Northern Helex Co. v. United States

• Decision Date: 22 October 1980
• Docket Number: No. 454-70.,454-70.
• Citation: 634 F.2d 557
• Parties: NORTHERN HELEX COMPANY v. The UNITED STATES.
• Court: U.S. Claims Court

634 F.2d 557

NORTHERN HELEX COMPANY v. The UNITED STATES.

No. 454-70.

United States Court of Claims.

October 22, 1980.

Clarence T. Kipps, Jr., Washington, D. C., attorney of record, for plaintiff. John Lloyd Rice, Miller & Chevalier, Washington, D. C., F. Vinson Roach and Dean W. Wallace, Omaha, Neb., of counsel.

Edward J. Friedlander, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant. John D. Trezise, Dept. of the Interior, Washington, D. C., of counsel.

Before FRIEDMAN, Chief Judge, and DAVIS, NICHOLS, KUNZIG and SMITH, Judges, en banc.

ON DEFENDANT'S EXCEPTIONS TO THE TRIAL JUDGE'S OPINION

FRIEDMAN, Chief Judge:

This is the third time this case has been before us. It involves the amount of damages to which the plaintiff is entitled for the government's breach a decade ago of a contract under which the plaintiff agreed to produce and supply helium to the government. The government has challenged the recommended decision of Trial Judge Spector, rendered on remand following our reversal of his prior decision awarding damages that we held were excessive because based on erroneous legal principles. In his latest decision the trial judge ignored our prior decision and recommended that damages be awarded on the same legal theories that we rejected in the prior case, but in a significantly greater amount than he previously had recommended.

We hold that our prior decision is the law of the case, and we follow it. We conclude, however, that the government has failed to prove one element for which we ruled in our prior decision that damages could be reduced.¹

I.

The government's termination of the helium purchase program, of which the plaintiff's contract was a part, has been the subject of substantial litigation, both in this court and in others. See Northern Helex Co. v. United States (Northern Helex II), 207 Ct.Cl. 862, 524 F.2d 707 (1975), cert. denied, 429 U.S. 866, 97 S.Ct. 176, 50 L.Ed.2d 146 (1976); Northern Helex Co. v. United States (Northern Helex I), 197 Ct.Cl. 118, 455 F.2d 546 (1972); Phillips Petroleum Co. v. United States, No. 248-76 (Ct.Cl. Sept. 12, 1980); Cities Service Helex, Inc. v. United States, 211 Ct.Cl. 222, 543 F.2d 1306 (1976); 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); National Helium Corp. v. Morton, 455 F.2d 650 (10th Cir. 1971). It is unnecessary to restate all of the facts pertaining to the helium purchase program; instead, we sketch the basic factual history and describe the procedural situation relevant to our decision.

In 1961, the government entered into longterm contracts with four natural gas producers² to obtain helium, a by-product of natural gas production, which it wanted for conservation purposes. The four producers constructed helium processing plants as part of integrated natural gas production facilities. In 1969, the government ceased paying the amounts due under the contracts, and in 1970, Northern Helex brought suit in this court, alleging a breach.³ Because of the integrated nature of the plaintiff's operations, it has necessarily continued to use its helium plant to remove helium from the natural gas. In some instances, it found another purchaser for the helium; on other occasions, it has justifiably vented the helium into the atmosphere as a waste product.

In Northern Helex I, supra, we held that the government had materially and totally breached its contract with Northern Helex and that Northern Helex had not waived the breach and was justified in treating the contract as terminated. 197 Ct.Cl. at 134, 455 F.2d at 555-56. We expressly left open all issues relating to damages and returned the case to the Trial Division for an initial determination of those issues.

Trial Judge Spector thereafter recommended that the plaintiff recover the full contract price, including the costs of continued performance, for the remainder of the contract term, less the amounts received from sales to a third party after the breach, storage expenses, and payments made for deliveries after suit was filed. 20 Cont.Cas.Fed. 89,085, 89,132 (Ct.Cl. Trial Div.1974). On en banc review of that recommended decision, however, the court "reached a somewhat different result." Northern Helex II, supra, 207 Ct.Cl. at 868 n.1, 524 F.2d at 709 n.1.

