United States Court of Appeals
For the First Circuit
No. 08-1663
INTERNATIONAL SALT COMPANY, LLC,
Plaintiff - Appellant,
v.
CITY OF BOSTON,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard Stearns, U. S. District Judge]
Before
Boudin, John R. Gibson,* and Howard,
Circuit Judges.
Bruce W. Edmands with whom Julia B. Vacek and Eckert Seamans
Cherin & Mellott, LLC were on brief for appellant.
Adam Cederbaum with whom William F. Sinnott, Corporation
Counsel, and Scott C. Holmes, Assistant Corporation Counsel, City
of Boston Law Department, were on brief for appellee.
December 18, 2009
*
Of the Eighth Circuit, sitting by designation.
JOHN R. GIBSON, Circuit Judge. International Salt
Company, LLC (“International Salt”) appeals from the district
court’s entry of judgment for the City of Boston (“City”) in a
dispute over payment for road salt that the company supplied during
the winter of 2004-05. The City awarded a contract to
International Salt to supply 75,000 tons of road salt for that
winter, but its supply dwindled midway through the season after
several unusually heavy snows hit the area. In early February
2005, the City demanded another 25,000 tons of salt, which
International Salt said it could provide but at a higher price
because its shipping costs had risen. The City was insistent in
its demand but did not agree to pay more than the original contract
price. International Salt supplied the additional salt after the
City characterized the situation as a public safety issue for which
it would hold the company responsible, but the company reserved the
right to litigate the price. True to its word, the City paid the
same rate per ton as it had under the contract, and this suit
followed. The district court entered judgment for the City of
Boston following a non-jury trial. International Salt appeals,
arguing: 1) the parties’ failure to comply with the Massachusetts
Uniform Procurement Act was excused under the Act’s emergency
provisions; 2) the District Court erred in holding that
International Salt’s claims are barred by its failure to show that
it strictly complied with the Boston City Charter; and 3) it should
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be permitted to assert equitable estoppel against the City. We
will affirm the judgment.
I.
The parties largely stipulated to the relevant facts.
International Salt was the successful bidder to supply the City
with 75,000 tons of road maintenance salt for the period between
October 1, 2004 and June 30, 2005. The contract received both the
written approval of the Mayor of Boston and approval by a city
official that appropriations were available. From November 2004 to
March 2005, Boston received more than eighty-five inches of snow,
with roughly half falling in January. Road salt is critically
important during winter snow and ice storms, and its absence poses
a significant threat to public health and safety. Without it, the
City’s streets become dangerous to vehicles and pedestrians.
Effective use of road salt requires that the City apply it to
streets and highways before, during, and after storms.
The City wrote the contract at issue. The only provision over
which International Salt had any control was the bid (and
ultimately, the contract) price. This lawsuit arose because the
parties could not agree on an interpretation of certain contract
language. The first dispute is over an incorporated contract
provision of the City’s invitation for bids, which reads: “Price
will be held for the term of the contract and shall not be limited
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to the estimated number of items.” However, the City did not use
the word “estimated” anywhere else in the contract documents.
In addition to uncertainty over the word “estimated,” the
contract contains other ambiguities. The signature page of the
contract, in listing the terms, states that the “total amount [of
the contract is] not to exceed $2,731,500.00.” That figure is
derived from multiplying 75,000 tons by $36.42, the price bid per
ton. The bid response form contains two additional pertinent
statements. First, in the space allotted to the “total bid price”
for the contract, International Salt recorded it as $36.42 a ton,
for a total of $2,731,500.00. Second, where asked to list the
price components of the bid price, International Salt wrote: “Total
contract. Based upon 75,000 tons.”
As of the first week of February 2005, International Salt had
delivered 70,848 tons of salt to the City, and the City had
approximately 28,117 tons remaining in its storage yards. Much of
the winter was yet ahead, and the City’s Public Works
Superintendent, Joseph Canavan, liked to keep the reserves above
20,000 tons because of the uncertainty of weather and the problems
caused by running out of salt.
