the Agreement. Specifically, Atlas alleged that BFI was to provide Atlas with a minimum of 26,000 tons of source separated and commingled recyclables and that BFI was to have paid Atlas $32.50 per ton for receipt of those recyclables. Atlas sought to recover both a per ton tipping fee of $32.50 ("Tipping Fee") for each ton BFI failed to deliver of the 26,000 ton contractual minimum and lost profits for those recyclables Atlas was unable to process and resell.
Following a bench trial, the Sacramento Superior Court found BFI had breached the DSA by both failing to deliver the annual minimum tonnage and failing to deliver source separated commingled recyclables. The Court awarded Atlas $316,192.50, the equivalent of $32.50 for each of the 9,729 tons not delivered.
The trial court specifically found: (1) the DSA was valid; (2) the DSA required BFI to deliver a minimum of 26,000 tons per year; (3) during the first year, the parties agreed to a $32.50 per ton Tipping Fee for commingled commercial loads; (4) BFI was not entitled to reduce the damage award by loads wrongfully rejected as BFI failed to establish any wrongfully rejected loads; (5) Atlas was not entitled to lost profits because, as a new venture, those anticipated profits were too speculative; and (6) Atlas was entitled to $316,192.50, which represented the lost Tipping Fees.
Upon entry of final judgment, BFI appealed contending the trial court erred in awarding Atlas its lost gross revenues as damages for breach of contract. The appellate court, after considering all the evidence before it, affirmed the judgment and awarded Atlas the Tipping Fees it would have received had BFI performed under the agreement.
STANDARD
The Federal Rules of Civil Procedure provide for summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).Rule 56 also allows a court to grant summary adjudication on part of a claim or defense. See Fed.R.Civ.P. 56(a) ("A party seeking to recover upon a claim . . . may . . . move . . . for a summary judgment in the party's favor upon all or any part thereof."); see also Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter Township of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).
The standard that applies to a motion for summary adjudication is the same as that which applies to a motion for summary judgment. See Fed.R.Civ.P. 56(a), 56(c); Mora v. ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).
Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. at 323(quoting Rule 56(c)).
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).
In attempting to establish the existence of this factual dispute, the opposing party must tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed.R.Civ.P. 56(e). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52 (1986); Owens v. Local No. 169, Assoc. of Western Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1987).
Stated another way, "before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251 (quoting Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872)). As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more that simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 586-87.
In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
A summary judgment motion brought pursuant to Fed.R.Civ.P. 56(c) is a proper way to establish issue preclusion. See Takahashi v. Board of Trustees of Livingston Union School District, 783 F. 2d 848, 849 (9th Cir. 1986), cert. denied 476 U.S. 1182.
ANALYSIS
Atlas requests the following issues be precluded from litigation in the current action: (1) whether the DSA dated March 19, 1999, constitutes an enforceable contract; (2) whether, under the terms of the DSA, BFI was obligated to deliver to Atlas a minimum of 26,000 tons of commingled recyclables for each year of the three year term of the contract; (3) whether, under the terms of the DSA, BFI agreed to pay Atlas a per ton Tipping Fee for commingled commercial loads; (4) whether the proper measure of damages for any shortage in tons delivered is the Tipping Fee multiplied by that shortfall; and (5) whether any damage award may be offset by those processing and disposal costs saved due to the tonnage shortfall. Atlas carries the burden of proving with clarity and certainty that the doctrine of collateral estoppel applies. Clark v. Bear Stearns Co., 966 F.2d 1318, 1321 (9th Cir. 1992).The doctrine of collateral estoppel or issue preclusion precludes parties from contesting matters that they have had a full and fair opportunity to litigate, thereby protecting their adversaries from the expense and vexation of multiple lawsuits, conserving judicial resources, and fostering reliance on judicial action by minimizing the possibility of inconsistent decisions. Montana v. United States, 440 U.S. 147, 153-154, 99 S. Ct. 970, 59 L. Ed. 2d 210 (1979).
