Concise Oil & Gas Partnership v. Louisiana Intrastate Gas Corp.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 91-3612
_____________________
CONCISE OIL & GAS PARTNERSHIP,
AUSTRAL OIL COMPANY, INC. and
ENERGY CONSULTANTS, INC.,
Plaintiffs-Appellants,
Cross-Appellees,
versus
LOUISIANA INTRASTATE GAS
CORPORATION,
Defendant-Appellee,
Cross-Appellant.
_________________________________________________________________
Appeals from the United States District Court for the
Eastern District of Louisiana
_________________________________________________________________
(March 18, 1993)
Before POLITZ, Chief Judge, and SMITH and BARKSDALE, Circuit
Judges.
BARKSDALE, Circuit Judge:
This appeal turns on sufficiency of the evidence challenges to
a $50-million jury verdict, concerning a long-term contract to
purchase natural gas. The verdict for the plaintiff-sellers was
based on fraud during one period of the contract and breach of
contract during another; but the district court set aside the fraud
portion. Both sides appeal, raising almost countless issues. We
AFFIRM, except with respect to the prejudgment interest
calculation, and REMAND for that limited purpose.
I. FACTS AND PROCEDURAL HISTORY
Concise Oil & Gas Partnership, Austral Oil Company,
Incorporated, and Energy Consultants, Inc. (EnCon; all three
collectively referred to as Sellers) are producers of natural gas
from the Montegut Field (the Field) in Terrebonne Parish,
Louisiana. They own 62 1/2% of the gas produced from that field;
the remainder is owned by Goldking Production Company (now DeNovo
Oil & Gas, Inc.; hereinafter Goldking). In November 1977,
Louisiana Intrastate Gas Corporation (LIG) contracted for a 20-year
term to purchase the Sellers' share of the gas produced in the
Field (Contract 495).1 Goldking was designated the Sellers'
Representative "for all purposes" under the contract. And,
Goldking had its own contract to sell its gas from several fields,
including from the Field, to LIG (Contract 493), which contained
provisions similar to those in Contract 495.
Item 3 of the contract governs price.2 Item 3(a) establishes
a base price, and provides for annual increases, if the price is
not otherwise redetermined. Item 3(b) gives the Sellers the right
to have the price redetermined under certain conditions, while 3(c)
states the method. Item 3(d) gives LIG the right to have the price
redetermined if economic conditions indicate a significant downward
change in the value of gas to LIG, but provides that the
redetermined price "shall not be less than such prices then being
1
The original Contract 495 sellers were EnCon, GS Oil & Gas
Co., and Cenard Oil & Gas Co. Concise acquired Cenard's interest
in 1988; Austral, GS's in 1985.
2
Item 3 is reproduced in the Appendix.
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paid by [LIG] to ... producers [in Terrebonne and contiguous
parishes -- St. Mary, LaFourche, and Assumption] for similar gas
...." Item 3(e) states that if any state or federal law makes "all
or any portion of Item 3(c)" illegal or inoperative, the parties
will meet and mutually determine a price for each anniversary date,
and provides for termination by either party if they are unable to
agree. And, Item 3(f) provides that if "any state or federal law,
rule or regulation establish[es] a ceiling price for the gas sold
under this Contract, then in such event, Seller shall receive the
maximum price allowed by such law, rule or regulation".
The contract contains a "take-or-pay" provision: LIG must
either purchase 80% of the gas produced in the Field each day, or
pay for any deficiency. And, LIG must take not less than 60% of
that 80% each month.
Production began in May 1978; that November, the Natural Gas
Policy Act of 1978 was enacted.3 Accordingly, that December,
Goldking (the Sellers' representative) informed LIG that it
interpreted Item 3(f) to require a price increase. After
evaluating the request, LIG agreed in August 1979 that the Sellers
were entitled to receive the price established under § 102 of the
NGPA. But, LIG pointed out that the NGPA imposes an obligation to
refund if it is later determined that the price paid exceeds the
"maximum lawful ceiling price". LIG paid the § 102 price from
January 1979 until March 1983.
3
See Pennzoil Co. v. Federal Energy Regulatory Comm'n, 645 F.2d
360, 367 (5th Cir. 1981), cert. denied, 454 U.S. 1142 (1982).
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Effective March 1983, LIG sought a price reduction, based on
the "substantial reduction in market demand due to a downturn in
the United States economy"; and the Sellers agreed. Accordingly,
from March 1983 through November 1987, the prices were governed by
letter agreements.
In December 1987, the Sellers discovered that LIG was paying
higher prices to other producers in Terrebonne and contiguous
parishes than it was paying them. Therefore, they requested a
price redetermination pursuant to Items 3(b) and (c); but LIG
refused to furnish information regarding the prices it was paying
those other producers. After 1987, and throughout this litigation,
LIG continued to purchase the Sellers' gas, remitting payment
through Goldking.
Austral, one of the Sellers, filed suit against LIG in Texas
state court in December 1988; and Concise, another of the Sellers,
filed this action in federal court in Louisiana in January 1990.
Shortly after EnCon, the remaining Seller, intervened in 1990 in
the Texas proceeding, the federal court compelled the joinder of
Austral and EnCon in this action.
The Sellers claimed, inter alia, that LIG breached the
contract by failing to pay the contract price after March 1983; and
that, in addition, LIG fraudulently obtained the consent of the
Sellers and their representative, Goldking, to reduced prices from
March 1983 through November 1987. They sought the difference
between the price paid and the contract price, with interest; a
declaratory judgment as to the validity of the contract; and
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specific performance. LIG counterclaimed for overpayment from 1979
through 1984.
