Nobs Chemical, U.S.A., Inc. v. Koppers Co., Inc., No. 77-3202

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore CHARLES CLARK, RONEY and HENDERSON; HENDERSON
Citation616 F.2d 212
Parties28 UCC Rep.Serv. 1039 NOBS CHEMICAL, U.S.A., INC. and Calmon-Hill Trading Corp., Plaintiffs-Appellants Cross-Appellees, v. KOPPERS CO., INC., Defendant-Appellee Cross-Appellant, Schenectady Chemicals, Inc., Defendant.
Docket NumberNo. 77-3202
Decision Date02 May 1980

Page 212

616 F.2d 212
28 UCC Rep.Serv. 1039
NOBS CHEMICAL, U.S.A., INC. and Calmon-Hill Trading Corp.,
Plaintiffs-Appellants Cross-Appellees,
v.
KOPPERS CO., INC., Defendant-Appellee Cross-Appellant,
Schenectady Chemicals, Inc., Defendant.
No. 77-3202.
United States Court of Appeals,
Fifth Circuit.
May 2, 1980.

Page 213

David C. Redford, Houston, Tex., for plaintiffs-appellants cross-appellees.

Alvin M. Owsley, Jr., Cathy L. Jordan, Houston, Tex., for defendant-appellee cross-appellant.

Appeals from the United States District Court for the Southern District of Texas.

Before CHARLES CLARK, RONEY and HENDERSON, Circuit Judges.

Page 214

HENDERSON, Circuit Judge:

Koppers Company contracted with the plaintiffs, Nobs Chemical, U.S.A., Inc. (hereinafter referred to as "Nobs") and Calmon-Hill Trading Corporation (hereinafter referred to as "Calmon-Hill") to purchase 1000 metric tons of cumene. 1 Koppers breached the contract. Nobs and Calmon-Hill brought suit in United States District Court for the Southern District of Texas, and the case was tried before the court sitting without a jury.

The district court found that the plaintiffs had arranged to purchase the cumene in Brazil for $400.00 a ton and to expend $45.00 per ton for the cost of transporting the cumene to the defendant, for a total expense of $445,000.00. Koppers agreed to buy the cumene for.$540,000.00. The court applied Tex.Bus. & Com.Code § 2.708(b) (Vernon), 2 and determined that the plaintiffs were entitled to recover their lost profits, $95,000.00 ($540,000.00 minus $445,000.00). The district court ruled that the plaintiffs could not recover the extra $25.00 per ton they allegedly were forced to pay their Brazilian supplier when the price per ton increased because their total order with the supplier was reduced from 4,000 metric tons to 3,000 metric tons because of Koppers' breach. The court decided this lost quantity discount amounted to consequential damages and was, therefore, not recoverable.

Nobs and Calmon-Hill appeal the measure of damages applied by the district court, and, assuming it is correct, they challenge the computation of those damages. The defendant, Koppers, cross-appeals, also claiming that the district court's calculation of damages under the lost profits method was incorrect.

We first turn to the issue of whether the district court was correct in applying the lost profits measure of damages to the plaintiffs' loss.

According to Tex.Bus. & Com.Code Ann. § 2.708 (Vernon)

(a) . . . the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this chapter (Section 2.710), but less expenses saved in consequence of the buyer's breach.

(b) If the measure of damages provided in Subsection (a) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this chapter (Section 2.710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

The plaintiffs urge that subsection (a) should govern in this case. Because the market value of cumene dropped to between $220.40 and $264.48 a metric ton at the time of the breach, the plaintiffs contend that they should recover the difference between the contract price ($540,000.00) and the market price (between $220,400.00 and $264,480.00), substantially more than the $95,000.00 awarded them under subsection (b).

There appears to be no Texas, nor any other state's, law directly on point. Under Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court must follow state law in a diversity case. Where no state court has decided the issue a federal court must "make an educated guess as to how that state's supreme court would rule." Benante v. Allstate Ins. Co., 477 F.2d 553, 554 (5th Cir. 1973); Smoot v. State Farm Mut.

Page 215

Auto. Ins. Co., 299 F.2d 525, 529 (5th Cir. 1962).

