The East Alabama Water, Sewer and Fire Protection District v. Westpoint Home, Inc.

Filing 38

OPINION AND ORDER directing that defendant WestPoint Home, Inc.'s 28 Motion for summary judgment is denied. Signed by Honorable Myron H. Thompson on 6/21/10. (scn, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION THE EAST ALABAMA WATER, SEWER AND FIRE PROTECTION DISTRICT, Plaintiff, v. WESTPOINT HOME, INC., Defendant. ) ) ) ) ) ) ) ) ) ) )

CIVIL ACTION NO. 3:09cv541-MHT (WO)

OPINION AND ORDER Plaintiff East Alabama Water, Sewer and Fire

Protection District ("East Alabama") filed this lawsuit against defendant WestPoint Home, Inc. ("WestPoint"), charging, among other things, breach of contract.

Jurisdiction is proper pursuant to 28 U.S.C. § 1332 (diversity). This lawsuit is before the court on WestPoint's motion for summary judgment. For the reasons that

follow, that motion will be denied.

I.

SUMMARY-JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). Under

Rule 56, the party seeking summary judgment must first inform the court of the basis for the motion, and the burden then shifts to the non-moving party to demonstrate why summary judgment would not be proper. v. Catrett, 477 U.S. 317, 323 Celotex Corp. see also

(1986);

Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-17 (11th Cir. 1993) (discussing burden-shifting under Rule 56). The non-moving party must affirmatively set forth

specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials in the pleadings. Fed. R. Civ. P. 56(e).

The court's role at the summary-judgment stage is not to weigh the evidence or to determine the truth of the

2

matter, but rather to determine only whether a genuine issue exists for trial. Anderson v. Liberty Lobby, Inc., In doing so, the court must

477 U.S. 242, 249 (1986).

view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986). II. In 1972, East BACKGROUND entered into a written

Alabama

"Agreement for Waste Treatment Service" with West PointPepperell, Inc. ("WPP"). No. 21-1). Ex. 1 to Am. Compl. at 1 (Doc.

The agreement provided that East Alabama

would construct a waste treatment system and "render sanitary sewer service to [WPP] by collecting any and all industrial and domestic Id. at §§ waste 3 & from 4. [specified Construction WPP] was

facilities."

financed, in part, "by the issuance of revenue bonds by [East Alabama," and it was "agreed that [WPP would] pay ... 75.85 % of each year's debt service (principal and 3

interest) on the portion of the bonds the proceeds of which [were] required for and applied toward construction of the System." Id. at § 5. In addition, WPP would "pay

its portion of the operating costs of the System ... in each Contract Year," based on its use of the system. at § 7. Id.

Under the terms of the contract, over 70% of See id. at

the system's capacity was reserved for WPP. § 1.

East Alabama and WPP further agreed in writing that, "The term of this contract shall begin on the date this contract was executed by the parties hereto and shall expire on the twentieth anniversary of the [completion of the system]." Id. at § 2. The parties to this lawsuit

agree that the system was completed, as defined by the written agreement, in July 1975. The parties also agree

that the written agreement thus expired, by its own terms, in July 1995.1

1. The construction bonds mentioned above were also "to have a life which will expire no later than twenty (continued...) 4

The written agreement provides for renewal of its terms in the following provision: "Renewal: Upon 60 days written notice prior to the expiration of the term of this contract, [WPP] shall have the right to renew this contract for a like term upon similar terms and conditions; provided, however, that any further amortization charges or operating charges payable by [WPP] during said renewal period shall be determined prior to the expiration of this contract in accordance with ... [a specified] formula." Id. at § 12. In the early 1990's, well into the life of the written agreement, WPP was reorganized into WestPoint Stevens, Inc. ("WPS"). This re-organization did not There is no

interfere with performance of the agreement.

dispute that East Alabama, WPP, and then WPS, "each performed their obligations during the initial twenty year term." Pl's Br. at 6 (Doc. No. 33).

