Posts tagged "Recycling"

JRM Hauling & Recycling Services, Inc. v. The Newark Group, Inc. (Lawyers Weekly No. 09-056-17)

No. 2015-3790 BLS 1
This contract dispute was tried before me, jury waived, from October 23 to 27, 2017. The
dispute arises out of a contract between plaintiff, JRM Hauling & Recycling Services, Inc.
(“JRM”), and defendant, The Newark Group, Inc. (“Newark”), wherein Newark agreed to
purchase and JRM agreed to sell “all secondary fiber produced by [JRM] at” JRM’s location in
Malden, Massachusetts (the “Agreement”). JRM claims that Newark wrongfully terminated the
Agreement in January 2015. By its terms, the Agreement was to run for ten years from its
execution on November 1, 2006 to October 31, 2016.
JRM asserts its claim in two counts: breach of contract and breach of the implied
covenant of good faith and fair dealing. Newark counterclaims, pursuant to a provision of the
Agreement, seeking indemnification from JRM for Newark’s costs, including legal fees and
disbursements, incurred defending any unsuccessful claims made by JRM.
The Agreement
JRM, a company with headquarters in Peabody, Massachusetts, is a hauler of trash and
recycled material. JRM is under contract with municipalities and businesses to pick up at
curbside the trash generated by the occupants. JRM picks up trash that has been separated by the
occupants to put newspaper and other paper into one bin and all other trash in another bin. The
contract in this case concerns what JRM was to do with the “loose paper” picked up at curbside.
Under its contracts with the municipalities, JRM was required to guarantee that the materials it
collected from the residents would be recycled..
Newark is a New Jersey corporation with corporate offices in Cranford, New Jersey. In
February 2015, as discussed below, Newark was acquired by Caraustar Industries, Inc.
In 2005, JRM learned that a facility located at 1130 Eastern Avenue in Malden,
Massachusetts (“the Malden facility”) might be available as a location for JRM’s operations. The
facility had been operated previously as a recycling center. JRM began negotiations with the
owner of the facility, Robert Heffernan, who was, at that time, a Newark employee. At around
the same time in 2005, Newark was looking for sources of supply of Secondary Fiber/RMP for
use by its mill in Fitchburg, Massachusetts. Secondary Fiber/RMP is a description of the loose
news and other paper collected by JRM. The mill in Fitchburg manufactured recycled paper
board products from the secondary fiber. In particular, the mill was producing “graphic board” to
be used as game boards and covers for books.
Jonathan Gold was a long time executive of Newark. He started employment with Newark
in 1978. In 2006, Gold was Senior Vice-President of the Recycled Fibers Division of Newark.
Gold lived in Swampscott, Massachusetts. His family had a long history of working in the
recycle industry. Gold knew the president and sole shareholder of JRM, James R. Motzkin, and
Motzkin’s son, James (“Jimmy”) S. Motzkin. In 2006, Gold became involved, on behalf of
Newark, in the discussions with JRM regarding a lease of the Malden facility and a supply
contract for secondary fiber for Newark.
According to Gold, Newark wanted to secure all of the output of secondary fiber from
JRM. Newark’s demand for secondary fiber for its Fitchburg mill was so large that it also
contracted with other suppliers of secondary fiber to provide the material. Gold was told by his
superiors to get sufficient supply under contract because it was very important to the success of
the Fitchburg mill. The Fitchburg mill was looking for as much as 10,000 tons monthly of
secondary fiber. Gold testified that at the time of the supply contract with JRM it did not matter
to Newark where JRM collected secondary fiber to deliver to Newark. He did not even consider
the possibility that JRM could deliver more secondary fiber than the Fitchburg mill could use. I
find this testimony to be credible.
JRM simultaneously negotiated (1) an agreement with Heffernan to lease the Malden
facility, (2) an agreement with Newark to provide approximately $ 250,000 in financing for the
purchase of equipment for the Malden facility; and (3) the supply Agreement with Newark that is
the subject of this case. A deal was struck. JRM entered into a lease for the Malden facility with a
term of 10 years, starting on July 1, 2005. JRM would not have entered into the lease for the
Malden facility if it were not also entering into the Agreement with Newark to supply the
Fitchburg mill. JRM needed a guaranteed market for secondary fiber to sustain its operations at
the new Malden facility.
The Agreement was entered into on November 1, 2006. The term of the Agreement was
for ten years, from November 1, 2006 to October 31, 2016. The form of the Agreement was a
standard form developed and presented by Newark. Both parties, however, were represented by
counsel with respect to the negotiation of the Agreement. Paragraph 1 of the Agreement is as
Buyer agrees to buy, and Seller agrees to sell, all secondary fiber
produced by Seller at the following location(s): 1130 Eastern
Avenue, Malden, MA on the following terms and conditions:
(Emphasis in the original). Paragraph 1 goes on to describe the price, grade and quality of the
secondary fiber. Paragraph 1 also includes a promise by Newark as the buyer to purchase a
minimum of 500 tons per month. The Agreement contains no specified limit in tons that
constitutes a maximum amount of secondary fiber that Newark was obligated to purchase.
The Agreement includes an integration clause stating that the Agreement constitutes the
entire agreement between the parties. The parties agreed that the Agreement may not be
amended, nor may compliance with its terms be waived, except pursuant to a writing signed by
the party to be charged. The Agreement precludes JRM from assigning any interest in the
Agreement without first obtaining the written consent of Newark. The Agreement provides that
“the duties, rights and remedies of the parties hereunder shall be governed by the substantive
