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Allegheny Energy Supply Company v. Wolf Run Mining Company

August 13, 2012

ALLEGHENY ENERGY SUPPLY COMPANY, LLC AND MONONGAHELA POWER COMPANY, APPELLEES/CROSS-APPELLANTS
v.
WOLF RUN MINING COMPANY, F/K/A ANKER WEST VIRGINIA MINING COMPANY, INC., HUNTER RIDGE HOLDINGS, INC., F/K/A ANKER COAL GROUP, INC., AND INTERNATIONAL COAL GROUP, INC. APPEAL OF: WOLF RUN MINING COMPANY AND HUNTER RIDGE HOLDINGS, INC. APPELLANTS/CROSS-APPELLEES



Appeal from the Judgment Entered August 25, 2011 In the Court of Common Pleas of Allegheny County Civil Division at No(s): GD 06-30514.

The opinion of the court was delivered by: Strassburger, J.

Consolidated Cross Appeal

BEFORE: MUSMANNO, BENDER, AND STRASSBURGER,*fn1 JJ.

OPINION BY STRASSBURGER, J.

This consolidated appeal and cross appeal stem from a judgment entered in favor of Appellees/Cross-Appellants, Allegheny Energy Supply Company, LLC and Monongahela Power Company (collectively referred to as "Allegheny Energy") and against Appellants/Cross-Appellees Wolf Run Mining Company and Hunter Ridge Holdings, Inc.*fn2 (collectively referred to as "Wolf Run"). We affirm in part, vacate in part, and remand for further proceedings.

On February 17, 2005, Allegheny Energy entered into a Coal Sales Agreement (the Agreement)*fn3 with Wolf Run, then known as Anker West Virginia Mining Company, whereby Allegheny Energy agreed to purchase all coal from existing reserves of the Sycamore No. 2 Mine. Anker Coal Group, Inc., the parent company of Anker West Virginia, guaranteed Anker West Virginia's performance of the Agreement. *fn4

At the time the parties entered into the Agreement, the existing reserve of the Sycamore No. 2 Mine was estimated to contain not less than 20 million tons of coal. The Agreement provided that throughout 2005 until September of 2006, Wolf Run would deliver to Allegheny Energy the actual production of the Sycamore No. 2 Mine, which was estimated at 500,000 tons. Beginning on October 1, 2006, Wolf Run would deliver 150,000 tons per month. Beginning in January 2007 through the expiration of the Agreement, Wolf Run would deliver 1.8 million tons of coal per year until the reserve was exhausted. The Agreement also contained a force majeure clause which excused non-delivery when certain events occurred.

During the summer of 2006, operations at the Sycamore No. 2 Mine were temporarily idled. Wolf Run attributed the closing to the accidental breach of an abandoned gas well, changes in the enforcement of regulations for mining within the vicinity of gas wells, and a collapsing mine roof. As a result, in August of 2006, Wolf Run informed Allegheny Energy that it would be unable to meet its obligations under the Agreement. On August 25, 2006, Wolf Run issued a formal force majeure notice pursuant to Section 13 of the Agreement wherein it averred that the conditions leading to the idling of the Sycamore No. 2 Mine were beyond its control, and not the result of its fault or negligence.*fn5 To cover the delivery shortfalls Allegheny Energy purchased coal from third party suppliers.

On December 18, 2006, Allegheny Energy instituted a breach of contract action against Wolf Run, Hunter Ridge, and ICG based on Wolf Run's failure to perform under the Agreement.*fn6 Wolf Run filed a counterclaim.

On May 11, 2010, following pre-trial discovery and motions, the Honorable R. Stanton Wettick granted summary judgment in favor of ICG with respect to all claims asserted against it. Additionally, Judge Wettick granted summary judgment in favor of Allegheny Energy with respect to Wolf Run's counter claim.

