Justia Contracts Opinion Summaries

Plaintiffs are producers of coal bed methane gas; defendant is large coal-mining company. Gas extraction firms need access to coal from which to extract gas and coal companies need to have gas removed from their mines before mining. To form an alliance for that purpose, plaintiff began by acquiring options to buy coal-mining rights; it planned to sell the options in exchange for the right to extract gas from its partner's coal. The parties signed memorandum of understanding, which stated that it did not constitute a binding agreement, and, later, a non-binding letter of intent. Plaintiff began transferring coal rights to defendant as contemplated by the letter of intent, but defendant delayed reciprocating. Ultimately defendant announced that it was terminating the letter of intent. The trial court entered summary judgment for defendant on a fraud claim. The Seventh Circuit affirmed, stating that "when a document says it isn't a contract, it isn't a contract" and that plaintiff did not establish promissory fraud or justifiable reliance.

John and Betty Vlasin leased the oil and gas rights to their land to Ranch Oil Company. Ranch Oil operated on one-half of the land in the lease and Byron Hummon operated on the other half. After the primary term of the lease expired and the wells stopped producing oil, the Vlasins entered into a new lease agreement with Hummon which encompassed the entirety of their land. Thereafter, Ranch Oil took action to revive one of its dormant wells, relying on a savings provision of the lease, which stated that the lease shall not terminate if the lessee commences operations for drilling a well within sixty days from such cessation. Plaintiffs, the Vlasins and Hummon, brought suit against Ranch Oil for declaratory judgment, trespass, and conversion. The court ruled in favor of Plaintiffs but awarded only nominal damages. The Supreme Court affirmed, holding that the district court did not err in concluding (1) Ranch Oil's activities on the Vlasins land did not operate so as to extend Ranch Oil's interest in the lease, and (2) Plaintiffs failed to prove they were entitled to damages under trespass and conversion claims, and the Vlasins were entitled only to nominal damages.

Plaintiff owns 2,485 acres containing Indiana's only antebellum plantation and 2,000 acres of "classified forest," with endangered species habitats. A utility company has a lease for storing and extracting oil and natural gas on portions of the property. The Lease continues so long as "oil or gas is produced in paying quantities" or "the Property continues to be used for the underground storage of gas" and will terminate upon the utility's surrender or failure to make payments. The lease contains provisions to protect historic sites and to calculate damage to trees, requires notice of utility activity, and requires that the utility's use be "as minimally necessary." Plaintiff sought damages and to terminate the lease and evict the utility. The district court entered judgment for the utility, finding that a disagreement about the use of land was not an express reason for termination and that the lease specifically provided that damages were the proper remedy. Plaintiff dismissed the damages claim with prejudice to appeal the ejectment claim. The Seventh Circuit affirmed. Plaintiff did not show that damages are inadequate to compensate for the harm to its property.

Plaintiff, which owned a nuclear power plant, entered into the standard U.S. Department of Energy contract, under which DOE agreed to collect spent nuclear fuel (SNF) no later than 1998. DOE never began collecting SNF and has breached contracts nationwide. Massachusetts restructured the electric utility industry and, in 1999, the plant sold for $80 million; buyer agreed to accept decommissioning responsibilities for $428 million. The district court awarded $40 million for the portion of the decommissioning fund corresponding to projected post-decommissioning SNF-related costs attributable to DOEâs continuing breach. The court awarded the buyer $4 million in mitigation damages, including direct and overhead costs for new spent fuel racks and fees paid to the NRC. The Federal Circuit reversed in part and remanded. Plaintiff cannot recover damages under a diminution-of-value theory in a partial breach setting. The sale of assets does not alter the principle that when the breaching party has not repudiated and is still expected to perform, anticipated damages are not recoverable until incurred. A non-breaching party may recover from the government indirect overhead costs associated with mitigation and the costs of financing those activities.

Celeste Grynberg and her husband were co-owners of Grynberg Petroleum. Celeste filed a complaint for declaratory relief, breach of contract, unjust enrichment, and conversion against L&R Exploration Venture and numerous individuals and entities having an interest in the venture (collectively L&R), claiming that L&R owed her compensation for services Grynberg Petroleum provided to L&R and that she was entitled to payment of those amounts. The district court granted summary judgment for L&R and dismissed the complaint on the basis of res judicata, finding that Celeste was in privity with parties involved in prior litigation in Colorado and New York and her complaint involved the same subject matter and issues resolved in those proceedings. The Supreme Court affirmed, holding that Celeste was in privity with her husband, who was a party in the New York proceedings, as the assignee of his interest in L&R and with Grynberg Petroleum as the co-owner of the company and was bound by the prior rulings.

