917-902-7979 917-902-7979

Representative Cases

National Utility Service, Inc.v. Savannah Foods and Industries Inc 11365J

LEXSEE 1994 U.S. DISTRICT LEXIS 21489

NATIONAL UTILITY SERVICE, INC.,

Plaintiff, v. SAVANNAH

FOODS & INDUSTRIES, INC., Defendant.

Civil Action No. 91-2891(WGB)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

1994 U.S. Dist. LEXIS 21489

September 9, 1994, Decided
September 9, 1994, Filed; September 12, 1994, Entered on the

Docket

NOTICE: [*1] NOT FOR PUBLICATION

DISPOSITION: Savannah’s motion for summary judgment denied and NUS’s
cross-motion for summary judgment granted. Judgment entered in favor of NUS in
the amount of $ 2,973,289.35 and dismissed Savannah’s counterclaims for the $
51,134.87 already paid. NUS’s claim for prejudgment interest denied, without
prejudice.

LexisNexis(R) Headnotes

COUNSEL: Peter G. Goodman, Esq., Kurzman, Karelsen & Frank, Fair Lawn, N.J., for
plaintiff. Michael P. Graff, of Counsel.

Richard M. Eittreim, Esq., McCarter & English, Newark, N.J., for defendant.

John M. Tatum, Esq., Miller, Simpson & Tatum, Savannah, Ga., for defendant.

JUDGES: WILLIAM G. BASSLER, U.S.D.J.

OPINIONBY: WILLIAM G. BASSLER

OPINION: BASSLER, DISTRICT JUDGE:

This matter comes before the Court on a motion by the defendant, Savannah
Foods & Industries, Inc. (“Savannah”), a Delaware Corporation with its principal
place of business in Savannah Georgia, for Summary Judgment pursuant to Federal
Rule of Civil Procedure 56. Plaintiff, National Utility Service, Inc., (“NUS”),
a New Jersey corporation, the successor in interest to a New York corporation of
the same name as a result of a January 1, 1988 merger, Cross-Moves for Summary
Judgment. Savannah is licensed to do business in New Jersey. [*2] This Court
has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

For the reasons stated below, the Court will deny Savannah’s Motion for
Summary Judgment and grant NUS’s Cross-Motion for summary judgment.

I. BACKGROUND

NUS is the world’s largest utility cost consultant and has been in business
for over sixty years. (Frankel Aff., P 4). It employs approximately 1,100 people
worldwide and maintains offices in eleven countries. (Id.) Savannah is in the
business of producing, among other things, refined sugar. (Compl., P 6).

On October 26, 1984, NUS and the defendant, Savannah entered into a utility
cost consulting contract (the “Agreement”) under which NUS, aside from an
initial fee, would be compensated only to the extent that Savannah “acted upon”
and “implemented” NUS’s recommendations on reducing energy costs. (Frankel Aff.,
Ex. 2). NUS was to receive a percentage of the amount saved as a result of its
recommendations. NUS’s action seeks to recover what it considers to be the
balance of the fee owed by Savannah under the Agreement.

The Agreement provides as follows:
(1) We [Savannah] hereby authorize you [NUS] to submit [*3]
recommendations for all possible savings and refunds on our energy
costs . . . . You will make a detailed analysis of all factors in our
costs and advise where refunds and reductions can be obtained.

(2) Your initial examination will cover the past twelve (12) months’
bills. Where applicable, you will review our old bills as far back as
possible for refunds. Your continuing analysis will cover our current
bills, which we will send you each month during the term of this
agreement.

(3) Any recommendation you make is subject to our approval. Any
recommendation acted upon by us shall be deemed accepted and if
implemented, we will pay you as outlined below after such savings and
refunds are achieved. We will promptly forward all information
pertaining to your recommendations for your evaluation and further
advice.

(4) All negotiations with suppliers are to be conducted by us unless
it is mutually agreed otherwise.

(5) We agree to pay you as follows . . .
b. After recapture of our service fee we will pay you fifty
(50%) percent of each refund secured. We shall also pay you
fifty (50%) percent of each savings secured for a period of
sixty (60) months after which [*4] the entire savings will
be ours.

(Frankel Aff., Ex. 2; NUS’s 12G Stat., P 11). In compliance with the terms of
the Agreement, NUS generated a report, dated April 26, 1985, on Savannah’s
energy needs and consumption (the “April 1985 Report”). (Frankel Aff., Ex. 18;
Savannah’s 12G Stat., P 6; NUS’s 12G Stat., P 22-25).

