Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00989/USCOURTS-caed-2_05-cv-00989-1/pdf.json

Parties Involved:
Atlas Disposal Industries, LLC
Plaintiff
BFI Waste Systems of North America, Inc.
Defendant

Document Text:

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ATLAS DISPOSAL INDUSTRIES, LLC,

2:05-cv-0989-MCE-KJM

Plaintiff,

v. MEMORANDUM AND ORDER

BFI WASTE SYSTEMS OF NORTH

AMERICA, INC.,

Defendant.

----oo0oo----

Through the present action, Atlas Disposal Industries, LLC

(“Atlas”) seeks damages from BFI Waste Systems of North America,

Inc. (“BFI”) resulting from the alleged breach of years two and

three of a three year Disposal Service Agreement (“DSA”) entered

into between the parties in 1999. Preceding this action, Atlas

successfully brought suit against BFI seeking damages for breach

of the first year of the DSA. Given this previous adjudication

regarding year one of the DSA, Atlas now moves for partial

summary judgment contending certain issues are barred from

consideration in this proceeding based on the doctrine of

collateral estoppel. 

Case 2:05-cv-00989-MCE -KJM Document 29 Filed 08/28/06 Page 1 of 16
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Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

2

For the reasons set forth below, Atlas’s motion is granted in

part and denied in part.1

BACKGROUND

BFI hauls residential, commercial, industrial, and

construction waste and materials. Atlas operates a materials

recovery facility at which mixed recyclables and waste are sorted

and certain recyclable materials are recovered and sold. On

March 19, 1999, Atlas and BFI entered into a DSA requiring BFI to

deliver an annual minimum of 26,000 tons of source separated

commingled recyclables. The DSA provided as follows: “[BFI]

agrees to provide commingled C&D recyclables (wood, cardboard,

metals), source separated wood waste, source separated green

waste, and/or other commingled recyclables (including, but not

limited to, plastic, fiber, wood, ferrous and non ferrous metal)

and/or other recyclable materials (any of foregoing, ‘Recyclable

Material’). Recyclable Materials shall include the type of

materials generated by commercial, industrial, governmental,

residential and/or institutional customers.”

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3

The DSA specified BFI’s obligations as follows: “[BFI]

shall deliver to [Atlas] at [Atlas’s] Facility, and [Atlas] shall

receive from [BFI], 26,000 tons of Recyclable Materials (the

‘Minimum Annual Quantity’) and not more than 65,000 of Recyclable

Materials (the ‘Maximum Annual Quantity’) during each successive

year beginning on the date of the Agreement (‘Contract Year’).”

With respect to price, the DSA provided that: “[BFI] agrees to

pay [Atlas] Thirty-Two Dollars and Fifty Cents ($32.50) per ton

for all Recyclable Materials that [BFI] delivers to [Atlas],

except that rates for particular Recyclable Materials specified

on Exhibit ‘A’, attached hereto, including clean wood waste,

green waste, residential and commercial commingled recyclables,

and other source separated recyclable materials are as specified

on the Exhibit ‘A’.” The DSA further provided that the $32.50

fee automatically increased three percent (3%) each successive

year unless otherwise agreed. Finally, the DSA contained the

following Diversion Guarantee: “Through the operation of

[Atlas’s] facility, [Atlas] shall divert a minimum of eighty

percent (80%) of the incoming Recyclable Material delivered to

the Facility by [BFI], averaged over each calendar quarter.”

In June 2000, Atlas filed suit against BFI in Sacramento

Superior Court alleging, inter alia, that BFI breached the terms

of the DSA during the first year of the Agreement. Specifically,

Atlas alleged that BFI was to provide Atlas with a minimum of

26,000 tons of source separated and commingled recyclables and

that BFI was to have paid Atlas $32.50 per ton for receipt of

those recyclables.

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4

Atlas sought to recover both a per ton tipping fee of $32.50 

(“Tipping Fee”) for each ton BFI failed to deliver of the 26,000

ton contractual minimum and lost profits for those recyclables

Atlas was unable to process and resell.

Following a bench trial, the Sacramento Superior Court found

BFI had breached the DSA by both failing to deliver the annual

minimum tonnage and failing to deliver source separated

commingled recyclables. The Court awarded Atlas $316,192.50, the

equivalent of $32.50 for each of the 9,729 tons not delivered. 

The trial court specifically found: (1) the DSA was valid;

(2) the DSA required BFI to deliver a minimum of 26,000 tons per

year; (3) during the first year, the parties agreed to a $32.50

per ton Tipping Fee for commingled commercial loads; (4) BFI was

not entitled to reduce the damage award by loads wrongfully

rejected as BFI failed to establish any wrongfully rejected

loads; (5) Atlas was not entitled to lost profits because, as a

new venture, those anticipated profits were too speculative; and

(6) Atlas was entitled to $316,192.50, which represented the lost

Tipping Fees.

