Phoenix Services Ltd. Partnership v. Johns Hopkins Hospital

HOLLANDER, Judge. This appeal is rooted in a contract dispute between Phoenix Services Limited Partnership (“Phoenix”), appellant, and Johns Hopkins Hospital (“JHH” or “Hopkins”), appellee. Under the contract, Phoenix was obligated to remove medical and other waste generated by JHH. In February 2003, seven years prior to the anticipated expiration of the contract, Hopkins terminated the parties’ agreement.

Claiming that the termination was “for cause,” Hopkins refused to pay the early termination fee of approximately $5 million. Consequently, on March 14, 2003, Phoenix filed a “Complaint for Declaratory Relief’ in the Circuit Court for Baltimore City. As amended, Phoenix sought a declaration, inter alia, that JHH unlawfully terminated the contract. In its answer and counterclaim, JHH sought opposing declarations.

The circuit court held a seven-day bench trial in March 2004. In a “Memorandum Opinion” dated June 18, 2004, the court ruled that JHH was justified in terminating the contract. ³³⁴ On July 7, 2004, the court issued its “Declaratory Judgment” in favor of JHH. On appeal, Phoenix poses four questions, which we quote: I. Did the circuit court err in rejecting the Certificate of the Independent Engineer and substituting its judgment for the Independent Engineer’s “Certified Assurance”?

II

Did the circuit court err when it inserted into the parties’ contract a new and additional requirement that the Independent Engineer’s Certificate be unconditional and contain no assumptions?

III

Did the circuit court err in finding that the Independent Engineer did not certify that any changes had been made by Phoenix?

IV

Did the circuit court err when it refused to admit evidence that the plan certified by the Independent Engineer actually worked? For the reasons that follow, we shall vacate and remand. I. FACTUAL AND PROCEDURAL BACKGROUND 1 JHH and other Baltimore area hospitals (the “Founding Hospitals”) contracted with Phoenix to create and operate a “Regional System” for the disposal of medical and non-medical waste. The parties’ relationship is governed by a “Waste Supply Agreement” (the “Agreement”) dated November 16, 1989, and the “First Amendment to Waste Supply Agreement” (the “Amendment”), dated November 15, 1994 (collectively, the “Contract”). 2 ³³⁵ In connection with the establishment of the Regional System, Phoenix constructed a facility in Baltimore City containing two large incinerators designed to dispose of both medical and non-medical waste (the “Facility”).

Phoenix also established a “Transportation System” for the collection and conveyance of unsegregated medical and general waste from the Founding Hospitals to the Facility. See Agreement, ¶ 3.0. 3 Under the Contract, JHH was obligated to pay for the processing of a certain guaranteed annual tonnage of waste (the “GAT”) for a period of twenty years. See Agreement, ¶ 6.0; ¶ 2.0. JHH produces an average of about 700,000 pounds of waste each month.

At peak times, it produces 3,000 pounds of waste per hour. 4 Article 3 of the Agreement pertains to “Disposal of Waste,” while Article 4 pertains to the “Transportation System.” It states, in part: 4.0. Transportation. In accordance with the Transportation Addendum, MWA, at its sole expense, shall, commencing on the Notification Date, transport all Acceptable Waste from Waste Supplier’s place of business to the Facility in compliance with Applicable Law, subject to the other terms and conditions of this Agreement. As described in this Article, MWA shall provide certain equipment for the collection, storage and transportation of Acceptable Waste within Waste Supplier’s place of business and from Waste Supplier’s place of business to the Facility.

The Transportation System shall be installed and operated according to the terms and conditions contained in the Transportation Ad ³³⁶ dendum. MWA shall at all times maintain the Transportation System in good working order. 4.1. Disposal Carts. Subject to the provisions of the Transportation Addendum, MWA shall provide to the Waste Supplier disposal carts ... for the purpose of collecting, storing and transporting Acceptable Waste to the Facility ....

The number of such carts shall be reasonably sufficient to allow the collection and removal of all Acceptable Waste from Waste Supplier’s place of business..... Article 16, entitled “Dispute Resolution,” states, in part: (b) When the amount of the matter in controversy exceeds Two Hundred and Fifty Thousand Dollars ($250,-000.00), such Issue shall be decided by arbitration conducted by three (3) arbitrators in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, provided that the party to such arbitration shall have, for a period of six (6) months following initiation of such arbitration proceeding, all rights of discovery provided by the Maryland Rules of Civil Procedure and Practice then pertaining. (c) The agreement to arbitrate contained in this Section shall be specifically enforceable under the Maryland Arbitration Act as amended. The award rendered by the arbitrators) shall be final, and judgment may be entered upon and in accordance with applicable law in any court having jurisdiction thereof.

(Emphasis added). Pursuant to the “Recitals” portion of the Agreement, construction of the Regional System was to be financed, in part, “by tax-exempt bonds issued by the Maryland Industrial Development Finance Authority (“MIDFA”).” The Agreement served as security for the bonds; because the bonds had a term of twenty-one years, “long term commitments” were sought for use of the Facility. Neil Ruther, Esquire, Vice-President and General Counsel for Phoenix, explained at trial that the bond underwriters’ legal counsel insisted that the Agreement contain “strict provisions that would make it next ³³⁷ to impossible in all but the most extreme circumstances for the hospitals to cancel [their] agreements.” Therefore, JHH was entitled to terminate the Agreement “for any reason,” so long as it gave thirty days’ notice and made a substantial payment to Phoenix in accordance with calculations specified in the Agreement. See Agreement, ¶ 14.2.

At the outset, JHH briefly participated in the Regional System. But, the parties agreed that Phoenix was then unable to service Hopkins adequately. JHH was not brought back into the system until 1992. Even then, JHH continued to experience problems with Phoenix’s performance.

Ruther characterized Phoenix’s performance during the period of 1992 to 1994 as “spotty.” He acknowledged that “the system of carts ... was still problematic” and the plant was “in fairly severe financial difficulty.” Ruther also recalled that, in the winter of 1994, Phoenix “was not able to process” appellee’s waste “in accordance with the Contract.” In February 1994, because of MWA’s poor performance, JHH suspended its participation in the Regional System. 5 Joanne E. Poliak, Esquire, Vice-President and General Counsel of JHH, wrote to Ruther on February 18, 1994. She said: JHH notifies MWA .. . that MWA has not met its obligations under the Agreement and is incapable of curing such failure to perform without a substantial revision and/or reorganization of MWA’s operations and finances. Because the health and welfare of JHH’s patients and employees have been directly affected by MWA’s prior inability to perform under the Agreement, JHH cannot permit resumption of MWA service until a long-range plan of meaningful correction has been agreed to by JHH and MWA.... During the plan development period, JHH will burn its own ³³⁸ waste and the parties’ obligations under the Agreement will be suspended. * * * Repeated telephone calls from representatives of JHH through the summer and fall of 1993 advised MWA of the repeated and severe breach of contract provisions.

Meetings between representatives of JHH and MWA to discuss the deficiencies occurred on September 1, 1993, October 18, 1993, November 10, 1993, and December 20, 1993 .... Despite these repeated notifications, meetings and correspondence, MWA’s performance did not improve. Indeed, the consistent and persistent lack of performance culminated in a disastrous situation for JHH at the end of January [1994]. Over a period of several days, MWA did not perform and the waste accumulated at JHH causing severe health and safety hazards.

The piles of trash and red-bag wastes were piled to the ceiling in the corridors in the basement of the Hospital and on the patient floors of the Hospital. Patients, visitors and professional personnel walked between walls of waste to travel from the Emergency Room to the X-Ray Department or up to the patient halls. Entranceways to elevators were blocked with stacks of waste. On many patient halls there was no room to move stretchers with patients between the piles of waste.