laws of the State of New Jersey, without regard to its conflicts of law principles.” The Agreement
provides for the waiver of trial by jury with respect to any litigation arising out of the Agreement.
Finally, the Agreement provides that Newark, but not JRM, shall be indemnified for its legal fees
and disbursements and other costs incurred in enforcing or defending against any unsuccessful
claims made by JRM with respect to the Agreement.
At the time JRM entered into the Agreement with Newark, the Malden facility was the
only location that JRM used to receive recycled materials from its trucks picking up trash from
customers pursuant to JRM’s contract with municipalities and businesses. The JRM trucks
picked up trash at curbside, drove to Malden, and then simply dumped the trash on the floor of
the Malden facility. Recycled paper was dumped in a separate area from other recyclables. A
JRM employee then pushed with a loader vehicle the loose paper onto a conveyer belt leading to
a compactor. Another employee watched the loose paper on the belt and pulled out anything that
was not paper. The belt dropped the paper into the compactor. From the compactor, the paper
was pushed into the trailer of a truck. The paper was not baled or otherwise processed. The paper
was delivered to Newark loose.
Under the Agreement, Newark could select a mutually agreeable location for Newark to
pick up the secondary fiber from JRM. The parties subsequently agreed, however, that JRM
would deliver the loose paper/secondary fiber to Newark for an additional price per ton.
As referenced, Gold, the lead negotiator for Newark of the Agreement, testified that
Newark did not care at the time of entering into the Agreement whether the secondary fiber
delivered from JRM would come from the Malden facility or elsewhere. Notwithstanding the
language in the Agreement stating that Newark was obligated to purchase “ all secondary fiber
produced by Seller at the following location(s): 1130 Eastern Avenue, Malden, MA”, Gold
testified that the specification of the collection location was insignificant. I find this testimony to
be credible, given the heavy demand for secondary fiber anticipated by Newark for its Fitchburg
1 Newark called as a witness Ms. Lynn Herro. Herro currently works for Caraustar, and
was previously employed by Newark as corporate controller. She works at the corporate office in
New Jersey. She testified that she had no role in negotiating the Agreement with JRM.
Nevertheless, she offered the opinion that the reason for specifying the location from which
Newark was obligated to purchase was to impose some limit on the quantity Newark was to buy.
Performance of the Contract Until 2014
For eight years, from 2006 to mid 2014, the parties operated under the Agreement with no
difficulties, disagreements or disputes. JRM typically delivered secondary fiber to Newark each
work day (on average, twenty days per month), taking two, and sometimes three, truck loads per
day to Newark. Each delivery was approximately 20 to 25 tons of secondary fiber. Thus, using
the estimate of 25 tons per load, JRM could deliver secondary fiber to Newark in the amount of
approximately 1,000 to 1,500 tons per month. For the calendar year 2014, however, JRM’s
delivery of secondary fiber to Newark averaged 933 tons per month.
Market Changes Affecting Newark
In or about 2010, market demand for the products manufactured by Newark at its
Fitchburg mill decreased significantly. In 2011, Newark began the process of changing the
products produced at its Fitchburg mill to paperboard that required much less loose paper/
secondary fiber. As a result, Newark began selling the loose paper received from JRM to
customers in the domestic and export market. Newark suffered losses, at an increasing rate, on
those transactions. By January 2014, Newark’s Fitchburg mill was using only ten per cent of the
secondary fiber being furnished by its suppliers. Newark was experiencing substantial losses as a
result of the Agreement with JRM.
Newark Considers Getting Out of the Contract
In February 2014, Mr. Frank Papa, Newark’s CEO, stated to Gold that “the mill needs
I find that although Herro’s testimony might be correct in another context, in this case Gold was
adamant that there was no limit to what Newark wanted to buy. The location designation was
merely to reference the one and only place JRM operated a facility to collect material for recycle.
The actual location of the JRM collection facility was insignificant to Newark.
your help to try to minimize this expense. We can’t be absorbing a $ 1.5 million loss for next
year. I’m confident you can get creative and find a home for the news.”
A few months later, Newark, for the first time in the eight year history of the Agreement,
claimed that the paper delivered by JRM was excessively contaminated with prohibited food
materials. The claim was raised by officials at the Newark mill in Fitchburg. Gold investigated
the claim. He concluded that the claim of contamination was baseless. The rejection of JRM’s
load was, according to Gold in an email at the time, “laughable.” Gold recommended in writing
to his superiors that Newark divert the tonnage from JRM to Newark’s plant in Salem,
Massachusetts instead of Fitchburg. Gold would then cause the Salem plant to sell the secondary
fiber to overseas markets. The other option, Gold wrote to his superiors, was to terminate the
Agreement for default on quality. Gold recommended against this option because the claim of
contamination would not hold up. Newark elected not to terminate the Agreement on the ground
of poor quality of the delivered secondary fiber.
JRM Fails to Deliver Loose Paper to Newark on January 13, 2015
In the several years prior to 2015, JRM planned to construct a state-of-the-art recycling
facility on property owned by the Moskins. The facility would have the capability to handle,
refine and process various types of recycled material (e.g., paper, cardboard, glass, plastic,