Upon entry of final judgment, BFI appealed contending the

trial court erred in awarding Atlas its lost gross revenues as

damages for breach of contract. The appellate court, after

considering all the evidence before it, affirmed the judgment and

awarded Atlas the Tipping Fees it would have received had BFI

performed under the agreement.

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5

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

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.” Fed. R. Civ. P. 56(c). One of the

principal purposes of Rule 56 is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).

Rule 56 also allows a court to grant summary adjudication on

part of a claim or defense. See Fed. R. Civ. P. 56(a) (“A party

seeking to recover upon a claim ... may ... move ... for a

summary judgment in the party’s favor upon all or any part

thereof.”); see also Allstate Ins. Co. v. Madan, 889 F. Supp.

374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter

Township of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

The standard that applies to a motion for summary

adjudication is the same as that which applies to a motion for

summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v.

ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).

Under summary judgment practice, the moving party

always bears the initial responsibility of informing

the district court of the basis for its motion, and

identifying those portions of ‘the pleadings,

depositions, answers to interrogatories, and admissions

on file together with the affidavits, if any,’ which it

believes demonstrate the absence of a genuine issue of

material fact.

Celotex Corp. v. Catrett, 477 U.S. at 323(quoting Rule 56(c)).

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6

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.

253, 288-89 (1968).

In attempting to establish the existence of this factual

dispute, the opposing party must tender evidence of specific

facts in the form of affidavits, and/or admissible discovery

material, in support of its contention that the dispute exists. 

Fed. R. Civ. P. 56(e). The opposing party must demonstrate that

the fact in contention is material, i.e., a fact that might

affect the outcome of the suit under the governing law, and that

the dispute is genuine, i.e., the evidence is such that a

reasonable jury could return a verdict for the nonmoving party. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52

(1986); Owens v. Local No. 169, Assoc. of Western Pulp and Paper

Workers, 971 F.2d 347, 355 (9th Cir. 1987).

Stated another way, “before the evidence is left to the

jury, there is a preliminary question for the judge, not whether

there is literally no evidence, but whether there is any upon

which a jury could properly proceed to find a verdict for the

party producing it, upon whom the onus of proof is imposed.” 

Anderson, 477 U.S. at 251 (quoting Improvement Co. v. Munson, 14

Wall. 442, 448, 20 L.Ed. 867 (1872)).

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7

As the Supreme Court explained, “[w]hen the moving party has

carried its burden under Rule 56(c), its opponent must do more

that simply show that there is some metaphysical doubt as to the

material facts .... Where the record taken as a whole could not

lead a rational trier of fact to find for the nonmoving party,

there is no ‘genuine issue for trial.’” Matsushita, 475 U.S. at

586-87.

In resolving a summary judgment motion, the evidence of the

opposing party is to be believed, and all reasonable inferences

that may be drawn from the facts placed before the court must be

drawn in favor of the opposing party. Anderson, 477 U.S. at 255. 

Nevertheless, inferences are not drawn out of the air, and it is

the opposing party’s obligation to produce a factual predicate

from which the inference may be drawn. Richards v. Nielsen

Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

aff’d, 810 F.2d 898 (9th Cir. 1987).

A summary judgment motion brought pursuant to Fed. R. Civ.

P. 56(c) is a proper way to establish issue preclusion. See

Takahashi v. Board of Trustees of Livingston Union School

District, 783 F. 2d 848, 849 (9th Cir. 1986), cert. denied 476

U.S. 1182.

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8

ANALYSIS

Atlas requests the following issues be precluded from

litigation in the current action: (1) whether the DSA dated March

19, 1999, constitutes an enforceable contract; (2) whether, under

the terms of the DSA, BFI was obligated to deliver to Atlas a

minimum of 26,000 tons of commingled recyclables for each year of

the three year term of the contract; (3) whether, under the terms

of the DSA, BFI agreed to pay Atlas a per ton Tipping Fee for

commingled commercial loads; (4) whether the proper measure of

damages for any shortage in tons delivered is the Tipping Fee

multiplied by that shortfall; and (5) whether any damage award

may be offset by those processing and disposal costs saved due to

the tonnage shortfall. Atlas carries the burden of proving with

clarity and certainty that the doctrine of collateral estoppel

applies. Clark v. Bear Stearns & Co., 966 F.2d 1318, 1321 (9th

Cir. 1992).

The doctrine of collateral estoppel or issue preclusion

precludes parties from contesting matters that they have had a

full and fair opportunity to litigate, thereby protecting their

adversaries from the expense and vexation of multiple lawsuits,

conserving judicial resources, and fostering reliance on judicial

action by minimizing the possibility of inconsistent decisions. 

