Boston Gas Company v. Century Indemnity

Filing 783

Chief Judge Patti B. Saris: MEMORANDUM AND ORDER entered. "...The Courts hereby ORDERS the parties to provide the Court with a revised Stipulation and Order for Dismissal within seven (7) business days." (LaFlamme, Jennifer)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
BOSTON GAS COMPANY d/b/a/ KEYSPAN
ENERGY DELIVERY, NEW ENGLAND
Plaintiff,
v.
CENTURY INDEMNITY COMPANY
Defendant.

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)CIVIL NO. 02-12062-PBS
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MEMORANDUM AND ORDER
September 26, 2013
Saris, C.J.
I. Introduction
According to the Joint Status Report submitted to the Court
on July 24, 2013, the parties have agreed to settle this action.
The parties have asked the Court to resolve their remaining
disputed issue, involving Century Indemnity Company’s obligation
to pay prejudgment interest on certain costs incurred by Boston
Gas Company between 2007 and 2010. The Court concludes that since
Century never refused Boston Gas’s demand for payment, Century is
not obligated to pay prejudgment interest on these costs.
II. Procedural Background
The First Circuit provided a comprehensive history of the
long and winding road of litigation between these parties in its
2013 decision. Boston Gas Co. v. Century Indem. Co., 708 F.3d
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254, 257-58 (1st Cir. 2013). The Court will recount an
abbreviated version here. Boston Gas sought indemnification from
Century for costs incurred in remediating environmental
contamination at its former manufactured gas plant sites,
including the Everett and Commercial Point sites. A trial on
claims involving the Everett site took place in 2005. The jury
entered a verdict in favor of Boston Gas in the amount of $6.1
million in past remediation expenses at the Everett site, and the
district court entered a declaratory judgment obligating Century
to pay all future costs associated with the cleanup of the
Everett site.
After a nine-day trial in 2007 on claims involving the
Commercial Point site, a second jury returned a verdict in favor
of Boston Gas for approximately $1.7 million to remediate the
Commercial Point site. The Court deferred ruling on post-trial
motions and entry of final judgment pending the outcome of the
parties’ appeal of the Everett site trial. See Boston Gas Co. v.
Century Indem. Co., 588 F.3d 20, 23 (1st Cir. 2009); Boston Gas
Co. v. Century Indem. Co., 454 Mass. 337 (2009); Boston Gas Co.
v. Century Indem. Co., 529 F.3d 8, 22 (1st Cir. 2008). Following
the conclusion of the Everett appeal, this Court resolved the
pending Commercial Point post-trial motions on June 28, 2011
(Docket 751) and entered judgment on July 19, 2011 (Docket 748).

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The First Circuit affirmed the Commercial Point judgment in 2013.
Boston Gas, 708 F.3d at 269.
The parties submitted a Stipulation and Order of Dismissal
to this Court on July 24, 2013 (Docket 778). The accompanying
Joint Status Report (Docket 777) stated that the drafted
Stipulation and Order represented the parties’ agreement to
dismiss this action and the companion action entitled Boston Gas
Company D/B/A National Grid v. Century Indemnity Company, Civ.
Action No. 07-10701-PBS, subject to the Court’s resolution of the
disputed prejudgment interest issue.
III. Factual Background
In March 2010, Boston Gas presented Century with invoices
for payments made on Commercial Point after the jury’s 2007
verdict. (“New Invoices”). The New Invoices represented over $4.8
million in additional costs incurred during the ongoing
investigation and remediation of Commercial Point. Pl. Mem., Ex.
B. As of March 24, 2010, Boston Gas had submitted the invoices to
Century, but had not provided Century with supporting
documentation for the costs. Id. On March 24, 2010, Century sent
Boston Gas a letter confirming “Century’s agreement to pay these
additional costs . . . conditioned upon its receipt of sufficient
backup documentation and audit.” Id. Century proffers that it
received supporting documentation from Boston Gas in April 2010.
Def. Mem. at 1.

