Southwestern Public Service Co. v. Thunder Basin Coal Co.

• Decision Date: 27 April 1999
• Docket Number: Nos. 98-139,98-140,s. 98-139
• Citation: 978 P.2d 1138
• Parties: SOUTHWESTERN PUBLIC SERVICE COMPANY, Appellant (Defendant), v. THUNDER BASIN COAL COMPANY, Appellee (Plaintiff). Tuco, Inc., Appellant (Defendant), v. Thunder Basin Coal Company, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 1138

978 P.2d 1138

SOUTHWESTERN PUBLIC SERVICE COMPANY, Appellant (Defendant), v. THUNDER BASIN COAL COMPANY, Appellee (Plaintiff).

Tuco, Inc., Appellant (Defendant), v. Thunder Basin Coal Company, Appellee (Plaintiff).

Nos. 98-139, 98-140.

Supreme Court of Wyoming.

April 27, 1999.

Kate Fox, Davis & Cannon, Cheyenne, WY, and Stephanie Landry, Hinkle, Cox, Eaton, Coffield & Hensley, L.L.P., Albuquerque, NM, Representing Appellant Southwestern Public Service Company. Argument by Ms. Fox.

John J. Coates, Dill, Dill, Carr, Stonbraker & Hutchings, P.C., Denver, CO; John A. Coppede, Sundahl, Powers, Kapp & Martin, Cheyenne, WY; and Steven L. Hoard, Don D. Sunderland, Brad A. Chapman, Mullin, Hoard & Brown, L.L.P., Amarillo, TX, Representing Appellant TUCO, Inc. Argument by Mr. Coates.

David K. Isom, J. Preston Stieff, David K. Isom Law Offices, Salt Lake City, UT; Thomas F. Linn, Atlantic Richfield Company, Denver, CO; and William D. Omohundro, Omohundro Law Offices, Buffalo, WY, Representing Appellee Thunder Basin Coal Company. Argument by Mr. Isom.

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and HILL, JJ.

HILL, Justice.

Appellants, TUCO, Inc. and Southwestern Public Service Company (SPS), challenge the district court's rulings in a declaratory judgment action brought by Appellee Thunder Basin Coal Company. Appellants claim the court erred in refusing to dismiss or stay the Wyoming action because it resolved factual issues at the center of a pending case filed in Texas. They also attack the district court's entry of summary judgment in favor of Thunder Basin. Although the district court did have jurisdiction over TUCO in respect to one of two coal supply agreements, we find it abused its discretion in refusing to stay the Wyoming action during the pendency of the Texas lawsuit. Because we reverse and remand on that basis, summary judgment in favor of Thunder Basin is vacated.

ISSUES

TUCO presents the following issues for review:

1. Do principles of comity and federalism mandate that the trial court dismiss or stay Thunder Basin Coal Company's declaratory relief action because it carves out a central fact issue from a first-filed Texas case and presents it for determination in Wyoming?

2. Did the trial court err by failing to stay or dismiss Thunder Basin Coal Company's complaint for declaratory relief when there was no case or controversy presented for the court to determine because the subject matter of the dispute under the Coal Supply Agreements had been resolved by Thunder Basin Coal Company's performance?

3. When it became apparent that there was no case or controversy to confer jurisdiction over Thunder Basin Coal Company's complaint, did the trial court err by permitting this case to proceed to summary judgment?

4. Should TUCO INC. have been granted summary judgment when it proved that the unambiguous terms of the Coal Supply Agreements when given their plain meaning established that there were no genuine 5. Alternatively, did the trial court err in granting Thunder Basin Coal Company's motion for summary judgment when the terms of the Coal Supply Agreements were shown to be ambiguous and there were disputed issues of material fact to be determined at trial that precluded the entry of summary judgment?

issues of material fact for determination at trial and that TUCO was entitled to judgment as a matter of law?

SPS limits its appeal to two issues:

1. Does Thunder Basin have standing to seek declaratory judgment on a contract that had never been assigned to it?

2. Is there a case or controversy regarding agreements that are contingent upon a happening that has yet to occur?

Appellee Thunder Basin phrases the issues:

1. Did the district court properly grant summary judgment in favor of Thunder Basin on the ground that the unambiguous language of the Coal Supply Agreements supports Thunder Basin's interpretation of the contracts?

2. Did the district court abuse its discretion in declining to dismiss or stay this action where, among other considerations, this action involved critical issues and claims not being litigated in Texas, complete relief was not available in Texas, the subject contracts were governed by Wyoming law, and all interested parties were parties to this action but not the Texas action?

FACTS

This dispute involves separate contracts for the purchase of coal. In 1976, TUCO agreed to purchase coal from ARCO pursuant to the Revised Harrington Agreement (the First Agreement). The initial term of the First Agreement continued through 1993, and, by extension, terminated at the end of 1997. At the same time, SPS signed a Guaranty Agreement with ARCO assuring that SPS would assume TUCO's obligations under the First Agreement if TUCO defaulted.

