United States District Court, D. Hawaii
PACIFIC COMMERCIAL SERVICES, LLC, a Hawaii limited liability company, Plaintiff,
LVI ENVIRONMENTAL SERVICES, INC., nka NORTHSTAR CONTRACTING GROUP, INC., ET AL., Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Michael Seabright Chief United States District Judge.
Pacific Commercial Services, LLC (“PCS”) filed
this action for breach of contract and unjust enrichment
against Defendants LVI Environmental Services, Inc.
(“LVI”) and Northstar Recovery Services, Inc.
“Defendants”) related to two projects: the first
involves services relating to deactivation of the Hawaiian
Electric Company's (“HECO”) Honolulu Power
Plant (the “HECO Project”); the second relates to
a building that was destroyed by a 2012 fire at HECO's
Kahuku Wind Farm (the “Kahuku Project”). Stip.
Facts ¶ 7. In response, LVI filed a Counterclaim for
reimbursement of certain payments. After substantial
pre-trial litigation and an order resolving some issues at
the summary-judgment stage, the court conducted a non-jury
trial of the remaining issues on January 17-18, 2018,
followed by post-trial briefing.
to Federal Rule of Civil Procedure 52(a), the court issues
these Findings of Fact (“Findings”) and
Conclusions of Law (“Conclusions”). To the extent
any Findings may also be deemed to be Conclusions, they shall
also be considered Conclusions. Similarly, to the extent any
Conclusions may be deemed to be Findings, they shall be
considered Findings. See In re Bubble Up Del., Inc.,
684 F.2d 1259, 1262 (9th Cir. 1982) (“The fact that a
court labels determinations ‘Findings of Fact' does
not make them so if they are in reality conclusions of
law.”) (citation omitted).
court finds and concludes that Plaintiff has proven by a
preponderance of the evidence that LVI breached provisions of
the HECO Subcontract and the Kahuku Subcontracts (as those
terms are described in the Findings) and that Plaintiff is
entitled to damages and, separately, recovery for unjust
enrichment. LVI failed to prove its Counterclaim by a
preponderance of the evidence, and Plaintiff did not breach
the HECO Subcontract first. Plaintiff is entitled to recover
damages and restitution against Defendants in the amount of
$767, 053.14, plus prejudgment interest to
be calculated based on a supplemental filing. After entry of
Judgment, Plaintiff is also entitled to submit an application
for reasonable attorneys' fees and costs in accordance
with the court's local rules.
convenience of the parties, the court begins by summarizing
(without citations to the record) the key points, which are
detailed and supported in the Findings and Conclusions that
follow. The parties know the issues in dispute and the
specific evidence in question, and thus will understand this
summary even if a casual reader would not without first
reviewing the Findings and Conclusions for context.
breached the HECO Subcontract by violating its obligation to
use PCS exclusively for waste transportation and disposal
services for the HECO Project, such as by contracting
directly with Waste Management for removal of asbestos
containing material (“ACM”) beginning in January
of 2013. For this breach, PCS is entitled to damages of $699,
044.74 for ACM work and $22, 478.25 for “other
non-hazardous solid waste” (performed by Tajiri), along
with prejudgment interest to be determined in a supplemental
failed to prove its claim for $284, 978.10 in damages related
to 518, 142 gallons of “oily water” removed by
Unitek beginning in March 2013. The scope of such work was
not contemplated in the HECO Subcontract and was the subject
of a change order to the main LVI-HECO Prime Contract that
resulted in a much lower unit price than in
potentially-applicable line items in the HECO Subcontract
(i.e., 69 cents per gallon paid to Unitek versus $1.50 per
gallon in a line item in the HECO Subcontract). It is
entirely speculative whether PCS would have been awarded such
work under a change order (and if so, at what price) even if
LVI had not breached the HECO Subcontract and LVI had offered
responsibility for the oily-water task to PCS. Indeed, PCS
(as a waste broker) probably would not have performed the
task itself and would have lost money if it had done so at 69
cents per gallon.
Counterclaim (and in defense of Plaintiff's claims),
Defendants failed to prove that PCS breached the HECO
Subcontract first when PCS charged LVI $700 per drum instead
of $700 per ton for the sludge disposal. The per-drum unit
price falls within the “small font” provision of
Line Item 4 of Exhibit A to the HECO Subcontract. In this
regard, the court accepts and relies upon the testimony of
PCS managing director Jingbo Chang, whose manner of
testifying was credible and believable. On the other hand,
the testimony of Defendants' witness, former LVI branch
manager Michael Moore, was evasive and inconsistent as to key
points in this particular area (such as whether he knew or
should have known that PCS was charging $700 per drum), and
thus the court finds against Defendants on this issue.
