U.S. Energy Corp. v. Nukem, Inc.

• Decision Date: 24 February 2005
• Docket Number: No. 03-1444.,No. 03-1451.,03-1444.,03-1451.
• Citation: 400 F.3d 822
• Parties: U.S. ENERGY CORP., a Wyoming corporation, and Crested Corp., a Colorado corporation, d/b/a USE/CC, a joint venture, Plaintiffs-Appellees-Cross-Appellants, v. NUKEM, INC., a New York corporation, and Cycle Resource Investment Corporation, a Delaware corporation, Defendants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

400 F.3d 822

U.S. ENERGY CORP., a Wyoming corporation, and Crested Corp., a Colorado corporation, d/b/a USE/CC, a joint venture, Plaintiffs-Appellees-Cross-Appellants, v. NUKEM, INC., a New York corporation, and Cycle Resource Investment Corporation, a Delaware corporation, Defendants-Appellants-Cross-Appellees.

No. 03-1444.

No. 03-1451.

United States Court of Appeals, Tenth Circuit.

February 24, 2005.

Carolyn B. Lamm (Francis A. Vasquez, Jr., and Jonathan C. Hamilton, White & Case LLP, Washington, DC, and Frances A. Koncilja and David V. Millard, Koncilja & Associates, PC, Denver, CO, with her on the briefs), White & Case LLP, for Defendants-Appellants-Cross-Appellees.

William R. Fishman (Kenneth A.B. Roberts, Jr., Highlands Ranch, CO, with him on the briefs), Denver, CO, for Plaintiffs-Appellees-Cross-Appellants.

Before BRISCOE and MURPHY, Circuit Judges, and STEWART, District Judge.^*

BRISCOE, Circuit Judge.

This case involves a partnership dispute. Plaintiffs U.S. Energy Corporation and Crested Corporation brought this action in 1991 alleging that defendant Nukem, Inc., misappropriated partnership assets for its own benefit and to the detriment of the partnership. In 1994, the parties stipulated to binding arbitration. An arbitration panel issued an award in favor of plaintiffs in April 1996, which the panel amended in July 1996. Since then, the parties have been litigating issues related to the confirmation and enforcement of the amended arbitration award. The district court previously entered judgment in favor of plaintiffs in the amount of $15,677,535 plus interest, which was affirmed by this court. See U.S. Energy Corp. v. Nukem, Inc., 1998 WL 738336 (10th Cir. Oct.22, 1998) (Nukem I). The district court subsequently entered another judgment in favor of plaintiffs in the amount of $20,044,183. In this appeal and cross-appeal, the parties argue the district court erred in denying their respective post-judgment motions to alter or amend the $20,044,183 judgment. We have jurisdiction pursuant to 28 U.S.C. § 1291 and vacate and remand to the district court for further remand to the arbitration panel for clarification of the arbitration award.

I.

This case comes before this court for the third time. In an order and judgment disposing of Nukem's first appeal, this court set out the background facts, as follows:

Plaintiff USECC is a joint venture comprised of two uranium mining companies, Plaintiffs U.S. Energy Corp. and Crested Corp., which held several mining claims in Wyoming and a number of long-term contracts to supply uranium to utility companies. [Cycle Resource Investment Corp. ("CRIC")] is a wholly-owned subsidiary of [Defendant] Nukem[, Inc.,] formed specifically to enter into the agreements at issue in this case. On December 21, 1988, USECC and CRIC entered into a transaction for the purpose of mining uranium in Wyoming and selling it to domestic utilities. In an asset purchase agreement, USECC agreed to sell a 50% interest in its mining claims and long-term supply contracts to CRIC. In a separate partnership agreement, USECC and CRIC each agreed to make capital contributions of their one-half interest in the mining claims and supply contracts to the new partnership, Sheep Mountain Partners (hereafter "SMP"). The partnership agreement contained an arbitration clause and required SMP to enter into independent contract agreements with USECC to operate the mines and with CRIC to market the uranium produced. CRIC subsequently assigned its rights and duties under the marketing agreement to Nukem.

After USECC and CRIC entered into their partnership agreement, Nukem negotiated uranium importation contracts with the Commonwealth of Independent States (hereafter "CIS"), whose members include Uzbekistan, Kazakhstan and Kirgizstan. In order to prevent members of the CIS from dumping uranium in the United States at prices below fair market value, the United States had imposed a tariff in excess of 100% of the value of the imported CIS uranium. The United States, however, agreed to permit some shipment of CIS uranium into the United States without tariff if the purchaser had a long-term utility supply contract executed prior to March 5, 1992. If a supply contract met this requirement, the contract was considered "grandfathered." Acting in its own right, Nukem subsequently submitted utility supply contracts to the U.S. Department of Commerce for grandfathering. These contracts included five supply contracts owned by SMP. The grandfathering of the contracts allowed Nukem to purchase CIS uranium in amounts necessary to meet the delivery requirements of those utility supply contracts. Nukem did not, however, supply the CIS uranium to SMP to satisfy the five utility supply contracts' requirements, but instead sold the uranium to other buyers. As a result, SMP purchased uranium from other suppliers at higher prices to meet its contractual obligations.

