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Foster Poultry Farms, Inc. v. Water Works & Sewer Board of City of Demopolis

United States District Court, S.D. Alabama, Northern Division

February 25, 2019




         This matter comes before the Court on defendant's Motion for Summary Judgment (doc. 45) and plaintiff's Motion for Partial Summary Judgment (doc. 47). Both Motions have been briefed and are now ripe.

         I. Nature of the Case.

         This dispute arises from a food processing facility's contentions that a municipal water board's inadequate and unreliable water service caused it to suffer lost production, business interruption, and ensuing damages. More specifically, plaintiff, Foster Poultry Farms, Inc., alleges that defendant, The Water Works and Sewer Board of the City of Demopolis, has provided inadequate water service to Foster Farms' plant in Demopolis, Alabama, and has retaliated against Foster Farms for complaining by imposing an arbitrary wastewater discharge restriction. On the strength of these allegations, Foster Farms asserts state-law causes of action against the Water Board sounding in negligence (Count One), wantonness (Count Two), breach of contract (Count Three), breach of contract third-party beneficiary (Count Four), injunctive relief (Count Five) and declaratory relief (Count Six).[1]

         Now the parties have filed cross-motions for summary judgment. The Water Board seeks dismissal of all claims and causes of action on a variety of grounds, while Foster Farms moves for summary judgment on the limited issue of whether an express and/or implied contract existed between the parties at all material times.

         II. Factual Background.[2]

         For more than two decades, Foster Farms has operated a food processing facility in Demopolis, Alabama. The plant employs roughly 450 people, and is the largest corn dog producer by product count in the United States. (Miller Dep. (doc. 54, Exh. 1), at 9.) The facility requires adequate flow and pressure of water for numerous aspects of the production and cleanup processes, as well as for safety (fire suppression). (Id. at 20-21, 24-27.) For example, the facility's fire suppression system requires water volume of approximately 1, 000 gallons/minute and pressure of approximately 40 psi to function properly. (Id. at 24.) Foster Farms' day-to-day operations depend on it receiving reliable volumes and pressures of water. (Miller Aff. (doc. 54, Exh. 3), ¶ 10.)

         A. Water Service Disruptions Beginning in March 2014.

         Both sides agree that the Water Board provided consistent, adequate, reliable water service to the Foster Farms plant until March 2014. (Miller Aff., ¶ 2; Miller Dep., at 77.) Indeed, Foster Farms' evidence confirms that water flow and pressure readings at the facility were consistently adequate during that time frame. (Smith Dep. (doc. 54, Exh. 7), at 77-80.) Prior to March 2014, the Water Board supplied water to the facility via a line north of the plant on Highway 80, tied in to the Industrial Park Water Tower (“IP Tower”). (Miller Aff., ¶ 2; McCants Aff. (doc. 46, Exh. 1), at 1.) A two-mile line ran from Highway 80 to Foster Farms' plant. (Id.) In 2014, however, the 12-inch cast iron pipe comprising that water line (which had been installed in the 1970s) experienced repeated breaks, holes and cracks caused by corrosion of the metal surfaces. (McCants Aff., at 1.) At the same time, the Water Board adopted a separate plan to refurbish the IP Tower by painting it inside and out, which would require taking that tower out of service for some time. (McCants Dep. (doc. 46, Exh. 9), at 121-22; McCants Aff., at 2.)

         As a direct consequence, Foster Farms' Demopolis plant began experiencing periodic, chronic interruptions in water service (as to both flow and pressure). (Miller Aff., ¶ 3.) Foster Farms characterizes these interruptions as becoming “systemic” starting in March 2014. (Miller Dep., at 64.)[3] The Water Board acknowledges that the numerous breaks in the water main caused interruptions in service, which in turn caused production shutdowns at the Foster Farms plant, all resulting from what was quintessentially “a water board problem to fix.” (McCants Dep., at 110; Miller Aff., ¶ 3.) All told, Foster Farms documented approximately three dozen interruptions in water service (leading to production shutdowns ranging in duration from 7 minutes to 7 hours) between 2014 and 2017. (Doc. 46, Exh. 4.)[4] In repairing breaks and leaks to that water line, the Water Board “had to dig out large portions of Foster Farm's concrete lot, ” which it never subsequently repaired. (Miller Aff., ¶ 3.)

