529 S.W.3d 472
Tex. App.2016Background
- TXUPM (buyer) contracted with four Wind Farms to purchase annual quantities of wind-generated electricity and associated renewable energy credits (RECs); the Wind Farms failed to meet annual minimums.
- Electricity is fungible and cannot be stored; TXUPM performed continuous, real-time daily balancing (replacing shortfalls from other sources) to meet customer demand.
- Trial jury found the Wind Farms breached and awarded TXUPM $8,900,000 in market-damage (Section 2.713) for Renewable Energy not delivered (Question 4).
- Trial court also submitted a separate Question 5 asking whether TXUPM had "covered" (defined as purchasing/producing substitute electricity); jury answered Yes, the court concluded cover precluded market damages, and entered take-nothing judgment for TXUPM.
- On appeal and remand from the Texas Supreme Court, the appellate court held TXUPM preserved its statutory-construction argument that cover under Tex. Bus. & Com. Code §2.712(a) requires post-breach purchases, reversed the take-nothing judgment, rendered judgment for TXUPM for $8,900,000, allowed retention of $3,075,000 drawn under letters of credit, and remanded for attorney’s fees and interest.
Issues
| Issue | Plaintiff's Argument (TXUPM) | Defendant's Argument (Wind Farms) | Held |
|---|---|---|---|
| Whether Question 5 (cover) should have been submitted / its answer disregarded | TXUPM: Cover requires purchases "after a breach"; its daily balancing was pre-breach operational activity, so cover did not apply as a matter of law | Wind Farms: TXUPM’s real-time replacements were substitute purchases/productions that constituted cover, so market damages are barred | Majority: TXUPM preserved the argument; §2.712(a) requires post-breach cover; Question 5 should not have been submitted or relied upon; jury market award stands |
| Availability and amount of market damages (§2.713) | TXUPM: Entitled to market damages; $8.9M jury award is binding; asks for larger award on remand (not preserved) | Wind Farms: Market damages unavailable if buyer covered; also attacked expert valuation | Majority: $8.9M award stands (unchallenged on sufficiency); TXUPM’s request to increase award not preserved |
| Whether TXUPM can retain letter-of-credit proceeds ($3,075,000) | TXUPM: Allowed to retain proceeds as partial satisfaction of damages judgment | Wind Farms: Trial court ordered return because it concluded TXUPM had no recoverable damages | Majority: Because TXUPM recovers market damages, it may retain the LOC proceeds in partial satisfaction |
| Entitlement to attorney’s fees (Civ. Prac. & Rem. Code Ch. 38) | TXUPM: Prevailing on breach claim, so entitled to Chapter 38 fees | Wind Farms: Opposed | Majority: TXUPM is prevailing party on breach; remand to trial court to determine reasonable Chapter 38 fees |
Key Cases Cited
- Jon-T Farms, Inc. v. Goodpasture, Inc., 554 S.W.2d 743 (Tex. Civ. App.—Amarillo 1977) (pre-breach routine purchases held not to be evidence of statutory cover)
- Osterberg v. Peca, 12 S.W.3d 31 (Tex. 2000) (preservation rules; jury-charge objections required to preserve certain appellate complaints)
- Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221 (Tex. 2011) (Rule 279 omitted-element framework; deemed findings and sufficiency review)
- T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1993) (methods to preserve legal-sufficiency complaints in jury trials)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for legal and factual sufficiency review)