STATE OF NORTH DAKOTA IN DISTRICT COURT

COUNTY OF CASS EAST CENTRAL JUDICIAL DISTRICT

MWT ND, LP, Civil No. 09-2023-CV-02021

Plaintiff,

vs. ANSWER OF DEFENDANTS

AND
Sanford Health and Healthcare Environmental COUNTERCLAIM AND THIRD-
Services LLC, PARTY COMPLAINT OF
DEFENDANT HEALTHCARE
Defendants, ENVIRONMENTAL SERVICES LLC

and

Healthcare Environmental Services LLC,

Third-Party Plaintiff,

vs.

David Cardenas,

Third-Party Defendant.

[¶1] Defendant Sanford Health (“Sanford”) and Defendant and Third-Party Plaintiff

Healthcare Environmental Services, LLC (“HESI”) as and for their Answer to the Complaint of

Plaintiff MWT ND, LP (“MWT”), state and allege as follows:

GENERAL DENIAL

[¶2] Except as to those allegations that are expressly admitted herein, Defendants deny

each and every allegation contained in Plaintiff’s Complaint except as may be hereinafter admitted,

qualified or explained, and deny Plaintiff’s right to all relief requested.

 INTRODUCTION

[¶3] Paragraph I of the Complaint is an introductory paragraph to which no response is

required. To the extent a response is required to Paragraph I of the Complaint, Defendants deny

the same.

[¶4] Paragraph II of the Complaint is an introductory paragraph to which no response is

required. To the extent a response is required to Paragraph II of the Complaint, Defendants deny

the same.

[¶5] Defendants lack sufficient knowledge to admit or deny any of the allegations in

Paragraph III of the Complaint and therefore deny the same.

[¶6] In response to Paragraph IV of the Complaint, Defendants lack sufficient

knowledge to admit or deny whether MWT “has been left with no choice but to file this lawsuit.”

Defendants deny any and all remaining allegations in Paragraph IV of the Complaint.

BRIEF BACKGROUND

[¶7] In response to Paragraph V of the Complaint, Defendants deny allegations related

to HESI’s disposal facilities or operations in the Fargo area. Defendants lack sufficient knowledge

to admit or deny the remaining allegations in Paragraph V of the Complaint and therefore deny the

same.

[¶8] In response to Paragraph VI of the Complaint, Defendants lack sufficient

knowledge regarding the history of medical waste incinerators in the United States and therefore

deny the same. Defendants state that to the extent the article cited in Paragraph VI of the Complaint

exists, it speaks for itself. Defendants deny the remaining allegations in Paragraph VI of the

Complaint, including any allegations made in the third-party article.

[¶9] In response to Paragraph VII of the Complaint, Defendants admit that MWT began

processing HESI's waste at its New Mexico facility before the Fargo Facility opened, and that

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MWT obtained financing to build out the Fargo facility. Defendants deny the remaining allegations

in Paragraph VII of the Complaint.

[¶10] In response to Paragraph VIII of the Complaint, Defendants admit that MWT

obtained financing to build out the Fargo Facility. Defendants deny the remaining allegations set

forth in Paragraph VIII of the Complaint, including but not limited to the allegation that Sanford

or any of its affiliates guaranteed MWT’s loan.

[¶11] In response to Paragraph IX of the Complaint, Defendants admit that HESI

packaged waste prior to delivering the waste to MWT, and that HESI assisted with sorting the

waste at the Fargo Facility. Defendants deny the remaining allegations set forth in Paragraph IX

of the Complaint.

[¶12] In response to Paragraph X of the Complaint, Defendants state that disposal of

waste was governed by the Disposal Agreement, as that term is defined in the Complaint, and that

the Disposal Agreement speaks for itself. Defendants deny any and all remaining allegations in

Paragraph X of the Complaint, including but not limited to the allegation that HESI has repeatedly

delivered noncompliant waste to MWT.

[¶13] In response to Paragraph XI of the Complaint, Defendants state that the Disposal

Agreement speaks for itself. Defendants deny the remaining allegations in Paragraph XI of the

Complaint.

[¶14] Defendants deny the allegations in Paragraph XII of the Complaint.

[¶15] Defendants deny the allegations in Paragraph XIII of the Complaint.

THE PARTIES

[¶16] Defendants lack sufficient knowledge to admit or deny any of the allegations in

Paragraph XIV of the Complaint and therefore deny the same.

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 [¶17] Defendants deny the allegation in Paragraph XV of the Complaint as Sanford

Health is a South Dakota non-profit corporation, and affirmatively assert that the proper party for

purposes of this action is Sanford North, a North Dakota non-profit corporation.

[¶18] In response to Paragraph XVI of the Complaint, Defendants admit that HESI is a

North Dakota limited liability company with its principal place of business in Fargo, North Dakota.

Defendants further state that HESI is a wholly-owned subsidiary of Sanford North. Defendants

deny any and all remaining allegations in Paragraph XVI of the Complaint.

JURISDICTION AND VENUE

[¶19] In response to Paragraph XVII of the Complaint, Defendants do not dispute

personal jurisdiction.

