JRM Hauling & Recycling Services, Inc.
The Newark Group, Inc.
(with first initial, no space for Sullivan, Dorsey, and
Walsh): Leibensperger, Edward P., J.
FINDINGS OF FACT AND RULINGS OF LAW AFTER
P. Leibensperger Justice
contract dispute was tried before me, jury waived, from
October 23 to 27, 2017. The dispute arises out of a contract
between plaintiff, JRM Hauling & Recycling Services, Inc.
(" JRM"), and defendant, The Newark Group, Inc.
(" Newark"), wherein Newark agreed to purchase and
JRM agreed to sell " all secondary fiber produced by
[JRM] at" JRMâs location in Malden, Massachusetts (the
" Agreement"). JRM claims that Newark wrongfully
terminated the Agreement in January 2015. By its terms, the
Agreement was to run for ten years from its execution on
November 1, 2006 to October 31, 2016.
asserts its claim in two counts: breach of contract and
breach of the implied covenant of good faith and fair
dealing. Newark counterclaims, pursuant to a provision of the
Agreement, seeking indemnification from JRM for Newarkâs
costs, including legal fees and disbursements, incurred
defending any unsuccessful claims made by JRM.
FINDINGS OF FACT
company with headquarters in Peabody, Massachusetts, is a
hauler of trash and recycled material. JRM is under contract
with municipalities and businesses to pick up at curbside the
trash generated by the occupants. JRM picks up trash that has
been separated by the occupants to put newspaper and other
paper into one bin and all other trash in another bin. The
contract in this case concerns what JRM was to do with the
" loose paper" picked up at curbside. Under its
contracts with the municipalities, JRM was required to
guarantee that the materials it collected from the residents
would be recycled.
is a New Jersey corporation with corporate offices in
Cranford, New Jersey. In February 2015, as discussed below,
Newark was acquired by Caraustar Industries, Inc.
2005, JRM learned that a facility located at 1130 Eastern
Avenue in Malden, Massachusetts (" the Malden
facility") might be available as a location for JRMâs
operations. The facility had been operated previously as a
recycling center. JRM began negotiations with the owner of
the facility, Robert Heffernan, who was, at that time, a
Newark employee. At around the same time in 2005, Newark was
looking for sources of supply of Secondary Fiber/RMP for use
by its mill in Fitchburg, Massachusetts. Secondary Fiber/RMP
is a description of the loose news and other paper collected
by JRM. The mill in Fitchburg manufactured recycled paper
board products from the secondary fiber. In particular, the
mill was producing " graphic board" to be used as
game boards and covers for books.
Gold was a long-time executive of Newark. He started
employment with Newark in 1978. In 2006, Gold was Senior
Vice-President of the Recycled Fibers Division of Newark.
Gold lived in Swampscott, Massachusetts. His family had a
long history of working in the recycle industry. Gold knew
the president and sole shareholder of JRM, James R. Motzkin,
and Motzkinâs son, James (" Jimmy") S. Motzkin. In
2006, Gold became involved, on behalf of Newark, in the
discussions with JRM regarding a lease of the Malden facility
and a supply contract for secondary fiber for Newark.
to Gold, Newark wanted to secure all of the output of
secondary fiber from JRM. Newarkâs demand for secondary fiber
for its Fitchburg mill was so large that it also contracted
with other suppliers of secondary fiber to provide the
material. Gold was told by his superiors to get sufficient
supply under contract because it was very important to the
success of the Fitchburg mill. The Fitchburg mill was looking
for as much as 10, 000 tons monthly of secondary fiber. Gold
testified that at the time of the supply contract with JRM it
did not matter to Newark where JRM collected secondary fiber
to deliver to Newark. He did not even consider the
possibility that JRM could deliver more secondary fiber than
the Fitchburg mill could use. I find this testimony to be
simultaneously negotiated (1) an agreement with Heffernan to
lease the Malden facility; (2) an agreement with Newark to
provide approximately $250, 000 in financing for the purchase
of equipment for the Malden facility; and (3) the supply
Agreement with Newark that is the subject of this case. A
deal was struck. JRM entered into a lease for the Malden
facility with a term of 10 years starting on July 1, 2005.
JRM would not have entered into the lease for the Malden
facility if it were not also entering into the Agreement with
Newark to supply the Fitchburg mill. JRM needed a guaranteed
market for secondary fiber to sustain its operations at the
new Malden facility.
