Tampa Electric Company v. Nashville Coal Company

Decision Date26 February 1963
Docket NumberCiv. A. No. 2418.
Citation214 F. Supp. 647
PartiesTAMPA ELECTRIC COMPANY, Plaintiff, v. NASHVILLE COAL COMPANY, Nashville Coal, Inc., West Kentucky Coal Company, Defendants.
CourtU.S. District Court — Middle District of Tennessee

William C. Chanler and Stephen A. Weiner, of Winthrop, Stimson, Putnam & Roberts, New York City, and David Keeble, of Hooker, Keeble, Dodson & Harris, Nashville, Tenn., for plaintiff.

K. Norman Diamond, James R. McAlee and Melvin C. Garbow, of Arnold, Fortas & Porter, Washington, D. C., and Cecil Sims, of Bass, Berry & Sims, Nashville, Tenn., for defendants.

WILLIAM E. MILLER, Chief Judge.

Tampa Electric Company, plaintiff herein, is a large electrical utility company serving Tampa, Florida, and its metropolitan area. On May 23, 1955 it entered into a contract with the defendants' assignors for the sale and delivery to the plaintiff of all the coal required as fuel for the production of electrical energy at its newly constructed Gannon Station near Tampa, Florida, for a period of twenty years. The contract provided that the first two units of the plant then in operation would use coal as fuel, and that as to these units the full requirements should not be less than 225,000 tons of coal per unit per year. It was further agreed that all future units constructed would be supplied by the Seller if the Buyer elects to use coal as fuel, two years' notice being required to be given the Seller indicating the Buyer's election. The contract fixed a minimum of $6.85 less a minimum rebate of 45 cents per ton for the first eighteen months and 30 cents per ton thereafter.

In November 1956, defendants requested the plaintiff to modify the price provisions of the contract and upon the plaintiff's refusal to do so, the defendants furnished the plaintiff with an opinion of defendants' counsel to the effect that the contract was illegal under Sec. 3 of the Clayton Act, 15 U.S.C.A. § 14, and Secs. 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2. However, it was not until February 11, 1957, less than two months prior to the scheduled commencement of coal deliveries, that defendants informed plaintiff that the contract would not be performed.

Plaintiff filed suit for declaratory judgment in the Circuit Court of Hillsborough County, Florida, seeking a determination that the contract was valid and binding. This action, later removed to the U. S. District Court for the Southern District of Florida, was dismissed for want of jurisdiction on August 13, 1957. Plaintiff then brought the present action in this court seeking a judgment declaring the validity of the contract. Both parties having moved for summary judgment, the Court granted the defendants' motion and denied the motion of the plaintiff, holding that the contract was illegal under Section 3 of the Clayton Act, 168 F.Supp. 456. This judgment was affirmed by the Court of Appeals for the Sixth Circuit on April 4, 1960, 276 F.2d 766, but the Supreme Court on February 27, 1961 reversed and remanded the case to this Court for further proceedings not inconsistent with its opinion, 365 U.S. 320. In the meantime, while the case was pending on appeal, the plaintiff in February 1959 notified the defendants that it elected to terminate the contract due to the defendants' failure to perform, and that it would hold the defendants fully responsible for all damages caused by the breach.

On May 1, 1961, judgment was entered by this Court, pursuant to the mandate of the Supreme Court, that the contract, as amended, "is a valid, lawful and enforceable contract and is binding upon the plaintiff and the defendants according to its terms." The Court also reserved jurisdiction to grant such further relief against the defendants, or any of them, based upon such judgment, as may be necessary or proper.

On May 15, 1961 plaintiff filed a motion with this Court pursuant to 28 U.S.C.A. § 2202, in which it requested that it be awarded, after hearing, the damages which it had incurred as of March 31, 1961 by virtue of defendants' breach of contract. Following two pre-trial conferences the date for the hearing on plaintiff's damage claim was, after one postponement at defendants' request, designated as February 1, 1962. On January 19, 1962 plaintiff filed a supplemental motion for damages in which it requested the award of $3,964,670.98, the total sum for which it now makes claim, covering the period from May 1, 1957, when the defendants were requested to begin deliveries under the contract, to February 1, 1962, the date of the trial on the damage claim. Attached to the supplemental motion was an exhibit showing the basis of computation for each alleged item of damage.

