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Pacific Commercial Services, LLC v. LVI Environmental Services, Inc.

United States District Court, D. Hawaii

August 10, 2018

PACIFIC COMMERCIAL SERVICES, LLC, a Hawaii limited liability company, Plaintiff,
v.
LVI ENVIRONMENTAL SERVICES, INC., nka NORTHSTAR CONTRACTING GROUP, INC., ET AL., Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          J. Michael Seabright Chief United States District Judge.

         I. INTRODUCTION

         Plaintiff 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. (“NRS”) (collectively, “Defendants”)[1] 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.

         Pursuant 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).

         The 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.

         II. SUMMARY

         For 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.

         LVI 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 filing.

         But PCS 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.

         On the 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).

         PCS is 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.

         But PCS 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.

         As for 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).

         Finally, 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).

         The total amount of damages/restitution is summarized as follows:

Basis of Award

Damages/Restitution

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

Total

$ 767, 053.14

         III. PROCEDURAL HISTORY

         PCS 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.

         On May 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.

         On 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.

         On June 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).

         The MSJ 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 & 139.

         On 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.

         Along 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.[2] 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 admitted).[3] Plaintiff also separately submitted deposition designations and excerpts, which, without objection, are also in evidence. ECF No. 144.

         IV. FINDINGS OF FACT

         A. The Parties

         1. 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.

         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., Ex. P-32.

         3. 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.

         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.

         5. NCG 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.

         B. The HECO Project and the HECO Subcontract

         6. The 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, 2-8:8-15.

         7. In 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.

         8. On 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; Ex. P-6.

         9. On 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.

         10. LVI used PCS's proposal in preparing its proposal to HECO for the prime contract. Stip. Facts ¶ 11.

         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.

         12. PCS 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.

         13. 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.

         14. 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.

         15. As 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.

         16. As 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.

         17. LVI 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 2-128:23-25.

         18. In total, LVI paid PCS $526, 376.04 for PCS's work on the HECO Project. Stip. Facts ¶ 18.

         19. In 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.

         C. Diversion of Asbestos-Containing Material Work

         20. As 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.

         21. PCS was LVI's subcontractor for transportation and disposal of the Asbestos-Containing Material (“ACM”). Stip. Facts ¶ 17.

         22. In 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.

         23. The 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 1-2).

         24. 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.

         25. 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.

         26. PCS charged $825 per ton for friable ACM compared to $425 per ton for non-friable ACM. Ex. P-12 at 4.

         27. If 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 id.

         28. LVI 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.

         29. One 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.

         30. 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.

         31. For 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.

         32. 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.

         33. If 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.

         34. 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.

         35. On 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.

         36. 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.

         37. 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.

         38. 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.

         39. 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.

         40. In a December 21, 2012 email to Chang, Moore wrote, in pertinent part:

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.

Id.

         41. On 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.

         42. 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.

         43. 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.

         44. 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. at 2-133:2-4.

         45. 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.

         46. PCS's charges for its services as a waste broker are factored into its unit rates. Tr. at 1-22:4-6.

         47. On January 8, 2013, Moore accepted and signed Waste Management's proposal for ACM disposal in the HECO Project. Ex. P-23 at 6.

         48. LVI did not give PCS any more ACM work to handle after January 7, 2013. Ex. P-27 (Invoice 7864-04) at 2.

         49. Waste Management began directly handling ACM disposal for LVI on January 17, 2013. Ex. P-72-2 at 1 (Manifest 19453).

         50. On 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. P-26.

         51. In 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.

         52. On 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.

         53. 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.

         54. 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.

         55. The 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 2-142:4-7.

         56. LVI 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 to 2-142:3.

         57. In a July 23, 2013 email to Quezada, Moore estimated the profits LVI earned to date from ACM disposal after going direct to Waste Management:

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 profit.

Ex. P-30 at 1; Ex. P-1 at 101:1 to 105:5.

         58. It 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 Management.

         Table 1

Choice of Vendor

ACM Loads

Tons

LVI Billings to HECO

Vendor Cost

LVI Profit

Average LVI profit/load

PCS

34

536.26

$627, 424.20

$457, 833.22

$169, 590.98

$4, 987.97

WM

97

1, 432.08

$1, 675, 533.60

$501, 907.10

$1, 173, 626.50

$12, 099.24

         As set forth in Table 1, when LVI used PCS, it earned an average profit per load of $4, 987.97 of friable ACM.[4] When LVI used Waste Management, its average profit per load increased to $12, 099.24 per load of friable ACM.[5]

         59. It 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 HECO Subcontract.

         60. As 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.

         D. Hazardous Solid Waste (“Sludge”) Transportation and Disposal

         1. The “Small Font” Provision of Item 4 of the HECO Subcontract

         61. 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 1-43:21-23.

         62. 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.

         63. PCS 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.

         64. 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 Item 4:

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.

         65. 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.

         66. In 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.

         67. 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.

         (Image Omitted)

         68. 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).

         2. The July 2012 Load of Seven Drums

         69. On 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 case.

         70. 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.

         71. On 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.

Id.

         72. On August 29, 2012, Chang sent a reply email (consistent with the Small Font Provision of the HECO Subcontract) to Moore stating:

[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 disposal ...

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