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International Waste Industries Corp. v. Cape Environmental Management, Inc.

United States District Court, D. Maryland, Southern Division

December 19, 2013


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[Copyrighted Material Omitted]

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For International Waste Industries Corporation, Plaintiff: Afshin Pishevar, LEAD ATTORNEY, Law Office of Afshin Pishevar, Rockville, MD.

For Cape Environmental Management, Inc., Defendant: Craig Robert Haughton, LEAD ATTORNEY, McGuireWoods LLP, Baltimore, MD; Maurice Albert Bellan, LEAD ATTORNEY, McGuireWoods LLP, Washington, DC.


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Alexander Williams, Jr., United States District Judge.

Pending before the Court is Defendant Cape Environmental Management, Inc.'s Motion for Summary Judgment. Doc. No. 30. The Court has reviewed the motion papers and exhibits and concludes that no hearing is necessary. See Loc. R. 105.6 (D. Md. 2011). For the reasons discussed below, Defendant's Motion will be GRANTED.[1]


The following facts are taken from the motion papers and exhibits and are not disputed, unless otherwise noted.

A. The Bidding Phase

On or about August 1, 2009, the Air Force Center for Engineering and the Environment (" AFCEE" ) requested proposals for the construction of a solid waste management facility at Camp Bastion, Afghanistan. The project was referred to as Task Order 10 (" TO10" ). The proposals were requested under the Heavy Engineering Repair & Construction indefinite quantity / indefinite duration (" HERC IDIQ" ) contract. [2] The AFCEE required responses to its requests for proposals (" RFP" ) by August 31, 2009.

On August 21, 2009, Defendant Cape Environmental Management Inc. (" CAPE" ), preparing a bid on the TO10 project, issued a request for quotes (" RFQ" ) to potential subcontractors for the fabrication of incinerators to be installed at the waste management complex. The RFQ was sent to at least six subcontractors, including Plaintiff International Waste Industries Corporation (" IWI" ). The RFQ provided that lower-tiered subcontractors could not be used unless they were expressly identified on the Quotation Form supplied by CAPE. The Quotation Form required bidders to list subcontractors or suppliers providing over $500,000.00 in supplies or services.

On August 26, 2009, IWI submitted its original bid proposal to CAPE in the amount of $4,180,250.00 for two 24-ton/day capacity incinerators. IWI's bid materials represented that it was a full service organization and manufacturer. IWI did not disclose, however, that it intended to use subcontractors for the manufacture of the incinerators. At the time of the original bid proposal, IWI had not determined what, if any, subcontractors it would use to assist in the fabrication of the incinerators, and asserts that no such subcontract would exceed $500,000.00 in value. The parties dispute whether IWI's initial representations regarding manufacture and the use of subcontractors were accurate.

Following IWI's August 26, 2009 submission, CAPE engaged in a series of communications to obtain more details on IWI's bid proposal. For example, on August 30, 2009, CAPE informed IWI that its layout and footprint information and systems description contained insufficient detail.

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CAPE also e-mailed IWI on August 31, 2009 to request price information for certain incinerator parts, a list of spare parts, and additional specifications of incinerator and generator capacities. IWI submitted revised bid proposals on August 27, 2009 (Revision A) and again on August 31, 2009 (Revision B) to supply more information. [3] Contrary to CAPE's assertions, IWI maintains that its initial bid proposals were sufficiently detailed and compliant with CAPE's RFQ.

On August 31, 2009, CAPE submitted a bid proposal to the AFCEE for the construction of the solid waste management complex. CAPE's August 31 proposal incorporated IWI's Revision B bid proposal, and no other subcontractors' proposals were included in CAPE's bid. CAPE's total bid amount to the AFCEE was $14,070,660.00.

In early September 2009, CAPE and other prime contractors were notified by the AFCEE that the prices quoted on TO10 exceeded the AFCEE's budget for the project. The AFCEE reduced the capacity of the requested incinerators from 24 tons/day to 12 tons/day and clarified other changes to the scope of the work. On September 9, 2009, CAPE contacted IWI regarding the price reduction and requested another quote in light of the reduced capacity requested by the AFCEE. CAPE requested a response from IWI by the following morning. CAPE sent similar correspondence to other potential subcontractors as well. In response, HiTemp Technology Corporation (" HiTemp" ) submitted a revised bid dated September 10, 2009, in the amount of $1,070,000.00 for the reduced capacity incinerators.

On September 22, 2009, the AFCEE contacted CAPE and other HERC IDIQ contractors to allow each prime contractor an opportunity to revise their initial proposals as a result of the reduction in incineration capacity and other changes to the project. On September 24, 2009, IWI accounted for the reduction in incineration capacity and submitted another revised bid proposal (Revision D) to CAPE in the amount of $1,020,785.00. Relying upon and using IWI's Revision D bid proposal, on September 24, 2009, CAPE submitted to the AFCEE its Final Proposed Revisions (" FPR" ) for the TO10 project in the amount of $8,369,905.00.