In 1977, ARCO assigned its interest in the First Agreement and the Guaranty to its subsidiary, Thunder Basin. The same year, ARCO and TUCO signed the Tolk Agreement (the Second Agreement) for additional supplies of coal through the year 2017. ARCO assigned the Second Agreement to Thunder Basin in 1982.

In lieu of a direct guaranty to the Second Agreement, SPS and ARCO signed a "Conditional Agreement for Coal" (Conditional Agreement). Under the Conditional Agreement, if the Second Agreement is canceled, ARCO and SPS will execute a new coal agreement (the SPS Agreement), which contains terms virtually identical to the Second Agreement. The SPS Agreement is attached as an exhibit to the Conditional Agreement and can be assigned if, and only if, the Second Agreement is canceled. The Conditional Agreement is not assignable.

On February 16, 1994, TUCO and SPS initiated an action in Texas district court against Thunder Basin and ARCO asserting limited claims relating to the First Agreement. (TUCO INC. v. Thunder Basin Coal Company, No. 79, 483-C). In September 1994, TUCO amended its petition in the Texas action to allege that Thunder Basin failed to adjust the price of coal in relation to its actual production costs, and, therefore, overcharged TUCO millions of dollars under both the First and Second Agreements.

Thunder Basin counterclaimed, contending that its actual production costs were not relevant to pricing. Thunder Basin asserted that only those costs relating to taxes and royalties were to be used in calculating the price of the coal, otherwise using industry indices as a basis for price. Under that formula, Thunder Basin alleged it had correctly charged or even undercharged TUCO.

In August and September 1994, TUCO notified Thunder Basin that it intended to audit Thunder Basin's books and records pursuant to the audit provisions of the Agreements. In May 1995, TUCO sent Thunder Basin a list of the specific documents it wished to review on audit, including all documents relating to coal production costs. Thunder Basin refused to comply. Consistent with its position in the pending Texas lawsuit, Thunder Basin maintained Two days later, Thunder Basin filed a declaratory judgment action in the Wyoming district court naming TUCO and SPS as defendants. Thunder Basin sought a declaration that TUCO's audit request exceeded the scope of the Agreements' audit provisions in asking for actual costs which were unrelated to the price of coal.

that TUCO's request for actual costs of production exceeded the scope of the audit provisions because those costs did not affect the coal price. By letter dated June 23, 1995, TUCO asserted that Thunder Basin's failure to provide the requested documents would result in a breach of the audit provisions.

SPS responded to Thunder Basin's declaratory judgment action with a motion to dismiss, claiming it was not a signatory of the First or Second Agreements, and, therefore, was not a proper party to the action. In October 1995, Thunder Basin filed a motion for summary judgment asserting it was entitled to judgment as a matter of law regarding the interpretation of the audit provisions. Subsequently, Thunder Basin amended its complaint to assert that SPS was a proper party under the Guaranty and the Conditional Agreement. TUCO and SPS then filed motions to dismiss or stay the Wyoming action because the crucial question, i.e., how the pricing was to be calculated, was at the heart of the earlier-filed Texas lawsuit and properly should be decided by the Texas court.

A few days after Thunder Basin filed its claim in the Wyoming court, TUCO served discovery requests on Thunder Basin in the Texas action. TUCO requested production of all documents regarding the administration of the Agreements, including all "supporting cost data" evidencing Thunder Basin's actual costs of production. Eventually, the same documentation which was the subject of TUCO's audit request was produced in response to the discovery request. Having received the information it wanted, TUCO formally withdrew the audit request on January 5, 1996.

Hearings on the Motion to Dismiss or Stay the Wyoming proceedings were held on January 8, 1996, and May 9, 1997 ¹. On May 23, 1997, the district court issued a written order denying the motion. In response to this ruling, TUCO amended its answer to assert a counterclaim for declaratory relief against Thunder Basin, alleging that the unambiguous terms of the Agreements required Thunder Basin to maintain and produce actual cost data for producing, processing, and loading coal purchased by TUCO. The amendment was followed by TUCO's cross-motion for summary judgment. The district court heard arguments on the summary judgment motions on August 12, 1997, and on March 6, 1998, issued its order granting Thunder Basin's motion, and denying all of TUCO's pending motions. ² TUCO and SPS then filed this timely appeal.

STANDARD OF REVIEW

In a de novo review of the threshold question of jurisdiction, "we examine the policies underlying both the Uniform Declaratory Judgments Act and the doctrine of justiciability to determine if this is a proper case for judicial action." Reiman Corp. v. City of Cheyenne, 838 P.2d...