Bill's Coal Co., Inc. v. Board of Public Utilities of Springfield, Mo.

Decision Date06 October 1989
Docket Number87-1719,Nos. 87-1716,s. 87-1716
Citation887 F.2d 242
Parties9 UCC Rep.Serv.2d 1238 BILL'S COAL COMPANY, INC., a corporation; William D. Patch; Savanna Lee Patch; Lloyd F. Burkdoll; Anna Faye Burkdoll; John E. Burkdoll; Virginia L. Burkdoll, and all the general partners of and d/b/a Cherokee Coal Company, a general partnership, Plaintiff-Appellants/Cross-Appellees, v. BOARD OF PUBLIC UTILITIES OF SPRINGFIELD, MISSOURI d/b/a City Utilities, and City of Springfield, Missouri, Defendants-Appellees/Cross-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

George P. Coughlin (Paul Scott Kelly, Jr., with him on the briefs), of Gage & Tucker, Kansas City, Mo., for plaintiffs-appellants/cross-appellees.

Mark E. Gardner of Hall, Ansley, Carmichael & Gardner, Springfield, Mo. (Randell D. Wallace of Hall, Ansley, Carmichael & Gardner, Springfield, Mo., Stan P. Doyle of Doyle & Harris, Tulsa, Okl., and Turner White, III, Springfield, Mo., with him on the briefs), for defendants-appellees/cross-appellants.

Before McKAY, LOGAN, and TACHA, Circuit Judges.

McKAY, Circuit Judge.

This diversity case involves a contract dispute between the Board of Public Utilities of Springfield, Missouri d/b/a City Utilities and the City of Springfield, Missouri (collectively the "purchaser"), and Bill's Coal Company, Inc. and Cherokee Coal Co. (collectively the "sellers"). The long, tortured, procedural history of this case is recounted in our prior opinion, Bill's Coal Co. v. Board of Public Utilities of Springfield, 682 F.2d 883, 883-85 (10th Cir.1982), cert. denied, 459 U.S. 1171, 103 S.Ct. 816, 74 L.Ed.2d 1014 (1983). A brief reprise of pertinent facts provides the setting for this appeal.

In 1970, Bill's Coal agreed to supply purchaser with its coal requirements on a cost-plus basis through 1980 and possibly beyond. The coal contract was assigned to Cherokee Coal in 1976, although Bill's Coal continued to operate the mines. In 1978 spot coal prices began to drop and the relationship between the parties deteriorated. After the parties were unable to resolve a dispute involving the administration of the contract's cost-plus features, purchaser filed suit against sellers, seeking a declaration as to the propriety of their disallowance of certain cost and expense items.

Ultimately, purchaser questioned the legality of the coal contract, withheld payments to sellers, and stopped taking deliveries of coal. However, sellers obtained a preliminary injunction requiring purchaser to perform the contract. Before a hearing on purchaser's motion to dissolve the injunction, the parties settled. The settlement was in the form of a final amendment to the contract, executed in 1979 (hereinafter the "1979 amendment"). The 1979 amendment shortened the contract from 1989 to 1985. In addition, the 1979 amendment created a termination clause in the contract. If any noncontract company was able to meet the contract specifications and submit a bid fifteen to twenty-five percent under sellers' price, purchaser could end the contract before 1985. Pursuant to this clause, purchaser attempted to terminate the contract in 1980, 1981, and 1982.

In March of 1980 purchaser sought a declaratory judgment of nonliability in the federal district court of Missouri with respect to its 1980 termination. Sellers filed suit in the federal district court of Oklahoma claiming purchaser breached and repudiated the contract in 1980 through wrongful termination. Sellers were granted a preliminary injunction by the Oklahoma court, requiring purchaser to perform the contract pending litigation. After the Oklahoma court issued the preliminary injunction, it transferred sellers' action to the Missouri court (where purchaser's action was pending). In December of 1980, the Missouri court transferred both cases back to Oklahoma where they were consolidated for all purposes (the "1980 case"). The parties submitted the 1980 case to the Oklahoma court, without a jury, in three phases. Phase I involved the interpretation of the 1979 Amendment to the coal contract. Phase II involved breach and liability issues. Phase III involved damages.

In Phase II purchaser sought a declaration that it had properly terminated the contract by contracting with a qualified bidder in each of the years 1980, 1981, and 1982. Purchaser also sought to cancel the contract because of sellers' breach, repudiation, and "bad faith." The district court, in its Phase II ruling, held that sellers had breached and anticipatorily repudiated the contract. Based on that conclusion, injunctive relief in the 1980 case was dissolved. Sellers filed an immediate appeal to this court from the dissolution ruling. This court stayed the district court's order dissolving injunctive relief pending the appeal. Bill's Coal Co., 682 F.2d 883. We found the district court erred in its conclusions of law in its Phase II opinion and ordered the injunction reinstated. Id. at 886. The case was remanded to determine sellers' damages. We expressed no view on the trial court's other rulings in Phase I or II.

