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COMMONWEALTH EDISON CO. v. DIVERSIFIED TECHS. GROU

May 25, 1995

COMMONWEALTH EDISON COMPANY, an Illinois Corporation, Plaintiff,
v.
DIVERSIFIED TECHNOLOGIES GROUP, INC., a Maryland corporation, and CHARLES E. JENSEN, d/b/a/ DIVERSIFIED TECHNOLOGIES, Defendants.



The opinion of the court was delivered by: MARVIN E. ASPEN

 MARVIN E. ASPEN, District Judge:

 Plaintiff Commonwealth Edison Company ("ComEd") brings this two-count complaint against Diversified Technologies Group, Inc. ("Diversified/Maryland") and Charles E. Jensen d/b/a Diversified Technologies ("Jensen" or "Diversified") for breach of contract. *fn1" Defendant Jensen has brought two amended counterclaims for breach of contract, alleging that ComEd unduly delayed Diversified's performance under the contract and wrongfully terminated the agreement. ComEd has moved for summary judgment on Count II of its complaint, and on Counts I and II of Jensen's counterclaims. For the reasons set forth below, plaintiff's motion is denied.

 I. Background

 Since 1984 ComEd, a large electricity producer, had been looking for a way to dispose of certain radioactive wastes it produced when decontaminating the Unit One Reactor at the Dresden Nuclear Power Station. These wastes consisted of a liquid solution used to remove radioactive oxides from the inside of pipes ("NS-1") and radioactive particulates suspended in that solution. ComEd concentrated this NS-1 solution, producing "NS-1 Concentrates" and a vapor containing small amounts of NS-1 and radioactive particles. This vapor was condensed and "demineralized," meaning it was passed through a demineralization chamber filled with resin beads. The contaminated particulates bonded with the resin beads, yielding clean water and contaminated beads. The resin beads were then suspended in water to form a slurry called "NS-1 Supernatant" or "NS-1 Resin Slurry". ComEd stored the resulting waste in four tanks: three tanks of NS-1 Concentrates and one tank of NS-1 Resin Slurry. ComEd eventually planned to solidify these wastes in fifty-five gallon drums with a vinyl-ester-styrene binder, and store them at an arid, low-level nuclear waste disposal site. The United States Nuclear Regulatory Commission ("NRC") approved this plan in an Environmental Impact Statement ("EIS"), concluding that solidification and storage of the solid waste at either the Hanford, Washington site or the Beatty, Nevada site would be acceptable. Because these two arid waste sites would be closed to ComEd shipments after December 31, 1992, the company set out to procure a contractor to perform the necessary solidification before that date.

 In June 1990 several of Diversified/Maryland's representatives, including Vice President Jensen, met with ComEd to discuss solidification of the NS-1 waste. Diversified claimed that it could solidify ComEd's wastes by this NRC-approved method, and that the process could be completed by the December 31, 1992 deadline. On June 13, 1990, ComEd distributed a Bid Specification to Diversified and a competitor (which eventually chose not to bid), wherein ComEd stated that the chosen contractor must comply with (1) the prescribed timetable for solidification, *fn2" (2) the terms of the EIS issued by the NRC, and (3) all applicable regulations and licenses for solidification and storage. Diversified submitted an initial proposal in August 1990, offering to solidify all 2317 cubic feet of the NS-1 waste *fn3" with vinyl-ester-styrene binders for $ 460.50 per cubic foot of waste plus $ 90,600 in "Mobilization/Demobilization" costs, for a total of $ 1,157,580. Complaint, Exb. 2C, at PFI-2A. The initial proposal also indicated that Diversified could complete the project within ten months of the start date, and that the company knew time was of the essence. Although Diversified suggested two alternative means of solidifying the NS-1 Supernatant ("dewatering" and "VERI processing"), ComEd claims that it did not plan on using either of these two methods. *fn4" After this bid was submitted, the parties learned that the amount of liquid that needed to be solidified was more than previously calculated, since the NS-1 Concentrates had to be diluted before they could be properly solidified. Diversified amended its bid to take into account the additional liquid needed for dillusion, and agreed to charge $ 398 per cubic foot of these "Additional NS-1 Dilution Volumes."

