Gregory v. Chemical Waste Management, Inc. (38 F. Supp. 2d 598, 1996)

Citations

38 F. Supp. 2d 598

Full opinion text

OPINION AND ORDER

HORTON, District Judge.

This action by Plaintiffs charges the Defendant with breaching two important provisions of a contract to purchase a waste disposal site near Emelle, Alabama. The two provisions allegedly violated are the quarterly payment provision, paragraph 2.1 of the contract, and paragraph 6.11, the maximization provision. Additionally, Plaintiffs also charge the Defendant with fraud, willful misrepresentation and suppression of material facts and bad faith refusal to comply with the terms and conditions of the contract. Defendant vehemently denied that it breached paragraphs 2.1 and 6.11 of the contract. Defendant denied that it, through its corporate officers, committed fraud and misrepresented or suppressed any material facts relating to any acts taken pursuant to the contract. After having answered the complaint, as amended, Defendant counter-claimed that Plaintiffs had, in fact, been overpaid on the contract. The sale/purchase contract between the parties is dated February 23, 1978. In reference to the payments, the parties often used the words percentage of revenues and royalties interchangeably.

This Court concludes the Emelle contract was entered into by all of the parties thereto guided by highly competent legal advice. All parties had their eyes wide open. All parties fully agreed and understood the revenue royalty payment terms of the contract. There was an offer. There was an acceptance. There was consideration. The fact that the revenue royalty payments due by the contract terms exceeded the highest expectations of the parties gives the Defendant no right to brainstorm a “new” contract interpretation with the intention obviously to curtail the amount of revenue or royalty payments due plaintiffs. The purchase agreement payment language is clear. The language is totally unambiguous. A promise is a promise. As between the parties to this lawsuit, an unambiguous contract promise to pay a specified percentage of all revenues must be complied with. There is no alternative.

Introduction

During the mid-seventies, Plaintiffs developed and began operating a commercially hazardous waste disposal facility located outside of a small town known as Emelle, Alabama. Defendant purchased the facility and other assets from Plaintiffs in 1977. The written purchase agreement provided that as part of the purchase price Plaintiffs would receive quarterly installment payments equal to twelve and one-half percent (12 1/2%) of all revenues from the operation of the site for twenty-one years. At the end of the twenty-one year period, Plaintiffs would receive one percent (1%) of all revenue from the operation of the site throughout the facility’s economically useful life. In addition, the contract obligated Defendant to operate the facility to its maximum capacity thereby maximizing plaintiffs’ quarterly installments or “royalty” payments.

Soon after Defendant took over operations of the site, the facility began generating a large amount of revenue — literally tens of millions of dollars yearly. Plaintiffs and Defendant, throughout the trial, referred to the site as one of the premier waste disposal sites in the United States. However, as early as 1982 and certainly no later than 1985, a decision had apparently been made by Defendant’s top corporate officials to attempt in some way to limit or reduce Plaintiffs’ royalty payments. Unbeknownst to Plaintiffs, Defendant began to excluded certain revenues from the royalty payment calculations based upon Defendant’s unilateral re-interpretation of the contract payment language. Defendant also shifted certain waste and waste treatment processes to other related corporate entities. Moreover, Defendant abandoned its contract commitment to develop the maximum incineration capability of Emelle in favor of an incinerator development located at Defendant’s Port Arthur, Texas, facility obviously attempting to limit Plaintiffs’ royalty payments.

By the later part of 1992, Plaintiffs began having serious concerns about the Defendant’s accounting practices relating to the royalty calculations and payments due them. These concerns were confirmed in January 1993 when Defendant informed Plaintiffs it mistakenly overpaid them in excess of eight million dollars ($8,000,000). Defendant also withheld from Plaintiffs the fourth quarter 1992 royalty payment to off set part of the alleged overpayment.

On April 7, 1993, several of the principal plaintiffs met with Defendant’s chief financial officer and the chief financial officer of Defendant’s parent company, Waste Management Technologies, Inc., to discuss the alleged overpayment. During this meeting, one of Defendant’s representatives informed Plaintiffs that Chem Waste interpreted the 12 1/2% royalty language to apply only to “disposal revenues,” i.e., revenues generated from land-filling or burying of hazardous waste, as opposed to treatment, processing and other revenues. Defendant’s representative then offered to “buy-out” Plaintiffs’ remaining interest in the facility for a significantly reduced amount compared to what Plaintiffs’ had been receiving in quarterly installment payments.

On April 15, 1993, Plaintiffs filed this action for declaratory judgment and other relief pursuant to 28 U.S.C. §§ 2201, 2202 and Rule 57 of the Federal Rules of Civil Procedure alleging breach of contract. During the course of discovery, Plaintiffs discovered Defendant’s exclusion of revenues from the royalty calculations. Accordingly, Plaintiffs were allowed to amend their complaint to include three counts of fraud under Alabama state law for misrepresentation, suppression and bad faith refusal to pay, counts II, III, IV, respectively. The Court subsequently dismissed court IV of the amended complaint for failure to state a claim.

Defendant argued throughout this litigation that the 12 1/2% royalty calculation only applied to revenues generated from the actual burial or “land-filling” of waste at Emelle. Defendant also maintained that it met its maximization obligations under paragraph 6.11 of the purchase agreement by spending millions of dollars developing Emelle into one of the nation’s premiere hazardous waste disposal sites.

Prior to trial, Plaintiffs moved for partial summary judgment on the issue of interpreting the contract payment language. The Honorable Robert M. McRae found no ambiguity in the purchase agreement with respect to the “all revenue” language. Paragraph 2.1 of the purchase agreement states in part:

(b) For the four calendar month period ending March 31, 1978 and for each three calendar month period thereafter for a term of 21 years from December 1, 1977, Buyer [Defendant] shall pay the Company [plaintiffs] or its designees the following amounts:

i) an amount equal to 12 1/2% of all revenues (exclusive of transportation revenues) from the operation of the Company’s hazardous waste landfill site (the “Landfill Site”) (the legal description of which is set forth in Schedule G, attached hereto and made part hereof) during each respective three calendar month period, as currently permitted and including any successor or replacement permits for currently permitted property or subsequently acquired property operated under said permits, or any additional permits required.

(c) For the twelve (12) calendar month period ending November 30, 1999 and for each twelve (12) calendar month period thereafter for a term equal to the useful operating life of the Landfill Site as currently permitted and including any successor or replacement permits for currently permitted property or subsequently acquired property operated under said permits, Buyer shall pay the Company or its designees an amount equal to 1% of all revenues (exclusive of transportation revenues) from the operation of the Landfill Site during each respective 12 calendar month period.