Under any standard, MWA’s performance was wholly inadequate In contrast to the originally envisioned regional waste concept [under the Agreement] which would avoid continual contact with medical wastes by JHH’s employees, these employees have been forced over the past year, and were forced during this recent critical period, to handle red-bag wastes on a continual basis .... On June 13, 1994, Phoenix filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. As part of Phoenix’s reorganization plan, Grotech Capital Group (“Gro- ³³⁹ tech”), a Maryland venture capital firm, 6 planned to invest over $7 million in Phoenix for various improvements. However, Grotech predicated its investment on JHH’s willingness to resume supplying waste to Phoenix. 7 As we discuss in more detail, infra, Hugh Woltzen, a CPA and managing director and partner of Grotech in 1994, and G. Daniel Shealer, Jr., Esquire, a vice president and deputy general counsel of JHH, both testified that: 1) Grotech wanted to assure Hopkins’s continued participation under the Agreement and limit Hopkins’s ability to arbitrarily terminate the Contract; and 2) Hopkins was willing to resume business with Phoenix only upon amendment of the Agreement to include specific standards of performance and provisions for early termination in the event that Phoenix failed to satisfy these standards.

These objectives culminated in the Amendment of November 15,1994. Among other things, the Amendment contemplated a review of appellant’s waste disposal system and Facility by an “Independent Engineer.” As reflected in the Amendment, the parties agreed that R.W. Beck & Associates (“Beck”) 8 would serve as the Independent Engineer. Pursuant to the “Recitals” section of the Amendment, Phoenix “proposed to make the additions, improvements, and renovations to the Facility” as set forth in Beck’s report of April 20, 1994, which was attached to the Amendment as an exhibit (the “1994 Beck Report”). These changes were referred to as the “Capital Improvement Program.” ³⁴⁰ In ¶ 13(b) of the Amendment, JHH agreed to rescind the suspension of service on the “Effective Date” of the Contract.

Pursuant to ¶ 13(a), the “Effective Date” was defined as the date on which Phoenix delivered to JHH “a certificate of the Independent Engineer stating that the JHH Capital Improvement Program has been completed.” In 1996, after appellant provided JHH with Beck’s certification, JHH lifted the suspension and resumed supplying waste to Phoenix. The Amendment included various exhibits outlining Phoenix’s duties to JHH. Pursuant to Exhibit I, titled “Transportation Addendum for The Johns Hopkins Hospital,” Phoenix was required to make seven daily pickups according to a specific schedule. Moreover, it was required to arrive within sixty minutes before or after each scheduled pickup.

Exhibit G, titled “Intermediate Sanctions,” provided for a monetary penalty if Phoenix arrived beyond the scheduled time. It also said: “In addition, if the On-Time Pickup Rate for all Founding Hospitals for a month is less than 90%, within 5 Business Days after the end of the month MWA shall, in addition to the Sanctions, deposit $5,000 into the Transportation Improvement Fund.” Under ¶ 2.2 of the Amendment, the Contract was to continue until July 2, 2011. As outlined in ¶ 13(b), the Amendment included a multi-step process to terminate the Contract for cause: (1) the occurrence of a “Major Backup” and a written notice from JHH to appellant of cause for suspension (see Amendment, ¶¶ 13(b)(l)(A)-(C)); (2) JHH’s issuance of a notice of suspension, if Phoenix failed to resolve the Major Backup within three hours of its receipt of the notice; (see ¶ 13(b)(1)(D)) 9 and (3) the failure of Phoenix to provide a Certificate of Reasonable Assurances (the “Certificate”) from an agreed upon Independent Engineer, within the time provided (see ¶ 13(b)(1)(D)). In the absence of cause, however, ³⁴¹ JHH could unilaterally buy out its participation, in accordance with a formula set forth in ¶ 14.2 of the Agreement. 10 We quote from ¶ 13 of the Amendment, because it is central to this appeal: (b) ...

MWA recognizes that it has an obligation not again to impair the Waste Supplier’s expectation of receiving performance under this Agreement. (1) Accordingly, if at any time after the Effective Date, (A) MWA fails to make (i) three Complete Scheduled Pickups (for purposes of this Section, a Complete Scheduled Pickup shall mean the arrival of an empty trailer with the capacity to haul 48 carts, as described on Exhibit I hereto) for which Sanctions are applicable under Exhibit G within a one week period or (ii) three Complete Scheduled Pickups within a day for which Sanctions are applicable under Exhibit G, and (B) the failure causes more than 50 carts of waste to be backed up at the Waste Supplier’s facilities, and (C) the Waste Supplier gives MWA a written notice of cause for suspension (which may be by facsimile) stating that, at the time of the notice, the pickups have not been made and MWA’s failure to remedy the situation will result in suspension (the concurrence of events (A), (B) shall collectively constitute a “Major Backup”), and (D) within three hours after receipt of the notice, MWA has not arrived at the Waste Supplier’s loading facilities with sufficient tractors, trailers, equipment, and personnel to effect the prompt removal of all waste that was to have been removed by the missed or partial pickups, the Waste Supplier may, by the issuance of a notice of suspension not later than 30 hours after the Major Backup, cause the initiation of a suspension period. The suspension period shall continue until the Waste Supplier receives reasonable ³⁴² assurances in the form of a certificate of the Independent Engineer stating that [Phoenix] has made changes to the Transportation System or the Facility sufficient to prevent the recurrence of a failure to comply with the agreed upon schedule of pickups. The failure of [Phoenix] to provide such certified assurance within the sooner of (i) 30 days (or such longer period not to exceed 60 days, as the Independent Engineer certifies to be needed to implement the corrective changes with due diligence) from the notice or (ii) the date agreed to by both parties shall constitute an Event of Default under the Waste Supply Agreement which, notwithstanding any other provision (including, without limitation, Section 14.1) of the Waste Supply Agreement to the contrary, shall give [JHH] the option of terminating the Waste Supply Agreement without penalty upon notice given during the suspension period.

(Emphasis added). In sum, as JHH explains, under the Amendment “the requirements to trigger a suspension included both late pickups and a backup of waste, [but] the requirements to lift a suspension were focused exclusively on Phoenix’s assured ability to meet the pickup schedule in the future; if Phoenix did not provide reasonable assurances that it would avoid future late deliveries, JHH was permitted to terminate— without any showing that there would be future backups.” Woltzen testified that he was “very involved all the way through” the negotiations that led to execution of the Amendment. He engaged in discussions with Colene Daniel, Vice-President of Corporate Services and Community Health and Services at JHH, as well as Shealer and Plank. According to Woltzen, Grotech would not agree to invest $7 million in Phoenix as part of its reorganization unless Hopkins, appellant’s “largest customer,” was committed to continuing its Agreement with Phoenix for the remaining term of the Contract.

Woltzen explained: [0]ur opinion was, [Phoenix] was not viable without the Hopkins contract. Furthermore, in our opinion, [JHH] ³⁴³ added two things, first thing was the largest amount of cash flow relative to the contract and second, Hopkins as important to us in this transaction because obviously it has a world class reputation as one of the finest hospitals in the country, in the world. They thought that would lead other people to believe this was a viable opportunity. To be sure, Woltzen acknowledged that JHH was “very concerned [about the] recurrence of performance problems.” Nevertheless, he reiterated that he “wasn’t willing to invest [his] firm’s money in the project without certification that Hopkins was going to be there,” and participate “[t]hrough the life of the agreement.... ” Woltzen’s “reaction” was, “we have got to have a contract [with JHH].

We have to know that cash flows are definitive, and you can’t, based on a whim, change this contract based on anything, change this contract, it’s a take or pay contract, that is [set] up to service those bonds, and we are not putting money in unless you are sure [Hopkins is] going to be there.” Woltzen added: “I had to have [JHH] in the facility, there are no questions about that in my mind.” Of import here, Woltzen insisted that, from “a business standpoint,” the language of § 13(b)(1)(D) regarding the Certificate made clear that the Independent Engineer’s decision was binding. The following testimony is pertinent: [COUNSEL FOR PHOENIX]: All right. Was there any discussion about the terms of [sic] conditions which Hopkins could leave the system? [MR. WOLTZEN]: Well, there were discussions about what happened if something goes wrong.

I wasn’t willing to make the investment, unless I was actually sure they couldn’t or wouldn’t leave the system, but there was discussion about what would happen if there was a recurrence of the problem. The substance was there was a series of events, notices, those kind of things, time, deadlines, those kind of things, at the end of the day though, there was a final determination to be made that was almost like an arbitration. It was ³⁴⁴ basically, an engineer that comes in, looks at the facility and provides, say, hey, [the] facility is adequate to service the hospital and the reasonfs] for the fear have been taken care of, and we can go forward. [COUNSEL FOR PHOENIX]: Can you tell us what conversations there were between you and Hopkins concerning how that issue would finally be resolved, who would make a decision? [MR. WOLTZEN]: The independent engineer or the engineer.