Agreement was entered into on November 1, 2006. The term of
the Agreement was for ten years, from November 1, 2006 to
October 31, 2016. The form of the Agreement was a standard
form developed and presented by Newark. Both parties,
however, were represented by counsel with respect to the
negotiation of the Agreement. Paragraph 1 of the Agreement is
AGREEMENT TO PURCHASE AND SELL
Buyer agrees to buy, and Seller agrees to sell, all secondary
fiber produced by Seller at the following location(s):
1130 Eastern Avenue, Malden, MA on the following
terms and conditions:
(Emphasis in the original.) Paragraph 1 goes on to describe
the price, grade and quality of the secondary fiber.
Paragraph 1 also includes a promise by Newark as the buyer to
purchase a minimum of 500 tons per month. The Agreement
contains no specified limit in tons that constitutes a
maximum amount of secondary fiber that Newark was obligated
The Agreement includes an integration clause stating that the
Agreement constitutes the entire agreement between the
parties. The parties agreed that the Agreement may not be
amended, nor may compliance with its terms be waived, except
pursuant to a writing signed by the party to be charged. The
Agreement precludes JRM from assigning any interest in the
Agreement without first obtaining the written consent of
Newark. The Agreement provides that " the duties, rights
and remedies of the parties hereunder shall be governed by
the substantive laws or the State of New Jersey, without
regard to its conflicts of law principles." The
Agreement provides for the waiver of trial by jury with
respect to any litigation arising out of the Agreement.
Finally, the Agreement provides that Newark, but not JRM,
shall be indemnified for its legal fees and disbursements and
other costs incurred in enforcing or defending against any
unsuccessful claims made by JRM with respect to the
time JRM entered into the Agreement with Newark, the Malden
facility was the only location that JRM used to receive
recycled materials from its trucks picking up trash from
customers pursuant to JRMâs contract with municipalities and
businesses. The JRM trucks picked up trash at curbside, drove
to Malden, and then simply dumped the trash on the floor of
the Malden facility. Recycled paper was dumped in a separate
area from other recyclables. A JRM employee then pushed with
a loader vehicle the loose paper onto a conveyer belt leading
to a compactor. Another employee watched the loose paper on
the belt and pulled out anything that was not paper. The belt
dropped the paper into the compactor. From the compactor, the
paper was pushed into the trailer of a truck. The paper was
not baled or otherwise processed. The paper was delivered to
the Agreement, Newark could select a mutually agreeable
location for Newark to pick up the secondary fiber from JRM.
The parties subsequently agreed, however, that JRM would
deliver the loose paper/secondary fiber to Newark for an
additional price per ton.
referenced, Gold, the lead negotiator for Newark of the
Agreement, testified that Newark did not care at the time of
entering into the Agreement whether the secondary fiber
delivered from JRM would come from the Malden facility or
elsewhere. Notwithstanding the language in the Agreement
stating that Newark was obligated to purchase " all
secondary fiber produced by Seller at the following
location(s): 1130 Eastern Avenue, Malden, MA ."
Gold testified that the specification of the collection
location was insignificant. I find this testimony to be
credible, given the heavy demand for secondary fiber
anticipated by Newark for its Fitchburg mill.
of the Contract Until 2014
eight years, from 2006 to mid-2014, the parties operated
under the Agreement with no difficulties, disagreements or
disputes. JRM typically delivered secondary fiber to Newark
each work day (on average, twenty days per month), taking
two, and sometimes three, truck loads per day to Newark. Each
delivery was approximately 20 to 25 tons of secondary fiber.
Thus, using the estimate of 25 tons per load, JRM could
deliver secondary fiber to Newark in the amount of
approximately 1, 000 to 1, 500 tons per month. For the
calendar year 2014. However, JRMâs delivery of secondary
fiber to Newark averaged 933 tons per month.
Changes Affecting Newark
about 2010, market demand for the products manufactured by
Newark at its Fitchburg mill decreased significantly. In
2011, Newark began the process of changing the products
produced at its Fitchburg mill to paperboard that required
much less loose paper/secondary fiber. As a result, Newark
began selling the loose paper received from JRM to customers
in the domestic and export market. Newark suffered losses at
an increasing rate on those transactions. By January 2014,
Newarkâs Fitchburg mill was using only ten percent of the
secondary fiber being furnished by its suppliers. Newark was
experiencing substantial losses as a result of the Agreement
Considers Getting Out of the Contract
February 2014, Mr. Frank Papa, Newarkâs CEO, stated to Gold
that " the mill needs your help to try to minimize this
expense. We canât be absorbing a $1.5 million loss for next
year. Iâm confident ...