Accordingly, Defendants' Counterclaim - seeking a refund
regarding amounts LVI paid for 48 drums of waste - fails, as
does their “first to breach” defense to
Plaintiff's claim for breach of the HECO Subcontract.
Defendants have also failed to prove that the HECO
Subcontract was terminated by operation of the other asserted
Terms and Conditions of the HECO Subcontract (i.e., note
2/paragraph 17, paragraph 4, or paragraph 10).
also entitled to $13, 472.51 on its unjust enrichment claim
related to the HECO Project for time and materials related to
mercury component disposal (as set forth in Invoice 7864-06).
It is also entitled to prejudgment interest on this amount at
a per diem rate to be determined in a supplemental filing.
has not met its burden of proof as to the $25, 000 it claimed
under Invoice 7864-07 for “mobilization,
demobilization, and waste documentation” from January
2012. These specific tasks were not included in the scope of
the HECO Subcontract (or would have been included in the unit
prices), and were not claimed until October 15, 2014 - well
over two years after they would have been performed.
the Kahuku Project, PCS is entitled to recover for the unpaid
invoices 8246-13, -14, -15, -18, and -19 (totaling $23,
942.46) - invoices which are not excused by the “pay if
paid” clauses. Prejudgment interest is also awarded as
set forth in the table at page 58 of Plaintiff's Proposed
Findings of Fact and Conclusions of Law, ECF No. 164 at 62
(and as incorporated in the Findings below).
PCS is entitled to $8, 115.18 in demurrage charges outside
the scope of the Kahuku Contracts, as set forth in Invoices
8246-16 and 8246-17. Prejudgment interest is awarded at the
per diem rates set forth on pages 58 and 59 of
Plaintiff's Proposed Findings and Conclusions, ECF No.
164 at 62-63 (and as incorporated in the Findings below).
total amount of damages/restitution is summarized as follows:
Basis of Award
Count I (ACM work to Waste Management)
$ 699, 044.74
Count I (Non-hazardous solids to Tajiri)
$ 22, 478.25
Count II (Mercury component removal)
$ 13, 472.51
Count III (Kahuku project invoices)
$ 23, 942.46
Count IV (Demurrage charges)
$ 8, 115.18
$ 767, 053.14
filed this lawsuit against LVI in the Circuit Court of the
First Circuit, State of Hawaii, on April 19, 2016. ECF No.
1-3. The Complaint alleged claims for breach of contract and
unjust enrichment with respect to the HECO Project (Counts I
and II) and the Kahuku Project (Counts III, IV, and V).
Id. LVI removed the action to this Court on May 18,
2016, based on diversity of citizenship, 28 U.S.C. §
1332. ECF Nos. 1, 6.
26, 2016, LVI and NRS filed their Answer to the Complaint,
and LVI asserted a Counterclaim for a refund from PCS for
alleged overpayments. ECF No. 8. And on June 9, 2016, PCS
filed an Answer to the Counterclaim. ECF No. 12.
February 21, 2017, PCS filed a Motion for Partial Summary
Judgment on the liability of LVI for PCS's claims
pertaining to the HECO Project, ECF No. 44, and Defendants
filed two Motions for Partial Summary Judgment - one as to
PCS's claims pertaining to the HECO Project, ECF No. 46,
and one as to PCS's claims pertaining to the Kahuku
Project, ECF No. 47. On April 27, 2017, PCS filed an Amended
Motion for Partial Summary Judgment, ECF No. 80, and an
Amended Complaint, ECF No. 82, to correct certain allegations
in the original Complaint. The court heard the Motions on May
30, 2017. ECF No. 108.
26, 2017, the court entered an “Order: (1) Granting in
Part and Denying in Part Plaintiff's Amended Motion for
Partial Summary Judgment, ECF No. 80; (2) Denying
Defendants' Motion for Partial Summary Judgment on Counts
I and II of Complaint, ECF No. 46; and (3) Granting in Part
and Denying in Part Defendants' Motion for Partial
Summary Judgment on Counts III, IV, and V of Complaint, ECF
No. 90” (the “MSJ Order”). See ECF
No. 111; Stip. Facts ¶ 13; Pac. Commercial Servs.,
LLC v. LVI Envtl. Servs., Inc., 2017 WL 2817883 (D. Haw.
June 26, 2017).