At the trial in early 1991 (evidence presented in six days),
the jury, through interrogatories, found against LIG on its
counterclaim; and found that it both defrauded the Sellers from
late March 1983 through November 1987 (approximately $26 million)4,
and breached the contract from December 1987 through trial
(approximately $23 million). The district judge expressed concern
about the verdict when it was returned.
On post-trial motions, the district court denied the Sellers'
requests for declaratory judgment and specific performance, and
granted only part of the requested prejudgment interest. LIG moved
for judgment notwithstanding the verdict, a new trial, or a
remittitur. For the fraud award (March 1983 - November 1987), the
district court granted JNOV, but conditionally granted a new trial.
It denied JNOV for breach of contract (December 1987 - date of
trial).
II. ISSUES
As noted, although many claims, facts, documents, lengthy time
periods, extremely large damage claims, and complex and technical
data, legal terms, and terms of art were in issue, the evidence was
presented in six days, due in large part to the timely and
consistent rulings by the district judge, many sua sponte. Here,
the parties raise almost every issue imaginable, many of which are
4
For this period, as discussed infra in Part II.E.2., the court
did not submit a breach of contract claim.
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without merit and do not require discussion. The significant
issues are addressed below.
As also noted, sufficiency of the evidence challenges are at
the heart of this case. Our JNOV review is governed by the well-
known standard from Boeing Co. v. Shipman, 411 F.2d 365 (5th Cir.
1969) (en banc):
On motions for directed verdict and for
judgment notwithstanding the verdict the Court
should consider all of the evidence -- not just
that evidence which supports the non-mover's case
-- but in the light and with all reasonable
inferences most favorable to the party opposed to
the motion. If the facts and inferences point so
strongly and overwhelmingly in favor of one party
that the Court believes that reasonable men could
not arrive at a contrary verdict, granting of the
motions is proper. On the other hand, if there is
substantial evidence opposed to the motions, that
is, evidence of such quality and weight that
reasonable and fair-minded men in the exercise of
impartial judgment might reach different
conclusions, the motions should be denied, and the
case submitted to the jury.... A mere scintilla of
evidence is insufficient to present a question for
the jury.... However, it is the function of the
jury as the traditional finder of the facts, and
not the Court, to weigh conflicting evidence and
inferences, and determine the credibility of
witnesses.
Id. at 374-75.
A. Fraud
Consistent with the JNOV, our review of the record reveals
only a mere scintilla of evidence of fraud. We need address only
one of the requisite elements for fraud, defined in Louisiana as
... a misrepresentation or a suppression of the
truth made with the intention either to obtain an
unjust advantage for one party or to cause a loss
or inconvenience to the other. Fraud may also
result from silence or inaction.
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La. Civ. Code art. 1953 (West 1987). Accordingly, the jury was
instructed that fraud is the (1) intentional misrepresentation or
suppression of material facts made by one party to another, (2)
with knowledge of their falsity, (3) with the intent to induce the
other party to rely on the misrepresentation and act on it, (4)
reliance on the false information, and (5) injury as a result of
that reliance. The Sellers had the burden of proving each element
by a preponderance of the evidence, La. Civ. Code art. 1957;
insufficient evidence for any element sustains the JNOV.
As stated, an essential element of the fraud claim was proof
that LIG intentionally misrepresented or concealed material facts.
The district court held that such proof was lacking, because the
Sellers were more interested in "takes" than prices. We agree.
The contract required LIG to either take or pay for a certain
amount of the gas produced daily from the Field, and to take part
of that daily requirement on a monthly basis. In the months
leading up to LIG's first request for a price concession in March
1983 -- the start of the period for which fraud is charged -- the
takes had been decreasing. At one point, the Sellers' wells were
shut-in for about 45 days, because LIG told Goldking that it could
not take the gas.
In fact, there was a shortage of takes during 1980-1984, and
considerable evidence that the Sellers were concerned about
maintaining them. Ripple (LIG) testified that LIG had a shortage
of takes for contract years 1980 through 1984, and that increased
takes in later years were intended to make up for prior deficient
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takes. Corcoran (LIG) testified that he told Goldking that, if it
did not accept LIG's price, LIG would reduce takes under the
contract. And, Johnson (LIG) testified that Goldking agreed to
reduce the price in return for increased takes. In a written
summary of a January 1985 meeting with the Sellers, Speyrer
(Goldking) stated that "the consensus was not concerned with price,
however, but with takes". And, he admitted that a higher price
might not be as economically advantageous as having more gas
purchased at a lower price. It was his understanding that, without
some price adjustment, LIG would reduce takes considerably. On the
other hand, however, he testified that LIG offered only one price
-- there was no option to instead have reduced takes at a higher
price. Mealy (Goldking) testified that Goldking did not expect to
be able to move significant volumes of gas if it did not reduce the
price, and that producers had to "take what they could get".
Carter (Goldking) testified that the producers wanted to assure
that takes would be maintained at the level provided for in the
contract, but that LIG was unwilling to bargain on price.
According to Carter, the lowered price was dictated by LIG, and
Johnson (LIG) did not say that contractually-required takes could
be maintained without the demanded price concession. But, Cantrell
(EnCon) testified that the Sellers were interested in both takes
and price, and conceded that they agreed to reduce the price in
order to move the gas.