[¶20] In response to Paragraph XVIII of the Complaint, Defendants do not dispute

subject-matter jurisdiction.

[¶21] In response to Paragraph XIX of the Complaint, Defendants do not dispute venue.

GENERAL FACTS AND ALLEGATIONS

[¶22] In response to Paragraph XX of the Complaint, Defendants admit that the parties

discussed establishing a waste disposal facility in Fargo that would be operated by MWT.

Defendants deny the remaining allegations in Paragraph XX of the Complaint.

[¶23] Defendants admit the allegations in Paragraph XXI of the Complaint.

[¶24] In response to the allegations in Paragraph XXII of the Complaint, Defendants state

that the Sanford Guaranty, as that term is defined in the Complaint, speaks for itself. Defendants

deny any and all remaining allegations in Paragraph XXII of the Complaint.

[¶25] In response to the allegations in Paragraph XXIII of the Complaint, Defendants

state that the Disposal Agreement speaks for itself. Defendants deny any and all remaining

allegations in Paragraph XXIII of the Complaint.

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 [¶26] In response to the allegations in Paragraph XXIV of the Complaint, Defendants

state that the Disposal Agreement speaks for itself. Defendants deny any and all remaining

allegations in Paragraph XXIV of the Complaint.

[¶27] In response to the allegations in Paragraph XXV of the Complaint, Defendants state

that the Disposal Agreement speaks for itself. Defendants deny any and all remaining allegations

in Paragraph XXV of the Complaint.

[¶28] In response to the allegations in Paragraph XXVI of the Complaint, Defendants

state that the Disposal Agreement speaks for itself. Defendants deny any and all remaining

allegations in Paragraph XXVI of the Complaint.

[¶29] In response to the allegations in Paragraph XXVII of the Complaint, Defendants

state that the Disposal Agreement speaks for itself. Defendants deny any and all remaining

allegations in Paragraph XXVII of the Complaint.

[¶30] Defendants deny the allegations in Paragraph XXVIII of the Complaint.

[¶31] In response to the allegations in Paragraph XXIX of the Complaint, Defendants

state that HESI had numerous discussions with MWT regarding packaging and sorting waste.

Defendants deny all remaining allegations in Paragraph XXIX of the Complaint.

[¶32] In response to the allegations set forth in Paragraph XXX of the Complaint,

Defendants state that the Lease Agreement speaks for itself. Defendants deny all remaining

allegations in Paragraph XXX of the Complaint.

[¶33] Defendants deny the allegations in Paragraph XXXI of the Complaint.

[¶34] In response to Paragraph XXXII of the Complaint, Defendants admit that HESI

employees often had to sign waste manifests on behalf of MWT, which MWT was aware of and

consented to, because there were no MWT employees available due to lack of staffing and because

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MWT’s pyrolysis machine was constantly breaking down, requiring attention. Defendants deny

the remaining allegations in Paragraph XXXII of the Complaint.

[¶35] In response to the allegations in Paragraph XXXIII of the Complaint, Defendants

admit that HESI employees entered the Fargo facility on March 8, 2023 to remove waste and

HESI-owned property due to MWT’s complete failure to timely and safely dispose of waste as it

had agreed to do in the Disposal Agreement. Defendants also admit that HESI sent MWT a notice

of default. Defendants deny the remaining allegations in Paragraph XXXIII of the Complaint.

[¶36] In response to Paragraph XXXIV of the Complaint, Defendants admit they

removed waste from the Fargo facility on March 9, 2023, and that HESI employees turned off the

water feed to the boiler because MWT employees had locked them out of the facility. Defendants

state that the email referenced in Paragraph XXXIV of the Complaint speaks for itself. Defendants

deny any and all remaining allegations in Paragraph XXXIV of the Complaint.

[¶37] In response to the allegations in Paragraph XXXV of the Complaint, Defendants

admit that MWT financed the build out of the Fargo facility with a loan. Defendants admit that, at

MWT's direction and following the execution of the Disposal Agreement, HESI made payments

directly to MWT’s lender. Defendants deny that Sanford or any of its affiliates guaranteed any

loan made to MWT. Defendants lack sufficient information to admit or deny the remaining

allegations in Paragraph XXXV of the Complaint and therefore deny the same.

[¶38] In response to the allegations in Paragraph XXXVI of the Complaint, Defendants

admit that HESI sent MWT a notice of termination on April 28, 2023. Defendants deny the

remaining allegations in Paragraph XXXVI of the Complaint.

[¶39] In response to the allegations in Paragraph XXXVII of the Complaint, Defendants

admit that HESI appended photographs to the notice of termination taken between March 3 and

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March 8, 2023. Defendants deny the remaining allegations in Paragraph XXXVII of the

Complaint.

[¶40] Defendants deny the allegations in Paragraph XXXVIII of the Complaint.

[¶41] Defendants deny the allegations in Paragraph XXXIX of the Complaint.

COUNT ONE
BREACH OF CONTRACT

[¶42] In response to the restated allegations in Paragraph XL of the Complaint,

Defendants restate and incorporate their answers in the preceding paragraphs herein.

[¶43] Defendants deny the allegations in Paragraph XLI of the Complaint.

