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September 19, 1995

JOHN J. PIERSON, LOUIS DEGANGE, Plaintiffs, against WILLETS POINT CONTRACTING CORP., a New York Corporation, and HAULAGE ENTERPRISES CORP., a New York Corporation, Defendants.

The opinion of the court was delivered by: DENIS R. HURLEY

 HURLEY, District Judge


 By complaint dated March 10, 1988, plaintiffs commenced a diversity action against the corporate defendants for monies allegedly due under a contract dated February 10, 1986.

 In its answer, defendant Willets Point Contracting Corporation ("Willets"), inter alia, counterclaimed for $ 75,000 it paid to plaintiffs pursuant to what it claims were anticipated "consulting agreements" which never materialized.

 The answer of defendant Haulage Enterprises Corporation *fn1" contains a series of denials, coupled with references to "all the terms and conditions" of the February 10, 1986 Agreement, and of the "contract between defendants and the Town of Oyster Bay" (Answer PP 2-3.) In addition, Haulage Enterprises has asserted an indemnification cross claim against Willets for any sums it, Haulage Enterprises, may be called upon to pay to plaintiffs. That cross claim is based on the Release Agreement between defendants dated August 19, 1987.

 The case was tried non jury before the undersigned in June of 1994.


 Initially, the largely undisputed facts in the case will be presented by way of background. That will be followed by a synopsis of the trial testimony of each witness, as well as the Court's finding of fact regarding the contested matters.

 1. Factual Background

 In early 1986, a group consisting of (1) Pasquale DiMatteo, who was the President of defendant Haulage Enterprises, (2) John Cameron, (3) Joseph Longo, (4) plaintiff J.J. Pierson and, (5) plaintiff Louis J. DeGange (collectively, the "Haulage Group"), began preparing a bid for a waste disposal contract with the Town of Oyster Bay, Nassau County, New York. The Haulage Group had made arrangements for O'Hara Construction to obtain the multi-million bond needed to submit the bid proposal. However, at the last moment, O'Hara withdrew from the venture. In an effort to remedy that situation, the Haulage Group contacted defendant Willets, an established contractor with considerable experience in major municipal construction projects, although devoid of experience in the waste disposal field. The Haulage Group needed Willets to obtain the bond, and Willets -- after some discussion with various members of the Haulage Group -- became interested in the Oyster Bay project. As a result, the February 10, 1986 Agreement was executed. (Pls.' Ex. 1.)

 The Agreement -- which is the focal point of the present dispute -- was prepared by plaintiff Pierson and unfortunately is not a model of clarity. Its essential provisions are as follows:

 1. Willets and Haulage Enterprises would jointly prepare the bid to the Town of Oyster Bay, which bid would be submitted solely in Willets's name;

 2. Willets was required to secure all bonds needed to bid on the project;

 3. Haulage Enterprises was to supply disposal locations, i.e. landfills for the solid waste;

 4. If Willets was successful in obtaining the Oyster Bay contract:

a) it would name Haulage Enterprises as the subcontractor to perform the contractual obligations with Oyster Bay;
b) Willets would secure all bonds called for under the Oyster Bay contract. However, Haulage Enterprises was required to "secure and execute a performance and payment bond in and for the amount of one-half of the performance bond required under the [Oyster Bay] contract." That bond was to be delivered by Haulage Enterprises to Willets after the awarding of the contract, and was to "set forth assurances to Willets that Haulage would assume one-half (1/2) of Willets's liability to perform the contract." (Id. at 2, (First) P 6.);
c) pursuant to the second paragraph 6 of the Agreement, the parties were to be paid as follows:
Willets and Haulage [Enterprises] shall divide net profits (and losses) on an equal basis after the following professional fees are paid:
. . .
c. To J.J. Pierson, Esq., [] One Dollar ($ 1.00) per ton of solid waste transferred, hauled and disposed during the duration of the Contract. This shall represent payment for Legal Services. Payment shall be made in accordance with payments made by the Town to Willets.
d. To Louis J. DeGange [], One Dollar ($ 1.00) per ton of solid waste transferred, hauled and disposed of during the duration of the Contract. This shall represent Transportation Consultant Services. Payment shall be made in accordance with payments made by the Town to Willets.

