United States District Court, E.D. Louisiana
PROGRESSIVE WASTE SOLUTIONS OF LA, INC.
ST. BERNARD PARISH GOVERNMENT
ORDER & REASONS
before the Court are Consolidated Defendants SDT, Inc. and
Sidney D. Torres, IV's (“SDT Defendants”)
Motion to Dismiss for Failure to State a Claim (R. Docs. 101,
106) and Plaintiff Progressive Waste Solution's Motion
for Summary Judgment (R. Doc. 109). After reviewing the
briefs, the applicable law, and counsels' statements at
oral argument, the Court now issues this Order & Reasons.
consolidated cases arise out of a contract dispute. Plaintiff
Progressive Waste Solutions of LA, Inc. (“PWS”)
is a Delaware corporation that specializes in solid waste
removal. R. 1 at 1-2. In early 2006, St. Bernard Parish
Government (“St. Bernard”) issued a Request for
Proposals for Municipal Solid Waste Removal, Curb Side Pick
Up. R. 1 at 2. SDT Waste & Debris Services, LLC,
(“SDT”) submitted a proposal, and on July 27,
2006, contractually agreed to provide solid waste removal
services to St. Bernard. R. 1 at 2. On February 7, 2007, SDT
entered into a Time Contract with St. Bernard regarding both
curb side pick-up services and dumpster pick-up services. The
Time Contract was set to commence on January 28, 2008, and
terminate on January 27, 2014. R. 1 at 3. The Time Contract
also provided SDT the option to extend the agreement through
July 26, 2016. R. 1 at 3.
of 2011, SDT was purchased by IESI LA Corporation, which
included the transfer and assignment of the July 27, 2006
Agreement and the February 7, 2007 Time Contract. Despite the
purported term of the Time Contract extending to at least
January 27, 2014, St. Bernard told IESI that St. Bernard
intended to terminate the contractual relationship. On
December 5, 2011, St. Bernard sought bids for curb side
pick-up services and dumpster pick up services. R. 1 at 3-4.
On December 8, 2011, IESI filed a Petition for Temporary
Restraining Order, Preliminary and Permanent Injunction, and
Declaratory Judgment in the Thirty-Fourth Judicial District
Court for the Parish of St. Bernard. R. 1 at 4. The state
court issued the preliminary injunction on December 14, 2011,
and enjoined St. Bernard from requesting proposals for bids
for solid waste collection. R. 1 at 4. One week later, the
state court enjoined St. Bernard from entering into any new
contract for the services currently being performed by IESI.
R. 1 at 4.
changed its name to Progressive Waste Solutions of LA, Inc.
(“PWS”) on January 12, 2012. In May of 2013, St.
Bernard once again issued Requests for Proposals inviting
vendors to submit proposals for the waste collection services
provided by PWS. R. 1 at 4. In response, PWS filed a Motion
for Contempt and a Second Supplemental and Amending Petition
for Temporary Restraining Order, Preliminary and Permanent
Injunction and Declaratory Judgment in state court on May 20,
2013. R. 1 at 4-5. The parties resolved their differences
before the state court could rule. St. Bernard agreed to
extend the Time Contract through December 31, 2020. PWS in
turn reduced its rates from $20.00 per household per month to
$15.50 per household. R. 1 at 5. Two months later, PWS and
St. Bernard entered into a new Time Contract that extended
PWS's provision of solid waste services until December
19, 2016, St. Bernard wrote to PWS stating that they intended
to unilaterally terminate the solid waste services contract
on July 6, 2016. St. Bernard provided two reasons for the
termination: (1) the St. Bernard Home Rule Charter prohibits
contracts for services not covered by public bid law
exceeding three years; and (2) PWS breached the contract by
missing residential pickups. R. 1 at 6, 1-7. PWS filed suit
in response, requesting injunctive relief and a declaratory
judgment. R. 1 at 7-9. PWS also sought damages for breach of
contract, detrimental reliance, and deprivation of rights
under color of law. R. 1 at 9-13.
response, St. Bernard filed five counter claims against PWS.
R. 35. First, St. Bernard alleges a breach of contract claim
for overbilling for the quantity of services performed from
August 1, 2006 through December 31, 2012. R. 35 at 8-9.