THE COURT: And what’s the decision that the engineer is making? [MR. WOLTZEN]: The decision, Your Honor, that the engineer is making that the plant is capable of performing as, under the contract. [COUNSEL FOR PHOENIX]: And that kind of discussion would occur after what kind of event had occurred? [MR. WOLTZEN]: After there had been some disruption of service, after they had gone into the process leading up to that. [COUNSEL FOR PHOENIX]: When you left that investigation, could you tell the Court whether or not there was doubt in your mind whether there was a deal? [MR. WOLTZEN]: No, it was very clear to me and even after ten years, still is, that if we had a dispute, we would bring in the engineer for better or worse. [COUNSEL FOR PHOENIX]: You would have to live with the results? [MR.

WOLTZEN]: We have to live with the results. They have to live with the results, and for better or worse would be determinative whether or not they would go forward. (Emphasis added). On cross-examination, the following colloquy ensued: [COUNSEL FOR JHH]: Okay.

And if you were concerned about [the Contract] being iron-clad, you saw this language, ³⁴⁵ did you ever pick up the phone and call Dan Shealer or Colene Daniel, for instance, or anyone, and say, we need to put something in here that says the decision of the engineer is final, binding, conclusive, anything like that, did you ever do that? [WOLTZEN]: There were a lot of discussions, and I made it very clear to Dan Shealer, to Colene Daniel and everybody at Hopkins that we are not going to make our investment, unless we were sure they were going to be in here, and it was iron-clad. I was very clear on that .... [COUNSEL FOR JHH]: Mr. Woltzen, my question to you is did you ever ask anyone to put in the agreement language that said not only that there would be a certificate of an engineer, but it would be binding or conclusive? [WOLTZEN]: And the answer is yes. [COUNSEL FOR JHH]: Well, when it wasn’t in there, did you— [WOLTZEN]: I think it is. [COUNSEL FOR JHH]: Show me the language that says that? [WOLTZEN]: It starts out in the same paragraph you said that says, suspension period shall continue until the company receives, or Hopkins receive reasonable assurances in the form of engineer certificate that it could go on period. I mean it can’t be any more clear than that to me, at least on a business standpoint, it’s clear. (Emphasis added).

According to JHH, after the Amendment was executed “Phoenix’s service was as poor as its predecessor’s.” 11 On January 8, 2003, one of Phoenix’s two incinerators was shut down because of a rupture in the steel of the incinerator’s ³⁴⁶ “water jacket.” 12 Annette Fries, Senior Counsel for JHH, wrote to Michael Plank, President of Phoenix, on January 10, 2003, advising that “close to 300 carts” of waste had accumulated in the hallways of JHH. She stated: “[I]t is Phoenix’s responsibility to remove the trash that is generated by this institution. Phoenix has consistently failed to do so. Please advise me immediately what steps Phoenix intents [sic] to take to remedy this intolerable situation immediately.” Thereafter, at approximately midnight on January 11, 2003, while one incinerator “was down for repair,” Phoenix’s other incinerator “ruptured,” flooding the basement of the Facility. 13 Plank acknowledged at trial: “There was nothing we could do at that point but to shut the incinerator down because the water had risen to the level where it would have prevented us from running further----” The water had to be pumped from the basement and, once the incinerators were repaired, they had to warm up for “six to eight” hours. 14 Plank conceded that, “for 26 hours,” Phoenix lacked “any incineration capacity.” Consequently, from January 12, 2003, to January 14, 2003, Phoenix did not make all of its scheduled pickups at JHH.

In particular, on Sunday, January 12, 2003, Phoenix failed to make all of JHH’s scheduled pickups. On January 13, Phoenix made one of five scheduled pickups, at 10:00 p.m.; it ³⁴⁷ missed two and made the other two the next day. On January 14, Phoenix missed all five scheduled pickups; the only pickups on that date were two that had been scheduled for January 13, 2003. At 3:37 p.m. on January 15, 2003, Shealer sent Plank and Ruther a letter, by facsimile, captioned: “Notice of Major Backup under the Waste Supply Agreement between The Johns Hopkins Hospital and Medical Waste Associates Limited Partnership dated October 2,1989 as amended by the First Amendment to Waste Supply Agreement dated November 15, 1994 (the “Agreement”).” 15 It said, in part: I am writing in follow-up to Annette Fries’ letter to Mr. Plank dated January 10, 2003, in which we notified you of a significant back-up of waste at The Johns Hopkins Hospital (“JHH”) created by several missed pick-ups and further exacerbated by what we understand to be the partial shut down of the Medical Waste Associates Limited Partnership (“Phoenix”) plant over the weekend.

Please be advised that Phoenix has missed three scheduled pick-ups on January 14: 4:00 p.m., 8:00 p.m., and 10:45 p.m. and two scheduled pick-ups on January 15: 7:00 a.m. and 12:30 p.m. This has caused a back-up of approximately 200 carts of waste at JHH. This letter constitutes written notice of cause for suspension. At the time of this notice, the pick-ups have not been made.

Phoenix’s failure to remedy the situation as provided for in the Agreement will result in the suspension under the Agreement. JHH’s transportation logs, admitted in evidence, showed that Phoenix was over sixty-one minutes late for the five scheduled pickups referenced in Shealer’s letter. Three missed pickups, combined with substantial accumulation of waste, constituted a Major Backup under the Agreement. JHH’s Notice triggered Phoenix’s obligation under the Amendment to remedy the Major Backup within three hours.

Although an illegally parked truck blocked Phoenix’s access to ³⁴⁸ the JHH loading dock until approximately 5:20 p.m. on January 15, 2003, the waste was not removed by 8:20 p.m., i.e., within three hours of clearance of the dock. According to Plank, Phoenix’s employees removed waste from JHH until 6:00 a.m. on January 16, 2003. By facsimile on January 16, 2003, Shealer sent a “Notice of Suspension” to Plank and Ruther. It stated: The Major Backup (as such term is defined in the Agreement) of which [JHH] notified [Phoenix] at 3:21 p.m. yesterday was not remedied in accordance with the terms of the Agreement.

Accordingly, JHH is providing Phoenix with this notice of suspension, which causes the initiation of a suspension period. During the suspension period, JHH will continue to deliver Acceptable Waste to Phoenix. Under the terms of the Agreement, Phoenix has an on-going responsibility to perform its duties under the Agreement utilizing Phoenix’s Backup Systems (as defined in the Agreement).... As noted, pursuant to ¶ 13(b)(1)(D) of the Agreement, in order to avoid an “Event of Default,” Phoenix had thirty days in which to provide a Certificate of Reasonable Assurances from the Independent Engineer.

To that end, Phoenix engaged Beck to satisfy its contractual obligations. In turn, Beck assigned the matter to Herbert Kosstrin, Ph.D.; since 1988, Kosstrin has been “a senior project manager” at Beck. Although Dr. Kosstrin holds a Bachelor of Science degree in Mechanical Engineering, a Masters Degree in Aerospace Engineering, and a doctorate in Mechanical and Aerospace Engineering, he is not a licensed professional engineer in any state. On January 24, 2003, Richard Montgomery, Chairman of the Board of Phoenix, sent an email to Todd Gartrell, Director of the Department of Environmental Services at Hopkins, concerning “the scope” of Dr. Kosstrin’s “review.” Montgomery alerted JHH that Kosstrin would “focus on the causes for Phoenix not picking up the waste at the hospital,” including “a review of the transportation system, the number of carts available to serve the hospital and the back up plan that was ³⁴⁹ in place at that time.” Montgomery also alerted JHH that Kosstrin “wants to visit the hospital to familiarize himself with the hospital’s requirements, facilities and resources and see how waste is delivered to the loading area for transport to Phoenix,” and to “review the steps being proposed to prevent a repeat of such back up episodes.” In addition, Montgomery indicated that he asked Kosstrin to “look at the total flow of waste from the hospital and determine if the current service template addresses the current needs of the hospital.” Kosstrin prepared the proposed Certificate, provided it to Phoenix for comment, and then incorporated Phoenix’s comments.

