CHARLESTON – The West Virginia Supreme Court says an Ohio County circuit court judge improperly allowed Waste Management to terminate the pending purchase of a smaller refuse collection company because Waste Management argued a federal court decision made the deal "less economic."
The justices, in a per curiam opinion, said the phrase "less economic" –- language in Waste Management's asset purchase agreement -- is ambiguous and valid fodder for litigation brought in 2006 by Jochum Truck Service, a business run by Jacob Frederick Jochum and his son of the same name.
According to the opinion, Waste Management and the Jochums on March 8, 2004, entered into an agreement in which Waste Management would buy the Jochums' business for $465,000. The Jochums' business included residential, commercial and industrial waste retrieval and disposal in Ohio and Marshall counties.
The agreement included the purchase of Jochums' business assets as well as the certificates of convenience from the state Public Service Commission to do business.
The parties went to the PSC on March 22, 2004, to arrange for the transfer of the certificates. Another business, American Disposal Services of West Virginia, protested the transfer, but the PSC transferred the certificates on Dec. 28, 2005. ADS appealed that decision to the Supreme Court.
The appeal was still pending when a federal magistrate in U.S. District Court ruled that the certificates were invalid and not required.
The appeal by ADS was denied by the Supreme Court. The certificates were never transferred to Waste Management anyway because they were no longer required.
The magistrate decision came on April 11, 2006. Waste Management on April 26, 2006 notified the Jochums that it intended to terminate the purchase agreement because the decision had made the deal less economical because the certificates were less valuable.
Waste Management maintained that the agreement language permitted the termination based on this premise.
The Jochums sued on Nov. 6, 2006, alleging Waste Management breached the agreement. Ohio Circuit Judge Martin Gaughan granted summary judgment to Waste Management on Oct. 1, 2007.
In their appeal, the Jochums contended that the "less economic" language in the agreement was ambiguous.
According to the opinion, the Jochums argued that "less economic" means a business becoming less profitable, not that Waste Management could get terminate the agreement and try for a better deal because the certificates had lost value.
The Jochums said that monthly gross revenues for their business actually grew steadily from $16,300 in March 2006 to $17,616 in June 2007.
Waste Management argued that the language related to any situation – like the magistrate decision – that would make the contract less economic.
"In the case at hand, we are not persuaded by Waste Management's contention that 'less economic' was an unambiguous term in the parties' agreement," the opinion says. "To the contrary, the evidence of record illustrates that there was significant confusion surrounding the meaning of that provision."
The younger Jochum in an affidavit said he believed the language to mean a situation in which state regulations changed or taxes increased that made the business less profitable. The elder Jochum said in an affidavit that he didn't think the language meant that Waste Management could simply renege on the deal without showing how the magistrate decision would cause the company to lose money.
"Given the ambiguity of the contract and the lack of evidence developed below, the circuit court's award of summary judgment was improper as there are genuine issues of material fact with regard to the parties' interpretation of 'less economic,'" the justices said in remanded the case back to Gaughan's court.
Melvin W. Kahle Jr., Frank X. Duff and John Jurco represented the Jochums. Edward J. George and Matthew S. Casto represented Waste Management.
Supreme Court case number: 34264