Order determined as a matter of law that on or about April
23, 2012, LVI and PCS entered into the HECO Subcontract - a
valid and enforceable subcontract for waste transportation
and disposal services. Stip. Facts ¶ 13. It determined
that the HECO Subcontract bound LVI to use PCS exclusively,
and was not terminable at will by LVI. 2017 WL 2817883, at
*6-7. It also determined that LVI breached the HECO
Subcontract by diverting work away from PCS, but left for
trial the duration of the breach and the amount of damages
resulting from the breach. Id. at *7. The MSJ Order
also did not resolve issues related to PCS's claims for
unjust enrichment, as well as questions regarding LVI's
Counterclaim and LVI's other defenses. Id. at
*8-10. After the MSJ Order was issued, the parties agreed
upon a modified trial process, and stipulated to certain
alternative trial procedures. See ECF Nos. 125 &
January 17 and 18, 2018, the court held a non-jury trial on
matters remaining after the MSJ Order, and after the parties
stipulated to a set of uncontested facts for trial.
See ECF No. 140. Many of the remaining issues were
submitted based on extensive briefing and stipulated
documentary evidence, with only two witnesses - Chang for
PCS, and Moore for LVI - testifying in person as to key
issues at trial. Following trial, the parties submitted
proposed findings of fact and conclusions of law, along with
supplemental briefing and evidence. See ECF Nos.
160, 161, 163, 164, 166 & 168.
with the stipulated facts and trial testimony, the evidence
consists of declarations, exhibits, and deposition
transcripts filed in conjunction with the respective trial
briefs, see ECF Nos. 141, 142, 143, 144, 145 &
146, although not all of the proffered exhibits were admitted
into evidence. To summarize the exhibits: (1) Exhibits
P-1 to P-91, P-62A to P-67A, D-1 to D-38, D- 40 to D-42, and
D-52, are in evidence; but (2) Defendant's proffered
exhibits D-39 and D-43 to D-51 are not (although some of
those proffered exhibits duplicate other exhibits that were
Plaintiff also separately submitted deposition designations
and excerpts, which, without objection, are also in evidence.
ECF No. 144.
FINDINGS OF FACT
Plaintiff PCS is a limited liability company organized under
the laws of the State of Hawaii. Stip. Facts ¶ 1. It
provides services relating to transportation and disposal of
hazardous and other waste materials. Stip. Facts ¶ 2.
PCS has two members, Jingbo Chang (“Chang”) and
his wife, Wendy. ECF No. 6 at 3; ECF No. 6-6; Chang Dep., Ex.
P-2 at 10. Both are residents of Hawaii, and at all times
between the filing of the original Complaint on April 19,
2016 through the present, have been residents of Hawaii. ECF
Nos. 166-1 & 166-2.
Chang is the general manager and senior environmental
scientist of PCS, where he has overall responsibility for the
company's daily operations. Tr. at 1-17 to 1-18. He has a
bachelor's degree in chemistry, a master's degree
focusing on biochemistry, and a Ph. D. focusing on computer
simulation. Id. at 1-18. He came to the United
States from China in 1986. Ex. P-2 at 11; Tr. at 1-86 to
1-87. As the court observed while Chang testified at trial,
he speaks with a heavy accent. See, e.g., Tr. at
1-25. Although Chang demonstrated fluency in English, both
conversationally and in scientific areas (both during trial
testimony and as evident in the trial exhibits), some of his
written emails contain minor grammatical mistakes that may
affect their meaning, as discussed below. See, e.g.,
Defendant LVI is a corporation organized under the laws of
the State of California. Stip. Facts ¶ 3. On or around
July 2014, LVI changed its name to Northstar Contracting
Group, Inc. (“NCG”). Stip. Fact ¶ 4. NCG is
organized under the laws of the State of California, with its
principal place of business in California. ECF No. 6 at 4.
Defendant NRS is a corporation organized under the laws of
the State of Delaware. Stip. Facts ¶ 5. Its principal
place of business is in Austin, Texas. ECF No. 6 at 4.
and NRS are affiliates of Northstar Group Holdings, LLC,
which is a limited liability company organized under the laws
of the State of Delaware. Stip. Facts ¶ 6.
The HECO Project and the HECO Subcontract
HECO Project consisted of the deconstruction of two
generating units, Units 5 and 7, at HECO's power plant in
downtown Honolulu. Each unit consisted of two large oil-fired
boilers, condensers, and turbine generators. The project
included the abatement and demolition of those components and
associated piping, cleaning of the project site, painting,
and some metal fabrication. Waste generated from the
demolition and abatement work also needed to be disposed of
properly by characterizing, labeling, transporting, and
transferring it to appropriate facilities. Tr. at 2-6:5-13,
connection with its bid on the HECO Project, LVI solicited
PCS to submit a subcontractor proposal for waste
transportation and disposal and cleaning services relating to
the HECO Project. Stip. Facts ¶ 8.