In the April 1985 Report, NUS informed Savannah that the natural gas price
was between $ 2.80 and $ 3.00/MMBTU, n1 significantly less than Savannah was
paying its current supplier of natural gas, Southern Natural Gas Company (
“Southern”). NUS recommended that Savannah renegotiate its contract with
Southern and, failing that, “investigate ways of receiving [its] natural gas
from various wellhead producers, depending on the outcome of FERC’s [Federal
Energy Regulatory Commission’s] hearing concerning ‘mandatory carriage. n2′”

(Frankel Aff., P 21; and Ex. 18).

– – – – – – – – – – – – – – Footnotes – – – – – – – – – – – – – – –

n1 Million British Thermal Units.

n2 The full text of the recommendation reads as follows:

(4) In the event Southern Natural Gas expresses an unwillingness to
renegotiate your contract, you should investigate ways of receiving
your natural gas from various wellhead producers, depending on the
out-come of FERC’s hearing concerning “mandatory carriage.”

(Frankel Aff., Ex. 18). “Mandatory Carriage” would have required that natural
gas companies serve as common carriers of gas owned by end-users, on a
non-discriminatory basis.

– – – – – – – – – – – – End Footnotes- – – – – – – – – – – – – – [*5]

At the time of the April 1985 Report, Savannah was paying Southern both for
the natural gas and the transportation of the natural gas. NUS’s suggestion was
intended to allow Savannah to either: (1) renegotiate the contract with Southern
to obtain a better overall price, (since NUS believed that Southern would want
to keep Savannah as a client in light of the deescalating natural gas prices and
the importance of Savannah’s business as the second largest direct line natural
gas consumer in Georgia); or (2) investigate “receiving” the natural gas from a
wellhead producer at a lower price and relegating Southern to the position of
providing only transportation services and not the actual product. (Frankel
Aff., P 30). A draft letter from Savannah to Southern was proffered with the
April 1985 Report seeking renegotiation of Savannah and Southern’s natural gas
contract. (Id., Ex. 18).

During the months that followed the April 1985 Report, Savannah entered into
negotiations with Southern regarding alternative fuels. (Id., PP 49-63). In
early July, 1985, Southern’s application for the Southern Customer
Transportation Program, which had been pending since April 17, 1984, was
approved. [*6] (NUS’s 12G Stat., P 37; Frankel Aff., P 44). This allowed
direct customers such as Savannah to receive their gas directly from the
wellhead producers, using Southern for its transportation services only. (Id.)

On September 11, 1985, Eugene G. Clark, Chief Engineer — Refineries of
Savannah, wrote to Southern “trying to determine how we can best approach the
use of transportation gas.” (NUS’s 12G Stat., P 70; Frankel Aff., Ex. 37). From
this time until May of 1986, Savannah negotiated with Southern regarding its use
of natural gas, while concomitantly NUS was making inquiries of Savannah on this
very issue, but apparently receiving little or no response. (Frankel Aff., PP
49-63).

NUS alleges that Savannah officials, cognizant of their Agreement with NUS
and the natural gas recommendation contained in the April 1985 Report,
stonewalled NUS and consciously made an effort to exclude NUS from the
Savannah/Southern negotiations. On May 9, 1986, Savannah entered into a contract
with Southern for transportation of gas which Savannah purchased from the
wellhead producers (the “Southern Agreement”). (NUS’s 12G Stat., P 87; Frankel
Aff., P 63 and Ex. 50).

On January 23, 1987, NUS, having [*7] become aware that Savannah had
obtained a cost savings by means of the renegotiated deal with Southern on its
natural gas service, sent a letter demand for payment under the Agreement. (NUS
‘s 12G Stat., P 94; Frankel Aff., Ex. 54). After initially denying any
liability, claiming that Savannah achieved the savings independently from NUS,
Savannah made two payments and then on April 27, 1988, Savannah wrote to NUS
requesting a refund, again claiming that the money saved by renegotiating with
Southern, was the result of the work of Savannah’s Engineering Group, and not

NUS. (NUS’s 12G Stat., P 98-103; Frankel Aff., Ex. 6).

NUS filed a three-count complaint against Savannah on July 2, 1991. Count’s
One and Two seek damages for breach of contract and unjust enrichment,
respectively. Count Three requests a declaratory judgment of the rights of the
parties under the Agreement.

Savannah now moves for summary judgment, claiming that it never made use of
NUS’s “recommendations,” if its April 1985 Report even qualifies as such, and
furthermore, that it is not responsible to pay any share of cost savings it
gained as a result of changes it made in its utilities services, since those
savings [*8] resulted from the work of its own engineering department.

NUS cross-moves for summary judgment, claiming that Savannah did, in fact,
make use of the natural gas recommendation, and is indebted to NUS in an amount
totaling 50% of the savings.