Collateral estoppel or issue preclusion provides that when a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction cannot be disputed in a subsequent suit between the same parties or their privies. Southern Pacific R.R. v. United States, 168 U.S. 1, 48-49, 18 S. Ct. 18, 42 L. Ed. 355 (1897). In determining the collateral estoppel effect of a state court judgment, federal courts must, as a matter of full faith and credit, apply that state's law of collateral estoppel. Bugna v. McArther (In re Bugna), 33 F.3d 1054, 1057 (9th Cir. 1994); See 28 U.S.C. § 1738.
Under California law, a party seeking to assert issue preclusion must establish the following: (1) the issue sought to be precluded must be identical to that decided in a prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue must have been necessarily decided in the prior proceeding; (4) the decision in the former proceeding must be final and on the merits; and (5) the party against whom issue preclusion is asserted must be the same as or in privity with the party to the prior proceedings. Lucido v. Superior Court, 51 Cal.3d 335, 341 (1990). With respect to the foregoing, both parties agree and the Court concurs that the decision in the prior proceeding was final and on the merits. In addition, the parties to the prior action are the same as the parties in the present action. Accordingly, the focus of the present inquiry is whether the issues sought to be precluded are identical to those necessarily litigated and decided in the prior action.
To succeed in the present Motion, Atlas bears the initial burden of demonstrating there exists no genuine issue of material fact. In the event Atlas satisfies its burden, the Court must then consider the public policies underlying the doctrine before concluding that collateral estoppel should be applied in this instance. Id. at 342-343.
I. Contract Enforceability
It is undisputed that on March 19, 1999, Atlas and BFI entered into a three year severable contract to perform certain obligations regarding the collection and disposal of recyclable waste. It is further undisputed that in the previous action, the trial court found that the DSA was valid and enforceable. As a result of that earlier ruling, Atlas seeks an order from this Court precluding BFI from litigating the enforceability of the DSA.
The DSA is a severable, or divisible contract "`under which the whole performance is divided into [three] sets of partial performances, each part of each set being the agreed exchange of a corresponding part of the set of performances to be rendered by the other promisor . . .'" ( Filet Menu, Inc. v. C.C.L. G., Inc., 79 Cal.App.4th 852,860 (2000)[quoting 6 Jaeger, Williston on Contracts (3d ed. 1962) § 860, p. 252(Williston)].)
At first blush it appears that enforceability has necessarily been litigated precluding BFI from revisiting the issue. However, upon further examination, it is clear that while validity has necessarily been decided, enforceability with respect to years two and three has not. Specifically, the issue of whether the DSA is a valid agreement, meaning an agreement that at the time of formation was legally operative in accord with the Parties' intent, has certainly been decided. In addition, the issue of whether the DSA was enforceable as against both parties during the first year of the DSA was likewise decided. Conversely, whether BFI remained compelled to adhere to the terms of the DSA during years two and three necessarily entails consideration of the facts and circumstances giving rise to that obligation. The facts considered by the previous court were limited to the performance of the Parties' obligations during year one. Whether the obligations of the Parties were later altered rendering the DSA unenforceable during years two and three remains an issue to be decided by the trier of fact in the present proceeding. Consequently, Atlas' Motion to preclude re-litigation of the enforceability of the DSA as to years two and three is denied.
II. Minimum Tonnage Requirement
Atlas further seeks to preclude BFI from re-litigating the minimum tonnage requirement for years two and three. In support of its position, Atlas avers that the previous court found the DSA required BFI to deliver to Atlas a minimum of 26,000 tons of commingled recyclables a year. BFI does not dispute this fact, however, BFI contends that the prior court in deciding this issue took into consideration evidence regarding BFI's alleged excused non-performance. BFI further argues that this issue should not be precluded because its non-performance for years two and three is based on evidence unique to those years and was, therefore, not considered in the previous proceeding. BFI's argument is misplaced.
The existence of facts excusing BFI's performance speaks to enforceability of this contract term rather than the term's substance. The previous court determined that the minimum tonnage provision in the DSA was "clear and unambiguous on its face." Pl's. Request for Judicial Notice, Exh. D, 6:14 ("Exh. D.") The court further found that "[u]nder the plain meaning of the provision, [BFI] had an obligation to deliver a minimum of 26,000 tons per annum." Id. 6:16-18.
