Hoke Co., Inc. v. Tennessee Valley Authority

Citation661 F. Supp. 740
Decision Date19 February 1987
Docket NumberCiv. A. No. C83-0186 P(J).
PartiesThe HOKE COMPANY, INC., and Alley-Cassetty Coal Company, Plaintiffs, v. TENNESSEE VALLEY AUTHORITY, et al., Defendants.
CourtUnited States District Courts. 6th Circuit. United States District Court of Western District of Kentucky

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Harold T. Hurt, Richard W. Jones, Hurt, Haverstock & Jones, Murray, Ky., for plaintiffs.

Edward S. Christenbury, Gen. Counsel, TVA, Knoxville, Tenn., James E. Fox, Deputy

Gen. Counsel, Robert C. Glinski, Melvin L. Harper, for defendant TVA.

MEMORANDUM

JOHNSTONE, Chief Judge.

This matter is before the Court on Defendant Tennessee Valley Authority's Motion to Dismiss or in the Alternative or Summary Judgment. This is an action for breach of an implied contract, or in promissory estoppel; for violation of 16 U.S.C. § 831h; violation of § 9(b) of the TVA Act; violation of TVA procurement regulations; for breach of public policy; and violation of the equal protection clause of the fifth amendment and the first amendment to the constitution. Jurisdiction is asserted under 28 U.S.C. §§ 1331 and 1332.

FACTS

This action arises from unsuccessful contract negotiations between TVA and Hoke for the purchase of coal by TVA. In October of 1981, TVA solicited offers for contracts to supply coal to the Paradise Steam Generation Plant near Drakesboro, Kentucky. In accordance with TVA's procurement policies, offers were solicited by issuance of a document titled "Requisition 62." Requisition 62 was a solicitation for a negotiated procurement rather than a competitive bid procurement. In this type of solicitation, contracts for coal are awarded on the basis of a bid arrived at after negotiations between the offerors and TVA and not as a result of a competitive bidding process. Final award of the contract was subject to approval by the TVA Board.

Among the bidders on Requisition 62 was The Hoke Company (hereinafter Hoke), a nonunion coal producer. Hoke prepared and submitted an offer of coal at $1.3022 per million BTU to TVA. This proposal apparently preliminarily satisfied the requirements and specifications set forth by TVA in Requisition 62, and thereafter, TVA entered into negotiations with Hoke. During these negotiations, Hoke claims that it raised the question of whether its nonunion status would affect TVA's consideration of Hoke's offer. Hoke claims that it informed TVA officials at that time that it did not wish to continue in the negotiations if TVA was only going to award the contract to a union producer. At each negotiation meeting, Hoke claims that it was assured by TVA officials that the contract award would not be affected by the labor affiliation or non-affiliation of the producers.

In June of 1984, the TVA staff recommended acceptance of Hoke's bid and two other low bids to the TVA Board of Directors. On June 29, 1984, the TVA Board of Directors held a closed "agenda meeting." At this meeting, TVA Board members considered the agenda for its upcoming public meeting scheduled July 17, 1982. The agenda for that meeting included the recommendation to accept Hoke's offer. After some deliberation, the Board decided to remove the recommendation from the agenda and directed the TVA staff to reconsider the amount of coal solicited in light of TVA's coal requirements.

The TVA staff sent a revised recommendation to the Board on July 8, 1982, recommending acceptance of only AMCA Resources, Inc.'s (AMCA's) offer under Requisition 62. AMCA, a union producer, was the lowest bidder under Requisition 62, offering to sell coal to TVA at a price of $1.1962 per million BTU. The Board approved the award of the contract to AMCA at its July 20, 1982 meeting. TVA informed Hoke of its decision by letter dated September 14, 1982.

Hoke claims that TVA rejected Hoke's bid because it is a non-union coal producer and TVA had a history of violence and other difficulties with deliveries of non-union coal at its Paradise generator. TVA claims on the other hand that TVA rejected Hoke's offer because the Board reassessed its future coal needs and revised its needs downward because of a decline in consumer demand.

