Paris Utility Dist. v. AC Lawrence Leather Co., Civ. No. 86-0111 P

• Decision Date: 15 July 1987
• Docket Number: 86-0234 P.,Civ. No. 86-0111 P
• Citation: 665 F. Supp. 944
• Parties: PARIS UTILITY DISTRICT, Plaintiff, v. A.C. LAWRENCE LEATHER CO., INC., Defendant.
• Court: U.S. District Court — District of Maine

665 F. Supp. 944

PARIS UTILITY DISTRICT, Plaintiff, v. A.C. LAWRENCE LEATHER CO., INC., Defendant.

Civ. Nos. 86-0111 P, 86-0234 P.

United States District Court, D. Maine.

July 15, 1987.

Theodore H. Kurtz, Kurtz & Myers, South Paris, Me., Stephen P. Beale, Skelton, Taintor, Abbott & Orestis, Auburn, Me., for plaintiff.

Peter L. Murray, Michael L. Parker, Murray, Plumb & Murray, Portland, Me., Nancy S. Bryson, Richard E. Schwartz, Crowell & Moring, Washington, D.C., for defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

GENE CARTER, District Judge.

These consolidated diversity cases grow out of a contractual arrangement whereby Plaintiff Paris Utility District ("the District") treated the industrial wastes generated by Defendant A.C. Lawrence Leather Co., Inc. ("Lawrence") at its tannery plant in South Paris, Maine. The District seeks to recover from Lawrence (1) a portion of the costs of expanding the laboratory at its treatment facility and (2) certain waste treatment costs incurred by the District in 1986, after Lawrence had ceased discharging waste to the District's facility. Lawrence seeks a declaration that it is entitled to contractual indemnification from the District for all costs incurred or to be incurred as a result of the District's activities at a landfill on Lawrence's property. Lawrence also alleges that the District has overcharged for its waste treatment services; Lawrence seeks an accounting to determine its entitlement to a reimbursement. After a three-day bench trial, the Court now enters its findings of fact and conclusions of law as required by Fed.R.Civ.P. 52(a).

I. Findings of Fact

Plaintiff Paris Utility District is a quasi-municipal entity providing water and sewer services in South Paris, Maine. Defendant A.C. Lawrence Leather Co., Inc. is incorporated in and maintains its principal place of business in Massachusetts. In 1976 the District and Lawrence's predecessor, Estech, Inc., entered an agreement ("the 1976 Agreement") under which the District would construct a treatment facility and thereafter treat the industrial wastes from Lawrence's tannery in South Paris. The parties stipulate that the 1976 Agreement is binding on Lawrence and the District.

Under Paragraph 5 of the 1976 Agreement, the District agreed to seek partial state and federal funding for the costs of constructing the facility, and Lawrence agreed to contribute its fair share of the local costs of construction, i.e., those costs not covered by state or federal funding and thus borne by the facility's users. Paragraph 9 of the 1976 Agreement required Lawrence to pay "its proportional share of the operation and maintenance costs to the District of its Water Pollution Control Facility, computed in accordance with the formula set forth on pages 11-A, 12-A and 13-A" of a 1975 Report prepared by the Whitman & Howard engineering firm (hereinafter "the Whitman & Howard Report"). Under Paragraph 13 of the 1976 Agreement, "should Lawrence cease operation after the Treatment Facility is constructed, Lawrence shall pay its assessment for the operation and maintenance expense for the full quarter year in which discharge of the Lawrence waste to the Treatment Facility last occurred and shall not again be assessed so long as there continues to be no waste discharged to the Treatment Facility." Under Paragraph 21 of the 1976 Agreement, Lawrence agreed to "permit the District to use without cost to the District, Lawrence's premises ... for the deposit thereon of waste sludge generated by the Treatment Facility.... In consideration of this permit, the District shall conduct on such premises a sanitary landfill operation in accordance with all applicable Federal, State and local statutes, ordinances and regulations, and, further, the District shall indemnify, save and hold Lawrence harmless from and against any and all liabilities and claims arising out of the activities conducted by the District on such premises."

The facility was constructed as planned and Lawrence contributed 64.64 percent of the local costs of construction. Lawrence began discharging to the plant and paid bills, as rendered by the District, on a monthly basis for its share of the facility's operation and maintenance costs. Lawrence also paid bills for certain capital improvements to the facility that were unrelated to the original construction; these bills were for varying percentages of the total cost of the improvements (from 84.2 percent to 100 percent), apparently depending upon the extent to which each improvement benefited Lawrence as compared with the District's other customers.

