City loses millions for breach of landfill contract

After four full days of testimony and almost seven hours of deliberation, a seven-member U.S. District Court jury awarded more than $8 million to Waste Management in its lawsuit against the city of Mobile’s Solid Waste Authority. The suit was based in allegations the authority breached a long-term contract signed back in 1993.

“The court decision in favor of Waste Management’s legal action against the city of Mobile Solid Waste Authority recognizes the very significant investments made by our company during the last 20 years to ensure the city of Mobile’s landfill meets all necessary environmental standards for modern landfills,” WM Gulf Coast Senior Manager of Government and Community Affairs Rene Faucheaux said in a statement. “Now that the court has ruled on these issues, Waste Management remains willing to work with the city of Mobile Solid Waste Authority and the city of Mobile to find opportunities that will strengthen this business partnership for the benefit of the city and all Mobilians … This court ruling provides us the opportunity to proceed with those efforts.”

The contract at the center of the suit allowed the entity that would become Waste Management Mobile Bay Environmental Center to operate the Chastang Landfill. After the first two years, the contract allowed Waste Management to receive annual price adjustments of the $20-per-ton tipping fee it charged the city for disposal at the landfill.

Aside from a temporary increase to $23.50 per ton from 2005 to 2009, Waste Management attorney Jaime Betbeze told the jury, the tipping fee never changed from its original per-ton rate.

In his opening argument, Betbeze compared the unchanging rate to gas prices, or to the change in the price of tuition at Harvard University from 1993 to 2015. In 1993, Harvard tuition cost $23,514, Betbeze told the jury. In 2015, the price is $44,000, an increase of more than 87 percent.

“Yet, today the Solid Waste Authority is paying $20 per ton,” he said.  

Betbeze argued WM was entitled to money through the contract due to improvements they made at the site and because of changing regulations making the landfill more costly to operate.

In his opening remarks, SWA attorney Larry Wettermark, who also was the city attorney when the suit was filed, argued that although WM had repeatedly asked for a tipping fee rate increase and other reimbursements, they did not provide supporting documents to back up the claim, which he said was a stipulation of the contract. He said the authority and its then-Chairman Tim Morris received letters from Faucheaux asking for a rate increase and the reimbursements but, he said, those never included an invoice of expenses.

Morris testified he had met with Faucheaux face-to-face to discuss the matter, telling jurors he wasn’t against giving WM a rate increase, but asked for documents to back it up. Morris said he never got the documents and thus ignored a later request for the same increase. It was also discovered through testimony the SWA went more than three years, from 2008 to 2011, without an official public meeting. Morris said he tried to hold meetings, but could never get a quorum.

Wettermark told the jury WM made the majority of its money from private disposal at the landfill and only about 25 percent of its business came from the city’s waste stream.

Wettermark also told the jury WM owed the SWA overdue royalty payments. The authority, through the contract, is entitled to royalty payments of 5 percent, Wettermark said, on all garbage collected by WM or a third party.

Before the trial started, U.S. District Judge Kristi DuBose ruled in favor of Waste Management regarding its claim the city breached the contract by sending its yard waste to a different landfill. Rae Richardson, vice-chairwoman of the SWA, testified the authority entered into a contract with Dirt, Inc. landfill for yard waste in 2008.

Betbeze told the jury, using testimony from WM financial analyst Michael Bass, that between 2008 and 2011, the city diverted more than 277,000 tons of yard waste to the other landfill, resulting in more than $8.7 million in lost profits.

Bass testified he came up with the numbers presented in the statement by multiplying the amount in tonnage of yard waste the city sent to Dirt, Inc. by the fee charged at Chastang Landfill. He said he subtracted out the cost to Waste Management to process the extra tonnage. During cross-examination, Bass told SWA attorney Jim Rossler he didn’t factor in operational or additional equipment expenses into the figure.

Rossler asked DuBose to call a mistrial, or at least, have Bass’ testimony stricken from the record. She denied both motions, at the time, but after the jury reached a unanimous verdict against the SWA, Rossler said he would bring those motions back up through an appeals process.

Rossler told the judge he received the spreadsheet only six days before trial and didn’t have time to have it independently verified. Additionally, he questioned the accuracy of the numbers, given the way Bass arrived at the profit and loss figures.

DuBose ruled that SWA was owed back royalty payments from WM in the amount of $272,000.

The jury found in favor of WM on all four counts of the lawsuit. They found SWA in breach of contract for not allowing a rise in the tipping fee charged to the city. In addition to awarding roughly $1.7 million for that count, the jury also set a new tipping fee to charge — $27.38 per ton.

Thus, the jury also awarded more than $3.5 million on two counts related to reimbursements it said the SWA owed Waste Management. The jury also awarded $3 million for breach of contract related to moving the city’s yard waste to the Dirt, Inc. landfill.