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NATIONAL UTILITY SERVICE, INC. v. CHESAPEAKE CORP.
April 14, 1999
NATIONAL UTILITY SERVICE, INC., PLAINTIFF,
CHESAPEAKE CORPORATION AND WISCONSIN TISSUE MILLS, INC., DEFENDANTS.
The opinion of the court was delivered by: Walls, District Judge.
This matter comes before the Court on the motion of plaintiff
National Utility Service, Inc. ("NUS") for summary judgment on
its breach of contract claims against defendants Chesapeake
Corporation ("Chesapeake") and Wisconsin Tissue Mills, Inc.
("WTM"). Pursuant to Fed. R.Civ.P. 78, the Court decides this
motion without oral argument. Plaintiff NUS's motion for summary
judgment is granted in part and denied in part.
NUS, a New Jersey corporation with its principal place of
business in Park Ridge, New Jersey, is an energy and utility cost
consultant. Chesapeake is a Virginia corporation which
manufactures and sells tissue products, specialty packaging and
displays, and forest and building products. Its principal place
of business is in Richmond, Virginia. Chesapeake's subsidiary,
WTM, also a manufacturer of tissue products, is a Delaware
corporation with its principal place of business in Menasha,
Wisconsin. This Court exercises diversity jurisdiction over this
This action arises out of a July, 1988 contingent fee contract
between plaintiff NUS and Chesapeake wherein Chesapeake engaged
NUS to make recommendations concerning its utility and energy
expenditures. Chesapeake agreed to pay NUS an initial service fee
of $9,500 and after that fee had been recaptured, fifty percent
of any refunds or savings realized from implementation of NUS's
recommendations for a period of sixty months. (Compl. ¶¶ 26-27.)
Each month during the five-year term of the agreement, Chesapeake
was to send NUS the electric, gas, petroleum, and water/sewer
usage bills for itself, all its subsidiaries and divisions to
enable NUS to make cost-saving recommendations and to determine
defendants' savings as a result of plaintiff's advice. (Compl. ¶¶
Special provisions were made for WTM in the contract, a form
agreement drafted by NUS, with the exception of paragraph 11,
which Chesapeake negotiated for two of its facilities. Paragraph
Two of our [Chesapeake's] locations, Wisconsin Tissue
Mills, Inc. and the Kraft Products facility at West
Point, have substantial utility costs. Usually
contracts for these utility services involve
extensive negotiation and intricate agreements to
determine charges for utilities furnished. It is our
preference that these facilities' utility costs be
audited rather than critiqued. Recommendations may be
suggested, but Chesapeake is under no obligation to
provide information or respond to such requests or
The parties understood the terms "audited" and "critiqued": an
audit was an examination of the utility invoices and bills to
ensure that the utility correctly calculated the bills; a
critique involved an analysis of the Chesapeake facilities' usage
to ensure that the facilities were utilizing the most economical
rate and suggestions as to how the facilities could reduce their
utility costs. (Paulette Aff. Ex. 5 ¶ 5, Ex. 6 at 29, 90, Ex. 11
After the agreement was executed, a number of Chesapeake
facilities, including WTM, sent their utility bills for the
previous twelve months to NUS. (Defs.' Br. In Opp. at 6.) By
letter dated March 22, 1989, NUS issued its first recommendations
for the Chesapeake facilities including WTM. (Id.) Some of the
recommendations for WTM were forward-looking "critiques,"
including a recommendation that WTM improve its power factor at
Plant No. 1. (Id. at 7, 9, Paulette Aff. Ex. 15 ¶¶ 9-11.) About
May, 1989, Chesapeake advised NUS that these critique
recommendations were outside the scope of the agreement,
that Chesapeake would not respond to them, and that NUS should
not follow up on them. (Paulette Aff. Ex. 15 ¶ 11.)
In an internal NUS memorandum dated October 9, 1989, Christine
R. O'Neil, an NUS account analyst described NUS's position with
regard to recommendations for WTM. She wrote, "we feel that our
hands are tied with regard to our success in achieving the
desired result (i.e., mutual profit for our companies) due to the
fact that there is a clause in our contract which limits our
efforts with regard to Wisconsin Tissue Mills (Paragraph 11)."
