*1 n u- оo T—I America; United UNITED STATES America, ex rel Robert J.
States
Norbeck, Plaintiffs-Appellees,
v. ELECTRIC POWER COOPER
BASIN
ATIVE, Defendant-Appellant. America, Plaintiff,
United States America, ex rel Robert
United States Norbeck, Plaintiff-Appellant,
J.
v. Cooperative,
Basin Electric Power
Defendant-Appellant. America,
United States
Plaintiff-Appellant, America, ex rel Robert States of
United Norbeck, Plaintiff,
J.
v. Cooperative, Power
Basin Electric
Defendant-Appellant. 99-3122, 99-3216,
No. 99-3450. Appeals, States Court of
United
Eighth Circuit. Oct. 2000.
Submitted: April
Filed:
. *5 Hansen,
Gary argued, Minneapolis, MN (Edwaed Allen, Fox, Aron on the F. J. brief), appellant. Nodland, Bismarck, argued, power
Irvin B. for the life of the contract. Ac- ND, for Robert Norbeck. cordingly, they agreed that price WAPA’s would be based on the power pro- cost of Loeb, argued, Washington,
Robert M. duction. The contract provided that (David Schneider, Ogden, John DC W. 185/450th, WAPA would pay forty-one or Letter, Benjamin Vernia, Douglas N. J. on percent, of the producing power cost of brief), for U.S. II. AVS WOLLMAN, Judge, Before Chief LAY The methodology Basin used for deter- BEAM, Judges. Circuit mining power the cost of AVS II was set LAY, Judge. Circuit out in A Exhibit of the contract. Exhibit A listed a series of fixed and variable or PART I. INTRODUCTION energy related costs associated with pro- (“Ba- Cooperative Basin Electric Power ducing power at facility, the AVS such as sin”), Dakota, located North orga- debt, costs, interest operation steam nized to build power plants provide expenses, and maintenance costs. The power for its members. In the late 1970s (“RUS”) Rural Utilities Service promulgat- 1980s, early Basin constructed the An- ed the Rural System Utilities Service (“AVS telope Valley Station facility”) (“RUS Accounts System”) upon which Dakota, subject North which is the of this these categories cost were based.2 The litigation. The facility includes three System RUS incorporates Generally Ac- (“AVS separate parts: two stations cepted Accounting (“GAAP”), Principles II”), I” and “AVS and a set of common general series of principles followed designed provide facilities service to accountants. Included in GAAP are the both AVS I and AVS II. (“FAS”) Financial Accounting Standards *6 published by the Financial Accounting
This litigation stems from a contract (“FASB”). (the Standards Board contract”) “Basin-WAPA between Ba- sin and Western Area Power Administra- However, before began purchas- WAPA (“WAPA”)1. tion During the course of II, ing power from AVS Basin sold AVS II building facility, the AVS Basin realized to a corporate consortium of for investors facility that the generate AVS would more $622,875,000, back, a total of and leased it power demanded, than its members so Ba- paying monthly a lease cost instead of sin needed to sell this excess power to interest cost- on II AVS debt. Conse- keep price power the from the AVS quently, the Basin-WAPA contract was facility at a reasonable rate. At the same modified to reflect that WAPA’s cost of time, WAPA power needed extra to meet power would pro include a rata share of the demands of its customers. In costs, costs, lease rather than interest WAPA buy contracted to mega-watts AVS II. (“MW”)of the 450 MW capacity of II. parties contract, When the executed the The contract was executed in 1982 and they could accurately not predict the price ran from 1985 to 1990 any appar- without 1. Department Administration, WAPAis a unit of the of Ener- predecessor fication was the gy, generates RUS, and distributes it, to RUS. and the REA before acted as regional or local distribution utilities. debt, guarantor the of Basin's and oversaw many aspects of Basin's We administration. 2. The actually Basin-WAPA contract lists will refer to both these entities as the "RUS.” REA, “REA Accounts.” The or Rural Electri- PART II. OF $15.5 In Robert Norbeck OVERCHARGE problems. ent (“Norbeck”), Basin’s chief MILLION VS. MILLION $2.4 who worked as contract, during the Basin-WAPA auditor Background A. job. He prospect losing the his faced Initially, challenges a “whistle blower” letter Basin’s Basin the district sent threatening finding overcharged to reveal several court’s management, Basin’s fraudulent transactions WAPA due to Basin’s sale and leaseback allegedly job. by Although his Undeterred of AVS II. Basin kept unless he admits some letter, Norbeck,3 respond- overcharge who approx- Basin fired occurred returned tarn, trial, under the bringing qui imately ed action million to WAPA before by $2.4 §§ Claims Act.4 See 31 U.S.C. 3729- the district court found that the total False eventually overcharge inter- amount of approx- Government vened, imately contract million. In with this although pursued accord $15.5 claims, decision, to claims under the opposed as district court awarded Act, ($15.5 Nor- over mil- against slightly False Claims Basin. WAPA million $13 million) Relator, beck, pursued then in as the lion minus contract dam- $2.4 by ages. claims abandoned Govern- The district court further found false overcharges ment. that Basin submitted thesе violation of False Claims stated, Broadly parties bring ‘four Act multiplied damages the contract First, appeals appeal. issues provided the Act for a total that Basin violated finding district court’s appeal, million. judgment On $35.95 to the regard the False Claims Act that we reverse district asks manner in which it accounted and billed award, in- arguing court’s Norbeck5 Second, II. for the of AVS sale/leaseback support troduced no evidence to the dis- appeals finding the district court’s judgment. agree, trict court’s We and we that Basin breached the Basin-WAPA con- reverse the district court’s award of $13 by ten-year amortization choosing tract damages, as the million contract as well Next, on period for the common facilities. damages multiplied award of under cross-appeal, Norbeck claims the district Act. False Claims court erred when it found Basin did facilities, large power Like not breach the Basin-WAPA contract most *7 including imputed facility inter- AVS was financed on debt. Under post-construction contract, power original a to the Basin-WAPA charged est as cost of WAPA. of the costs included a share interest Finally, cross-appeals the Government WAPA’s II. costs also finding payments court’s that Basin’s calcula- on AVS WAPA’s district from the tion and coal costs did not con- included a share of the interest billing for only portion a discuss common facilities. Since a of stitute breach of contract. We II, only issues the common facilities served AVS these seriatim. discharge False Act allows an individual 3.Norbeck’s from Basin was the 4.The Claims (the Relator) qui bring a claim—a to tarn separate subject a discrimination suit in of claim “in the name of the Government.” jury damages a no awarded to Nor 3730(b)(1). brings § a U.S.C. A Relator who appealed beck. Norbeck his case to this ultimately that is successful can false claim court, jury where verdict was affirmed. damages percentage award- recover a of Coop., 215 See Norbeck v. Basin Elec. Power 3730(c)(l)-(2). § ed. See id. at Cir.2000). (8th F.3d pursued this claim.
5.The Government has not Instead, kept interest all in a single common faсilities’ was AVS debt was portion a II, pro and a rata pool. allocated to AVS Since the cost of from IAVS passed on to WAPA. share of that and II AVS included interest debt from facility providing power, as well as original of the Ba- After the formation a of the portion interest the common contract, new general sin-WAPA facilities, to in- Basin needed allocate the it in that was serious manager discovered pooled terest from this debt to each of the money pay To raise to financial straits. AVS facilities. The interest was allocated debt, II to an off Basin sold AVS outside upon each back, proportionate based facilities’ of investors and then leased group (cost). net investment value retaining operations full control over II, paying monthly but now a lease. AVS transaction, After the sale/leaseback original agreement made WAPA Since was no longer responsible any WAPA for interest, a II responsible for share of AVS II, charges including interest from AVS II eliminat- and the AVS sale/leaseback interest from the million unretired $99.5 debt, II ed AVS Basin and WAPA altered Basin, II debt. According AVS it elimi- original agreement. their Under the new II category nated AVS interest as a cost agreement, responsible became WAPA WAPA, properly charge but continued to payments a II lease share of AVS lieu of WAPA its share of the common facili- payments. II The common interest AVS ties’ interest. million was still $99.5 part not a facilities were sale/lease- debt, however, pooled AVS inter- II, back of AVS so this amendment to the est from the million still accrued. $99.5 Basin-WAPA contract did not affect pooled When Basin allocated the interest responsibility for its WAPA’s share of (AVS I AVS the common facilities common facilities’ interest. II having been eliminated because Basin, however, apply did not all of the sale/leaseback), part of the interest from money it from the sale II received of AVS million was allocated to the com- $99.5 project Approximately debt. AVS $99.5 Then, mon facilities. once the common pay higher million went to off interest debt facilities’ interest was allocated to IAVS agreement from other WAPA’s projects. II purposes AVS for the of determin- to pay a share of AVS II lease costs as a ing the cost power, portion substitute for AVS II interest costs meant interest from the unretired million $99.5 not have responsi- WAPA should been Thus, was allocated to II. when any ble for interest from the unretired billed WAPA for common facilities’ inter- agree Both parties million. $99.5 est, the bill included a small portion of the charged for some of the inter- million, interest from the unretired $99.5 est from They disagree, million. $99.5 for which Basin admits WAPA should not however, of the overcharge. on the amount responsible. have been *8 explanation To understand Basin’s for Apparently complained the no one overcharge on interest from the about $99.5 debt, overcharge during million in unretired a brief this period, examina- the contract tion of accounting procedures and it was when Norbeck threatened necessary. keep did not separate Basin to “blow the whistle” on several of Basin’s pools of debt for each of the AVS facilities. transactions that Basin took action.6 Af- letter, upon 6. Based whistle blower Norbeck’s ease. Norbeck’s letter did refer to an audit contract, the district court believed that Norbeck done on a was similar but the letter does well overcharge. aware of any this This is