We are most mindful of a court's properly circumscribed role
in reviewing a jury verdict. This notwithstanding, based upon our
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review of the record, as discussed in part above, the evidence
supports only one conclusion: the Sellers agreed to reduce the
price in order to keep the gas flowing. Therefore, LIG's alleged
misrepresentation that the Sellers were receiving its "best" price,
and its failure to disclose its payment of higher prices to other
producers in the contract area are not material. The Sellers could
have insisted that LIG honor the contractually-required levels of
takes at a higher price but, instead, they preferred to sell more
of their gas at reduced prices. Because reasonable jurors could
not have found that LIG misrepresented or concealed material facts,
we affirm the JNOV for fraud.5
B. Contract
1. Termination
The district court denied JNOV for breach of contract for the
period December 1987 through trial. LIG contends that the breach
claims should not have been submitted to the jury, asserting that
the contract terminated at the end of November 1987, when the
parties failed to mutually agree on a price after expiration of the
last pricing agreement.
LIG maintains that whether an enforceable contract existed is
a question of law; and it is well-settled, of course, that
interpretation of an unambiguous contract is indeed an issue for
the court. E.g., Rutgers, State University v. Martin Woodlands Gas
5
Therefore, it is not necessary to consider the other elements
of fraud; LIG's contentions that rescission was not available, the
fraud claims had prescribed, and Concise lacked standing; or the
conditional grant of a new trial on the fraud claims.
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Co., 974 F.2d 659, 661 (5th Cir. 1992). But, it is equally well-
settled that whether the parties' conduct constitutes a breach
"presents a pure question of fact that the trier of fact alone may
decide". Turrill v. Life Ins. Co. of North America, 753 F.2d 1322,
1326 (5th Cir. 1985). LIG's termination contention is premised on
its claim that a January 31, 1985, letter agreement referring to
Item 3(e) applied to the contract and the subsequent price
redeterminations. The applicability of the letter agreement was a
question of fact properly submitted to the jury.
The Sellers' gas was deregulated effective January 1, 1985,
pursuant to the Natural Gas Policy Act. NGPA § 313(a), 15 U.S.C.
§ 3373(a), provides that "[n]o price paid in any first sale of
high-cost natural gas ... may be taken into account in applying any
indefinite price escalator clause ... with respect to any first
sale of any natural gas other than high-cost natural gas". "High-
cost natural gas" is defined as gas qualifying under NGPA § 107, 15
U.S.C. § 3317.
The parties agree that Item 3(c) is an "indefinite price
escalator clause", as defined in NGPA § 105(b)(3)(B), 15 U.S.C. §
3315(b)(3)(B). That item provides for calculating a new price
basically by "taking the average ... of the three (3) highest
prices per MMBtu for gas" being paid to other producers for similar
gas in the four-parish area. Item 3(e) provides that "[i]f any
state or federal law, rule or regulation makes all or any portion
of Item 3(c) ... illegal or inoperative, then in such event the
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parties shall meet and mutually agree and determine the price for
each respective anniversary date".
By the January 1985 letter (the 1/31/85 letter agreement), LIG
stated to Goldking that NGPA § 313(a) made Item 3(c) inoperative,
because the Item's formula includes the use of NGPA § 107 high-cost
prices. Based on its interpretation of the effect of NGPA §
313(a), LIG proposed that the parties mutually agree to a proposed
price for 1985, and redetermine it by mutual agreement "prior to
the commencement of the next, and each succeeding, contract year".
Within a month, Goldking executed and returned the 1/31/85 letter
agreement. But, although Goldking agreed to accept the price for
the remainder of 1985, it stated that it did "not wish to set a
precedent of agreeing to a price for a full year term", and
preferred "price redeterminations for terms shorter than one year".
According to LIG, the 1/31/85 letter reflects the parties'
agreement that Item 3(e) would apply to post-1984 redeterminations.
LIG maintains that, because the parties failed to mutually agree on
a price after the last redetermination expired in November 1987, as
required by Item 3(e), there was no contract for it to breach.
The Sellers counter that the 1/31/85 letter agreement applies
only to Contract 493 (Goldking's separate contract with LIG), and
not to theirs (Contract 495). In addition, concerning Item 3(e),
they contend that NGPA § 313(a) did not render Item 3(c) illegal or
inoperative, but merely prohibited the use of prices paid by other
producers for high-cost/§ 107 gas in redetermining price. See
Pennzoil, 645 F.2d at 377-78 ("Congress was ... aware of the use of
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... indefinite price escalators in intrastate contracts, [and] it
expressly limited the operation of price escalator clauses in four
instances, thereby allowing escalator clauses to otherwise operate
according to their terms"). Thus, according to the Sellers, they
never agreed to operate under Item 3(e); therefore, the contract
did not expire in late 1987 due to the parties' failure to agree on
a price. (They maintain that, instead, the redeterminations were
pursuant to Item 3(d), as discussed infra in Part II.E.2.)
The 1/31/85 letter agreement refers only to Contract 493,
between LIG and Goldking. It does not reference Contract 495, the
contract in issue. Mealy (Goldking) testified that, for that
reason, the Sellers were not given copies. Likewise, Goldking's
cover letter returning the executed 1/31/85 letter agreement
references only Contract 493.
LIG attempted to prove -- and continues to assert -- that,
despite the 1/31/85 letter referencing only Contract 493, it
nevertheless applied to Contract 495. LIG points out that,
according to Speyrer's (Goldking) testimony, several pricing
agreements which did not expressly reference Contract 495 were
nevertheless intended and understood by the parties to apply to it.
LIG further asserts that the parties' intent to operate under Item
3(e) is evidenced by their 21 price agreements, subsequent to the
1/31/85 letter, each of which established a mutually agreed price
for a specific term, and required further mutual agreement to cover
future periods.