 On August 19, 1987, Willets and Haulage Enterprises executed an agreement entitled "Release Agreement." (Haulage Ex. A.) In that instrument, the parties agreed "to declare . . . [the] pre-bid agreement [of February 10, 1986] null and void," and for Willets to pay $ 655,025 to Haulage Enterprises as a return of capital invested, and also to identify Haulage Enterprises "for any claims by parties *fn2" to the [February 10, 1986] agreement." In addition, Willets made arrangements to acquire the three balers that Haulage Enterprises had purchased as the subcontractor for the Oyster Bay project.

 In any event, Willets -- initially with Haulage Enterprises, and after August 19, 1987 alone -- transferred, hauled and disposed of 610,268.81 tons of solid waste for Oyster Bay from April 8, 1986 to August 31, 1988. (Pre-Trial Order P C, C (7).)

 The scenario thus far recited rests either on the stipulation of the parties, (Pre-Trial Order P C), or on evidence that was largely undisputed during the trial. Against that backdrop, attention will now be directed to contested matters, including, inter alia, what transpired between the time the Oyster Bay contract was awarded in April of 1986 and August 19, 1987, i.e. the date Willets and Haulage Enterprises parted company via the execution of the Release Agreement.

 2. Synopsis of Trial Testimony.

 The following witnesses were called by plaintiffs:

a. Kenneth Tully.

 The first witness called by plaintiffs was Kenneth Tully, the president of Willets, as well as a 50% shareholder of the corporation. Mr. Tully, after reviewing how his corporation became involved with the Haulage Group, detailed the post-bid problems that developed. Those problems were traceable to, inter alia, the fact that Oyster Bay closed its incinerator, thereby generating more refuse than anticipated.

 In addition, the primary and secondary landfills sites in Pennsylvania were closed shortly after the job commenced. This necessitated trips to distant landfills in the northeast and elsewhere. Problems also developed in the transportation system which the plaintiff DeGange and, to a lesser extent, Pierson had established for the movement of the waste.

 The project was losing money and required the infusion of additional capital from Willets and Haulage. Because of the changed circumstances and concomitant losses that were being sustained, Oyster Bay granted Willets an increase in the rate per ton from $ 72 to $ 115 in April of 1987.

 Towards the end of 1986, however, Haulage Enterprises was no longer in a position to contribute more capital to the then losing venture. Moreover, DiMatteo was unable to post a bond for one-half of the payment and performance exposure assumed by Willets under the Oyster Bay contract, nor was he able to furnish the alternative to such bond which the two corporations agreed to after the February 10, 1986 Agreement was signed, viz. a letter of credit. Therefore, in August of 1987, the second of the two executed contracts between defendants Willets and Haulage was executed, that being the previously mentioned Release Agreement.

 Mr. Tully also explained that the contract of February 10, 1986 was prepared by Pierson, and that Pierson served as the attorney for the Haulage Group for the matters that transpired thereafter between the two corporations, including the unsuccessful efforts to have an executed subcontract for the Oyster Bay project as called for in the February agreement.

 b. John J. Pierson.

 The next witness called by plaintiffs was John J. Pierson. Pierson, who was admitted to the bar in New Jersey in 1983, brought considerable experience in the waste disposal business to the Haulage Group. *fn3" He testified as to how he met DeGange and DiMatteo, and of the Haulage Group's efforts to draft a bid for the Oyster Bay contract. Towards that end, he estimated labor costs, assisted DeGange in preparing a system for the transportation of the solid waste, and also was involved, with DeGange and Longo, in securing landfill sites.

 Pierson said that 95% of his work on the project was completed by February 10, 1986. He anticipated that his functions thereafter were to be largely ministerial in nature although he stood ready, willing and able to provide whatever assistance was requested vis a vis the Oyster Bay contract.

 Pierson indicated there was never any discussion about a consulting agreement until Alvin Goldstein, Willets's attorney, broached the subject on April 29, 1986. This was, in Pierson's view, an effort by Willets to change the original contract.

 Pierson discussed Goldstein's request with DiMatteo, who told him to prepare the requested agreement. That direction was coupled with a reassurance from DiMatteo that it would not effect "your $ 1.00 a ton deal." Several drafts of such an agreement were prepared, but none was ever signed.

 Willets -- acting through Charles McDonald -- soon took over the day to day operation of the project. The Haulage Group was being "forced out," in Pierson's judgment. Moreover, Pierson was not being paid which he discussed with DiMatteo, who assured him that he would be paid. Eventually, as previously noted, payments were made to Pierson, which sums he shared with Longo and DeGange. At the insistence of Willets's Harry Irwin, Pierson submitted "consulting agreement" invoices for each payment, but never agreed to modify what he perceived to be his contractual right to $ 1 per ton regardless of post February 10, 1986 events.

