City of New Orleans v. United Gas Pipe Line Co.

• Decision Date: 30 April 1987
• Docket Number: Nos. CA,s. CA
• Citation: 517 So.2d 145
• Court: Court of Appeal of Louisiana — District of US
• Parties: CITY OF NEW ORLEANS; Blake G. Arata et al., representatives, etc.; and New Orleans Public Service, Inc. v. UNITED GAS PIPE LINE COMPANY. LOUISIANA POWER & LIGHT COMPANY v. UNITED GAS PIPE LINE COMPANY and Pennzoil Company. 3613, CA 3614.

Page 145

517 So.2d 145

90 P.U.R.4th 557

CITY OF NEW ORLEANS; Blake G. Arata et al., representatives, etc.; and New Orleans Public Service, Inc. v. UNITED GAS PIPE LINE COMPANY.

LOUISIANA POWER & LIGHT COMPANY v. UNITED GAS PIPE LINE COMPANY and Pennzoil Company.

Nos. CA 3613, CA 3614.

Court of Appeal of Louisiana, Fourth Circuit.

April 30, 1987.

As Corrected May 13, 1987.

Rehearings Denied Jan. 19, 1988.

C. Murphy Moss, Jr., Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, New Orleans, W. DeVier Pierson, Pierson, Semmes and Finley, Washington, D.C., John R. Hutcherson, Brunini, Grantham, Grower & Hewes, Jackson, Miss., for United Gas Pipe Line Co.

Charles W. Lane, III, John W. Haygood, R. Patrick Vance, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, Clayton L. Orn, Anderson, Brown, Orn & Jones, Houston, Tex., William C. Nelson, New Orleans, for New Orleans Public Service, Inc.

Donald R. Mintz, Constance Charles Willems, Ellis B. Murov, Pia Conte, McGlinchey, Stafford, Mintz, Cellini & Lang, New Orleans, for City of New Orleans and Blake G. Arata et al.

Andrew P. Carter, Kenneth P. Carter, Terrence G. O'Brien, Monroe & Lemann, New Orleans, for Louisiana Power & Light Co.

Stephen M. Hackerman, Baker & Botts, Houston, Tex., Gene W. Lafitte, Frederick W. Bradley, Liskow & Lewis, New Orleans, for Pennzoil Co.

Marshall B. Brinkley, Gen. Counsel, Louisiana Public Service Com'n, Baton Rouge, Michael R. Fontham, Wayne J. Lee, Paul L. Zimmering, Stephen G. Bullock, Noel J. Darce, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, for Louisiana Public Service Com'n.

Before REDMANN, C.J., and KLEES and LOBRANO, JJ.

REDMANN, Chief Judge.

United Gas Pipe Line Company appeals from judgments for breach of contract damages in favor of Louisiana Power and Light Company for $40,309,142 and New Orleans Public Service, Inc. (and the class of persons paying the latter's electric rates during the breach) for $44,403,106. LP & L and NOPSI were obliged by the contracts to buy, and United was obliged to supply to them, their requirements (or part-requirements) of natural gas for electric power plants over periods of up to 25 years. United raises many issues, including whether the trial judge should have been recused; whether the ratepayers have a right of action; whether some damages were wrongly awarded because not caused by its alleged breach; and whether pre-judgment interest was wrongly awarded. United's principal argument is that a national gas shortage and governmental distribution orders reduced or excused its contractual delivery obligations, both because the contracts so provide in cases of gas shortage, governmental orders, or force majeure, and because of a variety of other defenses.

The plaintiffs appeal or answer United's appeal (in either case referred to as an appeal), seeking added amounts or items of damages. LP & L seeks judgment in tort against United (as does the class) and against its one-time corporate parent, Pennzoil Company (whose corporate relationship is detailed in Louisiana Power & Light v. United Gas Pipe Line, 493 So.2d 1149 (La.1986)). LP & L also seeks deletion of the judgment's provision for deposit of its award into the trial court's registry until the court rules on a method of distribution to its customers.

We note the intervention on the side of LP & L by the Louisiana Public Service Commission, whose position is akin to that of an amicus curiae, seeking awards only for LP & L. We also note the City of New Orleans's anomalous claim of a right of action (presented in NOPSI's original petition) as the governmental rate-setting body for NOPSI. The briefs of the PSC and of the City and class, in addition to those of the contractual parties, have very much assisted this court in its review of the judgments appealed.