From these and other transactions, numerous disputes arose among the parties. In 1991, Plaintiffs filed this action in the district court. In 1994, the parties stipulated to binding arbitration. The parties raised more than 33 claims before the arbitration panel. One of those claims involved the CIS uranium contracts. Plaintiffs argued that by entering into CIS contracts on its own account, Nukem violated the marketing and partnership agreements. Plaintiffs also argued that Nukem improperly used the five SMP utility supply contracts to avoid the tariff on the CIS uranium.

The arbitration panel conducted a 73-day hearing and issued a written "Arbitration Order and Award" on April 18, 1996. The arbitration panel rejected the claim that Nukem violated the marketing and partnership agreements by entering into the CIS contracts. In regard to the five SMP utility supply contracts, the arbitration panel concluded that "Nukem without authority and without SMP's permission or consent used the SMP uranium supply contracts, which were partnership assets, to obtain purchase rights for CIS" uranium. The panel further found that "the uranium should have been made available to SMP to meet deliveries required by SMP's grandfathered supply contracts." As a result of Nukem's conduct, the panel impressed a constructive trust in favor of SMP over "those purchase rights, the uranium acquired pursuant to those rights and the profits therefrom...." The panel also determined that as a result of Nukem's conduct regarding the five supply contracts, SMP suffered damages in the amount of $31,355,070 and awarded Plaintiffs, as holders of a 50% interest in SMP, half that amount or $15,677,535 plus interest.

On July 3, 1996, in response to motions by Defendants, the panel amended the arbitration award to clarify the order and correct errors. On November 4, 1996, the district court entered an order and judgment confirming the arbitration award. The district court subsequently amended the order and judgment on March 11, 1997 and June 27, 1997.

U.S. Energy Corp. v. Nukem, Inc., Nos. 96-1532, 97-1332, 1998 WL 738336 (10th Cir. Oct.22, 1998) (unpublished) ("Nukem I").

Paragraph 163 of the Arbitration Award has been at the center of much of the controversy in this case. In paragraph 163, the arbitration panel stated:

It is clear that Nukem without authority and without SMP's permission or consent used the SMP uranium supply contracts to obtain purchase rights for CIS [uranium]. Since the rights to purchase the CIS uranium were obtained through the use of SMP contracts (partnership assets), those purchase rights, the uranium acquired pursuant to those rights and the profits therefrom are impressed with a constructive trust in favor of SMP, and we conclude that SMP is entitled to damages in the amount of $31,355,070 [half payable to Plaintiffs] to compensate it for its past and future lost profits. The uranium should have been made available to SMP to meet deliveries required by SMP's grandfathered supply contracts. We enter awards for those past and future profits denied to the partnership, together with statutory interest at 8% per annum. The relevant amounts are as follows:

                Gross Present Value
                Contract Profits to June 30, 1995
                Duke Power       $4,860,000         $ 5,543,433
                IPC              12,048,414          11,843,232
                TUCO              3,079,000           2,779,727
                BECO              2,383,950           2,298,050
                PSE & G           9,487,050           8,899,628
                                ___________         ___________
                Total:          $31,858,414         $31,355,070
                

Aplt.App. Vol. I, Doc. 7 at 209-10 (emphasis added).

As suggested by paragraph 163, there are two sets of contracts at issue: (1) SMP's five "grandfathered" contracts to supply uranium to certain domestic utility companies, and (2) four contracts entered into, by Nukem, with CIS countries¹ to buy uranium. It appears from the district court's judgment that the district court concluded the latter set of contracts were somehow obtained by Nukem through the misappropriation of the former set of contracts.

The connection between the SMP supply contracts and the CIS uranium purchase contracts is somewhat tenuous. On appeal, Nukem denies that there is any evidence establishing a connection between the SMP supply contracts and the CIS purchase contracts. In fact, however, the arbitration panel heard the testimony of Mr. Ronald Witzel, an expert introduced by U.S. Energy. Among other things, Witzel testified that Nukem could not have obtained the CIS contracts without the existing SMP supply contracts. Aplee. Supp.App. Vol. I, Doc. 6 at 114. Plaintiffs contend that the arbitration panel adopted Witzel's testimony on this issue, Aplee. Br. at 13, but they have not directed this court's attention to any indication in the record that the arbitration panel officially "adopted" Witzel's testimony regarding the connection between the SMP supply contracts and the CIS purchase contracts. The arbitration panel did, however, state that the ...