 During the post contract period, Pierson was rarely called upon, but when he was asked to perform a task he did so. His last activity on behalf of the joint venture was in February of 1987, when he was asked to address a problem at the transfer station in Oyster Bay. The particular problem was to find a baler machine, which he did.

 c. Richard J. Solomon.

 The next witness called by plaintiffs was Richard J. Solomon, who was engaged in the trucking business. He testified that in April or May of 1986, he met with McDonald of Willets who said he was in charge of the project and that neither DeGange nor Pierson was involved in the daily operations.

 d. Louis J. DeGange. Plaintiff DeGange testified that he is a civil engineer with a strong technical background in the landfill business. He detailed his activities in helping to fashion the bid proposal, and discussed the February 7, 1986 meeting with Willets.

 After the Oyster Bay contract was awarded to Willets, Mr. McDonald, according to DeGange, ignored the transportation system which he, and others in the Haulage Group had established, and told him that he "was out of the deal - get out." The witness indicated that he declined to follow that directive and remained available to render services if requested to do so.

 During cross examination DeGange indicated that he felt entitled to the $ 1 per ton figure based on his work before the Oyster Bay contract was awarded. He also explained that Longo was a member of the Haulage Group mainly because of his contact with Joseph Amity, the owner and operator of the primary landfill site designated in the bid.

 The following witnesses were called by the defendants:

 e. Alvin Goldstein.

 The first witness called by the defendant Willets was Alvin Goldstein, an attorney admitted to the New York State bar in 1953. Willets is, and was at all times relevant to this litigation, a client of his, pursuant to a retainer agreement. Yet he first learned of the February 10, 1986 Agreement weeks after its execution.

 On April 29, 1986, a meeting was held in Goldstein's New York City office to review a proposed subcontract between Willets and Haulage Enterprises. The attendees were Tully, Pierson and Goldstein. Goldstein had problems with the proposed subcontract, (Defs.' Ex. B), that Pierson had prepared at his, i.e. Goldstein's, request since it did not dovetail with the February 10, 1986 Agreement. Among other things, the proposed agreement had no reference to Haulage obtaining the required bond in favor of Willets. Mr. Goldstein also felt that a separate contract should be prepared for plaintiffs, specifying, inter alia, that any payments to them would be contingent upon Haulage Enterprises's meeting its obligations under the initial contract, and setting forth their obligations in greater detail. He said that Pierson seemed in agreement with his concerns. Also at the April 29th meeting, Goldstein said that should DiMatteo be unable to obtain the necessary bond called for in the February 10, 1986 Agreement, that a letter of credit in favor of Willets would suffice.

 Following that meeting, Goldstein sent Pierson a letter dated May 5, 1986, detailing the substance of the April 29, 1986 meeting. (Defs.' Ex. C.) By letter dated May 23, 1986, Pierson replied to Goldstein's letter. (Defs.' Ex. D.) Attached to the May 23, 1986 letter were two consulting agreements that had been prepared by Pierson. (Defs.' Ex. F-G.) Those agreements were never signed.

 Goldstein testified that he asked time and time again for Haulage Enterprises to provide either a bond or letter of credit. Until such security was furnished to protect Willets, no agreement beyond that already executed on February 10th would be signed by Mr. Tully.

 On cross examination, Goldstein reiterated that he did not know about the February 10, 1986 agreement until April of 1986, and that, in his judgment, the February agreement prepared by Pierson should have expressly, instead of just implicitly, delineated the nexus between the right to payment for members of the Haulage Group -- including the plaintiffs -- and their post-contract performance of required duties. For that reason, he felt additional agreements should be prepared and executed.

 f. John Cameron.

 The next witness was John Cameron, a self-employed engineer with considerable experience in the transportation of waste. He testified that, as part of the Haulage Group, he was instrumental in preparing the Oyster Bay bid. In enlisting his involvement, DiMatteo explained that he had already arranged for trucking and landfills, but that he needed his expertise regarding such matters as cost projections, transfer stations, and the obtaining of the necessary permits.

 Mr. Cameron detailed the operational and regulatory problems that developed after the contract was awarded. The costs of the project soared, ...

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