not the not indicate that was aware Norbeck of this, it learned single pool. Once KPMG “whistle blower” Norbeck’s receiving ter Basin owed conclusion that to withdrew its its bills WAPA. letter, Basin reviewed that of million. after, WAPA in excess $15 Basin informed WAPA Soon in excess an amount overcharged had been the is- pursued Norbeck sale/leaseback shortly would million, Basin and that of $1 in sue, however, court held and the district Basin even- money to the WAPA.7 refund opinion re- The district court’s his favor. mil- approximately $2.4 WAPA tually sent testimony the of Les- exclusively upon lied (in- overcharge the for payment lion who accounting professor ter an Heitger, interest), accepted which WAPA cluding Nor- expert an for Norbeck. testified as complaint. without sup- tо arguments three upon beck relies million re- the after years $2.4 Several court’s verdict. port the district proceeded fired and fund, was Norbeck First, relies the evidence Norbeck on complaint. Act False Claims with this Basin intention- showing at trial admitted and intervening considered Government proceeds million of ally $99.5 used to do firm of KPMG accounting hired II non- pay of AVS to off from the sale relationship. the Basin-WAPA of an audit charac- consistently debt. Norbeck AVS that Basin initially determined KPMG funds, misappropriation as a terizes this than the more million WAPA $13 owed use of this the intentional and believes already returned. Basin had million $2.4 supports off non-AVS debt money pay to by number assum- arrived at this KPMG judgment. the district court’s of debt kept separate pools Basin ing that review Heitger’s relies on next Norbeck facili- I, II, the common AYS AYS that Heitger testified audit. of the KPMG mind, then as- in KPMG that ties. With audit, and he be- the KPMG he reviewed million in unretired that the $99.5 sumed correctly de- audit that the KPMG lieved II in account and stayed debt AVS overcharged WAPA that Basin termined its charge WAPA for continued Basin Heitger’s review million. $15.5 interest, in II AVS remaining of this share limited, however, checking audit was Based payments. the lease addition work; conduct a new he did not KPMG’s KPMG deter- assumptions, these upon audit. WAPA overcharged that Basin mined million, rather than the $2.4 excess of $15 He- relies on argument third Norbeck’s already returned. Basin had million construct,” Heitger itger’s “parallel (Trial Tr. of to several times. referred complete, KPMG audit Once 136-37). be- Norbeck Heitger Lester assumption challenged KPMG’s received out that gins by pointing separate pools debt it maintained from the sale of million approximately $623 investigated facility. KPMG the AVS million, Basin used correct, II. Of that $623 assumption whether debt. non-AVS pay off million $99.5 debt confirmed of Basin’s guarantor’s Thus, percent sixteen approximately all AVS kept debt to KPMG the Norbeck let- Indeed, once it received transactions overcharge. Norbeck's brief admits over- the outcome of ter determined amount he was unaware ques- merely claims that letter charge good audit and his faith. Norbеck previous of that audit. the conclusions the amount fraudulently tioned determined sending a lesser overcharge, events, sequence of agree parties 7. The *9 would not hopes WAPA that in the amount Basin disagree the motivation. about but overcharge. notice real the honestly an audit of it undertook claims was, to use Norbeck’s proceeds attempts II beck’s to characterize AYS Basin’s use characterization, Nor- of the million as misappropriated. “misappropriation”. $99.5 mark, the points paid support beck then out that WAPA misses and cannot judgment. in lease costs for II million AYS $87.2 during period. the contract Norbeck con- Norbeck’s brief consistently at that, misappropriated cludes had Basin not tempts to characterize Basin’s use of $99.5 million, WAPA’s lease costs $99.5 million of II proceeds AVS on non-AVS gone have percent. would down sixteen debt a misappropriation, suggesting Thus, percent sixteen of million ais $87.2 misappropriation this supports the multiplied by little over million. When $13 judgment. We find several flaws with this factor, money cost this sum becomes First, position. appears it us Ba close to the amount the district court sin’s use of the inap million was not $99.5 overcharged found Basin WAPA. propriate. Basin was free to do what ever appeal, argues
On that neither the it II, wanted with the proceeds from AVS point any district court nor Norbeck including spending money on non- competent supporting judg- evidence Admittedly, AVS debt. Basin had an obli Further, ment. Basin points out that gation to deal with consequences introduced its actual billing statements to such a transaction correctly, and this WAPA, situation, and Norbeck did not use those it meant ensuring that WAPA billing prove statements to his case.8 Fi- would not charged be for interest nally, although Norbeck has the burden of the unretired million. Basin $99.5 admits claims, leads, proof however, on his contract as much. points This to the sec evidence, ond problem out that it did through argument. introduce Norbeck’s Deisz, Simply saying testimony that the Ms. Shawn an ex- million was $99.5 “misappropriated” accounting provide any ecutive Bаsin’s does not department, evidence of how much supports WAPA was description over of how charged. Even if overcharge million place. took argues $99.5 “misappropriated,” that Deisz’s is not evidence testimony is the direct evi- the actual amount of overcharge dence of the amount overcharge.
WAPA. Norbeck any does not cite to evi B. Overcharge Amount of dence, other than the abandoned KPMG audit, suggesting interest from the $99.5
We believe the district court com directly million was allocated to II mitted clear in holding error (as assumed). incorrectly KPMG audit overcharged WAPA Al million. $15.5 Thus, this argument fails to support though the district upon court relied Heit judgment. amount of the ger’s expert testimony, which Norbeck contends should be support sufficient to respect With to Heitger’s analysis, he the judgment, a close examination Heit first testified that the amount judg- ger’s testimony reveals that neither of supported his ment was by the KPMG initial arguments Also, withstand scrutiny. overlooks, however, Nor- audit.9 This the fact 8. We note that Norbeck (cid:127) admitted at oral ar- [KPMG] calculation” and “concluded gument that an examination of Basin's bills to (Tri- appropriate that it was an calculation.” overcharge. would not reveal an 130). Heitger al Tr. of Lester 9. Although Heitger upon relied the KPMG audit, independently he did not recalculate Rather, this audit. he testified that he "redid *10 audit, upon the of the proval
that the KPMG audit was based KPMG when KPMG conclusions, away backed from its own assumption separated that Basin faulty support cannot the district court’s judg- facilities’ debt. As the each of the AVS Hix, ment. ac- testimony of Arvle an unrebutted with KPMG who worked on the
countant Heitger’s “parallel Professor construct” shows, audit, KPMG determined this First, argument fails for several reasons. incorrect, and later assumption was aban- argument the upon assump- is based the initial draft doned the conclusion the tion that Basin misappropriated the $99.5 mil- overcharged WAPA $15.5 spent million it on debt. non-AVS As we lion.10 earlier, discussed Norbeck no rea- gives us misap- son believe the million was $99.5 cal-
Although Heitger checked KPMG’s Further, if propriated. money evеn correct, they culations to make sure were misappropriated, was Norbeck cannot testimony support faulty does not his any show connection between the misap- upon assumption separate debt propriation and WAPA’s lease cost.12 Ba- In the entire KPMG audit was based. negotiated sin and the outside investors fact, specifically acknowledged he that Ba- price II any before made (Trial pooled all of its debt. Tr. of sin use, appropriate inappropriate, or of the 132-33). Heitger Lester at neither Since funds. What Basin would do with the Heitger presented any have nor Norbeck funds from the sale II of AVS did not (and suggests evidence that KPMG’s initial negotiations price affect the for the lease abandoned) correct, assumption later II, which, course, of AVS determined Heitger’s support for the audit KPMG Therefore, lease the paral- WAPA’s costs. nothing. Heitger All proves Professor argument lel construct fails since Norbeck testify to correctly could was that if can show no connection between Basin’s correct, assumptions were KPMG’s then use of the million and lease WAPA’s $99.5 figures were the KPMG correct. Howev- costs. er, provide any he failed to evidence that fact, was, assumption support correct.11 We find no evidence to the dis- KPMG’s therefore, believe, Heitger’s ap- damages past trict court’s award of We 10 .Q. Okay. neglected you something spe- I to ask 11. We further note that the district court cifically you I wanted to When went back found that Basin’s debt was in address. single pool. ... and found out that the debt for AVS was pooled, any any or claims Heitger (seemingly contrary even testified your report issues in audit abandoned as a construct”) "parallel to his own the lease result of those consultations? have altered costs would not been A. Yes. application $99.5 "correct” million: Q. What or claim was abandoned as issue Q: (THE COURT) question: That cuLs investigation? result Would a lease have been lower in amount leveraged A. That first issue on the lease factor to WAPAif the million cost 99.5 transaction. yоur applied properly, had been under Q. just Okay. And so record clear payment terms? Would the lease have that, the issue about whether or lower? been ultimately not the that was made refund 2.4 to WAPA should have been million Well, answering question, A: the first is that dollars or 13 million dollars? itself, probably payment, would lease Yes, A. I think so. they not have been lower because would (Trial 74). Tr. of Arvle Hix properly applied. all been have then