 These and other documents were eventually incorporated into ComEd's Purchase Order to Diversified dated December 11, 1990. The order listed the price for solidification per cubic foot of each kind of waste, and stated that delivery was required in the manner outlined in the Bid Specification. ComEd agreed to pay $ 425,000 up front for the solidification processing, and Diversified would receive additional payments as work was performed and invoiced.

 As Diversified began manufacturing the equipment needed for the project, the parties ran into a series of disputes. First, in July 1991 the parties raised the possibility of solidifying the NS-1 Resin Beads through either dewatering or VERI processing. *fn5" Diversified subsequently obtained NRC approval for VERI processing of the waste in October 1991, and ComEd agreed to use that process to solidify the 600 cubic feet of NS-1 Resin Slurry. In order to utilize this process, however, Diversified would have to remove the liquid from the NS-1 Resin Slurry, and processes it separately. Diversified submitted a separate proposal to demineralize this material, but ComEd hired its on-site demineralization and dewatering provider, Chem-Nuclear Systems, Inc. ("CNSI"), to perform the required work on the additional liquid. In an October 18, 1991 fax transmission, Jensen informed ComEd that Diversified considered the contract with ComEd to include the treatment of all 600 cubic feet of resin slurry, and therefore Diversified would bill ComEd for the additional liquid amounts regardless of which treatment method was used on the NS-1 Resin Slurry and which company treated the additional liquid component. *fn6"

 Finally, the parties disagreed about how the solidified waste should be tested before shipping. Apparently, the State of Nevada (which regulates the Beatty storage site) requires all solidified drums of radioactive waste to be physically tested for free standing liquid. In order to comply with this regulation, ComEd demanded that a "drum tipper" be included in Diversified's solidification system. However, Diversified did not believe that such an apparatus was required by Nevada, and therefore did not initially develop its system to incorporated it. Consequently, after Diversified put the drum tipper in its system, it invoiced ComEd for the additional cost. This invoice was disputed by ComEd because it believed that the cost of such measures was included in the contract price.

 In an effort to resolve these and other disputes, the parties engaged in discussions between January 1992 and March 1992, leading up to the execution of a letter agreement dated March 11, 1992 ("Letter Agreement"). In this agreement ComEd promised to pay $ 460.50 per cubic foot of waste, as well as certain other bonuses as work was completed, including a $ 100,000 bonus if:

 
The entire volume of NS-1 which is the subject of the Contract is solidified in its present concentrated form and packaged and otherwise made ready for transportation from Edison's Dresden Plant site prior to December 31, 1992.

 Complaint, Exb. 3, at 1. In exchange, Diversified dropped its claims based on delays and the installation of the drum tipper. Diversified then began processing the NS-1 Concentrates and completed that portion of the project in late July 1992.

 This respite was short lived. After the NS-1 Concentrates were solidified and shipped, ComEd required Diversified to remove all of its solidification equipment before installing the NS-1 Resin Slurry processing equipment. ComEd claims this was done for safety reasons, while Diversified maintains that the solidification equipment posed no safety risk and that ComEd's orders significantly delayed work on the NS-1 Resin Slurry. The VERI processing equipment was finally installed in September 1992, and processing of the NS-1 Resin Slurry was set to begin in October 1992. However, on October 16, 1992, Diversified's VERI processing failed to completely solidify a large container of resin beads. ComEd immediately stopped work on the project, and demanded that Diversified identify the cause of the failed solidification, suggest a means of remediating the partially solidified waste, and provide some assurance that its VERI processing would work properly on the remaining waste. At the same time, ComEd began looking into dewatering the resin beads with another vendor. The parties also began exchanging numerous communications complaining of overcharges and failed payments. ComEd also informed Diversified that in order to resume operations, it would have to demonstrate the repeatability of VERI processing tests on multiple resin samples. *fn9" Diversified claims that it worked extensively between October 16 and November 20, 1992, and asserts that it was able to repeat successful solidification tests by November 20. ComEd disputes this contention, and maintains that Diversified never demonstrated that it could successfully solidify multiple samples of resin beads from the same liner under the ...


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