aluminum and steel) into raw materials for use in manufacturing. JRM’s owners created a
separate company called GreenWorks, Inc. in 2013 to own and operate this new facility. A major
investment with respect to GreenWorks was to purchase and install a large, technologically
sophisticated, sorting machine. The GreenWorks facility cost at least $ 18 million to develop.
JRM’s owners expected that GreenWorks could do more complete processing of recycled
material, enabling it to sell the material in finer and higher grades at higher prices. On January
12, 2015, JRM’s owners opened GreenWorks for business.
In January 2015, JRM was aware that Newark was losing money under the Agreement to
purchase JRM’s secondary fiber. Likewise, Newark was aware of the development, construction
and opening of GreenWorks by the owners of JRM. JRM’s owners intended, ultimately, to move
all of its operations from the Malden facility to GreenWorks. The lease for the Malden facility
expired at the end of June 2015. JRM’s owners testified that there was space at GreenWorks
where the JRM trucks could dump the loose paper for delivery to Newark exactly as had been
done for years under the Agreement. In fact, there was capacity at GreenWorks for GreenWorks
or JRM to increase the amount of secondary fiber collected for delivery.
As the GreenWorks facility was in the process of becoming operational in mid-January
2015, GreenWorks needed to test its new sorting machine. JRM directed its drivers to deliver
loose paper to GreenWorks, instead of the Malden facility, to be used to test the machine. JRM
failed to notify Newark that JRM would not be delivering its daily tons to Newark. Immediately
upon the lack of a delivery to Newark, on January 13, 2015, Newark emailed JRM inquiring
whether JRM intended to make deliveries to Newark. JRM responded the same day stating that it
was testing the machine at GreenWorks and “if you want material we have it.” Gold, on behalf of
Newark, responded within 45 minutes: “Let’s meet to go over the future. Name the time, place
etc. I have no problem with ending the loads that were going to Fitchburg and now Salem (your
call but no problem at all). Just want to make sure I finish all orders that I have taken before we
stop.” JRM responded in an email: “We are working out a lot of kinks this week. Testing speeds,
angles, etc to make sure we have a good product. We definitely want to work together and would
like to sit down to go over some details. Give me a week or two to get things worked out and we
can meet up then or at a break in the action.” Jimmy Motzkin testified, credibly, that JRM did not
intend to stop delivering material to Newark as called for under the Agreement.2 Gold responded
to Jimmy Motzkin’s email: “Perfecto and a big congratulations with the start up.” As indicated
by the emails, and as testified to by Gold, Newark had no objection to JRM suspending deliveries
on January 13, 2015.3 Gold testified: “We didn’t want the material.”
Gold testified that he had been aware of the plan to build GreenWorks by the owners of
JRM for years. Further, Gold was aware that JRM intended ultimately to move its operations
from the Malden facility to a location at GreenWorks. He understood that JRM would continue
to supply loose paper/secondary fiber to Newark under the Agreement from the GreenWorks
location starting in January 2015. Gold testified that JRM’s plan was of “no concern” to him. I
credit the testimony of Gold.
Newark Decides to Terminate the Agreement
Within three days of the missed delivery, by January 16, 2015, Newark decided to
terminate the Agreement. Gold testified that the CEO of Newark, Mr. Papa, instructed Gold to
“end the deal.” In an exchange of emails on that date among executives at Newark, reference is
made to a meeting that was scheduled with JRM on January 20, 2015. Gold invites Chuck Stone,
2 The parties stipulated that “[a]fter January 13, 2015, JRM continued delivering at least
some of the secondary fiber it collected to the Malden Facility.”
3 The record contains an exchange of emails from Newark (Marc Galardi) and Jimmy
Moskin on January 14, 2015. Newark had some existing orders for loose paper to fulfill. Galardi
mentions that Newark may be “facing roll over charges” if it does not receive material from
JRM. No evidence was presented at trial that Newark actually experienced the charges. JRM
responded by offering loose paper for pick up and referencing the agreement with Gold to sit
down for a meeting.
the Vice President/General Manager of the Northeast Region of Newark’s Recycled Fibers
Division, from the corporate office in New Jersey to attend the meeting. Stone asks that two
additional Newark employees attend. In the email, Gold states “come to JRM as I am putting an
end to the deal.”
A meeting between Newark and JRM occurred, over lunch at a restaurant, on January 20,
2015. Five people testified at trial regarding what was said at the meeting: James Motzkin,
Jimmy Motzkin, Gold, Stone, and Marc Galardi, another Newark employee. According to the
Motzkins, Gold stated at the meeting that effective immediately Newark would no longer accept
any material from JRM. The Motzkins testified that they were shocked at the termination. They
did not say that JRM agreed to the termination.4 Gold testified that he told the Motzkins at the
meeting that he had been given marching orders: Newark could no longer take delivery of
materials. Gold could not recall any response from the Motzkins. Stone testified that there was
discussion about Newark not wanting the material but he denied that Gold said Newark would
not accept deliveries. Stone also testified that James Motzkin said that “they will do whatever
[Gold] wanted to do.” Galardi testified that he could not recall the discussions at the meeting.
After the lunch meeting, the participants adjourned to a pre-arranged tour of the new
GreenWorks facility and there were discussions about future business opportunities.
I find the testimony of the Motzkins and Gold to be credible. At the meeting on January