Kivalina, a native community located on an Alaskan barrier island, filed a lawsuit (Complaint) in a California district court against The AES Corporation, a Virginia-based energy company, and numerous other defendants for allegedly damaging the community by causing global warming through emission of greenhouse gases. Steadfast Insurance, which provided commercial general liability (CGL) to AES, provided AES a defense under a reservation of rights. Later AES filed a declaratory judgment action, claiming it did not owe AES a defense or indemnity coverage in the underlying suit. The circuit court granted Steadfast's motion for summary judgment, holding that the Complaint did not allege an "occurrence" as that term was defined in AES's contracts of insurance with Steadfast, and that Steadfast, therefore, did not owe AES a defense or liability coverage. The Supreme Court affirmed, holding that Kivalina did not allege that its property damage was the result of a fortuitous event or accident, but rather that its damages were the natural and probable consequence of AES's intentional actions, and such loss was not covered under the relevant CGL policies.

Chevron, the franchisor, brought suit for declaratory judgment against one of its franchised dealers, M&M Petroleum Services, Inc. M&M responded with a counterclaim of its own, a counterclaim that was not only found to be frivolous, but the product of perjury and other misconduct. The court held that had M&M merely defended Chevron's suit, it could not have been held liable for attorneys' fees. The court held, however, that in affirmatively bringing a counterclaim that was reasonably found to be frivilous, M&M opened itself up to liability for attorneys' fees under the Petroleum Marketing Practices Act, 15 U.S.C. 2805(d)(3). Therefore, the district court did not err in determining that Chevron was eligible to recover attorneys' fees, nor did the district court abuse its discretion in determining that M&M's counterclaim was frivolous and awarding attorneys' fees to Chevron under section 2805(d)(3).

Jefferson Block submitted a claim under the London OPA Insurance Policy for Offshore Facilities (OPA Policy) for indemnification of the removal costs it incurred in responding to a pipeline leak. Underwriters denied the claim and Jefferson filed suit against Underwriters in district court, alleging that Underwriters wrongfully refused to indemnify it for oil pollution removal costs. The court held that the district court erred when it refused to apply the contra-insurer rule where the OPA Policy was ambiguous with respect to the issue of coverage for Jefferson Block's 16-inch pipeline and extrinsic evidence in the record did not conclusively resolve this ambiguity. Therefore, the court held that, since Jefferson Block offered a reasonable interpretation of the policy and did not completely draft the ambiguous provisions of the OPA Policy, the contra-insurer rule should apply and the ambiguity should be resolved in favor of the insured, Jefferson Block.

Five companies entered into special contracts with the Toledo Edison Company for the sale of electricity. The Public Utilities Commission of Ohio (PUCO) established February 2008 as the termination date for the contracts, basing its finding on the language of the special contracts and its orders in earlier electric-deregulation cases. Appellants challenged the decision, contending (1) Toledo Edison agreed in 2001 that the contracts would not terminate until Toledo Edison stopped collecting regulatory-transition charges from its customers, and (2) December 31, 2008 was the date when Toledo Edison stopped collecting regulatory-transition charges. The Supreme Court reversed, holding that the PUCO ignored the plain language of the 2001 amendments to Appellants' special contracts, and accordingly, the PUCO unlawfully and unreasonably allowed Toledo Edison to terminate the special contracts in February 2008.

Appellant, Summer Night Oil Company, and Appellees, individuals and oil companies, resolved a dispute over the operation of two oil wells through a settlement agreement. Appellant filed a motion to compel performance of the agreement after the parties failed to perform timely their obligations under the agreement. Specifically, Appellant asked the district court to compel Appellees to deliver all title clearance documents under the agreement. Appellees responded with a request to compel Appellant to pay a fine due to the EPA and a payment owed to Appellees under the agreement. Both parties sought attorney fees. The district court enforced what it determined to be the plain meaning of the agreement's terms, and (1) ordered Appellant to pay the fine owed to the EPA, (2) ordered Appellant to pay Appellee the amount owed it under the agreement, (3) ordered Appellees to deliver all title clearance documents to an escrow agent, and (4) declined to award attorney fees to either party. The Supreme Court affirmed, holding (1) the district court properly denied Appellant's motion to compel performance of the agreement according to Appellant's terms, and (2) the district court correctly denied Appellant's motion to alter or amend its judgment.