On February 14, 2003, 16 Beck sent its “Certificate of the Independent Engineer: Medical Waste Associates Changes to Facility Back-Up Plan,” dated February 14, 2003, to Plank and Shealer under the signature “R.W. Beck, Inc.” The cover letter accompanying the Certificate was also from Beck, and was signed by Kosstrin as “Principal and Senior Director, Special Projects.” It stated: Attached is our Certificate of the Independent Engineer which is being provided pursuant to Section 13(b)(1)(D) of the First Amendment of the Waste Supply Agreement between Medical Waste Associates Limited Partnership and John Hopkins Hospital. In the Certificate, Beck explained that it reached its conclusions after it (1) visited the Facility; (2) met with representatives of Phoenix; (3) met with JHH and visited JHH’s waste holding area and loading dock; (4) reviewed Phoenix’s existing backup plan; and (5) reviewed Phoenix’s revised backup plan, intended to prevent the recurrence of noncompliance. Beck also attached as Exhibit A to its Certificate, a four-page report discussing its findings. In Exhibit A, Beck summarized Phoenix’s backup plan at the time of the outages in January 2003, as follows: In essence, MWA’s primary plan was to minimize the waste received at the Facility via agreed upon measures with the ³⁵⁰ hospitals including, segregation of the general waste (clear bag) and medical waste (red bag), store as much waste as possible while the units are brought back online and bypass some waste to outside disposal facilities as necessary____ Prior to the time of the claimed Major Back-Up, one combustion system at the Facility was shutdown for scheduled maintenance and repairs.

The one steam autoclave that could accept cart waste was awaiting delivery of parts to repair the size reduction system, while the second combustion system was experiencing mechanical issues with the ash sump and was forced to shut down at midnight (24:00 hours), Saturday, January 11, 2003. It took approximately 30 hours to return the first combustion system back into service. During this period, MWA reports that on Sunday, January 12, 2003, it requested the hospitals to segregate their wastes and stated that MWA would cause open top dumpsters to be delivered to the hospitals to take care of the general wastes.... * * * Although the incinerator forced outage occurred on Saturday night, January 11, 2003 and continued until Monday morning (05:45 hours) January 13, 2003, MWA started to see the effects of the outage on Tuesday and Wednesday when the flow of waste that needed to be incinerated was in excess of the 85 TPD permitted capacity of the single incinerator. This waste flow, combined with the inability of the hospital to segregate waste, resulted in saturation of storage at the Facility and in MWA missing some pick-ups.

Beck also indicated that “storage capacity [at the Facility] is limited,” and the “inability to store waste puts constraints on the Facility when both incinerators are out of service.” Further, Beck stated that, following the Notice of Suspension, Phoenix “has taken, or has stated that it intends to add, a señes of items and arrangements to the Facility.” (Emphasis added). Beck continued: The primary enhancement to the Facility is the purchase of additional storage trailers that are to be dedicated to the ³⁵¹ Waste Supplier [i.e., JHH]. MWA has shown the Independent Engineer proof of delivery for 6 trailers with the capacity to store approximately 28 tons of waste. Such additional storage capacity should be able to accommodate approximately two days of [JHH’s] waste generation ....

In addition, completion of certain maintenance items has returned the Facility to full capacity. In addition, Beck discussed appellant’s “revised back-up plan,” which “is to be initiated when there is the potential of a delay in processing deliveries from [JHH] that would cause the next pick-up to be missed.” The revised backup plan involved the following elements: 1) taking advantage of additional onsite storage at the Facility; 2) maximizing use of the autoclaves for acceptable waste if JHH does not segregate the waste; 3) having additional storage at the Facility dedicated solely to JHH; 4) training of Phoenix employees in regard to the revised backup procedure; and 5) annual testing of the procedure. In Beck’s opinion, the “revised back-up plan is dedicated to meeting the needs” of JHH. Relying on Exhibit A, and noting that it “should be read in it’s [sic] entirety,” Beck opined in the Certificate: Based on the Independent Engineer’s review of the back-up plan, the configuration of the Facility, the length of previous dual incinerator outages, and the current waste generation of [JHH] and assuming that [Phoenix] 1) properly operates and maintains the Facility including the timely implementation of renewals and replacements, 2) actually initiates the back-up plan as soon as it cannot process [JHH’s] deliveries, and 3) barring a force majeure type event, the Independent Engineer is of the opinion that [Phoenix] via it’s [sic] revised back-up plan, which includes the procurement of additional dedicated storage for [JHH] at the Facility, has made changes to the Facility sufficient to prevent the recurrence of a failure to comply with the current agreed upon schedule of pick-ups.

(Emphasis added). On February 25, 2003, Shealer wrote a detailed letter to Ruther, advising that JHH rejected Beck’s Certificate “as a ³⁵² reasonable assurance that [Phoenix] has made changes to the Transportation System or to the Facility sufficient to prevent the recurrence of a failure to comply with the agreed-upon schedule of pick-ups” (the “Termination Letter”). Therefore, Shealer informed Phoenix that its letter “serves as Notice of Termination of the Waste Supply Agreement, effective immediately.” Shealer explained that the Certificate failed to provide the requisite assurances because, among other things, (i) Beck’s certificate relies on the facts stated in Exhibit A, and material facts are not included in Exhibit A or considered by the certifícate; and (ii) it does not identify any changes to the Transportation System or to the Facility that are sufficient to prevent a recurrence of the failure by Phoenix to comply with the agreed-upon schedule of pick-ups .... In part, Shealer stated: Beck’s analysis simply considers a situation when both incinerators are out of service and does not address the other flaws with the Facility and/or Transportation System that clearly existed prior to the time that both incinerators became inoperable and which caused Phoenix to fail to comply with the agreed-upon schedule of pick-ups.

Further, Beck’s calculation of available waste storage capacity at the Facility in the event that both incinerators become inoperable is flawed. Phoenix has multiple agreements with other hospitals pursuant to which it is obligated to accept medical waste. Beck’s calculations assume that, during a period in which both incinerators are inoperable, Phoenix would cease to provide service to other hospitals to which it was legally obligated to provide service. This is not a realistic or appropriate assumption.

Claiming that the Certificate failed to “identify changes to the Transportation System or Facility,” Shealer also asserted: The changes contemplated by the First Amendment relate to the Facility and to the Transportation System. They do not contemplate that the backup plan will be the way in ³⁵³ which Phoenix mil meet its agreed upon schedule of pickups. Rather, subsection 13(3) [of the Agreement] provides that the back-up system will be a redundancy, rather than a primary element of the Phoenix waste removal process. Beck’s certificate expressly states that [the] “Independent Engineer is of the opinion that MWA via its revised back-up plan, ... has made changes to the Facility sufficient to prevent the recurrence of a failure to comply with the current agreed-upon schedule of pick-ups.” (Emphasis added).

Notably, Shealer did not challenge the Certificate on the ground that Kosstrin is not a licensed professional engineer. Shealer agreed to meet with representatives of Phoenix “to discuss the possibility of a continuing business relationship under a new legal agreement with different terms.” According to Phoenix, that assertion evidenced JHH’s calculated plan, “at the highest levels,” to find a less expensive alternative to the Contract. By letter dated February 26, 2003, Ruther responded to JHH’s termination letter, stating: “No cause exists for such termination and Phoenix considers the agreement in full force and effect. Therefore, we will continue to provide service.” During the pendency of the litigation, by agreement of the parties, Phoenix continued to collect JHH’s waste on the same schedule and financial terms as if the Contract had not been terminated. 17 At trial, Dr. Kosstrin testified that he was part of Beck’s “energy asset consulting group,” and in January 2003 he was part of the “general consulting group.” 18 He testified generally as to the nature of his work: ³⁵⁴ [T]he vast majority of my work I do technical due diligence on various waste projects and various alternative energy projects; that includes municipal solid waste, an example of that would be a Montgomery County solid waste system and resource recovery system.