792 (9th Cir.1995). 321, Rather, already returned to 329 some Basin million $2.4 thing beyond negligence, falling has thus failed to meet mere but Norbeck WAPA. intent, proving overcharged specific short of must be shown for his burden of million, liability to attach. See United States v. in excess $2.4 WAPA Co., Cooperative Supply the district court’s & 476 F.2d accordingly, we reverse Grain (8th Cir.1973) 47, (holding dam- million contract 60 False Claim award of $13.05 Act intent standard was when satisfied ages. his claim in an defendant submitted false Damages Multiplied Under C. manner); “extremely careless and foolish” Act False Claims T. Boese, And John Civil False Claims Qui 2.04(c)(1) (2nd 2000) § ed. Tam Ba Actions court found that The district (“To summary judgment for avoid the de overcharge of the interest from the sin’s Act], the False [under fendant Claims ad million was done with the level of $99.5 missible, knowing credible evidence of a required multiplied dam intentionality required.”). false statement is Act. ages under the False Claims See 31 3729(a). § Although we have re U.S.C. gave The district court three reasons for versed the district court’s award over the finding overcharged already million Basin returned to $2.4 First, required with the intent. the dis WAPA, we must determine whether still trict court held that Basin “knew that in overcharged the Government this remaining terest debt of the AVS intentionality million with the level of $2.4 [project] being part allocated as an Act’s multi required for False Claims item, expense pay addition to the lease plied damages provisions.13 ments, in computing De [WAPA’s cost].” In order for Basin to be liable un this spite knowledge, “Basin Electric made Act, der the False Claims it must have a deliberate decision to retire other debt” submitted the false with the requi proceeds, claims with AVS II which led “a site state.14 continuing overcharge” mental The lowest level оf to WAPA. United intentionality that Coop., satisfies False States v. Basin Elec. Power No. 22, “act[ing] slip Claims Act is in reckless op. disre A1-95-003 at 1999 WL 1999). (D.N.D. gard Second, truth falsity or of the informa 33283354 Mar. 3729(b)(3). § tion.” See 31 U.S.C. “The the district court noted that once Norbeck contract,” letter, improper interpretation ... aof sent his the audit team investigating however, overcharge “does not constitute a false claim the “deliberately selected an payment.” $99,500,000 assumption United States ex rel. But payment Inc., ler Hughes Helicopters, v. 71 portion F.3d did not have to be to that applied (Trial 137-38). Heitger subject Tr. of Lester would not be to the False Claims Act’s multiplied damages provisions. we Since subject 13. The $2.4 district court did not support find no evidence to the district court's million Basin returned to WAPAbefore trial finding place, of fraud in the first we need not multiplied damages to the False Claims Act's reach this issue. provisions, apparently reasoning that since voluntarily Act, money, returned the including 14. The False Claims the intent subject standard, provisions. should not be to these significantly modified in 1986. indicated, appeal Norbeck and the de- recently Government this As this circuit the 1986 correct, cision. If the district court was then False Claims Act intent modification did not we Eighth $2.4 would not have to decide whether the alter the law in the See Miller Circuit. overcharge Emergency Management Agency, million was submitted in violation v. Federal Act, (8th Cir.1995). of the False Claims since the amount F.3d remaining being charged charged through debt to was to WAPA back (AVS door, i.e., WAPA, II through payments and 50% the interest Unit area).” Finally, Id. at 23. the common facilities.15 common *12 factors, held that both these district court Second, the district court holds that the myriad edges the of small “when linked to audit team reviewing the Basin-WAPA determining Electric” in by taken Basin contract “deliberately selected an assump- the “satisf[ies] costs under the contract that tion” million should be ap- $99.5 fraud under the False Claims requirement debt, plied pooled to the rather than Act.” Id. at believe each of these 23. We only to “portion remaining the debt lack reasons merit. This, being however, charged to WAPA.” First, that Basin no doubt knew interest reflects the district court’s misunderstand- situation, remaining pooled ing on the AVS debt was of the since Basin did not allocated, pools in to This maintain being part, separate WAPA. debt such that apply it could entirely appropriate, directly since even after million to a $99.5 II, portion certain the sale and leaseback of AVS WAPA of AVS debt. Had Basin for a of the used the million responsible pay was still share to off AVS debt $99.5 It un- in place, common facilities’ interest. is also the first it would have lowered pooled -including contested that Basin “made a deliberate AVS debt that was debt— entirely appro- decision” to retire debt with attributed to AVS I. It was non-AVS therefore, million Again, priate, II sale. for the audit team to from the AVS $99.5 assume, in entirely appropriate, determining this was since Basin the amount of the overcharge, pooled with could do what ever it wanted AVS debt by II it dealt would have been reduced proceeds long from AVS so million. $99.5 If consequences correctly. Finally, with the the audit team assumed the million $99.5 applied only directly it was somehow is also uncontested this decision to debt WAPA, indirectly continuing overcharge charged led to a to to the result would be a greater original WAPA. Basin admitted as much when it refund than the over- since, above, charge, only returned the million. as discussed $2.4 portion small of the interest the $99.5 lacking analysis any What is from this to in charged million was ever WAPA the knew, evidence that Basin or acted reck- place. first disregard, possibility any less if of the interest from this million was Even the district court was correct $99.5 million should have some- actually charged to WAPA. The inten- that the $99.5 charged pointed applied directly tional act the district court to was how been to debt debt, WAPA, provides it no evidence discharge of non-AVS attempted consequences to deal with the audit team knew or acted reckless disre- possibility assumption that its by eliminating gard this act interest from AVS deliberate category II as a cost in WAPA’s bills. was incorrect. The audit team’s assumption cannot be fraud Nowhere does the district сourt or Nor- choice of this any they honestly evidence that Basin if believed was correct point beck assumption, that interest from the million and the district court does-not knew $99.5 appears question Basin knew it was over- analysis It that the district court’s is whether WAPA, is infected with the same error as Norbeck’s charging whether Basin knew it not argument: $99.5 that Basin's decision to use paying debt. off non-AVS The district proceeds of AVS debt million II non-AVS point any of this. court did not evidence inappropriate. was somehow The correct suggesting point any evidence that was overcharged WAPA more than the case. this million. We further $2.4 believe that Norbeck has provide any failed to evidence Finally, the district court’s reliance payments submitted these edges” on the “small taken disregard reckless for the truth neces- computation various areas of cost cannot sary under the False Claims Act. We support its decision. The district court therefore reverse judg- district court’s the. found that all of other overcharges against ment Basin on this issue. just “simple contract breaches.” Id. above, at 24. But as we mentioned PART III. TEN-YEAR VS. TWEN- *13 misinterpretation
mere of a contract can TY-YEAR AMORTIZATION not be the basis of a False Act Claims PERIOD violation. All of these other “simple con breaches,” therefore, tract cannot provide Background A. knowing evidence of a violation of the Act. appeals Basin next the district court’s repeating arguments Other than ruling that it breached the Basin-WAPA court, district evidence Nor- by contract choosing ten-year a amortiza- points beck arguably support could period tion for the AVS common facilities. the finding of fraud are Basin documents Both Norbeck and the Government argue discussing Basin’s intent to use II AVS correctly the district court held Basin’s proceeds pay off non-AVS debt. For ten-year period amortization breached the example, points September Norbeck to a agree contract. We with Basin and re- 25, 1985 internal memo that he claims verse the district court’s award of dam- demonstrates that Basin knew it de- ages. frauding But WAPA. all this document (“G T”) Generating Transmitting and & does support position Norbeck’s is show businesses, Basin, like huge make invest- intentionally used million $99.5 plants ments in and facilities. G & T’s from the II sale AVS to settle non-AVS costs, need to recover these but to attempt debt. As we have mentioned several to recover their investment in the first few times, this decision was inappropriate. not years of plant’s operation would lead to These documents do not support prop- outrageous prices for consumers. There- osition that Basin dealt with the conse- fore, G & T’s commonly amortize these quences of this decision fraudulently. They costs spreading them into rates over a do not show Basin knew that interest period years. This ensures that rates from the million in unretired debt $99.5 remain stable G & would T’s recover get charged through to WAPA their investment. common facilities. As with much of Nor- argument, beck’s upon he relies al- In line practice, with this Basin decided leged misapplication of the million $99.5 to amortize the costs of the common facili- from the II support AVS sale to argu- his ties into lengthy rates over a period. Al- ment, when money such use of the was not though Basin twenty-year used a period a misapplication in place. the first for the common facilities at another (the We believe Norbeck failed to introduce station Laramie River Station (“LRS”) showing evidence overcharged completed 1970s), in the late WAPA beyond the million Basin re- ten-year $2.4 chose a period amortization reason, turned before trial. For this we the AVS common ten-year facilities. This find the district court erred in determining period increased the amortization rate and Coopers finally agreed because that a approximately to WAPA prices $3.6 raised over the life of the Basin-WAPA twenty-year period appropriate million for the that Ba- The Government claims contract. facility. The Government and Nor- ten-year peri- amortization sin’s choice of explanation beck believe Basin’s is a smok- good implied od violated the covenant escreen and assert that Basin chose the every contractual relation- present faith ten-year period amortization simply to ship. prices raise to WAPA. Ba The Basin-WAPA contract allowed Apparently disturbed Basin had amortize common facilities’ invest sin to twenty-year used a period amortization rates. No contrac price