20, 2015, Newark refused further deliveries under the Agreement. JRM did not assent to the
4 At trial, Jimmy Motzkin was confronted with his deposition where he testified that he
said “Okay” in response to Gold’s rejection of future deliveries. The context of the
“Okay” response at deposition was not provided. The use of the word “Okay” is ambiguous. It
does not necessarily mean that Jimmy Motzkin agreed to the termination of the Agreement.
termination of the Agreement.
In February 2015, the corporate office of Newark prepared a document to terminate the
Agreement in writing. Newark was about to be sold to Caraustar Industries, Inc. Gold was urged
to obtain a written confirmation from JRM that the Agreement was terminated. By email dated
February 7, 2015, Gold states to JRM that “with the sale of the company eminent [sic] Feb 17,
I’ve been asked to get all contracts closed or ended. Please see the attachment on the loose new
deal. Let me know when you have a chance.” The attachment is a document entitled Termination
Agreement. The Termination Agreement, dated February 1, 2015, purports to terminate the
November 1, 2006 Secondary Fiber Purchase Agreement and states that “neither party shall have
any further liability to the other” after the termination date. The document is signed by Gold.
Gold testified, credibly, that when he sent this email on February 7, 2015, he knew there had
been no agreement by JRM to terminate the Agreement. JRM responded by requesting a meeting
to discuss the proposed Termination Agreement. In fact, JRM never accepted the proposed
Termination Agreement and did not sign it.
On February 17, 2015, the date of the acquisition of Newark by Caraustar, Gold resigned
from his officer position at Newark. Starting in April 2015, Gold began to perform some
consulting work for JRM. Stone continued to be employed by Caraustar until his retirement in
2017. At the end of March 2015, Caraustar inquired of Marc Galardi (still employed by Newark)
about the status of the Agreement. Galardi responded in an email that “JRM has stopped bringing
material in, but the contract is still in place.”
JRM’s Response to Termination of the Agreement
JRM’s owners intended to move JRM’s collection of loose paper from the Malden
facility to GreenWorks once GreenWorks was up and operating. According to James Motzkin,
JRM had no reason to anticipate that Newark would object to the transfer of JRM’s collection
activity to the GreenWorks location. In fact, Motzkin had discussed JRM’s plan to move JRM’s
operation to GreenWorks with Gold, and Gold was supportive of the move. Gold never
expressed any concern over the proposed move. It was JRM’s intention to collect loose paper,
and deliver it to Newark, exactly as JRM had been doing from the Malden facility. JRM wanted
the Agreement with Newark to continue for the life of the contract.
After the January 20, 2015 meeting, JRM began to look for other purchasers of the loose
paper that had previously been delivered to Newark under the Agreement. According to James
Motzkin’s testimony there was essentially no market for loose paper. JRM could not obtain the
purchase price under the Agreement for the loose paper that Newark was obligated to pay. To
mitigate its losses, JRM decided to have GreenWorks process the loose paper to a higher, finer
grade and baled, for which there was a market. JRM was then able to sell the fully processed and
baled secondary fiber at a price higher per ton than what would have been paid by Newark for
loose paper. The cost, however, of processing the loose paper to a baled, refined degree was a
cost that JRM would not have incurred if Newark had continued the Agreement to buy
unprocessed, unbaled loose paper.
JRM claims that it has suffered damages as a result of Newark’s unjustified termination
of the Agreement. JRM calculates its damages to be $ 2,169,948 (Exhibit 43). Findings regarding
the damages calculation are in Part III, below.
The Agreement provides that the “duties, rights, and remedies of the parties” shall be
governed by New Jersey law. Because the sale of secondary fiber under the Agreement is a sale
of “goods” as defined by the Uniform Commercial Code (“UCC”), N.J. Rev. Stat. § 12A: 2-101,
105 et seq, the New Jersey UCC will be applied. It will be cited as UCC §2-xxx. New Jersey also
recognizes the implied covenant of good faith and fair dealing that applies to all contracts. To
prove a breach of the implied covenant, JRM must prove (i) the existence of a contract, (ii) that
Newark engaged in conduct, without good faith, with bad motive or intention, for the purpose of
depriving JRM of the rights and benefits of the parties’ contract, (iii) that JRM suffered damages
as a result of that conduct, and (iv) that JRM performed its own contractual duties, unless
excused. Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210,
224-225 (2005).
A. Repudiation of the Agreement
As referenced above, I find that Newark unilaterally terminated the Agreement on
January 20, 2015. Newark informed JRM that it would no longer accept deliveries of secondary
fiber from JRM under the Agreement. JRM did not consent to the termination.
Under UCC § 2-610, “[w]hen either party repudiates the contract with respect to a
performance not yet due the loss of which will substantially impair the value of the contract to
the other” the aggrieved party has certain options. I find that Newark’s repudiation of the
Agreement substantially impaired the value of the contract to JRM. The Agreement, providing a
guaranteed price to JRM for loose paper, had approximately 21 months left before the agreedupon
term ended. Under UCC § 2-610 (b) and (c), JRM was entitled, upon repudiation, to
suspend its own performance and to seek any remedy for breach.
Newark makes three legal arguments to justify the termination of the Agreement on
January 20, 2015. First, Newark contends that the failure of JRM to deliver loose paper on
January 13 – 20, 2015, was a breach of the Agreement, relieving it from performance. Second,
Newark avers that JRM abandoned the Agreement by failing to provide adequate assurance of