(...continued) years from the Completion Date." Ex. 1 to Am. Compl. at § 5. However, at some point WPP and East Alabama agreed to restructure the bonds, ultimately extending their life to 2008. 5

"As the end of the ... twenty year term approached in July 1995, [WPS's] representative, Eddie Lanier, and East Alabama's concerning agreement." manager, the Id. Stephen of Hamilton, a new had discussions treatment]

execution

[waste

These discussions did not produce a new

written agreement before the expiration date, nor did WPS exercise the renewal option noted above. The discussions

were referenced in a letter Lanier sent to Hamilton on June 27, 1995: "This letter is to confirm our recent conversations concerning the Agreement for Waste Treatment Services that you have with WestPoint Stevens. This agreement will expire on 7/1/95. Our discussions have indicated that you are agreeable to operating under the old agreement until the new agreement has been finalized. If this is not the case, please give me a call at [specified phone number]." Def.'s Ex. 4 to Segrest Dep. (Doc. No. 34-2). At that point, according to Lanier, East Alabama and WPS had "jointly decided it was better to ... continue to operate under the old agreement on a temporary basis

6

until

[they]

got

things

more

stabilized

and

could

finalize the agreement." No. 34-1).

Lanier Dep. at 50:12-17 (Doc.

WestPoint now contends that the June 27 Def.'s

letter "memorializ[ed] the parties' agreement." Br. at 3 (Doc. No. 28). In contrast to Lanier's description

of

the

discussions, Hamilton maintains that his "interaction with Eddie Lanier [in 1995] indicated [WPS's] desire to continue under the contract for an additional 20 years." Hamilton Dep. at 27:4-5 (Doc. No. 35-1).2 Indeed, he

claims that "none of [their] discussions ever indicated any shorter term than ... the 20-year duration of the contract." Id. at 55:24-56:1.

2. WestPoint notes that, "Hamilton's deposition was taken after the Motion for Summary Judgment had been filed." Def.'s Reply at 2 n.1 (Doc. No. 35.) Nonetheless, it cites to Hamilton's deposition throughout its reply brief. See, e.g., id. at 2, 3, 4 & 8. It also asserts that, "the deposition transcript [does not] raise a fact question material to summary judgment." Id. at 2 n.1. 7

Hamilton accurate

agrees of

that

the

June

27

letter with

"is

an

summary

[his]

conversations

Eddie

[Lanier]." letter, Lanier.

Id. at 57:19-21. diverges

His interpretation of that from that now provided by

however,

He read the letter as describing an agreement to

renew the contract and, apparently, a further agreement to later modify or nullify aspects of the contract.3 explains as follows: "My understanding of our agreement was that the old contract was renewed, that we would continue to treat [WPS] waste, and they would continue to make their payments. We [further] agreed that there ... was a need to update the contract to make it reflect current practices. And to my thinking, that's the only, quote, `new agreement' we were talking about; was updating the contract to reflect what we were billing for, because the treatment plant had changed tremendously from 1975 to 1995." Id. at 63:21-63:5; see also id. at 61:4-8 ("Q: ... [W]hat in the world does [`]until the new agreement has been He

3. East Alabama concedes that WPS had "concerns about [the] measuring of flow into the plant and other issues." Pl.'s Br. at 6. 8

finalized['] mean?

A: Well, if you entered into a new

agreement, then you would - part of that agreement would be to nullify the terms of the old agreement.").4 Hamilton and Lanier periodically discussed a "new agreement" until some time in 1998, but no new written agreement was ever produced. Lanier admits that at no

point during those discussions did he explicitly express the opinion that the parties were operating under a contract that was terminable at will. 54:7-56:8. See Lanier Dep. at

Indeed, he states that "it never came up

about whether we could cancel or when we would cancel." Id. at 56:13-14; see also Hamilton Aff. at ¶ 6 (Doc. No. 34-6) ("In my discussions with Eddie Lanier, he never

4. Hamilton was asked, "If Eddie [Lanier] were to tell us that he never intended to enter into a 20-year agreement back in 1995, do you have a reason to think he's lying about that?" Hamilton Dep. at 59:16-18. He responded, "I would disagree with him." Id. at 59:20. When asked, "Do you think [Lanier] did intend to enter into a 20-year agreement," he responded, "I did," explaining that "there was no discussion that it was otherwise, and the actions of WestPoint, from prior to later, indicated that the contract was in full force." Id. at 59:21-60:2. 9

characterized the arrangement between the parties after 1995 as a `temporary agreement.'"). In 2003, WPS filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. 6 to Segrest Dep. (Doc. No. 34-2). See Def.'s Ex. WPS "was not

reorganized­-instead a new company, WestPoint, the only defendant in this action, bought certain assets and

assumed certain liabilities of WPS."

Def.'s Br. at 4.