[¶44] Defendants deny the allegations in Paragraph XLII of the Complaint.

[¶45] In response to Paragraph XLIII of the Complaint, Defendants state that the Disposal

Agreement speaks for itself. Defendants deny any and all remaining allegations in Paragraph XLIII

of the Complaint.

[¶46] Defendants deny the allegations in Paragraph XLIV of the Complaint.

[¶47] Defendants deny the allegations in Paragraph XLV of the Complaint.

[¶48] Defendants deny the allegations in Paragraph XLVI of the Complaint.

[¶49] Defendants deny the allegations in Paragraph XLVII of the Complaint.

[¶50] Defendants deny the allegations in Paragraph XLVIII of the Complaint.

[¶51] Defendants deny the allegations in Paragraph XLIX of the Complaint.

[¶52] In response to Paragraph L of the Complaint, Defendants state that the Disposal

Agreement and the North Dakota Administrative Code speak for themselves. Defendants admit

that HESI employees often had to sign waste manifests on behalf of MWT, which MWT was aware

of and consented to, because there were no MWT employees available due to lack of staffing and

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because the pyrolysis machine was constantly breaking down, requiring attention. Defendants

deny any and all remaining allegations in Paragraph L of the Complaint.

[¶53] Defendants deny the allegations in Paragraph LI of the Complaint.

[¶54] Defendants deny the allegations in Paragraph LII of the Complaint.

[¶55] In response to the allegations in Paragraph LIII of the Complaint, Defendants admit

a HESI employee entered the Fargo facility and, while there, documented the unsafe conditions

therein. Defendants deny the remaining allegations in Paragraph LIII the Complaint.

[¶56] In response to Paragraph LIV of the Complaint, Defendants admit that HESI

employees entered the Fargo facility on March 8, 2023 to remove and immediately destroy waste

that MWT had failed to dispose of. Defendants deny the remaining allegations in Paragraph LIV

of the Complaint.

[¶57] In response to Paragraph LV of the Complaint, Defendants admit that HESI

employees entered the Fargo facility on March 9, 2023 to remove and immediately destroy waste

that MWT had failed to dispose of. Defendants deny the remaining allegations in Paragraph LV of

the Complaint.

[¶58] In response to Paragraph LVI of the Complaint, Defendants admit that HESI

temporarily turned off the feed water to the boiler because MWT had rendered the overhead door

inoperable and was denying HESI employees access to its property. Defendants deny any and all

remaining allegations in Paragraph LVI of the Complaint.

[¶59] Defendants deny the allegations in Paragraph LVII of the Complaint.

[¶60] In response to Paragraph LVIII of the Complaint, Defendants state that the Disposal

Agreement speaks for itself. Defendants deny that HESI was required to make any payments to

MWT’s lender. Defendants deny the remaining allegations in Paragraph LVIII of the Complaint.

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 [¶61] In response to Paragraph LIX of the Complaint, Defendants admit that MWT issued

invoices UMB-19 and UMB-20 to HESI, and that HESI did not make payments thereon.

Defendants deny the remaining allegations in Paragraph LIX of the Complaint.

[¶62] Defendants lack information sufficient to admit or deny the allegations in Paragraph

LX of the Complaint, and therefore deny the same.

[¶63] In response to Paragraph LXI of the Complaint, Defendants state that the Disposal

Agreement, Lease Agreement, and Sanford Guaranty (as those terms are defined in the Complaint)

speak for themselves. Defendants deny the remaining allegations in Paragraph LXI of the

Complaint.

COUNT TWO
TRESPASS

[¶64] In response to the restated allegations in Paragraph LXII of the Complaint,

Defendants restate and incorporate their answers in the preceding paragraphs herein.

[¶65] Paragraph LXIII of the Complaint contains legal argument to which no response is

required. To the extent a response is required to Paragraph LXIII of the Complaint, Defendants

deny the same.

[¶66] Defendants deny the allegations in Paragraph LXIV of the Complaint.

COUNT THREE
CONVERSION

[¶67] In response to the restated allegations in Paragraph LXV of the Complaint,

Defendants restate and incorporate their answers in the preceding paragraphs herein.

[¶68] In response to Paragraph LXVI of the Complaint, Defendants admit that HESI

employees entered the Fargo facility on March 8-9, 2023 and removed waste and other HESI-

owned property. Defendants further state that the Disposal Agreement speaks for itself. Defendants

deny any and all remaining allegations in Paragraph LXVI of the Complaint.

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 [¶69] Defendants deny the allegations in Paragraph LXVII of the Complaint.

[¶70] Paragraph LXVIII of the Complaint contains legal argument to which no response

is required. To the extent a response is required to Paragraph LXVIII of the Complaint, Defendants

deny the same.

COUNT FOUR
DECLARATORY JUDGMENT

[¶71] In response to the restated allegations in Paragraph LXIX of the Complaint,

Defendants restate and incorporate their answers in the preceding paragraphs herein.

[¶72] Defendants deny the allegations in Paragraph LXX of the Complaint.

AFFIRMATIVE DEFENSES

[¶73] Plaintiff has failed to state a claim upon which relief can be granted.