Second, St. Bernard alleges a breach of contract claim for
overbilling in pricing from January 20, 2014 to December 31,
2014 and January 21, 2015 and December 31, 2015. R. 35 at 10.
Third, St. Bernard alleges that “PWS breached its
obligations under the contract” by failing to collect
trash on certain dates and times, and allowing spillage to
occur during garbage collection. R. 35 at 11. Fourth, St.
Bernard sought a declaratory judgment that the first and
second SDT contracts, as well as the PWS contract were
awarded in violation of Louisiana's public bid law. R. 35
at 12. Finally, St. Bernard sought a declaration that the
second SDT contract and PWS contract violated the St. Bernard
Charter. R. 35 at 14. PWS seeks indemnification from the SDT
Defendants in relation to the first counterclaim.
Waste and Debris, LLC (“Pelican”), filed a Motion
for Leave to File Intervention on June 16, 2016. R. 11. The
Court granted the Order, finding that Pelican had an interest
in the litigation. Specifically, Pelican alleged that it was
hired by St. Bernard to replace PWS as the provider of
residential waste removal services in St. Bernard Parish, and
that its interests will be frustrated and it will be
prejudiced if PWS receives its requested relief.
Court denied the Motion for Preliminary Injunction on Friday,
June 24, 2016. On August 9, 2016, the Court issued an Order
resolving various motions for summary judgment filed by the
parties. The Court found that St. Bernard's contract with
PWS was invalid as it violated the terms of the St. Bernard
Charter, and its contract with Pelican was invalid because it
was reached without following St. Bernard Parish's
procedures for public service contracts. See R. 97.
October 25, 2016, PWS filed this consolidated case against
SDT, Inc. and Sidney D. Torres, IV, (“SDT
Defendants”) seeking a declaratory judgment. No.
16-15830, R. 1. PWS alleges that at on June 1, 2011 Torres
owned 100% of SDT Waste & Debris Services, LLC
(“SDT Waste & Debris), when IESI LA Corp, now known
as PWS, entered a Purchase Agreement to acquire 100%
ownership of SDT. According to the terms of that Agreement,
SDT and Torres agreed to “indemnify, defend, protect
and hold harmless” IESI or its successors from any
losses, liabilities, or claims, including costs and expenses,
sustained by IESI or a successor corporation as a result of
any intentional misrepresentations or omissions by SDT or
Torres in the Purchase Agreement. R. 1 at 4. Plaintiffs
allege this included an obligation to defend IESI in any
proceeding that was instituted after June 1, 2011 if those
claims arose before June 1, 2011. R. 1 at 4.
to Plaintiffs, St. Bernard Parish has a current suit pending
in this Court against PWS as a result of SDT's
overbilling between August 1, 2006 and December 31, 2012.
Specifically, Plaintiffs allege that a dispute between SDT
and St. Bernard arose during this period regarding disposal
costs, and while the SDT Defendants claim this dispute was
resolved, St. Bernard Parish considered litigating these
issues, and each party retained a forensic accountant to
evaluate these claims. Plaintiffs aver they were not notified
of this dispute in the Purchase Agreement. R. 1 at 6.
Plaintiffs claim St. Bernard and SDT had another dispute
regarding the appropriate number of units SDT should bill St.
Bernard during this same period. R. 1 at 7. Plaintiffs allege
that St. Bernard reduced its payments to SDT, while SDT
continued to bill St. Bernard for the same amounts.
Plaintiffs aver that the parties never resolved this dispute,
and it was not disclosed to PWS at the time of the purchase.
R. 1 at 7.
claim that each of the above disputes led to the lawsuit
between PWS and St. Bernard, as St. Bernard seeks to recover
payments made as a result of services SDT did, or did not,
provide prior to June 1, 2011. R. 1 at 8. Further, Plaintiffs
allege that Torres' threats of a lawsuit against Mr.
Taffaro, St. Bernard Parish President, constitute a threat to
institute a claim, as contemplated in the Purchase Agreement.