performance. Third, Newark says that JRM was planning to deliver loose paper from
GreenWorks, not the Malden facility. Thus, Newark had no obligation to continue purchases. I
will address each argument in turn.
The parties agree that the contract at issue is an installment contract as described in UCC
§ 2-612. JRM was obligated to deliver “all” of its secondary fiber/loose paper in separate lots.
The Agreement does not specify when the deliveries should occur. The Agreement provides that
the goods will be picked up by Newark pursuant to “a pickup schedule, which [Newark] may
revise from time to time in its reasonable discretion.” According to the parties’ stipulated facts, at
some date after the execution of the Agreement, the parties entered into another agreement for
JRM to deliver the goods to Newark for an additional price per ton. A copy of this delivery
agreement is not in the record. Accordingly, the record reflects no obligation for JRM to deliver
every business day, every week or every month. JRM was, however, obligated to sell “all” of its
output of secondary fiber to Newark. The evidence shows that the practice of the parties was for
JRM to deliver loose paper to Newark every business day.
Newark contends that the failure of JRM to deliver loose paper on January 13 – 20, 2015,
was a breach, or default, under the Agreement. If the failure to deliver was a “breach [that] goes
to the whole contract (12A: 2-612)”, Newark may cancel the Agreement. UCC § 2-711(1). The
reference to § 2-612 invokes the applicable provisions of law governing an installment contract
like the Agreement here.
Under UCC § 2-612(3), when a “default with respect to one or more installments
substantially impairs the value of the whole contract there is a breach of the whole.” I find that
the failure of JRM to deliver loose paper on January 13 – 20, 2015, did not impair the value of the
Agreement to Newark. Newark was losing money on its re-sale of loose paper. As stated by
Gold: “We didn’t want the material.” I find that the suspension of delivery by JRM on January
13, 2015, was viewed by Newark as an opportunity, not an impairment. The opportunity was to
use the suspension of delivery to “end the deal” as Gold did on January 20, 2015.
Next, Newark says that JRM failed to provide adequate assurance that it intended to
continue to perform following the suspension of deliveries on January 13, 2015. Newark argues
that failure to provide reasonable assurance from JRM to Newark constitutes repudiation by
JRM. UCC § 2-609(1) provides that “[w]hen reasonable grounds for insecurity arise with respect
to the performance of either party the other may in writing demand adequate assurance of due
performance and until he receives such assurance may if commercially reasonable suspend any
performance for which he has not already received the agreed return.”
Newark’s argument under UCC § 2-609 fails at more than one level. First, Newark’s
“insecurity” must arise from a threat to its “expectation of receiving due performance” that will
not impair the value of the contract. Id. As described above, Newark was not insecure about
JRM’s performance. On the contrary, it wanted to end the contract. Second, I find that the emails
from Marc Galardi to Jimmy Motzkin on January 13 and 14, 2015, are not, when viewed in
context, demands for assurance of performance of the whole contract. Galardi was inquiring
regarding the short term interest of Newark to obtain material to fulfill a handful of existing
orders. Gilardi did not express “insecurity” as to the contract as a whole and did not demand
performance of the contract as a whole. At precisely the same time as Galardi’s emails, Galardi’s
superior, Gold, stated to JRM that he had “no problem with ending the loads that were going to
Fitchburg and now Salem (your call but no problem at all).” Third, JRM did, in fact, provide
assurance that it could deliver the short-term loads requested by Galardi.
Finally, UCC § 2-609 requires “reasonable” grounds and “adequate” assurance.
According to Official Comment 3 to this UCC section, those terms should be understood by
applying commercial standards in accordance with commercial practices. JRM and Newark had
been performing under the Agreement for more than eight years prior to January 13, 2015. The
emails between the parties at that time propose reasonable steps to determine both parties’ intent
as to performance under the Agreement. A meeting was set for seven days5 after January 13,
2015, on January 20, 2015. Rather than engage in a commercially reasonable discussion at that
meeting regarding the continuation of performance under the Agreement, however, Newark
repudiated the Agreement. At no point did JRM repudiate the Agreement.
Newark’s last line of defense to the finding that it repudiated the Agreement on January
20, 2015, is to point to the fact that JRM intended, ultimately, to move its operation of collecting
the truck loads of curbside pick up of loose paper to GreenWorks rather than the Malden facility.
Newark argues that it was only obligated under the Agreement to purchase loose paper collected
5 Even if Newark’s emails from Galardi could be viewed as a justified demand for
assurance of performance, under UCC § 2-609(4), JRM had a “reasonable time not exceeding
thirty days” to provide assurance. I find that JRM acted reasonably by proposing, then attending,
a meeting within seven days.
at the Malden facility.
On January 20, 2015, JRM was still operating the Malden facility. Newark repudiated the
Agreement on that date because it was losing money on the deal, not because JRM might in the
near future begin to collect material at GreenWorks rather than Malden. The collection location
was immaterial to Newark at the time the Agreement was entered into, and the location remained
immaterial to Newark after it chose to repudiate.
Newark unjustifiably repudiated the installment Agreement on January 20, 2015. JRM
did not assent in writing or otherwise to the termination. JRM is entitled to proceed to the