         Foster Farms repeatedly expressed concerns to the Water Board about these interruptions in service. (Miller Aff., ¶ 3.) In July 2014, Foster Farms representatives visited the Water Board to complain about the disruption to their business caused by these ongoing unplanned water outages. (Miller Dep., at 65.) On November 17, 2014, Paul Miller, the General Plant Manager, followed up with a letter to the Water Board in which he stated that “Foster Farms has recorded no less than 8 disruptions to service since the water tower was taken offline in March of 2014.” (Doc. 46, Exh. 3.) In that correspondence, Miller expressed concern about “the potential for a public food safety health hazard” resulting from these service interruptions, as well as “significant financial losses to both the company and its employees, ” estimated at $195, 000 in additional costs and lost wages to date. (Id.) The November 2014 letter concluded with a veiled threat of litigation, as Foster Farms wrote, “It is our hope that by working together … this issue will be resolved amicably and without the need for further action.” (Id. (emphasis added).)

         Given the deterioration of the 12-inch cast iron pipe, the Water Board determined that the entire two-mile water line from Highway 80 to the Foster Farms plant must be replaced. (McCants Dep., at 110.) On November 17, 2014, based on Foster Farms' concerns, the Water Board declared an emergency to expedite that project, which is sometimes referred to in the record as “the Rangeline Road water line project.” (Doc. 46, Exh. 11.) The Water Board began constructing the new two-mile water line from Highway 80 to the Foster Farms plant in early 2015, utilizing an average of four to five employees on the project. (McCants Aff., at 3.) The project consisted of replacing the old, corroded 12-inch pipe with new 12-inch pipe. (Id.)

         B. The Tosco Road Temporary Solution.

         As the Water Board's crews worked on the Rangeline Road water line project (again, replacing the 12-inch pipe connecting the facility with the IP Tower to the north), the Foster Farms plant required an emergency supply of water to enable it to carry on with plant operations in the interim. (McCants Aff., at 3.) The solution devised by the Water Board was to connect the Foster Farms plant temporarily to the Tosco Road Water Tower (the “Tosco Tower”), located six miles to the south. (Id.) To do so, the Water Board utilized a preexisting water line owned by non-party Myrtlewood Water System. That line consisted of a 6-inch pipe running for 4.9 miles from the Tosco Tower to the “Y” intersection of Highway 21 and Highway 19, with an 8- inch pipe running from that intersection for an additional 0.9 miles in the direction of Foster Farms, stopping at railroad tracks 0.7 miles from the plant. (Id.) Thus, the Water Board's short-term, emergency solution was to connect the Foster Farms plant to the Myrtlewood line at the railroad tracks. (Id.) The Water Board understood that Foster Farms' water service from Tosco Tower to the south would not be as good as its regular IP Tower water service from the north, and always contemplated this to be a temporary, emergency solution to supply water to the Foster Farms plant until work was completed to replace the line to the north. (Id. at 3-4.)

         The Tosco Tower tie-in did not occur until approximately May 2015. (Miller Aff., ¶ 4.) Thus, there was a roughly six-month period between November 2014 and May 2015 when the Foster Farms plant continued to experience unplanned, disruptive water service interruptions. (Id.) Even after the Tosco Tower connection was completed, Foster Farms encountered ongoing water problems. Water service to the Foster Farms plant pursuant to this temporary fix was “high pressure / low flow, ” with high water pressure causing plaintiff's internal plumbing fixtures to “blow off the walls” until such time as Foster Farms installed pressure-reducing valves at substantial expense. (Id., ¶ 5.) And the low flow of water from the Tosco Tower had negative impacts on plant operations, especially as to the refrigeration evaporative cooling towers and sanitation processes. (Id.)