[¶74] Plaintiff’s claims are barred by the doctrines of unclean hands and bad faith.

[¶75] Plaintiff’s claims are barred by its consent to Defendants’ actions.

[¶76] Plaintiff’s claims are barred by its abandonment of the property.

[¶77] Plaintiff’s claims are barred by its own fraud.

[¶78] Plaintiff’s claims are barred, in whole or in part, by the doctrines of wavier,

estoppel, laches, and in pari delicto.

[¶79] Plaintiff’s claims are barred, in whole or in part, because Defendants have

committed no acts or omissions causing damage to Plaintiff.

[¶80] Defendants are not liable to Plaintiff by reason of compliance with applicable

statutes, laws, regulations, and guidelines.

[¶81] Plaintiff’s claims are barred, in whole or in part, because of Plaintiff’s anticipatory

and/or prior material breach of Plaintiff’s contracts with Defendants.

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 [¶82] Plaintiff has failed to mitigate damages, if any, and any recovery by Plaintiff must

be reduced or barred by reason thereof.

[¶83] Plaintiff’s alleged damages are speculative or uncertain and, therefore, not

compensable in whole or in part.

[¶84] Plaintiff’s claims are barred, in whole or in part, because any damages of Plaintiff

must be off-set against Plaintiff’s liabilities to Defendants.

[¶85] Defendants reserve the right to amend or supplement their Answer, and to raise

additional affirmative defenses, as and when facts or circumstances are disclosed that would make

any such defense applicable.

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 COUNTERCLAIM AND THIRD-PARTY COMPLAINT

[¶86] For its Counterclaim against Plaintiff MWT ND, LP (“MWT”) and Third-Party

Complaint against Third-Party Defendant David Cardenas, Defendant and Third-Party Plaintiff

Healthcare Environmental Services, LLC (“HESI”) states and alleges as follows:

INTRODUCTION

[¶87] MWT is a supposed medical waste disposal company that did not and could not

dispose of or process waste. Although MWT had represented to HESI that its allegedly-innovative

pyrolysis technology could easily manage HESI’s processing needs (and the needs of others),

MWT’s failure to perform its obligations resulted in mountains of waste accumulating at MWT’s

facility in Fargo, as well as a HESI-owned facility in Valley City, North Dakota.

[¶88] After HESI notified MWT that it was in default, MWT immediately cut all ties with

HESI and concocted outrageous claims and baseless theories that HESI was the defaulting party,

despite none of these issues having been previously brought to HESI’s attention.

[¶89] MWT never provided assurances that it would cure or could cure its failure to

properly dispose of waste, forcing HESI to take immediate steps to terminate its agreements with

MWT and to remedy a potentially serious safety hazard. Put simply, MWT failed to deliver on its

promises and allowed waste to accumulate for months in and around HESI’s facilities. HESI was

left with no choice but to make immediate, alternative arrangements to ensure proper disposal of

the waste that MWT failed to destroy.

THE PARTIES

[¶90] Defendant Healthcare Environmental Services, LLC is a North Dakota limited

liability company with a principal place of business located at 801 Broadway North, Fargo, ND

58122. HESI provides disposal services for medical waste, sharps, and pharmaceutical items;

compliance training; and document management services.

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 [¶91] Plaintiff MWT ND, LP is a Delaware limited partnership with its principal place of

business located at 8235 Douglas Ave., Suite 720, Dallas, TX 75225. MWT is an affiliate of

Monarch Waste Technologies.

[¶92] Upon information and belief, Third-Party Defendant David Cardenas is the

principal and owner of MWT and a resident of the State of Texas. Cardenas has made several trips

to North Dakota in connection with MWT’s facility in North Dakota and the agreements between

MWT and HESI, discussed in further detail below.

FACTS

A. MWT Agreed To Handle All of HESI’s Medical Waste.

[¶93] In 2019, HESI began discussions with MWT to build out and operate a facility on

HESI-owned land in Fargo to process waste delivered by HESI (the “Fargo Facility”).

[¶94] Cardenas was the key individual involved in negotiating with HESI on behalf of

MWT. During these discussions, Cardenas represented that MWT would build an innovative

pyrolysis waste decomposition/destruction system in Fargo and that MWT could easily handle

HESI’s waste management needs. Cardenas also represented that MWT could process most or all

of HESI’s “red bag” (biohazardous) waste, which represents the vast majority of HESI’s waste.

[¶95] Based on these representations, HESI and MWT reached an agreement by which

MWT would build out the Fargo Facility on land owned by HESI to MWT’s requested

configuration in exchange for a ten-year contract to dispose of certain medical waste delivered by

HESI. The agreement is memorialized in a Medical Waste Treatment and Disposal Agreement

(“Disposal Agreement”) and a Commercial Building Lease Agreement (“Lease Agreement”), both

dated September 9, 2020 (collectively, the “Agreements”). Cardenas signed the Agreements on

behalf of MWT.