It also goes beyond that, being we have done work in the disposing of solid waste, done work with disposal of medical waste. All these in a due diligence fashion where we review the work of others primarily for the purpose of financing a project. In addition to that, we have also assisted various entities in helping them contract out how to dispose of their waste I have also done a substantial amount of work in alternative energy .... Kosstrin estimated that “the majority” of the sixty-five engineers at Beck’s Boston office, where Kosstrin then worked, had engineering licenses.

While Kosstrin acknowledged that he “did the majority of the drafting” of the Certificate, he claimed that “any report or certificate that leaves the office needs to be reviewed by a senior person” with a license in engineering. In this matter, said Kosstrin, the Certificate was reviewed by Ken Rush, a licensed engineer with twenty-five years of experience. Rush “was familiar with the project” because he “worked on it several times over the course of the last eight or nine or ten years.... ” Describing the steps he took in early 2003 “to decide whether R.W. Beck was going to issue a certificate,” Kosstrin stated: Well, first we looked at the particular clause in the contract to see what type of certificate was to be issued, depending on whether or not something happened. We then gathered information from both Phoenix and the Johns Hopkins Hospital, basically, the certificate was dealing with how to, I’m not sure of the proper words here, but how to give assurances to the hospital that certain things would not reoccur in the future, that the hospital was claiming had occurred sometime in January of 2003.

So we investigated, ³⁵⁵ we tried to investigate what had happened. We talked to both sides as to see what they would propose to do to not have a situation reoccur. And then we independently looked at the system with our knowledge .... With respect to Phoenix, we asked them what happened, why they didn’t, you know, continuously pick up the material, what was their outage history at the facility, how they intend to maintain the facility, and what was their backup plan in general, if incinerators go down, ... and we gathered the information ..., had additional conversation^] to get more information as we made our review---- We reviewed that plan, we looked at it as we made our own independent judgment whether they thought that plan was adequate and reasonable.

When there was a facility down time, when both units were down, whether Phoenix could continue to have some place to pick up the waste. With the incinerator and facility of this type, once you pick up the waste ..., you have to get the waste out of the carts and clean the carts, put the carts back into service, and there are really only two ways to do that, one is to put them in the incinerator and incinerate the waste, and the second one is put in temporary storage so that the carts can continue [as] part of the transportation system, going back and forth and picking up the medical waste from the hospital. According to Kosstrin, a representative of JHH told Beck that there was “no problem with having sufficient carts in the System,” and “there were sufficient carts.” Because “it appeared from both sides [that] there was sufficient hospital carts,” Kosstrin determined that this “was no longer an issue.” Kosstrin elaborated on cross-examination: “If there weren’t sufficient carts at the point of [the] major backup, as claimed, then we would have done some more with the cart work. This incident was defined by Hopkins that there were sufficient carts.” Kosstrin added: ³⁵⁶ We next concentrated on the next part of the system, when you were dealing with waste and picking up at point A, you are taking to point B is it has to be somehow disposed of at point B, whether they immediately physically operate the incinerator or they put it on the dock, that if done later that becomes a critical process.

During Kosstrin’s discussions with JHH, it became clear that Phoenix’s “initial plan which was in place at the time ... did not address the issue[s].” Therefore, “Phoenix came up with the second plan which used the idea of storage, dedicated to Hopkins,” which Kosstrin regarded as “a reasonable method.” He stated: The last thing was really to calculate how much storage would be reasonable, giving enough margin of safety, so if a longer outage would occur. The other key point is what we wrote in our cert[ificate], is that the process of the backup plan needed to be initiated immediately upon the inability to dispose of waste at Phoenix[’s] site. The reason for that is that delays in implementing the plan had the possibility of delaying the ability to pick up the waste at Hopkins. That was a real key issue in the plan, meeting the limitation of the plan, having a plan [and] not implementing it does not help.

Before issuing the Certificate, Beck “received confirmation” from Phoenix of a “purchase order for a storage trailer and a check paying for a storage trailer.” On cross-examination, Kosstrin stated that he was personally involved in the preparation of the 1994 Beck Report and in the underlying investigation of the incident in January 2003. Kosstrin maintained that he considered all causes for the Major Backup in January 2003, stating: “We think we looked at causes that happened and were relevant to this particular issue.” In his view, the Major Backup in January 2003 was caused by “insufficient storage ... to handle all that waste that was coming in at that time.” Yet, Kosstrin conceded that, at the time of the Notice of Suspension, Plank informed Kosstrin that Phoenix had space ³⁵⁷ for nine tons of waste, which “would have taken [care of] a large chunk” of the waste. He also stated that Plank informed him that, at the time of the dual incinerator outage on January 11, 2003, “there was no waste [in] storage at that point, at the facility.” Kosstrin added: “[S]torage started to get filled up after that Monday, Tuesday, and Wednesday.” Further, Kosstrin agreed that, as of January 11, 2003, “Phoenix was well behind in its pickups from Hopkins” and “it had not ameliorated that situation by putting waste in storage.” Kosstrin recognized that, whether Phoenix’s “backup plan called for putting [waste] in storage or not, it was available but they didn’t implement it.” Therefore, he indicated that Phoenix “needed a different backup plan.” According to Kosstrin, when he conducted the review in 2003, he understood the Certifícate requirement as seeking reasonable assurances from Beck concerning the “capability of the system to perform,” i.e., that the system must include “all the physical attributes necessary to meet the [pickup] schedule.... ” The following exchange is pertinent: [COUNSEL FOR JHH]: Well, in certifying that the changes that had been made would enable Phoenix to comply with the pickup schedule, did you have in mind, one hundred percent compliance or did you have in mind 90 percent compliance? [DR. KOSSTRIN]: The point of what we had reviewed, and what we did, was to put, have in place the physical attribute to allow them during the time when both incinerators were down to continue to serve the hospital.

In this case, Johns Hopkins. So that with that, additional equipment, storage, at the facility, that allowed them to have the ability to continue to do what they had been doing with respect to pickup. Just keep to the pickup is to take the carts [sic], empty the carts and clean the carts and put it back on the truck. !]! * * [COUNSEL FOR JHI-I]: The question was, Dr. Kosstrin, in reviewing the backup plan and preparing the certificate], ³⁵⁸ you had in mind a one hundred percent on-time rate or 90 percent on-time rate? [DR. KOSSTRIN]: We had in mind the ability for Phoenix to continually pick up the material at the hospital.

In reality, I don’t think anybody was going to do a hundred percent on-time pickup rate, every day in the year, every pickup. * * * We did not pick a number whether it is a hundred percent or 90 percent, but obviously should be a number between these two numbers. [COUNSEL FOR JHH]: Okay. Now, did you understand that the transportation system was a critical component of what you were looking at? [DR. KOSSTRIN]: Yes. [COUNSEL FOR JHH]: And we say the transportation system, did you understand that the trucks, the carts on the trucks, the people operating the trucks, the people telling, dispatching the trucks, that that was a critical component? What were you looking at? [DR.

KOSSTRIN]: My understanding [of] the contract, a transportation system and the facility to find physical items, define physical items, did not define people[.] [COUNSEL FOR JHH]: So your understanding was, you were looking at the physical embodiment of the transportation system and the facility and not anything having to do with the management? [DR. KOSSTRIN]: The capability of the system to perform, that the physical attribute systems were in. [COUNSEL FOR JHH]: Let me ask you this question, then Dr. Kosstrin, let me ask you, hypothetically, suppose you had taken a look at this, and had concluded that all the physical attributes necessary to meet the [pickup] schedule one hundred percent of [the] time were in place, but that the dispatchers were taking three hour breaks right smack in the middle of [the] delivery schedule, and other things of that sort, that amounts to poor work practices, as poor ³⁵⁹ management were happening, is it your testimony you would have felt comfortable issuing a cert[ificate] in these circumstances? [DR. KOSSTRIN]: The part of the stuff that we look at, if you look at the system, we did not look at management and how management was operating the plant. We did look at some data which demonstrated what they had done from December, I believe, 2, through January 15.

But no, we did not look at the dispatcher.... On the hypothetical basis that a dispatcher was continuously not in place, and continuously did not dispatch the truck, I obviously, that hypothetical situation, would not have gone by. THE COURT: [Y]ou use the phrase, not have gone by, does that mean you would not have issued a certificate]? [DR. KOSSTRIN]: We would have gotten some kind of assurance from management— [COUNSEL FOR JHH]: Okay.

