Clean Harbors Environmental Services, Inc. v. State of Tennessee ( 2016 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
April 16, 2015 Session
CLEAN HARBORS ENVIRONMENTAL SERVICES, INC. v. STATE OF
TENNESSEE
Appeal from the Tennessee Claims Commission
No. K201213931 Robert N. Hibbett, Commissioner, TN Claims Commission
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No. M2014-01136-COA-R3-CV – Filed May 18, 2016
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This appeal arises from a contract dispute. The Tennessee Department of Environment and
Conservation (“TDEC”) contracted with a third party for the collection and disposal of
certain types of waste. The contract required the waste to be disposed of within the United
States. TDEC claimed the contractor allowed waste to move outside the United States and,
as a result of the alleged contract violation, recouped a portion of the contract payments by
“short-paying.” The contractor filed a complaint with the Tennessee Claims Commission to
recover the recouped payments. On cross-motions for summary judgment, the Claims
Commission granted summary judgment in favor of the contractor but denied its request for
pre-judgment interest. Although for purposes of summary judgment it assumed that some
waste collected by the contractor left the country, the Claims Commission found such a
breach by the contractor to be immaterial. TDEC and the contractor both appeal. We affirm
the grant of summary judgment to the contractor, although on different grounds; we reverse
the denial of pre-judgment interest.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission
Affirmed in Part, Reversed in Part, and Remanded.
W. NEAL MCBRAYER, J., delivered the opinion of the Court, in which FRANK G. CLEMENT,
JR., P.J., M.S., and RICHARD H. DINKINS, J., joined.
Herbert H. Slatery III, Attorney General and Reporter; Andreé Sophia Blumstein, Solicitor
General; Michael Markham and William J. Marett, Jr., Senior Counsel, for the appellant,
State of Tennessee.
Jeffrey W. Melcher, Atlanta, Georgia, for the appellee, Clean Harbors Environmental
Services, Inc.
OPINION
I. FACTUAL BACKGROUND
In 2005, Clean Harbors Environmental Services, Inc. responded to a request for
proposals issued by TDEC for the collection and disposal of household hazardous waste.
The parties subsequently entered into a written contract for the collection and disposal of
eighteen types of household hazardous waste, including electronics scrap material or e-
scrap.1 The initial term of the contract was from August 1, 2005, to July 31, 2008.
The contract obligated Clean Harbors to arrange waste pickup, conduct collection
events, and transport waste to a recycling or disposal facility. Of particular import to this
appeal, TDEC had to approve the disposal facility and no waste was to leave the United
States. The contract provided that Clean Harbors,
shall treat and/or dispose of all Household Hazardous Waste and school
chemicals (if not recycled by [Clean Harbors]) at an appropriate facility
approved in writing by the State. No wastes accepted by [Clean Harbors] may
be disposed in a Subtitle D landfill without express written approval from the
State and no such wastes may leave the United States of America without prior
written approval from the State.
The contract also obligated Clean Harbors to recycle, reuse, or properly dispose of all waste
within thirty days of waste acceptance. With its invoices, Clean Harbors submitted “[c]opies
of the manifests under which the wastes [included in the invoices] were shipped off site and
signed certificates of disposition from the final disposal or recycling facility.”
On September 9, 2005, Clean Harbors proposed using Supreme Asset Management
Recovery (“SAMR”), located in New Jersey, as a disposal facility for e-scrap, and TDEC
approved the selection. Clean Harbors began transporting e-scrap2 to SAMR without
1
According to TDEC, “electronics scrap material” includes computers, computer monitors, flat screen
monitors, cathode ray tube (CRT) monitors, computer mice, keyboards, printers, scanners, copiers, and the
like. However, the parties’ contract does not specify what is deemed “electronics scrap material.”
2
Clean Harbors transported household hazardous waste from collection events to its facility in
Greenbrier, Tennessee. From there, Clean Harbors transported waste to various facilities depending on waste
type.
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incident for almost three years. Clean Harbors’ agreement with SAMR required SAMR to
maintain a complete set of records pertaining to performance of its services and gave Clean
Harbors the right to both audit its records and inspect its facilities. However, the agreement
did not prohibit SAMR from exporting waste received from Clean Harbors. An audit
conducted by Clean Harbors prior to execution of the agreement showed that SAMR did in
fact export e-scrap out of the country.