July 23, 2011, PCS submitted to LVI a proposal to be a
subcontractor for transportation and disposal of certain
waste materials from the HECO Project. Stip. Facts ¶ 9;
July 29, 2011, LVI submitted a corresponding proposal to HECO
to be the prime contractor for the HECO Project. Stip. Facts
¶ 10; Ex. P-7.
used PCS's proposal in preparing its proposal to HECO for
the prime contract. Stip. Facts ¶ 11.
HECO accepted LVI's proposal and entered into a prime
contract with LVI for the HECO Project (the “HECO Prime
Contract”). Ex. P-8; Tr. at 2-16:13-16. The HECO Prime
Contract was a firm fixed-price contract. Ex. P-8 at 2.
and LVI entered into a subcontract (the “HECO
Subcontract”) for transportation and disposal of waste
for the HECO Project. The terms of the HECO Subcontract are
memorialized in the attachments to an email dated April 23,
2012 from Damariz Quezada (“Quezada”) of LVI to
Chang of PCS. Exhibit P-12 is a true and correct copy of the
HECO Subcontract. Stip. Facts ¶ 13; see also
Ex. P-11; Tr. at 1-22:7-23.
Chad Maddock (“Maddock”), the LVI project manager
for the HECO Project until June 2012, negotiated the HECO
Subcontract with PCS. Moore, president and branch manager of
LVI, was not involved in the negotiations. Tr. at 2-22:15-24,
2-118:8-22; Moore Dep., Ex. P-1 at 36:15-16, 37:3-7; Stip.
Facts ¶ 20.
PCS's role in the HECO Project was as a waste broker. A
waste broker assists the waste generator with various tasks
including identifying and characterizing waste; researching
and selecting a disposal facility; packaging and labeling
waste; preparing waste and shipping documentation;
transporting waste containers from the project site to the
ocean carrier for mainland shipping; arranging for hauling by
rail to final disposal facilities for disposition; and
compliance with federal, state, and local regulations.
See Trial Declaration of Jingbo Chang, ECF No. 141-1
(“Chang Decl.”) ¶ 4; Tr. at 1-21:4-22.
the court determined previously at summary judgment, the HECO
Subcontract obligated LVI to use PCS exclusively for the
waste transportation and disposal services listed in the HECO
Subcontract. Stip. Facts ¶ 16.
the court determined previously at summary judgment, LVI
breached the HECO Subcontract by diverting work away from
PCS, and was in breach as of the initial diversion beginning
approximately in January 2013. MSJ Order at 18; Pac.
Commercial Servs., 2017 WL 2817883, at *7.
did not invoke any of the termination provisions of the HECO
Subcontract. Ex. P-1 at 67:14 to 68:5. LVI never sent a
notice to PCS terminating the HECO Subcontract. See
Ex. P-89 (LVI's Response to Plaintiff's First Request
for Admissions), Response to No. 9. Moore believed that he
did not need to notify PCS because he thought (incorrectly)
that there was no contract between LVI and PCS. Tr. at
total, LVI paid PCS $526, 376.04 for PCS's work on the
HECO Project. Stip. Facts ¶ 18.
June or July 2012, Moore conducted a cost analysis of the
HECO Project and determined that the project was behind
schedule and over budget. Tr. 2-23:22 to 2-24:6. LVI
implemented measures to increase production and efficiency
and control abatement costs. Tr. at 2-24:7 to 2-25:3.
Diversion of Asbestos-Containing Material Work
the demolition work in the HECO Project progressed, LVI
encountered a problem with disposal of brick encasing two
boilers inside Unit 5. The bricks were surrounded by
asbestos-containing insulation. Tr. at 2-25:4-24.
was LVI's subcontractor for transportation and disposal
of the Asbestos-Containing Material (“ACM”).
Stip. Facts ¶ 17.
December 2012, HECO considered segregating the asbestos from
the brick waste and disposing the material as two separate
waste streams - friable (low density) ACM and non-friable
(high density) ACM. Ex. P-18 at 2; Ex. P-19 at 3.
HECO Prime Contract identifies two categories of ACM waste,
i.e., friable (low density) and non-friable (high density).
Ex. P-8, Part C at PageID #5412 (Line Items 35-36), ECF No.
143-2 at 96. In turn, the HECO Subcontract identifies the
same two categories of ACM waste. Ex. P-12 at 4 (Line Items
Friable (low density) ACM is very light material that
contains asbestos and includes materials like thermal
insulation, foam, ceiling tiles, or drywall. Ex. P-1 at
71:5-9; Ex. P-3 at 36:18-24; Tr. at 1-25:21 to 1-26:3.