(Tr. Ex. 1, pgs.5-6).

Judge McRae held the contract payment terms covered “all revenues from all operations of the Emelle facility under any permits issued to the facility,” and granted Plaintiffs’ motion for partial summary judgement on this issue. (Order, entered December 29, 1994, pg. 6). The case was subsequently transferred to this division of the Court after Judge McRae’s retirement. Defendant thereafter moved for reconsideration of that ruling by Judge McRae.

After a careful and independent review of the purchase agreement payment language, set out above, this Court concluded upon the entire record that no ambiguity existed in the contract royalty payment language. This Court adopted and reaffirmed Judge McRae’s ruling and denied Defendant’s motion for reconsideration. Moreover, the evidence submitted at trial demonstrated that Defendant’s “new” interpretation of the contract payment language is clearly without any support in the record and is merely a mental fabrication in an attempt to justify Defendant’s contractually unauthorized deductions from royalty payment calculations due Plaintiffs. Plaintiffs demonstrated by clear and convincing evidence that Defendant’s corporate officers willfully and knowingly defrauded them of royalty payments. Not only did Defendant keep a secret set of revenue summaries detailing the unauthorized deductions and exclusions from the royalty payment calculations but Defendant also retained $450,000 in royalty payments due Plaintiffs despite the fact that Defendant’s own accounting firm pointed out the error.

Accordingly, after a careful review of all of the evidence, including exhibits, testimony of witnesses, pleadings and submissions of counsel, and applicable law, the Court is of the opinion that judgment should be granted to the Plaintiffs on the breach of contract claims, Count I; the willful misrepresentation claim, Count II; and the fraudulent suppression of material facts claim, Count III. The Court is further of the opinion that judgement should be entered against the Defendant on its counterclaim based on alleged overpayment of contract royalties to plaintiffs.

The Court concludes Defendant should be directed to comply in good faith with all of the requirements of the contract and operate the Emelle hazardous waste site to its maximum capacity throughout the facility’s economically useful life. Additionally, Defendant should be ordered to pay the costs of an annual financial audit of the Emelle facility’s revenues and pay the costs of a review and evaluation of the facility’s operations by an expert in the field of hazardous waste treatment and disposal operations. The annual financial audit and the expert’s evaluation should be delivered to Plaintiffs or their representative no later than the last Monday of each July. Plaintiffs may, if necessary, petition the Court for appropriate review to ensure compliance with the provisions of this order.

The Court further finds that Plaintiffs are entitled to recover reasonable attorneys’ fees and costs associated with pursuing this lawsuit as provided for in the purchase agreement entered into by the parties. The award of attorneys’ fees and costs will be made by the Court after Plaintiffs submit a summary of attorneys’ fees and cost incurred in this case and Defendant has had an opportunity to respond. The Court will also award appropriate punitive damages.

FINDINGS OF FACT

In accordance with Rule 52 of the Federal Rules of Civil Procedure, the Court makes the following findings of fact and conclusions of law.

I. Background.

Plaintiffs in this case are: (1) James Massey, (2) David Wilder (3) James Parsons, (4) Mark Gregory, (5) Wesley Grace, (6) John Smith, (7) William Hagerman, (8) James Dugan, (9) William Oeding and (10) Charles Cooley. (Am.Compl.pgs.1-2). Plaintiffs are all residents of the State of Tennessee except for James Parsons who is a resident of the State of Alabama and William R. Oeding who now resides in the State of Florida. (Am.Compl.pgs.1-2). The Defendant, Chemical Waste Management, Inc., (Chem Waste) is a Delaware corporation with its principal place of business in Oak Brook, Illinois. (Ans.Amend.Compl.pg.3).

In 1977, Plaintiffs formed an Alabama corporation known as Resource Industries of Alabama, Inc. (RIA). RIA was formed to develop a commercial capacity hazardous waste disposal facility in Sumter County, Alabama. Plaintiffs chose Sumter County because a 1974 Environmental Protection Agency (EPA) Report listed the area as one of twelve potential sites throughout the United States suitable for a large scale hazardous waste treatment and disposal facility. (Ex. 54, Tab A, pg. 4). Massey and Wilder each owned twenty-four percent (24%) of RIA’s outstanding shares and Parsons owned twenty-eight percent (28%) of RIA. The remaining twenty-four percent was owned by an engineering partnership known as “HATS.” The HATS partnership consisted of Mark Gregory, Wesley Grace, John Smith, William Hagerman, James Dugan, William Oeding and Charles Cooley. Mark Gregory, Wesley Grace and John Smith each owned 4.8% interest in RIA (20% of HAT’s 24% interest in RIA). William Hagerman and James Dugan each owned 2.4% interest in RIA, William Oeding owned 3.6% and Charles Cooley owned 1.2%. RIA purchased approximately 340 acres of land near the town of Emelle, Alabama, and applied for an interim permit from the State of Alabama to operate the site. Parsons, the son-in-law of former Governor George Wallace of the State of Alabama, was apparently instrumental in obtaining an interim permit from Alabama’s Department of Public Health. Plaintiffs obtained the necessary permit and began operations at the site soon thereafter.

Approximately four months later, Plaintiffs were approached by Don Price and Ray Brock of Waste Management, Inc. (WMI). Price and Brock were involved with operations and acquisitions for WMI. Price and Brock indicated that WMI was interested in either a joint venture or marketing agreement with RIA, acquiring RIA or competing against it. A short time later, Wayne Huizenga, President of Waste Management, Inc.; Don Flynn, Waste Management’s Senior Vice President in charge of finance; and Bill Debes, administrative assistant to Mr. Huizenga involved with acquisitions, made an initial offer to purchase the facility from Plaintiffs sometime in the fall of 1977. (Tr. pgs. 186-188; 561-62). After extensive negotiations, Plaintiffs entered into a written purchase agreement on February 3, 1978, with Alabama Solid Waste Systems, Inc (ASWSI) for the sale of the facility and other assets. (Ex. 1, the “Agreement,” signed February 23,1978).