Montana v. United States, 440 U.S. 147, 153-154, 99 S. Ct. 970,

59 L. Ed. 2d 210 (1979).

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9

Collateral estoppel or issue preclusion provides that when a

right, question or fact distinctly put in issue and directly

determined by a court of competent jurisdiction cannot be

disputed in a subsequent suit between the same parties or their

privies. Southern Pacific R.R. v. United States, 168 U.S. 1, 48-

49, 18 S. Ct. 18, 42 L. Ed. 355 (1897). In determining the

collateral estoppel effect of a state court judgment, federal

courts must, as a matter of full faith and credit, apply that

state’s law of collateral estoppel. Bugna v. McArther (In re

Bugna), 33 F.3d 1054, 1057 (9th Cir. 1994); See 28 U.S.C. § 1738.

Under California law, a party seeking to assert issue

preclusion must establish the following: (1) the issue sought to

be precluded must be identical to that decided in a prior

proceeding; (2) the issue must have been actually litigated in

the prior proceeding; (3) the issue must have been necessarily

decided in the prior proceeding; (4) the decision in the former

proceeding must be final and on the merits; and (5) the party

against whom issue preclusion is asserted must be the same as or

in privity with the party to the prior proceedings. Lucido v.

Superior Court, 51 Cal.3d 335. 341 (1990). With respect to the

foregoing, both parties agree and the Court concurs that the

decision in the prior proceeding was final and on the merits. In

addition, the parties to the prior action are the same as the

parties in the present action. Accordingly, the focus of the

present inquiry is whether the issues sought to be precluded are

identical to those necessarily litigated and decided in the prior

action.

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 The DSA is a severable, or divisible contract “‘under 2

which the whole performance is divided into [three] sets of

partial performances, each part of each set being the agreed

exchange of a corresponding part of the set of performances to be

rendered by the other promisor...’” (Filet Menu, Inc. v. C.C.L. &

G., Inc., 79 Cal.App.4th 852,860 (2000)[quoting 6 Jaeger,

Williston on Contracts (3d ed. 1962) § 860, p. 252(Williston)].)

10

To succeed in the present Motion, Atlas bears the initial

burden of demonstrating there exists no genuine issue of material

fact. In the event Atlas satisfies its burden, the Court must

then consider the public policies underlying the doctrine before

concluding that collateral estoppel should be applied in this

instance. Id. at 342-343.

I. Contract Enforceability

It is undisputed that on March 19, 1999, Atlas and BFI

entered into a three year severable contract to perform certain

obligations regarding the collection and disposal of recyclable

waste. It is further undisputed that in the previous action, 2

the trial court found that the DSA was valid and enforceable. As

a result of that earlier ruling, Atlas seeks an order from this

Court precluding BFI from litigating the enforceability of the

DSA.

At first blush it appears that enforceability has

necessarily been litigated precluding BFI from revisiting the

issue. However, upon further examination, it is clear that while

validity has necessarily been decided, enforceability with

respect to years two and three has not.

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Specifically, the issue of whether the DSA is a valid agreement,

meaning an agreement that at the time of formation was legally

operative in accord with the Parties’ intent, has certainly been

decided. In addition, the issue of whether the DSA was

enforceable as against both parties during the first year of the

DSA was likewise decided. Conversely, whether BFI remained

compelled to adhere to the terms of the DSA during years two and

three necessarily entails consideration of the facts and

circumstances giving rise to that obligation. The facts

considered by the previous court were limited to the performance

of the Parties’ obligations during year one. Whether the

obligations of the Parties were later altered rendering the DSA

unenforceable during years two and three remains an issue to be

decided by the trier of fact in the present proceeding. 

Consequently, Atlas’ Motion to preclude re-litigation of the

enforceability of the DSA as to years two and three is denied.

II. Minimum Tonnage Requirement

Atlas further seeks to preclude BFI from re-litigating the

minimum tonnage requirement for years two and three. In support

of its position, Atlas avers that the previous court found the

DSA required BFI to deliver to Atlas a minimum of 26,000 tons of

commingled recyclables a year. BFI does not dispute this fact,

however, BFI contends that the prior court in deciding this issue

took into consideration evidence regarding BFI’s alleged excused

non-performance.

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BFI further argues that this issue should not be precluded

because its non-performance for years two and three is based on

evidence unique to those years and was, therefore, not considered

in the previous proceeding. BFI’s argument is misplaced. 

The existence of facts excusing BFI’s performance speaks to

enforceability of this contract term rather than the term’s

substance. The previous court determined that the minimum

tonnage provision in the DSA was “clear and unambiguous on its

face.” Pl’s. Request for Judicial Notice, Exh. D, 6:14 (“Exh.

D.”) The court further found that “[u]nder the plain meaning of

the provision, [BFI] had an obligation to deliver a minimum of

26,000 tons per annum.” Id. 6:16-18. 