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 [¶96] The Disposal Agreement defines “Medical Waste” or “Waste” as “infectious, bio

hazardous regulated medical waste.” Exhibit B to the Disposal Agreement identifies the following

categories of Waste: “Chemotherapy,” “Pathology,” “Pharmaceuticals (Non-Haz),” and “Red-

bag.” The Waste Acceptance Protocol attached as Exhibit A to the Disposal Agreement further

states that MWT’s pyrolysis system can accept “Chemotherapy waste, pathological waste (defined

as: human organs, body parts, and surgical specimens), contaminated parts/tissues, and other

biohazardous waste/sharps.”

[¶97] MWT’s obligations pursuant to Section 3 of the Disposal Agreement included the

following:

(a) MWT shall, in compliance with all applicable laws, rules, and regulations,
treat, destroy and dispose, . . . all Waste delivered to MWT. With respect to
any hazardous waste disposal manifests generated from MWT’s operations,
MWT shall be identified as the generator thereof. MWT employees shall be
trained in the proper handling and documentation procedures for such
Waste . . . .
....
(d) MWT shall assume responsibility for Waste delivered after said Waste is
unloaded, accepted, and received within the Facility.

(e) . . . MWT shall prioritize the processing of Customer Waste at the North
Dakota Facility before other MWT clients. In the event that the North
Dakota Facility is not operational, or Customer Waste exceeds MWT's
capacity, at any time, MWT shall be solely responsible to find suitable
methods of destruction or the transportation of all Medical Waste delivered
by Customer to the North Dakota Facility . . . .

[¶98] The Waste Acceptance Protocol further provides that waste delivered to MWT

“should be maintained in the facility in designated accumulation area which is secured from all

unauthorized persons, marked with signs and protected from animals, rodents, insects and natural

elements.”

[¶99] The Lease Agreement required MWT to keep its “Tenant Improvements [and]

Tenant Systems” (which included the pyrolysis system) “in good order, condition, and repair.”

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 [¶100] The Lease Agreement also placed certain environmental obligations on MWT:

 MWT “shall dispose or discharge any waste generated from the Permitted
Use in compliance with all applicable laws;”

 MWT “shall ensure that disposal occurs frequently enough to prevent

unnecessary storage of such substances in or around the Leased Premises”;
and

 MWT “shall, at its own expense, abate, remedy and remove any hazardous
material discovered on the Leased Premises which was located, generated,
created, stored, treated, discharged, disposed of, allowed to escape, or
released by [MWT].”

[¶101] Among the regulations with which MWT agreed to comply was Chapter 33.1-20-

12 of the North Dakota Administrative Code, which protects the public from the safety hazards or

environmental impact of “regulated infectious waste” and includes the following provisions:

3. The handling and storage of regulated infectious waste . . . must be

conducted in a manner which minimizes exposure to employees of the waste
generator, the waste transporter, and the public.
....
5. Containers and enclosed storage areas used for regulated infectious waste
must be . . . maintained in good repair and in a manner as necessary to
prevent litter, nuisances, odors, insect breeding, and rodents.
....
14. The owner or operator of a permitted regulated infectious waste treatment
facility shall comply with these standards:

a. . . . Waste handling and storage systems must provide sufficient excess

capacity to prevent nuisances, environmental impacts, or health hazards
in the event of mechanical failure or unusual waste flows.

b. All residues must be controlled and stored in a manner that does not
constitute a fire or safety hazard or a sanitary nuisance. . . . .”

[¶102] In exchange for its disposal services, HESI agreed to pay MWT a minimum annual

payment of $963,500, plus additional amounts based on the volume of waste delivered.

[¶103] The Disposal Agreement may be terminated if one party “violates or fails to

perform any of the other conditions, covenants of [the Waste] Agreement, and such default shall

continue for thirty (30) days after written notice from the non-defaulting party.”

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 [¶104] If the Disposal Agreement is terminated, HESI may also terminate the Lease

Agreement.

B. MWT Failed To Properly Dispose of HESI’s Medical Waste and Created a Potentially
Serious Safety Hazard.

[¶105] MWT began to process HESI’s waste at the Fargo Facility on or about May 23,

2022.

[¶106] After the “go-live” date, MWT quickly became overwhelmed with the amount of

waste being delivered to the Fargo Facility, despite having previously represented that it could

easily handle the volume.

[¶107] In an attempt to help MWT meet its obligations under the Disposal Agreement and

avoid a default, HESI took the extraordinary step of allowing MWT to use its disposal facility in

Valley City, ND (the “Valley City Facility”) to manage the waste it had been unable to process at

the Fargo Facility. MWT was supposed to pay the expenses for operating the Valley City Facility,

but it never did.

[¶108] After hearing reports in early 2023 from its drivers and other employees about the

potentially unsanitary and unsafe conditions at the Fargo Facility, HESI grew concerned and

investigated the matter. HESI employees entered the facility and photographed the conditions as

they existed. Despite MWT’s unfounded accusations, HESI did not alter or “stage” any scenes,

and the videotape referenced by MWT that purportedly shows such “surreptitious activities”

actually shows nothing of the sort.

[¶109] HESI employees found the Fargo Facility overrun with waste. Much of the waste

was at least several weeks old, and some dated back months to October 2022. There was so much

waste at the facility that MWT had obtained semi-trailers to store waste outside (some of which

16
were unlocked), and HESI could no longer pull its trucks into the facility to unload new waste for

processing.