BFI does not contend nor does the evidence show that this term was later altered by the Parties. BFI's sole contention is that the term is unenforceable due to later factual circumstances. As noted above, enforceability is squarely before this Court. On the contrary, the existence of the DSA and certain of its terms have necessarily been decided. Accordingly, Atlas's Motion for Partial Summary Judgment to preclude BFI from re-litigating the minimum tonnage requirement is granted.
III. Tipping Fee
Atlas seeks to collaterally estop BFI from litigating whether a per ton Tipping Fee was required under the DSA and, if so, the amount of that fee. In particular, Atlas argues that the trial court necessarily considered whether a Tipping Fee was required under the DSA and concluded in the affirmative. BFI essentially concedes the forgoing but again contends that the trial court derived the Tipping Fee solely from evidence unique to the first contractual year. BFI further asserts that the evidence regarding the Tipping Fee in year two and three is sufficiently distinct from the evidence existing in year one that collateral estoppel on that issue is inappropriate. The Court agrees.
In essence, Atlas argues that because the facts with regard to year one are substantially similar to years two and three, BFI should be precluded from litigating the amount of the Tipping Fee. While Atlas has provided the Court with a plethora of cases allegedly holding that direct identity of the issues is not required, those cases are inapposite. The Court concurs that the contract term requiring the payment of a per ton Tipping Fee was necessarily decided in the previous proceeding. However, the amount of the Tipping Fee rested on a number of facts relevant only to year one of the contract. In reaching its conclusion, the trial court considered testimonial evidence regarding the amount and composition of the loads delivered to Atlas during the first year. Id. 20:15-21:18. Those specific facts were used by the trial court to arrive at its conclusion that $32.50 was the correct Tipping Fee. Since the trial court's conclusion expressly rested on facts specific to year one, that conclusion cannot be extended to years two and three.
To the extent Atlas argues that the facts in year one are sufficiently similar to those in years two and three such that issue preclusion should apply, the Court disagrees. Res judicata or collateral estoppel `was never intended to operate so as to prevent a re-examination of the same question between the same parties where, in the interval between the first and second actions, the facts have materially changed or new facts have occurred which may have altered the legal rights or relations of the litigants.'" Evans v. Celotex Corp., 194 Cal. App. 3d 741 (1987) (citing Hurd v. Albert, 214 Cal. 15, 26 (1931)). Atlas' Motion for Partial Summary Judgment regarding the amount of the Tipping Fee is denied.
IV. Measure of Damages
Atlas seeks to preclude BFI from re-litigating the previous court's damage determination. Specifically, Atlas moves to preclude litigation of the following issues: (1) whether the proper measure of damages is the amount of the lost Tipping Fee times the tonnage shortfall; and (2) whether BFI is entitled to offset from any Tipping Fee damage award, Atlas' saved processing and disposal costs.
In the previous proceeding, the court derived the damage award by multiplying the tonnage shortfall by the Tipping Fee. Atlas seeks to preclude BFI from advancing any alternative calculation in the present action. In response, BFI asserts damages are to be calculated using the formulations set forth in California Civil Code sections 3300, 3358 as opposed to the foregoing formula. Additionally, BFI argues the previous Court did consider Atlas' processing cost when it computed the damages, but found that an "evidentiary vacuum" precluded granting the requested diminution of the award.
California Civil Code section 3300 provides that "for the breach of an obligation arising from contract, that measure of damages, except where otherwise expressly provided by this case, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." In addition, California Civil Code section 3358 clarifies that "except as expressly provided by statute, no person can recover a greater amount in damages for the breach of an obligation, than he could have gained by the full performance thereof on both sides."
The applicability of the foregoing California Civil Code provisions to this case has been decided and is properly precluded from re-litigation. However, damage calculations are necessarily an issue of fact. Consequently, the application of the California Civil Code damage formulations to the facts existing in years two and three is not subject to issue preclusion. Similarly, the application of facts existing in years two and three regarding offset are likewise not subject to issue preclusion. Consequently, Atlas' Motion to estop BFI from litigating any issue regarding calculation of damages is denied.
CONCLUSION
For the reasons set forth above, Atlas' Motion for Partial Summary Adjudication of contract enforceability, the proper Tipping Fee and the calculation of damages is denied. Atlas' motion for partial summary judgment of the minimum tonnage requirement is granted.IT IS SO ORDERED.