ment into WAPA project, LRS that Basin reverted required Basin to choose provision tual twenty-year period to a for the AVS com any period, long amortization so particular mon shortly facilities after the Basin- calculating method for the amortiza as the expired, WAPA contract the district court applicable tion rate was consistent with WAPA, holding found for that “the re rules. The RUS GAAP Government quirement consistency and uniformity not contend that the choice of a ten- does Basin, A1-95-003, controlling.” [is] No. *14 Instead, year these rules. period violated at op. agreed 11. The district court slip argues Basin breached Government relating that the discussions to a ten-year faith, good implied point covenant of period Coopers amortization between ing twenty-year to the choice of a amorti Basin took place, and further conceded period for common facilities at the zation wisely feared its outside audi station, LRS an internal Basin memoran id. at 9. The tors. See district court be suggesting twenty-year- dum a amortiza satisfy lieved that if Basin did not Coopers’ in line period tion was more with the use rate, regarding concerns the amortization facilities, ful life of the AVS common Coopers ‘quali “would be forced to issue a period a twenty-year Basin’s switch to opinion, fied’ which could have serious con shortly after the end of the Basin-WAPA sequences being to the business audited.” contract. believed, Id. at court howev 8. The district the Government relies on this evi- While er, testimony that “no witness or carries faith, argue dence to Basin acted bad and Ba Coopers [the discussions between story. According Basin tells a different Manager’s into the office or into sin] Basin, auditor, Coopers its outside Cooperative.”16 Board Id. at Rоom of it to Lybrand (“Coopers”), required choose ten-year period. Coopers a amortization urges this appeal, On the Government apparently twenty-year felt finding. court to affirm the district court’s guarantee not period amortization did identify not Although the district court did Basin would recover its investment any specific legal ground finding quickly enough. common facilities contract, specif- breached the and while no twenty-year admits that it switched to a contract provision after ic demanded period shortly the Basin-WAPA con- ended, any argues particular tract but it did so Basin choose amortization finding twenty-year period for the AVS 16. The district court's that "no wit- amortization facilities, Coopers' concerns into the prevented ness” carried but were common manager’s clearly is Both (Trial office erroneous. doing by Coopers. so Tr. of Robert McPhail, Manager Robert the General of Ba- 25-26; Ea McPhail at Trial Tr. Howard sin, Easton, and Howard the head of 28-29, 50, 62-63). ston at they marketing, wanted to a testified that use 796 (as complied as it
period long Comprehensive RUS duties.” Corp. Care v. Re rules), (8th believes that 1063, the Government Corp., habCare 98 F.3d 1066 Cir.1996). ten-year period, a choosing breached Nor should good faith be con duty good faith and fan- implied “give strued to rise to obligations new not dealing.17 otherwise contained in the contract’s ex press terms.” Id. Analysis: B. Faith and Good Consis- good The faith covenant does tency impose general not a requirement that a We review the district court’s le party Rather, act reasonably. the cove conclusions, gal including application merely nant a gap filler to deal .acts accounting principles, de novo. See Her with circumstances not contemplated by States, 465, cules Inc. 224 United Ct.Cl. v.. parties the time contracting. (1980) (“the 832, 626 F.2d application 2, Kham & Nate’s Shoes No. Inc. v. First of accounting rules to a finite problem (7th Whiting, Bank 908 F.2d raises an issue of contract interpretation, Cir.1990) (“Good faith compact is a refer law.”). which is an issue of applica ence to an impliеd undertaking not to take implied tion of the covenant of faith good opportunistic advantage way interpretation also an issue of contract could not contemplated have been at the we review de novo. Taylor Equip See time of drafting, [the contract’s] and which ment, Co., Inc. v. John Deere 98 F.3d therefore was not resolved explicitly by (8th Cir.1996). Federal common law omitted). parties.”) (quotations Since governs the interpretation and construc good merely faith is way of effectuating tion of a contract between the United *15 the parties intent in unforseen circum States and party. another See United stances, implied the covenant has “nothing Consultants, Applied States v. Pharmacy to do with the enforcement of terms actu Inc., (8th 603, Cir.1999); 182 F.3d 604 ally negotiated” and cannot “block [the] 619, United States v. Tharp, 973 F.2d 620 use of terms that actually in appear the (8th Cir.1992). When applying the “federal Bank, contract.” Continental N.A. v. Ev contracts, common law” of “that law must erett, 701, (7th Cir.1992). 964 F.2d 705 take into account the best in modern deci sion and discussion.” Montana Power Co. The Basin-WAPA contract States, (Cl.Ct. 730, v. United 8 Cl.Ct. gave authority broad to determine 1985). costs, its long as as the determination sat isfied RUS and GAAP requirements. We
The Government correctly urges
think it clear that
good
the
faith duty did
every
implies
contract
party
each
will
require
not
Basin to choose a particular
(Sec
act
good
faith. See Restatement
period.
amortization
As the Tenth
ond)
Circuit
Contracts,
(1981)
§ 205
(“Every
of
explained in Big Horn Coal Co. v. Com
contract imposes upon
party
each
duty
of
Co.,
monwealth Edison
852 F.2d
good faith and fair dealing in
perfor
its
(10th Cir.1988):
1267-68
enforcement.”).
mance and its
Courts
must be careful when considering good
possible
[I]t is
to so draw a contract as
faith, however, as it
imply
does not
“an
to leave
absolutely
decisions
un-
the
everflowing cornucopia of wished-for legal
controlled discretion of one
par-
of the
17. Norbeck also asks us to reverse the district
Act. Since we reverse the district court’s find-
'
finding
court's
ing
that Basin did not submit
that Basin committed a breach of con-
tract,
charges
these
in violation of
False
the
Claims
we have no need to discuss this issue.
good
rejected
of
at 705. The court nevertheless
a case the issue
ties and
such
case]
such
the
application
duty
[in
is irrelevant....
of the common law
faith
un-
contracted for the
parties expressly
faith
good
parties
because “the
contracted
they cannot
right and thus
conditional
pricing provision
provides
for a
expect any special implied
reasonably
with the discretion to
the price
USEC
set
protection.
aware,
parties
for contracts. Both
pur-
allowed,
is in accord with
This conclusion
and the contracts specifically
“protect the rea-
pose of the covenant to
could unilaterally
USEC
establish
im-
expectations
parties by
sonable
prices under the contracts.”
Id. at 706.
agreement.”
into
Id. at 1267
plying terms
Thus,
contract gives
where a
broad discre
omitted).
review of other
(quotations
Our
prices
parties,
tion to set
to one of the
Big
us that the
legal authorities convinces
court
it was inappropriate
held
to use the
approach
Coal
is a sound one.
Horn
to,
effect,
implied covenant
rewrite the
AB
in Barseback
v.
example,
For
bargained-for
lim
by
terms
the contract
Kraft
(1996),
States,
GAAP rules. Coke & Chem. Co. v. 560 F.2d (2d Cir.1977). Thus, limit Basin’s discretion to choose 1092 nant to the district require us to rewrite the con- rates would court’s review was determining limited to give tract and benefits for which it accounting whеther the principle consis- bargain. Beyond being tency did not unfair to demanded Basin treat the AVS and transactions, Basin, “in commercial facility does LRS common amortization rates justice promote consistently. not in end seek interpretations aid of strained those who We believe the district court erred in protect do not themselves.” James Baird applying consistency to this issue. As the Bros., (2d 344, Co. v. 64 F.2d 346 Gimbel indicates, Government’s brief the account- Cir.1933) J.). (L.Hand, ing principle consistency requires same, like transactions be treated the court The district held that the indicate, findings district court’s requirement consistency was control treatment of T G & amortization rates ling. explain The district court did not changed dramatically between the time the why consistency was controlling, but on LRS and AVS stations complete. appeal, argues Norbeck that consistency Basin, Al-95-003, See No. slip op. at 8-9. required GAAP.20We believe the Because G & T’s dramatically overbuilt law, district court erred as matter of 1970s, capacity during the there was a however, in applying the rule of consisten great concern that G & T’s would be un- cy. Consistency many one of ele able to recover up-front expenditures on ments of and it should not ap GAAP be projects facility. like the AVS See id. at 8. plied in a mechanical manner. See Thor result, 71, As a the FASB enacted FAS C.I.R., 522, Power Tool Co. v. 439 U.S. which establishes the GAAP that amortiza- 544, 773, (1979) 99 58 L.Ed.2d S.Ct. tion rates must be based upon a reason- (“Generally accepted accounting principles, able recovery. rate of See id. The lack of rather, a range tolerate of reasonable specific table, time continuing con- treatments, leaving the among choice al rates, cerns about long amortization management.”) (quotations ternatives to caused the try FASB to to amend FAS 71 omitted). rule of Thor limits the dis through the adoption of FAS FAS 92 court, trict an reviewing accountant’s sought to limit a new period amortization work, deciding only whether the accoun to a maximum years.21 of ten Id. at 8-9. tant procedure chose a from “the universе of generally accepted accounting princi The Government and Norbeck argue ples.” v. Conveying Godchaux Tech Basin, FAS never bound but this Inc., (5th niques, 306, 846 F.2d argument Cir. point. misses the FAS FAS 1988). Further, the GAAP principles must and the continuing concern over amor- *17 be examined in rates, relation to the type tization show that facility the LRS id.; business involved. See Pittsburgh and the facility AVS were not similarly 20. The prin- argues GAAP, Government’s brief mentions the that Basin's treatment violates ciple consistency, and he argue testimony Heitger. but does relies on the not that rules, relying Basin violated GAAP instead on adopted 21. FAS 71 was after Basin fact, good faith covenant. In one of the facilities, began amortizing the LRS common Government's witnesses testified that Basin's adopted ten-year but before Basin amorti- (Trial amortization rate did not violate GAAP. period zation for the AVS common facilities. 163; Tr. of Ned Christiansen at see also Trial FAS proposed finally adopted 92 was 58-59). Tr. of Arvle Hix at Norbeck alone years several later. situated. Whether or not Basin was district dismissed, court is no longer a bound FAS 92 does not alter the fact viable claim. (and Coopers) every had reason
to be concerned over a
PART
twenty-year
IV.
amor-
IMPUTED INTEREST
period.
tization
For the district court to
Background
A.
