Cities Service Helex, Inc. v. United States

• Decision Date: 20 October 1976
• Docket Number: 158-75.,No. 138-75,138-75
• Citation: 543 F.2d 1306
• Parties: CITIES SERVICE HELEX, INC. v. The UNITED STATES. NATIONAL HELIUM CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

543 F.2d 1306

CITIES SERVICE HELEX, INC. v. The UNITED STATES.

NATIONAL HELIUM CORPORATION v. The UNITED STATES.

Nos. 138-75, 158-75.

United States Court of Claims.

October 20, 1976.

COPYRIGHT MATERIAL OMITTED

Charles C. Baker, Shawnee, Okl., atty. of record, for Cities Service Helex, Inc. James M. Sturdivant and C. A. Coulter, Tulsa, Okl., of counsel.

Robert L. Ackerly, Washington, D.C., atty. of record, for National Helium Corp. Raymond S. E. Pushkar, Harvey G. Sherzer, D. Joe Smith, Jr., Sellers, Conner & Cuneo, Washington, D.C., and Wendell J. Dogget, of counsel.

Edward J. Friedlander, Washington, D.C., with whom was Asst. Atty. Gen. Rex E. Lee, Washington, D.C., for defendant. John D. Trezise, Washington, D.C., of counsel.

Before COWEN, Chief Judge, DURFEE, Senior Judge, DAVIS, SKELTON, NICHOLS, KUNZIG and BENNETT, Judges, en banc.

ON DEFENDANT'S AND PLAINTIFFS' MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND DEFENDANT'S CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT

DAVIS, Judge:

In 1960 Congress enacted Helium Act Amendments giving the Secretary of the Interior broad authority to establish a long-range helium conservation program. Four 22-year contracts providing for the Government's purchase of helium from private contractors formed the major components of this program. The court considered one of those contracts, and that contractor's claim of material breach, in Northern Helex Co. v. United States, 455 F.2d 546, 197 Ct.Cl. 118 (1972), and 524 F.2d 707, 207 Ct.Cl. 862 (1975), cert. denied, ___ U.S. ___, 97 S.Ct. 176, 50 L.Ed.2d 146 (1976).¹ Two of the other three contractors are now before us challenging certain government termination actions and nonpayment that occurred after the material breach for which Northern Helex brought suit.² However, only part of these two cases is to be decided at this time. Whatever our ruling, much remains to be litigated.

No. 158-75, National Helium Corp.

National Helium was one of the four helium conservation contractors. Its 1961 agreement required it to construct a helium extraction facility and to tender to the Government the helium produced, and in turn called upon the Government to pay for all helium tendered, up to an annual maximum of $15,200,000.³ This contract, like the other three, permitted termination prior to the end of the 22-year term only on specified grounds; the Government was given no general right to terminate for its own convenience.

On January 26, 1971, Under Secretary of the Interior Russell issued to each of the four helium contractors a 60-day notice of termination, accompanied by a statement of reasons, said to be pursuant to the contract's termination provision. National Helium's president responded with a letter of February 19, 1971, declaring that "we are unable to agree that the purported termination is valid," "respectfully suggesting that the determinations and the purported termination are ineffective," and urging Secretary of the Interior Morton "to remove the cloud of the purported termination notice by officially withdrawing the same." On March 11, Secretary Morton replied that the decision to terminate was final and would take effect on March 28. On March 17, National Helium filed suit challenging the action in federal district court in Kansas.⁴ See National Helium Corp. v. Morton, 326 F.Supp. 151, 152 (D.Kan.), aff'd 455 F.2d 650 (10th Cir. 1971).

The District Court complaint charged that the termination and the statement of reasons were "factually erroneous, arbitrary and capricious, an abuse of discretion, and otherwise illegal and contrary to the purposes and requirements of the National Helium Act, as amended, the National Environmental Policy Act of 1969 NEPA, and the Administrative Procedure Act."⁵ National Helium prayed for an injunction prohibiting the Government from terminating its contract, and the helium program, without first holding public hearings and for a declaration that the Russell termination was invalid and that the contract remained in full force and effect "unless and until the defendants terminate the contract in full compliance with the terms of the contract, the provisions of the 1960 Amendments to the National Helium Act, the National Environmental Policy Act of 1969, and the Administrative Procedure Act."⁶ On March 27, 1971, one day before the operative date of the Russell termination, the District Court temporarily enjoined the Government from taking any action leading to the termination of the helium program and the contracts, and ordered that the contracts remain in full force and effect pending further court order. National Helium Corp. v. Morton, 326 F.Supp. 151, 158 (D.Kan.1971). The Government appealed but the Tenth Circuit affirmed on the ground that the injunction was proper because of the Government's failure to comply with NEPA. National Helium Corp. v. Morton, 455 F.2d 650, 653-54, 657 (10th Cir. 1971).⁷

