Wah Chang v. Pacificorp

• Decision Date: 11 April 2007
• Docket Number: No. 002578.,No. A123961.,002578.,A123961.
• Parties: Wah CHANG, Plaintiff-Respondent, v. PACIFICORP, Defendant-Appellant.
• Court: Oregon Court of Appeals

157 P.3d 243

212 Or. App. 14

Wah CHANG, Plaintiff-Respondent, v. PACIFICORP, Defendant-Appellant.

No. 002578.

No. A123961.

Court of Appeals of Oregon.

Argued and Submitted November 8, 2006.

Decided April 11, 2007.

Robert L. Aldisert, Portland, argued the cause for appellant. On the opening brief were Lawrence H. Reichman, Jay A. Zollinger, Jeffrey C. Dobbins, and Perkins Coie LLP. On the reply brief were Jay A. Zollinger and Perkins Coie LLP.

Thomas W. Sondag, Portland, argued the cause for respondent. With him on the briefs was Lane Powell PC.

Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.

HASELTON, P.J.

Defendant appeals the trial court's order granting plaintiff relief from judgment. ORCP 71 B(1). Originally, plaintiff sought a declaratory judgment declaring that it has no further obligations to purchase electricity from defendant under the parties' contract. Plaintiff alleged, inter alia, that the primary purpose of that contract had been frustrated by an unanticipated event. The trial court granted defendant's motion for summary judgment, and, nearly a year after the entry of judgment, plaintiff sought relief under ORCP 71 B. Specifically, plaintiff proffered "newly discovered evidence" pertaining to its claim of "frustration of purpose" that, plaintiff asserted, would "probably change the result," viz., the allowance of summary judgment. The trial court determined that plaintiff's new evidence presented disputed issues of material fact pertaining to "frustration of purpose" and granted the requested relief. We affirm.¹

Because of the complex procedural posture, we begin by explaining our standard of review. Generally, we review the allowance of relief pursuant to ORCP 71 B for abuse of discretion. National Mortgage Co. v. Robert C. Wyatt, Inc., 173 Or.App. 16, 18, 20 P.3d 216, rev. den., 332 Or. 430, 30 P.3d 1183 (2001). Among other things, a court must consider whether the proffered "newly discovered evidence" "will probably change the result" of the previous judgment. See Oberg v. Honda Motor Co., 316 Or. 263, 272, 851 P.2d 1084 (1993), rev'd on other grounds, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994).²

Here, the previous judgment is the trial court's grant of summary judgment. Summary judgment is proper if the "pleadings, depositions, affidavits, declarations and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ORCP 47 C (emphasis added).

"No genuine issue as to a material fact exists if, based upon the record before the court viewed in a manner most favorable to the adverse party, no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment."

Id. In reviewing the allowance of summary judgment, we draw all reasonable inferences in favor of the nonmoving party. West v. Allied Signal, Inc., 200 Or.App. 182, 187, 113 P.3d 983 (2005).

Because we must consider whether the trial court erred in determining that the "newly discovered evidence" will change the "result"—the prior allowance of summary judgment—we view both the evidence in the summary judgment record and the new evidence in the light most favorable to plaintiff. That is, we view the former most favorably to plaintiff as the nonmovant on summary judgment, and the latter most favorably to plaintiff as the proponent of ORCP 71 B relief. We then determine whether, even with the evidence so viewed, defendant nevertheless remains entitled to judgment, which would render the trial court's allowance of ORCP 71 B relief an abuse of discretion. Accord State v. Johnson, 199 Or.App. 305, 311-12, 111 P.3d 784, rev. den., 339 Or. 701, 127 P.3d 1203 (2005) (a court's discretion is limited to "the range of legally acceptable options"); Mitchell v. Mt. Hood Meadows Oreg., 195 Or.App. 431, 457-59, 99 P.3d 748 (2004) (addressing application of "abuse of discretion" standard of review in analogous context). We proceed to describe the material facts consistently with that standard of review.

I. MATERIAL FACTS AND PROCEDURAL BACKGROUND

A. Contract Formation and Performance

Plaintiff Wah Chang manufactures specialty metals and chemicals at its plant in Millersburg, near Albany. Electricity is the Millersburg plant's second highest operating cost, and it has purchased its electricity from defendant PacifiCorp since 1956.