Where jurisdiction of an action in a federal court is dependent upon the diversity of citizenship of the parties, the Court will apply the law of conflicts of the state in which it sits. Klaxon Company v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Insurance Research Serv. v. Associates Finance Corp., D.C., 134 F. Supp. 54, 58. There is no reason to believe that Tennessee would not follow the general conflicts rule which requires the courts of the forum state to apply the law of the state in which the contract is to be performed in determining the measure of damages for its breach. McCormick, Damages, Sec. 2 (1935); 11 Am. Jur., Conflicts, Sec. 134; Restatement, Conflicts, Sec. 372; cf. Gray v. Telegraph Co., 108 Tenn. 39, 64 S.W. 1063, 56 L.R.A. 301; Cooper, Caruthers & Co. v. Sanford, 12 Tenn. 452; Robinson v. Queen, 87 Tenn. 445, 446, 11 S.W. 38, 3 L.R.A. 214; Hubble v. Morristown Land Co., 95 Tenn. 585, 588-589, 32 S.W. 965.

Defendants' first insistence is that the plaintiff's claim for damages must be denied for the reason that the plaintiff has failed to prove any damage or loss over the life of the contract. They argue that the burden of proof rests upon the plaintiff in the case of an anticipatory breach of contract to establish by a preponderance of the evidence the fact that its accrued losses would not be offset in the future years of the original contract by savings resulting from the substitute arrangements which it is required to make to obtain its necessary supply of coal. For this purpose the defendants cite and primarily rely upon the decision of the Supreme Court of Florida in Gilliland v. Mercantile Inv. & Holding Co., 147 Fla. 613, 3 So.2d 148 (1941) in which the following statement was made:

"The plaintiff introduced no evidence of what he would have received had the liquidation been made as originally contemplated. He contends that the wrongful act of defendant making the fulfillment impossible dispensed with the necessity of such proof. He contends his action is for an anticipatory breach and that defendant's wrongful act has rendered proof of actual damage impossible and for that reason he is entitled to the maximum amount. With this we do not agree. * * *
"The plaintiff is held to the same degree of proof to recover damages in an action brought on an anticipatory breach as if he had waited until after the time elapsed for fulfillment of his contract." (Emphasis supplied).

In the Gilliland case, the contract was for the plaintiff to receive a certain percentage in excess of liens and cash advances upon the liquidation of two companies. Plaintiff brought suit against the defendant for breach of contract on the grounds that the defendant had hindered and frustrated the liquidation, and also had sold and divested itself of all right to receive any sum under the plan of liquidation. In affirming the action of the trial court in directing a verdict on the ground that "plaintiff had proved no damage," the Supreme Court pointed out that "the plaintiff introduced no evidence of what he would have received had the liquidation been made as originally contemplated." It was the plaintiff's insistence that he was entitled to the maximum amount since the action was for an anticipatory breach and the defendant's wrongful act had rendered proof of actual damage impossible. In rejecting this argument, the Supreme Court held, as above stated, that the plaintiff is held to the same degree of proof to recover damages in an action brought on an anticipatory breach as if he had waited until after the time elapsed for fulfillment of his contract.

It thus appears that the factual situations in the Gilliland case and in the present case are entirely different. In the Gilliland case, the plaintiff failed to prove the fact of damage. It was possible that there might not have been any sums upon the liquidation of the companies in excess of the stated sums which were necessary to satisfy cash advances and liens, and the essential failure on the part of plaintiff was the failure of proof that any damage had been sustained. In the instant situation, however, the plaintiff has proved accrued damages—it has established the fact of loss, and the question is whether it is to be denied recovery for such loss simply because it has not offered proof that such loss will not be wiped out over the remaining sixteen years of the contract. It is obvious that this presents a problem which was not dealt with in the simple terms of the Gilliland decision. The result reached in the Gilliland case was entirely equitable on the facts there presented, but to construe that decision as requiring proof that an accrued loss would continue to the end of an extended period upon the anticipatory breach of a long-term supply contract would distort its true meaning and purpose. The stability of enterprises dependent upon such long term supply contracts would be seriously impaired should the courts deny recovery of accrued losses because of failure to introduce proof that such losses would not be erased by events occurring over a protracted, uncertain, and highly speculative future period.

It is the plaintiff's argument that the case of Palmer v. Connecticut Ry. & Lighting...

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