NUS seeks a judgment in the amount of $ 4,048,469.08, representing 50% of the
savings ($ 6,048,846.44 – $ 3,024,424.22 = $ 3,024,424.22) less the $ 51,134.87
paid, for a balance of $ 2,973,289.35, and including interest from September 1,
1986, the date the savings began, in the amount of $ 1,075,180.75. (See NUS’s
12G Stat., PP 105 and 106).

II. DISCUSSION

A. The Summary Judgment Standard
Summary judgment is appropriate only if “the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P.
56(c). Whether a fact is material is determined by the applicable substantive
law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106
S. Ct. 2505 (1986). An issue involving a material fact is genuine “if [*9] the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Healy v. New York Life Ins. Co., 860 F.2d 1209, 1219 n.3 (3d Cir. 1988),
cert. denied, 490 U.S. 1098, 104 L. Ed. 2d 1004, 109 S. Ct. 2449 (1989).

The moving party has the initial burden of showing that no genuine issue of
material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d
265, 106 S. Ct. 2548 (1986). Where the moving party satisfies this requirement,
the burden shifts to the nonmoving party to present evidence that there is a
genuine issue for trial. Id. at 324. Once the moving party has carried its
burden of establishing the absence of genuine issues of material fact, the
nonmoving party “may not rest upon mere allegations or denials” of its pleading,
Fed. R. Civ. P. 56(e), but must produce sufficient evidence to reasonably
support a jury verdict in its favor, Anderson, 477 U.S. at 249, and not just
“some metaphysical doubt as to material facts.” Matsushita Electric Industrial
Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348
(1986). [*10]

In deciding a summary judgment motion, “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, 477 U.S. at 249. In
determining whether any genuine issues of material fact exist, the Court must
resolve “all inferences, doubts, and issues of credibility … against the
moving party.” Meyer v. Riegel Products Corp., 720 F.2d 303, 307 n.2 (3d Cir.
1983), cert. dismd., 465 U.S. 1091 (1984) (citing Smith v. Pittsburgh Gage &
Supply Co., 464 F.2d 870, 874 (3d Cir. 1972)).

B. The Choice of Law

In a diversity case, a federal district court must apply the choice of law
rules of the state in which it sits. Klaxon Co. v. Stentor Electric
Manufacturing Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The
general rule in New Jersey is that the law of the place of the contract governs
the choice of law, especially when that place has a “significant relationship
… with the parties and the transaction.” State Farm Mut. Automobile Ins. Co.
v. Estate of Simmons, 84 N.J. 28, 37, 417 A.2d 488 (1980); Bell v. Merchants and
Businessmen’s Mut. Ins. Co., 241 N.J. Super. 557, 561-63, 575 A.2d 878 [*11]
(App. Div.), certif. denied, 122 N.J. 395 (1990). Under New Jersey law, a
contract is formed when the last act necessary for the formation of the contract
is performed, and the formation is complete at the place of that final act.

Mullaly v. Carlisle, 177 F. Supp. 588, 592 (D.N.J. 1959); Filson v. Bell Tel.
Laboratories, Inc., 82 N.J. Super. 185, 190, 197 A.2d 196 (App. Div. 1964); M.N.
Axinn Co. v. Gibraltar Dev. Inc., 45 N.J. Super. 523, 133 A.2d 341 (App. Div.
1957); and Arco Welding & Mach. Works, Inc. v. Terry Contracting, Inc., 44 N.J.
Super. 586, 131 A.2d 316 (App. Div. 1957).

Savannah argues that the following facts militate in favor of applying
Georgia law to this contract dispute: (1) NUS maintained a sales representative
in Georgia; (2) NUS delivered the executed contract to Savannah in Georgia; (3)
NUS delivered all the reports containing recommendations to Savannah in Georgia;
and (4) NUS’s representatives visited Savannah in Georgia. (Savannah’s Br. in
Supp., at 8).

NUS argues that New York law should apply because: (1) Savannah sent an offer
to NUS in New York, where it was accepted, [*12] executed and then posted to
Savannah in Georgia; (2) the parties intended that NUS perform its services in
New York; and (3) no services were performed in Georgia.

The Court finds that the nature of the services called for in the contract
and the fact that the acceptance and posting transpired in New York indicate
that the place of contract was New York. The Court will, therefore, apply New
York law to this contract dispute.