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The contract states that it "shall be in full force and effect
for a term of twenty (20) years from initial delivery of gas
hereunder", which occurred on May 23, 1978. In March 1988, LIG
proposed that it be cancelled, effective December 31, 1987, and
replaced with a new contract, but the Sellers refused.6 Speyrer
(Goldking) testified that Goldking did not receive a termination
notice from LIG and that, to his knowledge, Contract 495 had not
terminated or expired. Cantrell (EnCon) testified that no one at
LIG had ever discussed with him the notion that the contract might
have terminated, and that he had never received anything in writing
from LIG indicating that it had. Moreover, LIG was still
purchasing the Sellers' gas from the Field at the time of trial.
Munro, LIG's corporate representative, testified that it is LIG's
policy to purchase gas from producers only if there is a contract
on file. He further testified that LIG had not written to the
Sellers regarding its position that Contract 495 had terminated.
Although Munro testified in his deposition that Contract 495 was
still viable, he testified at trial that gas was not being
purchased pursuant to that contract.
Ripple testified that when he left LIG's gas supply department
in March 1989, Contract 495 had not been terminated. He testified
further, however, that the gas was not being purchased pursuant to
Contract 495. According to Ripple, there was no price in effect
under Contract 495 when the last letter agreement expired in 1987.
6
Goldking entered into a new contract with LIG effective
January 1, 1988; thereafter, Contract 493 was inoperative.
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Implicit in the jury's breach of contract verdict is a
rejection of LIG's contentions that the 1/31/85 letter applied to
Contract 495, that the price agreements after that date were
governed by Item 3(e), and that the contract terminated in 1987.
(The district court's denial of LIG's motion for JNOV, new trial,
or remittitur on this verdict obviously reflects that it, too,
rejected these contentions.)7 The evidence sufficiently supports
these findings.8
2. Declaratory Judgment/Specific Performance
As noted, the Sellers requested a declaratory judgment
(enforceability of contract and price to be paid) and specific
performance. The district court denied both, stating that the
7
LIG contends that Rutgers, State University v. Martin
Woodlands Gas Co., 974 F.2d 659 (5th Cir. 1992), supports its
position that the contract terminated. We disagree. The natural
gas sales contract involved there provided that it would "continue
in effect for five years ... and continue thereafter until canceled
on thirty days prior written notice". Id. at 660. It specified a
fixed price for the initial year, but provided that future prices
were to be established by mutual agreement of the parties. Id.
But, it did not contain either a "mechanism by which price after
the first year [could] be determined ... [or] language establishing
... a base or floor price to be used in the event the parties are
unable to agree on another price". Id. at 661. Accordingly, the
contract terminated at the end of the first year, when the parties
failed to agree on a new price. Id. at 662.
Contract 495 is easily distinguished from that in Rutgers.
Item 3(a) contains a base price, and Items 3(b) and (c) furnish a
mechanism by which a price can be determined. Thus, unlike the
Rutgers contract, Contract 495 "contains sufficient definitiveness
to establish a price (and thus a contract)". Id. at 661.
8
The Sellers contend that the district court abused its
discretion by refusing to admit into evidence a "Confidential
Offering Memorandum" developed by LIG's parent company in
connection with its offer to sell LIG. Because they offered it
only for the purpose of rebutting LIG's termination contention, it
is not necessary to address this issue.
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Sellers had not met their burden of proof, and that "the remedies
seem a generous extension, rather than inevitable implementation,
of the jury's findings".
The Sellers contend that the requested relief should have been
granted, because the court has a constitutional obligation to adopt
a view of the case consistent with the jury's findings. According
to them, declaratory relief would have settled, through one action,
the controversy arising out of this contract, obviating the
necessity of another over claimed continuing breaches.9
We review the denial of declaratory relief for abuse of
discretion. Sandefer Oil & Gas, Inc. v. Duhon, 871 F.2d 526, 528
(5th Cir. 1989).
The two principal criteria guiding the policy in
favor of rendering declaratory judgments are (1)
when the judgment will serve a useful purpose in
clarifying and settling the legal relations in
issue, and (2) when it will terminate and afford
relief from the uncertainty, insecurity, and
controversy giving rise to the proceeding.
10A C. Wright, A. Miller & M. Kane, Federal Practice & Procedure,
§ 2759 at 647-48 (quoting Borchard, Declaratory Judgments 299 (2d
ed. 1941)).
Specific performance is a "substantive right" under Louisiana
law, and "is the preferred remedy for breach of contract". J.
9
LIG does not contest the availability of specific performance
or declaratory relief, but maintains instead that the district
court's denial of those remedies constitutes a ruling on the merits
that there is no contract -- a ruling which would preclude any
future actions for breach. We reject this contention. Obviously,
if the district court had accepted LIG's contract termination
contention, it would not have upheld the verdict for breach
subsequent to then.
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Weingarten, Inc. v. Northgate Mall, Inc., 404 So. 2d 896, 897, 899
(La. 1981). However, it "may be withheld by the court when
specific relief is impossible, when the inconvenience or cost of
performance is greatly disproportionate to the damages caused, when
the obligee has no real interest in receiving performance, or when
the latter would have a substantial negative effect on the
interests of third parties". Id. at 897. We review the district
court's interpretation of state law de novo. Salve Regina College
v. Russell, ___ U.S. ___, 111 S. Ct. 1217, 1221 (1991).
As discussed, although LIG has continuously purchased the gas
subsequent to November 1987, it persists in claiming that the
contract terminated then. This continued insistence forms the
basis for the Sellers' contention that they are entitled to
declaratory relief. We conclude that such relief would not serve
the requisite useful purpose, because the jury's verdict and our
affirmance of the denial of JNOV on breach conclusively refute
LIG's termination contention. Accordingly, the district court did
not abuse its discretion in denying declaratory relief.