(Paulette Aff. Ex. 16.) By letter dated November 7, 1989, NUS
wrote the following to Chesapeake in order to clarify the meaning
of paragraph 11 of the contract:
Specifically, this paragraph is in no way intended to
preclude our company from submitting recommendations
on your Wisconsin Tissue Mills, Inc. and Kraft
Products facility in West Point. . . . your company
would welcome recommendations for cost savings on
these two locations with the understanding that
Chesapeake Corporation has the final determination as
to whether or not these recommendations will be
implemented. All we request of Chesapeake Corporation
is that they review the recommendations and advise us
of reasons why in certain cases they may not be
viable. You retain the final authorization to
implement any recommendations. It is our
responsibility to point out these recommendations to
you along with any supporting data as to their
feasibility. If you are in agreement with our
clarification of paragraph 11 as contained herein,
please sign one copy of this letter and return it for
our files. . . . Once we receive this information we
will reevaluate these two facilities and submit any
recommendations which we have at this point in time,
and/or follow through on ideas which may have been
suggested in the past. (Compl.Ex. B.)
John W. Kirk, Chesapeake's Controller who had executed the
original agreement, signed and returned the letter copy on
November 13, 1989.(Id.)
Chesapeake paid the initial service fee on August 4, 1988 and
later paid NUS an additional $3,149 through July 8, 1992.
(Compl. ¶ 28.) NUS seeks recovery for four utility cost saving
projects allegedly implemented by Chesapeake: (1) the power
factor correction at WTM's Plant No. 1; (2) purchase of
transportation gas at the Roanoke facility; (3) purchase of
transportation gas at the CD & P facility; and (4) a refund and
elimination of sales tax on electricity at the Holly Hill
facility. (Defs.' Br. In Opp. at 14-15.) Chesapeake claims that
NUS is not entitled to recover for the power factor correction at
WTM because critique recommendations for WTM were specifically
excluded from the contract. Moreover, Chesapeake was already in
the process of improving the power factor at WTM at the time NUS
made the recommendation. NUS cannot recover for the Roanoke
recommendation, according to Chesapeake, because it recommended a
service that did not exist at the time or for several years
thereafter. Even if Chesapeake were liable for the Roanoke
recommendation, its obligation to pay for the resultant savings
ended when it sold the Roanoke facility on May 23, 1997. (Defs.'
Br. In Opp. at 35.) Chesapeake admits liability for NUS's
recommendation that CD & P purchase transportation gas but
disputes the period of time for which it must pay NUS for the
resultant savings. Chesapeake does not dispute its liability for
the sales tax savings at the Holly Hill facility but contests
Chesapeake's request for prejudgment interest.
A. Summary Judgment Standard
Summary judgment is appropriate where the moving party
establishes that "there is no genuine issue of fact and that [it]
is entitled to a judgment as a matter of law." Fed.R.Civ.P.
56(c). A factual dispute between the parties will not defeat a
motion for summary judgment unless it is both genuine and
material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute
is genuine if a reasonable jury could return a verdict for the
nonmovant and it is material if, under the substantive law, it
would affect the outcome of the suit. See Anderson, 477 U.S. at
248, 106 S.Ct. 2505. The moving party must show that if the
evidentiary material of record were reduced to admissible
evidence in court, it would be insufficient to permit the
non-moving party to carry its burden of proof. See Celotex v.
Catrett, 477 U.S. 317, 318, 106 S.Ct. 2548, 91 L.Ed.2d 265
Once the moving party has carried its burden under Rule 56,
"its opponent must do more than simply show that there is some
metaphysical doubt as to the material facts in question."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The opposing party
must set forth specific facts showing a genuine issue for trial
and may not rest upon the mere allegations or denials of its
pleadings. See Sound Ship Building Corp. v. Bethlehem Steel
Co., 533 F.2d 96, 99 (3d Cir. 1976), cert. denied,
429 U.S. 860, 97 S.Ct. 161, 50 L.Ed.2d 137 (1976). At the summary judgment
stage the court's function is not to weigh the evidence and
determine the truth of the matter, but rather to determine
whether there is a genuine issue for trial. See Anderson, 477
U.S. at 249, 106 S.Ct. 2505. In doing so, the court must construe
the facts and inferences in the light most favorable to the
non-moving party. See Wahl v. Rexnord, Inc. 624 F.2d 1169, 1181
(3d Cir. 1980).
1. Whether Plaintiff Should Be Judicially Estopped from
Arguing that Virginia Law Applies to This Case
In its summary judgment motion, plaintiff relies almost
exclusively on New Jersey contract law. In its opposition papers,
defendant agrees that New Jersey law applies to this case.