         C. Delays, Negotiations and the Statement of Intent.

         The Rangeline Road water line project proceeded slowly. It was hampered by various circumstances, including weather-related delays and the separation of a Water Board employee due to disability. (McCants Aff., at 3.) By spring 2016, Foster Farms, having grown weary of ongoing problems and delays, retained counsel to engage in dialogue with the Water Board. (Miller Aff., ¶ 6.) Pursuant to those discussions, Foster Farms requested that the Water Board make a firm written commitment to complete the project by a date certain. (Id.) Foster Farms communicated to the Water Board that failure to do so would result in litigation. (Id.)[5] On or about June 15, 2016, the Water Board signed a Statement of Intent, through which it committed to completing the project by September 15, 2016, barring an Act of God. (Id., ¶ 7.) In reliance on that Statement of Intent, Foster Farms refrained from initiating litigation at that time. (Id.) More generally, during the approximately 2.5-year period in which the IP Tower was offline and unavailable to the Foster Farms plant, the Water Board repeatedly assured Foster Farms that this issue was a top priority. (Id., ¶ 13.) Foster Farms relied on those assurances in refraining from taking legal action, even as it signaled to the Water Board that litigation was on the table. (Id.)

         Unfortunately, the Rangeline Road project was not completed by the September 15, 2016 deadline specified in the Statement of Intent. (McCants Aff., at 3.) The Water Board attributed this failure to “personnel issues and weather.” (Id.) The project was finished two months later, with the IP Tower coming back online in mid-November 2016. (Miller Aff., ¶ 8.) Although Foster Farms was restored to the IP Tower at that time, it was dissatisfied with the resulting service because the pressure was too low; indeed, Foster Farms was receiving inadequate flow of water to its boilers and refrigeration evaporative cooling towers. (Id.) As a result, Foster Farms requested that the Water Board place the plant back on the Tosco Tower because the IP Tower water service was causing even greater disruption than the Tosco Tower water service had. (Id.) The Water Board granted this request. (McCants Aff., at 3.) After returning to the Tosco Tower line, however, Foster Farms continued to experience water-related issues, including outages to the evaporative cooling towers and inadequate flow for the fire suppression system. (Miller Aff., ¶¶ 8-9.)[6]

         D. Foster Farms Goes Back on the IP Tower.

         In June 2018, Foster Farms requested that the Water Board switch its water service back to the IP Tower line. (Miller Aff., ¶ 9.)[7] The Water Board accommodated this request. (McCants Aff., at 3-4.) For a period of several months thereafter, Foster Farms neither voiced complaints nor identified problems with its water service. (Id.; Ferrell Dep. (doc. 46, Exh. 6), at 8 (stating that since June 7, 2018, flow and pressure seemed better, and “I've not had any complaints”).)[8]

         Although plaintiff documents ongoing water issues at the plant today, its own evidence dispels any inference that the Water Board is to blame. In particular, plaintiff's expert engineer, David Upton, P.E., states in his report that even after returning to the IP Tower line, Foster Farms has “still experienced some pressure issues when cleaning and disinfecting the plant (the highest flow times), ” during which internal pressures have dropped “to the middle 20 psi range which is insufficient for that required hygienic activity.” (Upton Aff. (doc. 54, Exh. 14), at 6.) Moreover, plaintiff's risk assessment vendor concluded that after Foster Farms' water service was restored to the IP Tower line in June 2018, the facility's water service lacks sufficient flow or pressure to satisfy the demands of its internal fire suppression systems. (Smith Dep. (doc. 54, Exh. 7), at 98-100.)[9] Significantly, though, that vendor testified that flow and pressure readings were sufficient at the Water Board hydrant, but not at the Foster Farms private hydrant just 75 feet away. (Id. at 32-40, 100-02.) As the vendor acknowledged, Foster Farms is losing pressure and flow somewhere after the water passes the City hydrant, but he does not know where or why. (Id. at 40.) This testimony by plaintiff's own witness reflects that whatever problems Foster Farms may presently be experiencing with water flow and pressure are on its side of the meter, not the Water Board's. Foster Farms submits no evidence to link those current supply issues to any acts, omissions or shortcomings by the Water Board.