Non-Friable (high density) ACM is very heavy material that
contains asbestos and includes materials like bricks and
Transite concrete pipes. Ex. P-1 at 71:8-9; Ex. P-3 at
36:14-16, 38:1-8; Tr. at 1-26:8-14.
charged $825 per ton for friable ACM compared to $425 per ton
for non-friable ACM. Ex. P-12 at 4.
HECO separated the waste streams, it would incur higher costs
to remove friable asbestos on the surface of the non-friable
materials, but it would pay less in disposal costs because it
could take advantage of the cheaper rate to dispose of
non-friable ACM. Ex. P-3 at 39:6-16. Conversely, not
separating the non-friable ACM into two waste streams would
increase disposal costs but lower abatement costs. See
self-performed the asbestos abatement work. Tr. at 2-8:1-7.
LVI charged HECO on a lump sum basis for abatement. Ex. P-7
at 150-51, Line Items 15-17, 22-24; Tr. at 2-145:2-3.
reason for the large cost differential for disposal between
friable and non-friable ACM is the difference in weight and
density. The cost of shipping ACM in a container is the same
regardless of the weight of the material being shipped in the
container. Tr. at 1-26:20 to 1-27:1; Ex. P-18 at 1. Friable
ACM tends to be lighter than non-friable ACM but less dense,
so it can fill up a container more easily. Ex. P-18 at 1-2;
Ex. P-2 at 116:7-11; Chang Decl. ¶ 15.
HECO, not PCS, decided that ACM disposal would be charged by
the ton. Tr. at 1-27:8-12. Because shipping costs are fixed,
while transportation and disposal charges increase with
weight, PCS's cost per ton for ACM transport and disposal
is inversely related to the weight of the load. As the weight
increases, the cost per ton decreases, and as the weight
decreases, the cost per ton increases. As a result, PCS's
profit margin increases as the weight of the load increases,
and decreases as the weight of the load decreases. Tr. at
1-27:18 to 1-28:4.
each category of ACM, PCS made assumptions about the weight
of each load. PCS assumed that each container of friable ACM
would be 10 tons, and that each container of non-friable ACM
would be 20 tons. Based on those assumptions and the rates in
the HECO Subcontract, PCS expected to charge $8, 250 for a
full container of friable ACM ($825 per ton times 10 tons)
and $8, 500 for a full container of non-friable ACM ($425 per
ton times 20 tons). Tr. at 1-29:7 to 1-30:15.
Another reason for the cost differential between disposal of
friable and non-friable ACM is that the two types of ACM need
to be disposed of in different facilities. Friable ACM is
disposed of at the landfill operated by Chemical Waste
Management (“Waste Management”), and non-friable
ACM goes to the Columbia Ridge landfill. Ex. P-3 at 37:3-23;
Chang Decl. ¶ 16; Ex. P-18 at 1-2.
a waste stream contains both friable and non-friable ACM, the
entire waste stream must be classified as friable ACM because
any waste containing friable ACM must go to the landfill
operated by Waste Management. Ex. P-3 at 37:3 to 38:18; Tr.
at 2-28:19 to 2-29:7.
HECO ultimately decided to dispose of the brick together with
the asbestos. Tr. at 1-33:10 to 1-34:19, 2-28:11-12.
December 20, 2012, Moore informed Chang: “Good news for
us, HECO has agreed to not scrutinize the cleanliness of the
brick and ship all as friable waste.” Ex. P-20 at 2.
HECO's decision not to segregate the brick waste into
separate waste streams and dispose of it all as friable ACM
tremendously increased the quantity of this low density ACM
in the HECO Project and created a more profitable situation
for whoever handled this waste disposal. Chang Decl. ¶
19; Tr. at 1-34:23 to 1-35:1. That is, HECO's decision
not to segregate the brick waste, thus generating significant
quantities of heavy waste to be categorized as friable ACM,
dramatically increased the profitability of the ACM work.
HECO's decision created an unexpected increase in the
volume (tonnage) of expensive, friable ACM work. See
Tr. at 1-28:22-24; Chang Decl. ¶ 19; Ex. P-2 at 115:22
to 116:16. At the same time, HECO's decision lowered
abatement costs, which LVI performed on a lump sum basis.
See supra Finding 28.
After deciding not to segregate the brick waste, HECO
continued to ask LVI about the differences in cost for ACM
disposal, which prompted Moore to ask Chang to look into
cost-savings options for ACM disposal, perhaps by sending the
ACM to a different disposal facility. Ex. P-20 at 1-2; Ex.
P-2 at 142:24 to 143:4.
Chang checked alternative disposal sites and determined that
the Waste Management disposal facility was still the
cheapest. Chang informed Moore of the results of his inquiry.