Nor did the Sellers meet their burden for specific
performance. The contract has a 20-year term and is scheduled to
terminate in May 1998. This litigation concerned breaches that
occurred through the date of trial; and the Sellers were fully
compensated, by damages, for them. They failed to establish their
entitlement to a remedy for breaches that have not yet occurred.10
10
See 4 Corbin on Contracts § 956 (contracts requiring
continuing performance for a specified period are capable of a
series of partial breaches) and § 954 (injured party may reasonably
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C. Prejudgment Interest
Article IX-A(a) of the contract provides that, "[i]f the
correct amount is not paid within 10 days of the due date, interest
on any unpaid amount shall accrue at the rate set as the prime rate
by the First City National Bank in Houston, Texas, per annum...."
The Sellers sought this prejudgment interest, calculated (prime
rate) from the date each payment should have been made until the
date of the verdict; but the district court granted only "legal"
interest from the date of judicial demand until paid. The Sellers
contend that the court erred in failing to award pre-judgment
interest (1) for the period between the due date and judicial
demand, and (2) at the correct rate.
In a diversity case, prejudgment interest is governed by state
law. Smith v. Industrial Constructors, Inc., 783 F.2d 1249, 1250
(5th Cir. 1986). And in Louisiana, "[w]hen the object of the
performance is a sum of money, damages for delay in performance are
measured by the interest on that sum from the time it is due, at
the rate agreed by the parties...." La. Civ. Code Ann. art. 2000.
expect performance of remainder of contract, and thus has option of
treating non-performance as "partial" breach only, and getting
judgment therefor without barring a later action for subsequent
breaches) (1951 & Supp. 1992).
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1. Starting Date
The Sellers rely on Mini Togs Products, Inc. v. Wallace, 513
So. 2d 867 (La. App. 2d Cir.), writ denied, 515 So. 2d 447, 451
(La. 1987), and City of New Orleans v. United Gas Pipe Line Co.,
517 So. 2d 145 (La. App. 4th Cir. 1987), cert. denied, 488 U.S. 917
(1988). In Mini Togs, the court examined the Louisiana Supreme
Court's decision in Alexander v. Burroughs Corp., 359 So. 2d 607
(La. 1978), and read it "as holding that a claim arising out of a
contract, whether liquidated or not, bears legal interest from
judicial demand or from such earlier date when the claim became
ascertainable and due". Id. at 873.
In using the term "ascertainable" the court
did not mean that the precise amount of the claim
need be liquidated or established without dispute
in order for legal interest to commence in a
contract claim. In the Alexander case the amount
of recovery was in dispute throughout with the
amount awarded by the district court being changed
by the court of appeal and then again by the
supreme court. What was meant was that a debt or
claim for the payment of money or damages under a
contract is ascertainable and becomes due on the
date an active violation occurred or the obligor
was put in default, which can be earlier but never
later than judicial demand, and legal interest runs
from that date.
Id. In City of New Orleans, the court pointed out that "[a] debt
may be due before its amount is ascertained". 517 So. 2d at 164.
However, it stated that "[t]he degree of difficulty of ascertaining
ascertainable damages is not an obstacle to interest's running from
their due date". Id.
LIG relies on Trans-Global Alloy Ltd. v. First Nat'l Bank of
Jefferson Parish, 583 So. 2d 443, 457-59 (La. 1991), in which the
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Louisiana Supreme Court rejected the contention that interest
should be awarded from a breach two and one-half years before suit
was filed. Id. at 459. It distinguished other cases allowing
prejudgment interest from the date of breach on the basis that, in
those cases, "the amounts owed were both due and easily
ascertainable on the dates from which interest was awarded". Id.
In contrast, Trans-Global was a "highly complicated ... [case], in
which three courts have had difficulty in determining whether there
was a breach meriting compensation, and what the consequential
damages of that breach should be". Id. Because the damages were
not ascertainable at breach, the court held that prejudgment
interest ran only from judicial demand. Id. LIG asserts that
here, the debt, if due, was not ascertainable, because the Sellers
presented several different damage scenarios to the jury.
The question is a close one. The damages were not
ascertainable at breach. The price LIG would have paid was not
established until the jury reached its verdict, calculating damages
based on Items 3(b) and (c), as opposed to 3(a), 3(d) or 3(f). We
conclude that prejudgment interest should run only from judicial
demand. Accordingly, the district court did not err in refusing to
award pre-judicial demand interest.
2. Rate
LIG does not contest the Sellers' contentions that the
contract interest rate should apply. A schedule of that rate was
introduced at trial. In addition, with its motion for entry of
judgment, Concise provided calculations based on that rate.
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Pursuant to La. Civ. Code art. 2000, the Sellers were entitled
to prejudgment interest at the contract rate. Therefore, the
district court erred in using the legal rate. Accordingly, we
remand to recalculate prejudgment interest.
D. LIG's Counterclaim
Item 3(f) provides that, if any state or federal law, rule, or
regulation establishes a ceiling price for gas sold under the
contract, the Sellers "shall receive the maximum price allowed by
such law, rule or regulation". As noted, after the Natural Gas
Policy Act was enacted in late 1978, Goldking claimed that,
pursuant to Item 3(f), the Sellers were entitled to receive the
maximum price. As also noted, after considering the matter for
several months, LIG agreed.
LIG counterclaimed for overcharges against EnCon for 1979
through 1984; against Concise, June 1982 through 1984.11 It
contends that its counterclaim presents a pure question of law:
whether the price exceeded the maximum allowed under NGPA §
105(b)(1). It asserts that the district court erred in submitting
the issue to the jury over its objection, with erroneous
instructions which did not include the applicable NGPA section, and
that Item 3(f) is insufficient, as a matter of law, to entitle the
Sellers to an increase.