C. The Parties’ Asserted Positions

The business relationship between NUS and Savannah, as memorialized in the
Agreement, can be divided into four parts: (1) NUS would investigate economical
means of supplying Savannah with the energy necessary to run its facilities
based upon information provided by Savannah and NUS’s employees’ expertise in
the area; (2) NUS would make reports and recommendations to Savannah accompanied
by a draft letter, to be transferred to Savannah’s letterhead, and subsequently
sent to the recommended utility for the purpose of changing Savannah’s services;
(3) Savannah would use NUS’s letter and send a blind copy to NUS, so that NUS
would know that Savannah had used one of its ideas and that it would be entitled
to a share of the cost [*13] savings; and (4) once the cost savings were
calculated, which, in this case, NUS claims amounts to in excess of $
6,048,846.00, NUS would be paid its contractual share. (Frankel Aff., Exs. 2 &
18).

The following facts are undisputed. The parties signed the Agreement on
October 29, 1994 and Savannah paid a $ 7,500.00 retainer and provided NUS with
materials and information regarding its current operations. NUS analyzed
Savannah’s energy usage and generated a Report dated April 26, 1985. Savannah
received the Report. Parts one and two were, therefore, completed. Part three,
Savannah’s use of the form letter, was never performed. NUS is now seeking to
enforce the final part of the arrangement and collect its contractual fee
because it argues that Savannah made use of one of its recommendations.

The “recommendation” which NUS argues triggered its entitlement to a fee, was
contained in the 1985 Report from NUS to Savannah. (Id., Ex. 18). The Report
specifically stated:

(4) In the event Southern Natural Gas expresses an unwillingness to
renegotiate your contract, you should investigate ways of receiving
your natural gas from various wellhead producers, depending on the
out-come [*14] of FERC’s hearing concerning “mandatory carriage.”

(Frankel Aff., Ex. 18). Southern’s authorization to act as a carrier for
wellhead producers was being debated at that time and a hearing was scheduled
before the Federal Energy Regulatory Commission (“FERC”). In light of the fact
that Southern obtained permission to serve as an intermediary for transportation
fuel, NUS claims that this language constitutes a “recommendation” that Savannah
purchase natural gas for its Savannah sugar refinery at the wellhead and ship it
directly to the refinery through Southern’s interstate pipeline. n3

– – – – – – – – – – – – – – Footnotes – – – – – – – – – – – – – – –

n3 Savannah had been supplied with natural gas through Southern’s direct
pipeline since 1981, pursuant to a contract which was subject to periodic
amendments.

– – – – – – – – – – – – End Footnotes- – – – – – – – – – – – – –

The recommendation was accompanied by draft correspondence designed to be
used by Savannah in communicating its desire to renegotiate its natural gas
service with Southern. (Id., Ex. 18). Savannah argues that the suggestion
contained in the April 1985 Report does [*15] not constitute a valid
“recommendation,” because it failed to include such relevant and necessary
information as: (1) where such gas could be found; (2) its cost; (3) how it
could be transported; (4) who was both willing and capable of transporting it;
(5) what role Southern, with whom Savannah was already under contract, would
have in this kind of service and purchase arrangement; (6) the relative costs of
transportation; and (7) the reliability of the sources and the transportation.
Moreover, Savannah argues that the “recommendation” itself was not clearly
identified.

In addition, Savannah argues that conflicting information provided by NUS in
its “Cost Analysis Report,” dated February 12, 1985, states that NUS had
completed its initial analysis “in accordance with the agreement,” and that
after “special scrutiny,” NUS concluded that Savannah was “benefitting from the
most appropriate rates and terms available” in its natural gas service.

In support for its position that the April 1985 Report is inadequate as a
recommendation, Savannah argues that information is only valuable as
“consideration” for purposes of contractual liability, where it is “novel.”
Under New York law, “without [*16] novelty, no property right exists in
plaintiff, and there is no consideration giving rise to defendants’ obligation.”
Granoff v. Merrill Lynch & Co., Inc., 775 F. Supp. 621, 627 (S.D.N.Y. 1991).
Savannah argues that NUS’s suggesting in its April 1985 Report that Savannah
“investigate” ways of receiving natural gas from various wellhead producers,”
without providing any additional information, “was no more novel than suggesting
that one turn out his lights to save on energy costs.” (Savannah’s Br., at 32).

