Browning-Ferris Industries, Inc. v. Casella Waste Management of Massachusetts, Inc.

945 N.E.2d 964, 79 Mass. App. Ct. 300, 2011 Mass. App. LEXIS 575
CourtMassachusetts Appeals Court
DecidedApril 19, 2011
DocketNo. 09-P-156
StatusPublished
Cited by28 cases

This text of 945 N.E.2d 964 (Browning-Ferris Industries, Inc. v. Casella Waste Management of Massachusetts, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Browning-Ferris Industries, Inc. v. Casella Waste Management of Massachusetts, Inc., 945 N.E.2d 964, 79 Mass. App. Ct. 300, 2011 Mass. App. LEXIS 575 (Mass. Ct. App. 2011).

Opinion

Sikora, J.

This appeal presents an issue of contract interpretation. What standards permit a court to furnish a term missing from an agreement by reason of the parties’ mutual mistake or negotiating oversight? The two contracting parties, Browning-Ferris Industries, Inc. (BFI), and Casella Waste Management of Massachusetts, Inc. (Casella), engage in the [301]*301collection, transport, and disposal of solid waste material. Waste management companies of their large scale own, or contract for the use of, three major assets: (1) hauling routes typically acquired by agreement with municipalities or private entities from which the company collects residential and commercial waste; (2) transfer stations, located at short or intermediate distances from the hauling routes, to which the company brings collected material for sorting, processing, and temporary storage; and (3) disposal sites, usually more distant landfills or incinerators, to which the company brings the material for deposit or elimination. In a waste-to-energy disposal facility, the heat from incineration will generate steam convertible to electricity.

In this instance, BFI and Casella shared disposal rights at an incinerator facility. A dispute arose over their entitlements under a specific provision of their governing “Disposal Rights Agreement” (DRA). BFI sued for a declaratory judgment defining the provision. Casella counterclaimed for a contrary declaratory judgment or, alternatively, rescission of the DRA. At the conclusion of a four-day bench trial, a judge of the Superior Court found and ruled that the contested provision contained a significant ambiguity about which the firms had never reached a meeting of the minds. In an effort to fill the gap of their omitted understanding and to preserve the contract, he inserted a term designed to implement the stated business objectives of the parties, declared the resulting agreement binding, and dismissed the counterclaim for rescission. Each side has appealed from the resulting judgment: BFI challenges the inserted term; Casella objects to the denial of rescission. For the following reasons, we affirm the judgment.

Factual background. The following facts emerge from the jury-waived trial as undisputed or as amply supported by the evidence. We reserve certain details for discussion of the parties’ arguments.

1. The Ogden master agreement. In 1986, BFI entered into a long-term disposal master agreement with Haverhill Power, Inc., a utility company planning to develop and own a waste-to-energy incinerator facility in Haverhill. The master agreement extended to December 31, 2014. In or about 1999, Haverhill Power, Inc., assigned its rights under the master agreement, with BFI’s consent, to Ogden Haverhill Associates (Ogden).

[302]*302The terms of the master agreement required BFI to supply the Ogden facility with 250,000 to 275,000 tons of waste per year. BFI’s daily and monthly commitments varied by the month between specified minimum and maximum amounts. BFI paid a per ton fee (the “tipping fee”) for disposal service; the fee increased each year by the greater of three percent or the rise in the consumer price index for the greater Boston area. The agreement contained a “put or pay” term; i.e., it subjected BFI to financial penalties if the company failed to deliver at least eighty percent of its required monthly minimum tonnage to the Ogden facility.

2. Antitrust developments. In 1999, Allied Waste Industries, Inc. (Allied), the third largest waste management company in the United States, entered an agreement to acquire BFI, the second largest waste management company in the nation. The antitrust division of the United States Department of Justice (DOJ) concluded that the proposed merger would substantially lessen competition in as many as fourteen distinct markets throughout the country, including the eastern Massachusetts region, so as to violate Section 7 of the Clayton Act.1 It threatened to sue to enjoin the merger and began negotiations with the two companies.

The terms of the resulting consent judgment permitted the merger upon condition of divestiture of substantial designated assets (hauling routes, transfer stations, and disposal facility rights) by BFI and Allied in the affected markets throughout the country. Within the eastern Massachusetts market, the consent judgment compelled BFI to divest (1) any commercial routes recently acquired by it and serving Essex, Middlesex, Suffolk, Norfolk, Bristol, or Worcester Counties (i.e., its Peabody-based hauling operation including trucks, garages, equipment, supplies, permits, contracts, and accounts); (2) transfer stations in Auburn, Holliston, and Braintree; and (3) disposal or ownership [303]*303rights in its waste-to-energy incinerator in Rochester; airspace disposal rights at its Fall River landfill; and airspace disposal capacity of as much as 1,150 tons of waste per day at the Ogden incinerator for a period of ten years.

BFI was obliged to sell those assets to viable independent competitors. In addition, “none of the terms of any agreement between the purchaser and [BFI] [may give BFI] the ability unreasonably to raise the purchaser’s costs, lower the purchaser’s efficiency, or otherwise interfere in the ability of the purchaser to compete effectively in each relevant area.” The consent judgment directed BFI to use its best efforts to accomplish the divestitures within 120 days.

3. Negotiations between BFI and Casella. For Casella, the divestiture orders created a significant opportunity. As of 1999, it was a regional waste collection firm centered in Vermont, New Hampshire, and Maine, but ambitious to expand its small presence in Massachusetts. It responded to BFI’s overture to purchase its detachable assets. Negotiations proceeded for approximately four months, from early October of 1999 to the beginning of February, 2000; they covered multiple contracts for divestitures mandated by the consent judgment. Each side assigned one executive and one drafting attorney to the process. For the merging entity of BFI and Allied,2 Richard Wojahn, assistant to the Allied president, served as negotiator, and Attorney Kenneth Lee of the Phoenix, Arizona, law firm of Fennemore Craig, P.C., as drafter. For Casella, chief operating officer James Bohlig and Attorney Jeffrey Stein of the Boston law firm of Hale and Dorr, LLP, performed those roles. Their negotiations addressed as many as seven contracts, including the agreements necessary for the transfer of BFI’s hauling operations based in Peabody and covering routes within a fifty-mile radius; the conveyance of its Auburn and Holliston transfer stations; and the sale of up to 1,150 tons per day of disposal capacity at the Ogden facility.

Wojahn and Bohlig had one face-to-face meeting and numerous telephone discussions. They informed each other of their respective business objectives but did not become involved in [304]*304the specific drafting of contractual terms. As to the sale of capacity at the Ogden incinerator, Bohlig pursued three objectives or “deal points”: a favorable price; adequate disposal capacity for growth of its collection volume; and protection against put or pay penalties if that growth declined or fluctuated. Wojahn sought two objectives for BFI: a reasonable price, and predictable volumes of delivery from Casella.

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945 N.E.2d 964, 79 Mass. App. Ct. 300, 2011 Mass. App. LEXIS 575, Counsel Stack Legal Research, https://law.counselstack.com/opinion/browning-ferris-industries-inc-v-casella-waste-management-of-massappct-2011.