[¶110] An overwhelming stench filled the facility as a result of the accumulated waste.

MWT was forced to move waste out of the building during working hours due to the smell.

[¶111] The accumulation of waste created a potential threat to employees, transporters,

and the public, and the large quantities of excess waste created odors and potential environmental

impacts and health hazards.

[¶112] Upon information and belief, MWT was unable to keep up with the volume of waste

delivered by HESI because MWT was consistently understaffed, the disposal system was often

down and/or broken and in need of repair, and MWT lacked the correct mix of waste for the

process, among other potential failures. None of these issues, however, was HESI’s responsibility

or fault under the Disposal Agreement.

[¶113] Further, as far as HESI is aware, MWT had no formal training program for its

employees and no adequate on-site leadership. MWT never provided onsite training to HESI staff

regarding MWT’s procedures and never provided HESI with a training manual.

[¶114] Nathan Benson, a HESI waste technician, often signed many of the waste manifests,

which MWT was aware of and consented to, because MWT staff were too busy fixing the pyrolysis

machine or were too understaffed to fulfill their contractual duties. Mr. Benson also accepted and

weighed most of the waste himself even though MWT was supposed to perform those tasks. MWT

stated that “HESI needed to take care of it because MWT did not have the time or the help to have

someone at the scale.” These efforts by Mr. Benson and HESI were taken solely in an attempt to

assist and aid MWT in gaining control of a situation that was clearly beyond MWT’s promised

capabilities.

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 [¶115] HESI supervisor Chris Ackerland spoke with MWT about the lack of staff on site,

and MWT claimed that it did not need an MWT employee onsite to validate the waste.

C. MWT Defaulted on Its Obligations and HESI Terminated the Agreements.

[¶116] Concerned about the state of affairs at the Fargo Facility, on March 7, 2023, HESI

notified MWT’s director of operations, Tommy Kovatch, that HESI would begin removing more

than 20,000 pounds of medical waste from the Fargo Facility that was not being processed by

MWT, and which was impeding the delivery of new waste generated in the course of normal

operations.

[¶117] The next day, an MWT employee informed HESI that it needed to remove all of its

property from the Fargo Facility. The HESI team worked diligently to remove its property and

waste while enduring taunts and threats from MWT employees. MWT also called the Fargo Police

Department to report a “theft”—the police declined to respond.

[¶118] Late in the day on March 8, 2023, HESI sent a letter notifying MWT that it was in

default of the Disposal and Lease Agreements and demanded that MWT cure its failure to properly

dispose of HESI’s waste (the “March 8 Default Letter”). The following morning, HESI arrived to

the facility to see all of its red bins, gray garbage trucks, pallet jacks, and other equipment sitting

outside the building in the parking lot. MWT also disabled the Fargo Facility’s overhead doors so

that HESI could not remove its property, locked all of HESI’s waste manifests in the control room

office, and disabled HESI’s security cameras.

[¶119] During the negotiation to retrieve its property, HESI informed MWT staff that it

was going to shut down the feed water tank until MWT opened the doors. HESI employees

promptly restored the water line after they successfully removed their property and peacefully

exited the premises.

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 [¶120] HESI also informed MWT on March 8 that it could no longer operate the Valley

City Facility. In response, MWT employees sabotaged and damaged the Valley City Facility by

removing the keys from the trash compactor, submerging the forklift charger cord in water to

disable it, and rendering the steam sterilizer inoperable.

[¶121] After the events of March 8-9, 2023, HESI could no longer rely on MWT to act in

a civil and responsible manner, let alone properly process and dispose of HESI’s waste pursuant

to the Agreements.

[¶122] Accordingly, HESI made the reasonable and responsible decision to stop sending

MWT waste at that time. HESI also spent more than three weeks repackaging and removing 20,000

pounds of waste from the Fargo Facility and 53,000 pounds of waste from the Valley City Facility

that MWT had failed to dispose of. HESI also engaged an alternate company to handle its waste

disposal services.

[¶123] MWT provided no assurances that it had cured, or could cure, the issues discussed

in the March 8 Default Letter within 30 days of receiving the letter, or at any point. Most

importantly, MWT did not state or demonstrate that it was capable of disposing of HESI’s waste

in a timely and sanitary fashion. The fact that MWT allowed two separate facilities to become

overrun by waste demonstrates conclusively that MWT was in no position to deliver on the

services it agreed to provide in the Disposal Agreement and that it could not cure its defaults.

[¶124] Because HESI could not risk sending more waste to MWT that would not be

properly processed, HESI exercised its right to terminate the Disposal Agreement and Lease

Agreement on April 28, 2023.

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D. MWT Concocted Baseless Allegations Against HESI in Response to the Notice of
Default in an Attempt to Distract from Its Own Failures and Deceive the Public.

[¶125] Rather than respond to the issues in the March 8 Default Letter, MWT argued that

HESI had breached the Disposal Agreement and then raised allegations that had never been

previously brought to HESI’s attention. MWT’s allegations are baseless, categorically untrue, and

represent a clear attempt to deflect from its own failures and deceive the public.