On remand, the district court applied Missouri law to defeat an award of attorney's fees, applied Uniform Commercial Code (UCC) Sec. 2-708(1) to measure damages by the difference between the contract price and the market price at the time and place of tender, and denied interest charges and other expenses to sellers under UCC Sec. 2-710. The court also denied reimbursement for purchaser's BTU adjustments and for the mistake in overpayment of depreciation credit.

Sellers now appeal the district court's refusal to apply the lost profit damage measure of section 2-708(2), the district court's application of Missouri law to defeat an award of attorney's fees, and the court's denial of interest charges and other expenses under UCC Sec. 2-710. Sellers also appeal the district court's denial of reimbursement for purchaser's BTU adjustments and for the mistaken overpayment of depreciation credit. Purchaser cross-appeals, claiming error in the district court's determination of the market price for coal on sellers' spot purchases. They also claim error in the court's failure to find that sellers breached and repudiated the contract through bad faith performance and enforcement and through shipments of noncompliance coal. Finally, purchaser appeals the district court's grant of summary judgment against them on their antitrust claim. We deal with each of these issues in turn.

I. Standard of Review

Sellers and purchaser challenge the trial court's findings of fact and of law. We do not disturb the district court's findings of fact unless they are "clearly erroneous." Fed.R.Civ.P. 52(a); United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948); Amoco Production Co. v. Western Slope Gas Co., 754 F.2d 303, 309 (10th Cir.1985). A finding of fact will not be reversed as clearly erroneous unless "it is without factual support in record, or if the appellate court, after reviewing all the evidence, is left with the definite and firm conviction that a mistake has been made." LeMaire v. United States, 826 F.2d 949, 953 (10th Cir.1987). The district court need not be "correct" in its finding, but its conclusion must be "permissible" in light of the evidence. Volis v. Puritan Life Ins. Co., 548 F.2d 895, 901 (10th Cir.1977).

We review issues of law, decided by the district court, de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988). The standard of review on appeal is the same as that which would be applied by the trial court in making its initial ruling. United States v. Ortiz, 804 F.2d 1161, 1164 (10th Cir.1986). An appellate court is not constrained by a trial court's conclusions of law. State Distrib., Inc. v. Glenmore Distilleries, 738 F.2d 405, 412 (10th Cir.1984).

II. Lost Profit Damage Measure

The district court determined that UCC Sec. 2-708(1) 1 applied in determining the proper measure of damages. The damages provided in section 2-708(1) are the difference between the market price and the contract price of the goods. UCC Sec. 2-708(2) provides for damages up to the amount of the lost profits from the contract which has been breached. Sellers fall into section 2-708(2) only if they can demonstrate that they would receive inadequate damages under section 2-708(1). Section 2-708(2) is basically designed for specific categories of sellers, such as lost volume sellers, component sellers, and jobber sellers. See J. White and R. Summers, Uniform Commercial Code, 3d ed. (1988) at 356-65, for a full exposition on sellers that come under section 2-708(2). Sellers here argued that they were entitled to receive section 2-708(2) damages. Sellers have the burden of proving that they are lost volume sellers and thus fall under section 2-708(2). Snyder v. Herbert Greenbaum & Associates, Inc., 38 Md.App. 144, 380 A.2d 618 (1977); National Controls, Inc. v. Commodore Business Machines, Inc., 163 Cal.App.3d 688, 209 Cal.Rptr. 636 (1st Dist.App.1985); and Lake Erie Boat Sales, Inc. v. Johnson, 11 Ohio App.3d 55, 463 N.E.2d 70 (1983). A lost volume seller is one who has the capacity to perform the contract which was breached as well as other potential contracts, due to their unlimited resources or production capacity. Although sellers seek to portray the analysis of lost volume seller as a question of law subject to de novo review (sellers characterize their appeal as being limited to "questions of law"), it is a decision dictated by the underlying facts and thus ultimately a question of fact reviewed under the clearly erroneous standard. 2 Even where there is a mixed question of law and fact that involves primarily a factual inquiry, the "clearly erroneous" standard is appropriate. Supre v. Ricketts, 792 F.2d 958, 961 (10th Cir.1986).

Evidence presented at trial indicated that sellers did not have the production capacity to perform purchaser's contract as well as to sell to other...

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