In May 1972 a draft environmental impact statement was ready for comment and announced in the Federal Register. The final statement was issued in November 1972. In December, the Government moved to dissolve the injunction. As summarized in the District Court's mid-January order denying that motion, the Government informed the court that all necessary legal and administrative steps for proper termination had been completed but that the Government thought the injunction precluded it from terminating the contract. Explaining that the injunction had affected only the actions previously before the court and was not intended to restrict subsequent administrative action, the District Court ruled that the motion was premature because the sufficiency of the Government's actions would not be justiciable until the Government actually decided to terminate. On February 2, 1973, Secretary Morton issued the termination notice and statement of reasons referred to as the Morton termination, to be effective April 4, 1973. The Morton termination purported to stand on its own feet but also referred to the reasons for the Russell termination as sound.

The Government then renewed its motion to dissolve the injunction, which the District Court again denied. The Government appealed. The Tenth Circuit declined to rule on the appeal at that stage but noted that the District Court's review of the impact statement should be on the basis of the administrative record, not by trial de novo, and remanded for trial "forthwith" on the propriety of the environmental impact statement.⁸ In June 1973 the District Court found the impact statement inadequate and continued the injunction. National Helium Corp. v. Morton, 361 F.Supp. 78, 97-108 (D.Kan.1973). The Tenth Circuit, in October 1973, reversed, finding the impact statement to be sufficient, and remanded with directions to dismiss the action. National Helium Corp. v. Morton, 486 F.2d 995 (10th Cir. 1973), cert. denied, 416 U.S. 993, 94 S.Ct. 2405, 40 L.Ed.2d 772 (1974).

By letter of November 2, 1973, the Acting Secretary of the Interior informed National Helium that, according to official advice, the Tenth Circuit's mandate was to issue on November 12 and the Government planned on that date to shut in the pipeline through which it received plaintiff's helium, unless the company wished to deliver helium for storage for its own account. Plaintiff answered on November 7 that it had no desire to deliver helium for its own account, that the prior termination notices had expired, and that it would regard the closing of the pipeline "as an act of material breach of contract." The Government did close the pipeline on November 12 and accepted no helium thereafter. The injunction was dissolved and the case dismissed by the District Court on November 19. The dismissal order was entered "in accordance with the mandate of the Court of Appeals filed herein on November 13, 1973, and that Court's directive that the decision to terminate should be carried out without delay."

Until November 12, through almost the entire life of the injunction and the District Court suit, the plaintiff tendered and the Government accepted helium, though because of lack of appropriations the Government did not pay for helium delivered after the end of June 1972 (despite plaintiff's submission of regular invoices showing the amounts claimed to be due under the contract).

Plaintiff filed suit here a year and a half later, on May 12, 1975. In the first of three counts, it claims entitlement to the contract price, plus interest as provided by the contract, for helium delivered and tendered from July 1, 1972, through November 19, 1973, the date of the District Court's dissolution of the injunction. Count two seeks damages (based on the Government's maximum annual obligation and quantity of helium to be delivered to the end of the contract term in 1983) for the Government's material breach of failing to pay for helium delivered and tendered from July 1972 to November 1973. The damages requested in count three are the same as those in count two; however, the material breach stated is the "termination action effected by virtue of such notices the allegedly invalid Russell and Morton termination notices and by defendant's subsequent closing of the valve and shut-in of the pipeline." The amount sought is $171,572,603.20, plus contract interest on a portion, less any operational cost savings resulting from the cessation of helium operations.

No. 138-75, Cities Service Helex, Inc.⁹

Cities Service's 1961 helium conservation contract with the Government, which carried a somewhat lower annual ceiling on the Government's obligation than National Helium's ($9,100,000 per fiscal year compared to National Helium's $15,200,000),¹⁰ was one of the contracts covered by the Russell termination of January 26, 1971. The president of Cities Service protested by letter of February 19, 1971, that that action was "based on erroneous facts," "contrary to the national interest," and "defective."¹¹ Cities Service urged Secretary...