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Kleen awarded $3.8 million in lawsuit over contract dispute

  • Dennis Kim, right, co-owner of Kleen Laundry, speaks with Lebanon Police officers at the Kleen location in Lebanon, N,H., on Tuesday, Aug. 13, 2019. The body of a man was pulled from the Mascoma River behind the facility. (Valley News - Jennifer Hauck) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

Valley News Business Writer
Published: 10/11/2019 9:18:56 PM
Modified: 10/11/2019 9:56:08 PM

LEBANON — In a partial relief from its recent troubled history, commercial laundry operator Kleen has been awarded nearly $3.8 million in a jury verdict stemming from a lawsuit it filed against the compressed natural gas equipment installer that Kleen said failed to deliver the services it promised.

A jury in Grafton Superior Court in Haverhill earlier this week awarded Kleen $3,785,000 following a four-day trial in which Kleen said that failure by Massachusetts-based Xpress Natural Gas to live up to its end of a contract for installing new compressed natural gas equipment to power its Lebanon commercial laundry facility “contributed significantly” to the 122-year-old  company suddenly closing in June.

The shuttering of the commercial laundry plant, which followed the closing of Kleen’s retail dry cleaning service and laundromats in the Upper Valley, led to about 125 people losing their jobs.

Lawyers for Kleen said the nearly $3.8 million verdict was one of the largest ever awarded in Grafton County history. But, despite the size of the award, much if not all of it will go to paying back the bank and creditors owed money following the company’s emergence from bankruptcy in 2017.

“This verdict and the damages awarded by the jury, once collected, will help our secured creditors recover the losses incurred while they tried to support the Kleen business in our efforts to recover from 2017,” Kleen co-owner Ned Hazard said via email. “It is unfortunate for our business and our former employees that these breaches occurred in 2017, and that we were unable to bring this suit to a conclusion while it would have been possible to save the business and the jobs.”

Jonathan Pierce, a spokesman for Xpress Natural Gas, said the Andover, Mass.-based private company is “disappointed in the jury’s verdict and plans to appeal” the decision. He declined further comment.

The dispute that led to Kleen filing a breach-of-contract lawsuit against Xpress in 2018 began two years earlier, in 2016, when the companies entered into an agreement for Xpress to provide Kleen with a “bundled equipment/supply package” to convert the Lebanon plant from its aging liquid natural gas system, or LNG, to a compressed natural gas system, or CNG.

The natural gas-powered fuel and equipment was used to heat the facility, heat water for laundering and to power the hot-air dryers, and liquid natural gas represented one of Kleen’s biggest expenses, the company said in filings with the court.

In addition to converting Kleen’s plant to compressed natural gas, the contract also called for Kleen to swing its purchase of liquid natural gas to Xpress for the period of time that it would require Xpress to install the CNG system. As part of the contract, Xpress had also agreed to purchase Kleen’s LNG equipment for $250,000, according to the lawsuit.

Kleen’s rationale was that the higher short-term fuel cost for LNG would be more than offset by the long-term lower cost under the CNG system, according to Carolyn Cole, the Lebanon attorney who argued the case before the jury.

“They were willing to accept short-term pain for long-term gain,” she said on Friday.

The conversion of the laundry plant to CNG was supposed to begin by February 2017 and be completed by June 2017.

But days before the contract was to be executed, Xpress “privately did a financial analysis to determine whether it would be more profitable for Xpress to sell LNG or CNG, since converting to CNG meant Xpress had to spend approximately $1 million on CNG equipment and had to purchase Kleen’s LNG equipment for $250,000 after the CNG equipment was installed,” according to Cole’s prepared opening statement to the jury.

At the same time, she said, Xpress delayed installing the CNG system, sometimes citing alleged late payments by Kleen on a maintenance contract and refusing to send engineers to work on the equipment at the plant.

Kleen argued the maintenance contract fell under its predecessor company and was not assumed by the new company that emerged post-bankruptcy, but said even after it paid the outstanding balance no engineers were sent to Lebanon.

“Xpress had no intention of installing the CNG equipment once it realized that it would make significantly more profit selling LNG at an exorbitant rate to a customer that, because of the exclusivity clause in the contract, was not able to buy from another vendor to reduce the cost,” Cole said in her closing argument to the jury.

The CNG equipment was never installed, and Kleen operated under its LNG system until the day the plant closed.

Kleen’s dispute with Xpress occurred at a time when Kleen was experiencing other difficulties, from a declining retail dry cleaning business due to shifts in fashion as fewer men wear business suits to the rise in wash-and-wear apparel that does not require dry cleaning.

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