Following media reporting on the exportation of e-scrap outside the United States,
participants at the household hazardous waste collection events began questioning the
disposal of e-scrap collected. In response to these inquiries, in April 2008, TDEC began
investigating Clean Harbors’ disposal of e-scrap. TDEC devised a worksheet to obtain
information from both Clean Harbors and SAMR about their handing of e-scrap. TDEC’s
objective was to follow the e-scrap through the entire recycling chain.
Among other things, TDEC received documents indicating SAMR shipped glass
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cullet to “SAMTEL” in India. SAMTEL used the glass to make picture tubes for television
sets in India. TDEC also obtained bills of lading showing SAMR shipped “glass for
recycling” and “CRTs” to L.G. Philips Display Brazil, Ltda, in Brazil.4 Ultimately, Clean
Harbors was unable to provide documentation showing where e-scrap collected in Tennessee
went beyond SAMR, and TDEC was unable to trace Tennessee e-scrap from SAMR to a
foreign country.
Despite its investigation, TDEC never moved to rescind its approval of SAMR as a
disposal facility. TDEC concluded, however, that Clean Harbors’ inability to document
where Tennessee e-scrap went after delivery to SAMR constituted a breach of TDEC’s
contract with Clean Harbors. TDEC exercised its option to extend its contract with Clean
Harbors, and on November 24, 2008, TDEC informed Clean Harbors of its intent to recoup
amounts it had previously paid Clean Harbors for the collection and disposal of e-scrap
unless Clean Harbors could document the disposition of materials sent to SAMR. TDEC
claimed the right to recoup under the parties’ contract.
By letter dated May 18, 2009, counsel for TDEC wrote Clean Harbors stating that,
“[d]espite our overall excellent working relationship, Clean Harbors has for the past several
months failed to provide our agency with documentation that electronic waste has received
3
“Cullet” is an industry term for furnace-ready recycled glass. Glass Recycling Facts, GLASS
PACKAGING INST., http://www.gpi.org/recycling/glass-recycling-facts (last visited May 5, 2016).
4
In the proceedings before the Claims Commission, Clean Harbors disputed whether the bills of
lading describing the freight as “CRTs” were actually complete CRTs as opposed to glass cullet from what
once were CRTs.
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proper disposition as required under the terms of our contract.” TDEC threatened to recoup
from future payments the total amount paid to Clean Harbors for e-scrap from May 2006
through the fall of 2008. Alternatively, TDEC offered that Clean Harbors could withdraw
“from SAMR an amount of its e-waste equivalent to all the e-waste collected at Tennessee
events” and “then provide and document proper disposition of that e-scrap.”
TDEC, as it threatened, recouped $382,606.98 for its payments to Clean Harbors.
TDEC calculated the recoupment amount by multiplying the tonnage of all e-scrap Clean
Harbors collected, not just glass and CRTs, by the unit cost Clean Harbors charged TDEC
under the contract. TDEC did this despite not being of the “opinion or estimation that 100%
of [the e-scrap collected by Clean Harbors and transported to SAMR] went out of the
country.”
II. PROCEDURAL HISTORY
Clean Harbors filed a claim with the Division of Claims Administration on June 12,
2012. See Tenn. Code Ann. § 9-8-402 (Supp. 2015). When the Division of Claims
Administration failed to act within ninety days, it automatically transferred the claim to the
Tennessee Claims Commission on September 4, 2012. Id. § 9-8-402(c).
In its complaint filed with the Claims Commission, Clean Harbors sought recovery of
all amounts recouped by TDEC plus interest based on claims of breach of contract, unjust
enrichment/quantum meruit, and open account. TDEC moved to dismiss the unjust
enrichment/quantum meruit and open account claims based on sovereign immunity. In
response, Clean Harbors filed an amended complaint in which it asserted only breach of
contract and quantum meruit claims.
Clean Harbors filed a motion for summary judgment on November 26, 2013. In its
motion, Clean Harbors argued that, based on the undisputed material facts, it did not breach
its contract with TDEC. Alternatively, Clean Harbors argued that, if it did breach the
contract, the breach was not material or TDEC suffered no damages as a result of the breach.
TDEC responded and filed a cross-motion for summary judgment on January 31, 2014.