R. 1 at 9. Because PWS was not notified of these potential
claims and suits at the time of the sale, it now seeks a
declaratory judgment that it is entitled to indemnification
and defense costs for the portion of the St. Bernard
counterclaim that arises from the actions of the SDT
Defendants prior to June 1, 2011. R. 1 at 10. PWS submitted a
demand letter to SDT reflecting such, and SDT responded that
even if the claims fell within the terms of the
indemnification provision, that provision expired four years
after the sales date, and thus the indemnification provision
no longer applies. R. 1-6. However, SDT agreed that if the
St. Bernard claims are covered by Section 9.7 of the Purchase
Agreement, which sets out SDT's ongoing duty to defend,
than SDT would provide a defense-but not indemnification-for
the relevant counterclaim. SDT explained it had retained
counsel to coordinate this defense. R. 1-6 at 2.
argues that the temporal limitations do not apply to the
indemnification agreement, because the claims existed prior
to the agreement and were intentionally not disclosed. PWS
seeks a declaratory judgment from this Court as to its rights
to defense and indemnification under the terms of the
agreement. R. 1 at 13. Plaintiffs also seek attorney fees. R.
1 at 14.
reviewing the parties' arguments, the Court finds it
appropriate to discuss the relevant terms of the Purchase
Agreement. On June 1, 2011, IESI (now known as PWS), SDT,
Inc. and Sidney D. Torres, IV, entered a purchase agreement.
The agreement contains a chapter outlining the
indemnifications obligations SDT owed to IESI/PWS after the
sale. The relevant sections of that chapter provide:
9.1 Indemnification by Sellers. Subject to section 9.2, each
of the Sellers covenants and agrees to indemnify, defend,
protect, and hold harmless Buyer . . . from and against and
in respect of all liabilities, losses, claims, damages . . .
and costs and expenses (including without limitation
reasonable attorneys' fees) (collectively,
“Damages”) sustained, incurred, or paid by the
Buyer Indemnified Parties in connection with, resulting from,
or arising out of directly or indirectly; (a) any
misrepresentation in, omission from, breach or claim of
breach or any representation or warranty of either of the
Sellers set forth in Section 2.3, and any intentional
misrepresentation or omission by either of the Sellers
contained in this Agreement or any other document or
instrument delivered in connection with this Agreement.
9.2 Limitation of Indemnification by Sellers.
(a) Notwithstanding the foregoing, (i) Sellers' aggregate
liability for indemnification under this Agreement with
respect to any claims under Section 9.1 shall not exceed the
amount equal Ten Million and No/100 Dollars ($10, 000, 000)
and (ii) Buyer may not bring any claim under Section 9.1
after the fourth anniversary of the Closing Date. (emphasis
(b) Notwithstanding the foregoing, the provisions contained
in Section 9.2(a) shall not apply to any claim for
indemnification with respect to (i) claims made under Section
9.1(a) . . . or (iii) claims made under Sections 9.1(f), (g)
or (h) or Section 9.7.” (emphasis added).
read in conjunction, Sections 9.1 and 9.2 provide that the
Seller has an obligation to defend and indemnify the Buyer
for any claims or damages which relate to the Seller's
conduct before the Purchase Agreement. This obligation ends
four years after the date of the Purchase Agreement. However,
if the claim arises from a misrepresentation or omission the
Seller made in the Agreement, the four year time limit does
not apply. Further, Section 9.7 of the agreement provides:
(a) Sellers jointly and severally agree to defend Buyer and
the other Buyer Indemnified Parties . . . against any and all
claims or demands made or threatened to be made or causes of
actions or proceedings instituted or threatened to be
instituted against such persons in connection with any of the
matters set forth on Schedule 9.7 . . . and any other claims,
causes of actions or other proceedings that are either made
or instituted (i) prior to the Closing Date or (ii)
subsequent to the Closing Date to the extent that such
claims, actions or proceedings relate to or arise out of any
period of time on or before the Closing.
(d) sellers agree to pay for any costs incurred in connection
with the defense of the Existing Claims, including any fines,
orders, interests, penalties, settlement amounts or other
damages payable in connection therewith.
other words, Seller [SDT] agrees to defend Buyer [PWS] from
claims that are made before the Closing Date, or relate to or
arise out of the Seller's actions before the Closing. PWS
has now filed a Complaint seeking a Declaratory Judgment that
the SDT Defendants have an obligation to indemnify PWS for
any liability it incurs as a result of St. Bernard's
counterclaims. First, PWS argues the indemnity obligation
arises from Section 9.1 of the Agreement, as the
counterclaims arise from a ...