         E. The Oil and Grease Surcharge.

         During the spring/summer 2016 negotiations concerning pressure and flow issues at the Foster Farms plant, the Chair of the Water Board notified Foster Farms that the Water Board had discretion to lower the oil and grease discharge limits. (Miller Aff., ¶ 6.) Foster Farms construed these comments as suggesting that the Water Board might impose more restrictive limits in retaliation for Foster Farms' continued complaints and demands concerning inadequate water service. (Id.) Foster Farms believes the proposal was retaliatory because whenever it complained of service issues, Water Board officials “always steered [the conversation] back to wastewater.” (Miller Dep. (doc. 54, Exh. 1), at 88-89.) For its part, however, the Water Board maintains that the proposal to lower oil and grease discharge limits originated from discovery of “a big layer of oil and grease” at the wastewater treatment plant, which was remediated by bringing in an industrial vacuum truck on several occasions. (McCants Dep. (doc. 46, Exh. 9), at 239-40.) Testing revealed “a large quantity of oil and grease” at the Industrial Park South lift station, where Foster Farms was one of only two SID permit holders discharging oil and grease. (Id. at 241.) Excessive buildup of oil and grease at that lift station caused an overflow event that had to be reported to the Alabama Department of Environmental Management (“ADEM”), which inquired as to how the Water Board would prevent a recurrence. (Id. at 246-47.)

         The Water Board ultimately enacted its proposal to reduce the limits for oil and grease discharge. On June 19, 2017, the Water Board passed Resolution 2017-004, which amended its ordinance to provide for a surcharge of $0.60 per pound of oil and grease in excess of 5 mg/l. (Doc. 45, Exh. 2.) The effect of this resolution was to reduce drastically the discharge limit for oil and grease (from 50 mg/l to 5 mg/l), while simultaneously doubling the surcharge rate (from $0.30 to $0.60 per pound of excess). (Miller Aff., ¶ 11.) According to the Water Board, the only customer other than Foster Farms affected by Resolution 2017-004 was a trucking company called Dana Suttles, but the record is devoid of evidence as to the extent or severity of those effects on the trucking company. (McCants Dep., at 263 (“It would impact Dana Suttles also, but I don't know how. If you ask me how it has impacted them, I can't tell you.”).) The Water Board did not perceive the 5 mg/l limit as posing a major obstacle to Foster Farms, because “we went back … and looked back at Foster Farms' records, and it looked like they were complying with it anyway, so it didn't look like it was a big deal.” (Id. at 276.)[10]

         Plaintiff's expert engineer, Upton, opines that typically wastewater plants are designed to handle oil and grease discharges of up to 100 mg/l, which is the typical value imposed by wastewater treatment systems for surcharges. (Upton Aff., at 6.) Upton further states that “the mandating of 5 mg/l is extremely and unreasonably low, ” and that the Water Board “had no reasonable, rational or scientific basis to lower the oils and grease waste-water surcharge rate to 5 mg/l.” (Id. at 6-7.) A representative of ADEM testified that no one at that agency made a recommendation to the Water Board to set the oil and grease limit at 5 mg/l. (Ramsey Dep. (doc. 54, Exh. 21), at 21.) According to ADEM, 100 mg/l would be a typical level for oil and grease discharges for pretreatment facilities in Alabama. (Id. at 26-27.) Even the Water Board's consultant acknowledged in an email prior to passage of the Resolution that “I would like to include a direct reference to a lower limit but most of the single digit limits that I located were not for pretreatment facilities [like Foster Farms]. I will keep looking.” (Doc. 54, Exh. 23.) Thus, the Water Board itself did not locate any precedent for setting such a restrictive discharge limit. However, the Water Board relied on its engineering consultant, Scott Trott, in fixing the new discharge limit at 5 mg/l. (McCants Dep., at 252, 257-60.) Trott informed the Water Board that the 5 mg/l level was recommended by ADEM. (Id. at 252, 257-58.)