Ex. P-2 at 142:17 to 143:7; Tr. at 1-35:22 to 1-36:12. Chang
also told Moore: “We are losing money for some of the
line items, but will be compensated with some other line
items.” Ex. P-20 at 1.
a December 21, 2012 email to Chang, Moore wrote, in pertinent
I don't want PCS to eat any costs, period. My intent was
to have you squeeze your vendors. . . . Again Jingbo, do not
cut PCS costs. This should be a good, long term project for
both of us.
January 7, 2013, Moore wrote an internal email to Mark
Sampson of LVI stating, in pertinent part: “Mark - WM
pricing is why our vendor PCS is so high.” Ex. P-19 at
1. What Moore meant was that “Waste Management['s]
pricing is why our vendor [PCS's price] is so
high.” Ex. P-1 at 87:3-4; see also Tr.
2-131:4-11 (“PCS's price is high because its
sub-vendor, [Waste Management's] prices are high”).
Moore made this statement after obtaining a proposal from
Waste Management to perform the work directly (i.e., not
through PCS), Ex. P-22 at 1, 6-8, and conducting a cost
analysis that he testified had led him to believe that PCS
was supposedly “grossly overcharging” LVI for the
ACM work. See Tr. at 2-130:11 to 2-132:6.
When Moore obtained Waste Management's proposal, the HECO
Project was behind schedule and budget, LVI was losing money,
and it had exhausted efforts to control production costs. Tr.
at 2-41:23 to 2-42:7.
Moore gave inconsistent testimony regarding whether he
attempted to renegotiate PCS's rates for ACM work. In a
February 21, 2017 declaration, Moore stated:
I had several conversations with Jingbo Chang of PCS
regarding the rates that PCS was charging for hauling and
disposing of asbestos materials and the markups that it was
applying to the charges to its subcontractors but was not
able to reach an agreement with PCS that brought its charges
down for that service down to a market level that could be
sustained for the HECO Project.
Ex. P-21 at 3, ¶ 5. At his deposition, Moore could not
recall trying to negotiate PCS's rates for ACM work and
disavowed the correctness of paragraph 5 of his February 21,
2017 declaration. See Ex P-1 at 76:7 to 77:22. At
trial, however, Moore stood by his declaration
notwithstanding that he stated it was inaccurate at his
deposition. See Tr. at 2-134:2 to 2-138:7.
Moore did not attempt to renegotiate PCS's rates for ACM
other than to ask Chang to try to find a cheaper disposal
facility. Tr. at 1-37:1-4. Similarly, Moore did not ask Chang
to lower PCS's rate charged to LVI for ACM disposal. Tr.
Moore testified that when he compared Waste Management's
proposal with PCS's rates, he learned that PCS was
charging “[m]ultiple times the market rate.” Tr.
at 2-39:17-24. Moore understood, however, that Waste
Management, as a disposal facility, provides different
services than a waste broker like PCS, and that PCS's
prices are a markup of Waste Management's prices. Tr. at
2-127:14 to 2-128:3.
PCS's charges for its services as a waste broker are
factored into its unit rates. Tr. at 1-22:4-6.
January 8, 2013, Moore accepted and signed Waste
Management's proposal for ACM disposal in the HECO
Project. Ex. P-23 at 6.
did not give PCS any more ACM work to handle after January 7,
2013. Ex. P-27 (Invoice 7864-04) at 2.
Waste Management began directly handling ACM disposal for LVI
on January 17, 2013. Ex. P-72-2 at 1 (Manifest 19453).
February 28, 2013, LVI and Waste Management executed a formal
Subcontract Agreement for the disposal of friable ACM for an
amount not to exceed $300, 000.00. Stip. Facts ¶ 37; Ex.
an email exchange dated February 5, 2013 Moore confirmed to
Chang that LVI would be using Waste Management for asbestos
disposal instead of PCS and would be “going direct on
trucking” until the end of Unit 5 abatement. Stip.
Facts ¶ 26; Ex. P-24. Moore did not purport to exercise
any right of termination in the HECO Subcontract in sending
this email. Tr. at 2-128:14 to 2-129:9.
February 28, 2013, Moore followed up with Chang and asked:
“Jingbo - in light of the asbestos shipping, let me
know if you were still intending to service the balance of
the hazmat for the project. I am pre-planning for the next
couple months.” Ex. P-25 at 1. Chang replied: “We
want to do whatever are [sic] on the contract. We do not want
to breach the contract agreement. LVI can make any decision
what to do, but we honor the agreement.” Id.;
Tr. at 1-38:8 to 1-39:7.
