Northern Indiana Public Service Co. v. Carbon County Coal Co.

• Decision Date: 13 August 1986
• Docket Number: 86-1069,86-1074 and 86-1575,Nos. 85-2110,s. 85-2110
• Citation: 1 UCC Rep.Serv.2d 1505,799 F.2d 265
• Parties: 1 UCC Rep.Serv.2d 1505 NORTHERN INDIANA PUBLIC SERVICE COMPANY, an Indiana corporation, Plaintiff-Appellant, v. CARBON COUNTY COAL COMPANY, a partnership, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 265

799 F.2d 265

1 UCC Rep.Serv.2d 1505

NORTHERN INDIANA PUBLIC SERVICE COMPANY, an Indiana corporation, Plaintiff-Appellant, v. CARBON COUNTY COAL COMPANY, a partnership, Defendant-Appellee.

Nos. 85-2110, 86-1069, 86-1074 and 86-1575.

United States Court of Appeals Seventh Circuit.

Argued June 6, 1986.

Decided Aug. 13, 1986.

Joseph R. Lundy, Schiff, Hardin & Waite, Chicago, Ill., for plaintiff-appellant.

Terry M. Grimm, Winston & Strawn, Chicago, Ill., for defendant-appellee.

Before POSNER and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

POSNER, Circuit Judge.

These appeals bring before us various facets of a dispute between Northern Indiana Public Service Company (NIPSCO), an electric utility in Indiana, and Carbon County Coal Company, a partnership that until recently owned and operated a coal mine in Wyoming. In 1978 NIPSCO and Carbon County signed a contract whereby Carbon County agreed to sell and NIPSCO to buy approximately 1.5 million tons of coal every year for 20 years, at a price of $24 a ton subject to various provisions for escalation which by 1985 had driven the price up to $44 a ton.

NIPSCO's rates are regulated by the Indiana Public Service Commission. In 1983 NIPSCO requested permission to raise its rates to reflect increased fuel charges. Some customers of NIPSCO opposed the increase on the ground that NIPSCO could reduce its overall costs by buying more electrical power from neighboring utilities for resale to its customers and producing less of its own power. Although the Commission granted the requested increase, it directed NIPSCO, in orders issued in December 1983 and February 1984 (the "economy purchase orders"), to make a good faith effort to find, and wherever possible buy from, utilities that would sell electricity to it at prices lower than its costs of internal generation. The Commission added ominously that "the adverse effects of entering into long-term coal supply contracts which do not allow for renegotiation and are not requirement contracts, is a burden which must rest squarely on the shoulders of NIPSCO management." Actually the contract with Carbon County did provide for renegotiation of the contract price--but one-way renegotiation in favor of Carbon County; the price fixed in the contract (as adjusted from time to time in accordance with the escalator provisions) was a floor. And the contract was indeed not a requirements contract: it specified the exact amount of coal that NIPSCO must take over the 20 years during which the contract was to remain in effect. NIPSCO was eager to have an assured supply of low-sulphur coal and was therefore willing to guarantee both price and quantity.

Unfortunately for NIPSCO, as things turned out it was indeed able to buy electricity at prices below the costs of generating electricity from coal bought under the contract with Carbon County; and because of the "economy purchase orders," of which it had not sought judicial review, NIPSCO could not expect to be allowed by the Public Service Commission to recover in its electrical rates the costs of buying coal from Carbon County. NIPSCO therefore decided to stop accepting coal deliveries from Carbon County, at least for the time being; and on April 24, 1985, it brought this diversity suit against Carbon County in a federal district court in Indiana, seeking a declaration that it was excused from its obligations under the contract either permanently or at least until the economy purchase orders ceased preventing it from passing on the costs of the contract to its ratepayers. In support of this position it argued that the contract violated section 2(c) of the Mineral Lands Leasing Act of 1920, 30 U.S.C. Sec. 202, because of Carbon County's affiliation with a railroad (Union Pacific), and that in any event NIPSCO's performance was excused or suspended--either under the contract's force majeure clause or under the doctrines of frustration or impossibility--by reason of the economy purchase orders.

