United States District Court, S.D. Texas, Houston Division
AMENDED MEMORANDUM AND ORDER
ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE.
contract-interpretation case arises from a rental contract
for Sitco Enterprises, doing business as Summit Work Apparel,
to supply Tervita Corporation, formerly known as CCS
Midstream Services, with fire-resistant coveralls for
oilfield-service workers. Sitco manufactures flame-resistant
work apparel for the oil and gas industry; Tervita offers
environmental solutions to companies in that industry. In
April 2011, Summit and CCS entered into a three-year contract
for Summit to rent and maintain fire-resistant coverall
garments for CCS. In a June 2012 addendum, Summit and Tervita
extended the contract and changed some terms. In February
2015, Republic Services acquired the U.S. division of
Tervita, and, according to Summit, ratified and became a
party to the contract. Tervita eventually needed fewer
coveralls, which in turn affected Summit's margins. The
contract expired in September 2015.
sued Tervita, alleging that Tervita breached by not
“tak[ing] minimum requirements of uniforms, fail[ing]
to pay for uniform builds, [and] fail[ing] to reimburse
allowable expenses.” (Docket Entry No. 28). Tervita
counterclaimed for breach of contract, fraud, fraudulent
inducement, and sought an accounting. (Docket Entry No. 7).
parties dispute the contract interpretation and
Republic's status as a party to the contract. Tervita
moved for summary judgment, Summit responded and cross-moved
for summary judgment, and Tervita replied. (Docket Entries
No. 31, 35, 38). Based on the motion, response, reply, the
record, and the applicable law, the motions for summary
judgment, (Docket Entries No. 31, 35), are granted in part
and denied in part. The remaining issue about which there is
a factual dispute is whether the minimum-billing requirement
applied; summary judgment is denied as to that issue. Neither
party moved for summary judgment on Tervita's
counterclaims for fraud and fraudulent inducement; those
claims also remain. The motion to strike Summit's
cross-motion for summary judgment, (Docket Entry No. 36), is
denied as moot.
reasons for these rulings are explained below.
April 2011 contract provided for a three-year rental term
requiring CCS to order at least 200 garments for the first 50
weeks; 150 garments for weeks 51 through 75; and 100 garments
for the weeks after 76. The contract stated:
Minimum requirements: During the term of
this agreement, CUSTOMER will place Orders for the following
minimum quantities of garments. (Based on installation count
of 200 wearers)
100% (200) employee count through week 50
75% (150) employee count weeks 51-75
50% (100) high employee count weeks 76
The foregoing amounts are minimum guarantees and it is agreed
that CUSTOMER's actual orders may exceed such amounts. In
the event this Agreement is terminated by either Party in
accordance with the terms hereof, CUSTOMER shall have no
obligation or liability for any minimum quantity following
the effective date of such termination.
(Docket Entry No. 31, Ex. A § 9.2).
The contract continued:
Unless earlier terminated in accordance with the terms
hereof, this Agreement will continue in effect until March
31st 2014 (“Term”) and not be subject to tacit
renewal. However, if the parties agree to extend pricing and
continue to transact business beyond the term of this
Agreement, the term will be extended on an interim basis
until the parties execute a new agreement, extend this
Agreement by amendment or continue transacting business.
(Id. § 4.1).
contract also provided that Summit “will send weekly
invoice[s] based upon initial sizing employee count.
Invoicing count will remain until notified by CUSTOMER of
employee reduction.” (Id. § 10.2).
June 2012 addendum, Tervita and Summit extended the contract
term for a year and changed the minimum-billing requirements:
Contract Term: September 1st 2012 -
September 1st 2015
Unrealized depreciation of Current
Inventory: Reduced from $500, 000.00 to $350, 00.00
Payment required to Summit no later than August 31, 2012
Rental rate for all U.S. Tervita Locations
Full Issue Employees (11 Sets): $20.00
Loss/Replacement:Tervita will be responsible
for costs associated with garments that have been lost or
damaged beyond normal wear and tear and cannot be repaired.
Weeks in service:
< 10 = $125.00
11-50 = $90.00
51-75 = $70.00
76-104 = $50.00
105 = $0
Examples: Employee (A) Terminates at week
105 and does not return garments to Summit. No. charge to
Employee (B) Damages Garments at week 105 and requires
replacements. At end of contract, week 156. Tervita is only
responsible for buyout of garment based on L&R Schedule
of 51 Weeks: $70
Contract Min. Billing Requirements: (Minimum
Billing will not occur previous to 800 Wearers being
installed) Based on installation count of 800 wearers 100%
(800) employee count through week 50 75% (600) employee count
weeks 51-75 50% (400) employee count weeks 76
(Docket Entry No. 31, Ex. B).
June 2012 addendum did not alter the original termination
section, which provided that the seller or customer
“may terminate this Agreement at any time during the
Term by giving sixty (60) days' notice to the other
party. Customer is responsible to pay for garments in and out
of service based upon the Exhibit B loss and replacement
weeks in service.” (Id. Ex. A § 17.1).
2015, after acquiring Tervita, Republic asked Summit how much
it would cost to terminate before the end of the contract
term. Summit provided an estimated buyout invoice, totaling
$1, 256, 304.26, including a $582, 520 charge for
“minimum billing” for 2012 to 2015. (Id.
Ex. D). Tervita alleges that, instead of paying this high
buyout price, it would instead continue to rent coveralls
from Summit through the end of the contract term.
contract ended on its own terms on September 1, 2015. The
same day, Summit requested payment of the buyout invoice,
which, after several revisions, totaled $1, 648, 288.34,
including a $521, 720 charge for “minimum
billing” for 2012 to 2015. (Id. Ex. E). In
November 2017, after this lawsuit was filed and Summit's
corporate representative was deposed, Summit sent Tervita a
revised buyout invoice, totaling $1, 504, 727.19, including a
$389, 100 charge for “minimum billing” for 2012
to 2015 and a $751, 910 charge for “Coverall TT1 (S-5X)
USED.” (Id. Ex. F). Unlike the two previous
invoices, which both listed the charge for used coveralls as
$329, 000, the November 2017 invoice listed that ...