Phoenix Services Ltd. Partnership v. Johns Hopkins Hospital

892 A.2d 1185, 167 Md. App. 327, 2006 Md. App. LEXIS 22
CourtCourt of Special Appeals of Maryland
DecidedFebruary 27, 2006
Docket1050 September Term, 2004
StatusPublished
Cited by20 cases

This text of 892 A.2d 1185 (Phoenix Services Ltd. Partnership v. Johns Hopkins Hospital) is published on Counsel Stack Legal Research, covering Court of Special Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phoenix Services Ltd. Partnership v. Johns Hopkins Hospital, 892 A.2d 1185, 167 Md. App. 327, 2006 Md. App. LEXIS 22 (Md. Ct. App. 2006).

Opinion

HOLLANDER, Judge.

This appeal is rooted in a contract dispute between Phoenix Services Limited Partnership (“Phoenix”), appellant, and Johns Hopkins Hospital (“JHH” or “Hopkins”), appellee. Under the contract, Phoenix was obligated to remove medical and other waste generated by JHH. In February 2003, seven years prior to the anticipated expiration of the contract, Hopkins terminated the parties’ agreement. Claiming that the termination was “for cause,” Hopkins refused to pay the early termination fee of approximately $5 million. Consequently, on March 14, 2003, Phoenix filed a “Complaint for Declaratory Relief’ in the Circuit Court for Baltimore City. As amended, Phoenix sought a declaration, inter alia, that JHH unlawfully terminated the contract. In its answer and counterclaim, JHH sought opposing declarations.

The circuit court held a seven-day bench trial in March 2004. In a “Memorandum Opinion” dated June 18, 2004, the court ruled that JHH was justified in terminating the contract. *334 On July 7, 2004, the court issued its “Declaratory Judgment” in favor of JHH.

On appeal, Phoenix poses four questions, which we quote:

I. Did the circuit court err in rejecting the Certificate of the Independent Engineer and substituting its judgment for the Independent Engineer’s “Certified Assurance”?
II. Did the circuit court err when it inserted into the parties’ contract a new and additional requirement that the Independent Engineer’s Certificate be unconditional and contain no assumptions?
III. Did the circuit court err in finding that the Independent Engineer did not certify that any changes had been made by Phoenix?
IV. Did the circuit court err when it refused to admit evidence that the plan certified by the Independent Engineer actually worked?

For the reasons that follow, we shall vacate and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND 1

JHH and other Baltimore area hospitals (the “Founding Hospitals”) contracted with Phoenix to create and operate a “Regional System” for the disposal of medical and non-medical waste. The parties’ relationship is governed by a “Waste Supply Agreement” (the “Agreement”) dated November 16, 1989, and the “First Amendment to Waste Supply Agreement” (the “Amendment”), dated November 15, 1994 (collectively, the “Contract”). 2

*335 In connection with the establishment of the Regional System, Phoenix constructed a facility in Baltimore City containing two large incinerators designed to dispose of both medical and non-medical waste (the “Facility”). Phoenix also established a “Transportation System” for the collection and conveyance of unsegregated medical and general waste from the Founding Hospitals to the Facility. See Agreement, ¶ 3.0. 3 Under the Contract, JHH was obligated to pay for the processing of a certain guaranteed annual tonnage of waste (the “GAT”) for a period of twenty years. See Agreement, ¶ 6.0; ¶ 2.0. JHH produces an average of about 700,000 pounds of waste each month. At peak times, it produces 3,000 pounds of waste per hour. 4

Article 3 of the Agreement pertains to “Disposal of Waste,” while Article 4 pertains to the “Transportation System.” It states, in part:

4.0. Transportation. In accordance with the Transportation Addendum, MWA, at its sole expense, shall, commencing on the Notification Date, transport all Acceptable Waste from Waste Supplier’s place of business to the Facility in compliance with Applicable Law, subject to the other terms and conditions of this Agreement. As described in this Article, MWA shall provide certain equipment for the collection, storage and transportation of Acceptable Waste within Waste Supplier’s place of business and from Waste Supplier’s place of business to the Facility. The Transportation System shall be installed and operated according to the terms and conditions contained in the Transportation Ad *336 dendum. MWA shall at all times maintain the Transportation System in good working order.
4.1. Disposal Carts. Subject to the provisions of the Transportation Addendum, MWA shall provide to the Waste Supplier disposal carts ... for the purpose of collecting, storing and transporting Acceptable Waste to the Facility .... The number of such carts shall be reasonably sufficient to allow the collection and removal of all Acceptable Waste from Waste Supplier’s place of business.....

Article 16, entitled “Dispute Resolution,” states, in part:

(b) When the amount of the matter in controversy exceeds Two Hundred and Fifty Thousand Dollars ($250,-000.00), such Issue shall be decided by arbitration conducted by three (3) arbitrators in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, provided that the party to such arbitration shall have, for a period of six (6) months following initiation of such arbitration proceeding, all rights of discovery provided by the Maryland Rules of Civil Procedure and Practice then pertaining.
(c) The agreement to arbitrate contained in this Section shall be specifically enforceable under the Maryland Arbitration Act as amended. The award rendered by the arbitrators) shall be final, and judgment may be entered upon and in accordance with applicable law in any court having jurisdiction thereof.

(Emphasis added).

Pursuant to the “Recitals” portion of the Agreement, construction of the Regional System was to be financed, in part, “by tax-exempt bonds issued by the Maryland Industrial Development Finance Authority (“MIDFA”).” The Agreement served as security for the bonds; because the bonds had a term of twenty-one years, “long term commitments” were sought for use of the Facility. Neil Ruther, Esquire, Vice-President and General Counsel for Phoenix, explained at trial that the bond underwriters’ legal counsel insisted that the Agreement contain “strict provisions that would make it next *337 to impossible in all but the most extreme circumstances for the hospitals to cancel [their] agreements.” Therefore, JHH was entitled to terminate the Agreement “for any reason,” so long as it gave thirty days’ notice and made a substantial payment to Phoenix in accordance with calculations specified in the Agreement. See Agreement, ¶ 14.2.

At the outset, JHH briefly participated in the Regional System. But, the parties agreed that Phoenix was then unable to service Hopkins adequately. JHH was not brought back into the system until 1992. Even then, JHH continued to experience problems with Phoenix’s performance.

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Bluebook (online)
892 A.2d 1185, 167 Md. App. 327, 2006 Md. App. LEXIS 22, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phoenix-services-ltd-partnership-v-johns-hopkins-hospital-mdctspecapp-2006.