On May 17, 1985, Carbon County counterclaimed for breach of contract and moved for a preliminary injunction requiring NIPSCO to continue taking delivery under the contract. On June 19, 1985, the district judge granted the preliminary injunction, from which NIPSCO has appealed. Also on June 19, rejecting NIPSCO's argument that it needed more time for pretrial discovery and other trial preparations, the judge scheduled the trial to begin on August 26, 1985. Trial did begin then, lasted for six weeks, and resulted in a jury verdict for Carbon County of $181 million. The judge entered judgment in accordance with the verdict, rejecting Carbon County's argument that in lieu of damages it should get an order of specific performance requiring NIPSCO to comply with the contract. Upon entering the final judgment the district judge dissolved the preliminary injunction, and shortly afterward the mine--whose only customer was NIPSCO--shut down. NIPSCO has appealed from the damage judgment, and Carbon County from the denial of specific performance and from the district judge's order staying execution of the damage judgment without requiring NIPSCO to post a bond guaranteeing payment of the judgment should NIPSCO lose on appeal.

NIPSCO's appeal from the grant of the preliminary injunction is moot, the injunction having been dissolved last October when the final judgment was entered. Lifting a preliminary injunction does not always make an appeal from the grant of the injunction moot; if the injunction was improper, the defendant may be entitled to damages. See Fed.R.Civ.P. 65(c); Coyne-Delany Co. v. Capital Development Bd., 717 F.2d 385 (7th Cir.1983). But all that NIPSCO is asking for in appealing from the grant of the preliminary injunction is that the injunction be dissolved, and that request is moot. Later we shall see that another issue in the case, relating to the judge's instructions to the jury on force majeure, is also moot.

We are left with the following issues to decide: (1) whether the district judge abused his discretion in refusing to give NIPSCO more time to prepare for trial, (2) whether the contract was unenforceable as a violation of the Mineral Lands Leasing Act, (3) whether NIPSCO's obligations under the contract were excused or suspended by virtue of either the force majeure clause or (4) the doctrines of frustration or impracticability, (5) whether Carbon County was entitled to specific performance of the contract, and (6) whether NIPSCO should be required to post a bond in order to be allowed to stave off the execution of the damage judgment until the appellate process is over.

1. When he issued the preliminary injunction, two months into the case, the district judge scheduled the trial to begin in two months. This was a tight deadline for the completion of pretrial discovery, though NIPSCO is wrong to argue that it violates a local rule of the Northern District of Indiana. Rule 12(d) provides that "in all civil cases except in patent, antitrust, and trade-mark cases, all discovery shall be completed within five months after the case is at issue." Five months is the maximum, not the minimum. With somewhat greater force NIPSCO argues that this case is extraordinary, even though it is not a patent, antitrust, or trademark case. Although the issues are no more complex than they would be if the contract had been for $1 million rather than $1 billion (the estimated amount that NIPSCO would have owed over the life of the contract if the contract had not been cancelled), the large stakes justified a more careful and thorough preparation than if the stakes had been smaller: the consequences of an erroneous judgment were greater, so the optimal expenditure on avoiding error was greater. NIPSCO particularly complains about its inability to conduct thorough discovery of Carbon County's relationship to the Union Pacific Railroad--a relationship that as we shall see is the basis of NIPSCO's defense based on the Mineral Lands Leasing Act--and of Carbon County's theory of damages. And the only reason the district judge gave for drastically compressing the pretrial period was that his criminal trial calendar was so crowded (with cases not deferrable, because of the requirements of the Speedy Trial Act) that if he did not try the case in August 1985 he would have to put it over to April 1986--which still would have been only a year after the complaint was filed.

Nevertheless we do not think the district judge abused his discretion in refusing to postpone the trial. Matters of trial management are for the district judge; we intervene only when it is apparent that the judge has acted unreasonably. The occasions for intervention are rare. At a time when a combination of very heavy caseloads with the pressure exerted by the Speedy Trial Act to take criminal cases out of order and try them first makes managing federal district courts' dockets trickier than ever before, district judges must be allowed considerable leeway in scheduling civil cases, and therefore in denying continuances that would disrupt their schedules. Afram Export Corp. v. Metallurgiki Halyps, S.A., 772 F.2d 1358, 1366 (7th Cir.1985); see also Fontenot v. Upjohn Co., 780 F.2d 1190, 1193 (5th Cir.1986); cf. Kagan v. Caterpillar Tractor Co., 795 F.2d 601, 608-09 (7th Cir.1986).

Of course some cases are so immense that it would be unrealistic to insist on trial after only two months for pretrial discovery, or even to insist on rigid adherence to deadlines in local rules. But this is not such a case. To begin with, the two-month figure is misleading. NIPSCO had decided in 1984 to stop accepting coal deliveries from Carbon County and had retained late in that year--nine months or more before the trial began--the large Chicago law firm that would later conduct the trial with the help of the much smaller Indiana firm that is NIPSCO's regular counsel. The Chicago firm has between 40 and 50 lawyers in its trial...