Although LVI was losing money on the HECO Project as a whole,
it was not losing money on line items that were charged on a
unit rate basis. Ex. P-1 at 27:23-28:1; Tr. at 2-140:6-18.
Later, in an August 15, 2013 email, Moore told Chang:
“The reason LVI chose to go direct with [Waste
Management] was because there was no money being made for the
light loads.” Ex. P-33 at 1. “Light loads”
refers to low density ACM. Ex. P-1 at 26:21 to 27:6.
unit price that LVI charged HECO for ACM transportation and
disposal was a markup of the unit price that PCS charged LVI.
Ex. P-1 at 43:12-16, 82:22 to 83:10, 97:19 to 99:20; Tr. at
charged HECO $1, 170 per ton for transportation and disposal
of low density ACM. The price did not change throughout the
HECO Project. Ex. P-7 at 152, Line Item 35; Tr. at 2-140:24
a July 23, 2013 email to Quezada, Moore estimated the profits
LVI earned to date from ACM disposal after going direct to
Damariz - based on what Johnny is wanting, my records show
loads invoiced direct from WM from 1/9/13 to 5/16/13 total
447 tons. At 27 total loads that avg 16 tons x inv to heco
$1, 170/ton is $18, 720 less cost of $5, 174.30/container =
$13, 545.70 in our pocket.
Total inv $505, 440 less cost $139, 706.10 = $365.733.90
Ex. P-30 at 1; Ex. P-1 at 101:1 to 105:5.
is readily apparent, then, that LVI increased its profits
substantially by contracting directly with Waste Management,
rather than using PCS for ACM work as the HECO Subcontract
requires. Table 1 below compares the profitability of ACM
transportation and disposal for LVI when it subcontracted
with PCS versus when it contracted directly with Waste
Choice of Vendor
LVI Billings to HECO
Average LVI profit/load
$1, 675, 533.60
$1, 173, 626.50
forth in Table 1, when LVI used PCS, it earned an average
profit per load of $4, 987.97 of friable ACM. When LVI used Waste
Management, its average profit per load increased to $12,
099.24 per load of friable ACM.
is more likely than not that LVI diverted the ACM work to
Waste Management because LVI wanted to offset its losses on
the lump sum work in the HECO Project by obtaining a larger
share of the profits that would be generated due to
HECO's decision to not segregate the brick waste - work
that otherwise would have gone to PCS under the terms of the
a measure of damages to PCS for this diversion of work from
PCS to Waste Management, PCS calculates that it would have
earned $699, 044.75 in profits if LVI had given it the work.
PCS bases this calculation on the amount it would have
charged LVI for 1432.08 tons ($1, 215, 885) minus the
estimated costs it would have incurred for the work ($516,
840.25). See Ex. P-65A. The estimated costs are
based on an average of the actual costs PCS incurred for the
34 loads of ACM work that it actually handled before the
diversion. See Ex. P-62A. The parties have
stipulated that these calculations are correct based on the
corresponding documentary evidence (e.g., waste manifests,
timesheets, invoices) that are part of the record at Exhibits
P-69 to P-83). See ECF No. 159 (stipulation); Ex.
P-64A; ECF No. 145 at 67-69. (To be clear, however, the
parties have not stipulated to the fact of
any damages to PCS - only to the calculations and
methodology, if the court determines that PCS is entitled to
damages for such work. See ECF No. 159.) The court
accepts this stipulation and therefore does not independently
calculate the amount of potential damages for this diversion.
Hazardous Solid Waste (“Sludge”) Transportation
The “Small Font” Provision of Item 4 of the HECO
HECO estimated that 10 tons of hazardous solid waste would
need to be transported and disposed of in the HECO Project.
Ex. P-7 at 152, Item 38; Tr. at 2-14:2-15. The hazardous
waste stream was small in quantity relative to other waste
streams in the HECO Project. See Ex. P-6 at 7-8,
Line Items 35-45; Ex. P-7 at 152, Line Items 35-45; Tr. at
PCS's July 23, 2011 subcontract proposal to LVI for the
HECO Project listed a unit price of $700 per ton for
transportation and disposal of hazardous solid waste. Ex. P-6
at 7, Line Item 38. The proposal listed “360” as
an estimated quantity. Id. Maddock sent the initial
draft of the HECO Subcontract to Chang on March 23, 2012. Ex.
P-9 at 1. Consistent with PCS's earlier proposal, the
draft HECO Subcontract stated in Line Item 4 that
transportation and disposal of hazardous solid waste would be
charged at $700 per ton. Id. at 4, Line Item 4.
based its unit price of $700 per ton for hazardous solids on
the assumption that PCS would be given full container loads
(i.e., 20 tons per container) of hazardous solid
waste to handle. Tr. at 1-40:23 to 1-41:4; 1-48:11-16.