require that the
project
AVS
and the LRS
Norbeck on cross-appeal claims that Ba-
project be treated consistently turns the
sin, with
indifference,
reckless
breached its
accounting principle of consistency into a
contract with WAPA by imputing post-
wooden rule that is applied mechanically
construction interest
general
on its
fund
without taking into account
cir-
changing
loan to the
project
and charging that
cumstances and
range
of reasonable
interest to WAPA.22
Norbeck,
According to
alternatives available to accountants. See
imputing interest
in this manner violated
Thor,
(“Ac-
When presented with a question about constitute interest on long-term debt un- internal borrowing, Purcell, Roberta Chief der account 427. As for Basin’s violation of Technical Accounting and Auditing GAAP, Staff Norbeck relies on the premise RUS, testified as follows: that the Basin-WAPA contract was a cost *20 terms, repayment a note or Norbeck, such only or its as According
contract.25 a Basin memo points to a cost He also assigned schedule. can be costs historical fund loan general not a his- interest is characterizes the imputed and contract of At the heart This leads “dummy payments.” under GAAP. non-cash cost torical that the is the notion fund argument general that the to conclude Norbeck’s Norbeck at all. not a loan accounting loan fund interest are general imputed loan came bills Rather, the construction when recorded have been that should not fictions simply paid project, the AVS in for under charged to WAPA 427 or account Norbeck reserves. equity its them the contract. was not the imputed interest
reasons for accounting responds case, in this but borrowing funds cost of complied with fully interest imputed for Basin to earn a mechanism simply System The RUS requirements. RUS’s it had in the bank. capital equity on profit under account imputed interest allows for Norbeck position, support of his In legitimate is a that interest 427 because terms of the Basin-WAPA to the points In value. con- component asset’s accounts contract, adopt sixteen trast, interest imputed is post-construction purpose for the System from the RUS the asset and component not a cost component of the fixed cost determining If capitalized. post-construction cannot be accounts, adopting these By power.26 coop- in a included imputed interest were con- Basin also was contends that Norbeck statements, ov- it would financial erative’s re- tо adhere to the tractually obligated strength of the erestimate financial including System, of the RUS quirements faulty basis for provide cooperative post- allocating imputing on prohibition Basin ex- decisions. financing the RUS’s Spe- to account interest construction imputed it tracked although plains argues that because cifically, Norbeck during 427 both costs account interest contract, adopting the RUS by virtue of construction, compro- it did not and after recording post-construc- prohibits System, System the RUS integrity mise in account it also imputed tion interest was eliminated because that interest post-construc- prohibits billing WAPA books. The company’s consolidated in account 427. imputed tion interest Basin, result, finan- according to is that its testimony Purcell’s insists that Norbeck accurately portrayed the cial statements limited to a borrowing was about internal facility accordance value of the AVS loan. The dis- involving scenario an actual requirements goals with the characteristic, according tinguishing System. RUS Norbeck, ac- generate that actual loans that it would have acknowledges contrast, internal trans- tual In interest. System the RUS improper been under in this fund loan general fers such as the interest on capitalize imputed account 427 fictional, case, interest. imputed, or involve the construc fund after general loan nature of the trans- To the fictional prove doing so would inflate because period tion action, out that there are points Norbeck on Basin’s financial value asset prove evidence to no documents or other Thus, capitalize it did not general fund loan statements. legal existence power, under the contract also regulations 26. The cost of System define cost as 25. The RUS costs,” energy "variable or related included actually paid prop- money "the amount of System ac- separate set of RUS for which a § erty 1767.10. or services.” C.F.R. specified. counts did, however, II, prohibits any these interest costs. It cal Part the False Clams Act *21 borrowing gen person knowingly presenting culate the cost of from its from a false charges payment approv- eral fund and allocate to account or fraudulent claim for or government. purposes billing al the federal See 31 427 for of WAPA and 3729(a)(1). prima other customers their share of those § U.S.C. A facie case requires (1) charges.27 explains under the statute that that the cost of against borrowing money defendant made a claim the United to build the common fa States; (2) pro the claim was false or fraudu- cilities was associated with the cost of lent; (3) ducing power the defendant knew the claim from AVS II and therefore was false or fraudulent. Id. appropriately was bified to WAPA. Basin's position charges is that these interest are surrounding imputed The rules interest proper whether the source of funds is in application and their in the context of the (Basin's general fund) (a ternal or external straight- Basin-WAPA contract are not as party lender). third parties forward as the would have this matter, testimony court believe. As an initial Basin understands Purcell's Government, arguing long post-construction on behalf of Nor- to mean that as beck, acknowledges System imputed appear that the RUS interest does not on its prescribe billing. capitalized, does not a method for financial statements and is not important consideration, given recording imputed This is an interest in account 427 alleged by System. that the breach of contract Nor- is allowed under the RUS Ac- over-billing. cordingly, beck involves Basin concludes that its meth- odology computing gen- interest on the Equally troubling reading is Norbeck's charging eral fund loan and WAPA its regulations purport explain proportionate share, entirely proper proper implementation of the IRUS System by extension, System. post-construction imput under the RUS Because the Basin-WAPA contract. regula ed interest is not discussed in the tions, prohibited Norbeck reasons that it is Analysis B. any under 427 or other account. This line Despite accounting principles reasoning legal borrows from the maxim weigh heavily expressio (the and contract law that in the unius est exclusio alterius balance, expression thing the resolution of this issue must of one excludes others not legal principles underpin expressed) be based on the and we are not satisfied that it ning explained appropriately applied the False Claims Act. As in is in this case.28 See issue, sug- broadly 27. In its initial brief on the 28. The Government asserts that "the gests general that its loan from the fund is System Accounts, quite RUS Uniform clear- better characterizedas a loan from its mem- ly prohibits recording imputed even interest According Basin, general bers. its fund 427, regai~dless as a cost in Account of its largely comprised is of funds its members (Letter effect on the financial statements.' through membership invest investment 3). prohibition any- Br. for Govt. at This program. purpose program The is for thing Although experts but clear. testified pool Basin to members' individual invest- imputed general interest on funds is al- larger pot higher ments into a and earn a rate during lowed construction but disallowed return than what members otherwise facility operational, once a becomes we find by investing would be able to earn individual- place regulations explicitly pro- no in the ly. explains it was entitled to imputed being hibits interest recorded charge general calculate interest on the in account 427. fund loan in order to ensure financial benefit through to its members the member invest- program. ment source of that the Huddleston, Despite debt. other AVS v. MacLean & Herman internal was Basin’s funds at issue 683, 74 the 23, 103 S.Ct. n. 375, 387 U.S. lender, the party a third fund, rather than (1983) application (rejecting L.Ed.2d loan. nevertheless transaction idea that such embracing the the rule and what constitutes not define do regulations been subordinated “long have canons Courts System. the RUS under a loan construe will courts doctrine variety of con in a “loan” defined have conformity with an act details *22 defini reviewing well-settled After texts. Se (quoting purpose.”) dominating general circuits, this other in of the term tions Joiner v. C.M. Comm’n Exch. curities party one that where has stated court 350-51, 344, 64 U.S. Corp., 320 Leasing another, in turn who to money advances (1943)); v. Bailey 88 L.Ed. S.Ct. interest, with the loan repay to agrees St. Bank Crеdit Intermediate Federal of Dept. States See United is a loan. there Cir.1986) (8th of Louis, 788 F.2d Smith, 807 v. Servs. and Human Health ‘expres of applicability (noting “[t]he that Cir.1986). (8th In this 122, 124-25 F.2d the intent of the upon depends unius’ sio money advanced case, general fund Basin’s statute, the maxim of a drafters The amortization project. the AVS aids other only when be invoked should partic the that AVS indicates spread sheet at language that the suggest interpretation advance, with repay the were ipants exclusive.”). Noth to be was meant issue is sufficient This evidence interest. Basin’s that suggests regulations the ing in accounting the loan. When a created have interest post-construction inclusion of project AVS fund and the general for the participants billing AVS purpose of the in Basin’s consolidated combined runs that cost share of proportionate their reflected. books, was imputed interest no minimum, At System. of the RUS afoul testimony, this Purcell’s According to govern that regulations the we find imputed an not create does transaction a manda not 427 do contain account RUS RUS. eyes in the of interest situation imputed post-construction tory of exclusion See Unit billing. of the purposes interest outside view the transaction we If Co., 195 v. Parsons ex rel. Oliver the System, ed States of the RUS strict confines Cir.1999) (9th (noting that 457, 463 F.3d of issue becomes the ultimate resolution accounting is whether the issue where the construc- financed clear. Basin more federal Cost with the complied practices with loans facility the AVS tion of is a difference there Accounting Standards inter- sources, both external various mandatory are regulations borrowing between associat- a cost of There nal. is discretionary). that are and those parties agree The with such loans. ed System the RUS no in prohibition is there rec evidence the the Based on that prohibit- in the contract or otherwise between ord, the transaction find that we propor- its charging WAPA Basin from ed project AVS fund and the general on a expenses of interest tionate share to Purcell. presented the scenario fits into analysis of the оur loan. Given party third separate a have may not been Although it case, nothing in in this fund loan general the AVS company, the of unit or division charging Basin from contract prohibits the was “project” a certainly was project interest share proportionate WAPA set of books. separate for in accounted fund loan. general the general for the repayment A schedule of interpreted to be contract is A aon recorded project to the fund loan the circumstances totality of light with along schedule master amortization formation, surrounded its and the Knowledge under the False Claims Act principal purpose of parties given is civil nature and a showing of specific great weight. (Second) See Restatement intent to defraud is not required. See 31 202(1). 3729(b). § Contracts § To U.S.C. interpret However, Relator must, minimum, words and at a conduct of parties prove to a that the defen- contract, dant acted we put must ourselves in deliberate ignorance or reckless' position disregard for the Basin and truth or falsity WAPA the time of the information. See id. id., contract was Our analysis made. See at cmt. b. of the Basin-WAPA contract and the Basin-WAPA contract RUS awas cost con- System, in light case, facts of words, tract. this In other pro- contract led us to conclude that Basin’s interpreta- vided that Basin would charge WAPA for tion and performance under the contract the cost of producing Oliver, reasonable. See 195 F.3d at purchased from II. AVS At the onset of 463 (explaining that the reasonableness of project, and when the parties *23 a defendant’s interpretation of those stan- signed the contract, Basin-WAPA Basin are dards relevant to whether the defen- anticipated that construction would be dant knowingly claim). submitted a false funded by loans from outside investors. It We find that Norbeck’s claim under the was not until 1983 that Basin had to bor- False Claims Act fails because he did not row from its own general fund to finance prove that Basin acted requisite with the construction of the facility. Thus, AVS at knowledge. Accordingly, we affirm the the time Basin and negotiаted WAPA the district court’s dismissal of Norbeck’s im- contract, we must assume that WAPA un- puted interest claim. derstood its cost power of would include interest on the loans used to finance con- PART V. COAL OVERCHARGE struction. We decline to interpret the On cross-appeal, the Government claims contract in such a way that would reward that Basin breached its contract with WAPA, extension, by Norbeck for an by WAPA overcharging WAPA for the unanticipated course of events that shifted cost of coal burned in II. AVS Under the of source money used to construct the contract, Basin-WAPA the cost of coal was facility. AVS component a part of the price overall of power. question
