IT Corp. v. Motco Site Trust Fund

• Decision Date: 13 December 1994
• Docket Number: Civ. A. No. H-91-3532.
• Parties: IT CORPORATION, Plaintiff, v. MOTCO SITE TRUST FUND, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

903 F. Supp. 1106

IT CORPORATION, Plaintiff, v. MOTCO SITE TRUST FUND, et al., Defendants.

Civ. A. No. H-91-3532.

United States District Court, S.D. Texas, Houston Division.

December 13, 1994.

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J.C. Nickens, Houston, TX, mediator.

Daniel J. Davis, Gardere & Wynne, Dallas, TX, Stephen Lofton, Andrews & Kurth, Houston, TX, for plaintiff.

Mark C. Watler, Woodard, Hall & Primm, Houston, TX, Lawrence E. Goldenthal, Woodard Hall & Primm, Houston, TX, for defendants.

Michael L. Rice, Jones Day Reavis & Pogue, Dallas, TX, for respondent.

MEMORANDUM AND ORDER

ROSENTHAL, District Judge.

Monsanto Company ("Monsanto") and the Mercantile Bank of St. Louis, N.A., Trustee of the Motco Site Trust Fund ("Trustee") (collectively "defendants"), have filed a Rule 50(b) Motion for Judgment as to 1990 Release, (Docket Entry No. 395), and a Motion for Judgment Non Obstante Veredicto or, Alternatively, for New Trial, (Docket Entry No. 396). Plaintiff IT Corporation ("ITC") has filed a Motion for Entry of Judgment, (Docket Entry No. 404).

For the reasons stated below, defendants' Rule 50(b) motion is GRANTED and the motion for judgment non obstante veredicto or for new trial is DENIED in part and GRANTED in part. The motion for entry of judgment is GRANTED in part and DENIED in part.

I. Factual Background

On October 20, 1987, the United States District Court, Galveston Division, entered a Partial Consent Decree settling claims filed by the United States Environmental Protection Agency ("EPA") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. The Consent Decree was executed by parties potentially responsible for the presence of hazardous wastes at a former chemical waste disposal site known as the "Motco Site." The Consent Decree required the settling defendants, including Monsanto, to finance and perform certain remedial action at the Motco Site. The Motco Site Trust Fund was created for the remediation work. The Trustee of the Fund was to hold and manage the money contributed by the settling defendants and to hire the contractor to clean up the Motco Site.

During the four years before the Consent Decree, both Monsanto and the EPA had investigated the wastes at the Motco Site and analyzed remediation alternatives. The EPA had hired two independent consulting firms, CH2M Hill and Black & Veatch; Monsanto had hired Woodward Clyde Consultants. These firms studied the Motco Site and provided reports. Based on these studies, Monsanto recommended, and the EPA ordered, on-site incineration of the contaminated materials at the Motco Site.

In October 1986, Monsanto prepared a Request for Proposal ("RFP") for the Motco Site remediation work and sent it to contractors for comments. In the RFP, Monsanto provided a written "Scope of Work" that described the Motco Site and the waste materials in the eight pits to be remediated. The Scope of Work included technical data about the volume and properties of the waste materials in the pits. The data included the amounts of waste water, "high BTU liquid organics," "low BTU liquid organics," and "sludges/tars/solids" present at the Site. These waste profiles were based upon Monsanto's analysis of the data provided by the consultants. Monsanto summarized the waste characteristics and volumes in the RFP, and disclosed the underlying studies.

The RFP specified on-site incineration as the primary remediation method and required a lump sum bid for the remediation work. ITC reviewed the RFP and submitted comments. In response to those comments, Monsanto revised the RFP and sent it back to ITC.

In September 1987, ITC submitted its bid for a lump sum of $28,330,854, plus unit price extensions of $4,553,146, for a total bid of $32,884,000. Before submitting its bid, ITC had visited the Motco Site, obtained some waste samples, and performed tests on certain oils from two of the pits. ITC submitted the bid with a signed statement that it had visited the Site and was familiar with current Site conditions. On January 4, 1988, ITC and defendants signed the Remediation Contract, and ITC began work.

ITC encountered delays during the early phases of its work. In May 1990, the parties began negotiating ITC's claims to that point. On September 26, 1990, the parties executed a Release and Settlement Agreement providing that ITC would receive additional payment for the project delays and changes to the Scope of Work, in exchange for a release of certain claims. Under the 1990 Settlement Agreement, defendants paid, and ITC accepted, $3.1 million to settle $8.9 million in claims for additional work that ITC had asserted at that time.