NGPA § 105(b)(1) provides that the maximum lawful price for
gas such as that from the Field is the lower of the price under the
11
As to the refund, LIG took a nonsuit with prejudice against
Austral.
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then existing contract or the maximum lawful price for NGPA § 102
gas. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459
U.S. 400, 406 (1983). Because the price under Contract 495 was
lower than the § 102 price on the date of the enactment of the
NGPA, LIG contends that "the actual price [Sellers were] receiving
[on November 8, 1978] became the maximum lawful price [they] could
receive." Piney Woods Country Life School v. Shell Oil Co., 905
F.2d 840, 851 (5th Cir. 1990).
In its Order No. 23, the FERC stated, with respect to clauses
such as Item 3(f), that "the parties may interpret such clauses
(consistent with their terms) as providing contractual authority to
escalate to applicable Natural Gas Policy Act statutory prices."
Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 30,040 at p. 30,317 (4-5-79).
In discussing Order No. 23, our court stated in Pennzoil that area
rate clauses, such as Item 3(f)
are certainly ambiguous as applied to the
collection of currently available [NGPA] ceiling
rates for natural gas. A contract should be
interpreted in light of the changed circumstances
to accomplish what the parties intended.
645 F.2d at 383, 388.
We reject LIG's contention that its counterclaim should not
have been presented to the jury. Under FERC Order No. 23 and
Pennzoil, whether Item 3(f) authorized price escalation was
dependent on the parties' intent. In August 1979, after
considering (for nearly eight months) the Sellers' request for
escalation under Item 3(f), LIG agreed that they were entitled to
receive NGPA § 102 prices. Although LIG reminded the Sellers then
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that the NGPA imposes an obligation to refund if it is eventually
determined that the price paid exceeds the "maximum lawful ceiling
price", it paid the § 102 prices until March 1983, and made no
refund claim until 1990, during this litigation. Considering this
evidence of LIG's belated change in its interpretation of Item
3(f), the jury reasonably could have concluded that the parties
interpreted Item 3(f) to authorize escalation to the NGPA § 102
price.
E. Jury Instructions/Interrogatories
1. LIG
LIG claims numerous errors in jury instructions and
interrogatories. Most relate to the fraud claims; our affirmance
of that JNOV obviates addressing them. With regard to breach, LIG
maintains that it is entitled to a new trial, because the court did
not instruct the jury on its affirmative defenses of estoppel,
acquiescence, and waiver. It also contends that the court erred in
instructing the jury that it could interpret unambiguous
agreements, and could utilize equity in doing so. LIG maintains
that the interrogatories were insufficient, because they did not
include separate interrogatories for each of its affirmative
defenses and as to each of the Sellers.
Needless to say, the district court has "broad discretion in
formulating the jury charge". Bradshaw v. Freightliner Corp., 937
F.2d 197, 200 (5th Cir. 1991).
On appeal, the charge must be considered as a
whole, and so long as the jury is not misled,
prejudiced, or confused, and the charge is
comprehensive and fundamentally accurate, it will
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be deemed adequate and not reversible error. We
review jury instructions with deference and will
only reverse judgment when the charge as a whole
leaves us with substantial and ineradicable doubt
whether the jury has been properly guided in its
deliberations.
Id. (citations and quotations omitted). In instructing the jury,
district judges may "select their own words and ... charge in their
own styles". Harrison v. Otis Elevator Co., 935 F.2d 714, 717 (5th
Cir. 1991). "No harmful error is committed if the charge viewed as
a whole correctly instructs the jury on the law, even though a
portion is technically imperfect". Id. "[M]ere differences in
form or emphasis in jury instructions do not constitute reversible
error". Bommarito v. Penrod Drilling Corp., 929 F.2d 186, 190 (5th
Cir. 1991).
The standard of review for special interrogatories is
summarized in Barton's Disposal Service, Inc. v. Tiger Corp., 886
F.2d 1430 (5th Cir. 1989). We inquire
(i) whether, when read as a whole and in
conjunction with the general charge the
interrogatories adequately presented the contested
issues to the jury; (ii) whether the submission of
the issues to the jury was "fair"; and (iii)
whether the "ultimate questions of fact" were
clearly submitted to the jury.
Id. at 1435 (footnotes and citations omitted).
LIG's requested instruction on equitable estoppel was
irrelevant to the breach claims for the period after November 1987.
That instruction refers to the Sellers' knowledge of LIG's payment
of higher prices to other producers during the period covered by
the fraud claims (pre-December 1987). Even if it can be construed
to cover the period after November 1987, the Sellers' ability to
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discover the prices LIG was paying others is irrelevant to whether
LIG breached the contract by refusing to furnish that information
pursuant to Items 3(b) and (c).
The district court did not err in refusing the requested
instructions on acquiescence and waiver, because LIG did not
introduce evidence that the Sellers either acquiesced in LIG's
refusal to comply with their repeated requests after November 1987
for price redetermination in accordance with Items 3(b) and (c), or
waived any of their contractual rights during that period.
Even if the district court erroneously instructed the jury on
contract interpretation, it is not reversible error. As reflected
in the interrogatory, in reaching its verdict on the Sellers'
breach of contract claims, the jury did not engage in contract
interpretation. In any event, LIG's requested instructions
included language similar to that about which it now complains.
It was not necessary to present separate interrogatories for
each affirmative defense and as to each of the Sellers. We
conclude that the instructions, when read in conjunction with the
interrogatories, adequately presented the contested issues to the
jury. In sum, we find no reversible error.