After submitting its bid, PCS had learned that the hazardous
solid waste would come “like sludge in drums” and
in “small quantit[ies].” Tr. at 1-43:25 to
1-44:11. On March 23, 2012, Chang wrote back to Maddock after
receiving the initial draft of the HECO Subcontract,
commenting on Line Item 4 that the bid was based on
“bulk solid at large volume.” Ex. P-10 at 1. He
was responding because PCS had learned that the hazardous
solids waste stream would also be mixed with asbestos and
liquid and would be small in volume, thus requiring disposal
at a different facility than originally thought and would be
much more expensive. Chang Decl. ¶ 9; see also
Tr. at 1-45:7-17. Specifically, Chang told Maddock as to Line
You may want to send an RFI to HECO. We were bidding on bulk
solid at large volume to send to Chem Waste, but looks like
the waste stream is not only RCRA hazardous, but also mixed
with asbestos and liquid too at small quantity at a time.
Chem Waste is not able to accept the [waste stream], and we
have to send it to Clean Harbors. Clean Harbors will charge
this waste stream at a much higher price.
Ex. P-10 at 1.
Chang expressed concern about the $700 per ton unit price
because the cost of shipping waste, which is the major
determinant of the total cost of waste transportation and
disposal, is affected by the volume of waste involved. The
$700 per ton pricing assumes, among other things, shipping
full containers using 20 foot or 40 foot containers
(approximately 40, 000 pounds of hazardous waste per
container). PCS's shipping vendor, Matson, charges a
minimum of 40, 000 pounds regardless of the container size
used. When this waste stream is in non-bulk packaging such as
drums, and the quantity is small, the shipping and handling
cost and disposal cost are much higher than in bulk packaging
in a full container. PCS accordingly wanted to have
flexibility to use the most appropriate shipping and handling
method based on the characterization and volume of the waste
stream. Chang Decl. ¶ 9.
response to Chang's concern, Maddock proposed the
following to Chang in an April 4, 2012 email:
Leave line item 4 as is with the understanding that this
pricing is for volume loads in container amounts. Smaller
volume will require appropriate adjustment. Additionally, if
characterization changes due to contents of material, there
could be price adjustments.
Ex. P-11 at 1 (numbered item 2); see also Tr. at
1-47:21 to 1-49:3.
Chang accepted Maddock's proposal. Ex. P-11 at
1. The language in Maddock's April 4, 2012
proposal was reproduced verbatim (starting with
“Smaller volume will require . . .”) in small
font in Line Item 4 of Exhibit A to the HECO Subcontract (the
“Small Font Provision”), next to the $700 per ton
price. Ex. P-12 at 4, Line Item 4 (reproduced below). The
Small Font Provision is part of the HECO Subcontract. 2017 WL
2817883, at *8.
Chang understood that the process for price adjustments under
the Small Font Provision entails PCS sending a price quote to
LVI followed by negotiations. Tr. at 1-49:18 to 1-50:5. As
the MSJ Order concluded, “the provision invites further
discussion or negotiations to determine the
‘appropriate adjustment' - it does not allow PCS to
unilaterally increase the price without LVI's
consent.” 2017 WL 2817883, at *8 (emphasis omitted).
The July 2012 Load of Seven Drums
July 17, 2012, PCS arranged for the transportation and
disposal of sludge and sediment mixed with lead and asbestos
in connection with the HECO Project. Stip. Facts ¶ 19;
Ex. P-14 at 4; Ex. P-15. This load of sludge and sediment
came in seven drums and contained liquid. Tr. at 1-52:21 to
1-53:8. The billing and payment for this task led to (at
least initial) confusion, and is an important part of this
Because the sludge was semi-solid and contained liquid, it
was packed into drums, which is considered non-bulk
packaging. Ex. P-2 at 58:1-20; Tr. at 1-53:7-19.
August 28, 2012, Moore sent an email to Chang (and others)
with a subject line “Re: heco waste and
manifests.” Ex. P-13 at 2. It stated in part:
Jingbo - manifests received for initial drums of sludge
shipped in June [sic - July]. However, there are no drum
weights and that is how we invoice. Let me know if you have
weights per drum.
August 29, 2012, Chang sent a reply email (consistent with
the Small Font Provision of the HECO Subcontract) to Moore
[Normally] the disposal facility charge by drum for waste in
drum (non-bulk), not by weight. As far as the weight on the
manifest is less than 10% difference, they don't change
it to the actual weight. We have to provide change order to
HECO for those drums. Our price was based on large quantity
and can be shipped in full 40' container to the one