The of Basin whether would determine the Basin breached cost of coal II, burned Basin-WAPA AVS relevant, contract calculate WAPA’s but proportionate share, not a and plug conclusive factor in amount analysis into the pricing formula used to Norbeck’s False calculate Claims Act claim. As we monthly WAPA’s noted, bill. have breach contract alone does not constitute a false claim payment. A number of factors went into Basin’s Butler, See Therefore, F.3d 329. determination itsof coal costs. At issue in even if we were to find that Basin breach- this case is a discount Basin received on ed the contract virtue of post-construc- purchased coal it from the ANG Coal tion imputed interest charges, Norbeck (“ANG”) Gasification Company and a per must satisfy still the third element of his ton amortization charge Basin included as case: that Basin knew the claim was false power cost of to help cover the expenses or fraudulent. it incurred to finance the Freedom Mine.29 supply 29. The chain coal AVS II was Freedom sat beginning Mine at the case, purposes multi-faceted. For of this chain. The coal then through traveled purchase that ANG would provided is two- ANG for breach claim The Government’s that included from Basin at a rate to include the first, failed' fold: in the discount defined quantity the coal discount quantity coal full benefit the JCSA Although under JCSA. burned cost of coal when determinеd amount of coal based on the discount was second, spread- II; and in AVS II, provided in AVS PSA burned Freedom calculate the Basin used sheet 2 ... Fuel and Fuel 1 and Unit Unit “[f]or charge fundamen- was Mine amortization include the full shall also Related Costs charged WAPA tally flawed such in the quantity discount” benefit Mine for the Freedom its share more than PSA, Art. JCSA. I. expenses. a “varia- II was The coal burned in AVS for Basin found district court under the energy cost[]” or related ble claims. both the coal contract. Since Basin-WAPA in the discount defined JCSA quantity Quantity Discount A. Coal of coal burned the amount qn based Background II, that the the Government reasons AVS have been subtract- a dual contractual discount should ANG had entire in that the cost coal burned whereby bought each ed from relationship allocated the discount facility. Had Basin purchased the other. and sold would have benefitted way, in this II from ANG I AVS coal for *24 power for from paying price a lower Agree- by Supply Coal a Joint to pursuant Instead, Basin diluted the dis- (“JCSA”). JCSA, II. the ANG AVS Under ment the cost of by it from equal subtracting count Basin at á discount to the coal sold project, which for the entire AVS per cents ton coal fifty-eight approximately to quantity I. the coal included AVS Because See II.30 JCSA AVS of coal burned based on the amount of coal discount was 5.6(a)(1). Supply ¶ A Power related II, contrac- (“PSA”) and cost-based and burned AVS between Basin Agreement I, burned in AVS the the amount of coal Company, was a subsid- Coal which Dakota II, or half the' of coal in AVS the amount burned coal to the moved iary of Basin. Next togeth- coal in AVS I and II amount of burned gasification Finally, deliv- nearby plant. ANG Ultimately, was structured to er. the discount facility coal where it the to the AVS ered get II provide incentive to AVS Basin with an by II. AVS I and AVS burned ' ANG stood to possible. on-line as soon as on the coal benefit if the was based discount Basin discounted the coal because ANG provided AVS II PSA burned because the on (the purchase to fines” smaller agreed "coal on-line, would once AVS II went ANG that lower of screened with a coal B.TU pieces purchаsed pay the it a lower rate for content), larg- which to use the allowed ANG Basin, turn, an incentive Basin. had higher energy value pieces of coal with the er complete quantity AVS II the coal to because gasification exchange the In plant. at facility once that discount was to take effect coal, buying grade the wanted lower Basin burning started coal. charge paid royalty to cover a Basin on ANG applied month- ANG the to Basin’s discount purchased ton of from ANG. each coal it example, ly For ANG’s invoice to coal bill. Foss, According testimony to the trial of Mark July amount of Basin for 1986 lists the total counsel, general parties to a the came facility, "Less: coal delivered to the compromise:” pay half of “classic ANGwould by Unit Quantity coal consumed discount for have would otherwise the override Basin Thus, although was mea- II.” the discount purchased on the from ANG. pay coal it II, by burned in AVS sured the amount of coal amount of coal the over- combined total bill arrive half testified Foss to AVSI II. delivered ride, been based have the discount could tors like Basin may not elect to retain the count in fact was limited to the amount of benefits or they rebates discounts that coal burned in AVS II. purchases obtain as a result of made to responds quantity coal contract,
fulfill the the Government argues discount is better described as a downward that Basin breached the contract failing price adjustment that reflects the lower pass on the entire discount to WAPA. grade coal purchased for the AVS facili- The Government rejects as irrelevant ty. I Since AVS and AVS II equally the PSA’s treatment of the coal quantity shared burden of burning the lower matter, discount. As an initial the Govern- grade coal, both units properly shared in argues ment that the JCSA and the PSA the discount. In support of argument, this are two separate agreements dealing with Basin physical contends that its manage- subject different matters: the former ment, inventory and accounting system, with deals coal and the latter deals with and contractual arrangement purсhas- Moreover, power. the JCSA contains an ing the coal all discount, show or clause, integration which states that price, reduced properly applied “supersedes JCSA prior all agreements the entire AVS facility. and understandings of parties with explains first that it applied the respect to the contemplated transactions discount according physical to the alloca- hereby,” and that parties “the shall look tion of the coal fines purchased from ANG. only to this Supply Joint Coal Agreement For purposes of its ANG, contract with rights for the obligations parties could, did, calculate the amount respect to each related to other II, coal burned in AVS which then was subject matter § hereof.” JCSA 12.12. used as the basis for the discount on its According Government, to the this clause total monthly coal purchase. In reality, precludes possibility the proper however, Basin maintained only big “one application of the coal quantity discount is coal pile” to all supply plants, of its contained in the PSA. *25 was in segregated never fact separate into Finally, the argues Government that fuel supplies for IAVS and II. AVS even if the PSA and the JCSA properly Second, for its interpreted own together, accounting their and in- plain lan- ventory purposes, guage limits weighted the used the discount to the coal in cost average methodology, burned II. AVS The which PSA defines is the the industry quantity coal standard treating discount according to coal inven- “Sec- PSA, tory. tion 5.6 of An expert the [JCSA].” for Basin Art. I. testified at trial parties agree that it 5.6(a)® would paragraph be with inconsistent the the weighted JCSA applies, by average which system its terms cost apply con- the to fines the coal quantity discount to coal “consumed discount to by AVS but II not to ¶ 2.” 5.6(a)®. Unit If contrast, JCSA In AVS I. the discount were to be allocated 5.6(a)(ii), paragraph II, which does not to AVS apply purchased customers who case,31 in this defines the discount in terms I pay AVS would a higher rate of coal “consumed Unit 1 or than Unit 2.” purchased customers who power from ¶ 5.6(a)(ii). JCSA The Government rеa- AVS II. Basin reasons that such result (a)(i) sons that because during was invoked would be unreasonable because both AVS performance the contract, the dis- I and II AVS burned the lower grade coal. 5.6(a)(ii) Paragraph
31. only triggered by was specified 4.3(a)(ii) JCSA, paragraph in meeting of a contingency, which was but did not occur. 808 in this case. and term not a black white the JCSA contends that
Finally, made can be good arguments two When agreements integrated are the PSA and as to contrary positions two for either of to reach pari materia read in must be an provision, of a contract meaning application and construction the correct Ins. v. exists. Home Co. ambiguity See Basin inter- discount. quantity the coal (8th Co., 927, 929 236 F.3d Aetna Ins. to mean together agreements prets these Cir.2001). ambigu a contract is Whether was to be measured the discount subject to novo of law de question ous is a II, appor- but AVS tonnage burned v. Pub. Power Dist. Nebraska review. See units. both tioned between 1032, Co., F.3d Energy 234 MidAmerican no that there was court held The district (8th Cir.2000). a contract is When 1040 to the respect with of contract breach looks to extrinsic evi ambiguous, court the coal applied in which manner dence, subject the nature and the such as agree. quantity. We and the facts and matter of the contract negotiation, surrounding its circumstances Analysis to parties how the intended to discern true, as the It Government AgGrow contract terms. See define the out, are contractors that cost-based points Oils, Fire Ins. v. National Union L.L.C. than what charging more prohibited from PA, 777, Pittsburgh, 242 F.3d 779 Co. of limit proper” must is “reasonable (8th Cir.2001). through those they pass the costs into contract with v. Basin entered its See Jensen “actually paid.” are 361, 699, it Manthe, years 703 two after executed Neb. 95 N.W.2d (1959). Based on this contractor JCSA and PSA ANG. means that This chronology, when Basin contracted to sell buyer with credit the discounts must WAPA, understanding of the power to provides the contract other unless credits based, part, produce power Town cost to v. Prom House See LaPuzza wise. Inc., arrangement purchase Inn, Neb. 217 N.W.2d on its сontractual Motor Therefore, (1974). However, we look in this case we coal from ANG. JCSA, quantity contains the coal Basin did which not asked to decide whether are discount, extrinsic evidence ascertain WAPA with the discount or not credit did Rather, of coal for meaning of Basin’s cost ques it from ANG. received II. us is whether the manner tion before apportioned discount Basin and ANG executed *26 answer, look to the For the we proper. day. Al and the on the same JCSA PSA of the contract itself. terms coal though JCSA deals with power, contract with the context