NUS argues in opposition, that: (1) the suggestion contained in the April
1985 Report constitutes a “recommendation” within the meaning of the Agreement;
(2) its agreement to provide specialized services to effectuate its
recommendation was sufficient consideration to support the Agreement; (3) the
Agreement is unambiguous and should be enforced as written; (4) there are
genuine issues of material fact regarding Savannah’s negotiations with Southern
and whether or not Savannah’s actions were in response to NUS’s recommendations
or its own independent actions, which preclude summary judgment in Savannah’s
favor; (5) there are no genuine issues of material fact regarding [*17]
Savannah’s breach of contract, its unjust enrichment and the amount of savings
to which NUS is now entitled, so summary judgment should be entered in NUS’s
favor; (6) Savannah’s counterclaims for the $ 51,134.87 it paid to NUS should be
dismissed as it was tendered to NUS as part of a valid and enforceable contract;
and (7) the factual assertions made by Savannah cannot be considered as they are
not made by parties on their factual knowledge in violation of Federal Rule of
Civil Procedure 56(e).

Each of these asserted arguments will be discussed below.

1. Consideration

As a preliminary matter, the Court will address the parties arguments
regarding the consideration necessary to support the contract. “To form a valid
contract, there must be a person able to contract, a person able to be
contracted with, a thing to be contracted for, sufficient consideration, clear
and explicit words to express the agreement and assent of both contracting
parties.” Tuition Plan, Incorporated v. Zicari, 70 Misc. 2d 918, 335 N.Y.S.2d 95
(2d Dist. 1972). In this argument, Savannah challenges the “sufficiency of the
consideration afforded by NUS.”

“The propositions are basic that [*18] a contract to be enforceable must be
supported by a valid consideration or there must exist at the time of its
inception mutuality of obligation.” Dennis Realty Corporation v. Twersky, 190
Misc. 936, 76 N.Y.S.2d 798 (1st Dist. 1947); In Topken, Loring & Schwartz, Inc.
v. Schwartz, 249 N.Y. 206, at page 211, 163 N.E. 735, at page 736, 66 A.L.R.
1179, the New York Court of Appeals stated that:
the contract for its consideration rests upon mutual promises. One of
the promises may or may not be good, the same as if a discretion were
left to one of the parties to perform or not perform. Under such
circumstances there is no consideration, and the contract cannot be
enforced.

Id.

Savannah argues that under the decision in Granoff v. Merill Lynch & Co.,
Inc., 775 F. Supp. at 627, NUS’s idea to buy natural gas directly from the
well-head is insufficient consideration to support a contract because it is not
“novel.” In Granoff, the United States District Court for the Southern District
of New York entered summary judgment against a developer of the idea of
“portfolio protection insurance,” which would use insurance to [*19] provide to
an investor an unconditional guarantee that portfolio would not lose more than a
stated percentage of the investment.

The plaintiff had brought an action against a brokerage firm and related
parties for breach of contract, misappropriation of idea, and fraud and
misrepresentation, alleging that the brokerage firm used his idea in creating a
growth and guarantee fund. On the motion of the brokerage firm and related
parties for summary judgment, the District Court, held that: (1) the developer
could not recover damages for use of confidentially disclosed ideas in absence
of novelty; and (2) the developer failed to create genuine issue of material
fact on issues of novelty, similarity, and use of idea to avoid entry of summary
judgment against him. Id., 775 F. Supp. at 627.

The District Court held that “to meet the requirement of minimal
consideration, even actions on express contracts must involve the use of an idea
which is novel. Without novelty, no property right exists in plaintiff, and
there is no consideration giving rise to defendants’ obligation.” Id. (citing
Educational Sales Programs, Inc. v. Dreyfus Corp., 65 Misc. 2d 412, 414, 317
N.Y.S.2d 840 (1970)). [*20]

“It is clear, however, that an idea if valuable, may be the subject of
contract. While the idea disclosed may be common or even open to public
knowledge, yet such disclosure if protected by contract, is sufficient
consideration for the promise to pay.” High v. Trade Union Courier Pub. Corp.,
31 Misc. 2d 7, 69 N.Y.S.2d 526, 529 (N.Y. Sup. 1946) aff’d 275 A.D. 803, 89
N.Y.S.2d 527 (1st Dept. 1949) (citing Keller v. American Chain Co., 255 N.Y. 94,
174 N.E. 74; Gellert v. Dick, 277 N.Y. 123, 13 N.E.2d 603; and Bristol v.
Equitable Life Assurance Society, 132 N.Y. 264, 30 N.E. 506, 28 Am. St. Rep.
568).

In Granoff, the suit was based upon the sale of an idea by the plaintiff to
the defendant. In order for such a sale contract to be enforceable, it is clear
that the idea being sold had to have value, and value in that context is
measured by novelty. In this case, NUS was not marketing a specific idea to a
company it sought to have buy the idea. NUS was marketing a service and payment
for the work performed was largely contingent upon Savannah’s subsequent use of
the information and ideas generated [*21] by NUS’s employees.