COMMON LAW CLAIMS

In its original Complaint, Hoke asked for specific performance of an implied contract with TVA to sell and deliver coal to the Paradise Steam Plant.1 Hoke claimed that this contract was formed during Hoke's negotiations with TVA and that TVA's refusal to accept Hoke's offer on allegedly improper grounds was a breach of that contract. Hoke revised this argument in its Brief in Opposition to Defendant Tennessee Valley Authority's Motion to Dismiss to instead assert that Hoke and TVA's negotiations had resulted in the formation of a "preliminary contract" between Hoke and TVA.2

Under its "preliminary contract" theory, Hoke claims that TVA's assurances that Hoke's nonunion status would not affect TVA's contract award constituted a promise on the part of TVA to consider factors other than union status in TVA's decision process. In return for this promise, TVA allegedly sought to have Hoke continue negotiating with TVA. Continuation in the negotiations entailed substantial work and expense on Hoke's part refining its offer and purchasing coal reserves. Hoke claims that it continued negotiations, but that TVA considered Hoke's nonunion status in reaching its decision, thereby breaching the alleged "preliminary contract."

Alternatively, Hoke claims that TVA's assurances constituted a promise or promises, and that Hoke justifiably relied upon these promises to its detriment. Hoke now claims damages in quasi-contract under a theory of promissory estoppel. Hoke also claims that TVA's actions in the face of its assurances constituted a violation of public policy, for which Hoke should also be recompensed.

"Preliminary Contract"

Hoke's contract claims3 center around the authority of the TVA officials with whom Hoke negotiated. The controlling question therefore is whether these TVA officials had the power to enter into the alleged "preliminary contract" which Hoke sues upon here.

It is axiomatic that an agent may contractually bind his principal only if the principal has actually, impliedly or apparently delegated that agent the authority to do so. In the present case, it is undisputed4 that any offer for a contract under Requisition 62 had to be given final approval by the TVA Board of Directors.5 Hoke has not directed the Court to any actual delegation of authority to bind the TVA Board as to the exercise of its discretion in accepting bids under Requisition 62. Nor has Hoke alleged any action by TVA or the TVA officials with whom Hoke dealt which would support a claim of implied or apparent authority in light of the known limitations of TVA officials' authority. Indeed, Hoke has not specified which TVA officials made the "promises" which formed the basis of the alleged "preliminary contract."

Nothing in this case's voluminous record indicates that the TVA officials negotiating with Hoke had the authority to bind the TVA Board in the exercise of the power vested exclusively in the Board to accept or reject contract offers of the magnitude of Hoke's offer. Hoke's pleadings and supporting documents in this case are inadequate in that they offer no more than the general conclusory allegation that TVA's representatives were "authorized." While such allegations may have been sufficient to state a claim in Hoke's initial Complaint, something more was required when faced with a Motion for Summary Judgment. Fed.R.Civ.P. 56(e). See Felix v. Young, 536 F.2d 1126, 1134-35 (6th Cir.1976).

TVA raised the issue of the extent of the TVA officials' authority in its Brief in support of its Motion to Dismiss or in the Alternative for Summary Judgment. In response, Hoke has offered no Affidavits or other proof that the officials with whom it dealt had the authority to enter into the alleged "preliminary contract." This Court is aware that Hoke is under the discovery restrictions of the Court's Protective Order entered August 21, 1984. However, that Order did not preclude Hoke from discovering any actions by the Board which would have actually or impliedly delegated authority to TVA's negotiating officials. Neither Hoke's representatives nor the officials who negotiated on TVA's behalf were protected by the Court's Order. Presumably these persons have knowledge of facts establishing an actual, apparent or implied delegation of authority. Hoke has not directed this Court to any affidavits or testimony of these persons reflecting any special authority on the part of TVA's officials.

To this date, Hoke has not supported its allegations of authority on the part of TVA's agents in the face of TVA's evidence to the contrary. Thus there is no genuinely disputed issue of fact on this matter. The Court must conclude that any representations made by TVA officials during the course of their negotiations with Hoke as to how the Board would decide to accept or reject Hoke's offer were beyond the authority of those agents.

As a matter of law, TVA, a wholly government owned corporation, acting as an agency of the federal government, cannot be contractually bound by representations of an employee made without actual authority. See, e.g., Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383-85, 68 S.Ct. 1, 2-4, 92 L.Ed. 10 (1947); McCauley v. Thygerson, 732 F.2d 978, 981 (D.C.Cir. 1984); Empire-Detroit Steel Div. v. Occupational Safety & Health Review Comm'n, 579 F.2d 378, 382-3 (6th Cir. 1978).

There is no genuine issue of material fact in dispute as to Hoke's "preliminary contract" claim, and judgment is appropriate as a matter of law. This Court shall therefore grant TVA's Motion for Summary Judgment on this claim.

Promissory Estoppel

Hoke claims that the representations of TVA officials concerning Hoke's nonunion status constituted a promise upon which Hoke relied to its detriment such that Hoke should now be allowed recovery under the theory of promissory...

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