Am. Paper Recycling Corp.. v. Ihc Corp..

775 F.Supp.2d 322

AMERICAN PAPER RECYCLING CORP.

v.IHC CORPORATION, MPS/IH, LLC, and Wilmington Paper Corp.

Civil Action No. 09–10761–RGS.

United States District Court, D. Massachusetts.

April 7, 2011.

Carlo Cellai, Cellai Law Offices, Boston, MA, for American Paper Recycling Corp.Christopher S. Finnerty, Jeffrey S. Patterson, Nelson Mullins Riley & Scarborough LLP, Boston, MA, for MPS/IH, LLC.Charyn K. Hain, Varnum, LLP, Grand Rapids, MI, for Wilmington Paper Corp.Jeffrey R. Martin, Catherine Elizabeth Murillo, Burns & Levinson LLP, Boston, MA, for IHC Corporation.

MEMORANDUM AND ORDER ON CROSS–MOTIONS FOR SUMMARY JUDGMENT

STEARNS, District Judge.

American Paper Recycling Corporation (APR) brought this lawsuit to compel performance by defendants IHC Corporation (IHC) ¹ and MPS/IH, LLC (MPS) of a waste paper output sales contract. APR also seeks to enjoin the sale of waste paper by MPS to an APR competitor, Wilmington Paper Corporation (Wilmington). All parties have moved for summary judgment.

PROCEDURAL BACKGROUND

Defendants removed this case (filed originally in Bristol Superior Court) to the federal district court on diversity grounds. After defendants moved to dismiss the removed Complaint, APR filed an Amended Complaint alleging breach of contract and breach of the covenant of good faith and fair dealing against IHC and MPS, and tortious interference with contractual relations against MPS and Wilmington. On August 7, 2009, the court heard oral argument and denied the motions to dismiss without prejudice. The court also granted APR 120 days of discovery limited to an exploration of the corporate relationship between MPS and Ivy.

Following the preliminary discovery period, the parties filed cross-motions for summary judgment. After an April 13, 2010 hearing, the court rejected APR's contention of a de facto merger between Ivy and MPS and, as a result, dismissed Count III of the Amended Complaint (breach of contract against MPS), Count IV (breach of the covenant of good faith and fair dealing against MPS), and Count VII (specific performance against MPS). The court also entered summary judgment for Wilmington on APR's claim of tortious interference with contractual relations (Count VI), finding no plausible basis to believe that Wilmington “acted out of any motive to gratuitously inflict harm on APR, or in accepting a corporate opportunity for the benefit of its own shareholders, acted with improper motive or improper means.” See April 23, 2010 Order, 707 F.Supp.2d 114, 122–23 (D.Mass.2010).

After completion of all discovery, the parties renewed their cross-motions as to the remaining counts of the Amended Complaint.² IHC moves for summary judgment against APR as to Count I (breach of contract); Count II (breach of the covenant of good faith and fair dealing); Count VII (specific performance); and Count VIII (violation of Mass. Gen. Laws ch. 93A). APR cross-moves for judgment on the same counts contending that “sufficient undisputed facts have been submitted to ... enter Judgment against the Defendant [IHC], as a matter of law.” MPS moves for judgment on the remaining claims against it: Count V (tortious interference); and Count VIII (violation of Mass. Gen. Laws ch. 93A). Wilmington also moves for judgment on APR's Chapter 93A claim against it.

BACKGROUND

APR is an Illinois corporation with a principal office in Mansfield, Massachusetts. IHC and MPS have corporate headquarters in New York. Wilmington's corporate offices are in New Jersey.

APR is engaged in the business of purchasing waste paper and other paper products for recycling. Prior to the events giving rise to this litigation, Ivy was engaged in the business of manufacturing paper packaging for CD–ROM manufacturers. As a by-product of its business, Ivy generated significant quantities of recyclable waste paper. APR paid Ivy an agreed rate based on the volume and quality of the waste paper that it received. Ivy operated plants in, among other locations, Terre Haute, Indiana, and Louisville, Kentucky.

On November 6, 1990, Ivy and APR entered into a Waste Paper Sales Contract (Sales Contract) drafted by APR under which Ivy agreed to sell all of its waste paper to APR. The Sales Contract, in relevant part, provided that:

E. It is mutually agreed that the quantities, classification, price periods during which the Agreement shall be effective, packing, shipping and other provisions shall be as follows:

1. Entire accumulation of saleable waste paper stock generated at [Ivy] plants.

2. Price per ton for each grade shall be adjusted monthly to confirm [sic] to Mill Purchase Order prices less $10.00 per ton.