In 1978, Alabama Solid Waste Systems, Inc., was a wholly-owned subsidiary of Waste Management Inc. ASWSI became Waste Management of Alabama, Inc. (“WMAI”) at some point after the agreement was signed. (Ex. 2). WMAI was then merged into Waste Management, Inc. (WMI). Waste Management, Inc., now called “WMX Technologies, Inc.” (WMX), unconditionally guaranteed ASWSI’s performance of its obligations under the contract and wholly owned Chem Waste. (Ex. 1, pg. 64, Tr. 1873, Ex. 133, pg. 6; see also, Defendant’s Post-Trial Revised Findings of Fact and Conclusions of Law, pgs. 7-8; Tr. Vol. IV, pgs. 386-88).

II. Plaintiffs Breach of Contract Claim, Count I.

Plaintiffs claim Defendant breached two important provisions of the purchase agreement, paragraph 2.1, the quarterly payment provision, and paragraph 6.11, the maximization provision of the purchase agreement.

A. Payment Under Paragraph 2.1(b)(i) of the Purchase Agreement.

Paragraph 2.1 of the purchase agreement states in part as follows:

(b) For the four calendar month period ending March 31, 1978 and for each three calendar month period thereafter for a term of 21 years from December 1, 1977, Buyer [Defendant] shall pay the Company [Plaintiffs] or its designees the following amounts:

(Ex. 1, pgs.5-6).

As indicated earlier, Judge McRae interpreted this provision to cover “all revenues from all operations of the Emelle facility under any permits issued to the facility.” This Court finds that the words “landfill site” used in paragraph 2.1(b)(i), followed by the legal description of the property, indicates that the parties intended payments to be calculated at 12 íé % on all revenues incident to the operations of the facility as the facility exists within the boundaries of the area of land described in Scheduled G. The Court finds no ambiguity in the contract payment language and reaffirms and adopts the Court’s earlier rulings on this issue.

To verify the accuracy of royalty calculations and payment throughout the term of the agreement, each side appointed a representative to calculate the facility’s revenues and the quarterly installments or royalty payments. At the end of each quarter, each representative would compare his figures with the other’s, and if the figures matched, Chem Waste would be directed to issue payment to Plaintiffs. Along with the quarter installment payment, Defendant would prepare and send Plaintiffs a “quarterly statement” setting forth the revenues and royalty calculation for that quarter. (Ex. 4 & 5). From about 1978 to 1980, Mr. Parsons was Plaintiffs’ representative. (Ex. 7). Jim Phillips, controller for the Emelle facility for a period of several years, was Chem Waste’s representative.

Parsons testified that he and Phillips would take all the revenue from all of the accounts receivable for each quarter, deduct any transportation costs, and designated or called that net figure “disposal revenue.” He and Phillips would then multiply the “disposal” revenue figure by twelve and a half percent to compute the basic installment or royalty payment. (Tr. pg.140). Parsons also testified that during the time he calculated the royalty, Chem Waste was primarily involved with transportation and land disposal of waste. However, Parsons went on to state that the site did have two lagoons involved with neutralization and treatment of waste. Parsons testified that the revenues generated from these lagoons, or treatment processes, were included in the “disposal revenue” definition used to calculate the royalty payment.

Parsons also testified that on one or maybe two occasions, the quarterly installment computation excluded some “off-site” revenue. Parsons indicated this was done because Emelle had no involvement with the waste other than billing. Mark Gregory confirmed Parson’s testimony on this point. Gregory testified that some revenue was not included in the royalty calculation because it was not related to Emelle’s operations but merely taken off a truck at Emelle and then loaded on another truck for shipment to another facility. Gregory, Parsons and all the other Plaintiffs indicated they knew about and agreed to this exclusion of revenue from the royalty calculation. This exclusion of revenue was shown on the quarterly revenue summaries as “non-qualifying” revenue for the relevant time period. (Tr. pgs. 104-42, Ex. 4, Tab 1979).

In 1981, Jim Parsons left Chem Waste. Plaintiffs then engaged Drayton Pruitt, an attorney, to act as escrow agent for the royalty payments. In 1981, a representative for Chem Waste approached Plaintiffs and requested that Plaintiffs agree to exclude from the royalty calculation revenues generated from incinerating waste at sea on a ship named the Vulcanus. (Ex. 6; Tr. pgs. 133-34, 406-10). Plaintiffs testified that they agreed to this exclusion on the assumption it would increase their royalty payments because the Vulcanus ship could feed the Emelle facility with residual waste left over from the incineration process. In addition, Emelle apparently did not have the capability to incinerate this type of waste at that time. According to Plaintiffs, no other exclusions or deductions were authorized from the royalty calculation.

Beginning in 1981, questions began to surface within the Chem Waste organization about different types of waste “streams” associated with Emelle’s operations. Specifically, questions arose as to the proper accounting procedures for these new waste streams for purposes of Plaintiffs’ royalty calculation. (Ex. 11, 12, and 13). Jim Phillips, Emelle’s controller, sent several memos to Chem Waste’s upper management about his questions and how to account for these new revenues. (Ex. 11, 12, and 13). Frank Krohn, who was involved in the drafting of the purchase agreement and who was at that time general counsel and vice president for Chem Waste, responded to Jim Koenig’s October 2, 1981, memo stating that, •“ ‘if cleanups’ are incident to ‘operation of hazardous waste landfill site’ they should he included in the 12 1/2% of revenues; if not, they should be excluded. Perhaps Don should make a proposal to Mark [Gregory].” (Ex. 12) (emphasis added).

In May of 1983, Bruce Tobecksen became vice president and chief financial officer for Chem Waste. He was responsible for all financial reporting and accounting for Chemical Waste Management and for payment under the contract. Tobecksen began receiving memos questioning whether certain “revenue streams” should be included in the royalty calcülations as early as June of 1983. (Ex. 16,17,18 and 19). On June 14, 1985, William Ingram, who at that time was Regional Controller for Chem Waste, sent Tobecksen a memo about the royalty situation and stated that Chem Waste’s “objective is to limit the amount of monies spent on royalty payments to increase pre-tax earnings and increase cash flow.” Ingram also listed what he believed to be Chem Waste’s only two realistic options: (1) buying out Plaintiffs; or (2) negotiating a maximum annual payment. Ingram further stated that he “disagree^] with Don Flynn’s approach of breaking down each of the processes and only paying on the disposal element” for three reasons; one being, “there is no basis in the agreement for such an interpretation.” (Ex. 18). In October of 1985, John Calhoun was controller for the Emelle site. Calhoun sent a memo to Tobecksen dated October 29, 1985, wherein Calhoun outlines the discussion he had with Tobecksen concerning the decision that was made to exclude certain revenues from the royalty calculation. (Ex. 19). In a hand-written response to that memo dated November 12, 1985, Tobecksen replies, “I agree with the accounting interpretation.” (Ex. 19).