The Basin-WAPA PSA deals negotiated were they end of each month which reveals provides that closely were its “fixed” and “vari these contracts linked Basin shall determine larger component parts transac energy or related costs associated able are tion. When two instruments executed unit.” Basin-WAPA appropriate ¶ time, A, 3, by parties, the same 4. listed as a at the same at Ex. Coal is contract transaction, and under the the course of the same energy or related cost variable matter, Thus, subject they be determine cover the same will we must contract. together. Jorgensen v. construed See properly calculated its cost whether (N.D.1991). Crow, 120, by II. 466 N.W.2d for AVS As evidenced coal be- of the connection of coal is Further evidence parties’ arguments, Basin’s cost plain ed the total amount of coal it delivered to tween these contracts is found in the language PSA, expressly facility cites the AVS and subtracted from that paragraph the discount based on the coal burned in 5.6 of the JCSA. See Lakeland Realty Reese, billing Co. of Minn. v. 77 N.D. AVS II. ANG's method also com- (1951) (noting ports industry weighted 46 N.W.2d with the standard may together average system by instruments be construed cost used Basin to they supplement sup~3ly where reference and each track the coal for the entire AVS other). integration flagged by facility. Thus, The clause ANG's invoices to Basin prohibit the Government does not our ex- proof although offer further the coal amination of the PSA to understand the quantity by discount was measured meaning quantity of the coal discount as II, amount of coal consumed in AVS it was defined in the JCSA. It is well-established purchased in fact allocated to the coal that a statement in a contract that it is facility. the entire AVS integrated conclusive, is not but background mind, With this we find factor to be considered. See Restatement that when it entered into its contact with (Second) Contracts, (1981). § 209 cmt. b WAPA, Basin intended that its cost of coal surrounding pointing circumstances proportionate for AVS II include a share the interrelatedness of the JSCA and the quantity Although of the coal discount. possibility PSA override the argues the Government for a different re- and ANG intended one to be read to the sult, there is no evidence in the record to exclusion of the other. parties show that the understood Basin's Paragraph provides 5.6 of the JCSA cost of coal would be calculated in a differ- that ANG is to credit Basin with a dis- reasons, ent manner. For these we affirm equal approximately fifty-eight count finding the district court's that Basin did per by cents ton of coal consumed AVS II. by not breach its contract with WAPA 5.6(a)(i). ¶ See JCSA The PSA sets forth virtue of the manner in which it credited proper application quantity of the coal quantity WAPA with the coal discount. discount: "For Unit 1 and Unit 2 of the Generating only, Plant Fuel and Fuel Re- B. Freedom Mine lated Costs shall also include the full bene- quantity provid- fit of the discount on fines Background ed for in Section 5.6 of the Joint Coal part Supply Agreement parties." The second of the Govern between the cross-appeal pricing PSA, ment's on the coal Art. I. This means that when it con- alleged power issue relates to Basin's over tracted to sell from AVS II charges WAPA, to WAIPAbased on the Freedom Basin understood that its cost of rate, facility Mine amortization which was a com coal for the entire AVS was re- ponent price paid quantity duced the coal discount. under the Basin-WAPA contract. performance Course of also is rel provided explaining ambiguous The Freedom Mine coal for the evant contract *27 (Second) production powеr facility. terms. See Restatement of Con from the AVS tracts, separately contractually obligated § 5 cmt. a. ANG did not Basin was to fund a according portion development bill Basin to the coal burned in of Freedom Mine and Rather, future reclamation costs.32 Basin's Free AVS I and AVS II. ANG calculat- obligation ANG, obligation ap- 32. Basin shared this with Basin's estimated constituted operated nearby gasificationplant. proximately fifty-threepercent which the of the Free- ex- period and additional it the amortization twofold: costs were related dom Mine penditures. mine devel portion financed directly made interest-free it also and opment spread- court found the The district Properties Company to the Coteau loans the Freedom Mine computing sheets Ba (“Coteau”), the mine. operated “[did rate for 1986 and 1987 amortization and loans expenditures total sin estimated for ad- and included costs up” add not] project engineering reports based on Coteau, were to “which Basin vances from needs over financial estimated ed Coteau’s Basin, 90-345, No. made.” in fact never of time. period a certain result, according to the The slip op. 14. Mine de- its Freedom amortized court, the numbers is that when district (direct and expenditures costs velopment to retrospect, they “appear are viewed loans) recovered interest on and imputed reality.” with Id. relationship have little charge levied through per ton costs those Although the court determined at 15. facility. at the AVS the coal burned by esti- caused inaccurate the errors price the factored into charge was This it found faulty assumptions, mates and includ- participants, II paid AVS Basin to require did not that such errors ing WAPA. ap- adjustments. Under make retroactive standards, accounting estimated plicable per-ton amortization calculated its retroactively correct- not be advances need (a) the amortiza- using five factors: rate made in such estimates were ed as long (c) (b) tonnage; coal Co- period; tion the available information accord with the best (d) additional principal payments; teau’s subsequent and modified in at the time (e) interest rate and the expenditures; on new any changes reflect based years to bookkeeper A Basin imputing interest. Ultimately, the court con- information. spreadsheet into a plugged the information carry the Government did not cluded that out” rate until it “zeroed adjusted over- proving burden of The period. amortization at the end Mine de- charged via the Freedom rate result serve as the amortization would ferral. year. for the Basin re-calculated beginning of each amortization rate at the Analysis 2. annually each factor
year, adjusting the “best available equation according to prima of a facie case The elements at the time.33 information” (1) are of contract existence breach (2) contract; contract; of a breach complain does not The Government (3) which flow from damages calculating formula for about Basin’s City v. Rather, Moorhead Const. Co. breach. amortization rate. the Govern- See 1008, Forks, n. 10 508 F.2d Grand ment claims that Basin made fundamental Cir.1975). (8th plaintiff bears spreadsheets errors in the 1986 and 1987 each element. representing proving burden of regard to the variables January register 1986. its fuel retroactive ANG was to fund dom- Mine costs and again forty-seven percent. reduced the rate difference In March ton, per per $.7650 $.7942 ton to from recalcu- 33. at least three occasions Basin On January adjustment effective as of made the mid-year rate when lated its amortization 1990, Basin increased in June 1988. Then March accurate data. In received more $.8945 and made $.8233 rate from per $2.2465 ton Basin reduced the rate January change retroactive ton, change in per $1.9487 and made the *28 price The paid power under quired to retroactively adjust under the Basin-WAPA contract was based on GAAP. the cost production. The cost calcula- We find no breach of contract with re- tion methodology set forth in the contract gard to Basin’s change of the amortization
was based on the fixed and variable or period. The record shows that Basin had energy related cost producing power. a legitimate reason for changing the amor- Accordingly, prevail to in its breach of period. 1988, tization In ANG failed and contract against Basin, claim the Govern- was being operated by Department first, ment must show that WAPA’s share Energy, which 1988, wanted to sell it. In of the Freedom Mine amortization rate did Basin acquired the assets of ANG represent not a true cost of producing the Government. The acquisition plan called power it purchased second, that for Basin to form a subsidiary, Dakota miscalculated rate resulted in an over- Coal Company, which charge acquire would WAPA. to assets and ANG, liabilities of as well as a. Amortization Period Basin’s to obligations finance the Freedom Mine. result, As a on spreadsheet November amortization origi- nally obligation was to structured for a advance thirty-two year funds to Coteau amortization was period correspond to transferred from to the Basin and ANG term of its obligation contractual Dakota Company. finance Coal the Freedom Mine. The Government com- Basin made its final loan to Coteau plains that the 1986 amortization schedule 1988, which Coteau was to repay through for the Freedom Mine was completed March 2003. Basin then revised its amor- through the first years, nineteen tization schedule so that the Freedom increased the annual amortization rate Mine amortization period would corre- from what it would have been if it were spond with expiration of its last loan carried through for the entire thirty-two Coteau. year By term. increasing the annual amortization rate in this way, the Govern- Since the majority of the Freedom Mine ment complains that WAPA unfairly amortization rate was on imputed based with paying burdened more of the rate interest on Basin, final Coteau’s note to we than it would have if a thirty-two year agree with Basin that it was reasonable to schedule were used.34 The district court link the period amortization date did not any mаke specific findings this when the payment final on that note was issue. event, due. In any the Government has Although the Government complains prove failed to any breach of contract with that Basin’s switch from thirty-two to nine- regard to change in the amortization years teen unfairly shifted the financial term. burden of the Mine Freedom deferral to WAPA, it does explain not how that b. Additional Expenditures change amounts to a breach of contract Basin. The Government also fails to ex- allegations Government’s that plain how this switch constituted a materi- erred with regard to expen- the additional al calculation error that Basin was re- ditures column of the Freedom Mine spreadsheet 34. The 1987 though calculated subsequent over spreadsheets used a nine- year a thirty-three period, amortization year period. al- teen *29 $81,045,715. Again, assuming two-fold.35 taled are spreadsheet amortization represents that column expenditures claims additional First, the Government more projected total repaid, to be Coteau’s spreadsheets loans that were amortization in loans than was to Coteau as of 1987 money going to Basin projected indebtedness repayments. in Coteau $122,454,077. to be received pro- Coteau’s amounted interest loans Coteau Although the spreadsheet on the same jected payments paid by free, interest to be imputed $64,687,180,leaving discrep- totaled only responsible was Coteau participants, $57,766,897. According to the ancy of Second, the principal. repaying Government, million also was this $58 in- imputed claims Government rate, rather through per-ton amortized not that were advances on additional terest payments, into Coteau’s than calculated in fact made. in overcharge to WAPA resulting in an outstanding note bal- In 1986 Coteau’s $41,712,484. Basin’s amortiza- ance was that the Government responds year fore- for that same spreadsheet