BFI does not contend nor does the evidence show that this

term was later altered by the Parties. BFI’s sole contention is

that the term is unenforceable due to later factual

circumstances. As noted above, enforceability is squarely before

this Court. On the contrary, the existence of the DSA and

certain of its terms have necessarily been decided. Accordingly,

Atlas’s Motion for Partial Summary Judgment to preclude BFI from

re-litigating the minimum tonnage requirement is granted.

III. Tipping Fee

Atlas seeks to collaterally estop BFI from litigating

whether a per ton Tipping Fee was required under the DSA and, if

so, the amount of that fee. In particular, Atlas argues that the

trial court necessarily considered whether a Tipping Fee was

required under the DSA and concluded in the affirmative.

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13

BFI essentially concedes the forgoing but again contends that the

trial court derived the Tipping Fee solely from evidence unique

to the first contractual year. BFI further asserts that the

evidence regarding the Tipping Fee in year two and three is

sufficiently distinct from the evidence existing in year one that

collateral estoppel on that issue is inappropriate. The Court

agrees.

In essence, Atlas argues that because the facts with regard

to year one are substantially similar to years two and three, BFI

should be precluded from litigating the amount of the Tipping

Fee. While Atlas has provided the Court with a plethora of cases

allegedly holding that direct identity of the issues is not

required, those cases are inapposite. The Court concurs that the

contract term requiring the payment of a per ton Tipping Fee was

necessarily decided in the previous proceeding. However, the

amount of the Tipping Fee rested on a number of facts relevant

only to year one of the contract. In reaching its conclusion,

the trial court considered testimonial evidence regarding the

amount and composition of the loads delivered to Atlas during the

first year. Id. 20:15-21:18. Those specific facts were used by

the trial court to arrive at its conclusion that $32.50 was the

correct Tipping Fee. Since the trial court’s conclusion

expressly rested on facts specific to year one, that conclusion

cannot be extended to years two and three.

To the extent Atlas argues that the facts in year one are

sufficiently similar to those in years two and three such that

issue preclusion should apply, the Court disagrees.

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Res judicata or collateral estoppel ‘was never intended to

operate so as to prevent a re-examination of the same question

between the same parties where, in the interval between the first

and second actions, the facts have materially changed or new

facts have occurred which may have altered the legal rights or

relations of the litigants.’” Evans v. Celotex Corp., 194 Cal.

App. 3d 741 (1987)(citing Hurd v. Albert, 214 Cal. 15, 26

(1931)). Atlas’ Motion for Partial Summary Judgment regarding

the amount of the Tipping Fee is denied.

IV. Measure of Damages

Atlas seeks to preclude BFI from re-litigating the previous

court’s damage determination. Specifically, Atlas moves to

preclude litigation of the following issues: (1) whether the

proper measure of damages is the amount of the lost Tipping Fee

times the tonnage shortfall; and (2) whether BFI is entitled to

offset from any Tipping Fee damage award, Atlas’ saved processing

and disposal costs.

In the previous proceeding, the court derived the damage

award by multiplying the tonnage shortfall by the Tipping Fee. 

Atlas seeks to preclude BFI from advancing any alternative

calculation in the present action. In response, BFI asserts

damages are to be calculated using the formulations set forth in

California Civil Code sections 3300, 3358 as opposed to the

foregoing formula.

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15

Additionally, BFI argues the previous Court did consider Atlas’

processing cost when it computed the damages, but found that an

“evidentiary vacuum” precluded granting the requested diminution

of the award.

California Civil Code section 3300 provides that “for the

breach of an obligation arising from contract, that measure of

damages, except where otherwise expressly provided by this case,

is the amount which will compensate the party aggrieved for all

the detriment proximately caused thereby, or which, in the

ordinary course of things, would be likely to result therefrom.” 

In addition, California Civil Code section 3358 clarifies that

“except as expressly provided by statute, no person can recover a

greater amount in damages for the breach of an obligation, than

he could have gained by the full performance thereof on both

sides.”

The applicability of the foregoing California Civil Code

provisions to this case has been decided and is properly

precluded from re-litigation. However, damage calculations are

necessarily an issue of fact. Consequently, the application of

the California Civil Code damage formulations to the facts

existing in years two and three is not subject to issue

preclusion. Similarly, the application of facts existing in

years two and three regarding offset are likewise not subject to

issue preclusion. Consequently, Atlas’ Motion to estop BFI from

litigating any issue regarding calculation of damages is denied. 

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CONCLUSION

For the reasons set forth above, Atlas’ Motion for Partial

Summary Adjudication of contract enforceability, the proper

Tipping Fee and the calculation of damages is denied. Atlas’

motion for partial summary judgment of the minimum tonnage

requirement is granted.

IT IS SO ORDERED. 

DATED: August 25, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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