The matter proceeded to a lengthy non-jury trial before the Honorable Joseph M. James. That trial began on January 10, 2011 and concluded on February 1, 2011. On May 3, 2011, the trial court issued a Memorandum and Verdict in which it found that Wolf Run had breached the Agreement; that the force majeure clause contained in the Agreement did not excuse Wolf Run's breach; that the defense of commercial impracticability under Section 2-615 of the Uniform Commercial Code (U.C.C.) was unavailable to Wolf Run; and that Allegheny Energy was entitled to damages as a result of Wolf Run's breach of contract. See Memorandum and Verdict, 5/3/2011, at 5. The trial court awarded damages to Allegheny Energy in the total amount of $104,103,893.00. Id. at 6-7. This award included $11,304,332.00 in past damages and prejudgment interest for breaches related to the Sycamore No. 2 Mine, $2,456,533.00 in past damages and prejudgment interest for breaches related to the Sycamore No. 1 Mine, and $90,343,02.00 in future damages. Id. at 7.

Both parties filed timely motions for post-trial relief, which were denied in their entirety on August 25, 2011. On that same date, judgment was entered against Wolf Run and in favor of Allegheny Energy in the amount of $106,071,884.40, which included the amount of the verdict plus interest accrued from May 2, 2011 until August 25, 2011. Both parties now appeal to this Court.*fn7

Allegheny Energy raises the following issues for our review:

1. [Because] the uncontroverted evidence at trial established that Allegheny Energy spent $84,163,895 to purchase cover coal because of [Wolf Run's] failure to deliver the quantities of coal required in [the Agreement] and the trial court expressly found that Allegheny Energy acted reasonably in doing so, did the trial court err by limiting the damages awarded to Allegheny Energy for cover coal to $11,304,332.00?

2. Did the trial court err in granting summary judgment to [ICG], where Allegheny Energy established genuine issues of material fact regarding: whether ICG was the alter ego of Wolf Run or Hunter Ridge, which contracted to supply coal to Allegheny Energy; whether ICG assumed the obligations of Wolf Run and Hunter Ridge under the agreement at issue; and whether ICG materially participated in, and in fact directed, Wolf Run's and Hunter Ridge's breaches of contract?

Allegheny Energy's Brief at 6.

Wolf Run's brief sets forth a counter-statement of questions involved, responding to Allegheny Energy's questions presented, and asserts its own issues on cross-appeal:

1. Did the trial court err in its legal application of the contractual force majeure standard by focusing on the foreseeability of conditions despite the parties' agreement that force majeure may apply to "existing" or "forseen" conditions, and by determining negligence based on a standard of "aggressiveness" instead of "reasonableness"?

2. Did the trial court err in its calculation of future damages (a) by measuring damages as of the time of trial instead of the time [Allegheny Energy] learned of the breach years before trial, based on both overwhelming evidence and [Allegheny Energy's] own admissions; (b) by making a finding regarding the amount of coal remaining in the reserve that is not supported by competent evidence; and (c) by failing to reduce future damages to present value?

3. Did the trial court err by sustaining an objection to Wolf Run's effort to cross-examine [Allegheny Energy's] lead witness concerning key admissions made by [Allegheny Energy] in a brief filed by [Allegheny Energy's] counsel?

4. Did the trial court err by awarding prejudgment interest on the damages arising out of Section 1.3 of the Coal Sales

Agreement, where the Section 1.3 pricing had not become due by agreement of the parties?

Wolf Run's Brief at 3.

We begin our evaluation of this case by addressing Allegheny Energy's claim that Judge Wettick erred in granting summary judgment as to ICG. Allegheny Energy's Brief at 36.

Our standard of review on an appeal from the grant of a motion for summary judgment is well-settled. A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. As with all questions of law, our review is plenary.

In evaluating the trial court's decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. Pa.R.C.P. 1035.2. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. Where the non-moving party bears the burden of proof on an issue, he may not merely rely on his pleadings or answers in order to survive summary judgment. Failure of a non-moving party to adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof establishes the entitlement of the moving party to judgment as a matter of law. Lastly, we will ...


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