Based on the evidence in this case, the Court finds that Chem Waste knowingly breached the payment provision of the purchase agreement, paragraph 2.1(b)(i). Chem Waste intentionally made unauthorized and undisclosed deductions and exclusions of revenues from the quarterly installment or royalty calculations.

B. The Failure to Maximize pursuant to Paragraph 6.11 of the Agreement.

Plaintiffs claim Chem Waste breached the maximization provision of the agreement, paragraph 6.11, by not having processes in place to handle waste banned from land-filling beginning in 1987. Paragraph 6.11 states that “[bjuyer [Defendant] agrees to operate a hazardous waste disposal facility as herein defined and as improved by the capital investment herein required to its maximum capacity during the full economically feasible life of such facility.” (Ex. 1, pg.27). In accordance with paragraph 6.8 of the Agreement, Defendant was required to expend no less than 1.5 million dollars within the first eighteen months to improve the facility from the date of purchase in accordance with the proposed budget stated in Schedule “U”. Schedule “U” provided for the expenditure of approximately $400,000 to $500,000 to purchase additional land and between $300,000 and $400,000 for the purchase of additional processing equipment and other improvements. (Ex. 1, pgs. 26 & Tab 24).

Plaintiffs called William Hagerman, one of the plaintiffs in this lawsuit, to testify as their expert in the field of hazardous waste management. His testimony related, in part, to the failure to maximize claim. As indicated earlier, Mr. Hagerman was a member of the HATS partnership that owned an interest in the Emelle facility. Mr. Hagerman has a degree in civil engineering and has specialized in environmental engineering both educationally and professionally. In addition, Mr. Hagerman is a licensed engineer in twelve states and does extensive consulting work with numerous firms in the hazardous waste industry. In fact, Mr. Hagerman was still employed by Chem Waste as a consultant at the time of trial. Moreover, Hagerman consulted extensively with Chem Waste on various projects at Emelle including its incineration capability and the permitting of the facility.

.Plaintiffs testified that from the beginning they anticipated the development of the Emelle site into a full service facility with incineration capabilities. In fact, at the time of the purchase, Plaintiffs had already made a down payment on an incinerator which was constructed and briefly placed in operation on the site. (Tr. 418-21, 675, Ex. 54, Tab C). This incinerator was known as the ULD incinerator. (Tr. 674-77, Ex. 54, Tab C, as it existed in 1982). Hagerman pointed out that this incinerator was omitted from Emelle’s “Part B” RCRA (Resource Conservation and Recovery Act) permit application for the site that was sent to the EPA for approval. (Tr. 421, 685-88, 691-93).

After closing the ULD incinerator, Chem Waste proposed a chalk drying-“PCB” incinerator. A “PCB” designated incinerator is “permitted” or licensed under the “Toxic Substance Control Act” regulations (TSCA). (Tr. 421, 712-715, Ex 37; Ex. 54, Tab E). Chem Waste did a special project analysis study for the proposed PCB incinerator in March of 1984. (Ex. 54, Tab E). A notation to this study states that “many people estimate that the maximum amount of available PCB material for incineration to be twenty to thirty million dollars per year.” (Ex. 37, pg 1; Ex. 54, Tab E, pg. 1). Hagerman testified that he thought this was a reasonable estimate of the market at that time. Exhibit 37, page 11 and Exhibit 54, Tab E, (Bates stamped no. E004506), indicate that the total estimated revenue for this incinerator for the first five years of its operation to be two-hundred fourteen million nine hundred and forty-seven thousand dollars ($214,947,000). Plaintiffs’ royalty payment on this revenue would have been approximately twenty-six million eight hundred and sixty-eight thousand three hundred and seventy-five dollars ($26,868,375). The analysis also anticipates the total capital requirements to be eight million three hundred and thirty-seven thousand dollars ($8,337,000) and the payback period to be less than one year. (Ex. 54, Tab E, Bates Stamp pg. no. 004505; Tr. 720-26). Hag-erman testified that this incinerator was not built and he did not know why Chem Waste did not build it. (Tr. 726).

In 1985, Chem Waste developed a market study of a rotary kiln incinerator at Emelle. (Ex. 54, Tab G). This study suggested that Emelle could lose thirty to fifty percent of its site revenues through the implementation of the Hazardous and Solid Waste Amendments (HSWA) of 1984 to RCRA unless alternative processing was developed. (Tr. 731-32; Ex. 54, Tab G, pg. 2). Mr. Hagerman indicated that some of HSWA’s provisions were commonly referred to as “hammers” in the industry. (Tr. 737). These “hammers” required certain waste to be handled or processed in a particular manner after a certain date. For example, in August 1988, a ban was placed on high volume/high toxicity waste from land-filling. (Ex. 54, Tab G, pgs. 6-7; Tr. 735 — 40). Hagerman indicated that it was well known these hammers would require different types of treatment processes for particular waste streams and Chem Waste should have taken steps to ensure it did not lose its capability to handle these waste streams and the revenue they produced.

In January of 1986, Bruce Tobecksen and Jerry Dempsey sent a memo to WMI’s management committee requesting expenditure of engineering funds to develop incineration capability at Emelle costing approximately twelve million dollars. (Ex. 54, Tab J; Tr. 753). At that time, Tobeck-sen was Chem Waste’s Chief financial officer and Dempsey was Chem Waste’s President. (Tr. 753). Notably, the financial assumptions of this project did not include royalties for Plaintiffs on the revenues generated by this incinerator. (Ex. 54, Tab J, pg. 2). Sometime later, in 1988, Jack Adams, the project manager for this incinerator, wrote a critical report indicating it was unlikely that Emelle would obtain a workable permit in the near future due to permitting problems. (Ex. 54, Tab H). However, in 1987, Chem Waste submitted a Part B permit for an incinerator at their Port Arthur, Texas, facility designed to handle 150 million BTU’s (British Thermal Units) of waste per hour. (Tr. 769-70; Ex. 54, Tab N). Compared to the Port Arthur incinerator, the Emelle incinerator was three times smaller. (Tr. 770-71). The Port Arthur incinerator began accepting waste in the early part of 1990, and Chem Waste increased the thermal capacity for the Port Arthur incinerator up to one hundred and seventy-five million BTU’s per hour. (Tr. 771). Hag-erman was of the opinion that Chem Waste’s decision to build the Port Arthur incinerator with three times the capacity as needed, “pretty well without a doubt makes a conclusion that there will never be an incinerator at Emelle ...” (Tr. 777).