tion breach proving its burden of cannot bear amount in the expenditures cast additional unavailability theory this because $12,629,190. expendi- If the additional relating сomplete source documentation an interest-free figure represents tures calcula- to the Mine amortization Freedom loan, expenditure rather than a direct tions, made more than a dec- which were indebted- Basin, projected total Coteau’s brought trial. this issue was ade before $54,341,674. as of 1986 ness to Basin witness was the book- only available payments However, calcu- note the Coteau the numbers keeper simply plugged who spreadsheet the 1986 lated on spreadsheet. No other witnesses $45,779,178,leaving discrep- into amounted to development in the $8,562,496. According to the Gov- who were involved ancy of ernment, the difference up made or the numbers the amortization formula and re- principal testify. note between Coteau’s it were available to that went into amortization payments by increasing Moreover, many of Basin’s records concludes rate. The Government either been lost or 1986 and 1987 have amortization WAPA’s share of How- destroyed in the course of business. principal. note wrongly rate included ever, that is cur- based on the information years, those a Basin rently available about evidenced on discrepancy A similar were in fact explained executive there year, In spreadsheet. Basin’s 1987 explanations figures for the $41,408,362 plausible note balance was Coteau’s used to calculate the amortization to- were projected expenditures additional 35. At information about tional find out was for the doesn't It future those tion of the expenditures expenditures Loincur and collect What I don’t know and says expenditures” column: trial, expenditures were not all advances on the say additional Deisz rate, additional that Basin Electric there’s no what acknowledged expenditures. says through the amortiza- column of advances on comprised the "addi- note, expenditures. error. was not able but, the lack of If, additional advances, It’s the note. going right. fact, fact, It (Trial part There wasn't I don’t had how that additional the deferral and how it was other are all advances or expenditures Nobody who was around could Tr. of Shawn done that back in those of new advances :¡: expenditures. know the additional # anybody if or what it was a Deisz at expenditure played into if, around or :1: part 71, 172). fact, years. to be supposed anymore of additional' expenditures 'A they part of include [*] recall it. *30 rate. Basin concludes that the Govern- rors such as the one promulgated by ment’s bold assertion of breach cannot phantom advances must be made on a piecemeal stand on the evidence present- Thus, retroactive basis. the Government Basin, ed at trial. concludes that breached the contract by virtue of the phantom advances wheth- The Government’s charge second er the issue is analyzed under the strict breach regarding additional expenditures terms of the contract or under GAAP. is that the spreadsheets amortization 1986 and 1987 included advances to Coteau Basin responds that its amortization that were fact never made. According schedules necessarily and permissibly Government, to the these so-called “phan- were based on Coteau’s estimated and pro- tom advances” increased the jected amortization needs for the Freedom Mine. To turn, rate and in price increased the support its argument that methodology charged WAPA for power. Despite ac- for .estimating and updating the annual counting principles that generally require Freedom Mine amortization rate comport- prospective, retroactive, not adjustments GAAP, ed with Basin points to the conclu- sheets, to balance the Government main- sion of the outside performed audit tains that Basin contractually obligat- Coopers. After reviewing Basin’s amorti- ed to credit WAPA for the overcharge zation methodologies, data and calcula- once it realized projected tions, ad- Coopers concluded that pro- vances were not in fact made to Coteau. cedures with respect to the Freedom Mine amortization rate were both “reasonаble In support of argument, the Govern- and proper.” Basin explains also that the points ment to the terms of the Basin- experts who testified at trial all agreed WAPA contract. Although the contract that it was proper for Basin to base esti- stated that Basin would “submit an esti- mated additional expenditures to Coteau mated monthly bill to the United States on the “best available information” at the (15) within days fifteen after the end of the time the estimates were made and that month,” it provided also “[mjonthly GAAP requires prospective adjustments to adjustments be made [would] to correct be made as the “best available informa- for differences between and ac- estimated tion” changes.36 GAAP, Under retroactive tual bills.” WAPA-Basin contract at adjustments are only reserved ¶ material 9(i). The Government argues that this Thus, error. or under-estimates over-esti- provision in the contract supersedes any mates in an amortization calculation accounting principle that might otherwise should changed be prospectively an- when suggest adjustments retroactive are not adjustments nual to the rate are made. However, required. the Government points out that this case actually GAAP The district court was correct that the required Basin to credit WAPA for the spreadsheets for 1986 do not add overcharge. GAAP, Under material er- up they sense reflect more However, experts Government’s ing they testi- would have known that twelve fied that the skewed produced by numbers advanced, million dollars hadn’t been spreadsheets should flag have raised a red triggered should have somebody to ... Basin and that Basin should have acted to (Trial evaluate these advances.” Tr. Ned instance, correct the errors. For Chris- Ned 118). Christiansen Christiansen went on to tiansen, KPMG, an accountant testified explain time went on Basin did that “[t]he cross-examination 1986 ad- job better analyzing prepar- the future and vance of twelve really million dollars wasn’t ing the amortization schedule. hindsight for they them. When prepar- books, resolution of Basin’s accounting from Co- than collected
going to Coteau is whether the errors the amortization Our focus course of however. teau over justify attempt not Basin ac- does a refund to WAPA. warranted period.37 any accounting or retroactively under discrepancy it did not knowledges that Rather, on how it focuses legal principle. Mine amortization adjust the Freedom *31 in the column expenditures the additional or credit years, preceding rate for on es- necessarily was based spreadsheets basis. overcharge prospective on for the avail- using the best calculated and timates Thus, rate in- insofar as the amortization the time. at information able Coteau, to principal on advances cluded the contract. Basin breached However, not reasoning does this forecasted spreadsheets why the explain the record it is review of Upon than collected to Coteau being paid more that Basin included advances also clear the amortization the life of from it over that were spreadsheet the 1986 and 1987 amortization Mine The Freedom period. true that under not in fact made. It is expendi direct Basin’s to include rate was GAAP, projected addi long as as Basin’s interest on imputed mine and tures on on ad on the Freedom Mine Principal expenditures tional to Coteau. advances component of legitimate available informa was not a were based on the best vances admittedly sparse time, required to Despite rate. it was not tion at at forth trial set adjustments. evidence the Government It is also make retroactive claim, weighed against support to when Basin’s financial Coopers true that audited “plausible are that there response the Freedom regard with statements fig Mine the Freedom explanations” found that Ba Mine amortization rate and ures, attention. deserves the claim and methodology was “reasonable sin’s of whether Ba question But the proper.” calculations to the
According the contract overcharged WAPA under sin trial, the rate introduced spreadsheets by accounting principles. is not solved Moreover, under principal. included Rather, govern the contract the terms of consti- calculations GAAP these erroneous appropriate and was not an com what was that must be retroac- error tute a material power.38 ponent paid the cost WAPA is not with concern tively corrected. Our loan, repaid by despite principal to be on the with points out that 37. The Government imputed recovered interest to be Coteau to whether confusion in the evidence through participants. direct ex- expenditures constituted additional (which was not penditures by Coteau argument We find the Government’s based advances obligated repay) or additional 9(i) paragraph of the Basin-WAPA con- on repay obligated to (upon which Coteau provi- unpersuasive. Although the tract to be interest), district court principal, but not to WAPA states that Basin would submit sion money finding re- made a of fact that bill, monthly which thereafter an estimated spreadsheets were advances. flected on the bill, adjusted the actual would be to reflect Basin, Al-95-003, slip op. at 14-15. See No. argues purpose that the intent contrary that Basin evidence to adjust provision was to WAPA’sbills ac- this by a speculation presented at trial was consumption cording WAPA’s actual "plau- there executive who asserted that producing power, actual cost of not Basin’s numbers. Basin explanations for the sible” interpreta- power. is a reasonable This clarify appeal the issue consump- does not seek if it is true that WAPA’s tion expenditures col- monthly the additional readily and refers to on a was determinable tion basis, producing For this in its briefs. actual umn as "advances” while the cost instance, reason, expendi- power was not. For the Freedom we that the additional find rate, which factored into Ba- Mine deferral additional advances tures column constituted Accordingly, nally, we find that Basin also on the Government’s cross-appeal of issue, breached the contract with respect to the the coal pricing we affirm part, advances the 1986 spread- and 1987 and reverse and remand in part. af-We sheets which were not in fact made. firm the district finding court’s did breach its not contract with WAPA by breach, however, finding This does virtue of the manner in which appor- not necessarily mean that the Government tioned the quantity coal discount. Howev- will be successful on its Freedom Mine er, we reverse the district finding court’s claim, inextricably as its claim is inter- regard to the Freedom Mine amorti- it proving any twined with damages it Therefore, zation rate. we reverse and suffered as a result of the breach. Ac- remand the Freedom Mine issue to the cordingly, we reverse and remand this district court for a determination of dam- *32 claim to the district court for a determina- ages, if any. On Norbeck’s False Claims tion of if damages, any. Act claims 'that are reversed and the Gov- ernment’s involving claim the coal quantity PART VI. CONCLUSION discount, we remand to the district court conclusion, In the resolution of this case with directions that these claims be dis- First, on appeal is as follows. on the issue prejudice. missed with II appealed sale/leaseback Basin, by we find that the district court BEAM, Circuit Judge, concurring. erred in determining that Basin over- I concur in only. the result charged WAPA more than the million $2.4 prior it refunded litigation. this We
also find that the district court erred
determining that Basin submitted the $2.4 in overcharges
million with the intent nec- essary for a False Claims Act violation. PAWLYK, William J. Petitioner- We therefore reverse the district court’s Appellant, judgment for Norbeck under the False Second, v. Claims Act. appeal issue, amortization we find that 10/20 WOOD, Respondent-Appellee. Tana the district court erred when it found that No. 98-35026. Basin breached its contract with by WAPA choosing ten-year period. amortization United States Court of Appeals, In view of our holding that Basin did not Ninth Circuit. breach its contract with by choos- Argued and Submitted Jan. ing year a ten period, amortization Nor- issue, beck’s claim of fraud on this Filed Jan. dismissed, the district court no longer 2,May Amended
viable claim and is ordered dismissed.
Third, on the imputed issue of interest Norbeck,
cross-appealed by we affirm the
district court’s dismissal of this claim. Fi- producing reason, sin’s power, cost of WAPA's provi- variable. For this the contract basis, calculated on an annual which would sion relied on Government does not monthly have rendered adjust- the contract’s support" argument. provision meaningless
ment in terms of that