2. Sellers
As noted, the Sellers relied on two theories of recovery for
the period March 1983 through November 1987: fraud and breach.
The district court submitted an interrogatory only on fraud.12
12
The Sellers requested one for breach, and objected to it being
refused. Although LIG asserted in its briefs that the Sellers
failed to preserve this issue for review, it conceded at oral
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Having affirmed the JNOV on fraud, we must consider the Sellers'
claim of reversible error because a breach interrogatory was not
submitted.
We conclude that the error, if any, in refusing to submit it
was harmless. As stated in Part II.A.2., supra, in the letter
agreements between March 1983 and November 1987, the Sellers agreed
to accept reduced prices in exchange for increased takes. The
Sellers maintain that LIG's payment of higher prices to other
producers during that period establishes a prima facie case of
breach. We disagree. Their contention is correct only if the
special price agreements were under Item 3(d) (the economic-out
provision); if they were valid modifications of the contract for
limited periods, it is incorrect. Our review of the record reveals
insufficient evidence to support the former.
As LIG correctly notes, between March 1983 and November 1987,
Item 3(d) was never mentioned in connection with any price
discussion, nor in any document. Corcoran (LIG) testified that his
goal was to reduce the price to market-clearing levels, and that
Item 3(d) did not furnish a mechanism for that. Although LIG's
requests for price concessions were based on market conditions, and
Ripple, LIG's gas supply representative from March 1987 through
March 1989, referred to the prices reflected in the letter
agreements as "the LIG economic-out price", Mealy (Goldking)
testified that he never tried to fit the agreements into any
argument that they were entitled to the interrogatory if the grant
of a conditional new trial were affirmed.
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particular part of Item 3. Carter (Goldking) testified that,
although he did not recall specifically discussing Item 3(d) with
LIG, he "understood" that LIG was exercising its rights under that
provision. And, Cantrell (EnCon) likewise testified that he
"believed" that LIG was operating under Item 3(d). He testified,
however, that the Sellers could agree with LIG to change the price
for a limited period of time, and when that time expired, the price
would be governed by the contract. Likewise, Johnson (LIG)
testified that the Sellers had a right to terminate the letter
agreements, "which meant it would go back under the original terms
of the contract". This evidence is insufficient to establish that
LIG invoked Item 3(d).13 Because the letter agreements were valid
and governed the price from March 1983 through November 1987, the
district court did not reversibly err in refusing to submit a
breach interrogatory for that period.
F. Damages
Launching numerous attacks against the bases for the Sellers'
expert's opinion, LIG contends that they failed to introduce
competent evidence to justify any contract damage award. We
briefly discuss a few of these contentions and reject the
remainder.
In reviewing a jury award, we are actually, of
course, reviewing the district court's denial of a
motion for a new trial or remittitur. Because the
district court has a wide range for discretion in
acting on such motions, our standard of review is
not simply right or wrong but abuse of discretion.
13
We also note that, in the interrogatory, the jury awarded
damages for fraud based on Items 3(b) and (c), not (d).
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Sam's Style Shop v. Cosmos Broadcasting Corp., 694 F.2d 998, 1006
(5th Cir. 1982). "[T]here is no such abuse of discretion unless
there is a complete absence of evidence to support the verdict".
Id.
The jury awarded damages based on the difference between
prices LIG paid to the Sellers from December 1987 through trial
(February 1991), and prices calculated pursuant to Items 3(b) and
(c) for that period. The damages were based on the testimony of
the Sellers' expert, John Brickhill. Item 3(c) provides that the
redetermined price shall be the average of the three highest prices
for gas of similar quality and pressure being paid by pipeline
companies to producers in Terrebonne and contiguous parishes under
contracts with terms of one year or longer.
LIG asserts that, to establish a price under Item 3(c), the
Sellers were required to prove actual prices being paid on May 23
(Contract 495 production anniversary date) of each of the three
years in question under contracts for gas that met the Item 3(c)
requirements. This contention is based on a strained reading of
that item. It does not require the use of prices being paid on May
23. Brickhill's testimony was based on prices actually paid near
the time of the effective date of the redetermination, and his
opinion was subjected to intense cross-examination on this point.
He testified that the prices he used in his calculations were not
suspended or subject to refund. In addition, the contracts
Brickhill used were for a term in excess of one year. LIG's
remaining contentions regarding the pressure, quality, and volume
- 27 -
of gas were also the subject of vigorous cross-examination, and go
to the weight, rather than admissibility, of that evidence.
LIG also attacks Brickhill's reliance on purchased gas
adjustment ("PGA") filings in reaching his opinion. PGAs are
periodic filings by interstate gas pipelines which show the
quantity of gas delivered to the pipeline over a period of time,
the cost of gas incurred by the pipeline for that period, and cost
and quantity projections for future periods. LIG contends that
Brickhill's testimony and the PGAs were purely speculative and
incompetent evidence for purposes of calculating damages under Item
3(c). It further contends that the PGAs were not admissible
through the testimony of the Sellers' expert under Fed. R. Evid.
703, because they were not of a type reasonably relied upon by
other experts in that particular field. According to LIG,
Brickhill's mathematical method of dividing the volume of gas
reported in a PGA into the total costs reported for that period
does not provide the price the interstate pipeline paid to the
various producers, and amounts to a guess.
