Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BIO-SYSTEMS v. BIOWASTE SYS.

December 17, 1994

BIO-SYSTEMS, INC., Plaintiff, against BIOWASTE SYSTEMS, INC., Defendants.

ARTHUR D. SPATT, United States District Judge


The opinion of the court was delivered by: ARTHUR D. SPATT

SPATT, District Judge:

 In this diversity case, the Court is called upon to interpret the modern-day risk allocation features of a contract between two companies involved in the collection and disposal of medical waste. The plaintiff Bio-Systems, Inc. ("Bio-Systems") alleges that the defendant BioWaste Systems, Inc. ("BioWaste") breached a partnership agreement between the parties. Bio-Systems moves pursuant to Fed. R. Civ. P. 56(a) for summary judgment in its favor on the complaint. The complaint seeks a declaration of BioSystems' rights under the contract, and specific performance by the defendant of its alleged obligations under the contract. The defendant opposes the plaintiff's motion, and cross-moves for summary judgment in its favor. The parties agree on the facts of this case and do not contend that any material facts are in dispute. Rather, they only dispute the interpretation of certain provisions of the contract.

 BACKGROUND

 Prior to 1988, the plaintiff Bio-Systems collected and disposed of medical waste -- that is, waste products from hospitals and other medical facilities -- in the New York metropolitan area. As part of its operations, Bio-Systems maintained a plant in Farmingdale, New York. In 1987, BioSystems contracted with an agent to look for a purchaser of or investor in Bio-System's business. The agent introduced Bio-Systems to Scherer Healthcare, Inc., a subsidiary of which is the defendant BioWaste. Negotiations ensued between Bio-Systems and BioWaste, and in August 1988 the parties entered into a Partnership Agreement (the "agreement" or "contract").

 Of particular relevance to this case are the business-risk allocation features of the agreement, which allocate the risk of economic loss between the parties through a system of "put" and "call" options available to the parties under the agreement. As described more fully below, the parties essentially agreed that if by a certain date the partnership's business had not reached a certain level of income, then the plaintiff Bio-Systems could exercise a "put" option granted to it under the terms of the agreement, whereby the defendant BioWaste would be required to purchase the plaintiff's interest in the partnership according to the "put" terms specified in the agreement. On the other hand, if Bio-Systems did not exercise its put option, then the defendant BioWaste could exercise a "call" option granted to it under the terms of the agreement, whereby the plaintiff Bio-Systems would be required to sell its interest in the partnership according to the "call" terms specified in the agreement.

 The present controversy centers around Bio-Systems' put right. Essentially, Bio-Systems contends that its put right became validly exercisable under the terms of the contract on November 30, 1993, but that BioWaste has refused to perform its obligation to purchase Bio-Systems' interest in the partnership. BioWaste, on the other hand, contends that the plaintiff's put right was not exercisable on November 30, 1993, but has been indefinitely postponed under the terms of the contract, and that BioWaste, therefore, need not perform its end of the bargain.

 The Relevant Contract Provisions.

 Under the terms of the agreement, BioWaste was potentially obligated to provide the partnership with loans to help fund the development of additional waste processing plants. As mentioned previously, the partnership had one plant in operation at Farmingdale, New York ("Plant 1"). The loans for additional plants were defined in the agreement as the "Plant 2" loan, "Plant 3" loan and "Plant 4" loan. BioWaste's obligation to make these loans, however, was conditioned on the success of Plant 1. Section 3.3.3 of the agreement, in relevant part, define's the defendant's loan obligation as follows:

 
BioWaste shall be obligated to provide the Plant 2 Loan only when Plant 1 has attained the Plant 2 Target Date. The Plant 2 Target Date shall be met when Plant 1 has generated (i) Two Million Seven Hundred Thousand Dollars ($ 2,700,000) in average annualized Gross Plant Revenue and (ii) One Million Three Hundred Thousand Dollars ($ 1,300,000) in average annualized Net Plant Revenue during a period of three (3) consecutive months which period shall end no later than eighteen months from the month in which the Plant 1 Opening Date occurs.

 The "Plant 1 Opening Date" is defined in the agreement as November 30, 1988. Both Parties concede that the Plant 2 Target Date never occurred, and significantly both sides agree in their Rule 3(g) statements that Biowaste did not become obligated to provide the Plant 2 Loan under section 3.3.3.

 Pursuant to the second paragraph of section 3.3 of the agreement, however, Biowaste's loan obligation under section 3.3.3 of the agreement could be delayed under the following circumstances:

 
Notwithstanding anything to the contrary contained herein, BioWaste shall have no obligation to make the . . . Plant 2 Loan, Plant 3 Loan or Plant 4 Loan, as set forth below, until such time as all permits and/or licenses with respect to the partnership's business and Plant 1 that are required by applicable federal, state and local law shall have been obtained.
 
"Put Date" shall refer to the fifth (5th) anniversary of the Plant 1 Opening Date; provided, however, that if Biowaste's obligation to make the Plant 2 Loan pursuant to Section 3.3.3 is delayed pursuant to the second paragraph of Section 3.3, ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.