remedies provided to a seller upon default by the buyer as described in UCC §§ 2-703, 2-706,
and 2-708.
UCC § 2-703 lists the remedies available to a seller when the buyer has repudiated the
contract. Among the remedies are to resell the goods and recover damages (§ 2-706), or to
recover the difference between the contract price and the market price for the goods (§ 2-708(1)).
Here, JRM is proceeding under UCC § 2-708(1). See JRM’s Proposed Conclusions of Law, ¶ 15.
JRM’s theory of damages is that the market price for the loose paper that, absent repudiation,
would have been sold to Newark, can be determined by the evidence of what GreenWorks did
with the loose paper. JRM delivered the loose paper to GreenWorks for no consideration.6
GreenWorks then processed the loose paper to a higher, refined degree than mere loose paper,
and baled the finished product (‘finished paper”). GreenWorks sold the finished paper to third
6 Because JRM delivered the loose paper to GreenWorks for no consideration there was
no “resale” that would allow a calculation of damages pursuant to UCC § 2- 706.
parties, thereby determining a market price for the finished paper.
To calculate damages, JRM then applies a cost factor to refining the loose paper to
become finished paper. JRM subtracts that cost from the market value (total revenue received) of
the finished paper. The calculation produces a “net return.” The “net return” is a loss in 2015 and
a profit in 2016. The last step in JRM’s damages theory is to take the total revenue that would
have been received by JRM from Newark if the contract had been performed, and adjust that
number by the “net return.”
UCC § 2-708(1) provides as follows:
Subject to subsection (2) and to the provisions of this Chapter with respect to
proof of market price (12A: 2-723), the measure of damages for non-acceptance
or repudiation by the buyer is the difference between the market price at the time
and place for tender and the unpaid contract price together with any incidental
damages provided in this Chapter (12A: 2-710), but less expenses saved in
consequence of the buyer’s breach.
JRM does not seek the remedy of profit it would have earned under the Agreement, pursuant to
subsection (2) of § 2-708.7 It proceeds under § 2 – 708(1), as guided by UCC § 2-723.
Under JRM’s theory of damages, it bears the burden of proving three measurement points
necessary for JRM’s calculation of damages: (1) the contract price for loose paper that Newark
was obligated to pay, (2) the market price of the loose paper at the time and place of tender, and
(3) the reasonable quantity of loose paper that Newark was obligated to buy. JRM’s damages
calculation is contained in Exhibit 43. The calculation was prepared by JRM’s long-time
7 As referenced above, JRM is explicitly proceeding under UCC § 2-708(1), not § 2-
708(2). JRM’s Proposed Conclusions of Law, ¶ 15. Moreover, JRM offered no evidence to show
the profit margin that it, as opposed to GreenWorks, experienced prior to the breach. JRM’s
damages witness (John Hoffman) testified that he did not prepare any analysis of JRM’s profits
in 2014.
accountant, John Hoffman. Hoffman is a certified public accountant who has acted as JRM’s
outside accountant for more than twenty years. He has also served as the outside accountant for
GreenWorks since its inception. At trial, Hoffman explained the calculations.
As to the first measurement point, Hoffman used the minimum price per ton of loose
paper that Newark agreed to pay. That price is $ 57.50 per ton of loose paper. The price of $ 57.50
per ton is referenced in the “Minimum Price Rider” attached to the Agreement. While Newark
argued that the minimum price rider “provides for suspension of the minimum price in certain
circumstances” (JRM Proposed Findings of Fact ¶ 17), there was insufficient proof that any such
circumstances applied to JRM’s calculation of damages. I find that $ 57.50 per ton is the correct
price to use in calculating JRM’s damages.
The second measuring point under JRM’s theory of damages is “the market price at the
time and place for tender” of the goods not purchased by Newark. See UCC § 2-708(1). JRM
elected to offer no evidence of what the market price for loose paper was in the 2015 – 2016
period. Instead, it proceeded on a theory of showing what a reasonable estimate of market price
for loose paper could be based on a comparable market.
UCC § 2-708(1) directs the court to UCC § 2-723 for a description of acceptable proof of
market price. As stated in the Official Comment to that section, “[w]here the appropriate market
price is not readily available the court is here granted reasonable leeway in receiving evidence of
prices current in other comparable markets or at other times comparable to the one in question.”
JRM introduced evidence showing that there was no market for loose paper, or at least there was
no “readily available” market. Consequently, in its effort to mitigate damages, JRM decided to
use the market for finished paper as a comparable market. While it may be that the market for
finished paper could be used as a “comparable market” under the circumstances of this case,
JRM failed to offer acceptable evidence to adjust the finished paper price to a reasonable
estimate of the price of loose paper.8 In fact, nowhere in its damages analysis (Exhibit 43) or in
Hoffman’s testimony is there evidence that would allow a reasonable estimate of the market price
of loose paper in the 2015 – 2016 period. This is the fundamental flaw in JRM’s claim for
Hoffman detailed in Exhibit 43 the per ton price actually obtained by GreenWorks from
third parties for finished paper. That evidence was unrebutted. As shown on Exhibit 43, the
comparable market price for finished paper varied significantly over the remaining 21 months of
the Agreement. By the use of actual prices obtained for finished paper, JRM satisfied the
requirement of UCC § 2- 708(1) to show market price in a comparable market “at the time and
place for tender.”
The market price for finished paper must be adjusted, however, to come to a reasonable