To apply Savannah’s Granoff argument in the context of this case would be to
suggest that an attorney representing someone in a contingent fee case should
not be paid for his or her services and ideas if his or her litigation strategy
turns out to be an obvious one. Savannah’s argument would be more appropriate in
a situation where that same attorney sent a letter to other law firms advising
them of his or her obvious litigation strategy and when those firms begin using
it, suing those firms to collect some consultation fee suggested in the letter.

In short, this is not an intellectual property suit, but a suit on a service
contract. NUS is not seeking a property interest in the idea of purchasing
natural gas directly from the well-head, but payment on a consulting contract
which Savannah agreed to pay. The rule in Granoff is, therefore, simply not
applicable here. C.f. Women Golfer, Inc. v. Meredith Corp., 792 F. Supp. 211
(S.D.N.Y. 1992).

Additionally, as NUS argues, the contract called for additional services
beyond suggesting ideas to Savannah. NUS performed an analysis based upon
information provided by Savannah, made recommendations [*22] based upon that
analysis and its knowledge of the industry, and further offered to follow those
recommendations with assistance in negotiating new deals with the suppliers.
These things, both separately and in combination, amount to adequate
consideration to support the Agreement.

2. The Enforceability of the Agreement

Savannah also argues that the Agreement cannot be enforced because its
language and that of its partial fulfillment, the Report, is ambiguous.

As stated previously, New York law applies to the interpretation of the
Agreement upon which NUS’ breach of contract suit is based. Under New York law,
the construction of a contract is for the court when its terms are unambiguous
and there are no extrinsic facts to affect its construction. National Utility
Service, Inc. v. Whirlpool Corporation, 325 F.2d 779, 780 (2d Cir. 1963). The
Court must first interpret the provisions of the contract in order to determine
whether they are ambiguous.

The Court finds it important to note the distinction between construction of
a contract, “a process by which legal consequences are made to follow from the
terms of the contract and its more or less immediate context, [*23] and from a
legal policy or policies that are applicable to the situation,” and
interpretation of a contract, “endeavoring to ascertain the meaning or meanings
of symbolic expressions used by the parties. Edwin W. Patterson, The
Interpretation and Construction of Contracts, 64 COLUM. L. R. 833, 835 (1964).

In order to ascertain whether the Agreement is ambiguous, the Court must
interpret its provisions. Once that has been done, the Court can then engage in
construction of the contract so that it can be properly enforced.

Savannah claims that the language of the Agreement is ambiguous and permits
more than one fairly reasonable interpretation and that summary judgment in
favor of NUS is thus inappropriate. See Aetna Casualty & Surety Co. v. Giesow,
412 F.2d 468, 471 (2d Cir. 1969). See also, e.g., Grand Union Co. v. Cord Meyer
Development Corp., 735 F.2d 714 (2d Cir. 1984). NUS, on the other hand,
interprets the contract to mean that all recommendations made by NUS that were
subsequently acted upon by Savannah give rise to obligations under the contract.
The Court agrees with NUS, finding that the Agreement is not ambiguous [*24]
and that the parties are bound by its provisions.

The Agreement specifically states that “any recommendation [NUS] make[s] is
subject to [Savannah’s] approval. Any recommendation acted upon by [Savannah]
shall be deemed accepted and if implemented, we will pay you as outlined below
after such savings and refunds are achieved. We will promptly forward all
information pertaining to your recommendations for your evaluation and further
advice.” (Frankel Aff., Ex. 2). The Court finds this to be a facially simple and
unambiguous expression of agreement between the parties.

Under New York law, “if a contract is determined to be unambiguous on its
face, absent the presence of any colorable defenses to its enforcement, it will
be upheld according to its terms.” Beltrone Const. Co., Inc. v. State, 189
A.D.2d 963, 592 N.Y.S.2d 832, 834 (A.D. 3rd Dept. 1993). As the Court finds the
Agreement to be facially unambiguous, the Court must enforce it according to its
terms, absent a colorable defense. 592 N.Y.S.2d at 834. The Court must,
therefore, analyze the defenses raised by Savannah in order to determine whether
any of them are colorable.

The Court has already found the [*25] consideration and ambiguity defenses
unavailing. Savannah has also argued, however, that the Agreement is
inapplicable here, because the purchase of natural gas directly from the
well-head was its own idea and was a natural consequence of work performed by
Savannah’s own people.

NUS argues, and the Court agrees, that it makes no difference what Savannah
did to reduce its utility expenses after it entered into the Agreement with NUS.
Once the Agreement was executed, Savannah worked independent of NUS at its own
risk. The Agreement clearly indicates that Savannah was paying NUS to work on
saving it money on its utility expenses. The Agreement requires that NUS need
only make a recommendation in order to qualify for payment if its recommendation
was thereafter successfully used by Savannah.