Hagerman also testified that based on information submitted to the Texas National Recourse Conservation Commission by Chem Waste, he was able to determine that Chem Waste was shipping a considerable amount of waste to Port Arthur from Emelle. (Tr. 775, Ex. 54, Tab 0). Hager-man also testified that the waste tonnage estimates from the Tobecksen-Dempsey memo turned out to be fairly accurate based on the amount of waste sent to Port Arthur from the State of Alabama. (Tr. 778-80). Accordingly, based on his analysis, Hagerman was of the opinion that Emelle lost two hundred and twenty-five million one hundred and twelve thousand six hundred and eighty-five dollars ($225,-112,685) of incineration revenues from 1987 to 1998. (Ex. 54, Tab P; Tr. 780-81, 785-86). Hagerman calculated 12 1/2% of this amount to equal twenty-eight million one hundred and thirty-nine thousand and eighty-six dollars ($28,139,086). (Ex. 54, Tab P, Tr. 785-86). Hagerman used the time period beginning in 1987 for lost revenues from incineration because he was of the opinion that Chem Waste could have operated the incinerator included in the draft permit issued by the EPA as modified and approved by the Administrative Law Judge in the permit appeal proceedings. (Tr. 780-85). Hagerman indicated he ended his calculation in 1998 based on his opinion that Chem Waste could not get an incinerator permitted and operational at Emelle until 1998 if they started at the time of trial. (Tr. 781).

Hagerman also testified that a supplemental fuels blending program known as “Unit 700” had been in operation at Emelle since around 1980. However, Hag-erman stated that a company known as OHM Materials, which was acquired by Chem Waste, actually managed the program from OHM’s Morrow, Georgia, facility. Hagerman indicated that for the last couple of years the revenues from the fuels program accrued to the Morrow, Georgia, facility and not Emelle. Hagerman indicated he and the other Plaintiffs did not receive any royalty on this revenue. (Tr. 788- 91, Ex. 56).

Based on his analysis, Hagerman testified that Chem Waste had spent slightly over eighty million dollars on developing Emelle, primarily as a landfill operation, compared to over two hundred million dollars spent solely on incineration capability at Port Arthur. (Tr. 791-805). Hagerman also testified that Chem Waste had only developed approximately 350 out of 2700 acres of available land at Emelle covered by the permit issued to Chem Waste. Hagerman indicated this represents about one quarter of the nation’s permitted capacity for hazardous waste disposal. He was also of the opinion that the full economic life of the facility is approximately one hundred years. (Tr. 805-06). Finally, Hagerman gave his opinion that Chem Waste had not operated Emelle to its maximum capacity as required under the agreement. (Tr. 805).

Chem Waste offered various reasons why it abandoned the incineration project planned for Emelle and why various waste treatment processes were either sold or shifted to other corporate entities and facilities. In particular, Chem Waste argued that the political climate in the State of Alabama at that time concerning the importation of hazardous waste to the State prevented it from obtaining a workable permit for the facility and the incinerators it attempted to license. Undoubtedly, Chem Waste faced difficulty in obtaining permits for the incinerators at Emelle. However, the Court concludes that Chem Waste could have operated the incinerator at Emelle included in the draft permit issued by the EPA as modified and approved by the Administrative Law Judge in the permit appeal proceedings. The Court is also of the opinion that Chem Waste abandoned its efforts to obtain licensing for an incinerator at Emelle because Chem Waste realized it could send its incinerator waste to its Port Arthur, Texas facility and not pay Plaintiffs a royalty on the revenue generated. In other words, Chem Waste did not use its best efforts or attempt in good faith to secure incineration capability at Emelle. The Court also finds discussion of Defendant’s reasons for not being able to secure incineration capability at Emelle and for transferring revenue generating processes to other locations or corporate entities to be of little assistance. Simply stated, Defendant’s witnesses and the reasons for abandoning the incineration project at Emelle as well as shifting waste and revenue generating processes to other facilities were not credible.

• Based on the record in this case, the Court finds that Chem Waste breached paragraph 6.11 of the purchase agreement by not developing and operating the Emelle facility to its maximum capacity. Chem Waste failed to obtain incineration capability for Emelle. Chem Waste also breached the maximization provision of the purchase agreement by diverting waste to other corporate related entities and/or facilities. Furthermore, the Court finds Chem Waste breached the maximization provision by willfully and knowingly divesting the Emelle facility of revenue generating waste treatment and handling processes.

III. Fraudulent Misrepresentation and Suppression.

The Court now turns to Plaintiffs’ fraud claims. Plaintiffs allege in count two of the amended complaint that Chem Waste violated Alabama Code Sections 6-5-101, 103 and 104 by fraudulently misrepresenting the facility’s revenue figures. The elements of fraudulent misrepresentation under Alabama law are: (1) that the defendant made a false representation to the plaintiff; (2) that the false representation related to a material fact; (3) that the plaintiff justifiably relied on the false statement; and (4) that the plaintiff sustained damages as a proximate result. Braswell v. ConAgra, Inc., 936 F.2d 1169, 1174 (11th Cir.1991) (citations omitted). In count three, Plaintiffs allege Chem Waste violated Alabama Code Sections 6-5-102 and 104 by fraudulently suppressing the exclusions and deductions from the facility’s revenues. The elements for suppression of a material fact are “(1) that the defendant had a duty to disclose a material fact; (2) that the defendant either failed to disclose or concealed that material fact; (3) that the defendant’s failure to disclose or his concealment of that material fact induced the plaintiff to act or to refrain from acting; and (4) that the plaintiff suffered damage as a result of his action, or inaction, induced by the defendant’s failure to disclose or his concealment of the material fact.” The Independent Life & Accident Insurance Co. v. Harrington, 658 So.2d 892, 896 (Ala.1994) citing, Soniat v. Johnson-Rast & Hays, 626 So.2d 1256, 1258-59 (Ala.1993); see also, Wolff v. Allstate Life Insurance Co., 985 F.2d 1524, 1529 (11th Cir.1993).