The "arrangement for wastewater treatment services then in effect was one of the liabilities WestPoint assumed." Id. In 2006, approximately eleven years after the written contract had expired, Tony Segrest replaced Hamilton as East Alabama's manager. Lanier, now employed by

WestPoint, met with Segrest and later sent him an email "explaining how our relationship ... worked." Dep. at 64:23-65:1. He wrote, in part, Lanier

"You had asked for some information on the wastewater budgeting process between WestPoint Home (WPH) and East Alabama. Our contract (I gave you a copy of when 10

we met in your office), requires that East Alabama provide us an operating budget each year that we can use to develop our wastewater treatment budgets at each facility." Pl.'s Ex. 6 to Lanier Dep. at 1 (Doc. No. 34-1). The

contract referred to in the email is the 1972 written contract. It is undisputed that East Alabama, WPS, and then WestPoint, each performed under the terms of the 1972 written agreement through 2008. But in 2008, "[d]ue to

plant closures, WestPoint's usage of the plant declined drastically." Pl.'s Br. at 11. On November 14 of that

year, general counsel for WestPoint sent Segrest written notice of termination of the parties' wastewater See Pl.'s

treatment agreement effective January 1, 2009. Ex. 11 to Lanier Dep. (Doc. No. 34-1). East complaint, contract. Alabama subsequently among that, other "After filed the

instant of of

alleging, It claims

things, giving

breach notice

termination, WestPoint refused to pay the monthly amounts

11

owed under the Agreement."

Pl.'s Br. at 11.

It further

alleges that, "The unpaid amounts accrued as of March 31, 2010 total $ 521,457.63." Id. WestPoint admits that it Def.'s Br. at 8 n.1.

"remains an East Alabama customer." III. A. East DISCUSSION

Breach-of-Contract Claim maintains that WestPoint is

Alabama

contractually bound by the terms of the written agreement until July 2015, and that, "By attempting to cancel the contract before expiration of the contract term,

WestPoint is in breach of the agreement." 2. As should be clear from the

Def.'s Br. at factual

detailed

background provided above, East Alabama does not assert that either WestPoint or WPS entered into a new written agreement after the initial agreement expired in 1995. Nor does it claim that WPS exercised the agreement's renewal option. Rather, it contends that the parties are

bound by an implied-in-fact contract.

12

"An

implied

contract

arises

where

there

are

circumstances which, according to the ordinary course of dealing and common understanding, show a mutual intent to contract." Broyles v. Brown Engineering Co., 151 So. 2d

767, 770 (Ala. 1963); Radiology Associates, P.A. v. St. Clair Timber, Co., 563 So.2d 1020, 1021 (Ala. 1990) ("An implied-in-fact contract may be found from circumstances showing that a mutual agreement had been reached."

(citation omitted)).

"Such a contract must contain all

the elements of an express contract, which rests on consent, and is to every intent and purpose an agreement between the parties, and it cannot be found to exist unless a contract status is shown." Broyles, 151 So. 2d

at 770; see also Steiger v. Huntsville City Bd. of Educ., 653 So. 2d 975, 978 (Ala. 1995) ("A contract implied in fact requires the same elements as an express

contract."). implied

"The difference between an expressed and an is merely in the mode of proof."

contract

Broyles, 151 So. 2d at 770.

13

"It is a general rule of law that where parties who have entered into a contract continue their respective performances under the terms of the contract beyond the expiration date of the contract, the parties are deemed to have mutually agreed to a new implied contract

encompassing the same terms."

Gafnea v. Pasquale Food

Co., 454 So. 2d 1366, 1369 (Ala. 1984) (citations and quotation marks omitted). In this case, East Alabama,

WPS, and then WestPoint, performed under the terms of the written expired. WestPoint argues that no implied-in-fact 20-year agreement for more than 13 years after it

contract could exist because, "WPS and East Alabama made the deliberate decision ... to operate under the terms of the expired agreement on a temporary basis while they attempted to negotiate a new contract." Def.'s Br. at 5.

Indeed, it asserts that "there is no dispute of fact that the parties did in fact reach an agreement in 1995, and that this agreement did not specify as to duration."

14

Def.'s

Reply

at

4.

According

to

WestPoint,

this

"arrangement was memorialized in Eddie Lanier's letter of June 27, 1995." Id.