As contemplated by the 1976 Agreement, the District deposited sludge in the landfill on Lawrence's premises. (Lawrence itself had been depositing waste at the site since 1955.) In 1973 the District had applied to Maine's Board of Environmental Protection (BEP) for permission to operate a landfill at the Lawrence site. The BEP denied the application because the soil on the site was too permeable to be suitable for sludge disposal; Lawrence knew of the BEP denial as early as 1975. The BEP ordered the District to find another site, but in the interim granted the District a series of temporary, conditional permits to operate the landfill. The last of these permits expired on October 1, 1979, and the District's application for a further extension was denied.

The BEP ordered the District to submit a site closure plan and a ground water quality monitoring plan by December 12, 1979. Despite an exchange of letters between the District and BEP over the following years, the District never submitted a site closure plan and did not submit the monitoring plan until 1985, when it did so in conjunction with Lawrence. Lawrence received copies of several of the District-BEP letters during this period and thus was repeatedly reminded that BEP had found the site unsuitable for permanent use and that the District was not operating the site in accordance with applicable law. Much of the sludge that the District deposited at the site was the by-product of the District's treatment of wastes from Lawrence's own operations, and Paul Finnegan, Lawrence's Director of Environmental Affairs, told the District that finding an appropriate landfill site elsewhere would have been very expensive for Lawrence.

In 1984 the District received a letter from the United States Environmental Protection Agency (EPA) indicating that the District was discharging insufficiently-treated effluent into the Little Androscoggin River and that unless the District and Maine's BEP could resolve the matter themselves, EPA was prepared to take action to force the District into compliance. Subsequently, in September of 1984, the District and Maine's BEP negotiated an administrative consent agreement and order requiring the District to improve its operations. At the suggestion of Richard Micklon, the District's chief operator, this agreement incorporated a requirement that the District expand its laboratory facilities to permit improved process control and effluent quality testing.

In December of 1984, the District wrote to Robert Abate, Lawrence's Vice President of Finances, stating that "as you are aware, A.C. Lawrence has a contractual obligation to pay it's sic fair share of the costs involved with capital improvements" and asking for Abate's "thoughts on a mutually agreeable repayment plan" for Lawrence's share of the lab expansion costs, which at that time were estimated to total $150,000. In an internal Lawrence memo dated December 7, 1984, Finnegan stated:

A negotiated agreement with the District would be more favorable to Lawrence if it could be arranged. Otherwise we may end up paying more than we have to, since we pay ninety percent of the operating costs. If the District would accept the same percentage contribution toward the laboratory as it did in the original construction costs of the plant, it would be to Lawrence's advantage. This would amount to about twenty-five percent. However, this is a big "if."

On January 7, 1985, the District's trustees met with Abate and Finnegan, who proposed a twenty-six percent figure. A week later, the trustees made a counterproposal that Lawrence pay 64.64 percent of the lab expansion costs. The trustees explained that although Lawrence had paid about twenty-seven percent of the total costs of the original facility, much of that total cost had been covered by state and federal grants; the appropriate figure representing Lawrence's share of the use of the facility was 64.64 percent, i.e., Lawrence's share of the local, user-borne costs.

On May 7, 1985, the District awarded a $133,753 contract to construct the lab expansion. Shortly thereafter, Lawrence announced that it was closing the "beamhouse" portion of its tanning operation in South Paris.¹ Finnegan then requested a meeting with the District and Maine's Department of Environmental Protection (DEP) to discuss whether the lab expansion was still needed in view of Lawrence's scaled-back operation. The parties met first on May 24, and the District informed Lawrence that the lab expansion contract had already been awarded. The parties met again on May 31, at which time the District's consulting engineer stated that the lab expansion was still necessary and the DEP representative stated that the lab expansion would have to remain a part of the consent agreement.

Representatives of the District and Lawrence met again on June 7, 1985. The parties agreed on a 64.64 percent share, but Abate stated that Lawrence could not pay its share all at once. The possibility was raised that Lawrence could pay its share without interest; the parties left the meeting agreeing to consider this proposal.² In a June 20 internal memo, Finnegan stated that he and Abate had met with the District and worked out "a satisfactory Lawrence share" of the lab expansion costs. On June 24 the District's trustees met and voted to propose that...