[¶126] For example, MWT argues that HESI delivered unauthorized waste, including

hazardous waste and what it alleges to be a human torso. Sanford is a Level I trauma center with

a robust research and academic mission, in which physicians and residents learn procedures and

techniques using medical specimens which are donated by individuals upon their deaths, and

procured through companies licensed to provide these items to the medical community. Once a

teaching specimen’s use is completed for its educational purpose, it is packaged for sanitary

destruction as medical waste. The item alleged to be a “torso” was a partial lower body research

specimen used for resident education in hip replacement procedures. The specimen was clearly

tagged by the external procurement company as “Human Tissue for Research”, and was the type

of routine biological material inherent in a medical and teaching facility like Sanford, that MWT

guaranteed it would safely and promptly dispose of. Safe and humane disposal in this manner is

mandated by North Dakota law. MWT’s failure to not only perform its contracted duty, but to

actually twist its failures into a public allegation of wrongdoing to smear Sanford, starkly

demonstrates the bad faith with which MWT has approached this relationship.

[¶127] HESI drivers inspect each bin at the facility of origin to detect black hazardous

waste bins. In the infrequent event that black bins were discovered, HESI staff removed the black

bin and placed it on a designated shelf. HESI is aware of only one instance when it unknowingly

delivered liquid hazardous waste when a black box containing formaldehyde was mistakenly

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delivered to MWT. HESI followed protocol to return the box to its origin. MWT had never

previously alleged that HESI failed to follow proper procedures.

[¶128] MWT never rejected any waste delivered by HESI during the parties’ relationship,

nor did HESI ever receive notice from MWT or the State about nonconforming waste. In fact,

HESI created rejection slips for MWT because they did not have their own, but MWT never used

them.

[¶129] Further, MWT’s contention that HESI delivered an improper “torso” or other body

parts that were not covered by the Disposal Agreement is absolutely untrue. Indeed, MWT never

alleged the body part was improperly packaged and delivered until after it received HESI’s notice

of default. HESI also never removed body parts from the Fargo Facility, meaning that MWT must

have disposed of them (as it was required to do under the Disposal Agreement).

[¶130] MWT has also accused HESI’s drivers of not being properly trained. Contrary to

MWT’s allegations, HESI trains its drivers to open and examine each bin to ensure it does not

contain hazardous waste. HESI also trained a number of MWT staff on how to properly weigh

waste and fill out the manifest.

[¶131] MWT also alleges that HESI failed to properly package and sort its waste. HESI

sorted all waste upon delivery to the Fargo Facility into two categories: red bag/sharps waste and

incinerables. MWT was supposed to perform this work but did not do so because it was

understaffed. When an issue arose in 2022 regarding packaging of boxed waste, HESI agreed to

pay MWT additional compensation for labor associated with accommodating that request.

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 COUNT I
BREACH OF CONTRACT
(against MWT)

[¶132] HESI realleges and incorporates by reference the allegations contained in

Paragraphs [¶86]-[¶131] of its Counterclaim and Third-Party Complaint.

[¶133] The Agreements are valid and enforceable contracts between HESI and MWT.

[¶134] MWT breached the Agreements in numerous ways, including the following without

limitation:

(a) failing to dispose of HESI’s waste in a timely and sanitary manner;

(b) creating a potential health hazard for employees, transporters, and the public;

(c) creating and failing to eliminate odors, nuisances, environmental impacts, and
health hazards;

(d) failing to store waste in designated accumulation areas; instead resorting to

unsecured temporary storage;

(e) failing to identify and implement alternative means for disposing of HESI’s
waste;

(f) failing to provide adequate staffing or on-site leadership at the Fargo Facility;
and

(g) failing to implement training protocols for MWT and HESI staff.

[¶135] MWT also breached the Agreements by failing to manage the waste in compliance

with applicable laws, including without limitation Chapter 33.1-20-12 of the North Dakota

Administrative Code.

[¶136] MWT failed to cure its default within 30 days of notice thereof, which entitled HESI

to terminate the Agreements.

[¶137] HESI incurred significant expenses as a result of MWT’s breaches, including but

not limited to repackaging and transporting 73,000 pounds of waste from the Fargo and Valley

City Facilities, maintenance and operation costs related to the Fargo and Valley City facilities,

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costs associated with transitioning to an alternate waste disposal company, repairing the damage

to the Valley City Facility, lost rent profits or sale profits from the Fargo and Valley City Facilities,

and costs associated with processing categories of waste MWT failed to accept.

[¶138] As a result of MWT’s breaches, HESI is entitled to damages from MWT in an

amount to be proven at trial, together with interest, attorneys’ fees, costs, and disbursements.

COUNT II
FRAUDULENT MISREPRESENTATION
(against MWT and Cardenas)

[¶139] HESI realleges and incorporates by reference the allegations contained in

Paragraphs [¶86]-[¶138] of its Counterclaim and Third-Party Complaint.

[¶140] Prior to signing the Agreements, Cardenas, on behalf of MWT, represented and

warranted to HESI that MWT would build an innovative pyrolysis waste

destruction/decomposition system in North Dakota that could easily handle HESI’s waste

management needs, and that MWT’s system could dispose of most or all of HESI’s “red bag”

waste.