By order entered on May 30, 2014, the Claims Commission granted Clean Harbors’
motion for summary judgment and denied TDEC’s motion. The Claims Commission
awarded Clean Harbors damages of $382,606.98. Later Clean Harbors moved for an award
of pre-judgment interest under Tennessee Code Annotated § 9-8-307(d) (Supp. 2015).5 The
5
Tennessee Code Annotated § 9-8-307(d) provides as follows:
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Claims Commission denied the request for pre-judgment interest, finding that, in light of the
breach, “[t]he amount of compensation due to [Clean Harbors] is not so certain as to make it
advisable to award pre-judgment interest.”
On appeal, TDEC asserts the Claims Commission erred in: (1) granting summary
judgment in favor of Clean Harbors and concluding it did not materially breach the contract;
and (2) denying TDEC’s motion for summary judgment. Clean Harbors contends the Claims
Commission erred in denying its request for pre-judgment interest.
III. ANALYSIS
Regular proceedings before the Claims Commission are governed by the Tennessee
Rules of Civil Procedure where applicable. Tenn. Code Ann. § 9-8-403(a)(1) (Supp. 2015);
Tenn. Comp. R. & Regs. 0310-01-01-.01 (2016). Under those rules, summary judgment may
be granted only “if the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” Tenn. R. Civ. P.
56.04; see also Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn.
2015), petition for cert. filed, 84 U.S.L.W. 3547 (U.S. Mar. 15, 2016) (No. 15-1168); Martin
v. Norfolk S. Ry. Co., 271 S.W.3d 76, 83 (Tenn. 2008); Penley v. Honda Motor Co., 31
S.W.3d 181, 183 (Tenn. 2000). The party moving for summary judgment bears the burden of
demonstrating both that no genuine dispute of material fact exists and entitlement to a
judgment as a matter of law. Martin, 271 S.W.3d at 83.
When faced with cross-motions for summary judgment, the trial court “must rule on
each party’s motion on an individual and separate basis.” CAO Holdings, Inc. v. Trost, 333
S.W.3d 73, 83 (Tenn. 2010).
With regard to each motion, the court must determine (1) whether genuine
disputes of material fact with regard to that motion exist and (2) whether the
party seeking the summary judgment has satisfied Tenn. R. Civ. P. 56’s
standards for a judgment as a matter of law. Therefore, in practice, a cross-
If the claimant is successful with any claim filed with the claims commission after January 1,
1985, the state shall pay such interest as the commissioner may determine to be proper, not
exceeding the legal rate as provided in § 47-14-121. In contract actions, interest may be
awarded, but if the rate of interest is provided in the contract, the award of interest shall be at
that rate.
Tenn. Code Ann. § 9-8-307(d).
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motion for summary judgment operates exactly like a single summary
judgment motion.
Id. (citations omitted). For the respective competing motions, the court must view the
evidence in the light most favorable to the opposing party and draw all reasonable inferences
in the opposing party’s favor. See Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997). The
court is not to “weigh” the evidence when evaluating a motion for summary judgment, or
substitute its judgment for that of the trier of fact. Martin, 271 S.W.3d at 87; Byrd v. Hall,
847 S.W.2d 208, 211 (Tenn. 1993). The denial of a cross-motion for summary judgment
does not necessitate the granting of the competing cross-motion. CAO Holdings, Inc., 333
S.W.3d at 83.
A. GRANT OF SUMMARY JUDGMENT TO CLEAN HARBORS
Other than tax appeals, an appeal from the regular docket of the Claims Commission
is governed by the same rules and procedures as an appeal from the civil trial court. Tenn.
Code Ann. § 9-8-403(a)(1). Therefore, we review the summary judgment decision as a
question of law. Martin, 271 S.W.3d at 84; Blair v. W. Town Mall, 130 S.W.3d 761, 763
(Tenn. 2004). Based upon a de novo review of the record, we must make our own
determination of whether the requirements of Tennessee Rule of Civil Procedure 56 have
been met. Rye, 477 S.W.3d at 250; Blair, 130 S.W.3d at 763.
