Clean Harbors, Inc. v. John Hancock Life Insurance

17 Mass. L. Rptr. 468
CourtMassachusetts Superior Court
DecidedMarch 15, 2004
DocketNo. 024343BLS
StatusPublished

This text of 17 Mass. L. Rptr. 468 (Clean Harbors, Inc. v. John Hancock Life Insurance) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Clean Harbors, Inc. v. John Hancock Life Insurance, 17 Mass. L. Rptr. 468 (Mass. Ct. App. 2004).

Opinion

van Gestel, J.

This matter comes before the Court on Defendants’ Motion for Summary Judgment (Paper #46), Clean Harbors, Inc.’s Motion for Partial Summary Judgment (Paper #54), and the all too frequent array of ancillary related motions to impound documents, to strike supporting materials, to file memoranda in excess of 20 pages, and the like.

BACKGROUND

The plaintiff, Clean Harbors, Inc. (“Clean Harbors” or the “Company”), is a publicly traded company that maintains avast network of service centers and waste management treatment and disposal facilities and provides a broad range of environmental services. Clean Harbors’ stock has been publicly traded on the NASDAQ exchange under the symbol “CLHB” since 1987. Clean Harbors’ gross revenues for 2003 are projected to exceed $650 million.

The defendant John Hancock Life Insurance Company (“John Hancock”) is a Massachusetts insurance company, providing a broad array of insurance and investment products to retail and institutional customers. John Hancock also is an investor in a range of investments, including public and private securities. Like essentially all businesses, John Hancock intends that its revenue producing activities and operations will generate a sufficiently stable stream of income to meet its obligations to its policyholders, shareholders and investors.

The defendant John Hancock Variable Life Insurance Company (“JHVL”) is an affiliated company of John Hancock that provides variable life insurance coverage and an investment return to an underlying portfolio of investments chosen by the policyholders.

The defendants Signature 4 Limited (“Signature 4”) and Signature 5 L.P. (“Signature 5”) are each partnerships formed under the laws of and maintaining registered offices in the Cayman Islands. John Hancock participated in the formation of Signature 4 and Signature 5 and currently serves as their respective portfolio advisor.

The defendant Arrow Investment Partners (“Arrow”) is a partnership formed and existing under the laws of California. Arrow was created to acquire and actively manage a portfolio of investments for a small number of individual investors. Arrow often invests in high-yield debt securities.

The defendant Bill & Melinda Gates Foundation (the “Gates Foundation”) is a charitable trust, formed and existing under the laws of the State ofWashington. The assets of the Gates Foundation are invested pending distribution for the benefit of selected charitable causes.

The defendant Special Value Bond Fund, L.L.C. (“Special Value”) is a limited liability company formed and existing in the State of Delaware. Special Value is a private investment fund established to acquire and actively manage a diverse portfolio of investments.

The remaining defendants, Hare & Company, Blazerman & Co., and Coastledge & Co., are each business entities that, at least for the purposes of this case, hold certain promissory notes issued by Clean Harbors on behalf of respectively Signature 4 and Signature 5, the Gates Foundation and Arrow.

Clean Harbors was founded in 1980. At all relevant times, Clean Harbors’ corporate management was comprised of intelligent, competent, and “reasonably sophisticated” business people.

The mid-to-late 1990s were turbulent times for Clean Harbors and the industrial waste management industry as a whole. Growing excess capacity among industrial waste service providers, along with decreasing waste volumes, resulted in deteriorating pricing throughout the industry. This excess capacity created fierce competition that resulted in irrationally low pricing and net losses for many service providers. Various industry participants, including two of Clean Harbors’ largest competitors, Safety-Kleen Corp. (“Safety-Kleen”) and Philip Services Corp. (“Philip"), ultimately were forced to seek bankruptcy court protection.

Clean Harbors’ financial performance in the mid-to-late 1990s was adversely affected by the general “turmoil” in the industrial waste management industry. Clean Harbors suffered net losses for six straight years from 1995 through 1999, and its stock price plunged from a high of $17.50 per share in 1993 to a low of slightly more than $1.00 per share in 1999.

Clean Harbors had $50 million in 121/2% senior notes coming due in May 2001 (the “Outstanding Indebtedness”). Clean Harbors’ management was aware that the failure to refinance that Outstanding Indebtedness “could materially adversely affect the Company.” Accordingly, refinancing Clean Harbors’ Outstanding Indebtedness became a priority for its management in the months and years leading up to the May 2001 repayment deadline.

Although there apparently was an improvement in conditions in the waste management industry starting in 1999, and Clean Harbors’ financial picture itself improved, it encountered difficulty in refinancing the Outstanding Indebtedness in 2000. As a result, in October 2000, Clean Harbors retained Deutsche Bank Securities, Inc. (“Deutsche Bank”) to “act as financial advisor in the structuring ... of a new credit Facility . . . and as exclusive agent in connection with the private placement... of subordinated debentures . .. [470]*470to be issued by” Clean Harbors. In its role as exclusive placement agent for Clean Harbors, Deutsche Bank, with the prior approval of Clean Harbors, was authorized to

contact potential investors, assist in the negotiation and structuring of the Facilities and Securities, and provide related services that Deutsche Bank deems advisable and reasonable that may facilitate the successful completion of the Structuring and Offering .. .

Deutsche Bank is an international investment concern that, through its Global Finance division, provides ideas, access and opportunities to emerging growth, mid and large capitalization companies through a complete range of investment banking products, industry sectors and regional markets. Deutsche Bank had served as a financial advisor to Clean Harbors in the past, including in the placement of the $50 million of 12 ½% senior notes that were coming due in May 2001.

Deutsche Bank held a series of meetings with Clean Harbors’ management for the purpose of understanding Clean Harbors’ needs, identifying financing alternatives, and beginning the process of compiling the necessary solicitation materials. In the course of those meetings, Deutsche Bank warned that, “[d]espite Clean Harbors’ recent momentum, the Company face[d] tight capital market conditions in refinancing its 12.50% Senior Notes due May 2001.” Deutsche Bank stated that “[h]igh-yield public bonds within a single B category [were] currently trading to yield 14% to 15%,” that “new issuance ha[d] come to a virtual standstill,” and that, “[a]s a result of these issues, current capital raising efforts [were] focused on the asset based loan market and the private mezzanine debt market.” Finally, Deutsche Bank predicted that “Clean Harbors [would] be required to address significant difficulties experienced by other waste services companies as a result of their aggressive consolidation strategies,” citing Safeiy-Kleen and Philip as examples. These negative factors, among others, were expected to drive up the cost of any refinancing package that Clean Harbors was able to arrange.

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