3. This Agreement shall continue throughout December 31, 2004, and shall be automatically renewed at the same terms unless written cancellation is given by either party 90 days prior to the expiration of this contract period.

* * *

Beginning in February of 1991, Ivy and APR executed the first of ten amendments to the Sales Contract under which APR provided Ivy with financing to modernize and automate its facilities and Ivy agreed to extensions of the Sales Contract.

In November of 1993, APR undertook to “add[ ] baling equipment [and to build out space], for the purpose of gathering waste paper ... at the Ivy Hill L.A. California Plant” at a cost of $386,515 to APR. Ivy granted APR the right to purchase ninety percent of its waste paper product for another ten years (to January 1, 2015). One year later, in November of 1994, the parties executed Amendment # 4. APR agreed to provide additional baling equipment for Ivy's Louisville, Kentucky plant at a cost to APR of $65,545. Ivy agreed to extend the Sales Contract for an additional year to January 1, 2016.

In March of 1996, the parties amended the Sales Contract a fifth time. APR agreed to finance and install additional baling equipment at Ivy's existing plants. Ivy granted APR a right of first refusal for the purchase of the waste paper to be generated at its new Burbank, California plant. Although the pre-printed amendment form included language extending the Sales Contract for an additional year, the provision was stricken by agreement of the parties. The Sales Contract was, however, extended for an additional year when, in July of 1996, Ivy and APR executed Amendment # 6 on APR's agreement to supply Ivy with air conveyor equipment for its Los Angeles plant.

Under Amendment # 7, executed on May 15, 2000, APR provided Ivy with 0% financing for an additional baling system for the Los Angeles plant. Ivy agreed to extend the Sales Contract to January 1, 2018. When Ivy sought financing to repair two balers at its Terre Haute plant, APR again provided generous terms. The resulting Amendment # 9 extended the Sales Contract to January 1, 2019. A final Amendment # 10 was negotiated on May 1, 2006. APR agreed to finance (at 0% interest) a $26,280.98 baler repair at Ivy's Los Angeles plant, and Ivy agreed to a twenty-four-month extension of the Sales Contract. The parties included language in Amendments # 3 through # 10, stipulating that “[s]hould monthly waste paper sales be insufficient to cover the above payment [for financing for purchase or repair of systems], Ivy Hill shall pay the difference to APR for any such month(s) upon receipt of [an] invoice from APR.” The final version of the Sales Contract, as amended, was to expire on December 31, 2020.

On April 9, 2009, pursuant to an Asset Purchase Agreement (APA), Cinram (U.S.) Holdings, Inc. (Cinram) sold substantially all of Ivy's assets to MPS in a cash-and-stock deal ($23,250,000 in cash and 7,750 shares of C Preferred Stock in MPS).³ MPS agreed to assume most, but not all, of Ivy's liabilities. Ivy notified APR of the proposed APA approximately three months before it was signed. Ivy retained thirty-two contracts and assets (identified on Schedule 1.2(m) of the APA). Among the assets that remained with Ivy was the

Waste Paper Sales Contract dated November 6, 1990, as amended by Amendment # 1 dated February 19, 1991, Amendment # 2 dated November 26, 1991, Amendment # 3 dated November 9, 1993, Amendment # 4 dated November 1, 1994, Amendment # 5 dated March 20,1996, Amendment # 6 dated July 1, 1996, Amendment # 7 dated May 15, 2000, Amendment # 8 dated March 29, 2001, Amendment # 9 dated May 6, 2003 and Amendment # 10 dated May 1, 2006, between American Paper Recycling Corporation and [Ivy].

MPS and Wilmington have been doing business together since at least October of 2006. Prior to MPS's purchase of Ivy's assets, Wilmington provided waste paper recycling services for nine facilities owned by subsidiaries of MPS's parent company, including plants close to Ivy's Louisville, Kentucky, and Terre Haute, Indiana facilities.

On April 16, 2009, Ray Wheelan, a Vice–President of MPS, notified Kenneth Golden, APR's President, that MPS intended to consolidate the recycling business at the newly-acquired Terre Haute and Louisville plants with MPS's existing contract with Wilmington. Wheelan told Golden that APR's recycling service at these facilities was being terminated effective May 10, 2009. APR then warned Wilmington that it had an “exclusive contract with Ivy Hill.” On April 24, 2009, Wheelan wrote to APR cautioning that “[y]ou need to stop scheduling pick ups at the Terre Haute and Louisville plants effective immediately. All pick ups have been discontinued.” APR responded with this lawsuit.

DISCUSSION

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A ‘genuine’ issue is one that could be resolved in favor of either party, and a ‘material fact’ is one that has the potential of affecting the outcome of the case.” Calero–Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19 (1st Cir.2004), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A party seeking ...