We conclude that the record supports the trial judge's factual conclusion that United did not prove its affirmative defenses for its conceded failure to deliver the contracted gas. United did not prove that, if it had not released gas reserves that it already had (and had acted with reasonable diligence to acquire additional available gas reserves to meet its already existing contractual commitments and had not further committed itself to new sales of gas), the shortage would still have occurred (or to what extent) on its interstate and New Orleans area intrastate pipelines. United did not prove that its actions did not cause its shortage and were not, at the least, a breach of its implied contractual obligations under its contracts to provide gas. We reason that the contractual impairment of deliveries clause does not purport to exonerate United from liability; that the governmental orders would not have been necessary as to United but for United's self-caused shortage; and that the force majeure clause is inapplicable because United did not prove that the shortage was not within its control. We increase the amounts of damages awarded for increased costs of fuel (and purchased electricity) and we add damages for part of the costs of conversion of the generators to oil-burning. We agree that pre-judgment, but not pre-damage, interest is allowable, with La.C.C. 2924 rates on pre-suit damages only from 1980, and in those senses we reduce the interest award. We delete the provision for deposit of LP & L's damages into court, because questions of rebate or rate reduction fall exclusively to the Louisiana Public Service Commission (or the New Orleans City Council, as to Algiers rates) rather than to any district court. We agree that no tort claim is available against United or Pennzoil.

It is undisputed that United did not supply the gas that, unless somehow excused, it was obliged to supply for LP & L's and NOPSI's power plants under the long-term contracts. United is therefore liable for the damages caused by its failure to deliver the contracted gas, unless it proves that its delivery obligation is reduced or excused by one of its several defenses.

Essentially, all of United's defenses partake of the nature of impossibility of performance because of a nationwide gas shortage and federal commission and court orders adopted because of that shortage. Essentially, the trial court's response, which we deem not manifestly erroneous but supported by the evidence, is that United bound itself to perform its contracts with LP & L and NOPSI, and that United did not prove that it did perform those contracts reasonably and in good faith: did not prove that it acted reasonably, in view of its performance obligations, to acquire and maintain sufficient gas reserves to satisfy its contractual obligations. The trial court's reasoning is that United itself brought about its shortage, which therefore does not exonerate United from liability.

UNITED'S APPEAL

United's arguments on appeal can be grouped into five: (I) the trial judge should have been recused because he was a member of a plaintiff class who would directly participate in the proceeds of judgment; (II) the ratepayers have no right of action for contractual damages from breach of a contract to which they were not parties; (III) liability was imposed on United without any consideration of the effect of the well-recognized gas shortage of the 1970s on United's ability to serve its customers and without reasoned analysis of the prudence of United's management of its gas supplies; (IV) damages were awarded for reductions in deliveries brought about entirely by federal order rather than by United's shortage of gas; and (V) the award of prejudgment interest dating back to the initial claims of the plaintiffs in 1974 and the award of all costs against United were improper.

I. RECUSAL

We have no authority to consider United's argument that the trial judge, because a member of a plaintiff class of electric ratepayers, should have been recused. Although United cites the later Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986), the question of recusal in this very case has already been decided, rightly or wrongly, by the Louisiana supreme court: "The motion to recuse is denied on the merits." City of New Orleans v. United Gas Pipe Line Co., 407 So.2d 714 (La.1981). The courts of appeal have no jurisdiction to review decisions of the Louisiana supreme court. La. Const. (1974) art. 5 Sec. 10(A).

II. RATEPAYERS' RIGHT OF ACTION

We also do not decide whether the trial court should have sustained the exception of no right of action aimed at the NOPSI ratepayers, represented by several individuals and the City of New Orleans and the State of Louisiana. The first petition for damages was filed on behalf of the ratepayers and NOPSI together. NOPSI does not complain of sharing its recovery with the ratepayers, and United does not show any post-trial burden resulting from the arguably improper maintenance of the ratepayers' right of action. Also because it is of no concern to United, we change from January 1, 1973 to April 1, 1971, as the class requests, the trial judge's erroneous specification in the judgment of the date from which all electric ratepayers constitute the plaintiff class.

III. THE GAS SHORTAGE AS EXONERATION

That gas in ample quantity was unavailable from 1970 or so is not gainsaid. Beginning in 1968 and continuing through the 1970s, nationwide gas reserves declined as usage exceeded additions. But the shortage did not produce the results United claims by its many defenses, some of which overlap (as do this opinion's discussions).

III(a). INDUSTRY CONDITIONS AND UNITED'S ACTIONS

United's basic contention is that it did seek to perform, reasonably and in good faith, its contractual commitments; that its purportedly imprudent or improvident management decisions were in fact reasonable and blameless, given the conditions existing at the time and the knowledge available at the time, including the expectations regarding the size and accessibility of underground...