Because there does not appear to be any law directly on point, we take the liberty of looking to those more learned on the subject of the Uniform Commercial Code. Professors White and Summers, recognizing that § 2.708(b) is not the most lucid or best-drafted of the sales article sections, decided that the drafters of the Uniform Commercial Code intended subsection (b) to apply to certain sellers whose losses would rarely be compensated by the subsection (a) market price-contract price measure of damages, and for these sellers the lost profit formula was added in subsection (b). One such type of seller is a "jobber," who, according to the treatise writers, must satisfy two conditions: "(f)irst, he is a seller who never acquires the contract goods. Second, his decision not to acquire those goods after learning of the breach was not commercially unreasonable. . . . " J. White & R. Summers, Uniform Commercial Code § 7-10, at 228 (1972) (hereinafter cited as "White & Summers"). Nobs and Calmon-Hill clearly fit this description. The plaintiffs never acquired the goods from their Brazilian supplier, and, as White and Summers point out, an action for the purchase price or resale was therefore unavailable. See, Tex.Bus. & Com.Code Ann. §§ 2.703, 2.704, 2.706, 2.709 (Vernon). See also, American Metal Climax, Inc. v. Essex International, Inc., 16 U.C.C.Rep. 101, 115 (S.D.N.Y.1974) ("(C)ompensatory damages as provided in the contract-market formula of § 2-708(1) (§ 2.708(a)) are realistic only where the seller continues to be in a position to sell the product to other customers in the market.").

The plaintiffs argue, however, that in this...

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47 practice notes
  • Chemetron Corp. v. Business Funds, Inc., No. 80-1658
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 16, 1982
    ...are Erie-bound to make an "educated guess" as to how the Texas Supreme Court would rule. See Nobs Chemical, U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214-15 (5th Cir. 1980). Before making this "educated guess," we must explain this issue further so that it can be properly The purposes of e......
  • State Farm Mut. Auto. Ins. Co. v. Bates, Civ. A. No. C81-281R.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • June 30, 1982
    ...court must "make an educated guess as to how that state's supreme court would rule." Nobs Chemical, U.S.A., Inc. v. Koppers Company, Inc., 616 F.2d 212, 214 (5th Cir. 1980); Benante v. Allstate Insurance Company, 477 F.2d 553, 554 (5th Cir. 1973). Accord, Pennsylvania Glass Sand Corporation......
  • Taylor v. General Motors Corp., No. 87-5829
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 14, 1989
    ...what the Supreme Court of Florida would do if presented with appellants' claims. See, e.g., Nobs Chem., U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir.1980). Appellants seek to recover from the appellee manufacturers under two theories of tort liability: strict liability and neglig......
  • Riley v. Champion Intern. Corp., No. 1:95-CV-790.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • July 17, 1997
    ...would rule.'" Galindo v. Precision American Corp., 754 F.2d 1212, 1217 (5th Cir.1985) (quoting Nobs Chem., U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir.1980)). In making an Erie-guess, federal courts may properly consider the opinions of lower state courts. Vernon v. City of Los ......
  • Request a trial to view additional results
47 cases
  • Chemetron Corp. v. Business Funds, Inc., No. 80-1658
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 16, 1982
    ...are Erie-bound to make an "educated guess" as to how the Texas Supreme Court would rule. See Nobs Chemical, U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214-15 (5th Cir. 1980). Before making this "educated guess," we must explain this issue further so that it can be properly The purposes of e......
  • State Farm Mut. Auto. Ins. Co. v. Bates, Civ. A. No. C81-281R.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • June 30, 1982
    ...court must "make an educated guess as to how that state's supreme court would rule." Nobs Chemical, U.S.A., Inc. v. Koppers Company, Inc., 616 F.2d 212, 214 (5th Cir. 1980); Benante v. Allstate Insurance Company, 477 F.2d 553, 554 (5th Cir. 1973). Accord, Pennsylvania Glass Sand Corporation......
  • Taylor v. General Motors Corp., No. 87-5829
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 14, 1989
    ...what the Supreme Court of Florida would do if presented with appellants' claims. See, e.g., Nobs Chem., U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir.1980). Appellants seek to recover from the appellee manufacturers under two theories of tort liability: strict liability and neglig......
  • Riley v. Champion Intern. Corp., No. 1:95-CV-790.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • July 17, 1997
    ...would rule.'" Galindo v. Precision American Corp., 754 F.2d 1212, 1217 (5th Cir.1985) (quoting Nobs Chem., U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir.1980)). In making an Erie-guess, federal courts may properly consider the opinions of lower state courts. Vernon v. City of Los ......
  • Request a trial to view additional results

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