We held that "the plaintiff is not entitled to recover its cost of performance ... of the contract to the end of the contract period" (id. at 878, 524 F.2d at 715), that the price escalation clause in the contract, triggered by changes in the wholesale price index, was inapplicable, and that certain excess values, at that time not yet demonstrated, would be nonrecoverable by the plaintiff. We set forth a six-step process⁴ for determining the damages to be awarded (id. at 888-90, 524 F.2d at 721-22), and remanded the case for the trial judge to make the recommended findings of fact and calculations necessary to carry out that six-step process.

On remand, however, the trial judge made no attempt to comply with our explicit instructions for computing damages. Instead, he returned to the theory of damages that we rejected in Northern Helex II.⁵ He stated that "only payment of the contract price, reduced by the proceeds of any resale of helium to others, will place the plaintiff in as good a position as it would have been in had the contract been fully performed" (which is the admitted standard, see note 5, supra). He then recomputed the damages, using the same method he had used in his first opinion and that we had explicitly rejected in Northern Helex II. He increased the total damages to reflect changes in the wholesale price index that triggered the contract's escalator clause (which we had held does not apply in the event of breach). The trial judge recommended an award to the plaintiff of $94,839,000, "subject to further adjustment by reason of proceeds received by plaintiff on the resale of helium to others subsequent to December 24, 1970."

II.

It is "familiar doctrine that a lower court is bound to respect the mandate of an appellate tribunal and cannot reconsider questions which the mandate has laid to rest." Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 140, 60 S.Ct. 437, 440, 84 L.Ed. 656 (1940). "An inferior court has no power or authority to deviate from the mandate issued by an appellate court." Briggs v. Pennsylvania Railroad Co., 334 U.S. 304, 306, 68 S.Ct. 1039, 1040, 92 L.Ed. 1403 (1948). After an appellate court has decided a case and remanded to a lower court, the latter court "is bound by the decree as the law of the case; and must carry it into execution.... That court cannot vary it, or examine it for any other purpose than execution; ... or review it, even for apparent error, upon any matter decided on appeal...." In re Sanford Fork & Tool Co., 160 U.S. 247, 255, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895). Indeed, the rule that a lower court must carry out the mandate of an appellate court is so well established that a writ of mandamus may issue to compel such action. General Atomic Co. v. Felter, 436 U.S. 493, 497, 98 S.Ct. 1939, 1941, 56 L.Ed.2d 480 (1978); In re Sanford Fork & Tool Co., supra.

The obligation of a lower court to carry out the mandate of an appellate court exists where the appellate and lower tribunals are separate and independent judicial bodies. A fortiori, a trial judge of this court, who is not an independent judicial entity, has the same obligation.

In the present case, Trial Judge Spector blatantly disregarded this settled principle in considering this case following our remand in Northern Helex II. Instead of carrying out the duties that our judgment directed him to perform, he simply ignored our decision and proceeded instead to decide the case as he deemed proper and as if our decision never had been rendered. For example:

Although we directed that in determining the plaintiff's anticipated profits from the contract there must be subtracted from the total anticipated revenues under the contract of $80,255,000 "the total stipulated anticipated manufacturing costs of $43,067,413 that the plaintiff would have expended to the end of the contract term" (207 Ct.Cl. at 887, 524 F.2d at 721-22 (1975)), the trial judge did not make the subtraction.

Although we directed that the Wholesale Price Index escalation clause of the contract "should not be applied after the date of the breach" (207 Ct.Cl. at 890, 524 F.2d at 722), the trial judge applied the escalation clause and thereby substantially increased the damages.

Although we directed that the plaintiff's anticipated profits on the contract should be "discounted to current value as of the date of entry of final judgment" (207 Ct.Cl. at 890, 524 F.2d at 722), the trial judge concluded that "at this late date in the term of a 22-year contract, no `discount to present value' is warranted."

Although we directed that there should be subtracted from the plaintiff's total anticipated revenues under the contract any excess value of the helium plant at the time of breach (207 Ct.Cl. at 889, 524 F.2d at 721), the trial judge ruled that "so-called `excess values' have no relevance whatever in the event of a total and material breach of contract by the Government." (We discuss the excess value issue in section III.B. below.)

The result of the trial judge's failure to comply with our decision was that although in his prior decision he recommended damages of $78,012,142, which we rejected as excessive because based upon erroneous legal theories, in his decision on the remand he applied those same rejected legal theories and this time recommended damages of more than $94 million. This was $16 million greater than his previous award, which we had found was excessive.

The ostensible justification the trial judge gave for this extraordinary action was that portions of our opinion in Northern...