The Oregon Public Utilities Commission (PUC) requires utilities, such as defendant, to maintain consistent rates, set forth in tariffs for all of their customers.³ In order to deviate from tariff rates, contracting parties must receive the PUC's approval of a "special contract."⁴ Historically, plaintiff purchased electricity from defendant according to the prices set forth in defendant's standard tariff rate for large industrial customers—Rate Schedule 48T. However, in 1997, dissatisfied with that rate, plaintiff began looking into other options and found that it could purchase electricity for a five-year period through a relationship with the City of Millersburg, at a rate lower than defendant's tariff rate.

Ultimately, however, plaintiff also desired to continue its longstanding relationship with defendant. To that end, instead of pursuing the City of Millersburg option, plaintiff and defendant negotiated a "special contract" to submit for approval to the PUC. That contract, known as the Master Electric Service Agreement (MESA), is the subject of this case.

In negotiating the MESA, plaintiff requested a five-year fixed price at a rate lower than Schedule 48T. Defendant, unwilling to predict its own operating costs that far into the future, would not agree to a fixed price for a full five years. Consequently, the parties negotiated a deal calling for a three-year fixed rate, followed by a two-year variable rate.

The parties agreed that the two-year variable rate would be based on a published index of market prices. After discussing various indexes as options, the parties chose an index of market prices at the California-Oregon border published in the Wall Street Journal, commonly known as the "Dow Jones COB" index (the Dow COB index).⁵ The variable rate was then calculated by adding a set amount (the "adder") to the published Dow COB index price.

In an affidavit submitted in opposition to summary judgment, Robert McCullough, an expert on energy markets, explained the operation of the Dow COB index as follows:

"Utilities in the Pacific Northwest sell and buy [electricity] with counterparties in California and the Southwest, among others. The parties to these transactions often specify a substation near the Oregon-California border as the point of delivery. These transactions have come to be known in the industry as occurring `at COB.' Beginning in 1995, the Dow Jones Company began collecting price and volume information about certain transactions at COB. Dow Jones receives average prices and aggregate volumes from market participants who have agreed to provide it. Dow Jones averages the prices and aggregates the volumes and publishes the information daily as the Dow COB price index.

"The product reflected in the Dow COB index is a subset of all products traded at COB. Only transactions meeting certain criteria established by Dow Jones are reported. The transactions are purchases and sales agreed upon one day[,] for delivery the next day at COB * * *."

Based on that pricing structure—including using the Dow COB index price as the variable cost benchmark for the contract's final two years—the parties sought the PUC's approval of the MESA. In doing so, defendant submitted a "Technical Assessment Package" explaining the nature of the contract, including the expected rates and profits during each year. In that package, defendant explained that by using the variable rate calculation the parties had chosen (the rate based on the Dow COB index plus the fixed "adder"), it was ensuring profitability over the course of the final two years of the agreement.⁶ The PUC approved the MESA, and it went into effect September 1997, to be in effect until September 2002.

During the first three years of the contract, plaintiff enjoyed the benefits of the fixed rate. For example, during the first year, September 1997 through August 1998, plaintiff paid approximately $1.8 million less than it would have under defendant's Schedule 48T tariff rate. However, after the period of fixed rates expired and the variable rate commenced, plaintiff's price for electricity skyrocketed. During the first year under the variable rate, September 2000 through August 2001, plaintiff paid almost $26 million more than it would have under the tariff rate. That year, plaintiff's total electricity bill was approximately $31 million—a 600 percent increase over the previous year. As amplified below, the reasons for those extraordinary prices, and their relationship to the MESA, formed the substance of plaintiff's action and, particularly, its claim of "frustration of purpose."

B. Plaintiff's Complaint: "Frustration of Purpose"

In December 2001, with approximately 10 months remaining under the MESA, plaintiff filed its complaint in this case, seeking a declaration excusing it from further performance under the contract. In its complaint, plaintiff described recent regulatory changes in the California electricity market and the effects that those changes had on market prices:

"[R]estructuring of the California electricity market has proved to be disastrous due to serious market design flaws and behavior of market participants that have resulted in extremely high and volatile wholesale bulk power prices in California and elsewhere. By Order dated November 1, 2000, [the Federal Energy Regulatory Commission] addressed `the seriousness of market dysfunctions and recent price abnormalities in California' and found `that the electric market structure and...