However, plaintiff contends for the first time in its reply that
Virginia's parol evidence rules should apply and that it never
argued that New Jersey law applies to this case. (Pl.'s Reply at
3.) Defendants argue that plaintiff should be estopped from
taking this position because it is contrary to its reliance on
New Jersey law throughout the litigation. In its January 21, 1998
answers to defendants' interrogatories, plaintiff maintained that
New Jersey law applied to the July, 1988 agreement, the November
7, 1989 letter from NUS to Chesapeake, and the relationship
between the parties. Before plaintiff submitted its reply papers,
it had relied on the contract laws of New Jersey, not Virginia.
Defendants request that the Court strike that portion of
plaintiff's reply brief which discusses the parol evidence rule
under Virginia law.
The Third Circuit has recognized the doctrine of judicial
estoppel, "a judge-made doctrine that seeks to prevent a litigant
from asserting a position inconsistent with one that she has
previously asserted in the same or in a previous proceeding. It
is not intended to eliminate all inconsistencies, however slight
or inadvertent; rather, it is designed to prevent litigants from
playing fast and loose with the courts." In re Chambers Dev.
Co., 148 F.3d 214, 229 (3d Cir. 1998) (quoting Ryan
Operations, G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355,
358 (3d Cir. 1996)) (citations and internal quotations omitted).
An inconsistent position alone does not trigger the doctrine,
unless intentional self-contradiction is used as a
means of obtaining unfair advantage. Thus, the
doctrine of judicial estoppel does not apply when the
prior position was taken because of a good faith
mistake rather than as part of a scheme to mislead
the court. An inconsistent argument sufficient to
invoke judicial estoppel must be attributable to
Chambers, 148 F.3d at 229, (citing Ryan, 81 F.3d at 362).
"The basic principle . . . is that absent any good explanation, a
party should not be allowed to gain an advantage by litigation on
one theory, and then seek an inconsistent advantage by pursuing
an incompatible theory." 18 Charles A. Wright, Arthur R. Miller &
Edward H. Cooper, Fed. Prac. & Proc. § 4477 (1981 & Supp. 1998).
The party who seeks the estoppel need not demonstrate detrimental
reliance on the previous position, and the party against whom
estoppel is sought need not have benefitted from the earlier
position. Chambers, 148 F.3d at 229; Ryan, 81 F.3d at 361.
There is a question as to whether state or federal judicial
estoppel law applies in a diversity action. In Chambers, our
Circuit acknowledged that New Jersey judicial estoppel law is
consistent with the federal law. Chambers, 148 F.3d at 229 n.
13. The need for comparative analysis of state and federal
judicial estoppel law is absent. Here, as in Chambers, because
there is no relevant difference between the two rules, this Court
will apply federal law.
The Ryan court developed a two part test to determine whether
judicial estoppel is an appropriate remedy. First, is the
position of the party against whom estoppel is sought
inconsistent with a position it previously asserted in the
proceedings? Second, if so, did that party assert either or both
of the inconsistent positions in bad faith-i.e., with intent to
play fast and loose with the court? Ryan, 81 F.3d at 361.
Plaintiff contends that its position that Virginia law applies is
not inconsistent with any that it has previously taken in this
litigation. It asserts that its interrogatory responses that New
Jersey law applied were not binding admissions, and that it has
never argued in a brief that New Jersey law applies. The Court
finds that plaintiff's position that Virginia parol evidence
rules apply is inconsistent with its earlier reliance on New
Jersey contract law. Plaintiff's argument that it never contended
that New Jersey law applies to this case is disingenuous.
Although plaintiff never affirmatively stated that New Jersey law
applies in its moving papers, it relied on New Jersey contract
law without a single reference to Virginia law. Notwithstanding
plaintiff's protest, its interrogatory responses are admissions.
As to the second part of the test, whether either or both of
the inconsistent positions were asserted in bad faith, plaintiff
claims that it had not argued that Virginia law applies earlier
because it had not fully researched the choice of law issue until
preparation of its motion for summary judgment. Although this may
be true, it does not explain why NUS did not assert that Virginia
parol evidence rules apply in its moving papers when defendants
would have had an opportunity to respond to the assertion.
Plaintiff's explanation is suspect, but it does not demonstrate
bad faith or an intent to play fast and loose with the Court.
Because the Court has not found evidence that plaintiff took the
position in bad faith that Virginia law applies, plaintiff is not
judicially estopped from adopting that stance. Because plaintiff
first adopted this position in its reply brief, defendants did
not have an opportunity to respond to it. In the interests of
justice to remedy this circumstance, the Court ...