So isn’t it accurate to say that you did not look simply at physical assets, but you also looked at management? [DR. KOSSTRIN]: We looked at how to operate in the future. We did not look at hypothetical[s] in the past. [COUNSEL FOR JHH]: Well, did you begin by attempting to identify the ca[u]se of the problem? [DR. KOSSTRIN]: Yes, we did.

We said what was the root cause of the situation at Phoenix. [COUNSEL FOR JHH]: And is it your testimony, that in looking at the root cause, which is in the past, you looked only at physical assets, but in identifying the solution or certifying the solution, you looked at physical assets as management; is that your testimony? [DR. KOSSTRIN]: What we did was, we looked at what prevented, or in other words, what had caused the backup ³⁶⁰ at Hopkins, identified that sufficient storage would allow Phoenix to continue to service Hopkins in the event of a duel incinerator outage, and that, yes, then they had to implement that plan. If the plan is not implemented, it doesn’t do any good. [COUNSEL FOR JHH]: Now, did you attempt, Dr. Kosst-rin to identify a single cause or every cause if there was more than one, of what had happened? [DR. KOSSTRIN]: Well, when we started things, we thought there were two things, as you said, there’s a transportation system, and there is a facility ....

I said the interface between the two is how you handle the carts at the facility. We didn’t directly ask Hopkins, even we [sic] had a meeting with them, are there sufficient carts. That that was one of the things we were concerned about in the beginning which is, was the transportation system____ With regard to Kosstrin’s analysis of the cause of the Major Back-up in January 2003, the following exchange is also pertinent: [COUNSEL FOR JHH]: Let me ask the question again, Doctor. Did you look to, or did you attempt to determine every cause, if there was more than one of what had happened or just one cause, and you have answered it in the sense that you said you also looked at carts.

But now my question is, did you approach this with the goal of identifying as many causes as there were, or did you limit yourself to just one or just two? [DR. KOSSTRIN]: [W]e looked at key aspects that could cause something, on the equipment side, were there enough tractors and trailer[s]. They had a contract with an outside firm to do the transportation, outside firm. There were sufficient carts dedicated to Hopkins.

Hopkins said they had sufficient carts, then looked at two incinerators down, said they can’t process, what do you do. You either store on site or you have to have the hospital agree to have ³⁶¹ certain kind of desegregation at the hospital. Hopkins did know what to do anything [sic]. THE COURT: Was there any causes that you didn’t look at.

Yes or no, or I don’t know? [DR. KOSSTRIN]: We don’t think so. THE COURT: So you think you looked at every cause? [DR. KOSSTRIN]: We think we looked at causes that happened and were relevant to this particular issue.

THE COURT: So you looked at every relevant cause? [DR. KOSSTRIN]: We looked at and illuminated many, many things that were not relevant. THE COURT: So you looked at every cause relevant or not? [DR. KOSSTRIN]: No, I didn’t say that.

I said— THE COURT: Did you look at all the relevant causes? [DR. KOSSTRIN]: We believe we looked at relevant causes that cause backups. THE COURT: All of them? [DR. KOSSTRIN]: Physical?

THE COURT: All of them? All the physical causes? [DR. KOSSTRIN]: That we believe we looked at physical causes, yes. THE COURT: All the relevant physical causes? [DR.

KOSSTRIN]: What we thought was relevant. THE COURT: Actually, I’m asking you, did you look at what you thought all— [DR. KOSSTRIN]: What we thought were relevant causes. In his testimony, Kosstrin asserted: “[Although there were late pickups during the six-week period, the late pickup does not appear to cause the backup.” He elaborated: “In reviewing the data, that demonstrated that Phoenix has the capability because they have done it, that they were picking up most of the pickups on schedule, and that the reason for the major backup, was the inability to store.... ” (Emphasis added). ³⁶² To be sure, Kosstrin recognized “that there was a number of pickups that were probably missed over a year’s time period....” Nevertheless, he observed that “as long as the material did get picked up and taken away, that was what the real key was the service of the hospital.” As part of the review, Kosstrin “checked if there were sufficient trailers available, and we went further to figure out ... what allows the carts to get back to the system.” With regard to the sufficiency of trucks and trailers, he recalled: “[W]e asked [Phoenix] where the trucks and trailers come from, they informed us that they have a contract to the outside contractor for excess trucks and trailers, if one breaks down, they could call up and get another one.” In addition, Kosstrin stated: “[W]e looked at all the days,” and there were some “fairly large numbers of delays, lateness.” For example, he acknowledged that on December 8, 2003, some pickups were late by “seven hours, eight hours, [and] nine hours,” which were “very substantially late deliveries----” However, Kosstrin asserted: “Since there was no notice of a major backup from [JHH at that time], we do not look at that as [a] major backup.” With regard to Phoenix’s transportation records for pickups at JHH between December 12, 2002, and January 15, 2003, Kosstrin averred that the records demonstrated that appellant was “picking up most of the pickups on schedule____” Although he conceded that, on December 19, 2003, “eight pickups out of ten” were late, he insisted that the records also showed that Phoenix was “able to get on track within a day and a half’ and, “even if the pickup[s] on the 19, 20 [of December 2003] were late, they did pick up all the carts that Hopkins delivered.” Kosstrin explained: “[I]f you had consistent two or three hour delays ... there would be a buildup of waste between those points, and the key is being able to pick that stuff up and getting [it] out of the hospital.” The following exchange is pertinent: [COUNSEL FOR JHH]: Now, Dr. Kosstrin, you were only looking to prevent late pickups where there was notice or ³⁶³ were you looking to ensure there was a system in place that would provide reasonable assurance that there would not be a failure to comply with the pickup schedule? [DR.

KOSSTRIN]: [Counsel for appellee], a system in place that allows Phoenix to do its job. We do not go into the management part of things in which, to ascertain on the management side whether Phoenix does actually do, will do the pickup in the future. This is equipment review. [COUNSEL FOR JHH]: It was an equipment review, so the answer is, no, you were not looking— [DR. KOSSTRIN]: The system, the equipment was in place.

The following colloquy is also noteworthy: [COUNSEL FOR JHH]: So what you are suggesting then, you have here as [an] assumption, assuming that [Phoenix] actually initiated the backup plan as soon as it can to process waste supplier’s delivery. Now the backup plan that Mr. Plank gave to you, called for its implementation if the plant was down .... [KOSSTRIN]: That was previous— [COUNSEL FOR JHH]: Yes, and that was in effect from Mr. Plank’s perspective from January 8[, 2003] through 11, right? [KOSSTRIN]: I believe that is correct. [COUNSEL FOR JHH]: And it called for implementation if the plant is down for four hours and would not be operational in the next two hours, right? [KOSSTRIN]: That’s what it said. [COUNSEL FOR JHH]: So on January 8[, 2003] when the plant was down for 12 hours, this backup plan should have been implemented, right? [KOSSTRIN]: That’s what it said. [COUNSEL FOR JHH]: If it had been implemented, then the waste of Hopkins would be put in storage, right? [KOSSTRIN]: Some. [COUNSEL FOR JHH]: That didn’t happen, did it[?] ³⁶⁴ [KOSSTRIN]: Not according to the information that we read. [COUNSEL FOR JHH]: [Knowing that even with the backup plan for waste to be put in storage, Phoenix had not put waste in storage that came from Hopkins, did it concern you, Dr. Kosstrin, to assume that Phoenix actually, would actually initiate the backup plan ... ? [KOSSTRIN]: We had specific discussions with Phoenix management on this point, and we wrote this in there to emphasize that the backup plan has to be implemented, that has to be implemented quickly, if not, things will just run away and would not be able to, because there is not enough time.... We put it in we had discussions ..., [and] it would be a very strong point on our certificate]. [COUNSEL FOR JHH]: And you felt that Hopkins should be reasonably assured that not only would Phoenix [not] fail to make the same mistake and allow four days to go by without putting its waste in storage, but Phoenix would actually implement the backup plan and put the waste in storage, lickety-split immediately, is that correct? [KOSSTRIN]: That’s what I put in the certificate], that’s what is required, and we had to discuss [it] with Phoenix management. (Emphasis added).

