Virginia Electric and Power Co v. Bransen Energy, Inc
850 F.3d 645
| 4th Cir. | 2017Background
- Dominion contracted with Bransen to supply ~600,000 tons of Run-of-Mine (performance) coal for pre-commissioning testing of a new power plant; Master Agreement, Pre-COD Confirmation, and Services Agreement governed the transactions.
- Bransen delivered ~599,920 tons to a leased CTI stockpile but included ~43,000 tons of coke breeze (a non-coal industrial byproduct) and otherwise delivered GOB (waste) coal rather than Run-of-Mine coal.
- Dominion discovered the contamination (anonymous tip, interview with Bransen president, and independent SGS testing) and refused to deliver the stockpile to the Plant for pre-COD use; Dominion procured alternative fuel and sought to remediate/blend the stockpile.
- Dominion sued for breach of contract and sought damages; district court granted partial summary judgment on the coke-breeze portion and held for Dominion after a bench trial on the remaining GOB/waste coal, awarding about $22.9 million (net award after earlier partial recovery $20,936,688).
- Key contract provisions: Section 5 (quality adjustments, rejection, suspension) applies to shipments that violate numeric specification limits; Section 8.8 limits damages for other breaches to direct actual damages; parties agreed Virginia law applies.
Issues
| Issue | Plaintiff's Argument (Dominion) | Defendant's Argument (Bransen) | Held |
|---|---|---|---|
| 1) Did Bransen materially breach by delivering coke breeze and GOB (waste) coal instead of Run-of-Mine coal? | Bransen delivered non-coal coke breeze and waste (GOB) coal that defeated the contract’s essential purpose (performance fuel for testing). | Coke breeze was a small fraction and met some specs; Dominion accepted deliveries or failed to timely reject under UCC. | Yes. Court found coke breeze is not Run-of-Mine coal and GOB is waste coal; Bransen committed the first material breach. |
| 2) Was Dominion the first breaching party by declining future Post-COD purchases? | Dominion had no obligation to purchase post-COD; Post-COD Confirmations gave Dominion ordering option, not a purchase obligation. | Dominion purportedly decided not to purchase through 2017, constituting first breach. | No. Post-COD purchases were optional; Dominion’s decision did not breach. |
| 3) Do Section 5 remedies (quality adjustments/rejection/suspension) exclusively limit Dominion’s remedies for the product delivered? | Section 5 remedies apply to shipments that violate numeric specifications, but Dominion’s claim is that Bransen failed to deliver the contracted product (a separate ‘‘product’’ defect), so broader damages are available. | Section 5 is the Master Agreement’s exclusive remedy for nonconforming coal shipments. | Section 5 is exclusive only for remedies tied to specification nonconformity; it does not preclude recovery where the seller failed to deliver the contracted product (product-definition issue). Thus Section 8.8 (direct damages) controls here. |
| 4) Were the district court’s damages (processing, replacement coal, lease and permit costs, stockpile depreciation) improper or speculative? | Damages are direct and compensate cost to put Dominion in the position it would have been in but for breach (costs to process/repair stockpile, replacement coal, leases, permit costs). | Expert’s damages included impermissible indirect or lost-profit items; calculations relied on abandoned missing-coal theory. | Damages were within the contract’s direct-damages limitation and supported by expert testimony; district court adjusted for abandoned theories and did not commit clear error. |
Key Cases Cited
- Dreamstreet Invs., Inc. v. MidCountry Bank, 842 F.3d 825 (4th Cir. 2016) (summary judgment standard cited)
- Raleigh Wake Citizens Ass’n v. Wake Cty. Bd. of Elections, 827 F.3d 333 (4th Cir. 2016) (bench-trial mixed standard: legal conclusions de novo, factual findings for clear error)
- Andrews v. Am.’s Living Ctrs., LLC, 827 F.3d 306 (4th Cir. 2016) (clear-error standard explained)
- Mallory v. Booth Refrigeration Supply Co., 882 F.2d 908 (4th Cir. 1989) (discussion of clear-error review)
- TransDulles Ctr., Inc. v. USC Corp., 976 F.2d 219 (4th Cir. 1992) (measure of direct damages: cost to complete or cost of repair)
- Long v. Abbruzzetti, 487 S.E.2d 217 (Va. 1997) (definition of direct damages as those flowing naturally from breach)