LIG does not challenge Brickhill's qualifications to express
an opinion, Fed. R. Evid. 702, but contends that the facts he
relied upon are not of the same type as are relied upon by other
experts in the field, Fed. R. Evid. 703, and that he did not use a
well-founded methodology in reaching his conclusions. See
Christophersen v. Allied Signal Corp., 939 F.2d 1106, 1111 (5th
Cir. 1991) (en banc), cert. denied, ___ U.S. ___, 112 S. Ct. 1280
(1992). We disagree. In Christophersen, we stated that, "[a]s a
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general rule, questions relating to the bases and sources of an
expert's opinion affect the weight to be assigned that opinion
rather than its admissibility and should be left for the jury's
consideration". Id. at 1109. This applies here. LIG's challenges
were appropriate for resolution by the jury.
After careful consideration of LIG's numerous contentions, we
conclude that there was competent, admissible evidence to support
the damages.
III. CONCLUSION
We have reviewed all of the almost countless issues raised by
the several parties; those not specifically addressed have been
found to be without merit. The judgment of the district court is
AFFIRMED, except with respect to the prejudgment interest award.
The case is REMANDED for the limited purpose of recalculating it.
AFFIRMED in part; REVERSED and REMANDED in part.
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APPENDIX
3. Price:
(a) For all gas delivered to Buyer at any
point of delivery, Buyer agrees to pay Seller two
dollars and five cents ($2.05) per MMBtu during the
period from initial delivery of gas under this
agreement until the first anniversary thereof.
This price, if not redetermined as provided for
hereunder, shall escalate five cents (5.0¢) per
MMBtu on the first anniversary of first delivery of
gas and each anniversary thereafter.
(b) Seller has the option to cause the
price to be paid by Buyer for Seller's gas
delivered to be redetermined for the period
beginning with the first anniversary of initial
delivery of gas under this contract and additional
such options annually thereafter during the term of
this Contract. Such redetermined price shall
become effective on the first day of the period for
which it is determined and continue in effect until
replaced by a subsequent price redetermination or
escalate in the amount as provided in Item 3(a)
above. Any request for a redetermination of prices
shall be given in writing by Seller to Buyer not
later than thirty (30) days nor more than one
hundred twenty (120) days prior to the beginning of
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the period for which a price redetermination is
requested. Should such request not be given within
such time, Seller's said option shall be deemed to
have been waived by Seller for that redetermination
date only.
(c) The redetermined price shall be the
highest price of the following:
The price computed by taking the average
(rounded off to the nearest one-hundreth of a
cent) of the three (3) highest prices per
MMBtu for gas being paid by pipeline companies
to producers (including prices being paid by
Buyer and including prices being received by
Seller from other pipeline purchasers) under
contracts covering the purchase of gas in
Terrebonne Parish, and those parishes
contiguous thereto, whose original terms are
one (1) year or longer and which gas is of a
pressure and quality similar to that available
hereunder on the first (1st) day of the period
for which a redetermination is being made;
provided, however, any price being paid by an
interstate company will not be used under this
item to the extent that such price is
suspended or subject to refund at the time of
any such price redetermination hereunder. For
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purposes of this contract, a pipeline company
is defined as any company whose principal
business is purchasing gas from producers in
the field and transporting such gas through
their pipeline facilities for resale.
(d) Notwithstanding, the foregoing
provisions of this Item 3, if from time to time and
at any time Buyer determines that economic
conditions indicate a significant and evident
downward change in the value to Buyer of gas
purchased hereunder, Buyer is given the option to
cause the price to be paid by Buyer for Seller's
gas to be renegotiated for any price
redetermination period above described; provided,
however, that Buyer shall not have such right so
long as Buyer is paying producers (located in
Terrebonne Parish and parishes contiguous thereto
for the purchase of gas similar to that being
purchased hereunder) a price equal to or above the
price being paid to Seller hereunder, and if
renegotiated, such renegotiated price shall not be
less than such prices then being paid by Buyer to
such producers for similar gas in said geographical
area. Any request for a renegotiation of prices
shall be given in writing by Buyer to Seller not
less than thirty (30) days, nor more than one
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hundred twenty (120) days, prior to the beginning
of the period for which a price renegotiation is
requested hereunder. Buyer and Seller agree to
negotiate in good faith on a renegotiated price
which will reflect the economic conditions or
burden on Buyer in effect relating to gas purchases
as of the first (1st) day of the period for which a
price renegotiation is being made. Such
renegotiated price shall become effective on the
first day of the period for which it is determined;
provided, however, Seller may elect to terminate
this Contract instead of selling gas to Buyer
hereunder at such renegotiated price by giving
ninety (90) days prior written notice thereof to
Buyer anytime after the date such renegotiated
price is determined; provided, however, deliveries
continue at the last effective price on a day-to-
day basis at Seller's option for a maximum of 60
days while Seller locates another market for said
gas. If the renegotiated price is equal to that
provided for above and in 3(c) above, then in such
event, Seller shall not have the right to cancel
this contract.
(e) If any state or federal law, rule or
regulation makes all or any portion of Item 3(c)
above illegal or inoperative, then in such event
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the parties shall meet and mutually agree and
determine the price for each respective anniversary
date. Should the parties be unable to agree on
such price within a sixty (60) day period from the
effective date of such new price, then either party
may terminate this Contract by giving the other
party ninety (90) days prior written notice.
(f) Should any state or federal law, rule
and regulation establish a ceiling price for the
gas sold under this Contract, then in such event,
Seller shall receive the maximum price allowed by
such law, rule or regulation. It shall be the
responsibility of Seller to notify Buyer of any
such law, rule or regulation permitting a price
higher than that being paid hereunder, and such new
established price shall become effective on the
effective date of such Federal law, rule or
regulation, if Seller notifies Buyer within thirty
(30) days after such effective date. If notice is
not received by Buyer within (30) days of such
effective date, then the price shall become
effective upon receipt of Seller's notice by Buyer.
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