estimate of the market price for loose paper. Finished paper sells at a higher price because the
product is refined and baled. It costs more to refine and bale finished paper than to sell loose
paper. Guided by that fact, JRM embarked on an analysis of the cost of producing finished paper.
Hoffman calculated the cost of refining and baling the loose paper to make the product finished
paper. Hoffman calculated the cost for processing the paper to be $ 75.16 per ton and $ 73.50 per
ton for 2015 and 2016, respectively.
JRM’s proof of damages goes awry at this point. Instead of proving the market price of
8 For example, it is possible that there could be evidence that the price of loose paper
fluctuates at a certain percentage below the price of finished paper. There was no such evidence
loose paper, even by way of deduction or inference, JRM limits its proof to the cost of processing
loose paper to a finished product. Then, JRM performs a “net return” calculation measuring
GreenWorks’ profit and loss. For example, the calculation for 2016 in Exhibit 43 simply
calculates that GreenWorks made a profit on the sale of finished paper. Then, inexplicably, the
damages to JRM for that year are calculated to be the revenue JRM would have received had
Newark performed, less the profit GreenWorks made. This damages formula is inconsistent with
UCC § 2-708(1). JRM’s proof does not prove anything about the market price of loose paper
during the 2015 – 2016 period. On that basis alone, JRM fails to prove damages.
Even if JRM’s damages model is considered further, it is erroneous in its methodology.
First, the calculation of cost per ton is faulty. The premise of the calculation was to determine a
cost per ton of all of GreenWorks’ output, including product from glass, metals and paper. The
calculation uses 100% of GreenWorks’ costs, but fails to divide by 100% of GreenWorks’
output, when calculating cost per ton.9 If all output is considered, including cardboard, the cost
per ton of product from GreenWorks would be $ 59.15 and 53.80 for 2015 and 2016, respectively.
Use of those revised cost per ton numbers shows that GreenWorks made a substantial profit on
the sale of finished paper derived from loose paper delivered by JRM. Second, JRM fails to
explain the rationale of calculating damages by taking expected revenue from the Agreement in
9 Hoffman offered Exhibit 40 as his calculation of cost. As described by Hoffman, he
compiled the total cost of operating the GreenWorks facility for each of 2015 and 2016, and the
monthly average for each year. From the records of GreenWorks, Hoffman took the number of
total tons processed at the facility for the year. The number of total tons processed included all
materials processed at the facility, not just paper. Hoffman divided the cost number by the total
tons of product, except that he reduced by 75% the tons of cardboard product, to come to the
price per ton for processing. The reduction for cardboard is inconsistent with the purpose of the
2015 – 2016, and adjusting that number by GreenWorks’ net profit or loss. That calculation is
comparing apples to oranges. It says nothing about JRM’s loss or profit, nor does it provide a
basis for estimating the market price for loose paper in 2015 – 2016.
The third, and last, measuring point for JRM’s theory of damages is to prove the
reasonable quantity of loose paper that Newark was obligated to buy. Because JRM failed to
prove a reasonable estimate of price for loose paper in the 2015 – 2016 period, this measuring
point does not need to be addressed. Nevertheless, I make the following finding for the record.
JRM’s damages model, Exhibit 43, is built on the assumption that JRM could have delivered to
Newark a much larger amount of loose paper than it ever did during the time the Agreement was
operating. The damages model assumes 20,816 tons delivered in 2015 and 20,217 tons delivered
in 2016. In contrast, the tonnage delivered to Newark in 2014 was approximately 1,000 tons per
month, or 12,000 tons for the year. Testimony at trial showed that the Moskins intended in 2015 –
2016 to increase the amount of loose paper picked up because JRM had more capacity at
GreenWorks. UCC § 2-306 provides guidance for evaluating the reasonable expectations of the
parties to an output contract like this one. “A term which measures the quantity by the output of
the seller . . . means such actual output . . . as may occur in good faith, except that no quantity
unreasonably disproportionate to . . . any normal or otherwise comparable prior output . . . may
be tendered or demanded.” I find that Newark was not obligated to purchase the disproportionate
amounts of approximately 20,000 tons in the years 2015 – 2016.
In sum, JRM elected to transfer the loose paper it collected after January 20, 2015 to
GreenWorks for no consideration, thereby eliminating the typical measure of damages based on
resale of the goods. UCC § 2-706. It chose to seek damages under UCC § 2-708(1). There was,
however, no proof of the market price of loose paper after Newark’s repudiation. The evidence
offered at trial by JRM was insufficient to prove that JRM suffered damages.
JRM’s claims for breach of contract and breach of the implied covenant of good faith and
fair dealing must be DISMISSED for failure to prove damages. Under the Agreement, “Seller
shall also indemnify Buyer for its costs (including legal fees and disbursements) in enforcing, or
defending against any unsuccessful claims made by Seller with respect to, this Agreement.”
Newark counterclaims under that provision of the Agreement. Newark is hereby ORDERED to
serve, pursuant to Superior Court Rule 9A, its motion for legal fees and disbursements,
accompanied by supporting material and affidavits. The deadline for service of the motion is
January 8, 2018. Both parties should indicate in their respective motion and opposition papers
whether they wish to have an evidentiary hearing on the motion.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: December 7, 2017
23 read more