On February 7, Daniel Thompson, vice president of government
sales for International Salt, faxed a letter to Vincent Caiani, an
Assistant Purchasing Agent for the City, informing him that an
increase in ocean freight rates would cause International Salt to
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increase its price of salt from $36.42 a ton to $46.36 a ton,
effective with any shipments above the 75,000 tons specified in the
contract. That same day, Mr. Caiani telephoned Mr. Thompson to ask
that International Salt provide the City with additional salt in
excess of 75,000 tons, but at the contract price of $36.42 per ton.
They disagreed over whether International Salt was obligated to
provide it. The next day, Mr. Thompson spoke with William Hannon,
the City’s Purchasing Agent. Mr. Hannon said that the City was
precluded by Massachusetts General Laws chapter 30B from agreeing
to pay more than $36.42 per ton, and Mr. Thompson took the position
that International Salt had fulfilled its obligations under the
contract by supplying the City with 75,000 tons of salt and that it
could not supply additional salt at the same price because shipping
costs had increased. As these conversations were taking place, the
City was applying salt to its streets, and its supply diminished by
nearly 3000 tons in one day.
The parties continued to discuss this issue, with each side
holding fast to its position. Ultimately, on February 10, the
Boston Commissioner of Public Works, Joseph Casazza, telephoned
International Salt’s Chief Executive Officer, Robert Jones, to
demand written assurance that the company would continue to supply
the City with salt. The Commissioner presented his demand as a
safety issue; it was the middle of winter, in emergency conditions,
and he did not want the City to be shut down or to face problems
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with unsafe streets or with police and fire vehicles being unable
to move about. Mr. Casazza threatened to hold International Salt
responsible for streets rendered unsafe by lack of salt. He
deflected any talk of price as not his responsibility.
Following this February 10 conversation between the
Commissioner and the company’s CEO, Mr. Hannon sent Mr. Jones a
letter setting forth the City’s expectation that International Salt
would honor its contract and provide additional road salt at the
same price. Mr. Jones also sent Mr. Casazza a letter informing him
that International Salt would continue to supply salt even though
it had fulfilled its obligations under the contract, and that if
the parties could not agree on a price, International Salt would
seek fair market value as determined by a court or through
mediation. International Salt’s attorney sent Mr. Hannon a letter
the following day reiterating the company’s position and refuting
the City’s contract interpretation.
On February 16, International Salt completed delivery of
75,000 tons of road salt to the City, all of which came from
inventory at its facility in Charlestown, Massachusetts. The City
issued three more purchase orders for salt: February 11 (25,000
tons), March 11 (3000 tons), and April 15 (50 tons). From February
16 to March 14, International Salt made an additional eighteen
deliveries of salt, totaling 27,021.84 tons. For those deliveries,
International Salt turned to the ocean freight spot market and paid
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higher shipping rates. The City, however, continued to pay
International Salt a constant rate of $36.42 per ton for the
additional shipments.
On April 15, International Salt’s counsel wrote in a letter to
Mr. Hannon that the company viewed the City’s lack of response to
its previous correspondence about pricing and its additional orders
as an implicit agreement to pay fair market value, which it
determined to be $56.37 per ton. The letter concluded that the
City owed International Salt an additional $1,523,221.10. Mr.
Hannon replied five days later and said that the City had been
consistent in its view that the contract allowed the City to buy
quantities of greater than 75,000 tons of salt at the contract
price, and that Massachusetts law and the City Charter did not
permit the City to pay a higher price.
International Salt filed this action in three counts: breach
of contract, quantum meruit/unjust enrichment, and declaratory
judgment. The district court conducted a non-jury trial and
entered judgment for the City, finding that International Salt had
no viable claim of recovery. This appeal followed.
II.
Although the City once took the position that the parties’
contractual relationship continued to exist after International
Salt had completed delivery of 75,000 tons of road salt, it does
not make that argument on appeal. The City does not take exception
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to the district court’s ruling on the first day of trial that the
City’s interpretation of the original contract was commercially
unreasonable and that International Salt fully discharged its
obligations by delivering 75,000 tons of salt to the City in
compliance with the contract’s terms.
The parties thus agree that International Salt must be able to
demonstrate that a new contract was formed if it is to prevail on
its legal claims. In this case, we cannot determine if a new
contract was formed by looking solely at the parties’ dealings.
