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April 12, 1990


The opinion of the court was delivered by: Sweet, District Judge.


Defendant, Bell Atlantic TriCon Leasing Corporation, (named as formerly known, Tri-Continental, and referred to as "TriCon") has moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment to dismiss the complaint of plaintiff Ogden Martin Systems of Tulsa, Inc. and to recover on its counterclaim for transaction expenses. For the reasons set forth below, this motion is granted.


Ogden Martin Tulsa ("OMT") is a corporation organized and existing under the laws of the State of Oklahoma, with its principal place of business at 2122 South Yukon Avenue, Tulsa, Oklahoma. Ogden Martin Tulsa is a wholly-owned subsidiary of Ogden Martin Systems, Inc. ("Ogden Martin"), which, in turn, is an indirect, wholly-owned subsidiary of Ogden Projects, Inc. ("OPI"). All are wholly-owned subsidiaries of Ogden Corporation ("Ogden Corp."), a Delaware corporation having its principal place of business in New York, New York. The foregoing entities are hereinafter collectively referred to as "Ogden." Ogden is engaged in the business of owning and operating plants (commonly known as resource recovery facilities) that generate steam and electricity by incinerating municipal waste. Using an incinerator and grate system developed by Martin GmbH of Munich, West Germany, Ogden constructs, owns and/or operates municipal solid waste resource recovery facilities throughout the United States.

David L. Sokol ("Sokol") is the President and Chief Executive Officer of OMT, Ogden Martin, and OPI and is Co-President and a member of the Board of Directors of Ogden Corp.

Defendant TriCon is an indirect subsidiary of the Bell Atlantic Corporation ("Bell") and a direct subsidiary of Bell Atlantic Enterprises Corporation, which in turn is a direct subsidiary of Bell Atlantic Leasing Investments, Inc. which is itself a direct subsidiary of Bell. These entities are collectively referred to as "Bell." TriCon is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 95 North, Route 17 South, Paramus, New Jersey. TriCon loans money and makes other capital investments on behalf of Bell and other corporate members of the Bell Group. At all times relevant to this action, TriCon's investment decisions were made by a group of senior executives called the Senior Review Committee ("SRC").

Each party to the transaction at issue was represented by an investment advisor and by lawyers. Shearson Lehman Brothers, Inc. ("Shearson") and Sullivan & Cromwell ("S & C") acted for Ogden, while Commercial Union Capital Corporation ("Commercial Union") and Dewey, Ballantine, Bushby, Palmer & Wood ("Dewey Ballantine") acted for TriCon. The principal members of the TriCon team were: James Boyan ("Boyan"), TriCon's General Counsel; Mark Camora ("Camora"), President of Commercial Union; William Cordiano ("Cordiano"), Vice President of Commercial Union; Thomas Currier ("Currier"), corporate partner at Dewey Ballantine; Raymond Dombrowski ("Dombrowski"), Bell's in-house tax attorney; Michael Foster ("Foster"), TriCon's Senior Vice President in charge of this transaction; and Everett Jassy ("Jassy"), tax partner at Dewey Ballantine.

Prior Proceedings

Ogden commenced this action in or about October 1986 seeking approximately $1,750,000.00 in damages for an alleged breach of contract. On January 8, 1987, TriCon interposed an answer and counterclaim and, on August 24, 1988, with leave of Court, an amended answer and counterclaim. On August 18, 1989, TriCon moved for summary judgment before The Honorable John M. Walker, Jr., and the motion was considered submitted as of December 1, 1989. Following the appointment of Judge Walker to the Second Circuit, this action was reassigned. Pursuant to the request of the parties and the court, the motion was reargued on January 19, 1989, and the motion was considered fully submitted as of that date.

The Pleadings

Ogden advances as an alternative theory that the exchange of the documents referred to above indicates that the parties had reached agreement on all the essential terms of the proposed sale and leaseback and by virtue of the custom and practices of the leveraged leasing industry, the parties mutually and expressly bound themselves to do all that good faith required to consummate the sale and leaseback financing. Ogden alleges that TriCon breached that obligation when it aborted the financing in the fashion and for the expressed reason that it did on July 18, 1986.

TriCon's Answer and Counterclaim ("Answer") alleges that TriCon's undertaking to proceed with the sale and leaseback financing did not evidence intent to be bound and was subject to a number of conditions precedent, including Ogden's obligation to tender insurance "reasonably satisfactory" to TriCon, and the execution of certain additional documents. The Answer alleges that those conditions precedent were never satisfied.