[¶141] The representations were false.

[¶142] The representations had to do with a present fact concerning MWT’s ability to

dispose of the volume of waste delivered by HESI and comply with applicable laws.

[¶143] The representations were material to HESI entering into the Agreements.

[¶144] The fact of MWT’s inability to properly dispose of HESI’s waste was known to

Cardenas and MWT at the time MWT executed the Agreements.

[¶145] Cardenas and MWT knew the representations were false, or alternatively

knowingly omitted to state material facts.

[¶146] Cardenas and MWT intended to have HESI be induced to act or justified in acting

upon its false representations.

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 [¶147] HESI was induced to execute the Agreements based upon Cardenas and MWT’s

false representations, and HESI was justified in acting upon them.

[¶148] HESI executed the Agreements in reliance upon Cardenas and MWT’s false

representations.

[¶149] As a result of Cardenas and MWT’s fraudulent misrepresentations, HESI is entitled

to rescission of the Agreements and recovery of all amounts paid to MWT, together with interest,

attorneys’ fees, costs, and disbursements.

COUNT III
DECLARATORY JUDGMENT
(against MWT)

[¶150] HESI realleges and incorporates by reference the allegations contained in

Paragraphs [¶86]-[¶149] of its Counterclaim and Third-Party Complaint.

[¶151] An actual controversy exists between HESI and MWT with respect to the rights

and obligations of HESI in light of the fact that MWT has breached the Agreements as described

in the preceding paragraphs.

[¶152] Pursuant to the North Dakota Declaratory Judgment Act, N.D.C.C. § 32-23-01 et

seq. and N.D. R. Civ. P. 57, HESI is entitled to a declaratory judgment that (1) HESI complied in

full with its obligations under the Agreements, (2) MWT has breached the Agreements, and

(3) HESI was entitled to, and did, terminate the Agreements on April 28, 2023.

COUNT IV
PROPERTY DAMAGE
(against MWT)

[¶153] HESI realleges and incorporates by reference the allegations contained in

Paragraphs [¶86]-[¶152] of its Counterclaim and Third-Party Complaint.

[¶154] In response to HESI’s notice that MWT could no longer operate the Valley City

Facility, MWT employees sabotaged and damaged the Valley City Facility by removing the keys

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from the trash compactor, submerging the forklift charger cord in water to disable it, and rendering

the steam sterilizer inoperable.

[¶155] As a result of MWT’s intentional destruction of HESI’s property, HESI is entitled

to damages from MWT in an amount to be proven at trial, together with interest, attorneys’ fees,

costs, and disbursements.

COUNT V
PROMISSORY ESTOPPEL
(against MWT)

[¶156] HESI realleges and incorporates by reference the allegations contained in

Paragraphs [¶86]-[¶155] of its Counterclaim and Third-Party Complaint.

[¶157] MWT promised HESI that it would pay all operating expenses associated with its

use of the Valley City Facility to process excess waste it was unable to process at the Fargo

Facility.

[¶158] HESI justifiably relied on MWT’s promise to pay the Valley City Facility’s

operating expenses when it permitted MWT to use that facility to dispose of waste that MWT

could not process at the Fargo Facility.

[¶159] MWT received the benefits of operating the Valley City Facility, but has not

honored its promise to pay operating expenses.

[¶160] Equity and justice require that MWT be made to honor its promise to pay the

operating expenses associated with the Valley City Facility.

[¶161] In light of the foregoing, HESI is entitled to damages in an amount to be proven at

trial, together with interest, attorneys’ fees, costs, and disbursements.

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 PRAYER FOR RELIEF

[¶162] WHEREFORE, Defendant Sanford Health and Defendant and Third-Party Plaintiff

Healthcare Environmental Services LLC request judgment in their favor and against Plaintiff

MWT ND, LP and Third-Party Defendant David Cardenas as follows:

A. Dismissal of all claims asserted by MWT against Defendants, and denial of all relief

sought by MWT, on the merits and with prejudice;

B. An award of damages to HESI in an amount to be proven at trial;

C. A declaration that (1) HESI complied in full with its obligations under the

Agreements, (2) MWT has breached the Agreements, and (3) HESI was entitled to, and did,

terminate the Agreements on April 28, 2023;

D. An award of reasonable attorneys’ fees, interest, costs, and disbursements to

Defendants to the fullest extent permitted by law; and

E. An award of such other and further relief as the Court deems just and proper.

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Dated: June 29, 2023 MASLON LLP

By: /s/Jason Lien

Jason Lien (ND #09004)
David E. Suchar (MN #392583)
(pro hac vice application forthcoming)
Jevon C. Bindman (MN #0396337)
(pro hac vice application forthcoming)
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-4140
(612) 672-8200

Email: jason.lien@maslon.com
david.suchar@maslon.com
jevon.bindman@maslon.com

ATTORNEYS FOR DEFENDANT

SANFORD HEALTH AND
DEFENDANT/THIRD-PARTY PLAINTIFF
HEALTHCARE ENVIRONMENTAL
SERVICES LLC

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