Plaintiffs have established the elements for fraudulent misrepresentation, Count II, by clear and convincing evidence. Chem Waste sent Plaintiffs quarterly statements that falsely represented that the royalty payments were calculated on 12 1/2% of “disposal” revenues which term both parties understood and intended to include all revenues exclusive of transportation revenues according to the terms of the purchase agreement. Chem Waste sent Plaintiffs royalty checks that falsely represented the quarterly installment payments equaled 12 1/2% of all revenues from the operation of the hazardous waste landfill site as provided by the agreement. The Court finds the rep-reservations made by Defendant on the quarterly revenue summaries and the royalty checks related to a material fact. The Court finds Plaintiffs justifiably relied on the false statements in the revenue summaries and royalty checks. Lastly, the Court finds Plaintiffs sustained damages as a proximate result of Defendant’s fraud.

The Court also finds Plaintiffs have established the elements for fraudulent suppression of material facts, Count III, by clear and convincing evidence. Over the years, Plaintiffs questioned whether they should audit Chem Waste as allowed under the terms of the purchases agreement. However, on each occasion, Mark Gregory, who had developed a relationship with many of Chem Waste’s management officials, felt there was no reason to believe that Chem Waste was not paying them properly pursuant to the contact based on the reassurances made by Chem Waste’s officers. In 1990 or 1991, Gregory contacted Bill Ingram, who was regional controller for Chem Waste at that time, and asked Ingram if Chem Waste was computing the royalty payments in the usual manner. Gregory stated that Ingram told him they were doing everything the same. (Tr. 422-23): In 1992, when Chem Waste was changing Emelle to a “costs center,” Gregory called Mr. Ingram and asked him again about the calculation of the royalty. Gregory states that at that time, Ingram told him they (Plaintiffs) were going to be paid on all revenue. (Tr. 423-24).

The Court also finds that Chem Waste had a contractual obligation to disclose any material facts and not mislead Plaintiffs in accordance with paragraph 6.15 of the purchase agreement. Paragraph 6.15 states in relevant part that

Buyer [Defendant] warrants that all the representations, statements, certificates, agreements, exhibits and schedules provided by it are true and correct in all material aspects. It warrants ... that this Agreement, Schedules hereto, and all other documents and information previously submitted herewith or hereafter furnished to Company and Shareholders [Plaintiffs] and its representatives pursuant thereto, do not and will not include any untrue statement of material fact or fail to include any material fact, all to the end that such statements are not misleading.

(Ex. 1, pgs.28-29) (emphasis added).

Chem Waste undertook this contractual obligation when it entered into the contract. (See, Defendant’s Answer to the Amended Complaint, pgs. 9). Evidence in the record clearly shows that Chem Waste violated its promise and this provision of the Agreement.

Chem Waste had a duty to disclose its purported “re-interpretation” of the contract payment language. The Court finds that this duty arises from the “particular circumstances” created by paragraph 6.15 of the agreement as well as Plaintiffs’ and Defendant’s relative access to the information concerning Emelle’s finances and the royalty payment calculations. See, Wolff v. Allstate Life Insurance Co., 985 F.2d 1524, 1528-31 (11th Cir.1993). Chem Waste also had a duty to disclose its deductions and exclusions of revenues from the royalty payment calculations. Chem Waste also had a duty to disclose the fact that it began calculating the royalty payments in a manner substantially different from previous occasions and the manner in which it made the calculations resulted in a substantial loss to Plaintiffs. Chem Waste intentionally failed to disclose and concealed the above material facts from Plaintiffs. Chem Waste’s failure to disclose and its decision to conceal the above material facts induced Plaintiffs not to act. Lastly, Plaintiffs suffered damage as a result of Chem Waste’s fraudulent action.

Simply stated, the Court finds by clear and convincing evidence that Chem Waste fraudulently misrepresented Emelle’s revenues and fraudulently suppressed the unauthorized deductions and exclusions of revenue from the quarterly installment payment calculations.

IY. Plaintiffs’ Contract Damages.

A. Excluded Revenues

Having concluded the Defendant materially breached the purchase agreement, the Court will now address the issue of damages.

Plaintiffs called Phillip Shannon as their expert witness to testify on the issue of damages in this case. Mr. Shannon, a Certified Public Accountant (CPA), has been an accountant for twenty-three years and is one of four partner with the accounting firm of KPMG Peat Marwick in Memphis, Tennessee. He specializes in auditing and is responsible for the audits of a number of large billion dollar manufacturing companies.

Mr. Shannon identified the following categories of revenues or “revenue steams” that were excluded from the royalty calculations: (1) truck wash fees, (2) lab fees, (3) Wilsonville and Denver project revenues, (4) incinerator ash revenue, (5) reductions in revenues, (6) unreported revenues, (7) waste processed at Emelle but not recorded, (8) PCB waste, (9) Alabama Hazardous Waste disposal taxes, (10) revenues transferred to non-facility records and (11) intra/intercompany pricing differences. The Court will address each of these categories separately.

(1) Truck Wash Fees. Mr. Shannon first identified three hundred ninety-two thousand and forty-three dollars ($392,043) in truck wash fees that were excluded from the royalty calculation from 1985 to May 31, 1995. (Ex. 77, Schedule B). Defendant agrees that under the Court’s partial summary judgment ruling, these fees are revenues from the activities of Emelle and should have been included in the royalty calculations. (Def.’s Revd. Find. Fact. pgs. 23, 25-26).

(2) Lab Fees. Mr. Shannon identified four million five hundred thirty-seven thousand two hundred and eighty-nine dollars ($4,537,289) in lab fees that were excluded from the royalty calculation from 1985 to May 31, 1995. (Ex. 77, Schedule B). Defendant agrees that under the Court’s partial summary judgment ruling, these fees are revenues from activities of Emelle and should have been included in the royalty calculations. (Def.’s Revd. Find. Fact. pgs. 23, 25-26). Notably, Chem Waste closed the lab at the Emelle facility and began sending their lab work to another location.

(3) Wilsonville and Denver project revenues. Mr. Shannon identified four million three hundred seven thousand five hundred and three dollars ($4,307,503) in revenues generated from the Wilsonville and Denver hazardous waste clean up projects. (Ex. 77, Schedule B). These revenues occurred between 1985 and 1988. Defendant claims all but the 1988 revenues of $2,633 are time barred. In addition, Chem Waste argues that Plaintiffs have failed ‘to demonstrate what part of the revenues are attributable to off-site operations and therefore not attributable to disposal at Emelle.