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Century presented Boston Gas with payment for its pro rata
share of the New Invoices on December 23, 2010. Pl. Mem., Ex. B.
In making this payment, Century incorrectly calculated its pro
rata share at 14.5%. This Court’s 2011 Judgment determined that
Century’s pro rata share was 14.9%. Judgment, July 19, 2011, ¶ 7
(Docket 748). Century has agreed to pay this shortfall, which
totals approximately $28,500. Def. Mem. at 1 n.1. Although
Century has paid prejudgment interest on other payments related
to this litigation, Century did not pay any prejudgment interest
on its pro rata share of the New Invoices. See Def. Supplemental
Mem. in Supp. of Mot. for Entry of J. on Commercial Point, at 27
n.45 (Docket 725); Pl. Mot., Ex. B, at 2.
IV. Discussion
Boston Gas seeks interest on this payment pursuant to Mass.
Gen. Laws ch. 231, § 6C, which governs prejudgment interest in
contract actions. The statute provides that interest shall be
added “upon a verdict, finding or order for judgment” at either
the rate established in the contract or the statutory rate of 12%
per year, calculated from “the date of the breach or demand.”
“The plain language of chapter 231, section 6C establishes
conclusively that it is to govern the award of prejudgment
interest in contractual disputes,” including disputes resolved in
whole or part through a declaratory judgment. Comm. Union Ins.
Co. v. Walbrook Ins. Co., 41 F.3d 764, 775 (1st Cir. 1994). Since
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Century’s obligation to indemnify Boston Gas for the New Invoices
stems from the declaratory judgment1 issued by the Court in July
2011 in accordance with the jury’s 2007 verdict, Section 6C is
generally applicable to any appropriate demand for payment which
Century refuses to pay.
Nevertheless, the Court concludes that Boston Gas is not
entitled to Section 6C prejudgment interest on the December 2010
payment because Boston Gas has not established that Century ever
refused to pay for its share of the New Invoices. The right to
prejudgment interest does not attach absent an “unequivocal
demand for payment” and refusal to pay. Boston Gas, 529 F.3d at
22 (internal quotations omitted). On the parties’ first trip up
the appellate ladder, the First Circuit held that prejudgment
interest should be calculated from the date Boston Gas filed
suit, not the earlier dates when the costs were incurred,
reasoning that “until [Boston Gas filed] suit, there was never a
refusal to pay any invoice, specifically or categorically.” Id.;
see also Foley v. City of Lowell, 948 F.2d 10, 17-18 (1st Cir.
1991) (noting judicial discretion to adjust award of prejudgment
interest where a prevailing party was responsible for delay).

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This declaratory judgment entitles Boston Gas to pro rata
indemnification for “reasonable and necessary future
investigation and/or remediation costs” related to the Commercial
Point damage. Judgment, July 19, 2011, ¶ 7 (Docket 748), aff’d,
Boston Gas Co. v. Century Indem. Co., 708 F.3d 254 (1st Cir.
2013).
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Though Century was aware of the “potential for claims” after
the jury’s verdict in 2007, Century couldn’t be expected to honor
a request for payment of the New Invoices until Century tendered
a demand. Boston Gas, 529 F.3d at 22. According to the
documentation provided by the parties, that demand occurred
sometime in March 2010, when Boston Gas submitted the New
Invoices for reimbursement. The December 23, 2010 letter asserts
that Century agreed to pay its share of the New Invoices on March
24, 2010, shortly after Boston Gas submitted the New Invoices to
Century. Century’s letter to Boston Gas states: “As per my March
24, 2010 letter, Century has agreed to pay its pro rata share of
covered costs on outstanding invoices that Boston Gas claimed it
had incurred” in connection with the cleanup at Commercial Point.
Pl. Mem., Ex. B (emphasis added). Century ultimately submitted
payment in December 2010, after reviewing backup documentation
from Boston Gas and conducting an audit of the materials. Boston
Gas has not argued that Century unreasonably delayed payment
during the months Century reviewed the submitted invoices, which
concerned a three-year time and approximately $4.8 million in
payments.
Boston Gas is not entitled to prejudgment interest on
Century’s December 2010 payment in satisfaction of its pro rata
share of the New Invoices. Prejudgment interest at the statutory
rate of 12% does apply to the portion of the New Invoices which

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Century still owed Boston Gas after December 2010. See supra n.1.
Prejudgment interest on this remaining amount will run from
December 23, 2010 until the date of payment. Going forward, the
Court adopts the parties’ agreement that Century shall have 90
days to review invoices before it is obligated to pay, unless
Century shows good cause for additional time.
The Court hereby ORDERS the parties to provide the Court
with a revised Stipulation and Order for Dismissal within seven
(7) business days.

/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge

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