Instead, we must also consider Massachusetts law and the Boston
City Charter, both of which set out procurement procedures and
contract requirements that demand strict compliance. The district
court examined those provisions and determined they were unmet,
thereby leaving International Salt without contractual recourse
unless it could demonstrate that the emergency provision of the
Massachusetts Uniform Procurement Act applied. The district court
concluded that the emergency provision did not apply.
We review de novo the district court’s legal conclusions,
Williams v. Poulos, 11 F.3d 271, 278 (1st Cir. 1993), and its
application of the statute and charter to the facts, Servicios
Comerciales Andinos, S.A. v. Gen. Elec. Del Caribe, Inc., 145 F.3d
463, 469 (1st Cir. 1998). The Massachusetts Uniform Procurement
Act, Massachusetts General Laws chapter 30B, governs every contract
for the procurement of supplies by the City of Boston. Mass. Gen.
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Laws ch. 30B, §§ 1-2. Section 8 of the Act addresses emergency
procurements.
Whenever the time required to comply with a requirement
of this chapter would endanger the health or safety of
the people or their property, a procurement officer may
make an emergency procurement without following that
requirement. An emergency procurement shall be limited
to only supplies or services necessary to meet the
emergency and shall conform to the requirements of this
chapter to the extent practicable under the
circumstances. The procurement shall make a record of
each emergency as soon after the procurement as
practicable, specifying each contractor’s name, the
amount and the type of each contract, a listing of the
supply or service provided under each contract, and the
basis for determining the need for an emergency
procurement.
The procurement officer shall submit a copy of this
record at the earliest possible time to the state
secretary for placement in any publication established by
the state secretary for the advertisement and
procurements.
Mass. Gen. Laws ch. 30B, § 8. International Salt argues that the
district court’s findings compel the conclusion that section 8
applies. Specifically, it points to the district court’s finding
that it is “undisputed that salt is critical in keeping City
streets safe during snow emergencies for all vehicles, and
especially emergency vehicles.” The district court further found
that it is “beyond dispute that the City was alarmed by the
prospect that its inventory of salt might be depleted, and that as
a result it pressured [International Salt] to guarantee deliveries
over and above the originally contemplated 75,000 tons.” Finally,
the district court noted that the City perceived an urgent need for
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some amount of additional salt in mid-February 2005.
In spite of its sympathetic tone, the district court concluded
as a matter of law that International Salt had not proved that the
City had an immediate need for 25,000 tons of salt. The emergency
provisions of section 8 limit procurements to only those supplies
necessary to meet the emergency and excuse compliance if the time
required to comply would endanger the health or safety of people or
property. Given those statutory limitations and the narrow
construction given by the Massachusetts courts, the district court
determined that section 8's emergency provisions did not apply.
Our review of the record reveals that the district court did
not err. Although the City exerted a great deal of pressure on
International Salt to supply more salt – pressure which was
ultimately successful – International Salt has not met its burden
of proving that a true emergency existed. Public Works
Commissioner Casazza and Public Works Superintendent Canavan both
testified that they did not consider the City’s salt supply to be
at an emergency level in mid-February 2005. International Salt
introduced no competing testimony. Moreover, section 8 does not
excuse compliance with all of chapter 30B’s requirements in the
face of an emergency. It excuses only those requirements for which
health and safety would be endangered if the parties took time to
complete them. When discussing the City’s request for more salt,
the parties parried back and forth for several days, ultimately
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involving Public Works Commissioner Casazza and International
Salt’s CEO Jones. They clearly had each other’s attention and the
record does not suggest that they lacked sufficient time to have
negotiated a new written contract as required by section 17 of
chapter 30B. Section 8 also requires the City’s procurement
officer to make a detailed record of an emergency procurement,
including the basis for determining the need, and to submit such
record to the secretary of state. No such record was created.
Similarly, the district court concluded that International
Salt did not show compliance with the Boston City Charter. The
Charter requires contracts involving $10,000 or more to be in
writing and to have both the Mayor’s approval and the City
Auditor’s certification of available appropriations.
