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Bankruptcy Court Holds That "Economic Waste" Doctrine, as Adopted in Wisconsin, Prevented Owner From Recovering Costs to Repair Defectively Designed Digester and Awards No Damages, Even Though the Digester Was Not Designed to the Applicable Code

WTE-S&S AG Enters., LLC v. GHD, Inc., 2017 Bankr. LEXIS 2343 (Bankr. N. D. Ill. August 18, 2017)

Author: Robert A. Gallagher

10/26/2017

Read the full post at Constructlaw

Bankruptcy Court Holds That "Economic Waste" Doctrine, as Adopted in Wisconsin, Prevented Owner From Recovering Costs to Repair Defectively Designed Digester and Awards No Damages, Even Though the Digester Was Not Designed to the Applicable Code

This breach of contract dispute arises out of a contract to design and build a cow-manure digester on a farm in Wisconsin. The digester vessel designed and constructed by Defendant, DVO, Inc. (formerly known as GHD, Inc.), consisted of a 300-foot long tank with two side-by-side chambers which were each 35 feet wide. A thick concrete cover sat atop the vessel to prevent “free oxygen” from entering the digester. A center wall ran the length of the vessel, separating the two chambers and also serving as the interior load-bearing wall.

The Debtor/owner commenced this action against DVO, contending, among other things, that the interior center wall footing of the vessel was defectively designed in that it was undersized and not compliant with the applicable code for waste-storage facilities. Debtor’s expert testified that the undersized and overstressed wall footings could lead to settlement of the vessel and cracks in the foundation, which would compromise its structural integrity. Debtor’s expert further testified that to properly support the vessel weight, the currently constructed three-foot wall footing needed to be three-and-a-half to four foot wide.

The court agreed that DVO’s design was defective and constituted a breach of the contract because it failed to comply with the applicable code. However, applying the “economic waste” doctrine, the court denied Debtor’s request for damages of $988,475 to replace the entire vessel or, in the alternative, $655,000 to shut down and clean out the vessel to check for cracks or settlement issues.