Dr. Henson testified that he, Mark Gregory, and others developed remediation services for customers to capture hazardous waste ih the market. This basically consisted of cleanup services for hazardous waste at a particular site or location. As part of the remediation process, the hazardous waste would be brought back to Emelle for disposal. (Tr. pgs.1704-05). This program or service later came to be called “ENRAC.” EN-RAC was a profitable service and was later traded to another corporation, Rust Engineering, in exchange for part of that company’s' stock. (Tr. pgs.1706-07). It appears that the ENRAC service or remediation program was initially part of Emelle’s operation and its revenues were treated as Emelle’s revenues for purposes of the royalty calculation. (Tr. pg.463).

Mr. Shannon testified that the revenues from Wilsonville and Denver were recorded as “contra expenses” to Chem Waste instead of revenue. (Tr. pgs.1028-29, 1083-37). According to Mr. Shannon, in accounting terms, revenues are credits and expenses are debits. A “contra-expense” is where a revenue is recorded as a reduction in expense rather than as revenue. (Tr. pgs.1028-29). This type of recording has the effect of reducing expenses so the bottom line remains unchanged but revenues are reduced. (Tr. pg.1034). Mr. Shannon also testified that Defendant’s recording of these projects as contra-expenses had the effect of reducing revenues upon which the contract payment was to be calculated. (Tr. pg.1035).

Based on the record in this case, the Court finds the Wilsonville and Denver project revenues were part of the operation of the Emelle facility and subject to the 12 1/2% royalty calculation. The Court concludes Plaintiffs are not limited to recovery of these revenues occurring in 1988.

(4) Incinerator Ash Revenue. Plaintiffs’ expert identified one million nine hundred ninety-five thousand five hundred and fifty-eight dollars ($1,995,558) in revenues from incineration ash buried at Emelle that was incorrectly excluded from the royalty calculation in 1992. (Ex. 77, Schedule C). Chem Waste initially recorded this item as revenue but later made a journal entry to change it to a “contra-expense.” (Tr. pgs.1037-38). Chem Waste does not dispute that it should have paid Plaintiffs 12 1/2% in royalty on this revenue. (Def.’s Revd. Find. Fact. pg. 26). Accordingly, the Court finds Plaintiffs are entitled to a 12 1/2% royalty payment on this item of revenue.

(5) The 1992 Recalculation-Reduction of Revenue. Mr. Shannon identified eight million three hundred thirty-two thousand eight hundred and forty-seven dollars ($8,332,847) in revenue for the year 1992 that Chem Waste excluded from the “total disposal revenue” figure included in the quarterly statement sent to Plaintiffs. (Ex. 77, Schedule C; Ex. 5, Tab 1992 last page). This figure was calculated as a reduction from the royalty payment for December of 1992. (Ex. 5, Tab 1992, last page). Defendant argues Plaintiffs have Pot met their burden of demonstrating that these revenues are related to the operations of Emelle, and that these items are nothing more than off-setting adjustments or corrections of certain accounting entries.

Defendant’s own “disposal revenue” recalculation indicates the above sum is part of Emelle’s revenue. (Ex. 5, Tab 1992, last page). In addition, Ann Akin, controller for Emelle during this time period, stated that the figure represents several different line items. Part of the eight million represents the December 1992 revenue for incinerator ash from Port Arthur and TWI buried at Emelle. (Tr. pg.331). The remaining part consist of the items outlined in the January 28, 1993, letter to Drayton Pruitt from Chem Waste where it claimed it mistakenly overpaid Plaintiffs. (Ex. 31). The Court finds that Plaintiffs have adequately demonstrated by a preponderance of the evidence that these revenues are a part of Emelle’s revenues and Plaintiffs are entitled to a 12 1/2% royalty payment calculated on these revenues.

(6)Unreported revenues. Mr. Shannon next identified one million two hundred seventy thousand four hundred and ninety-two dollars ($1,270,492) as revenue recorded on Emelle’s general ledger but not reported for purposes of Plaintiffs’ royalty payment. Defendant opposed any award to Plaintiffs for this item for the same reasons listed above. The Court finds Plaintiffs have shown by preponderance of the evidence that these revenues were generated as part of the hazardous waste operations occurring at the Emelle Facility and should be included in the royalty calculation.

(7) Waste Processed at Emelle But Not Recorded. Mr. Shannon identified six million three hundred and ninety-nine thousand four hundred and nineteen dollars ($6,399,419) in revenue from 1981 to May 31, 1995, from waste streams processed at Emelle but not recorded as revenue by Chem Waste. (Ex. 77, Schedule D-l). Mr. Shannon indicated Emelle recognized $45,105 for 1981 and $2,710 for 1985 for solvent waste streams in those years. (Ex. 77, Schedule D-l; Tr. 1050-51). These amounts were derived from the calculation work sheets prepared by Chem Waste. (Tr. 1055-51).

Mr. Shannon stated that he relied on the “revenue code summaries” (RCS) as the most reliable information regarding the revenues of the facility. For the years 1992, 1993, and 1994, the revenue code summaries showed invoices for amounts that were not subsequently reported on the general ledger or operating income report. (Tr. pg.1051). In 1992, the RCS’s showed $78,996 invoiced for bulk liquid fuels and special bulk solids but not recorded as revenue to Emelle. For 1993, Mr. Shannon found the general ledger indicating $138,353 more in revenue than the revenue code summaries so he reduced the amount Plaintiffs claimed by $138,353 for 1993. (Ex. 77, Seh.D-1). For 1994 and 1995, Mr. Shannon determined Chem Waste had not included as revenue the 1994 $4,509,474 fuels program revenue and $1,901,487 for the first half of 1995 in fuels revenues.

Chem Waste argues these revenues were from a fuels activities program of a separate entity called RMI. Chem Waste also argues the agreement did not prevent Defendant or its parent company from selling or transferring assets or operations as business conditions dictated. (Def.’s Revd. Find. Fact. pgs. 27).

The Court finds all the above amounts identified by Mr. Shannon should have been included as revenues for the Emelle facility for purposes of Plaintiffs’ royalty payments. Plaintiffs have shown by a preponderance of the evidence that the above revenue items were from the operation of the Emelle facility. The Court specifically rejects Defendant’s assertion that by transferring an operation to another entity and then operating it on the site, Defendant is thereby relieved of its royalty obligation to Plaintiffs. If the Court accepted this argument, all Defendant would have to do is transfer each operation to a separate company, even one at the Emelle site, and ultimately owe Plaintiffs nothing. Defendant’s argument is foreclosed by the payment provision of the contract as well as the maximization provision, paragraph 6.11, of the purchase agreement. Accordingly, the Court concludes Plaintiffs are entitled to 12 $ % of the revenues identified by Shannon on Schedule D-l. (Ex. 77).