In support of this argument, WestPoint cites to Hamilton's deposition, noting that he agreed that the June 27 letter was "an accurate summary of [his]

conversations with Eddie [Lanier]." Hamilton Dep. at 57:19-21. Hamilton It went conveniently on to provide ignores, a however, of that the

description

"agreement" reached, and an interpretation of the letter, that diverges substantially from that provided by Lanier. Given the totality of Hamilton's testimony, the court finds a material dispute of fact with respect to whether the parties did in fact reach an agreement in 1995.5 "The question of whether there has been mutual assent between the parties is an issue to be determined by the trier of fact." Big Thicket Broadcasting Co. v. Santos, 594 So. 2d

5. At the very least, there is a dispute as to the content of any such agreement. 15

1241, 1243 (Ala. Civ. App. 1991).

Thus, the court must

reject this argument as a basis for summary judgment.6 Alternatively, WestPoint argues that no implied-infact 20-year contract could exist because any inference of mutual intent to so to contract the is defeated by an the

expressed

declaration

contrary.

Despite

general rule regarding performance of a contract after expiration, "where mutual agreement is contradicted by the statements of either party at the time ... there can

6. For the same reason, the court must reject WestPoint's argument that "East Alabama is estopped from claiming that conduct consistent with the temporary arrangement could give rise to an implicit contract." Def.'s Br. at 15. That argument too relies on the assertion that, "It is undisputed that East Alabama agreed to the temporary arrangement proposed by Mr. Lanier on behalf of WPS." Id. Similarly, while the court accepts that an agreement by WestPoint "to continue [a] temporary agreement following WPS's bankruptcy ... [would not] transform [a] temporary agreement into a twenty year commitment," def.'s reply at 7, the court has not found a temporary agreement. As WestPoint itself concedes, it "assumed the rights and liabilities in existence at the time of the bankruptcy." Def.'s Br. at 15. For reasons discussed above and below, just what rights and liabilities existed at the time of bankruptcy will be determined at trial. 16

be no implication of contractual under-taking by that party." WestPoint, Broyles, 151 So. 2d at 770. "the relevant declaration According to appears in Mr.

Lanier's [1995] letter, which plainly contemplates a temporary arrangement." Def.'s Reply at 5. But the key

sentence in that letter--"Our discussions have indicated that you are agreeable to operating under the old

agreement until the new agreement has been finalized"-cannot, at this stage of the lawsuit, carry the weight that WestPoint assigns it. The court does not read the

sentence as an express refusal to renew the contract or a clear rejection of a long-term contract. Moreover, and

as noted above, Hamilton's account of the "discussions" referenced in that sentence, and his related

interpretation of the sentence itself, raise questions about the intentions of the parties. for the trier of fact to resolve. Even if a long-term agreement was reached, WestPoint argues that it cannot be enforced as the "purported Such questions are

17

twenty-year agreement runs afoul of one of the bedrock principles of Alabama law­-the Statute of Frauds."

Def.'s Br. at 6. relevant part, that:

1975 Ala. Code § 8-9-2 states, in

"In the following cases, every agreement is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by therewith or some other person by him thereunto lawfully authorized in writing: (1) Every agreement which, by its terms, is not to be performed within one year from the making thereof." But as the Alabama Supreme Court has explained, "This argument overlooks the fact that the original contract is in writing and indicates the terms of the [alleged] implied contract." Gafnea, 454 So. 2d at 1369.

Having rejected the arguments raised by WestPoint, the court will deny summary judgment with respect to East Alabama's breach-of-contract claim.

18

B. East Alabama

Other Claims asserts claims of unjust

also

enrichment, quantum meruit, and payment due on an open account. Alabama These claims rely on the allegation that East "has been failure and to continues to be [it] damaged for by

WestPoint's

compensate

waste

treatment services rendered."

Am. Compl. at ¶ 26.

WestPoint contends that it "is due summary judgment on these claims as well, as all depend on East Alabama's litigation position that there is a contract for

wastewater treatment services running through 2015 and WestPoint has therefore exhausted ... credit due to it at the end of 2008." Def.'s Br. at 8 n.1. In other words,

it maintains that, "An award of summary judgment on East Alabama's contract and specific performance claims thus compels claims." an award of summary judgment on all other

Id.

It offers no other arguments specific to

these claims.

19

The court has rejected WestPoint's arguments with respect to the breach-of-contract claim and will deny its request for summary judgment on that claim. Thus, the

court will also deny summary judgment with respect to the other claims. *** For defendant the foregoing reasons, Inc.'s it is ORDERED for that

WestPoint

Home,

motion

summary

judgment (doc. no. 28) is denied. DONE, this the 21st day of June, 2010. /s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE