United States District Court, N.D. Alabama, Southern Division
VEOLIA WATER NORTH AMERICA OPERATIONS SERVICES, LLC, Plaintiff/Counter-Defendant,
SSAB ALABAMA, INC., Defendant/Counter-Plaintiff.
E. Ott, Chief United States Magistrate Judge.
litigation began in November 2015, when
Plaintiff/Counter-Defendant Veolia Water North America
Operations Services, LLC (“Veolia”) sued
Defendant/Counter-Plaintiff SSAB Alabama, Inc.
(“SSAB”) for its alleged anticipatory breach of a
Process Water Agreement (the “Agreement”) under
which Veolia owned and operated a process water facility that
serves a steel mill owned by SSAB. (Doc. 1). Currently before
the court is Veolia's motion for summary judgment with
respect to SSAB's remaining counterclaims. (Doc. 130).
The motion has been fully briefed, (docs. 131, 135, 136), and
is now ripe for decision. For the following reasons, the
court concludes that the motion is due to be
complaint, Veolia alleged that SSAB exercised its contractual
option to terminate the Agreement and take title to the
process water facility, but indicated its intent not to pay
Veolia a $6 million termination fee required under the
Agreement. (Doc. 1). Veolia sought an order directing SSAB to
pay the $6 million termination fee. (Id.). SSAB
answered the complaint and expressly denied any breach or
anticipatory repudiation of the Agreement. (Doc. 21). SSAB
also counterclaimed against Veolia, requesting a declaratory
judgment that it was entitled to a set-off against the
termination fee due to Veolia's alleged inability and
failure to perform under the Agreement. (Id.)
December 18, 2015, the court entered a consent order
requiring SSAB to pay the $6 million termination fee to
Veolia and requiring Veolia to post a $6 million surety bond
to protect SSAB in the event it proved a right and
entitlement to a set-off under the Agreement. (Doc. 39). The
consent order also provided that “[t]he payment of the
$6 million Termination Fee by SSAB, the posting of the Bond
by Veolia, and the transfer of [the process water facility]
to SSAB shall be without prejudice to any claim, defense or
right of any party . . . all of which shall be
reserved.” (Id. at ¶ 4). SSAB paid the
termination fee on December 31, 2015, and Veolia posted the
surety bond as ordered. (See Doc. 40).
subsequently filed an amended counterclaim against Veolia.
(Doc. 58). In its amended counterclaim, SSAB alleges that
Veolia owes it “at least $11, 363, 335.00” for
the additional costs SSAB incurred as a result of
Veolia's alleged “inability and failure to properly
regulate and treat” the water generated by SSAB's
steel mill. (Id. at ¶ 4). The amended
counterclaim contains claims for negligence, breach of
contract, breach of warranty/guarantee, and declaratory
judgment. (Id. at 3-7).
after answering the amended counterclaim, (doc. 67), Veolia
moved for summary judgment on the amended counterclaim,
advancing seven separate arguments for why summary judgment
should be granted in its favor. (Docs. 68 & 71). In
response, SSAB conceded that its claim for negligent breach
of contract was due to be dismissed. (See Doc. 89 at
17). Additionally, upon agreement of the parties, the court
decided to address four of the remaining six arguments and
hold two arguments in abeyance to be renewed after discovery.
(Docs. 93, 97). As for the four arguments addressed by the
court, the court granted the motion as to the negligence
claim and claim for declaratory judgment. (Docs. 97-98). The
court also granted the motion to the extent that the amended
counterclaim sought the recovery of damages relating to waste
disposal costs. (Id.). The court denied summary
judgment on the other two grounds and specifically allowed
Veolia to reassert its remaining arguments at a later time.
(Id.). That time is now.
SUMMARY JUDGMENT STANDARD
to Rule 56 of the Federal Rules of Civil Procedure, a party
is authorized to move for summary judgment on a claim or
defense asserted by or against the movant. Under that rule,
the “court shall grant summary judgment 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.” Fed. R. Civ. Pro. 56(a). “Disposition of a
summary judgment motion in a declaratory judgment action is
governed by the same basic principles that generally rule the
grant or denial of such a motion.” Bingham, Ltd. v.
United States, 724 F.2d 921, 924 (11th Cir. 1984).
party moving for summary judgment “always bears the
initial responsibility of informing the district court of the
basis for its motion, ” relying on submissions
“which it believes demonstrate the absence of a genuine
issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986); see also Clark v.
Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.
1991); Adickes v. S.H. Kress & Co., 398 U.S. 144
(1970). Where the movant will not bear the burden of proof on
a claim or issue at trial, the movant can satisfy that burden
by pointing to specific portions of the materials on file
that either negate an essential element of the
non-movant's claim or that affirmatively indicate
“that the party bearing the burden of proof at trial
will not be able to meet that burden.” Clark,
929 F.2d at 608; see also United States v. Four Parcels
of Real Prop. in Greene & Tuscaloosa Ctys. in State of
Ala., 941 F.2d 1428, 1438 n. 19 (11th Cir. 1991). By
contrast, when the moving party has the burden of proof at
trial, it must support its motion with credible evidence that
would entitle it to a directed verdict if not controverted at
trial. See Four Parcels, 941 F.2d at 1438. “In
other words, the moving party must show that, on all the
essential elements of its case on which it bears the burden
of proof at trial, no reasonable jury could find for the
nonmoving party.” Id.
the moving party has met its initial burden, the nonmoving
party must “go beyond the pleadings” and refer
the court to evidence demonstrating that there is a genuine
issue for trial. Celotex Corp., 477 U.S. at 324. In
its review of the evidence, a court must credit the evidence
of the non-movant and draw all justifiable inferences in the
non-movant's favor. See Stewart v. Booker T.
Washington Ins., 232 F.3d 844, 848 (11th Cir. 2000). At
summary judgment, “the judge's function is not
himself to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for
trial.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986).
1999, SSAB began construction of a steel mill in Mobile
County, Alabama. In July 1999, while the mill was under
construction, SSAB and Veolia entered into the Agreement,
pursuant to which Veolia agreed to construct a process water
facility (the “Facility”) to treat the water that
would be circulated and discharged during the production of
steel at the mill. (Agreement § 3). The Agreement
provided that Veolia would own the Facility and would
“operate, maintain and repair” the Facility so as
to provide SSAB with treated water meeting certain
specifications. (Id. §§ 2.4-2.5,
6.1(1)(a)). SSAB was responsible for “[t]he costs of
all off-site treatment and disposal of solid or other waste
produced by the … Facility.” (Id.
Rolling Mill Contact Cooling Water System
counterclaims involve Veolia's treatment of process water
from SSAB's rolling mill contact cooling water system. In
the rolling mill, contact cooling water is sprayed at high
pressure onto the steel slabs to remove mill
scale from their surfaces and then circulated
through various parts and equipment in the rolling mill to
cool the slabs. (Deposition of Scott Kelley on 8/16/18
(“Kelley Dep. I”) at 63-64). Afterwards, the
rolling mill's contact cooling water goes to the process
water facility so it can be treated. Water that contains mill
scale exits the rolling mill through a flume. (Id.
at 70). The water then enters a pre-sedimentation pit where
the heaviest solids settle out of the water. (Id. at
70-71; Schubert Dep. at 51). The water is pumped from the
pre-sedimentation pit into two secondary pits where smaller
solids settle out. (Kelley Dep. I at 72; Schubert Dep. at
52). From that point, the water collects in the secondary pit
“hot well” where it is pumped by three pumps,
collectively called the “612 pumps, ” to a header
which distributes the water to ten pressure filters. (Kelley
Dep. I at 73, 267). The water flows from the top of the
filter through sand and gravel media that further collect
fine solids from the water. (Schubert Dep. at 148-49). The
resulting water is then pumped to cooling towers where the
cooled water is collected in a cold well and then either
pumped back to the rolling mill for reuse or discharged to
the Mobile River. (Kelley Dep. I at 74; see also
Early Disputes Resulting in Settlement and Agreement
steel mill and the Facility began operations in 2001. (Doc.
12 ¶ 22). Shortly thereafter, disputes arose between the
parties. Among other issues, Veolia asserted a claim against
SSAB for certain costs it had incurred during the
construction of the Facility and a claim for increased
operation and maintenance costs. SSAB, in turn, claimed that
Veolia had failed to meet the requirements of the Agreement
with respect to the provision of treated water.
December 10, 2003, the parties entered into a settlement
agreement and mutual general release (the “2003
Release”). In relevant part, the 2003 Release
released Veolia from “any and all manner of claims . .
. whether accrued or hereafter maturing . . . resulting from
. . . any act, omission, statement, promise, covenant,
contract, breach of contract, tort, cause, matter or thing
whatsoever occurring or existing from the beginning of time
to the date hereof arising out of or relating to the
Agreement or the performance of the Services . . . .”
(2003 Release ¶ 3). The parties also amended the
Agreement (“the 2003 Amendment”) as part of
the settlement. The amendment shifted the responsibility for
maintenance and repair of the Facility from Veolia to SSAB.
(2003 Amendment § 2.5). Veolia, however, remained the
owner of the Facility and retained its obligations with
respect to the operation of the Facility.
Red Water and its Treatment
water” is created when heated steel slabs are flattened
by passing the slabs through rollers in the rolling mill.
(Declaration of Steven Bell (“Bell Decl.”)
¶¶ 6-7). While the steel is in the rolling mill,
it is sprayed with water to remove scale that forms on the
surface of the hot metal, after which the spray water drains
into an open flume and is channeled into the Facility, where
it flows through a series of pits and basins and the solids
suspended in the water are removed. (Id. ¶ 6).
When certain grades of steel are sprayed in the rolling mill,
it causes red-colored, microscopic particulate on the surface
of the hot metal to be washed into the water and gives the
water a red hue. (Id. ¶ 7).
“there is always some red water when . . . steel”
is made, (deposition of Paul Wilson on 9/10/18 (“Wilson
Dep. I”) at 56),  the costs associated with treating
the red water became an issue between the parties beginning
in 2005. (Wesselman Dep. at 106). At that time, the steel
mill began manufacturing X-grade steel which had higher
mechanical properties than other types of steel. (Kelley Dep.
I at 107, 123). The manufacture of X-grade steel results in
higher concentrations of fine iron oxides than other types of
steel and, as such, produces more intense red water.
(Wesselman Dep. at 72; Wilson Dep. I at 161-62).
and 2006, increased red water incidents were sporadic,
(Wesselman Dep. at 130), and Veolia, SSAB and ChemTreat, the
chemical vendor, discussed treatment methods for the red
water during their weekly meetings. (Kelley Dep. I at 126-30,
135-37). The solution for treatment of the more intense red
water was to add more chemicals to the process water,
(id. at 125-27), but this solution was expensive. In
early December 2005, during one of the weekly meetings,
Veolia pointed out multiple costs that were keeping Veolia
from maintaining their budget, including increased costs to
treat red water. (Doc. 135-6). The plant manager for SSAB at
the time “emphasized that [SSAB] [wa]s interested in
looking for [a] technical solution” to the red water
costs, as well as other costs, so overall treatment costs
could be controlled. (Id.).
and 2008, more concentrated red water was infrequent.
(Wesselman Dep. at 130). In 2009, however, a large order of
X-grade steel from SSAB caused red water for months.
(Id. at 130-31). The concentrated red water was
treated by adding additional chemicals, as well as renting
equipment to aid in the treatment. (Kelley Dep. I at 166-68).
The solution was expensive: in 2009 alone, Veolia incurred
“over $1 million in chemical, labor, and equipment
rental costs . . . .” (Bell Decl. ¶ 8). Not only
was it expensive, but during this increase of red water, the
parties continued to discuss different ways to handle its
treatment. (See Wesselman Dep. at 135;
Doc. 135-8; Doc. 135-9).
and 2011, the red water incidents again became more
intermittent. (Kelley Dep. I at 154). Then, in mid-2012, the
frequency of more concentrated red water again increased and
continued for a prolonged period due to increased production
of X-grade steel. (Id. at 154). In June 2012, SSAB
and Veolia made the decision to bring in additional equipment
to handle the increase of red water, just as they had in
2009. (Doc. 132-10). Veolia and ChemTreat also began using
additional chemicals so that more of the fine iron oxide
particles would settle out in the secondary pits before
reaching the pressure filters. (Wesselman Dep. at 134-35;
see also Kelley Dep. I at 217-18, 285-87).
2012 through November 2013, SSAB, Veolia and ChemTreat
continued to develop and refine strategies for treating the
red water and improving operations during increased periods
of red water. (Kelley Dep. I. at 225). Those strategies
included a chemical feed automation program. (See
id. at 220-23). During this time period, however, Veolia
continued to use increased chemicals to treat the instances
of red water. SSAB internally questioned the use of the
chemicals, but trusted the judgment of Veolia as “the
expert” when it came to the water systems.
(See Wilson Dep. I. at 48-50). SSAB, however,
“took the position . . . that red water [wa]s a normal
part of [the steel making] process . . . [and] these filters
should take [care of the issue]” without having to use
the additional chemicals and equipment which resulted in the
added expenses. (Id. at 53-54, 58, 81).
2012, SSAB independently retained HDR, Inc., an engineering
company, to evaluate the entire water systems, including some
areas that were not in Veolia's control, and determine
how SSAB might “radically change” the process
water system. (Wesselman Dep. at 258-60, 263; Wilson Dep. I
at 79-80). In November 2013, HDR, Inc. concluded that the two
612 pumps could be reprogrammed to work together in a way
that would allow the filters to treat the more concentrated
red water without using more chemicals to settle out the fine
iron oxide in the secondary pits. (Wilson Dep. I at 297-99;
Kelley Dep. I at 232). SSAB employed Deanna DeLucia to
reprogram the pumps' controlling software. (Deposition of
John Schubert (“Schubert Dep.”) at 129-30;
Kelley Dep. I at 232-34, 234, 308). Once the pumps were
reprogrammed, Veolia operated the Facility with this new
protocol which did not require the use of the additional
chemicals and equipment. (See Wilson Dep. I at
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