(8) PCB Waste. Mr. Shannon also identified twenty-one million two hundred ninety-two thousand nine hundred and sixty-four dollars ($21,292,964) in revenue from PCB waste that was backed out of Emelle’s revenues for purposes of the royalty calculation. (Tr. pg. 1054; Ex. 77, Schedule D). This amount represents treating, processing and repackaging revenues for waste received and then shipped out to an off-site incinerator. The figures also represents revenues from PCB waste that were buried at Emelle in 1988 and 1989 but were excluded from the royalty calculation. The royalty payment on the amount of revenue excluded from burial at Emelle amounted to approximately $450,-000. Chem Waste’s own outside auditor, Arthur Anderson & Co., discovered this error and bought it to management’s attention. Despite this fact, Chem Waste it did not inform Plaintiffs of the error or attempt to correct it by paying Plaintiffs. Moreover, Chem Waste had not corrected this error at the time of trial.

Chem Waste claims Plaintiffs can only recover 12 1/2% of $23,580 of the PCB revenues because the remainder is either time-barred or attributable to off-site incineration. For the reasons discussed above, the Court rejects this narrow interpretation of the purchase agreement. The incineration revenues, even if the incineration occurred off-site, are clearly related to and part of the operation of the Emelle facility because the necessary treatment, processing and repackaging of waste for incineration took place at Emelle. Again, the Court does not find that Plaintiffs are limited in their recovery to 1987 revenues because the earlier revenues can be recovered as part of Plaintiffs’ damages under their fraud claims.

(9) Alabama Hazardous Waste Disposal Fees/Taxes. Mr. Shannon also indicted that Chem Waste excluded one hundred and eleven million three hundred twenty-two thousand eight hundred and forty-seven dollars ($111,322,847) from the royalty calculation which represented the hazardous waste fees/taxes imposed on Chem Waste by the State of Alabama that Chem Waste passed on or collected from its customers. (Ex. 77, Schedule D). See, Alabama Code § 22-30B-1 et seq. as amended (1992). The parties dispute whether the taxes collected from Chem Waste’s customers should be counted as revenue to the site as argued by Plaintiffs or analogous to sales or excise taxes as argued by Defendant and not recognized as revenue to the facility.

Mr. Shannon stated that under generally accepted accounting principles taxes are treated as expenses and thus any amounts collected from customers to recoup these fees are revenues. Defendant’s expert, Eileen P. Scudder, a CPA and partner in the accounting firm of Deloitte & Touche, gave her opinion that the disposal taxes are not revenue from the operation of Emelle because Emelle is not in the business of generating revenues through taxes. She indicated that the taxes are analogous to sales or excise taxes for which Chem Waste does not derive any benefit but merely collects from customers for the State of Alabama and should not be recognized as revenues for the purposes of the royalty calculation.

The statute clearly imposes the tax on the operator of a hazardous waste disposal facility and not the generators of the waste. Ala.Code § 22-30-B-2. (1992). (Ex. 67). It appears the Alabama Legislature did set the tax rate at a relatively high rate whereby Chem Waste would, of business necessity, have had to pass the tax on to the generators of the waste or possibly go out of business. (Tr. 2380-81). The tax is also calculated on an amount of waste the operator receives from the generator and certain generators could seek an exemption from the tax. Ala. Code § 22-30B-2(d). Moreover, the tax is based on a transaction with a customer and calculated according to the size or amount of the transaction. It therefore appears that the tax is targeted towards the generator of the waste. See, Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 112 S.Ct. 2009, 2017, 119 L.Ed.2d 121 (1992). However, Chem Waste did record this tax as revenue to the facility from 1988 to 1990 but did not include it in the royalty calculation. In 1990. Chem Waste began recording the taxes as a liability. (Ex. 77, Sch D-2).

The Court concludes that although the tax appears analogous to a sales or excise tax, Chem Waste treated these funds as revenues. Accordingly, the Court concludes the funds collected for payment of the Alabama hazardous waste taxes are revenue to the Emelle facility for purposes of the royalty calculation. Plaintiffs are therefore entitled to their 12 1/2% royalty on these revenues.

(10) Revenues Transferred to Non-Facility Records. In this category Mr. Shannon identified one million seven hundred ninety-eight thousand seven hundred and fifty dollars ($1,798,750) in deductions from Emelle’s revenues where there was no corresponding entry crediting that amount to any account on Emelle’s books. (Tr. 1230; Ex. 77, Schs. E and E-l). Ms. Scudder testified that because Emelle became a “cost center” during this time, Mr. Shannon would not have seen the corresponding entries. (Tr. 2294). Plaintiffs’ counsel did request an explanation for these transactions from defense counsel. (Tr. 1232-36; Ex. 80). Defense counsel was able to account for six of the items but gave no further information as to the other entries. (Tr. 1232, 1235-36; Ex. 81). In addition, Ms. Scudder did not identify the remaining deductions from revenue or explain them.

The Court concludes Plaintiffs proved by a preponderance of the evidence that these revenues were related to the operations of Emelle and should therefore be included in the royalty calculations.

(11) Intra/Inter Company Pricing Differences. Because of the events surrounding this dispute, Mr. Shannon was asked to look for possible price differences between intra/intercompany charges and third party companies. Both Dr. Henson, Chem Waste’s expert in hazardous waste disposal and manager of Emelle for a number of years, and Mark Gregory testified that Chem Waste would normally give its related or sister companies a ten percent (10%) discount for services provided by Emelle. This discount whs apparently designed to help Chem Waste’s related companies capture waste in the market and secure this waste for disposal at the Emelle facility. Defendant’s accounting expert, Eileen Scudder, indicated that she had been provided documentation suggesting a 10%, and sometimes larger, discount was given on competitively bid special projects.

On the other hand, Mr. Shannon concluded from his analysis that the price differential was substantially more than ten percent. According to his analysis, the inter/intracompany pricing ranged from 34 to 59 percent below third party pricing. (Tr. 1154). In addition, Mr. Shannon was of the opinion that this pricing difference accounted for $20,886,834 in unrecognized revenues for Emelle from 1992 to May 31, 1995. (Tr. 1149-51; Ex. 77, Sch E, E-2, and E-2A).

Mr. Shannon’s conclusion of preferential pricing was supported in part by a pricing schedule obtained through discovery dated March 11, 1994. (Ex. 73, pg.l). The schedule outlined total all-in costs for a particular service, an intercompany price and a third party price. (Tr. 1143-59, Ex. 73). That price list indicated