On December 4, 1990, ITC informed defendants in writing that the information Monsanto had provided in the 1987 RFP and related bid documents about the waste characteristics and amounts "may be" wrong. ITC stated that while incinerating liquids in one of the pits at the Site, ITC had discovered that the actual quantity of oil in the pit was one-third of the amount specified in the RFP. (P.Ex. 36). ITC continued to work under the contract while providing defendants with progressively more detailed information as to the amounts, classifications, and BTU content of the different types of contaminants that were in fact in the Motco Site pits.

ITC's bid and work were based on the use of incinerators using Hybrid Thermal Treatment Systems, known as "HTTS" units. These incinerators depended on the use of liquid injection incineration, which in turn depended on the amount of liquid wastes as opposed to sludges/tars/solids, and the BTU values of those wastes. (TR. 156:20 — 160:24). ITC asserted that the amount of liquids actually present at the Site was much lower than the RFP had described; that the amount of solids was much higher; and that the BTU values of the sludges/tars were much greater. ITC alleged that it could not reasonably have discovered the errors until it had done extensive work at the Site. ITC asserted that these differences had a "drastic" impact on the efficiency of ITC's intended method of incineration and the price. If it had known the true amounts, mix, and characteristics of the waste at the Motco Site, ITC claimed that it would have designed, sized, and configured its equipment differently, and would have provided a different contract price.

ITC claimed that because the waste was not as represented, ITC could not do the work with the equipment provided and for the price set. Because the mix of wastes at the site was substantially different from the mix of wastes upon which it had bid, ITC claimed additional compensation for remediating the "new" wastes. ITC also contended that during the contract period, defendants had interfered with ITC's performance by dumping over one million gallons of contaminated water into pit 7. ITC sought an "equitable adjustment" to the contract price.

Defendants refused to accept ITC's findings or consider an adjustment until ITC had completed the "trial burn" using the HTTS incineration units. ITC continued to work under the contract while the parties negotiated the request for equitable adjustment.

The parties were not able to reach agreement. In late November 1991, ITC notified Monsanto that it intended to suspend performance under the contract, which it did on December 1, 1991. This lawsuit and counterclaim resulted.

In its pleadings, ITC alleged that it was forced to discontinue operations at the Motco Site because defendants had misrepresented the Site conditions and had interfered with ITC's remediation work. ITC asserted causes of action based on breach of contract, breach of implied warranty, negligent and fraudulent misrepresentation, and gross negligence. ITC sought $55.8 million in actual damages, punitive damages, and attorneys' fees.

Defendants responded that ITC was required by the terms of the contract to remediate the Site, regardless of the amount or type of waste encountered. Defendants argued that ITC had inspected the Site before submitting the bid and represented itself as capable of performing the remediation work. Defendants claimed that no information was included in the RFP that was known to be inaccurate and that no material information was withheld.

Defendants also challenged ITC's claims that the RFP waste inventory description was inaccurate. Defendants claimed that ITC's waste inventory data was wrong and that ITC's work at the Site from 1987-1990 had drastically changed the Site from the way it had been at the time the RFP was prepared. Defendants asserted that the problems ITC had experienced were the result of poor management and/or equipment. Defendants denied that they had pumped contaminated water into pit 7 so as to interfere with ITC's work.

Defendants also contended that the 1990 Settlement Agreement between ITC and the Motco Trust released $8.1 million for ITC's claims asserted as of September 1990.

Defendants filed counterclaims based on fraud and breach of contract, and sought $20.9 million in damages for completing the project, as well as attorneys' fees.

This case was tried before a jury from March 18, 1994 until April 20, 1994. On April 20, 1994, the jury returned a verdict in favor of ITC. The jury's responses to the questions relevant to the pending motions are set forth below.

Question 1 Did Motco Trust or Monsanto make a positive assertion of BTUs, viscosities or quantities of waste in the RFP that was materially false, upon which ITC justifiably relied in connection with its 1988 contract with Motco Trust? Answer: Yes Question 2 Before the execution of the 1988 contract, did IT Corporation make an investigation of the accuracy of the BTUs, viscosities or quantities of waste described in the RFP? Answer: No Question 3 Did Monsanto or Motco Trust commit fraud? Answer: Yes Question 4 Did Monsanto or Motco Trust...