Northern Indiana Public Service Co v. Carbon County Coal Co.

799 F.2d 265 (7th Cir. 1986)

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Nature of the Case

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Facts

In 1978, Northern Indiana (P) entered into a long-term contract to purchase coal from Carbon County Coal Co. (D). The contract was for 20 years at 1.5 million tons per year. The contract had an escalation clause that took the price of the coal from $24 per ton to $44 per ton by 1985. The price of coal became depressed, and this made P's contract with D onerous. In 1983, P requested permission to raise its rates to reflect increased fuel charges. P’s customers objected in that P could, in fact, buy power from neighboring utilities for resale to its customers at cheaper rates. The requested increased was granted, but P was told to make a good faith effort to find and buy electricity from others if it was lower in cost than P’s cost of generation. The state public service commission ordered P to make 'economy purchase orders' from other utilities. The Commission then told P that it was basically going to bear the brunt of the adverse effects of entering a long-term coal supply contract, which did not allow for renegotiation and was not a requirements contract. The contract with D, in fact, did provide for renegotiation, but it was a one-way clause in favor of D. The contract was not a requirements contract. P sought declaratory relief from the contract; the Public Service Commission's action frustrated the purpose of the contract. D counterclaimed for breach and sought a preliminary injunction to require P to take delivery of the coal. The contract had a force majeure clause in it that permitted P to stop taking delivery of coal for any cause beyond its reasonable control including acts of civil authority, which wholly or partly prevent the utilizing of the coal. P argued that the Commission’s economy purchase orders prevented it in whole or part from using the coal it had agreed to buy from D. The district court granted D's motion. At trial, D was awarded a verdict of $181 million in lieu of specific performance. P appealed. D appealed the denial of specific performance.