B. The Award of the Prime Contract to CAPE and Subsequent Negotiations between IWI and CAPE

The AFCEE awarded the TO10 prime contract to CAPE on or about September 30, 2009. Once CAPE was awarded the contract, it held a kick-off meeting in which it began setting up meetings with potential subcontractors and suppliers and assigning duties to meet the requirements of the contract, which included engineering submittal deadlines of October 15, 2009. On October 2, 2009, CAPE sent IWI an agenda with a variety of critical items not provided in IWI's bid proposals, including a foundation plan, shipping information, a schedule of deliveries, systems capacities and descriptions, control panel details, a vertical preliminary design drawing, and water and electrical requirements. CAPE requested that IWI's submittals be provided by October 6 or October 7. According to CAPE, the only item that was timely submitted by IWI was a " basic" layout of a drawing view of the proposed Incinerator. IWI contends, however, that it timely complied with CAPE's request for submittals when it provided what it describes as a " detailed" system layout.

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Also on October 2, 2009, CAPE transmitted a document to IWI titled " Limited Notice to Proceed" (hereinafter, the " NTP" ). The NTP reads as follows:

This letter will serve as the formal notification that CAPE Inc. intends to award a subcontract agreement to [IWI] to perform the work in accordance with our client's requirement. This document will serve as authorization to [IWI] to provide support of this effort in accordance with the terms as specified herein. The effective date of this Limited Notice to Proceed is October 2, 2009.
Prior to a definitized subcontract execution, [IWI] is authorized to make expenditures up to $25,000.00 to provide CAPE Inc. the foundation plans, engineering submittals, shipping list of equipment including weights, dimensions and value in preparation and support of Delivery Order 010. These amounts may be increased based upon mutual agreement of the parties, prior to execution of a final subcontract document.
The cost limitations as specified herein can be changed only by mutual agreement of the parties and execution of a formal modification to this Notice to Proceed. [IWI] agrees to promptly begin preparing the foundation plans, engineering submittals, shipping list of equipment including weights, dimensions and value with completion as requested by [James Stewart, CAPE's Vice President of International Construction and Logistics] and within 10 weeks from the date of this Notice to Proceed.
[IWI] shall indicate acceptance of this Notice to Proceed by signing and returning one copy of this document to CAPE, Inc. not later than October 3, 2009 12:00 p.m. CDT. Upon acceptance of both parties, the subcontractor shall proceed with performance of the work specifically authorized.

Doc. No. 30 Ex. R. IWI never executed or expressly accepted the terms of the NTP. Instead, on October 8, 2009, IWI e-mailed CAPE and stated, " [p]lease note that the project starting date would be from the date we receive an acceptable Cape's [sic] contract to IWI and the advance payment." Doc. No. 30 Ex. S, at CAPE00598. IWI's President and owner Mehran Etemad avers that IWI was uncomfortable signing the NTP without consulting its attorneys because it was concerned about giving CAPE intellectual property rights in IWI's design drawings prior to the execution of a final contract. Etemad further testified during his deposition that the NTP was not executed because he was out of the state and was unable to review it with his attorney.

On October 9, 2009, CAPE sent a draft Purchase Order (" PO" ) to IWI along with several attachments. The draft PO was sent via e-mail from Michael Mooney, CAPE's senior contract negotiator, to Etemad. The PO incorporated by reference (1) IWI's Revision D bid proposal; (2) an Irrevocable Letter of Credit (" ILOC" ) required by IWI pursuant to language in its Revision D bid proposal; and (3) CAPE's Terms and Conditions. The attached Terms and Conditions contained provisions regarding intellectual property rights, warranty, termination, delivery, and limitations of liability, among other items. It also included an integration clause, which provided, " [t]his PO and any documents referred to on the face hereof constitute the entire agreement between the parties and no prior or additional or conflicting terms and conditions, including but not limited to trade customs or verbal or written statements including any e-mails shall apply." Doc. No. 30 Ex. V,

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¶ 21.[4]

During the subsequent two weeks, the parties engaged in negotiations regarding the PO and the Terms and Conditions. On October 15, 2009, Mooney e-mailed Etemad and stated, " [t]he PO must be signed today. Any other edits to the Terms and Conditions after we sign the PO is acceptable." Doc. No. 41 Ex. V. The PO was signed by both parties the same day. Although the PO document was signed on October 15, CAPE and IWI continued to negotiate the Terms and Conditions. On October 19, 2009, Etemad sent Mooney redlined edits and comments to the Terms and Conditions. Two days later, on October 21, Mooney sent Etemad four separate e-mails with additional edits and comments on the Terms and Conditions. The edits and comments concerned patent infringement and intellectual property rights, warranty, termination, delivery terms incorporating the ILOC, indemnification, and flow down provisions from CAPE's contract with the government. Etemad testified that the parties were " very close" or " extremely close" to finalizing the Terms and Conditions as of October 21, 2009.

With respect to the Irrevocable Letter of Credit, it was the intention of the parties for CAPE to deposit an agreed-upon amount in the bank that IWI could draw upon for payments based upon certain triggers and milestones for performance. All of IWI's bid proposals required CAPE to arrange for an ILOC " confirmed by U.S. Bank for 100% of the price valid for the duration of the project and to be paid as follow [sic]: 15% advance payment, 15% upon approval of submitted drawings, 70% upon presentation of shipping ...

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