Posted by Stephen Sandberg - January 6, 2018 at 9:54 am

Categories: News   Tags: , , , , , , , ,

Boston Electronics Recycling Day Will Be March 23

File Photo: Tony Jones, of Allentown, a recycling technician from AERC, lifts a television at the e-cycling event held by Parkland High School's GEO Club in January 2011.

The city announced that on March 23, residents will be able to recycle electronic waste at no additional cost.

Residents may bring up to computers, monitors, televisions, LCD panels, printers, other computer related equipment, stereos, cell and other phones, power supplies, electronic games, VCRs, circuit boards, microwaves, and other household electronic devices.  

However, air conditioners, dehumidifiers, refrigeratorsand white goods such as washers, dryers, and stoves will NOT be accepted.  For disposal of air conditioners, dehumidifiers and refridgerators, call (617) 635-4500 to arrange a special pickup.  The other items can be picked up at the curb with regular trash pickup.

Residents must be prepared to show proof of residency in order to be able to drop anything off.  All electronics will be recycled in Massachusetts by Electronic Recyclers International, an E-Steward Certified recycler.

The electronics recycling dropoff location on Saturday, March 23 is at the West Roxbury Public Works Yard, 315 Gardner St, West Roxbury, from 9 a.m. to 2 p.m.  read more

Posted by Stephen Sandberg - February 25, 2013 at 4:20 pm

Categories: Arrests   Tags: , , ,

Boston Schools Implementing New Single-Stream Recycling Program

Boston students, teachers and administrators are using National Green Week this year (Feb. 4th to 8th) to set up single stream recycling

Single stream recycling means paper, glass, plastic and metal can all be recycled together. The items are then sorted at a recycling center, which makes it simpler for residents to collect recycle materials and avoids excess waste being sent to landfills.

Through and extended day program offered by City Year, 322 students at the Blackstone, Hennigan, Holland, Marshall, Mattahunt, Orchard Gardens and Tobin schools will participate in Green Week lessons, activities and games to prepare them for successful single stream recycling at home and at school, according to Boston Public Schools.

The curriculum was selected by Green Education Foundation and Boston Public Schools to address concepts and themes such as hands on exploration, social equity, community leadership, physical activity, creativity, literacy and math. read more

Posted by Stephen Sandberg - February 5, 2013 at 6:16 pm

Categories: Arrests   Tags: , , , , ,