All contracts made by any department of the city of
Boston . . . shall, when the amount involved is $10,000
or more, . . . be in writing; and no such contract shall
be deemed to have been made or executed until the
approval of the mayor of said city has been affixed
thereto in writing and the auditor of said city has
certified thereon that an appropriation is available
therefor or has certified thereon the statute under
authority of which the contract is being executed without
an appropriation.
1890 Mass. Acts ch. 418, § 6, as amended by 1998 Mass. Acts ch.
262, § 1. Although the City Auditor ultimately certified that
appropriated funds were available for two of the three purchase
orders, the other two requirements were not met. Moreover, unlike
the Uniform Procurement Act, the Charter has no emergency
exception.
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In Massachusetts, a party seeking to enter into a municipal
contract has the responsibility of knowing the limitations on a
municipality’s contracting power, and such party cannot recover on
a contract that does not comply. Marlborough v. Cybulski, Ohnemus
& Assocs., 346 N.E.2d 716, 717 (Mass. 1976). International Salt
argues that strict compliance with the City Charter is not required
in all circumstances, citing Bradston Associates, LLC v. County
Sheriff’s Department, 892 N.E.2d 732 (Mass. 2008), and should not
be required in this case because it would frustrate the purposes of
the Uniform Procurement Act. However, Bradston Associates does not
support International Salt’s argument. The contract in Bradston
Associates, which was subject to the same City Charter provisions
at issue here, was a lease that was in writing, signed by the
mayor, and approved by the city auditor. Through “inadvertence,
negligence, or inadequate procedures,” the auditor’s certification
showed “$0.00" as the approved and funded contract amount, when in
fact sufficient funds were appropriated and available. Id. at 735
& n.5. The court refused to invalidate the contract for its lack
of “a ministerial, nondiscretionary verification of existing
budgetary authority.” Id. at 738. It went on to contrast that
function to that of the mayor, whose approval is mandatory and
discretionary and not a mere ministerial act. Id. at n.9.
The lack of a contract bearing the Mayor’s signature stands in
the way of International Salt’s ability to recover, and the
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district court did not err in so holding. The district court
correctly determined as a matter of law that no new contract was
created between the City of Boston and International Salt that
would satisfy the requirements of Chapter 30B or the City Charter,
and that such failure was not excused by the emergency provisions
of chapter 30B.
III.
International Salt also asserts that the district court erred
by concluding that it was not entitled to relief under a theory of
equitable estoppel, even though it acknowledges that the
Massachusetts Supreme Judicial Court has consistently refused to
allow equitable recovery on a contract that does not comply with
the material requirements of public bidding laws. E.g.,
Massachusetts Gen. Hosp. v. City of Revere, 434 N.E.2d 185, 187
(Mass. 1982). Nonetheless, International Salt suggests a
distinction exists because no other case has dealt with the
emergency provision of the Uniform Procurement Act.
The district court applied Massachusetts law and, as federal
courts are bound to do, applied the interpretation formulated by
the Supreme Judicial Court. See Daigle v. Maine Med. Ctr., Inc.,
14 F.3d 684, 689 (1st Cir. 1994). We are not free to create an
exception based on International Salt’s public policy argument.
The record supports International Salt’s assertion that it was in
a difficult position. The City was experiencing an unusually wet
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winter, and its salt supplies were rapidly dwindling. It was only
February, and the City wanted to safely make it through the rest of
the winter. A new contract was out of the question because the
process would take too long. The City thus put pressure on
International Salt to continue delivering salt at the old price,
threatening to hold the company liable if any streets became unsafe
due to lack of salt. The City made it known that it considered its
need for additional salt to be an urgent public safety issue, yet
it would not invoke the emergency provisions of the Uniform
Procurement Act to enter into a new contract. Unfortunately for
International Salt, it experienced an inherent risk of doing
business with the City, and the fact that the City benefited from
International Salt’s acquiescence is now of no consequence. See
Massachusetts Gen. Hosp., 434 N.E.2d at 187 (“That the city may
have benefited by the hospital’s actions is irrelevant to this
issue. The statutes are controlling.”).
For the foregoing reasons, we affirm the judgment of the
district court.
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