While Kosstrin recognized that the Certificate contained “several assumptions” on which Beck’s opinion was predicated, he maintained that there is “part assumption in most reports that we write when operations of a facility is involved.” According to Kosstrin, the opinion expressed in the Certificate “assume[d] there were some pickups on the 12 th [of January, 2003]” during the dual incinerator outage. He stated: “Well the 12th and 13th, data I have here and stuff that I looked at indicated to me ... that there was a pickup on the 12th ... there were some pickup[s] on the 12th.” Under the revised backup plan, Kosstrin acknowledged that, in the event of a dual incinerator outage, it would take Phoenix longer to unload the carts of waste than it otherwise would. ³⁶⁵ Kosstrin conceded that the Certificate “does not explicitly state anything” about Phoenix having “employees available to address the need for additional employees to remove the waste from the carts[.]” According to Kosstrin, however, Beck was “informed by Phoenix ... that they have a temporary service which they can call if they need more manpower.” And, Kosstrin believed that “the best proof in the pudding is [al test over a period of time, after the changes were made, that show whether they worked or not.” Prior to trial, JHH moved in limine to bar any evidence of appellant’s post-termination performance. Given the nature of the dispute, i.e., whether JHH was justified in terminating the Agreement based on deficiencies in the Certificate, Hopkins argued that appellant’s “subsequent performance cannot possibly be relevant to the decision that JHH was required to make in February 2003 based on the information available at that time.” In JHH’s view, it “did not have the option to wait and see whether the backup plan described in the Certificate ... made any difference at all in Phoenix’s performance^]” Rather, relying on ¶ 13(b)(1)(D), JHH claimed that it “had two options: either terminate the Agreement if the assurances Phoenix provided were not reasonable ..., or accept the Certificate and continue performing under the Agreement.” The court granted JHH’s motion. During trial, however, Phoenix moved for reconsideration, claiming the evidence “has relevance to important issues in this case.... ” Phoenix argued: In light of Hopkins’ position that the Certificate was not dispositive and the Hospital was entitled to make its own determination as to whether “reasonable assurances” had been provided, Maryland Rules 5-401 and 5-402 make clear that the evidence of Phoenix’s performance after it implemented the plan that the Independent Engineer certified, should be admitted.

The fact that the plan in fact worked has clear relevance to the disputed question. Counsel for Phoenix proffered the evidence it sought to offer as to its post-termination performance. Specifically, ³⁶⁶ appellant’s counsel stated that it would offer a log of appellant’s pickups which would show that, since January 16, 2003 (i.e., the date of the Notice of Suspension), the on time percentage has been over 99 percent. I would also proffer that although the plant was experiencing some significant downtime since January 16, [2003,] Hopkins has been unaware of those occasions when they have occurred, and there have also been some backups at Hopkins, during this time period, despite the fact that Phoenix was making all the deliveries on time.

All of which indicate that those backups were not caused by Phoenix, and that the plan instituted by Phoenix and certified by R.W. Beck, in fact, worked[.] The court remained unpersuaded. Nonetheless, even without such evidence, the court denied JHH’s motion for judgment. Hopkins then called Shealer as its sole witness. With regard to negotiations concerning the Amendment, Shealer noted that there were several factors pertinent to Hopkins’s decision to resume business with Phoenix, but “one primary, the overriding consideration was that [JHH] never find ourselves in the position that we were in prior to the catastrophic collapse, and a subcomponent of that was that we be assured that the operations were viable.” He emphasized: “[I]f they weren’t able to deliver on promise, that then we would be able to exit the relationship without penalty.” In addition, Shealer stated: I think we all recognized that if there were late, or missed pickups, it had the potential to cause major, major problems for Hopkins, and we also recognized that if there were episodic lateness or less severe or fewer number of lateness-es, that still would cause problems for Hopkins, but not of the nature of significant late or missed pickups.

The following testimony is also pertinent: [COUNSEL FOR JHH]: And was that last component discussed at these meetings? [SHEALER]: Yes. ³⁶⁷ [COUNSEL FOR JHH]: And was there any ambiguity in the way that Hopkins expressed its position? [SHEALER]: No. [COUNSEL FOR JHH]: Who expressed that position? [SHEALER]: All the Hopkins representatives present, but that, and the invincible, the concept of not having to concern ourselves on how was it was happening [sic] at Phoenix, as we just wanted to get the waste out of the hospital was the overriding theme throughout the discussion. [COUNSEL FOR JHH]: Now, did Grotech express [a] position with respect to any of these matters? [SHEALER]: Yes. [COUNSEL FOR JHH]: Okay. And let’s start with, since it is the one that is most immediately relevant, the notion that if Phoenix was unable to perform ... at the level that was promised, that Hopkins would be able to get out of the contract. What position — did Mr. Woltzen express [a] position on that? [SHEALER]: Yes, he did. [COUNSEL FOR JHH]: And what was his position? [SHEALER]: He understood our position, but articulated very clearly the position of Grotech, that although, that Grotech was making an investment, and wanted to be sure that Grotech’s interest was in assuring that Hopkins was not in a position to arbitrarily terminate the contract, unilaterally, arbitrarily terminate the contract. [COUNSEL FOR JHH]: Okay. Now, did you discuss with — well, let me ask you this.

Have you been involved in the negotiations of agreements during the course of your legal career, in which there were provisions that provide— that call for the resolution of disagreement by a third party? [SHEALER]: Yes. [COUNSEL FOR JHH]: And what sort of provision that you personally have been involved in of that sort, involved in negotiations? ³⁶⁸ [SHEALER]: One of the potentially, one example would be a binding arbitration provision. [COUNSEL FOR JHH]: When you negotiated with [counsel for Grotech], was there any discussion of either — well, first, was there any discussions of the determination of the reasonableness of assurances being submitted to an arbitrator for binding arbitration? [SHEALER]: No. [COUNSEL FOR JHH]: Was there any discussion of any third party having the right to make a binding determination on that issue? [SHEALER]: No. [COUNSEL FOR JHH]: Would Hopkins, would you have agreed to submit that determination to a third party for a binding determination? [COUNSEL FOR PHOENIX]: Objection. * * * [COUNSEL FOR JHH]: Did anyone every indicate, during your discussions with [Grotech’s lawyer] or for that matter, your discussions with Mr. Woltzen or anyone else on behalf of Grotech, that the determination of the independent engineer was binding? [SHEALER]: No. [COUNSEL FOR JHH]: And who had chosen the independent engineer? [SHEALER]: The independent engineer, I believe initially arose in the context of Grotechfs] evaluation of investment, and I believe Grotech chose the independent engineer at that time for that purpose. [COUNSEL FOR JHH]: And when you say you believe, is there any question in your mind as to whether Hopkins chose the independent engineer? [SHEALER]: Hopkins did not. We also point to the following exchange: ³⁶⁹ [COUNSEL FOR PHOENIX]: You could not, in your view of the Medical Waste Agreement, kick Phoenix out and obtain other medical waste hauling? [MR. SHEALER]: We did terminate the agreement. [COUNSEL FOR PHOENIX]: Who was servicing the medical waste at that point? [MR. SHEALER]: Phoenix is. [COUNSEL FOR PHOENIX]: If you wanted to terminate them, why didn’t you send them packing and tell them not to service your waste? [MR.

SHEALER]: Because we were giving Phoenix the benefit of the doubt and the opportunity to have the exercise that we are going through and have a determination, judicial determination of the termination. [COUNSEL FOR PHOENIX]: So you were just being nice? [MR. SHEALER]: That’s one element of it, but we were also being prudent. [COUNSEL FOR PHOENIX]: Well, isn’t it true that you were, in fact, uncertain about whether you had the right to terminate Phoenix? [MR. SHEALER]: No. The parties filed post-trial memoranda in April 2004. Thereafter, on June 18, 2004, the court issued a thoughtful and well-written forty-two page “Memorandum Opinion,” in which it ruled in favor of Hopkins.