Savannah could have modified the Agreement in order to protect it from having
to pay NUS for reduction projects in which it was already engaged, such as was
done in National Utility Service, Inc. v. Whirlpool Corporation, 325 F.2d 779
(2d Cir. 1963), in which Whirlpool modified the same form contract as was used
in this case by adding the paragraph: “At our St. Joseph, Michigan plant [*26]
we are in the process now of increasing our power factor from 88% To 100% And
reductions in our gas rates for processing and heating, therefore, these items
are not to be included in your computations of rate reductions.” Savannah had
ample opportunity to alter the Agreement to ensure that it not be held liable
for duplicative work performed by both NUS and Savannah’s engineering
department, but it failed to do so. It is now bound by the contract it made.

Moreover, if Savannah believed that it had already taken all the steps
necessary to obtain the less expensive natural gas from the wellhead and have it
transported by Southern, it should have rejected NUS’s recommendation, as it had
a right to do by virtue of the approval clause. The Agreement stated that “any
recommendation acted upon by [Savannah] shall be deemed accepted and if
implemented” NUS becomes entitled to the savings payment. See National Utility
Service v. Callahan Mining Corp., 799 F. Supp. 1004, 1005 (N.D.Cal. 1990).

Savannah also argues that the recommendation contained in the Report does not
constitute an adequate “recommendation” within the meaning of the Agreement. The
Agreement specifically [*27] provides that Savannah “hereby authorize[s] [NUS]
to submit recommendations for all possible savings and refunds on our energy
costs.” (Frankel Aff., Ex. 2; NUS’s 12G Stat., P 11) (emphasis added). In
fulfillment of its obligations under this portion of the Agreement, NUS
submitted the Report which suggested that Savannah renegotiate its contract with
Southern. The Report then went on to state that:

(4) In the event Southern Natural Gas expresses an unwillingness to
renegotiate your contract, you should investigate ways of receiving
your natural gas from various wellhead producers, depending on the
out-come of FERC’s hearing concerning “mandatory carriage.”

(Frankel Aff., Ex. 18). Although this language suggest a contingent plan, the
fact remains that it constitutes a suggested course of conduct which Savannah
ultimately employed successfully. Moreover, Savannah began to make payments on
what it obviously at one time believed to be a manifest obligation resulting
from its actions regarding this recommendation. The plain language of the
Agreement and the Report, combined with Savannah’s assumption of payments,
convinces this Court that NUS complied with its obligations [*28] under the
Agreement and supplied what can fairly be termed a “recommendation.”

3. Sufficiency of NUS’s Actions

Savannah attempts to argue that the Agreement required NUS to offer more than
was contained in the April 1985 Report in order to qualify for payment under the
Agreement. There is, naturally a requirement of good faith and fair dealing in
every contract, but there is nothing in the record to indicate that NUS did
anything but fulfill its obligations under the Agreement as best it could in
light of the materials Savannah gave it. Quite to the contrary, the facts in the
record indicate that it was Savannah, not NUS, that should be concerned about
its good faith obligations under the Agreement. See National Utility Service,
Inc. v. Blue Circle, Inc., 793 F. Supp. 52 (N.D.N.Y. 1992).

A covenant of good faith and fair dealing is implied in every contract
governed by New York law. National Utility Service, Inc. v. Blue Circle, Inc.,
793 F. Supp. at 55 (citing Leberman v. John Blair & Co., 880 F.2d 1555, 1560 (2d
Cir. 1989); and Filner v. Shapiro, 633 F.2d 139, 143 (2d Cir. 1980)). That
covenant precludes each [*29] party from engaging in conduct that will deprive
the other party of the benefits of their agreement. Id.

It is apparent in the record that Savannah has not dealt fairly with NUS and
has not acted in compliance with its obligations under the Agreement. Savannah
neither rejected the recommendation nor cooperated by providing all the
information it was required to provide; NUS offered to assist Savannah in its
negotiations with Southern and to provide further analysis if necessary.
Savannah chose not to accept NUS’s offer of further assistance. Savannah cannot
now assert that NUS failed to comply with the Agreement by virtue of the fact
that Savannah failed to comply with its own obligations. See National Utility
Service, Inc. v. Blue Circle, Inc., 793 F. Supp. at 56.

4. Accord and Satisfaction

Savannah’s argument that the $ 51,134.87 payment made to NUS constitutes an
accord and satisfaction is undermined by William W. Sprague, Jr.’s letter of
April 27, 1988, in which Sprague, Savannah’s president, states that:

Consideration of this project by our Engineering Group was begun prior
to any recommendations made by National Utilities. Payments made to
[*30] you for savings ostensibly accomplished with your assistance
were made in error and should be refunded.

