Northern Illinois Gas Co. v. Energy Cooperative, Inc.

461 N.E.2d 1049 (Ill. App Ct. 1984)

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Nature of the Case

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Facts

In order to deal with a natural gas shortage in the early to mid-1970s P received permission from the ICC to construct a supplemental natural gas (SNG) plant. The plant began operation in 1974 using various types of feedstock which were converted into natural gas. One type of feedstock was naphtha, which was supplied by Atlantic Richfield Company (ARCO), pursuant to a contract entered into with NI-Gas in 1973. The ARCO contract was assigned to D in 1976. The contract was to remain in force for 10 years or until 56 million barrels of naphtha had been delivered to P. In 1980 due to market forces, P decided to reduce the inventory by cutting back on SNG production, which was its most expensive source of gas. P attempted to negotiate an end to the contract with D. When negotiations failed, P terminated its performance as of March 31, 1980. P sued seeking a declaratory judgment that it had no further obligations under the contract and that D's damages, if any, were limited to the amount specified by the liquidated damages clause of the contract. D counterclaimed for $230 million in damages (the alleged difference between the contract and market prices of naphtha on February 29, 1980, when D learned of P's' termination of the contract), and unspecified additional damages. In defense of its breach, P argued the force majeure provisions of the contract, its obligation to comply with the Illinois Public Utilities Act, commercial impracticability of continued performance and frustration of the purpose for which it had entered into the contract. P also argued that D was entitled only to the liquidated damages clause of the contract and that D is precluded from obtaining the relief requested because it failed to mitigate its damages and D's damages, if any, are measured by the difference between the contract and resale prices, less expenses saved by D as a result of P's termination. In an amended complaint P also charged D with overcharging for gas and a breach of good faith in the performance of the contract. D was granted summary judgment on P's force majeure, frustration of purpose, and public utility defenses. Later, the trial court granted summary judgment for D on P's allegations of fraud and breach of contract by D because of its alleged overcharges. The trial court directed a verdict for D on P's defense of commercial impracticability after the close of the evidence. Prior to trial, the court entered judgment for P for the amount of D's overcharge and precluded P from referring to this judgment during trial. The court also granted D's motion in limine to exclude evidence concerning liquidated damages, force majeure and P's status and duties as a regulated public utility. This appeal resulted.