“In a breach of contract action, claimants must prove the existence of a valid and
enforceable contract, a deficiency in the performance amounting to a breach, and damages
caused by the breach.” Fed. Ins. Co. v. Winters, 354 S.W.3d 287, 291 (Tenn. 2011). The
parties do not dispute the existence of a valid and enforceable contract. However, both
parties claim a breach by the other. “Ordinarily, a party who first materially breaches may
not recover under the contract.” Madden Phillips Constr., Inc. v. GGAT Dev. Corp., 315
S.W.3d 800, 813 (Tenn. Ct. App. 2009).
The Claims Commission assumed6 for the purposes of summary judgment that some
6
The Claims Commission based its assumption upon “circumstantial evidence.” However, TDEC’s
evidence that e-scrap or constituent parts of e-scrap left the country does not appear substantively admissible
and, therefore, should not have been considered by the Claims Commission. Evidence filed “to support or to
oppose a motion for summary judgment must be admissible.” Shipley v. Williams, 350 S.W.3d 527, 564
(Tenn. 2011) (Koch, J., concurring in part and dissenting in part).
To be admissible, evidence at the summary judgment stage must satisfy the requirements of
the Tennessee Rules of Evidence, as well as any other requirements controlling the
admissibility of particular types of evidence. Thus, evidence that would be substantively
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of the e-scrap collected in Tennessee left the United States after Clean Harbors transported
the e-scrap to the disposal facility, SAMR. The Claims Commission then proceeded to
analyze whether such a “breach” would be material, concluding that it would not. The
Claims Commission’s analysis, therefore, rested upon the conclusion that e-scrap being
shipped outside of the United States by an approved disposal facility constituted a breach of
the contract between TDEC and Clean Harbors. We disagree.
When, as is the case here, “facts are undisputed or conclusively established or can lead
to only one reasonable answer, the question whether there has been a breach of a contract is
one of law for the court.” 17B C.J.S. Contracts § 1034 (2015) (footnotes omitted); see also
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999) (“The interpretation of a contract is a
matter of law that requires a de novo review on appeal.”). Before the Claims Commission,
TDEC and Clear Harbors supported their respective arguments that the other breached by
advocating conflicting interpretations of their contract. In resolving such conflicts, “our task
is to ascertain the intention of the parties based upon the usual, natural, and ordinary meaning
of the contractual language.” Guiliano, 995 S.W.2d at 95. We attempt to construe “[a]ll
provisions in the contract . . . in harmony with each other, if possible, to promote consistency
and to avoid repugnancy between the various provisions of a single contract.” Id.
Clean Harbors argued that, once it transported e-scrap to a TDEC approved disposal
facility within the United States, it satisfied the contractual provision that “[n]o such wastes
may leave the United States of America without prior written approval from the State.”
TDEC, on the other hand, argued that the provision required e-scrap to remain in the United
States through the entire recycling chain. Only Clean Harbors’ interpretation is consistent
with the language of the contract.
Read as a whole, the contract only required Clean Harbors to use a disposal facility
within the United States. In the same clause prohibiting waste from leaving the United
States, the parties also agreed that Clean Harbors would “treat and/or dispose of all
Household Hazardous Waste . . . at an appropriate facility approved in writing by the State.”
TDEC does not dispute SAMR was a disposal facility located in the United States that it
approved in writing. Importantly, the contract did not address recycling by the disposal
facility or a requirement to follow constituent parts of waste through the recycling process.
An interpretation that Clean Harbors must also ensure that constituent parts of waste
remain in the United States through the recycling chain after leaving a disposal facility would
inadmissible at trial would likewise be inadmissible at the summary judgment stage.
Id. at 565 (Koch, J., concurring in part and dissenting in part).
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conflict with or render other parts of the contract impossible to perform. See Maggart v.
Almany Realtors, Inc., 259 S.W.3d 700, 704 (Tenn. 2008). For instance, under the contract,
waste disposal facilities were not considered subcontractors. As Clean Harbors was
responsible for all work performed by subcontractors, omitting disposal facilities from the
definition of subcontractors would be at odds with TDEC’s interpretation of the contract.
TDEC’s interpretation is also difficult to square with the timing requirements of the
contract. The contract required Clean Harbors to “ensure that all waste accepted by [Clean
Harbors] is recycled, reused, or properly disposed within thirty (30) days from when [Clean
Harbors] accepts the waste.” If it was required to follow the waste through the entire
recycling chain, Clean Harbors might never satisfy the thirty day requirement.