The court articulated Phoenix’s position, as follows: [T]he Court’s analysis should begin and end with the Certificate of the Independent Engineer because, even assuming there was a Major Backup, and that the Notice of Suspension was valid and properly issued, JHH received “reasonable assurances in the form of a certificate of the Independent Engineer stating that [Phoenix] has made changes to the Transportation System or the Facility sufficient to ³⁷⁰ prevent the recurrence of a failure to comply with the agreed upon schedule of pickups.” It also set forth JHH’s position: JHH argues that: (1) the Certificate is defective because it was not prepared by a licensed engineer; (2) it is facially defective because it does not give the certification required by the Amendment; (3) the judgment of the Engineer is not binding because the analysis was superficial and exhibited favoritism toward Phoenix; and (4) the Certificate does not provide the objectively reasonable assurances required by the Agreement. According to the court, Hopkins had the burden to prove that Phoenix breached the Contract and that “it was justified in terminating the [Cjontract for cause.” The court held that JHH proved that “(1) there was a Major Backup on January 15, 2003; (2) Phoenix failed to bring sufficient personnel and equipment to cure the Major Backup within the required three hours; and (3) its rejection of the Independent Engineer’s Certificate was valid because the Certificate failed to provide reasonable assurance that [Phoenix] had made changes sufficient to prevent a recurrence.” As to the pickups, the court found that Phoenix “admitted that it failed to make the 4:00 p.m., 8:00 p.m., and 10:45 p.m. pickups on January 14th, thus it has admitted that it failed to make ‘three Complete Scheduled pick-ups.’ ” The court recognized that Phoenix claimed “that none of those pickups was ‘missed.’ ” Rather, Phoenix maintained that the pickups were not made at the scheduled times, and that its deviation from the schedule did not amount to a Major Backup because it was entitled to make up a missed pickup later during the week. The court regarded as “not credible” the testimony of Plank and Montgomery, challenging the accuracy of the transportation logs and disputing that Phoenix missed the pickups merely because they were not timely made. Rejecting Phoenix’s attempt to distinguish a late pickup from a complete failure to make a pickup, the court reasoned that, “under the plain language of the Agreement, a late pickup is the same as ³⁷¹ a failure to make a pickup under the Major Backup provision.” In this regard, it noted that the Agreement used the word “scheduled,” and a late pickup is not made when “scheduled.” Notably, the court concluded that, “if the Certificate did, on its face, provide reasonable assurance, that would end the suspension.” But, the court was persuaded that “[n]o party has authority to challenge the Independent Engineer’s recommendation or approval” in a facially valid certificate, because the Independent Engineer’s determination is “final and conclusive.” The court added: “Contrary to JHH’s argument, there is nothing to suggest that JHH may challenge the certificate of reasonable assurance in section 13(b)(1) if, on its face, it provides ‘reasonable assurance.’ ” (Emphasis added).

In reaching that conclusion, the court rejected JHH’s attempt to distinguish the language in the reasonable assurance clause from that contained in the binding arbitration clause. The court said: JHH argues that the fact that the parties used explicit language requiring binding arbitration for certain disputes but did not use it in § 13(b)(1), shows that the Independent Engineer is not a binding arbitrator and JHH has the right to challenge whether the Certificate actually provides reasonable assurances. [F]or purposes of the certificate of reasonable assurance in section 13(b)(1) [of the Contract], the Independent Engineer is not an arbiter and thus the arbitration cases relied upon by JHH do not apply. Under section 13(b)(1), the Independent Engineer does not resolve a “dispute” between the parties. The parties do not “submit their differences” to the Independent Engineer for the Independent Engineer to make a “judgment” as to which side is correct.

The Independent Engineer does not determine if the prerequisites for issuing a Notice of Suspension have been satisfied.[ ] In fact, there is no requirement that the parties have any “differences.” The parties may be in total agreement on ³⁷² the prerequisites to the Notice of Suspension, including total agreement on what needs to happen to remedy the problem. Or they may be in disagreement. In either event, the Independent Engineer’s task is not to solve the disagreement. The Independent Engineer simply determines what, if any, changes Phoenix must make.

If the Independent Engineer decides changes are necessary, the Independent Engineer also determines whether Phoenix has made those changes. The Independent Engineer then determines whether in its judgment the changes provide “reasonable assurances ... to prevent the recurrence of a failure to comply with the agreed upon schedule of pickups.” (Italics in original; boldface added). Upon concluding that it had the authority to assess the facial validity of the Certificate, the court found that the Certifícate was, indeed, facially defective, because it did “not provide ‘reasonable assurances ... that [Phoenix] has made changes to the Transportation System or the Facility sufficient to prevent the recurrence of a failure to comply with the agreed upon schedule of pickups.’ ” Characterizing the Certificate variously as “meaningless,” “so vague that it is unclear,” and “not worth the paper on which it is written,” it determined that Phoenix failed to provide a Certificate that satisfied ¶ 13(b)(1)(D) of the Amendment. In finding the Certificate facially flawed, the court rejected Phoenix’s contention that the “assumptions” contained in the Certificate were merely standard disclaimers.

The court reasoned: The Certificate does not provide any assurance that changes have been made which will prevent a reoccurrence. This failure is crucial because the point of the Independent Engineer’s certification is to relieve JHH from having to rely on plans that may or may not come to fruition. An examination of the Certificate reveals the defects. The first and most crucial defect is the word “assuming.” Assumption is defined as “[a] statement accepted or supposed true ³⁷³ without proof or demonstration.” American Heritage Dictionary 136 (2d. c.ed. 1982).

Thus, the Certificate effectively begins by stating that it accepts or supposes, without proof or demonstration “that [Phoenix]” will or is taking certain steps. As the Certificate is written it would be impossible for any party to hold R.W. Beck accountable if the assumptions fail to come true because R.W. Beck has certified nothing. Second, the suppositions that it [i.e., the Certificate] makes are that some events will take place in the future but there is nothing in the certification that gives any assurance that [Phoenix] will in fact do what is assumed. The statement that the Independent Engineer is “assuming that MWA 1) properly operates and maintains the Facility including the timely implementation of renewals and replacements, [and] 2) actually initiates the back-up plan as soon as it cannot process the Waste Supplier’s deliveries,” is meaningless .... [1 Nor is there any indication that the Independent Engineer has any expectation based on the factors outlined at the beginning of the sentence that the assumptions will come to fruition.

It may well be that the assumptions are in fact well-founded, but as assumptions they do not give any reasonable assurance.... [B]ecause assumptions are by definition “accepted or supposed true without proof,” the Independent Engineer undermines the opinion it provides. Finally, as if to underscore that its opinion is based on unproven supposition, the Independent Engineer opines “that MWA via its revised backup plan, which includes the procurement of additional dedicated storage for the Waste Supplier at the Facility, has made changes ... sufficient to prevent the recurrence of a failure to comply with the ... schedule of pick-ups.” The phrase “includes the procurement” is so vague that it is unclear whether the plan is to get additional storage in the future or if additional space has already been procured. ³⁷⁴ (Emphasis in original). 19 The court continued: “The Certificate must stand on its own, and that is what makes the defects so crucial. With the assumptions and vague language, to put it bluntly, the Certificate is not worth the paper on which it is written.” Comparing the Certificate to Beck’s 1996 certification, the court stated: What Phoenix overlooks is that the actual certificate of completion issued in October 1996 did not leave the Independent Engineer any ‘wiggle room.’ It stated clearly and unequivocally: [W]e are of the opinion that Phoenix has substantially completed the material elements of the Capital Improvement Program. Further we certify that those elements of the Capital Improvement Program which have been modified and those elements which have not been completed are not expected to have a material affect [sic] on the operation of the Facility and the delivery of services by Phoenix under the Waste Supply Agreement.

The difference between that language and the language in the Certificate involved in the current controversy highlights the defect in language in the Certificate issued in 2003. Conversely, the court rejected JHH’s contention that the Certificate was invalid because Kosstrin is not a licensed professional engineer. The court recognized that, pursuant to Md.Code (2002 RepLVol.) §§ 14-501 and 14-502 of the Business Occupations & Professions Article (“B.O.P.”), “it is illegal to practice engineering without a licen[s]e.” 20 But, it reasoned: ³⁷⁵ [A]s a factual matter, contrary to JHH’s argument, R.W. Beck, and not Dr. Kosstrin, was the Independent Engineer. The Certifícate is on R.W. Beck’s letterhead and is signed R.W. Beck.