(Frankel Aff., Ex. 6).

It is clear that Savannah never intended those payments to be an accord and
satisfaction of any debt under the Agreement, but sought then and is continuing
to seek to regain that money. Without intent, there can be no accord and
satisfaction. Jacoby and Meyers v. Crispi, 205 A.D.2d 312, 613 N.Y.S.2d 13
(A.D. 1st Dept. 1994).

D. Savannah’s Breach of Contract

The Court finds that Savannah has breached its Agreement with NUS and, as a
result, NUS is entitled to recover one-half of the total savings realized by
defendant for the 60 months referenced in the Agreement, running from August 31,
1986 through July 30, 1991. n4 According to the undisputed calculations of NUS,
the amount of the savings totals $ 6,048,846.44 and is the “difference between
the actual billing and what the billing would have been, but for the change” in
the utility services used by Savannah. (See Allied Supermarkets, Inc. v.
National Utility Service Inc., Civil Action No. 32336 (E.D. Mich. 1974) (NUS’s
Br., App. B, at 5). The Court will, therefore, enter [*31] judgment in favor of
NUS in the amount of $ 2,973,289.35, representing 50% of the savings obtained by
Savannah for the 60-month period running from October 26, 1984 through October
26, 1989, less the $ 51,134.87 already paid.

– – – – – – – – – – – – – – Footnotes – – – – – – – – – – – – – – –

n4 The Agreement stipulates that Savannah would be sharing any covered
savings from the date they first appeared on Savannah’s bills. (Frankel Aff.,
Ex. 2).

– – – – – – – – – – – – End Footnotes- – – – – – – – – – – – – –

NUS also requests that the Court award prejudgment interest. Under New York
law, pre-judgment interest should begin to run from the earliest ascertainable
date the cause of action existed. N.Y.Civ.Prac.L. § 5001(b). NUS claims that
this date should be September 1, 1986 and that the interest should amount to $
1,075,180.75. NUS’s calculation of prejudgment interest is unsubstantiated and
no affidavit, certification or declaration presently in the record supports its
$ 1,075,180.75 interest calculation. (See NUS’s 12G Stat., PP 105 and 106). The
Court will not, therefore, at this time enter an award of interest. The Court
will deny [*32] the request for interest without prejudice to NUS renewing its
application with properly substantiated proof of the amount of the interest.

The Court further finds that the defendant’s counterclaim for recovery of the
$ 51,134.87 amount already paid must be denied due to its breach of the
Agreement and failure to show non-compliance by NUS with the contract terms.
National Utility Service, Inc. v. Blue Circle, Inc., 793 F. Supp. at 56.
Plaintiff fully performed its obligation under the Agreement by analyzing the
submitted utility bills and recommended that Savannah purchase natural gas from
the wellhead producers. In addition, the $ 51,134.87 has been subtracted from
the amount which Savannah is obligated to pay under the Agreement. The Court
will, therefore, dismiss Savannah’s counterclaim. Id.

III. CONCLUSION

For the reasons discussed above, the Court denies Savannah’s motion for
summary judgment and grants NUS’s cross-motion for summary judgment. The Court
will enter a judgment in favor of NUS in the amount of $ 2,973,289.35 and
dismiss Savannah’s counterclaims for the $ 51,134.87 already paid. The Court
will deny, without prejudice, NUS’s claim for prejudgment [*33] interest. An
appropriate order follows.

Dated: September 9, 1994
WILLIAM G. BASSLER, U.S.D.J.

ORDER

This matter having come before the Court on a motion by the Defendant,
Savannah Foods & Industries, Inc., (“Savannah”) for Summary Judgment and a
Cross-Motion for Summary Judgment by Plaintiff, National Utility Service, Inc.,
(“NUS”); and
The Court having reviewed the briefs and other documents submitted by the
parties for this motion and having heard the oral argument of counsel; and
For the reasons set forth in the Court’s opinion filed on this date; and
For good cause shown;
It is on this 9th day of September, 1994 ORDERED as follows:
1. Savannah’s motion for Summary Judgment is hereby DENIED;
2. NUS’s Cross-Motion for Summary Judgment is hereby GRANTED;
3. Judgment shall be entered in favor of NUS and against Savannah in the
amount of $ 2,973,289.35, exclusive of interest;
4. NUS’s request for interest on the judgment is hereby DENIED, without
prejudice; and
5. Savannah’s counterclaims are hereby DISMISSED.

WILLIAM G. BASSLER, U.S.D.J.