         The Foster Farms plant exceeded the 5 mg/l discharge limit for oil and grease in October 2018, [11] and expects to receive an invoice for payment of the surcharge. (Miller Aff., ¶ 11.) At no time has the Water Board ever communicated that no surcharge will be invoiced to Foster Farms for the October 2018 overage. (Id.)

         F. Duties and Relationships between the Parties.

         A significant issue in this case concerns the existence and nature of any contractual or common-law duties running from the Water Board to its customer, Foster Farms. The summary judgment record includes evidence purportedly bearing on this question. Former Water Board president Chuck Smith testified that the Water Board entered into a contract with the City of Demopolis in the 1940s to supply water to the City's citizens. (C. Smith Dep. (doc. 54, Exh. 25), at 27.) Smith further testified that the Board is “responsible for supplying reliable water service to any customer.” (Id. at 34.)[12] Plaintiff also cites a book called The Water Board Bible, which describes the Water Board's mission as “providing high-quality, dependable-quantity water and other services at reasonable prices.” (Doc. 54, Exh. 26.) And Water Board official Jay Reynolds testified that the Water Board provides a product (i.e., water) to its customers, in exchange for which it receives money from its customers. (Reynolds Dep. (doc. 54, Exh. 28), at 25-26.) Reynolds, who is a layperson, offered his opinion that no contract exists between the Water Board and its customers for the provision of and payment for water. (Id. at 26, 32.)

         III. Summary Judgment Standard.

         Summary judgment should be granted only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a), Fed.R.Civ.P. The party seeking summary judgment bears “the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party has satisfied its responsibility, the burden shifts to the non-movant to show the existence of a genuine issue of material fact. Id. “If the nonmoving party fails to make 'a sufficient showing on an essential element of her case with respect to which she has the burden of proof,' the moving party is entitled to summary judgment.” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986)) (footnote omitted). “In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 999 (11th Cir. 1992) (internal citations and quotations omitted). “Summary judgment is justified only for those cases devoid of any need for factual determinations.” Offshore Aviation v. Transcon Lines, Inc., 831 F.2d 1013, 1016 (11th Cir. 1987) (citation omitted).

         Here, both sides have moved for summary judgment on the claims asserted in this action. It is well-settled that “[t]he applicable Rule 56 standard is not affected by the filing of cross-motions for summary judgment.” Page v. Winn-Dixie Montgomery, Inc., 702 F.Supp.2d 1334, 1345 (S.D. Ala. 2010) (citations omitted); see also Murray v. Holiday Isle, LLC, 620 F.Supp.2d 1302, 1307 (S.D. Ala. 2009) (same). The Eleventh Circuit has explained that “[c]ross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed.” United States v. Oakley, 744 F.2d 1553, 1555 (11th Cir. 1984) (citation omitted); see also Wermager v. Cormorant Tp. Bd., 716 F.2d 1211, 1214 (8th Cir. 1983) (“the filing of cross motions for summary judgment does not necessarily indicate that there is no dispute as to a material fact, or have the effect of submitting the cause to a plenary determination on the merits”). Nonetheless, “cross-motions may be probative of the absence of a factual dispute where they reflect general agreement by the parties as to the dispositive legal theories and material facts.” Page, 702 F.Supp.2d at 1345 (citations omitted); see also Murray, 620 F.Supp.2d at 1307. Such is the case here.

         IV. Analysis.

         As noted, there are pending cross-motions for summary judgment. In its Rule 56 Motion, the Water Board seeks dismissal of each of the six causes of action asserted in the Amended Complaint. By contrast, Foster Farms' Motion for Summary Judgment addresses only the existence of an express or implied contract between the parties, an element of ...

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