Because the contract only required Clean Harbors to use a disposal facility within the
United States, we conclude that Clean Harbors provided appropriate documentation of e-
scrap disposal. TDEC claimed that Clean Harbors was required to provide documentation
showing where Tennessee e-scrap went beyond SAMR. A TDEC representative testified she
would have liked to see the following documentation:
[S]hipping . . . to SAMR, Tennessee scrap [at SAMR] being . . . sorted into
commodity types . . . that need[] to go to a landfill [or] . . . recycling. [E]ach
of those commodities then being shipped to perhaps a metals recycler or to a
plastics recycler or to a glass-to-glass recycling facility and . . . total volumes
shipped to those locations.
However, the parties were bound by the terms of their contract, not some hidden, subjective
intent of TDEC. Cone Oil Co. v. Green, 669 S.W.2d 662, 664 (Tenn. Ct. App. 1983).
The contract required Clean Harbors to provide the following documentation:
The Contractor shall submit monthly invoices, in form and substance
acceptable to TDEC with all of the necessary supporting documentation, prior
to any payment. Such invoices shall be submitted for completed units of
service or project milestones for the amount stipulated. Copies of the
manifests under which the wastes were shipped off site and signed certificates
of disposition from the final disposal or recycling facility must accompany the
invoice for all wastes included in the invoice.
The record reflects that Clean Harbors complied with the contract by providing the necessary
signed certificates of disposition from the final disposal or recycling facility. The record
further reflects that TDEC accepted waste manifests and certificates of disposition from
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SAMR for nearly three years. We conclude there was no breach by Clean Harbors.
B. DENIAL OF PRE-JUDGMENT INTEREST
The Claims Commission has the authority to award a successful claimant pre-
judgment interest “as the commissioner may determine proper.” Tenn. Code Ann. § 9-8-
307(d). “An award of prejudgment interest is within the sound discretion of the trial court
and the decision will not be disturbed by an appellate court unless the record reveals a
manifest and palpable abuse of discretion.” Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927
(Tenn. 1998).
In Myint v. Allstate Insurance Co., our Supreme Court articulated the following
standard for awarding pre-judgment interest.
Simply stated, the court must decide whether the award of prejudgment interest
is fair, given the particular circumstances of the case. In reaching an equitable
decision, a court must keep in mind that the purpose of awarding the interest is
to fully compensate a plaintiff for the loss of the use of funds to which he or
she was legally entitled, not to penalize a defendant for wrongdoing.
Id. The Myint standard has been described as a “different, more flexible, standard for
considering prejudgment interest claims.” Scholz v. S.B. Int’l, Inc., 40 S.W.3d 78, 83 (Tenn.
Ct. App. 2000).
Addressing the two most common reasons for denying prejudgment interest,
the Court first held that “uncertainty of either the existence or amount of an
obligation does not mandate a denial of prejudgment interest.” Second, the
Court overruled all previous cases suggesting that prejudgment interest should
not be awarded if the claim is reasonably disputed.
Id. (citations omitted).
In this instance, the Claims Commission erred in not granting pre-judgment interest.
The Claims Commission determined it would be unfair to grant pre-judgment interest
because, although Clean Harbors acted in good faith and did not materially breach the
contract, Clean Harbors did not follow every word of the contract. Additionally, the Claims
Commission found the amount to be too uncertain to justify an award of pre-judgment
interest. As discussed above, we conclude that Clean Harbors did not breach the contract.
Further, we find the amount of the obligation of TDEC to Clean Harbors certain. Fairness
dictates awarding pre-judgment interest in this instance to compensate Clean Harbors for the
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loss of the use of the money it should have received earlier.
IV. CONCLUSION
Because we conclude the Clean Harbors did not breach its contract with TDEC, 7 we
affirm the Claims Commission’s grant of summary judgment in favor of Clean Harbors and
the denial of TDEC’s motion. We reverse the denial of pre-judgment interest. This matter is
remanded for further proceedings consistent with this opinion.
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W. NEAL MCBRAYER, JUDGE
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We may affirm a grant of summary judgment on different grounds than those relied upon by the trial
court. Hill v. Lamberth, 73 S.W.3d 131, 136 (Tenn. Ct. App. 2001)
10