The Answer includes a counterclaim alleging that "when TriCon accepted Ogden's offer" (the June 10 letter), TriCon and Ogden agreed that if the transaction did not close for any reason other than a "default by the Owner Participant [TriCon] in making its investment" Ogden would pay Tricon's transaction expenses. The Answer alleges that TriCon's refusal to perform the sale and leaseback financing on July 18, 1986 did not constitute a default by it, and therefore Ogden is obliged to pay all the transaction expenses TriCon incurred in connection with the aborted sale and leaseback. Last summer Tricon amended its Answer, adding counterclaims alleging that Ogden breached the duty to bargain in good faith, and fraud. Further, the Amended Answer alleges that Ogden fraudulently enticed TriCon into the proposed sale and leaseback by not disclosing to TriCon the actual state of the environmental laws as of May 1986 and the imperfections of environmental science. TriCon seeks indeterminate damages on these counterclaims.


OMT was created in 1984 for the specific purpose of designing, constructing, and operating the Facility located in Tulsa, Oklahoma. The Facility consists of the first and second units of a mass burn solid waste disposal, steam and electric power generating resource recovery facility. The Facility receives and stores solid waste, burns the waste, and produces steam and/or electricity. Along with a third unit which was expected to be completed in 1988 (the "Third Unit"), the Facility was designed to process up to 1,125 tons of solid waste per day and generate approximately 16.5 megawatts of electricity or 240,000 pounds of steam per hour.

On or about April 9, 1984, Ogden entered into a service agreement (the "Service Agreement") with the Tulsa Authority for Recovery of Energy ("TARE"), a municipal agency responsible for the collection of residential, commercial and light industrial solid waste in the City of Tulsa, whereby TARE agreed, for an initial period of twenty-one years, to supply to the Facility an annual minimum of 219,000 tons of solid wastes and pay Ogden a service fee for the disposal of the waste.

Prior to May 1986, Ogden determined to enter into a sale/leaseback financial transaction whereby it would sell the Facility and Third Unit to an owner trust established for the benefit of an institutional equity investor which, in turn, would enter into a lease of the Facility to Ogden. Ogden engaged Shearson as its financial advisor and exclusive placement agent for the purpose of arranging equity participation of the leaseback of the Facility. Although Ogden had constructed other resource recovery facilities, this was to be the first time that one of its facilities would be the subject of a sale/leaseback transaction.

In May 1986, Shearson issued to potential investors, including TriCon, the PPM describing the proposed sale/leaseback of the Facility. The PPM set forth the terms for the proposed sale/leaseback and invited potential investors to submit proposals for the acquisition of the Facility and the Third Unit and its leaseback to Ogden. Part IV of the PPM, headed "Summary of Proposed Terms" (the "Term Sheet") set forth the essential details for the proposed transaction.

The Term Sheet included the following relevant terms:

Paragraph VI

Facility Cost; Third Unit Cost: The total cost of the Facility
  will equal the fair market value of the Facility on the
  Facility Closing Date as determined by a qualified independent
  appraiser. The Facility Cost is expected to be approximately
  $85,000,000.00. The total cost of the Third Unit, if included,
  will equal the fair market value of the Third Unit on the Third
  Unit Closing Date as determined by a qualified independent
  appraiser. The Third Unit Cost is expected to be approximately
  The Owner participant's equity commitment in each case will be
  sufficient to accommodate a variation of 10% in Facility Cost
  and Third Unit Cost.

Paragraph VIII

Closing Dates: It is anticipated that closing and funding of the
  equity participation for a lease of the Facility will occur on
  or about July 17, 1986 (the "Facility Closing Date"), at which
  time construction of the Facility is expected to be
  substantially complete. The Facility will have been placed in
  service for tax purposes not more than 90 days prior to the
  Facility Closing Date.
  The closing and funding of the equity participation for a lease
  of the Third Unit, if included, is expected to occur during the
  first quarter of 1988 (the "Third Unit Closing Date"). In order
  to accommodate any unanticipated construction delays, the Owner
  Participant's equity commitment for the Third Unit will extend
  until December 31, 1988.

Paragraph XXIII

Insurance: The Lessee will maintain liability and casualty
  insurance on the Facility in amounts and against such risks,
  including deductible and self-insurance provisions, consistent
  with Lessee's obligations under the terms of the Service
  Agreement between the Lessee and TARE and the Loan Agreement
  between the Lessee and the TPFA; provided, however, that
  casualty insurance will be in an amount equal to Stipulated
  Loss Value.

Paragraph XXIX

Tax Indemnifications: The Lessee will indemnify the Owner
  Participant against the actual loss of any Tax Benefits
  resulting primarily and directly from any act or omission of
  the Lessee, other than those required or expressly permitted by
  the terms of the Lease, or any breach of the Lessee's
  The Lessee will not indemnify the Owner Participant for any
  loss of Tax Benefits resulting from a change in the Code, the
  income tax regulations or any other laws or regulations. In
  addition, the Lessee's obligations to indemnify the Owner
  Participant will be subject to other exceptions

  customary in leveraged lease transactions.
  The Lessee will have the option to finance any required
  indemnity payment to the Owner Participant as supplemental
  rent, either as a lump sum payment or in ...

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